SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 1995 Commission file number 0-15962
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(Exact name of registrant as specified in its charter)
Illinois 36-3256340
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 30
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 43
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . 43
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 44
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 45
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . . . . . $ 17,937,247 18,165,563
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . . . . . -- 2,129,166
Restricted funds (note 4(b)) . . . . . . . . . . . . . . . . . . . . . . . . . . -- 457,674
Interest, rents and other receivables (net of allowance
for doubtful accounts of $427,559 and $791,916 at
September 30, 1995 and December 31, 1994, respectively). . . . . . . . . . . . 251,972 621,516
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206,629 141,055
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,354 376,378
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,506,202 21,891,352
------------ ------------
Investment properties, at cost:
Land and leasehold interests . . . . . . . . . . . . . . . . . . . . . . . . . 6,982,049 10,788,810
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 105,566,436 150,959,418
------------ ------------
112,548,485 161,748,228
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 35,943,191 49,431,004
------------ ------------
Total investment properties, net of
accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . 76,605,294 112,317,224
------------ ------------
Investment in unconsolidated ventures, at equity
(notes 1, 2 and 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,846,534 8,864,503
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,067,124 2,776,163
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,145,961 1,226,212
------------ ------------
$106,171,115 147,075,454
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -----------
Current liabilities:
Current portion of long-term debt (notes 2(f), 4(b), 4(d) and 4(e)). . . . . . . $ 53,542,105 94,880,985
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,729,974 4,048,221
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,741,075 2,575,385
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,631,372 11,640,409
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 930,433 810,997
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,813 625,079
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 66,790,772 114,581,076
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422,308 423,743
Investment in unconsolidated ventures, at
equity (notes 1, 2 and 7). . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,839,611 167,376,693
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,443,153
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . 32,500,000 25,794,970
------------ ------------
Commitments and contingencies (notes 1, 2, 3, 4, 5 and 6)
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278,552,691 309,619,635
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,830,731) (20,281,012)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . (1,316,336) (1,235,319)
------------ ------------
(22,146,067) (21,515,331)
------------ ------------
Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . . . . . . . 351,746,836 351,746,836
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (457,806,317) (456,620,305)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . (44,176,028) (36,155,381)
------------ ------------
(150,235,509) (141,028,850)
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . . . . . . . (172,381,576) (162,544,181)
------------ ------------
$106,171,115 147,075,454
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1995 1994 1995 1994
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . $ 4,228,089 5,541,534 13,206,557 16,404,140
Interest income. . . . . . . . . . . . . . . . . . . . 277,258 261,378 860,204 699,445
Other income . . . . . . . . . . . . . . . . . . . . . -- -- 400,856 400,000
----------- ---------- ----------- -----------
4,505,347 5,802,912 14,467,617 17,503,585
----------- ---------- ----------- -----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . 2,777,725 3,239,370 8,855,956 9,987,757
Depreciation . . . . . . . . . . . . . . . . . . . . . 1,036,841 1,199,665 3,284,518 3,599,964
Property operating expenses. . . . . . . . . . . . . . 2,584,115 2,893,900 6,848,487 8,529,627
Professional services. . . . . . . . . . . . . . . . . 87,658 18,491 550,762 431,220
Amortization of deferred expenses. . . . . . . . . . . 155,288 107,034 443,114 315,388
General and administrative . . . . . . . . . . . . . . 508,678 291,441 904,169 540,099
----------- ---------- ----------- -----------
7,150,305 7,749,901 20,887,006 23,404,055
----------- ---------- ----------- -----------
Operating loss . . . . . . . . . . . . . . . . . (2,644,958) (1,946,989) (6,419,389) (5,900,470)
Partnership's share of operations of
unconsolidated ventures
(notes 1, 2 and 7) . . . . . . . . . . . . . . . . . . (33,148,476) (4,394,381) (42,102,148) (12,236,290)
----------- ---------- ----------- -----------
Net operating loss . . . . . . . . . . . . . . . (35,793,434) (6,341,370) (48,521,537) (18,136,760)
Gain on sale or disposition of investment
properties (notes 2(b), 4(a) and 4(b)) . . . . . . . . 7,784,269 -- 14,423,043 --
Gain on sale or disposition of unconsolidated
venture. . . . . . . . . . . . . . . . . . . . . . . . -- 1,702,082 -- 1,702,082
----------- ---------- ----------- -----------
Net loss before extra-
ordinary items . . . . . . . . . . . . . . . . (28,009,165) (4,639,288) (34,098,494) (16,434,678)
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1995 1994 1995 1994
----------- ---------- ----------- -----------
Extraordinary items:
Gain on forgiveness of indebtedness
(note 4(a)). . . . . . . . . . . . . . . . . . . . . -- -- 1,586,624 --
Partnership's share of gain on extinguishment
of indebtedness of unconsolidated venture
(note 2(c)). . . . . . . . . . . . . . . . . . . . . 30,980,232 -- 30,980,232 --
Prepayment penalty on refinanced long-term debt
(note 4(e)). . . . . . . . . . . . . . . . . . . . . (204,093) -- (204,093) --
----------- ---------- ----------- -----------
Net earnings (loss). . . . . . . . . . . . . . . $ 2,766,974 (4,639,288) (1,735,731) (16,434,678)
=========== ========== =========== ===========
Net earnings (loss) per limited
partnership interest (note 1):
Net operating loss . . . . . . . . . . . . . . $ (87.62) (15.18) (118.08) (43.41)
Gain from sale or disposition of
investment properties . . . . . . . . . . . 19.22 -- 35.60 --
Gain from sale or disposition of
unconsolidated ventures. . . . . . . . . . . -- 4.20 -- 4.20
Extraordinary items. . . . . . . . . . . . . . 75.97 -- 79.89 --
----------- ---------- ----------- -----------
Net earnings (loss). . . . . . . . . . . . . $ 7.57 (10.98) (2.59) (39.21)
=========== ========== =========== ===========
Cash distributions per limited
partnership interest . . . . . . . . . . . . . $ -- -- 20.00 --
=========== ========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,735,731) (16,434,678)
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,284,518 3,599,964
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . 443,114 315,388
Amortization of deferred rental income . . . . . . . . . . . . . . . . . . . . . . -- 110,515
Amortization of discount on long-term debt . . . . . . . . . . . . . . . . . . . . 189,799 460,756
Partnership's share of operations of unconsolidated ventures . . . . . . . . . . . 42,102,148 12,236,290
Gain on sale or disposition of investment properties (note 4(a)) . . . . . . . . . (14,423,043) --
Gain on sale of interest in unconsolidated venture (note 2(b)) . . . . . . . . . . -- (1,702,082)
Extraordinary items (notes 2(b), 4(a) and 4(e)). . . . . . . . . . . . . . . . . . (32,362,763) --
Changes in:
Restricted funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457,674 1,629,584
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . 369,544 (231,281)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,574) (219,757)
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (97,854) (104,035)
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,251 272,886
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (311,018) 106,662
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,690 88,870
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (409,266) (361,853)
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,607,778 2,268,858
Deferred interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,233 (1,759,195)
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,436 100,190
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,029 177,702
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (590,542) (12,446)
------------ -----------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . 3,071,423 542,338
------------ -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994
------------ -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments . . . . . . . . . . . 2,129,166 (2,301,061)
Additions to investment properties . . . . . . . . . . . . . . . . . . . . . . . . . (1,014,630) (2,113,822)
Partnership's distributions from unconsolidated ventures . . . . . . . . . . . . . . 1,369,320 4,980,081
Cash proceeds from sale of investment properties (note 4(a)) . . . . . . . . . . . . 2,795,768 --
Partnership's contributions to unconsolidated ventures . . . . . . . . . . . . . . . (10,000) (779,583)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (318,462) (723,432)
------------ -----------
Net cash provided by (used in) investing activities. . . . . . . . . . . . . 4,951,162 (937,817)
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . (376,203) (514,595)
Proceeds received on refinancing of long-term debt . . . . . . . . . . . . . . . . . 431,059 --
Prepayment penalty on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . (204,093) --
Distributions to general partners. . . . . . . . . . . . . . . . . . . . . . . . . . (81,017) --
Distributions to limited partners. . . . . . . . . . . . . . . . . . . . . . . . . . (8,020,647) --
------------ -----------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . . (8,250,901) (514,595)
------------ -----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . (228,316) 910,074
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . 18,165,563 17,255,489
------------ -----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . $ 17,937,247 18,165,563
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . $ 2,969,249 9,017,338
============ ===========
Sale of investment properties:
Total sale proceeds, net of selling expenses . . . . . . . . . . . . . . . . . . . $ 17,925,768 --
Principal balances due on mortgages payable. . . . . . . . . . . . . . . . . . . . (15,130,000) --
------------ -----------
Cash proceeds from sale of investment property,
net of selling expenses. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,795,768 --
============ ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994
------------ -----------
Forgiveness of indebtedness - Brittany Downs Apartments -
Phase II (note 4(a)):
Balance due on long-term debt cancelled. . . . . . . . . . . . . . . . . . . . . $ 495,310 --
Accrued interest on long-term debt cancelled . . . . . . . . . . . . . . . . . . 1,455,191 --
Reduction of escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . (363,877) --
------------ -----------
Extraordinary item due to forgiveness of indebtedness
secured by Brittany Downs Apartments - Phase II. . . . . . . . . . . . . . $ 1,586,624 --
============ ===========
Non-cash financing activities:
Gross proceeds from refinancing of long-term debt (note 4(e)). . . . . . . . . . . $ 26,000,000 --
Principal and interest paid at closing . . . . . . . . . . . . . . . . . . . . . . (24,985,162) --
Prepayment penalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (204,093) --
Payment of deferred mortgage expense . . . . . . . . . . . . . . . . . . . . . . . (379,686) --
------------ -----------
Proceeds received on refinancing of long-term debt . . . . . . . . . . . . . $ 431,059 --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1994 which are
included in the Partnership's 1994 Annual Report on Form 10-K (File No. 0-
15962) filed on March 28, 1995, as certain footnote disclosures which would
substantially duplicate those contained in such audited financial
statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the
accounts of the Partnership and its consolidated venture, Mariners Pointe
Associates ("Mariners Pointe"). The effect of all significant transactions
between the Partnership and its consolidated venture has been eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's
interests in Orchard Associates (note 2(b)); JMB/Piper Jaffray Tower
Associates ("JMB/Piper") and JMB Piper Jaffray Tower Associates II
("JMB/Piper II"); 900 3rd Avenue Associates ("JMB/900"); 1090 Vermont
Avenue, N.W. Associates Limited Partnership ("1090 Vermont");
Maguire/Thomas Partners - South Tower ("South Tower"); and the
Partnership's indirect (through Carlyle-XIV Associates, L.P.) interest in
JMB/NYC Office Building Associates, L.P. ("JMB/NYC").
The Partnership records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to present the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of the ventures as described
above. Such adjustments are not recorded on the records of the
Partnership. The effect of these items is summarized as follows for the
nine months ended September 30:
1995 1994
------------------------ -----------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ --------- ---------- ---------
Net earnings
(loss). . . . . . . . $(1,735,731) (19,607,175) (16,434,678) (17,409,300)
Net earnings
(loss) per
limited
partnership
interest. . . . . . . $ (2.59) (50.66) (39.21) (41.67)
=========== =========== =========== ==========
The net earnings (loss) per limited partnership interest is based upon
the limited partnership interests outstanding at the end of each period.
Deficit capital accounts will result, through the duration of the
Partnership, in the recognition of net gain for financial reporting and
Federal income tax purposes.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Partnership distributions from its unconsolidated ventures are
considered cash flow from operating activities to the extent of the
Partnership's cumulative share of net earnings. The Partnership records
amounts held in U.S. Government obligations at cost which approximates
market. For the purposes of these statements, the Partnership's policy is
to consider all such amounts held with original maturities of three months
or less ($17,855,000 and $18,160,000 at September 30, 1995 and December 31,
1994, respectively) as cash equivalents with any remaining amounts
(generally with original maturities of one year or less) reflected as
short-term investments being held to maturity.
The Wilshire Bundy Plaza incurred minimal damage as a result of the
earthquake in southern California on January 17, 1994. On February 22,
1995, the City Council of the City of Los Angeles passed an ordinance
relating to the repair of welded steel moment frame buildings in an area of
the city that includes Wilshire Bundy Plaza. While a complete
determination of the requirements to comply with the ordinance is not as
yet completed, it is estimated that the cost of such repairs, which have
been accrued for and are included in accounts payable in the accompanying
consolidated financial statements, could be approximately $3 million.
During March 1995, Statement of Financial Accounting Standards No. 121
("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" was issued. SFAS 121, when effective,
will require that the Partnership record an impairment loss on its long-
lived assets to be held and used whenever their carrying value cannot be
fully recovered through estimated undiscounted future cash flows from
operations and sale. The amount of the impairment loss to be recognized
would be the difference between the long-lived asset's carrying value and
the asset's estimated fair value. Any long-lived assets identified "to be
disposed of" would no longer be depreciated but adjustments for impairment
loss would be made in each period as necessary to report these assets at
the lower of historical cost and fair value less costs to sell. In certain
situations, such estimated fair value could be less that the existing non-
recourse debt which is secured by the property.
The amount of any impairment loss recognized by the Partnership under
its current accounting policy has been limited to the excess, if any, of
the property's carrying value over the outstanding balance of the
property's non-recourse indebtedness. An impairment loss under SFAS 121
would be determined without regard to the nature or the balance of such
non-recourse indebtedness. Upon the disposition of a property for which an
impairment loss has been recognized under SFAS 121, the Partnership would
recognize, at a minimum, a net gain for financial reporting purposes to the
extent of any excess of the then outstanding balance of the property's non-
recourse indebtedness over the then carrying value of the property,
including the effect of any reduction for impairment loss under SFAS 121.
The Partnership expects to adopt SFAS 121 no later than the first
quarter of 1996. Although the Partnership has not finalized its assessment
of the full impact of adopting SFAS 121, it is likely that additional
provisions for value impairment would be required for the properties owned
by the Partnership and its consolidated ventures, or by the Partnership's
unconsolidated ventures. Such provisions, including the Partnership's
share of such unconsolidated venture provisions, are currently estimated to
total approximately $16,000,000 in the first period of implementation of
SFAS 121. In addition, upon the disposition of an impaired property, the
Partnership would generally recognize more net gain for financial reporting
purposes under SFAS 121 than it would have under the Partnership's current
impairment policy, without regard to the amount, if any, of cash proceeds
received by the Partnership in connection with the disposition. Although
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
implementation of this new accounting statement could significantly impact
the Partnership's reported earnings, there would be no impact on cash
flows. Further, any such impairment loss would not be recognized for
Federal income tax purposes.
(2) VENTURE AGREEMENTS
(a) General
The Partnership at September 30, 1995 is a party to seven operating
joint venture agreements. Pursuant to such agreements, the Partnership
made initial capital contributions of approximately $192,607,000 (before
legal and other acquisition costs and its share of operating deficits as
discussed below). Under certain circumstances, either pursuant to the
venture agreements or due to the Partnership's obligations as a general
partner, the Partnership may be required to make additional cash
contributions to the ventures. Five of the joint venture agreements
(JMB/NYC (through an interest in Carlyle-XIV Associates, L.P.), JMB/Piper,
JMB/Piper II, JMB/900 and South Tower) are, directly or indirectly, with
partnerships (JMB/Manhattan Associates, Ltd. ("JMB/Manhattan"), Carlyle
Real Estate Limited Partnership-XIII ("C-XIII") and Carlyle Real Estate
Limited Partnership-XV ("C-XV")) sponsored by the Corporate General Partner
or its affiliates. These five joint ventures have entered into a total of
six property joint venture agreements.
The Partnership has acquired, through the above ventures, interests in
one apartment complex and seven office buildings. The venture properties
have been financed under various long-term debt arrangements.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
(b) Orchard Associates
The Partnership's interest in Old Orchard shopping center (through
Orchard Associates and Old Orchard Urban Venture ("OOUV")) was sold in
September 1993, as described below.
At sale, OOUV and an unaffiliated third party contributed the Old
Orchard shopping center and $60,366,572 in cash (before closing costs and
prorations), respectively, to a newly formed limited partnership.
Immediately at closing, the new partnership distributed to OOUV $60,366,572
in cash (before closing costs and prorations) in redemption of
approximately 89.5833% of OOUV's interest in the new partnership. OOUV,
the limited partner, has retained a 10.4167% interest in the new limited
partnership after such redemption. OOUV is also entitled to receive up to
an additional $4,300,000 based upon certain events (as defined), all of
which was earned in 1993 and received in 1994. Upon receipt, OOUV
distributed the $4,300,000 to the respective partners, based upon their
precontribution percentage interests. OOUV may still earn up to an
additional $3,400,000 based upon certain future earnings of the property
(as defined), none of which has been earned or received as of the date of
this report.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Contemporaneously with the formation of the new limited partnership,
OOUV redeemed Orchard Associates' ("Orchard") interest in OOUV for
$56,689,747 (before closing costs and prorations). This transaction has
resulted in Orchard having no ownership interest in the property as of the
effective date of the redemption agreement.
At the time of redemption, OOUV retained a portion of the Orchard
Associates redemption proceeds in order to fund certain contingent amounts
which may have been due in the future. In July 1995, OOUV distributed to
Orchard Associates their redemption holdback of $2,083,644. As a result,
the Partnership received its share of the holdback of $1,041,820. In
October 1995, OOUV distributed to Orchard their share of the pre-sale
settlement with Federated department stores of $288,452. As a result,
Orchard distributed to the Partnership its share of the settlement of
$144,226. The Partnership currently intends to retain these funds for
working capital purposes.
OOUV and Orchard have also entered into a contribution agreement
whereby they have agreed to share future gains and losses which may arise
with respect to potential revenues and liabilities from events which
predated the contribution of the property to the new venture (including,
without limitation, the distribution to OOUV of the $4,300,000 and the
potential future distribution of $3,400,000 amounts as described above) in
accordance with their pre-contribution percentage interests. In September
1994, Orchard received its share of the contingent $4,300,000 as discussed
above. Orchard distributed to each of the respective partners their share
($1,702,082) of such amount. The Partnership recognized a gain of
$1,702,082 for financial reporting and Federal income tax purposes in 1994.
Upon receipt of all or a portion of the remaining contingent amounts,
Orchard and the Partnership would expect to recognize additional gain for
financial reporting and Federal income tax purposes in the year of such
receipts. However, there can be no assurance that any portion of the
remaining contingent amounts will be received.
(c) JMB/NYC
The Partnership owns indirectly, through Carlyle-XIV Associates, L.P.
and JMB/NYC, an interest in (i) the 237 Park Avenue Associates venture
which owns an existing 23-story office building, (ii) the 1290 Associates
venture which owns an existing 44-story office building, and (iii) the 2
Broadway Associates and 2 Broadway Land Co. ventures which sold their 32-
story office building in September 1995 (together "Three Joint Ventures"
and individually a "Joint Venture"). All of the buildings are located in
New York, New York. In addition to JMB/NYC, the partners of the Three
Joint Ventures include O & Y Equity Company, L.P. and O & Y NY Building
Corp. (hereinafter sometimes referred to as the "Olympia & York
affiliates"), both of which are affiliates of Olympia and York
Developments, Ltd. (hereinafter sometimes referred to as "O&Y").
JMB/NYC is a joint venture among Carlyle-XIV Associates, L.P.,
Property Partners, L.P. and Carlyle-XIII Associates, L.P. as limited
partners and Carlyle Managers, Inc. as the sole general partner. Effective
March 25, 1993, the Partnership became a 40% shareholder of Carlyle
Managers, Inc. Related to this investment, the Partnership has an
obligation to fund $1,200,000 of additional paid-in capital to Carlyle
Managers, Inc. (reflected in amounts due to affiliates in the accompanying
consolidated financial statements).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JMB/NYC is a limited partnership, and the Partnership's interest in
JMB/NYC, which previously had been held directly, was contributed to
Carlyle-XIV Associates, L.P. in exchange for its limited partnership
interest in that partnership. As a result of these transactions, the
Partnership currently holds, indirectly as a limited partner of Carlyle-XIV
Associates, L.P., an approximate 50% limited partnership interest in
JMB/NYC. The sole general partner of Carlyle-XIV Associates, L.P. is
Carlyle Investors, Inc., of which the Partnership became a 40% shareholder
effective March 25, 1993. Related to this investment, the Partnership has
an obligation to fund, on demand, $1,200,000 of additional paid-in capital
(reflected in amounts due to affiliates in the accompanying consolidated
financial statements). The general partner in each of JMB/NYC and Carlyle-
XIV Associates, L.P. is an affiliate of the Partnership. For financial
reporting purposes, the allocation of profits and losses of JMB/NYC to the
Partnership is 50%.
The terms of the JMB/NYC venture agreement generally provide that
JMB/NYC's share of the Three Joint Ventures' annual cash flow, sale or
refinancing proceeds, operating and capital costs (to the extent not
covered by cash flow from a property) and profit and loss will be
distributed to, contributed by or allocated to the Partnership in
proportion to its (indirect) share of capital contributions to JMB/NYC. As
discussed below, an agreement with the Olympia & York affiliates, when
effective, would provide first for allocation of cash flow to the Olympia &
York affiliates to the level of certain preference amounts, as defined.
The agreement would also, among other things, provide for no further
allocation from the Joint Ventures of depreciation, amortization or
operating losses and the allocation of operating income from the Joint
Ventures only to the extent of cash flow distributions to JMB/NYC.
In October 1994, JMB/NYC entered into an agreement (the "Agreement")
with the Olympia & York affiliates to resolve certain disputes which are
more fully discussed below. Certain provisions of the Agreement became
immediately effective and, therefore, binding upon the partners, while
others become effective either upon certain conditions being met or upon
execution and delivery of final documentation. In general, the parties
have agreed to: (i) amend the Three Joint Ventures' agreements to
eliminate any funding obligation by JMB/NYC for any purpose in return for
JMB/NYC relinquishing its rights to approve almost all property management,
leasing, sale (certain rights to control a sale would be retained by
JMB/NYC through March 31, 2001) or refinancing decisions and the
establishment of a new preferential distribution level payable to the
Olympia & York affiliates from all future sources of cash, (ii) sell the 2
Broadway Building, and (iii) restructure the first mortgage loan on the
terms discussed below. A more detailed discussion of each of these items
is contained below. As part of the Agreements, in order to facilitate the
restructuring, JMB/NYC and the Olympia & York affiliates agreed to file for
each of the Three Joint Ventures a pre-arranged bankruptcy plan for
reorganization under Chapter 11 of the Bankruptcy Code. In June 1995, the
2 Broadway Joint Ventures filed their pre-arranged bankruptcy plans for
reorganization, and in August 1995, the bankruptcy court entered an order
confirming their plans of reorganization. Bankruptcy filings for the other
Joint Ventures are expected to occur in 1996 and JMB/NYC would seek to
incorporate the proposed transactions contained in the Agreement in the
reorganization plans for the other Joint Ventures, although there is no
assurance that such proposed transactions would be incorporated. During
the bankruptcy proceedings, there exists a possibility that one or more of
the proposed transactions could be challenged by certain creditors
resulting in the elimination or changes to all or portions of the Agreement
by the bankruptcy court. Consequently, there are no assurances that the
transactions contemplated in the Agreement will be finalized. If the
transactions contemplated in the Agreement are finalized, there would
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
nevertheless need to be a significant improvement in current market and
property operating conditions resulting in a significant increase in the
value of the 237 Park Avenue and 1290 Avenue of the Americas properties
before JMB/NYC would receive any share of future net proceeds from
operations, sale or refinancing. The restructuring of the Three Joint
Ventures' agreements would include the elimination of any funding
obligation by JMB/NYC for any purpose. Consequently, in such event,
JMB/NYC would recognize, for financial reporting purposes, a gain to the
extent of the then current deficit investment balance (which amount was
$251,588,694 as of September 30, 1995). In the event that one or more of
the transactions proposed in the Agreement are not consummated, JMB/NYC and
the Partnership may, among other things, recognize substantial gain for
Federal income tax purposes with no corresponding distributable proceeds.
In September 1995, the 2 Broadway Joint Ventures concluded the sale of
2 Broadway with a third party for a net purchase price, after commissions
and certain other payments but before prorations, of approximately $18.3
million. As a result of this sale and the disposition of its interest in
the 2 Broadway Joint Ventures, JMB/NYC recognized a net gain of
approximately $10,000,000 for financial reporting purposes. In
anticipation of this sale and in accordance with the Agreement, the unpaid
first mortgage indebtedness previously allocated to 2 Broadway was re-
allocated to 237 Park Avenue and 1290 Avenue of the Americas during 1994.
A provision for value impairment was recorded at December 31, 1993 for
financial reporting purposes for $192,627,560, net of the non-recourse
portion of the Purchase Notes given to the Olympia & York affiliates as
part of the consideration of JMB/NYC's acquisition of its interest in the
Three Joint Ventures including accrued interest related to the 2 Broadway
Joint Venture interests payable by JMB/NYC to the Olympia & York affiliates
in the amount of $46,646,810. The provision for value impairment was
allocated $136,534,366 and $56,093,194 to the Olympia & York affiliates and
to JMB/NYC, respectively. Such provision was allocated to the partners to
reflect their respective ownership percentages before the effect of the
non-recourse Purchase Notes including accrued interest.
In October 1995, certain affiliates of O&Y, including one of the
partners in the Joint Ventures, filed for protection from creditors under
Chapter 11 of the United States Bankruptcy Code. These affiliates of O&Y
are preparing a plan to restructure their ownership interests in various
office buildings, including the 237 Park Avenue and 1290 Avenue of the
Americas office buildings, which could take the form of one or more real
estate investment trusts. Any such restructuring would be subject to the
approval of their various creditors as well as the bankruptcy court, and
would likely result in such creditors collectively obtaining control of
such ownership interests. Although JMB/NYC has had discussions with the
Olympia & York affiliates and certain of the creditors concerning possible
restructuring proposals, because of the preliminary status and the
complexity of the proposals, as well as the current divergence in the
interests of certain of the creditors, the Partnership does not know at
this time how a restructuring would affect the Joint Ventures, JMB/NYC's
ownership interest therein and/or the effectuation of various transactions
pursuant to the Agreement. One or more of the proposed transactions
contemplated by the Agreement may not be effected as a result of such
restructuring, which could result in, among other things, JMB/NYC and the
Partnership recognizing substantial gain for Federal income tax purposes
with no corresponding distributable proceeds.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JMB/NYC purchased a 46.5% interest in each of the Three Joint Ventures
for approximately $173,600,000, subject to a long-term first mortgage loan
which has been allocated among the individual Joint Ventures. A portion of
the purchase price is represented by four 12-3/4% promissory notes (the
"Purchase Notes") which have an aggregate outstanding principal balance of
$14,272,592 and $35,158,225 at September 30, 1995 and December 31, 1994,
respectively. Such Purchase Notes, which contain cross-default provisions,
and are non-recourse to JMB/NYC, are secured by JMB/NYC's interests in the
Three Joint Ventures, and such Purchase Note relating to the purchase of
the interest in the ventures owning the 2 Broadway Building is additionally
secured by JMB/NYC's interest in $20,000,000 of distributable sale proceeds
from the other two Joint Ventures. A default under the Purchase Notes
would include, among other things, a failure by JMB/NYC to repay a Purchase
Note upon acceleration of the maturity, and could cause an immediate
acceleration of the Purchase Notes for the other ventures. Beginning in
1992, the Purchase Notes provide for monthly interest only payments on the
principal and accrued interest based upon the level of distributions
payable to JMB/NYC discussed below. If there are no distributions payable
to JMB/NYC or if the distributions are insufficient to cover monthly
interest on the Purchase Notes, then the shortfall interest (as defined)
accrues and compounds monthly. Interest accruals total $44,487,575 at
September 30, 1995. During 1994 and through September 30, 1995, no
payments were made on the Purchase Notes. All of the principal and accrued
interest on the Purchase Notes is due in 1999 or, if earlier, on the sale
or refinancing of the related property. The Agreement with the Olympia &
York affiliates, when effective, would provide for a 5-year extension of
the due dates on the Purchase Notes to 2004. It further provides for the
cancellation of indebtedness under the 2 Broadway Purchase Notes in excess
of $20 million. As discussed more fully below, the 2 Broadway Joint
Ventures concluded the sale of the 2 Broadway Building at a price which did
not provide any proceeds to JMB/NYC to repay the related Purchase Notes.
Consequently, $20,000,000 of the 2 Broadway Purchase Notes has been
reallocated and is payable out of JMB/NYC's share of distributable cash
flow or sale proceeds, if any, from the other two Joint Ventures.
Prior to 1992, operating profits (excluding depreciation and
amortization) were allocated 30% to JMB/NYC and 70% to the Olympia & York
affiliates, and operating losses (excluding depreciation and amortization)
were allocated 96% to JMB/NYC and 4% to the Olympia & York affiliates.
Depreciation and amortization were allocated 46.5% to JMB/NYC and 53.5% to
the Olympia & York affiliates. Subsequent to 1991, pursuant to the
agreement reached in March 1993 between JMB/NYC and the Olympia & York
affiliates, for the period January 1, 1992 to June 30, 1993, as discussed
below, gross income was allocable to the Olympia & York affiliates to the
extent of the distributions of excess monthly cash flow received for the
period with the balance of operating profits or losses allocated 46.5% to
JMB/NYC and 53.5% to the Olympia & York affiliates. Beginning July 1,
1993, operating profits or losses, in general, are allocated 46.5% to
JMB/NYC and 53.5% to the Olympia & York affiliates. The Agreement with the
Olympia & York affiliates, when effective, would provide for no further
allocation to JMB/NYC of depreciation, amortization or operating losses and
the allocation of operating income only to the extent of cash flow
distributions, if any, during the remaining term of the Joint Ventures.
There was no allocation of depreciation, amortization or operating income
or losses to JMB/NYC for Federal income tax purposes in 1994.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Under the terms of the Three Joint Ventures' agreements, JMB/NYC was
entitled to a preferred return of annual cash flow, with any additional
cash flow distributable 99% to the Olympia & York affiliates and 1% to
JMB/NYC, through 1991. The Olympia & York affiliates were obligated to
make capital contributions to the Three Joint Ventures to pay any operating
deficits (as defined) and to pay JMB/NYC's preferred return through
December 31, 1991. JMB/NYC did not receive its preferred return for the
fourth quarter 1991 and the Olympia & York affiliates applied JMB/NYC's
preferred return to 1992 disputed interest calculations (see below).
Subsequent to 1991, capital contributions to pay for property operating
deficits and other requirements that may be called for under the Three
Joint Ventures' agreements are required to be shared 46.5% by JMB/NYC and
53.5% by the Olympia & York affiliates. The Olympia & York affiliates have
alleged that pursuant to the Three Joint Ventures' agreements between the
Olympia & York affiliates and JMB/NYC, the effective rate of interest with
reference to the first mortgage loan for the purpose of calculating
JMB/NYC's share of operating cash flow or deficits after 1991 is as though
the rate were fixed at 12-3/4% per annum (versus the variable short-term
U.S. Treasury obligation rate plus 1-3/4% per annum (with a minimum 7%)
payable on the first mortgage loan). JMB/NYC believes that, commencing in
1992, the Three Joint Ventures' agreements require an effective rate of
interest with reference to the first mortgage loan, based upon each Joint
Venture's allocable share of the loan, to be 1-3/4% over the variable
short-term U.S. Treasury obligation rate plus any excess monthly operating
cash flow after capital costs of the Three Joint Ventures, such sum not to
be less than a 7% nor exceed a 12-3/4% per annum interest rate, rather than
the 12-3/4% per annum fixed rate that applied prior to 1992. The Olympia &
York affiliates have disputed this calculation of interest expense and
contended that the 12-3/4% per annum fixed rate applied after 1991.
During the quarter ended March 31, 1993, an agreement was reached
between JMB/NYC and the Olympia & York affiliates (the "1993 Agreement")
which rescinded the default notices previously received by JMB/NYC and
eliminated the alleged operating deficit funding obligation of JMB/NYC for
the period January 1, 1992 through June 30, 1993. Pursuant to the 1993
Agreement, during this period, JMB/NYC recorded interest expense at 1-3/4%
over the variable short-term U.S. Treasury obligation rate (subject to a
minimum rate of 7% per annum), which is the interest rate on the underlying
first mortgage loan. Under the terms of the 1993 Agreement, during this
period, the amount of capital contributions that the Olympia & York
affiliates and JMB/NYC would have been required to make to the Three Joint
Ventures, if the first mortgage loan bore interest at a rate of 12-3/4% per
annum (the Olympia & York affiliates' interpretation), became a priority
distribution level to the Olympia & York affiliates from the Three Joint
Ventures' annual cash flow or net sale or refinancing proceeds. The 1993
Agreement also entitles the Olympia & York affiliates to a 7% per annum
return on such unpaid priority distribution level. During this period, the
excess available operating cash flow after the payment of the priority
distribution level discussed above from any of the Three Joint Ventures was
advanced in the form of loans to pay operating deficits and/or unpaid
priority distribution level amounts of any of the other Three Joint
Ventures. Such loans bear a market rate of interest, have a final maturity
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
of ten years from the date when made and are repayable only out of first
available annual cash flow or net sale or refinancing proceeds. The 1993
Agreement also provides that, except as specifically agreed otherwise, the
parties each reserve all rights and claims with respect to each of the
Three Joint Ventures and each of the partners thereof, including, without
limitation, the interpretation of or rights under each of the joint venture
partnership agreements for the Three Joint Ventures. As a result of the
above noted agreement with the Olympia & York affiliates, the cumulative
priority distribution level payable to the Olympia & York affiliates at
March 31, 1995 was approximately $50,000,000. The term of the 1993
Agreement expired on June 30, 1993. Therefore, effective July 1, 1993,
JMB/NYC is recording interest expense at 1-3/4% over the variable short-
term U.S. Treasury obligation rate plus any excess operating cash flow
after capital costs of the Three Joint Ventures, such sum not to be less
than a 7% nor exceed a 12-3/4% per annum interest rate. The Olympia & York
affiliates continue to dispute this calculation and for the period
commencing July 1, 1993 contend that a 12-3/4% per annum fixed rate
applies. Based upon this interpretation, interest expense for the Three
Joint Ventures for the nine months ended September 30, 1995 was
$87,363,401. Based upon the amount of interest determined by JMB/NYC for
the nine months ended September 30, 1995, interest expense for the Three
Joint Ventures was $51,700,688. The cumulative effect of recording the
interest expense calculated by JMB/NYC is to reduce the losses of the Three
Joint Ventures by $108,734,142 (of which the Partnership's share is
$25,280,688) for the period of July 1, 1993 through September 30, 1995 and
to correspondingly reduce what would otherwise be JMB/NYC's funding
obligation with respect to the Three Joint Ventures.
Certain provisions of the Agreement with the Olympia & York
affiliates, when effective, would resolve the funding obligation dispute.
In general, the priority distribution level created in the 1993 Agreement
and JMB/NYC's alleged funding obligation subsequent to June 30, 1993 would
be eliminated in return for the creation of a new preferential distribution
level to the Olympia & York affiliates payable from all sources of
available cash ("Preference Amount"). Such Preference Amount would be
$81.5 million for 1290 Avenue of the Americas and $38.5 million for 237
Park Avenue and both amounts would bear interest at 9% per annum,
compounded monthly, retroactively effective from May 1, 1994. Net proceeds
available, if any, after repayment of the Preference Amounts plus interest,
would then be distributable in accordance with the original terms of the
Three Joint Ventures' Agreements which provide for, in general, that net
proceeds from all sources will be distributable 46.5% to JMB/NYC and 53.5%
to the Olympia & York affiliates, subject to, as described above, repayment
by JMB/NYC of its Purchase Notes.
The terms of the current joint venture partnership agreements between
the Olympia & York affiliates and JMB/NYC for the Three Joint Ventures
provide, in the event of a dissolution and liquidation of a Joint Venture,
that if there is a deficit balance in the tax basis capital account of
JMB/NYC, after the allocation of profits or losses and the distribution of
all liquidation proceeds, then JMB/NYC generally would be required to
contribute cash to the Joint Venture in the amount of its deficit capital
account balance. Taxable gain arising from the sale or other disposition
of a Joint Venture's property generally would be allocated to the joint
venture partner or partners then having a deficit balance in its or their
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
respective capital accounts in accordance with the terms of the joint
venture agreement. However, if such taxable gain is insufficient to
eliminate the deficit balance in its account in connection with a
liquidation of a Joint Venture, JMB/NYC would be required to contribute
funds to the Joint Venture (regardless of whether any proceeds were
received by JMB/NYC from the disposition of the Joint Venture's property)
to eliminate any remaining deficit capital account balance.
The Partnership's potential liability for such contribution, if any,
would be its share, if any, of the liability of JMB/NYC and would depend
upon, among other things, the amounts of JMB/NYC's and the Olympia & York
affiliates' respective capital accounts at the time of a sale or other
disposition of Joint Venture property, the amount of JMB/NYC's share of the
taxable gain attributable to such sale or other disposition of the Joint
Venture property and the timing of the dissolution and liquidation of the
Joint Venture. In such event, the Partnership could be required to sell or
dispose of its other assets in order to satisfy any obligation attributable
to it as a partner of JMB/NYC to make such contribution. Although the
amount of such liability could be material, the Limited Partners of the
Partnership would not be required to make any additional contributions of
capital to satisfy such obligation, if any, of the Partnership. The
Partnership's deficit investment balance in JMB/NYC as reflected in the
balance sheet (aggregating $165,569,119 at September 30, 1995) does not
necessarily represent the amount, if any, the Partnership would be required
to pay to satisfy its deficit restoration obligation. Under the Agreement
with the Olympia & York affiliates, subject to the satisfaction of certain
conditions, any deficit capital account funding obligation of JMB/NYC to
the Joint Ventures would be eliminated.
The 237 Park Avenue and 1290 Avenue of the Americas office buildings
serve as collateral for the first mortgage loan. The lender has asserted
various defaults under the loan. A restructuring of the loan now appears
likely to depend on the restructuring of the ownership interest of various
affiliates of O&Y in a number of office buildings, as discussed above. The
Olympia & York affiliates reached an agreement with the first mortgage
lender whereby effective January 1, 1993, the Olympia & York affiliates are
limited to taking distributions of $250,000 on a monthly basis from the
Three Joint Ventures and reserving the remaining excess cash flow in a
separate interest-bearing account to be used exclusively to meet the
obligations of the Three Joint Ventures as approved by the lender.
Interest on the first mortgage loan is currently calculated based upon a
variable rate related to the short-term U.S. Treasury obligation rate,
subject to a minimum rate on the loan of 7% per annum.
Should a restructuring of the joint venture partnership agreements
providing for the elimination of JMB/NYC's funding obligations in
accordance with the Agreement not be finalized, JMB/NYC may decide not to
commit any additional amounts to the Three Joint Ventures. In addition,
under these circumstances, it is possible that JMB/NYC may determine to
litigate these issues with the Olympia & York affiliates. A decision not
to commit any additional funds or an adverse litigation result could, under
certain circumstances, result in the loss of JMB/NYC's interest in the
related Joint Ventures. The loss of an interest in a particular Joint
Venture could, under certain circumstances, permit an acceleration of the
maturity of the related purchase note (each purchase note is secured by
JMB/NYC's interest in the related Joint Venture). Under certain
circumstances, the failure to repay a purchase note could constitute a
default under, and permit an immediate acceleration of, the maturity of the
purchase notes for the other Joint Ventures. In such event, JMB/NYC may
decide not to repay, or may not have sufficient funds to repay, any of the
purchase notes and accrued interest thereon. This could result in JMB/NYC
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
no longer having an interest in any of the related Joint Ventures, which
would result in substantial net gain for financial reporting and Federal
income tax purposes to JMB/NYC (and through JMB/NYC and the Partnership, to
the Limited Partners) with no distributable proceeds.
(d) JMB/Piper
Under the terms of a modification agreement with the lender, in
addition to fixed interest on the mortgage notes secured by the Piper
Jaffray Tower, contingent interest is payable in annual installments on
April 1 computed at 50% of gross receipts, as defined, for each fiscal year
in excess of $15,200,000. No such contingent interest was due for 1991,
1992, 1993 or 1994. In addition, to the extent the investment property
generates cash flow after payment of the fixed interest on the mortgage,
contingent interest, if any, leasing and capital costs, and 25% of the
ground rent, such amount will be paid to the lender as a reduction of the
principal balance of the mortgage loan. The excess cash flow payments
remitted to the lender for 1992, 1993 and 1994 totalled $923,362,
$1,390,910 and $353,251 respectively. On a monthly basis, the venture
deposits the property management fee into an escrow account to be used
(including interest earned thereon) for future leasing costs to the extent
cash flow is not sufficient to cover such items. To date, no escrow funds
have been required to be used for leasing costs. The manager of the
property (which was an affiliate of the Corporate General Partner through
November 1994 (see note 6)) has agreed to defer receipt of its management
fee until a later date. As of September 30, 1995, the manager has deferred
approximately $2,832,000 ($2,357,000 of which represents fees deferred
through November 1994) of management fees. If upon sale or refinancing as
discussed below, there are funds remaining in this escrow after payment of
amounts owed to the lender, such funds will be paid to the manager to the
extent of its deferred and unpaid management fees. Any remaining unpaid
management fees would be payable out of the venture's share of sale or
refinancing proceeds. Additionally, pursuant to the terms of the loan
modification, effective January 1992, OB Joint Venture, as majority owner
of the underlying land, began deferring receipt of its share of land rent.
These deferrals will be payable from potential net sale or refinancing
proceeds, if any.
Furthermore, pursuant to the loan modification, the venture can prepay
the mortgage note beginning February 1, 1996, subject to a prepayment fee.
The prepayment fee is calculated pursuant to a formula to provide the
lender a minimum return of 13.59% per annum (if the loan is held to
maturity) plus a participation in excess sale and refinancing proceeds, if
any. For financial reporting purposes, interest expense has been accrued
at a rate of 13.59% per annum. In order for the venture to share in future
net sale or refinancing proceeds, there must be a significant improvement
in current market and property operating conditions resulting in a
significant increase in value of the property.
During the fourth quarter of 1993, the joint venture finalized a lease
amendment with Popham, Haik, Schnobrich & Kaufman, Ltd. (104,843 square
feet). The amendment provides for the extension of the lease term from
February 1, 1997 to January 31, 2003 in exchange for a rent reduction
effective February 1, 1994. In addition, the tenant leased an additional
10,670 square feet effective August 1, 1995. The rental rate on the
expansion space approximates market which is significantly lower than the
reduced rental rate on the tenant's current occupied space.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During the second quarter of 1994, a major tenant and joint venture
partner, Piper Jaffray, Inc. (275,758 square feet) agreed to expand its
leased space by 3,362 square feet in July 1995 and 19,851 square feet in
December 1995 into space previously leased to tenants whose leases expire
just prior to the effective dates for Piper Jaffray, Inc.'s expansions.
The expansion space lease expiration date will be coterminous with Piper
Jaffray, Inc.'s existing lease expiration date of March 2000 and the net
effective rental rate approximates market.
(e) JMB/900
As a result of certain defaults by one of the unaffiliated joint
venture partners, an affiliate of the General Partners assumed management
responsibility for the 900 Third Avenue building as of August 1987 for a
fee computed as a percentage of certain revenues. In December 1994, the
affiliated property manager entered into a sub-management contract with an
unaffiliated third party. Pursuant to the sub-management agreement, the
unaffiliated property manager is managing the property.
Through December 31, 1991, it was necessary for JMB/900 to contribute
approximately $4,364,000 ($1,457,000 of which was contributed by the
Partnership) to pay past due property real estate taxes and to pay certain
costs, including litigation settlement costs, which were the responsibility
of one of the unaffiliated joint venture partners under the terms of the
joint venture agreement to the extent such funds were not available from
the investment property. In July 1989, JMB/900 filed a lawsuit in Federal
court against the former manager and one of the unaffiliated venture
partners to recover the amounts contributed and to recover for certain
other joint venture obligations on which the unaffiliated partner has
defaulted. This lawsuit was dismissed on jurisdictional grounds.
Subsequently, however, the Federal Deposit Insurance Corporation ("FDIC")
filed a complaint, since amended, in a lawsuit against the joint venture
partner, the Partnership, C-XV and JMB/900, which has enabled the
Partnership and C-XV to refile its previously asserted claims against the
unaffiliated joint venture partner as part of that lawsuit in Federal
court. There is no assurance that JMB/900 will recover the amounts of its
claims as a result of the litigation. Due to the uncertainty, no amounts
in addition to the amounts advanced to date, noted above, have been
recorded in the financial statements. Settlement discussions with one of
the venture partners and the FDIC continue. In addition, it appears that
the unaffiliated venture partners may not have the financial capabilities
to repay amounts advanced on their behalf. Consequently, a final
settlement may involve redirecting to JMB/900 amounts otherwise payable to
the unaffiliated venture partners in accordance with the venture agreement.
Under certain circumstances, JMB/900 may consider purchasing one or all of
the unaffiliated venture partners' positions in Progress Partners in order
to resolve this and potential future disputes. There are no assurances
that a settlement will be finalized or that the Partnership and affiliated
partner will be able to recover any amounts from the unaffiliated venture
partners.
In 1994, JMB/900, on behalf of Progress Partners, successfully
completed an extension to December 1, 2001 of its mortgage loan, which
matured on December 1, 1994. Pursuant to the loan extension, net cash flow
(as defined) after debt service and capital will be paid into an escrow
account controlled by the lender to be used, including interest earned
thereon, by the joint venture for the payment of real estate taxes as well
as for releasing costs associated with leases which expire in 1999 and 2000
(approximately 240,000 square feet of space). To date, no escrow funds
have been required to be used for leasing costs. The remaining proceeds in
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
this escrow plus interest earned thereon, if any, will be released to the
joint venture once 90% of such leased space has been renewed or released.
During April and July 1995, the venture deposited approximately $1,300,000
and $1,200,000, respectively, (representing net cash flow (as defined))
generated by the property during the first and second quarter, respectively
into escrow under the terms of the loan extension, for the payment of real
estate taxes. The agreement provides, however, that the joint venture can
immediately repay itself, out of the first available net cash flow (after
the payment of real estate taxes), certain costs incurred and deposits made
by the joint venture in connection with the loan extension. As of
September 30, 1995, approximately $1,300,000 of these amounts have been
repaid to the joint venture (of which the Partnership's share is
approximately $433,000).
(f) South Tower
The mortgage note secured by the South Tower Office Building in Los
Angeles, California, as well as the promissory note secured by the
Partnership's interest in the joint venture matured December 1, 1994. The
Partnership and the joint venture have been in discussions with the
respective lenders regarding an extension or refinancing of the mortgage
note and the promissory note. The joint venture had reached an agreement
with the lender of the mortgage note whereby the lender would refrain from
exercising its rights and remedies under the loan documents through
September 1, 1995 while the venture continued to negotiate an extension or
refinancing of the note with the lender. In 1995, the lender is currently
considering an extension of such agreement. The venture continues to make
interest payments to the lender under the original terms of the mortgage
note and is required to escrow all available cash flow. The Partnership
also has ceased making debt service payments on the promissory note and is
negotiating an extension or refinancing with the lender. Such extension or
refinancing is likely to be dependent on the results of negotiations with
the lender of the mortgage note. There is no assurance that the joint
venture or the Partnership will be able to extend or refinance these notes.
In March 1995, the venture entered into a seven year direct lease with the
Los Angeles Unified School District ("LAUSD") for approximately one-half of
a major tenant's (IBM's) space. Under the terms of an agreement reached
with IBM, the joint venture will be reimbursed by IBM for all shortfalls
between amounts due under the LAUSD as compared to amounts which would have
been received under the IBM leases. In early 1995, two major law firm
tenants occupying approximately 5% of the building's space notified the
joint venture of their intentions to disband each of these respective
firms. The joint venture negotiated a lease termination agreement with one
of the law firms for $1,600,000, all of which has been received as of
September 30, 1995. The other law firm, which has vacated its space and is
no longer paying rent, has filed for bankruptcy. The collectability of
amounts owed by such tenant under its lease obligation is uncertain. In
the absence of an extension or refinancing of the notes, and due to the
uncertainty that IBM will renew any of its remaining space, the Partnership
may decide not to commit any significant additional amounts to the
property. This would likely result in the Partnership no longer having an
ownership interest in the property, which would result in a gain for
financial reporting and for Federal income tax purposes with no
corresponding distributable proceeds. The promissory note secured by the
Partnership's interest in the joint venture has been classified at
September 30, 1995 and December 31, 1994 as a current liability in the
accompanying consolidated financial statements.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(g) 1090 Vermont
Through 1993, the Partnership and joint venture partners had
contributed a total of $4,076,000 ($2,038,000 by the Partnership) to the
joint venture to cover releasing costs and costs of a lobby renovation.
The Partnership and joint venture partner had agreed that the contributions
made to the joint venture would be repaid along with a return thereon out
of first available proceeds from property operations, sale or refinancing.
In 1993, the joint venture finalized a refinancing of the existing mortgage
loan with a new loan in the amount of $17,750,000. The refinancing
resulted in net proceeds of approximately $2,259,000 for the joint venture.
Of such proceeds, $1,785,560 (of which the Partnership's share was
$889,064) was distributed in December 1993 as a partial return of the
additional capital contributed. In addition to providing refinancing
proceeds to the joint venture, the debt service payments due under the new
loan are significantly lower than the payments due under the prior loan.
As a result of the reduced debt service payments under the new loan,
the property is currently producing cash flow for the joint venture.
Consequently, the Partnership and joint venture partners received
distributions totalling approximately $1.4 million since the effective date
of the refinancing (the Partnership's share was approximately $700,000).
Such distributions represented a partial return of the additional capital
contributed.
(h) Mariners Pointe
Under the terms of the joint venture agreement, the joint venture
partner is obligated to contribute 22.3% of annual cash operating deficits.
The Partnership had made a request for capital from the joint venture
partner for its share of the 1992 deficit. The joint venture partner's
obligation to make the capital contribution is secured by its interest in
the joint venture as well as personal guarantees by certain of its
principals. The joint venture partner has not made the required
contribution. The Partnership is currently negotiating with the joint
venture partner to obtain its interest in the joint venture and receive
certain amounts in satisfaction of its funding obligation. There can be no
assurance that the Partnership will collect any or all of the amounts due
from the joint venture partner.
Subsequent to the end of the quarter, the joint venture commenced
marketing the property for sale. There can be no assurance, however, that
a sale will be finalized.
The underlying mortgage note was originally scheduled to mature in
October 1994. See note 4(c) regarding the extension of such loan.
(3) DISPOSITION OF INVESTMENT PROPERTIES
(a) Turtle Creek
Under the terms of the Turtle Creek venture agreement, through
December 1990, the joint venture partner was obligated to make capital
contributions to the venture to fund operating deficits including debt
service of the property and to pay the Partnership a preferential return.
The joint venture partner defaulted on such obligations. Due to the non-
payment of debt service, the lender, on March 7, 1989, concluded
proceedings to realize on its security and took title to the property.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The joint venture partner's obligations to the Partnership were
guaranteed by certain of the joint venture partner's principals. After
filing a lawsuit against the joint venture partner and certain of the joint
venture partner's principals, on April 3, 1992, the Partnership entered
into a settlement agreement whereby the Partnership is scheduled to receive
total payments of $4,075,000. The Partnership received $650,000 of this
amount upon execution of the agreement. The remainder of the settlement
amount is represented by a promissory note issued to the Partnership in the
amount of $3,425,000. The note provides for monthly interest payments over
a six-year period at interest rates which vary from 4.8613% to 5.3684% per
annum. In addition, the note provides for annual principal payments of
$400,000 due every April for five years with a final payment in the amount
of $1,425,000 due on the sixth anniversary of the date of issuance of the
note. Due to the uncertainty of collection of the remaining settlement
amounts, settlement principal payments are reflected in other income only
as collected. As of the date of this report, all scheduled principal and
interest payments have been received. During the fourth quarter of 1994,
the joint venture partner and its principals contacted the Partnership
regarding a substantially discounted prepayment of the note, however, such
discounted prepayment as proposed by the joint venture partner has been
rejected by the Partnership.
(b) Brittany Downs Apartments Phase I and II
A summary description of the sale is contained in note 4(a).
(c) Louisiana Tower
A summary description of the disposition is contained in note 4(b).
(4) LONG-TERM DEBT
(a) Brittany Downs Apartments - Phase I and II
In June 1993, the Partnership refinanced the Brittany Downs Apartments
Phase I $7,090,000 mortgage loan resulting in a reduction of the effective
interest rate on the loan from 8.0% per annum to 6.2% per annum.
Brittany Downs Apartments Phase II did not produce sufficient cash
flow to cover its required debt service payments and, consequently, the
Partnership had been paying a reduced amount of debt service since November
1990. Although, the Partnership was negotiating to obtain a loan
modification to reduce the property's required debt service payments, the
Partnership was placed in default during the fourth quarter 1992, for
failure to pay the required debt service. Accordingly, the balances of the
Phase II first mortgage note, the second mortgage note, and related accrued
interest were classified as current liabilities in the accompanying
consolidated financial statements at December 31, 1994. Based upon the
notice of default, the total amount of interest in arrears on the existing
mortgage notes for Brittany Downs Apartment Phase II in the principal
amount of $8,645,310 as of December 31, 1994, was $1,455,200.
The Partnership had been marketing the two Phases together for sale.
In this regard, on January 10, 1995, the Partnership sold the Brittany
Downs Apartments Phase I and II to an unaffiliated third party. The sale
price was $18,380,000 (before selling costs and prorations), of which
$2,795,768 was received in cash at closing and $14,340,000 represented the
purchaser's assumption of the underlying debt (net of a payoff discount
granted by the underlying lender for Brittany Downs Apartments Phase II).
The sale resulted in a gain of $6,638,774 for financial reporting purposes
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
and approximately $8,800,000 for Federal income tax reporting purposes in
1995. In addition, as a result of the payoff discount granted by the
underlying lender for Brittany Downs Apartments Phase II, the Partnership
recognized an additional gain on forgiveness of indebtedness of $1,586,624
for financial reporting purposes and approximately $140,000 for Federal
income tax reporting purposes in 1995, respectively.
(b) Louisiana Tower
During 1988, Louisiana Tower restructured its existing mortgage note
with the lender. In 1990, the Partnership further restructured the loan in
order to reduce current and anticipated deficits resulting from the
termination of a major tenant's lease and costs associated with leasing.
The terms of the agreement required debt service payments in an amount
equal to the monthly cash flow generated by the property (before payment of
property management fees) plus $100,000 per annum for a five-year period
commencing with the January 1990 payment. The cash flow of the property
was escrowed monthly and remitted to the lender annually on March 31. The
difference between the above pay rate and the contract pay rate of 9% per
annum on the principal balance accrued at 9% per annum compounded monthly
until maturity when the principal and accrued interest was to be due and
payable. The existing modification period expired and the loan matured in
January 1995. The Partnership decided that it would not commit any
significant amounts of capital to this property due to the fact that the
recovery of such amounts would be unlikely. Consequently, commencing in
June 1994, the Partnership ceased making the required debt service payments
to the lender and sought further modifications to the loan. The lender was
unwilling to provide further modifications to the loan and began
foreclosure proceedings in October 1994. A receiver was appointed for the
property and a third party manager was appointed to manage the property on
the receiver's behalf. Title to the property was transferred to the lender
on August 30, 1995. The Partnership recognized a gain of $7,784,268 for
financial reporting purposes and approximately $3,300,000 for Federal
income tax purposes in connection with this transfer with no distributable
proceeds.
(c) Mariners Pointe
During the third quarter of 1994, the Partnership obtained a two year
extension of the existing $6,500,000 mortgage loan. The new maturity date
is October 1, 1996. Under terms of the loan extension, the loan bears
interest at 2.75% above the floating weekly tax exempt rate. The weekly
tax exempt interest rate at September 30, 1995 was 3.25% per annum for an
interest rate of 6.00% per annum as of that date. Prior to the extension,
the loan bore interest of 10.875% per annum.
(d) Wilshire Bundy Plaza
The Partnership had commenced discussions with the existing lender for
a possible debt modification on its mortgage loan which matures April 1996
in order to reduce its debt service and cover its releasing costs and
earthquake repair costs (note 1) over the next several years. In this
regard, the Partnership suspended debt service payments commencing with the
December 1, 1994 payment. During July 1995, the Partnership received a
formal notice of default on its mortgage loan from the lender. As of the
date of this report, $4,991,065 of principal and interest is in arrears
relating to this mortgage loan. Accordingly, the principal balance of the
mortgage loan ($41,292,105) and related accrued interest has been
classified as a current liability in the accompanying consolidated
financial statements at September 30, 1995 and December 31, 1994. The
lender began foreclosure proceedings in October 1995. A receiver has been
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
appointed for the property and the previously affiliated third party
property manager continues to manage the property on behalf of the
receiver. Title to the property is expected to transfer to the lender in
1996. The Partnership expects to recognize a gain for Federal income tax
and financial reporting purposes in 1996 in connection with this transfer
with no distributable proceeds. Reference is made to Part II Other
Information Item 1 Legal Proceedings for a discussion of the foreclosure
action.
(e) Louis Joliet Mall
The second mortgage loan matured on September 1, 1995. During
September 1995, the Partnership finalized a refinancing of the property's
first (with a principal balance of approximately $12,400,000) and second
(with a principal balance of $10,000,000 and accrued and deferred interest
of approximately $2,500,000) mortgage loans with a new seven year first
mortgage loan in the amount of $26,000,000. Such refinancing resulted in
approximately $430,000 in net proceeds after payment of the existing loans,
closing costs and prepayment penalty, which the Partnership has decided to
retain for working capital purposes. The new first mortgage loan bears
interest at 8.03% per annum with monthly interest only payments for the
first eighteen months and monthly principal and interest payments based
upon a 25 year amortization schedule thereafter. The new loan matures on
October 1, 2002 and can be prepaid after the second loan year with a yield
maintenance prepayment penalty. The first mortgage loan bore interest of
8.75% per annum and originally was to mature in April 1998. The second
mortgage loan bore interest of 10% per annum. As a result of the early
refinancing of the first mortgage loan, the Partnership paid a prepayment
penalty of approximately $204,000.
(f) Wells Fargo Center
The mortgage note secured by the Wells Fargo Center (South Tower
Office Building) (with a balance of $194,582,781 as of September 30, 1995)
as well as the promissory note secured by the Partnership's interest in the
joint venture (with a balance of $12,250,000 and accrued interest of
$245,000 and $918,750 as of December 31, 1994 and September 30, 1995,
respectively) matured December 1, 1994. The Partnership and the joint
venture have been in discussions with the respective lenders regarding an
extension or refinancing of the mortgage note and the promissory note. In
the absence of an extension or refinancing of the notes, the Partnership
may decide not to commit any significant additional amounts to the
property. This would likely result in the Partnership no longer having an
ownership interest in the property, and would result in a gain for
financial reporting and for Federal income tax purposes with no
corresponding distributable proceeds. The promissory note secured by the
Partnership's interest in the joint venture has been classified at
September 30, 1995 and December 31, 1994 as a current liability in the
accompanying consolidated financial statements.
(5) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale of
investment properties are to be allocated to the General Partners to the
greatest of (i) 1% of such profits, (ii) the amount of cash distributions
to the General Partners, or (iii) an amount which will reduce the General
Partners' capital accounts deficits (if any) to a level consistent with the
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
gain anticipated to be realized from the sale of properties. Losses from
the sale of investment properties are to be allocated 1% to the General
Partners. The remaining profits and losses will be allocated to the
Limited Partners.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon termination
of the Partnership. Distributions of "net cash receipts" of the
Partnership are allocated 90% to the Limited Partners and 10% to the
General Partners (of which 6.25% constitutes a management fee to the
Corporate General Partner for services in managing the Partnership).
The Partnership Agreement provides that subject to certain conditions,
the General Partners shall receive as a distribution from the sale of a
real property by the Partnership up to 3% of the selling price, and that
the remaining proceeds (net after expenses and retained working capital) be
distributed 85% to the Limited Partners and 15% to the General Partners.
However, prior to such distributions being made, the Limited Partners are
entitled to receive 99% of net sale or refinancing proceeds and the General
Partners shall receive 1% until the Limited Partners have received (i) cash
distributions of net sale or refinancing proceeds in an amount equal to the
Limited Partners' aggregate initial capital investment in the Partnership
and (ii) cumulative cash distributions from the Partnership's operations
which, when combined with the net sale or refinancing proceeds previously
distributed, equal a 6% annual return on the Limited Partners' average
capital investment for each year (their initial capital investment reduced
by net sale or refinancing proceeds previously distributed) commencing with
the third fiscal quarter of 1985. If upon the completion of the
liquidation of the Partnership and the distribution of all Partnership
funds, the Limited Partners have not received the amounts in (i) and (ii)
above, the General Partners will be required to return all or a portion of
the 1% distribution of net sale or refinancing proceeds described above up
to an amount equal to such deficiency in payments to the Limited Partners
pursuant to (i) and (ii) above.
(6) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership (or in the case of certain property management fees and out-of-
pocket expenses, by the Partnership's consolidated ventures) to the
Corporate General Partner and its affiliates as of September 30, 1995 and
1994 and for the nine months ended September 30, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
Unpaid at
September 30,
1995 1994 1995
-------- ------- -------------
<S> <C> <C> <C>
Property management
and leasing fees. . . . . . . . . $315,929 794,430 6,592
Insurance commissions
(refunds) . . . . . . . . . . . . 64,062 65,039 --
Reimbursement (at cost)
for out-of-pocket
expenses. . . . . . . . . . . . . 16,633 66,012 1,165
-------- ------- -----
$396,624 925,481 7,757
======== ======= =====
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Corporate General Partner and its affiliates relating to the
administration of the Partnership and the operation of Partnership
investment properties. For the nine months ended September 30, 1995 and
fiscal 1994, such costs aggregated $625,571 and $214,504, respectively, all
of which was paid as of September 30, 1995. All amounts deferred or
currently due to the Corporate General Partner and its affiliates do not
bear interest and are expected to be repaid in future periods.
The Corporate General Partner of the Partnership has determined to use
independent third parties to perform certain administrative services
beginning in the fourth quarter of 1995. Use of such third parties, is not
expected to have a material effect on the operations of the Partnership.
Reference is made to note 2(c) regarding the Partnership's obligation
to fund, on demand, $1,200,000 and $1,200,000 to Carlyle Managers, Inc. and
Carlyle Investors, Inc., respectively, for additional paid-in capital
(reflected in amounts due to affiliates in the accompanying consolidated
financial statements). As of September 30, 1995, these obligations bore
interest at 5.78% per annum and interest accrued on these obligations was
$341,075.
The manager of Piper Jaffray Tower (which was an affiliate of the
Corporate General Partner through November 1994) has agreed to defer
receipt of its property management fees as more fully discussed in note
2(d). Such fees were approximately $2,357,000 at September 30, 1995.
Effective January 1, 1994, certain officers and directors of the
Corporate General Partner acquired interests in a company which, among
other things, has provided and continues to provide certain property
management services to certain properties owned by the Partnership. Such
acquisition had no effect on the fees payable by the Partnership under any
existing agreements with such company. The fees earned by such company
from the Partnership for the nine months ended September 30, 1995 were
approximately $8,700, all of which have been paid.
Certain of the Partnership's properties are managed by affiliates of
the General Partners or their assignees for fees computed as a percentage
of certain rents received by the properties. In December 1994, one of the
affiliated property managers sold substantially all of its assets and
assigned its interest in its management contracts to an unaffiliated third
party. In addition, certain of the management personnel of the property
manager became management personnel of the purchaser and its affiliates.
The successor to the affiliated property manager's assets is the property
manager of the Wilshire Bundy Office Building, the Mariner's Pointe
Apartments, and the Piper Jaffray Tower. In addition, the affiliated
property manager entered into a sub-management agreement with the successor
for the management of the 900 Third Avenue office building.
The Louis Joliet Mall is managed by an affiliate of the Corporate
General Partner for fees computed as a percentage of certain revenues.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(7) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for Orchard Associates (note
2(b)), JMB/NYC, JMB/Piper, JMB/Piper II, South Tower, JMB/900 and 1090
Vermont for the nine months ended September 30, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Total income from properties
(unconsolidated) . . . . . . . . . . . . . . . . $181,697,760 196,485,734
============ ===========
Operating loss of ventures . . . . . . . . . . . . $ 53,594,673 26,184,946
============ ===========
Partnership's share of
operating loss . . . . . . . . . . . . . . . . . $ 42,102,148 12,236,290
============ ===========
Partnership's share of
gain on sale of
interest . . . . . . . . . . . . . . . . . . . . $ -- 1,702,082
============ ===========
Partnership's share of
gain on extinguishment
of indebtedness. . . . . . . . . . . . . . . . . $ 30,980,232 --
============ ===========
</TABLE>
(8) ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of September 30,
1995 and for the three and nine months ended September 30, 1995 and 1994.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are Notes to Consolidated Financial
Statements contained in this report.
At September 30, 1995, the Partnership and its consolidated ventures
had cash and cash equivalents of approximately $17,937,000. Such funds are
available for distributions to partners and working capital requirements
including the Partnership's potential funding obligations for cash
operating deficits currently being incurred at the Mariner's Pointe
Apartments and Louis Joliet Mall. In February 1995, the Partnership
distributed $8,020,647 to the Limited Partners ($20 per limited partnership
interest) and $81,017 to the General Partners out of proceeds from the sale
or refinancing of certain investment properties. The Partnership and its
consolidated venture have currently budgeted in 1995 approximately
$3,438,000 for tenant improvements and other capital expenditures. The
Partnership's share of such items and its share of such similar items for
its unconsolidated ventures in 1995 is currently budgeted to be
approximately $4,616,000. Actual amounts expended in 1995 may vary
depending on a number of factors including actual leasing activity, results
of property operations, liquidity considerations and other market
conditions over the course of the year. The source of capital for such
items and for both short-term and long-term future liquidity and
distributions to partners is dependent upon net cash generated by the
Partnership's investment properties, debt modifications for certain of the
Partnership's investment properties and the sale or refinancing of such
investments. However, due to the property specific factors discussions
below, the Partnership considers only Louis Joliet Mall, 1090 Vermont
Avenue and 900 Third Avenue to be significant sources of future long-term
operational cash generated. Due to the above situations and the property
specific concerns discussed below, the Partnership had suspended operating
distributions beginning with the fourth quarter 1991 distribution payable
in February 1992.
As of September 30, 1995, the current portion of the long-term
indebtedness of the Partnership and its consolidated ventures was
approximately $53,542,105, including the entire indebtedness encumbering
Wilshire Bundy Plaza and the Partnership's interest in the Wells Fargo
South Tower office building. Reference is made to Notes 2(f) and 4(d).
Piper Jaffray Tower
At the Piper Jaffray Tower, occupancy increased slightly to 98% during
the quarter, up from 97% at the end of the second quarter.
The Minneapolis office market remains competitive due to the
significant amount of new office building developments, which has caused
effective rental rates achieved at Piper Jaffray Tower to be below
expectations. During the fourth quarter of 1993, the joint venture
finalized a lease amendment with Popham, Haik, Schnobrich & Kaufman, Ltd.
(104,843 square feet). The amendment provides for the extension of the
lease term from February 1, 1997 to January 31, 2003 in exchange for a rent
reduction effective February 1, 1994. In addition, the tenant leased an
additional 10,670 square feet effective August 1, 1995. The rental rate on
the expansion space approximates market, which is significantly lower than
the reduced rental rate on the tenant's current occupied space.
During the second quarter of 1994, Piper Jaffray, Inc. (275,758 square
feet) agreed to expand its leased space by 3,362 square feet in July 1995
and 19,851 square feet in December 1995 into space previously leased to
tenants whose leases expire just prior to the effective dates for Piper's
expansions. The expansion space lease expiration date will be coterminous
with Piper's existing lease expiration date of March 2000 and the net
effective rental rate approximates market.
Pursuant to the modification of the mortgage loan made in August 1992,
to the extent the investment property generates cash flow after payment of
fixed interest on the mortgage, contingent interest, if any, leasing and
capital costs, and 25% of the ground rent, such amount will be paid to the
lender as a reduction of the principal balance of the mortgage loan. The
excess cash flow payments remitted to the lender for 1992, 1993 and 1994
totalled $923,362, $1,390,910 and $353,251 respectively. The mortgage note
provides for the lender to earn a minimum internal rate of return which
increases over the term of the note. Accordingly, for financial reporting
purposes, interest expense has been accrued at a rate of 13.59% per annum
which is the estimated minimum internal rate of return per annum assuming
the note is held to maturity. On a monthly basis, the venture deposits the
property management fee into an escrow account to be used for future
leasing costs to the extent cash flow is not sufficient to cover such
items. To date, no escrow funds have been required to be used for leasing
costs. The manager of the property (which was an affiliate of the
Corporate General Partner through November 1994 (see Note 6) has agreed to
defer receipt of its management fee until a later date. As of September
30, 1995, the manager has deferred approximately $2,832,000 of management
fees ($2,357,000 of which represents fees deferred through November 1994).
In order for the Partnership to share in future net sale or refinancing
proceeds, there must be a significant improvement in current market and
property operating conditions resulting in a significant increase in value
of the property. Reference is made to Note 2(d) for further discussion of
this investment property.
Brittany Downs Apartments - Phase I and II
In June 1993, the Partnership refinanced the Brittany Downs Apartments
Phase I $7,090,000 mortgage loan resulting in a reduction of the effective
interest rate on the loan from 8.0% per annum to 6.2% per annum.
Brittany Downs Apartments Phase II did not produce sufficient cash
flow to cover its required debt service payments and, consequently, the
Partnership had been paying a reduced amount of debt service since November
1990. The Partnership had been placed in default for failure to pay the
required debt service.
On January 10, 1995, the Partnership sold the Brittany Downs
Apartments Phase I and II to an unaffiliated third party. The sale price
was $18,380,000 (before selling costs and prorations), of which $2,795,768
was received in cash at closing and $14,340,000 represented the purchaser's
assumption of the underlying debt (net of a payoff discount granted by the
underlying lender for Brittany Downs Apartments Phase II). The sale
resulted in a gain of $6,638,774 for financial reporting purposes and
approximately $8,800,000 for Federal income tax reporting purposes in 1995.
In addition, as a result of the payoff discount granted by the underlying
lender for Brittany Downs Apartments Phase II, the Partnership will
recognize an additional gain on forgiveness of indebtedness of $1,586,624
for financial reporting purposes and approximately $140,000 for Federal
income tax reporting purposes in 1995.
JMB/NYC
Occupancy at 1290 Avenue of the Americas remained at 94% during the
quarter. A new lease with Alex Brown (78,000 square feet or approximately
4% of the building's leasable space) was executed during the third quarter
of 1994. The lease has an eighteen year term. It is expected that the
property will continue to be adversely affected by low effective rental
rates achieved upon releasing of space under existing leases which expire
over the next few years and may be adversely affected by an increased
vacancy rate over the next few years. Approximately 21% of the building's
space under tenant leases will expire by the end of 1995. During the third
quarter of 1995, the Joint Venture that owns the building executed a lease
with a major insurance company for a lease of approximately 506,000 square
feet of space in the building with a fifteen year term with occupancy to
commence in 1996. During the fourth quarter of 1994, the Joint Venture
that owns the building negotiated an amendment with a tenant, Deutsche Bank
Financial Products Corporation, under which the tenant will surrender space
on the 12th and 13th floors (137,568 square feet or approximately 7% of the
building's leasable space) on or before June 30, 1996. The original lease
(as amended) was to terminate on December 31, 2003. The amendment also
added space on the 8th and 9th floors (44,360 square feet or approximately
2% of the building's leasable space) which will expire on or before
December 31, 1997. In consideration for this amendment, the tenant paid an
early termination fee of $29,000,000 to the Joint Venture on December 1,
1994.
Occupancy at 237 Park Avenue during the quarter remained at 98%. It
is expected that the property will be adversely affected by the low
effective rental rates achieved upon releasing of space under existing
leases which expire over the next few years and may be adversely affected
by an increased vacancy rate over the next few years.
In October 1994 JMB/NYC entered into an agreement (the "Agreement")
with the Olympia & York affiliates to resolve certain disputes which are
more fully discussed below. Certain provisions of the Agreement are
immediately effective and, therefore, binding upon the partners, while
others become effective either upon certain conditions being met or upon
execution and delivery of final documentation. In general, the parties
have agreed to: (i) amend the Three Joint Ventures' agreements to
eliminate any funding obligation by JMB/NYC for any purpose in return for
JMB/NYC relinquishing its rights to approve almost all property management,
leasing, sale (certain rights to control a sale would be retained by
JMB/NYC through March 31, 2001) or refinancing decisions and the
establishment of a new preferential distribution level payable to the
Olympia & York affiliates from all future sources of cash, (ii) sell the 2
Broadway Building, and (iii) restructure the first mortgage loan on the
terms discussed below. A more detailed discussion of each of these items
is contained below and in Note 2. As part of the Agreement, in order to
facilitate the restructuring, JMB/NYC and the Olympia & York affiliates
have agreed to file for each of the Three Joint Ventures a pre-arranged
bankruptcy plan for reorganization under Chapter 11 of the Bankruptcy Code.
In June 1995, the 2 Broadway Joint Ventures filed their pre-arranged
bankruptcy plans for reorganization, and in August 1995, the bankruptcy
court entered an order confirming their plans of reorganization.
Bankruptcy filings for the other Joint Ventures are expected to occur later
in 1996. The reorganization plans are expected to incorporate the proposed
transactions contained in the Agreement. During the bankruptcy
proceedings, there exists a possibility that one or more of the proposed
transactions could be challenged by certain creditors resulting in the
elimination or changes to all or portions of the Agreement by the
bankruptcy court. Consequently, there are no assurances that the
transactions contemplated in the Agreement will be finalized. If the
transactions contemplated in the Agreement are finalized, there would
nevertheless need to be a significant improvement in current market and
property operating conditions resulting in a significant increase in the
value of the 237 Park Avenue and 1290 Avenue of the Americas properties
before JMB/NYC would receive any significant share of future net proceeds
from operations, sale or refinancing. The restructuring of the Joint
Ventures' agreements would include the elimination of any funding
obligation by JMB/NYC for any purpose. Consequently, in such event,
JMB/NYC would recognize, for financial reporting purposes, a gain to the
extent of the then current deficit investment balance (which amount was
$251,588,694 as of September 30, 1995). In the event that one or more of
the transactions proposed in the Agreement are not consummated, JMB/NYC and
the Partnership may, among other things, recognize substantial gains for
Federal income tax purposes with no corresponding distributable proceeds.
In October 1995, certain affiliates of O&Y, including one of the
partners in the Joint Ventures, filed for protection from creditors under
Chapter 11 of the United States Bankruptcy Code. These affiliates of O&Y
are preparing a plan to restructure their ownership interests in various
office buildings, including the 237 Park Avenue and 1290 Avenue of the
Americas office buildings, which could take the form of one or more real
estate investment trusts. Any such restructuring would be subject to the
approval of their various creditors as well as the bankruptcy court, and
would likely result in such creditors collectively obtaining control of
such ownership interests. Although JMB/NYC has had discussions with the
Olympia & York affiliates and certain of the creditors concerning possible
restructuring proposals, because of the preliminary status and the
complexity of the proposals, as well as the current divergence in the
interests of certain of the creditors, the Partnership does not know at
this time how a restructuring would affect the Joint Ventures, the
JMB/NYC's ownership interest therein and/or the effectuation of various
transactions pursuant to the Agreement. One or more of the proposed
transactions contemplated by the Agreement may not be effected as a result
of such restructuring, which could result in, among other things, JMB/NYC
and the Partnership recognizing substantial gain for Federal income tax
purposes with no corresponding distributable proceeds.
JMB/NYC has had a dispute with the Olympia & York affiliates over the
calculation of the effective interest rate with reference to the first
mortgage loan, which covers all three properties, for the purpose of
determining JMB/NYC's deficit funding obligation, as described more fully
in Note 2 of Notes to Financial Statements. During the quarter ended March
31, 1993, an agreement was reached between JMB/NYC and the Olympia & York
affiliates (the "1993 Agreement") which rescinded the default notices
previously received by JMB/NYC and eliminated the operating deficit funding
obligation of JMB/NYC for the period January 1, 1992 through June 30, 1993.
Pursuant to the 1993 Agreement, during this period, JMB/NYC recorded
interest expense at 1-3/4% over the short-term U.S. Treasury obligation
rate (subject to a minimum rate of 7% per annum), which is the interest
rate on the underlying first mortgage loan. Under the terms of the 1993
Agreement, during this period, the amount of capital contributions that the
Olympia & York affiliates and JMB/NYC would have been required to make to
the Three Joint Ventures, if the first mortgage loan bore interest at a
rate of 12-3/4% per annum (the Olympia & York affiliates' interpretation),
became a priority distribution level to the Olympia & York affiliates from
the Three Joint Ventures' annual cash flow or net sale or refinancing
proceeds. The 1993 Agreement also entitles the Olympia & York affiliates
to a 7% per annum return on such unpaid priority distribution level.
During this period, the excess available operating cash flow after the
payment of the priority distribution level discussed above from any of the
Three Joint Ventures was advanced in the form of loans to pay operating
deficits and/or unpaid priority distribution level amounts of any of the
other Three Joint Ventures. Such loans bear a market rate of interest,
have a final maturity of ten years from the date when made and are
repayable only out of first available annual cash flow or net sale or
refinancing proceeds. The 1993 Agreement also provides that, except as
specifically agreed otherwise, the parties each reserve all rights and
claims with respect to each of the Three Joint Ventures and each of the
partners thereof, including, without limitation, the interpretation of or
rights under each of the joint venture partnership agreements for the Three
Joint Ventures. The term of the 1993 Agreement expired on June 30, 1993.
Therefore, effective July 1, 1993, JMB/NYC is recording interest expense at
1-3/4% over the short-term U.S. Treasury obligation rate plus any excess
operating cash flow after capital costs of each of the Three Joint
Ventures, such sum not to be less than 7% nor exceed a 12-3/4% per annum
interest rate. The Olympia & York affiliates continue to dispute this
calculation for the period commencing July 1, 1993, and contend that a 12-
3/4% per annum fixed rate applies. Certain provisions of the Agreement
with the Olympia & York affiliates, when effective, would resolve the
funding obligation dispute.
The 237 Park Avenue and 1290 Avenue of the America's office buildings
serve as collateral for the first mortgage loan. A restructuring of the
loan now appears likely to depend upon the restructuring of the ownership
interests of various affiliates of O&Y in a number of office buildings, as
discussed below. In previous negotiations, the Olympia & York affiliates
reached an agreement with the first mortgage lender whereby effective
January 1, 1993, the Olympia & York affiliates are limited to taking
distributions of $250,000 on a monthly basis from the Three Joint Ventures
and reserving the remaining excess cash flow in a separate interest-bearing
account to be used exclusively to meet the obligations of the Three Joint
Ventures as approved by the lender. Interest on the first mortgage loan is
currently calculated based upon a variable rate related to the short-term
U.S. Treasury obligation rate, subject to a minimum rate on the loan of 7%
per annum. In the absence of the contemplated restructuring, an increase
in the short-term U.S. Treasury obligation rate could result in increased
interest payable on the first mortgage loan by the Three Joint Ventures.
In September 1995, the 2 Broadway Joint Ventures concluded the sale of
2 Broadway with a third party for a net purchase price, after commissions
and certain other payments but before prorations, of approximately $18.3
million. As a result of this sale and the disposition of its interest in
the 2 Broadway Joint Ventures, JMB/NYC recognized a net gain of
approximately $10,000,000 for financial reporting purposes. In
anticipation of this sale and in accordance with the Agreement, the unpaid
first mortgage indebtedness previously allocated to 2 Broadway was
reallocated to 237 Park Avenue and 1290 Avenue of the Americas during 1994.
A provision for value impairment was recorded at December 31, 1993 for
financial reporting purposes for $192,627,560, net of the non-recourse
portion of the Purchase Notes given to the Olympia & York affiliates as
part of the consideration for JMB/NYC's acquisition of its interests in the
Three Joint Ventures, including accrued interest related to the 2 Broadway
Joint Venture interests payable by JMB/NYC to the Olympia & York affiliates
in the amount of $46,646,810. The provision for value impairment was
allocated $136,534,366 and $56,093,194 to the Olympia & York affiliates and
JMB/NYC, respectively. Such provision was allocated to the partners to
reflect their respective ownership percentages before the effect of the
non-recourse Purchase Notes including accrued interest.
Should a restructuring of the joint venture partnership agreements
providing for the elimination of JMB/NYC's funding obligations in
accordance with the Agreement not be finalized, JMB/NYC may decide not to
commit any additional amounts to the Three Joint Ventures. In addition,
under these circumstances, it is possible that JMB/NYC may determine to
litigate these issues with the Olympia & York affiliates. A decision not
to commit any additional funds or an adverse litigation result could, under
certain circumstances, result in the loss of the interest in the related
Joint Ventures. The loss of an interest in a particular Joint Venture
could, under certain circumstances, permit an acceleration of the maturity
of the related purchase note (each purchase note is secured by JMB/NYC's
interest in the related Joint Venture). Under certain circumstances, the
failure to repay a purchase note could constitute a default under, and
permit an immediate acceleration of, the maturity of the purchase notes for
the other Joint Ventures. In such event, JMB/NYC may decide not to repay,
or may not have sufficient funds to repay, any of the purchase notes and
accrued interest thereon. This could result in JMB/NYC no longer having an
interest in any of the related Joint Ventures, which would result in
substantial net gain for financial reporting and Federal income tax
purposes to JMB/NYC (and through JMB/NYC and the Partnership, to the
Limited Partners) with no distributable proceeds.
1090 Vermont Avenue Building
During the quarter, occupancy of this office building decreased
slightly to 93%, down from 95% at the end of the second quarter. Through
1993, the Partnership and joint venture partners contributed a total of
$4,076,000 ($2,038,000 by the Partnership) to the joint venture to cover
releasing costs and costs of a lobby renovation. The Partnership and joint
venture partner had agreed that the contributions made to the joint venture
would be repaid along with a return thereon out of first available proceeds
from property operations, sale or refinancing. In 1993, the joint venture
finalized a refinancing of the existing mortgage loan with a new loan in
the amount of $17,750,000. The refinancing resulted in net proceeds of
approximately $2,259,000 for the joint venture. Of such proceeds,
$1,785,560 (of which the Partnership's share was $889,064) was distributed
to the venture partners in December 1993 as a partial return of the
additional capital contributed. As a result of the reduced interest
payments under the new loan, the property produced cash flow for the joint
venture in 1994. Consequently, the Partnership and joint venture partners
received distributions totaling approximately $1.4 million since the
effective date of the refinancing (the Partnership's share was
approximately $700,000). Such distributions represent a partial return of
the additional capital contributed.
Old Orchard Shopping Center
In the third quarter of 1993, Orchard Associates in which the
Partnership and an affiliated partnership sponsored by the Corporate
General Partner each have a 50% interest, sold its interest in the Old
Orchard shopping center (reference is made to Note 2(b)).
At the time of redemption, OOUV retained a portion of the Orchard
Associates redemption proceeds in order to fund certain contingent amounts
which may have been due in the future. In July 1995, OOUV distributed to
Orchard Associates its redemption holdback of $2,083,644. As a result, the
Partnership received its share of the holdback of $1,041,820. In October
1995, OOUV distributed to Orchard their share of the pre-sale settlement
with Federated department stores of $288,452. As a result, Orchard
distributed to the Partnership its share of the settlement of $144,226.
The Partnership currently intends to retain these funds for working capital
purposes.
Wilshire Bundy Plaza
Occupancy at the Wilshire Bundy Plaza decreased slightly to 86% during
the quarter, down from 87% at the end of the second quarter. From October
1995 through 1996, approximately 26% of the building's square feet under
tenant leases expires. Included in such expirations is Bozell, Jacobs,
Kenyan & Eckhardt (40,000 square feet or approximately 14% of the
building's leasable space) who informed the Partnership that it would not
be renewing its lease that expires in May 1996. In addition, several
tenants have approached the Partnership seeking space and/or rent
reductions. The Partnership is working with its existing tenants and
aggressively seeking replacement tenants for current and future vacant
space. The Brentwood office market (the competitive market for the
building) remains competitive with a current vacancy rate of approximately
14%. While office building development in this market is virtually at a
standstill, the Partnership does not expect a significant improvement in
the competitive market conditions for several years.
The Wilshire Bundy Plaza incurred minimal damage as a result of the
earthquake in southern California on January 17, 1994. On February 22,
1995, the City Council of the City of Los Angeles passed an ordinance
relating to the repair of welded steel moment frame buildings in an area of
the city that includes Wilshire Bundy Plaza. During June 1995, the
Partnership received notice from the City of Los Angeles which requires the
Partnership to submit a report to the City which indicates the number of
welded connections damaged and proposed repair procedures by no later than
December 20, 1995. All repairs must be completed by no later than March
19, 1998. While a complete determination of the requirements to comply
with the ordinance is not as yet completed, it is estimated that the cost
of such repairs, which have been accrued for and are included in accounts
payable in the accompanying consolidated financial statements, could be
approximately $3 million (none of which had been budgeted).
In 1995, and for several years beyond, the property will not generate
enough cash flow to pay for the costs associated with releasing the space
under leases which expire, the capital costs associated with the seismic
repair, and the required debt service payments. Consequently, the
Partnership had commenced discussions with the existing lender for a
possible debt modification on its mortgage loan which matures April 1996 in
order to reduce its debt service and cover its releasing costs and
earthquake repair costs (discussed above) over the next several years. In
this regard, the Partnership suspended debt service payments commencing
with the December 1, 1994 payment. During July 1995, the Partnership
received a formal notice of default on its mortgage loan from the lender.
As of the date of this report, $4,991,065 of principal and interest is in
arrears relating to this mortgage loan. Accordingly, the principal balance
of the property's underlying mortgage loan ($41,292,105) and related
accrued interest ($4,371,671) has been classified as a current liability in
the accompanying consolidated financial statements as of September 30,
1995. The lender began foreclosure proceedings in October 1995. A
receiver has been appointed for the property and the previously affiliated
third party property manager continues to manage the property on behalf of
the receiver. Title to the property is expected to transfer to the lender
in 1996. This property represents approximately 9% of the Partnership's
original cash investment in real properties. The Partnership expects to
recognize a gain for Federal income tax and financial reporting purposes in
1996 in connection with this transfer with no distributable proceeds.
Wells Fargo Center
The Wells Fargo Center ("South Tower") operates in the downtown Los
Angeles office market, which has become extremely competitive over the last
several years with the addition of several new buildings that has resulted
in a high vacancy rate of approximately 25% in the marketplace. In 1992,
two major law firm tenants occupying approximately 11% of the building's
space approached the joint venture indicating that they were experiencing
financial difficulties and desired to give back a portion of their leased
space in lieu of ceasing business altogether. The joint venture reached
agreements which resulted in a reduction of the space leased by each of
these tenants. Also, a major tenant, IBM, which originally leased
approximately 58% of the tenant space in the Wells Fargo Building, is sub-
leasing a portion of its space which is scheduled to expire in December
1998. In addition, the joint venture has entered into a seven year direct
lease with the Los Angeles United School District ("LAUSD") for
approximately one-half of IBM's space with occupancy beginning March 1,
1995. Under the terms of an agreement reached with IBM, the joint venture
will be reimbursed by IBM for all shortfalls between amounts which would
have been due under the IBM lease and the LAUSD lease. In early 1995, two
major law firm tenants occupying approximately 5% of the building's space
notified the joint venture of their intentions to disband each of these
respective firms. The joint venture negotiated a lease termination
agreement with one of the law firms for $1,600,000, all of which has been
received as of September 30, 1995. The other law firm, which has vacated
its space, has filed for bankruptcy. The collectability of amounts owed by
such tenant under its lease obligation is uncertain. The Partnership
expects that the competitive market conditions and the continued recession
in Southern California will have an adverse affect on the building through
lower effective rental rates achieved on releasing of existing space which
expires or is given back over the next several years. In addition, new
leases will likely require expenditures for lease commissions and tenant
improvements prior to occupancy. This anticipated decline in rental rates,
the anticipated increase in re-leasing time and the costs upon releasing
will result in a decrease in cash flow from operations over the near term.
The Partnership's share of distributions from the joint venture for 1992
and 1993 were insufficient to cover the debt service on the promissory note
secured by the Partnership's interest in the joint venture. Such shortfall
was due to rental concessions granted to facilitate leasing of space taken
back in 1992 from the two tenants noted above and the expansion of one of
the other major tenants in the building. The property produced cash flow
and distributed approximately $1,963,000 to the Partnership in 1994.
The mortgage note secured by the property (with a balance of
$194,582,781 as of September 30, 1995), as well as the promissory note
secured by the Partnership's interest in the joint venture (with a balance
of $12,250,000 and accrued interest of $245,000 and $918,750 as of December
31, 1994 and September 30, 1995, respectively) matured December 1, 1994.
The Partnership and the joint venture have been in discussions with the
respective lenders regarding an extension of the mortgage note and the
promissory note. The joint venture had reached an agreement with the
lender of the mortgage note whereby the lender would refrain from
exercising its rights and remedies under the loan documents through
September 1, 1995 while the venture continues to negotiate an extension or
refinancing of the note with the lender. The lender is currently
considering an extension of such agreement. The venture continues to make
interest payments to the lender under the original terms of the mortgage
note and is required to escrow all available cash flow. The Partnership
has ceased making debt service payments on the promissory note and an
extension or refinancing with the lender is likely to be dependent on the
results of negotiations with the lender of the mortgage note. There is no
assurance that the joint venture or the Partnership will be able to extend
or refinance these notes. In the absence of an extension or refinancing of
the notes, the Partnership may decide not to commit any significant
additional amounts to the property. This would likely result in the
Partnership no longer having an ownership interest in the property, and in
such event would result in a gain for financial reporting and for Federal
income tax purposes with no corresponding distributable proceeds. The
promissory note secured by the Partnership's interest in the joint venture
has been classified at June 30, 1995 and December 31, 1994 as a current
liability in the accompanying consolidated financial statements. The
property did not sustain any significant damage as a result of the January
1994 earthquake in southern California. Reference is made to Notes 2(f)
and 4(f).
900 Third Avenue Building
During the quarter, occupancy of this building remained at 96%. The
midtown Manhattan market remains competitive. Approximately 44,000 square
feet (approximately 8% of the building's leasable square footage) of leased
space expires in 1995 and 1996. The manager has signed a long term lease
with Zweig Advisors, Inc. to occupy 25,900 square feet (approximately 5% of
the building's leasable square footage) of this space upon the existing
lease expiration on March 1, 1996. The property's operating cash flow will
be adversely affected by lower rental rates achieved and leasing costs
incurred upon releasing this space and may be adversely affected by
increased vacancy during the releasing period. In 1994, JMB/900 Third
Avenue Associates, on behalf of the property joint venture, successfully
completed an extension to December 1, 2001 of its mortgage loan, which
matured on December 1, 1994. In addition, net cash flow after debt service
and capital will be paid into an escrow account controlled by the lender to
be used by the property joint venture for the payment of property taxes and
for releasing costs associated with leases which expire in 1999 and 2000
(approximately 240,000 square feet of space). To date, no escrow funds
have been required to be used for leasing costs. The remaining proceeds in
this escrow (including interest earned thereon), if any, will be released
to the property joint venture once 90% of such leased space has been
renewed or released. The agreement provides, however, that the joint
venture can repay itself, out of the first available net cash flow, certain
costs incurred and deposits made by the joint venture in connection with
the loan extension. As of September 30, 1995, approximately $1,300,000 of
these amounts have been repaid to the joint venture (of which the
Partnership's share is approximately $433,000). During April and July
1995, the venture deposited approximately $1,300,000 and $1,200,000,
respectively, (representing cash flow generated during the first quarter
and second quarter, respectively) into escrow under the terms of the loan
extension, for the payment of property taxes.
Louis Joliet Mall
Occupancy at this mall increased to 87% (excluding the effect of the
move-out of General Cinema, Inc., as discussed below), up from 80% at the
end of the second quarter, primarily due to new tenants, Italiani's (7,218
square feet, or approximately 2.5% of the mall's leasable space), Joliet
Public Library (4,727 square feet, or approximately 1.5% of the mall's
leasable space) and Lechters (3,300 square feet, or approximately 1% of the
mall's leasable space), taking occupancy during the quarter. During the
fourth quarter of 1994, General Cinema, Inc. (14,587 square feet or
approximately 5% of the mall space) ceased its operations within the mall.
The Partnership and the tenant are currently seeking a new operator to run
the theaters at the mall. The tenant continues to pay rent in accordance
with its lease (which expires December 31, 1998) and as of the date of this
report, all amounts due from the tenant under the lease have been received.
During the third quarter of 1993, Al Baskin Co. (19,960 square feet or
approximately 7% of the mall space) informed the Partnership that even
though its lease does not contain provisions allowing it to terminate its
lease, it believed it had the right and intended to terminate its lease
effective December 31, 1993 (as opposed to the original lease expiration of
December 31, 2003). In response, during the third quarter of 1993, the
Partnership filed an anticipatory breach lawsuit against the tenant in
order to prevent the tenant from vacating its space and cease paying rent
to the Partnership. Subsequently, the Partnership and tenant entered into
a temporary agreement under which the tenant continues to operate its store
and pay rent. As of the date of this report, all amounts due from the
tenant under the lease have been received. The Partnership believes the
tenant's position is without merit and intends to enforce the original
terms of the lease. On November 9, 1995, Al Baskin filed for protection
under Chapter 11 of the U.S. Bankruptcy Code. According to published
reports, in connection with its reorganization, Al Baskin intends to
repudiate its leases and close several of its stores including the store at
Louis Joliet Mall by February 1, 1996. The Partnership has only begun to
assess this situation and the remedies available to it by law. In the
short term, if Al Baskin is successful in repudiating its lease and closing
its store, there will be an adverse affect on the property's occupancy and
cash flow. The long term affects on the property cannot be determined at
this time. In addition, the Partnership is uncertain as to what will
happen with the above discussed ongoing litigation.
A mall enhancement program for the center was completed in November
1994 at a cost of approximately $2,500,000. The enhancement program
included new flooring, signage and mall entranceways. Costs were funded
from the property's operating cash flow and the Partnership's working
capital reserve.
The second mortgage loan matured on September 1, 1995. During
September 1995, the Partnership refinanced the first mortgage and second
mortgage loans with a new mortgage with the first mortgage lender. The
terms of the mortgage loan are for a $26,000,000 seven year term at an
interest rate of 8.03% per annum. The first mortgage loan bore interest of
8.75% per annum and was to mature in April 1998. The second mortgage loan
bore interest of 10% per annum. As a result of the early refinancing of
the first mortgage loan, the Partnership paid a prepayment penalty of
approximately $204,000. The Partnership received approximately $430,000 in
net proceeds after payment of the existing loans, closing costs and
prepayment penalty.
Louisiana Tower
The property operated at a small deficit in 1994 as a result of the
1990 debt modification as more fully discussed in Note 4(b). The existing
modification period expired and the loan (with an outstanding principal
balance of $22,173,850 at August 30, 1995) matured in January 1995. The
Partnership decided that it would not commit any significant amounts of
capital to this property due to the fact that the recovery of such amounts
would be unlikely. Consequently, commencing in June 1994, the Partnership
ceased making the required debt service payments to the lender and sought
further modifications to the loan. The lender was unwilling to provide
further modifications to the loan and began foreclosure proceedings in
October 1994. A receiver was appointed for the property and a third party
manager was appointed to manage the property on the receiver's behalf.
Title to the property transferred to the lender on August 30, 1995. This
property represents approximately 5% of the Partnership's original cash
investment in real properties. The Partnership recognized a gain of
$7,784,268 for financial reporting purposes and approximately $3,300,000
for Federal income tax purposes in connection with this transfer with no
distributable proceeds.
Mariners Pointe Apartments
Occupancy at the Mariners Pointe Apartments increased during the
quarter to 96%, up from 91% at the end of second quarter. The property has
operated at a small deficit in 1994 and 1995. During the third quarter of
1994, the Partnership obtained a two-year extension of the existing
$6,500,000 mortgage loan which matured on October 1, 1994. Under terms of
the loan extension, the loan bears interest at 2.75% above the floating
weekly tax exempt rate. The weekly tax exempt interest rate at September
30, 1995 was 3.25% per annum resulting in an interest rate of 6.00% per
annum on that date. Prior to the extension, the loan bore interest of
10.875% per annum.
Subsequent to the end of the quarter, the joint venture commenced
marketing the property for sale. There can be no assurance, however, that
a sale will be finalized.
In 1992 and 1993, the property operated at a small deficit as the
result of certain capital improvements. Under the terms of the joint
venture agreement, the joint venture partner was obligated to contribute
22.3% of such deficits. The Partnership had made a request for capital
from the joint venture partner for its share of the 1992 deficit. The
joint venture partner's obligation to make the capital contribution is
secured by its interest in the joint venture as well as personal guarantees
by certain of its principals. The joint venture partner has not made the
required contribution. The Partnership is currently negotiating with the
joint venture partner to obtain its interest in the joint venture and
receive certain amounts in satisfaction of its funding obligation. There
can be no assurance that the Partnership will collect any or all of the
amounts due from the joint venture partner in satisfaction of its funding
obligation.
General
To the extent that additional payments related to certain properties
are required or if properties do not produce adequate amounts of cash to
meet their needs, the Partnership may utilize the working capital which it
maintains and/or pursue outside financing sources. However, based upon
current market conditions, the Partnership may decide not to, or may not be
able to, commit additional funds to certain of its investment properties.
This would result in the Partnership no longer having an ownership interest
in such property, and generally would result in taxable income to the
Partnership with no corresponding distributable proceeds. The
Partnership's and the ventures' mortgage obligations are all non-recourse.
Therefore, the Partnership and its ventures are not personally obligated to
pay mortgage indebtedness.
There are certain risks and uncertainties associated with the
Partnership's investments made through joint ventures including the
possibility that the Partnership's joint venture partners in an investment
might become unable or unwilling to fulfill their financial or other
obligations, or that such joint venture partners may have economic or
business interests or goals that are inconsistent with those of the
Partnership.
While the real estate markets are recuperating, highly competitive
market conditions continue to exist in most locations. The Partnership's
philosophy and approach has been to aggressively and creatively manage the
Partnership's real estate assets to attract and retain tenants. Net
effective rents to the landlord from renewal tenants are much more
favorable than lease terms which can be negotiated with new tenants.
However, the Partnership's capital resources must also be preserved and
allocated in such a manner as to maximize the total value of the portfolio.
As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. The Partnership has also sought or is seeking additional loan
modifications or extensions of loan modifications where appropriate. By
conserving working capital, the Partnership will be in a better position to
meet the future needs of its properties since outside sources of capital
may be limited.
The Partnership has held certain of its investment properties longer
than originally anticipated in an effort to maximize the return to the
Limited Partners. After reviewing the remaining properties and their
competitive marketplace, the General Partners of the Partnership expect to
be able to conduct an orderly liquidation of the remaining properties as
quickly as practicable. Therefore, the affairs of the Partnership are
expected to be wound up no later than 1999 (with the possible exception of
the Partnership's interest in JMB/NYC) (sooner if the properties are sold
or disposed of in the nearer term), barring unforeseen economic
developments. However, in light of current severely depressed real estate
markets, it currently appears that the Partnership's goal of capital
appreciation will not be achieved. Although, the Partnership expects to
distribute from sale proceeds some portion of the Limited Partners'
original capital, without a dramatic improvement in market conditions, the
Limited Partners will receive substantially less than half of their
original investment.
RESULTS OF OPERATIONS
At September 30, 1995 and 1994, the Partnership owned ten and twelve
investment properties, respectively, all of which were operating.
The aggregate decrease in the balance of cash and cash equivalents and
short-term investments as of September 30, 1995 as compared to December 31,
1994 is primarily due to the distribution to partners of $8,101,664 in
February 1995, partially offset by the receipt of $2,795,768 relating to
the sale of Brittany Downs Apartments Phase I and Phase II in January 1995
and the receipt of $1,041,820, in July 1995 relating to the sale of Old
Orchard (Note 2(b)). The decrease in short-term investments at September
30, 1995 as compared to December 31, 1994 is primarily due to all of the
Partnership's investments in U.S. Government obligations being classified
as cash equivalents at September 30, 1995. Reference is made to Note 1.
The decrease in restricted funds as of September 30, 1995 as compared
to December 31, 1994 is due to the disposition of Louisiana Tower in August
1995 (see Note 4(b)).
The increase in prepaid expenses at September 30, 1995 as compared to
December 31, 1994 is due primarily to the timing of payment of insurance
premiums at each of the Partnership's consolidated investment properties.
The decrease in interest, rents and other receivables, escrow
deposits, land and leasehold improvements, buildings and improvements,
accumulated depreciation, and deferred expenses as of September 30, 1995 as
compared to December 31, 1994 is due primarily to the sale of the Brittany
Downs Apartments Phase I and Phase II in January 1995 (Note 4(a)) and the
disposition of Louisiana Tower in August 1995.
The decrease in current portion of long-term debt, accrued interest,
and long-term debt, less current portion as of September 30, 1995 as
compared to December 31, 1994 is primarily due to the sale of the Brittany
Downs Apartments Phase I and Phase II during January 1995, the disposition
of Louisiana Tower in August 1995, and the refinancing of the first and
second mortgage notes at Louis Joliet Mall in September 1995. The decrease
in accrued interest as of September 30, 1995 as compared to December 31,
1994 is partially offset by the compounding of interest on the loan secured
by Wilshire Bundy Plaza (Note 4(d)) and the debt secured by the
Partnership's interest in the South Tower Venture (Note 2(f)) for which the
Partnership has suspended debt service payments.
The increase in due to affiliates as of September 30, 1995 as compared
to December 31, 1994 is due primarily to interest accruing on the
Partnership's obligation to fund, on demand, $2,400,000 to Carlyle
Managers, Inc. and Carlyle Investors, Inc. ($1,200,000 for each), for
additional paid in capital (as more fully discussed in Note 2(c)).
The increase in accrued real estate taxes as of September 30, 1995 as
compared to December 31, 1994 is primarily due to the timing of the payment
of real estate taxes at Wilshire Bundy Plaza, partially offset by the sale
of the Brittany Downs Apartments Phase I and Phase II in January 1995.
The decrease in unearned rents as of September 30, 1995 as compared to
December 31, 1994 is primarily due to the timing of the collection of
rental income at Wilshire Bundy Plaza and Louis Joliet Mall.
The decrease in other liabilities as of September 30, 1995 as compared
to December 31, 1994 is primarily due to the disposition of Louisiana Tower
in August 1995.
The decrease in rental income, mortgage and other interest,
depreciation and property operating expenses for the three and nine months
ended September 30, 1995 as compared to the three and nine months ended
September 30, 1994 is due primarily to the sale of Brittany Downs
Apartments Phase I and II in January 1995 and the disposition of Louisiana
Tower in August 1995.
The increase in interest income for the three and nine months ended
September 30, 1995 as compared to the three and nine months ended September
30, 1994 is primarily due to the increase in 1995 in the average interest
rate earned on the Partnership's investment in U.S. Government obligations.
The increase in professional services for the three and nine months
ended September 30, 1995 as compared to the three and nine months ended
September 30, 1995 is primarily due to professional fees incurred in
conjunction with the refinancing of Louis Joliet Mall in September 1995 and
the disposition of the Louisiana Tower in August 1995.
The increase in amortization of deferred expenses for the three and
nine months ended September 30, 1995 as compared to the three and nine
months ended September 30, 1994 is primarily due to the amortization of
costs associated with the loan extension obtained at Mariners Pointe
Apartments during the third quarter of 1994 (Note 4(c)).
The increases in general and administrative expenses for the three and
nine months ended September 30, 1995 as compared to the three and nine
months ended September 30, 1994 are attributable primarily to an increase
in reimbursable costs to affiliates of the General Partners in 1995 and the
recognition of certain additional prior year reimbursable costs to such
affiliates. Reference is made to Note 6.
The increase in the Partnership's share of loss from operations of
unconsolidated ventures and the Partnership's share of gain from the
extinguishment of indebtedness of unconsolidated venture for the three and
nine months ended September 30, 1995 as compared to the three and nine
months ended September 30, 1994 is primarily due to the Partnership's share
of loss from the disposition of the 2 Broadway ventures (Note 2(c)) and the
related gain on the extinguishment of indebtedness.
The increase in the gain from the sale or disposition of investment
properties and extraordinary items for the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1994 is due to the
sale of the Brittany Downs Apartments Phase I and Phase II in January 1995
and the related gain recognized on forgiveness of debt (Note 4(a)), the
refinancing of Louis Joliet Mall in September 1995 and related prepayment
penalty (Note 4(e)) and the disposition of Louisiana Tower in August 1995.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 13, 1994, an action entitled TRAVELERS INSURANCE COMPANY V.
SHREVEPORT PLAZA ASSOCIATES LIMITED PARTNERSHIP was initiated in the 1st
Judicial District Court of Caddo Parish, Louisiana. In the lawsuit,
Travelers Insurance Company ("Travelers"), as the holder of a first
mortgage loan secured by the Louisiana Tower office building, sought to
foreclose the mortgage and obtain title to the property. In June 1994, the
Partnership ceased making the required debt service payments on the first
mortgage loan and commenced discussions with Travelers to obtain a further
modification to the terms of the loan in order to eliminate current
deficits being incurred for the property (the terms of the loan were
previously modified in 1990). Travelers refused to provide a further
modification, and the Partnership decided not to commit any significant
additional amounts of capital to the property since the recovery of such
amounts would be unlikely. A receiver appointed pursuant to a court order
did not contest the foreclosure action, and title to the property was
transferred to Travelers on August 30, 1995.
On October 17, 1995, an action entitled TEACHERS INSURANCE AND ANNUITY
ASSOCIATION V. CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV was filed in
California Superior Court of Los Angeles County, California. In the
lawsuit, Teachers Insurance and Annuity Association ("Teachers"), as the
holder of the first mortgage loan secured by the Wilshire Bundy Plaza
office building, seeks to foreclose the mortgage and obtain title to the
property. As a result of competitive market conditions combined with
significant lease turnover, the property will not generate sufficient cash
flow to pay re-leasing costs, anticipated capital costs and required debt
service during 1995 and several years after. Consequently, in December
1994, the Partnership ceased making the required debt service payments on
the first mortgage loan and commenced discussions with Teachers to obtain a
modification of the loan to reduce the debt service and cover capital and
re-leasing costs expected to be incurred over the next several years.
Teachers has refused to provide such a loan modification, and the
Partnership has decided not to commit any significant additional amounts of
capital to the property since recovery of such amounts would be unlikely.
By agreement of the parties, the court has appointed a receiver for the
property. The Partnership is not contesting the foreclosure action. Title
to the property is expected to transfer in early 1996.
Reference is made to Note 2(e) for a discussion of certain other
litigation involving the Partnership.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Reference is made to Notes 2(c), 2(f) and 4(d) and the Liquidity and
Capital Resources section of Management's Discussion and Analysis of
Financial Condition and Results of Operations included with this Report for
a discussion of defaults under, and/or current attempts to obtain
modifications of, loans secured by the 237 Park Avenue, 1290 Avenue of the
Americas, the Wells Fargo South Tower and the Partnership's interest in the
South Tower Venture and Wilshire Bundy Plaza, which discussions are hereby
incorporated by reference.
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment
properties.
<CAPTION>
1994 1995
------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Wilshire Bundy Plaza
Los Angeles, California . . . . . 87% 87% 80% 80% 83% 87% 86%
2. Brittany Downs Apartments
Phase I and II
Thornton (Denver), Colorado . . . 96% 96% 96% 95% N/A N/A N/A
3. Mariners Pointe Apartments
Stockton, California. . . . . . . 84% 86% 96% 91% 85% 91% 96%
4. 237 Park Avenue Building
New York, New York. . . . . . . . 98% 98% 98% 98% 98% 98% 98%
5. 1290 Avenue of the
Americas Building
New York, New York. . . . . . . . 90% 91% 91% 94% 94% 94% 94%
6. 2 Broadway Building
New York, New York. . . . . . . . 30% 19% 19% 18% 18% 18% N/A
7. 1090 Vermont Avenue
Building
Washington, D.C.. . . . . . . . . 99% 99% 99% 95% 95% 95% 93%
8. Louisiana Tower
Shreveport, Louisiana . . . . . . 83% 86% 88% 88% 88% 88% N/A
9. Piper Jaffray Tower
Minneapolis, Minnesota. . . . . . 99% 99% 98% 98% 97% 97% 98%
10. 900 Third Avenue Building
New York, New York. . . . . . . . 94% 94% 94% 94% 94% 96% 96%
11. Wells Fargo Center
South Tower
Los Angeles, California . . . . . 97% 97% 97% 96% 96% 96% 96%
12. Louis Joliet Mall
Joliet, Illinois. . . . . . . . . 75% 72% 76% 79% 79% 80% 87%
<FN>
- ----------------
An "N/A" indicates that the property was sold or the Partnership's interest in the property was sold and
was not owned by the Partnership at the end of the quarter.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4-A. Long-term debt documents relating to the first
mortgage loan secured by the Wilshire Bundy Plaza in Los Angeles,
California are hereby incorporated by reference to the Partnership's Report
on Form 8-K (File No. 0-15962) dated February 19, 1986.
4-B. Long-term debt documents relating to the first
mortgage loan secured by the 2 Broadway, 1290 Avenue of the Americas and
237 Park Avenue Buildings are hereby incorporated by reference to the
Partnership's Post-Effective Amendment #1 to the Partnership's Registration
Statement on Form S-11 (File No. 0-15962) dated June 4, 1984.
4-D. Long-term debt documents relating to the first and
second mortgage loans secured by the Louis Joliet Mall in Joliet, Illinois
are hereby incorporated by reference to the Partnership's Report on Form 8-
K (File No. 0-15962) dated August 1, 1985.
4-E. Long-term debt documents relating to the refinancing
of the first mortgage loan secured by the 1090 Vermont office building in
Washington, D.C., copies of which are hereby incorporated by reference to
the Partnership's Report for December 31, 1994 on Form 10-K (File No. 0-
15962) dated March 27, 1995.
4-F. Long-term debt documents relating to the September,
1995 refinancing of the first and second mortgage loans secured by the
Louis Joliet Mall in Joliet, Illinois, copies of which are filed herewith.
10-A. Acquisition documents relating to the purchase by the
Partnership of the Wilshire Bundy Plaza in Los Angeles, California are
hereby incorporated by reference to the Partnership's Report on Form 8-K
(File No. 0-15962) dated February 19, 1986.
10-B. Acquisition documents relating to the purchase by the
Partnership of an interest in the 1290 Avenue of the Americas Building in
New York, New York are hereby incorporated by reference to the
Partnership's Post-Effective Amendment #1 to the Partnership's Registration
Statement on Form S-11 (File No. 0-15962) dated June 4, 1984.
10-C. Acquisition documents relating to the purchase by the
Partnership of an interest in the 237 Park Avenue Building in New York, New
York are hereby incorporated by reference to the Partnership's Post-
Effective Amendment #1 to the Partnership's Registration Statement on Form
S-11 (File No. 0-15962) dated June 4, 1984.
10-D. Acquisition documents relating to the purchase by the
Partnership of an interest in the 2 Broadway Building in New York, New York
are hereby incorporated by reference to the Partnership's Post-Effective
Amendment #1 to the Partnership's Registration Statement on Form S-11 (File
No. 0-15962) dated June 4, 1984.
10-E. Acquisition documents relating to the purchase by the
Partnership of an interest in the Wells Fargo Center - IBM Tower in Los
Angeles, California are hereby incorporated by reference to the
Partnership's Post-Effective Amendment #5 to the Partnership's Registration
Statement on Form S-11 (File No. 0-15962) dated June 4, 1984.
10-G. Acquisition documents relating to the purchase by the
Partnership of the Louis Joliet Mall in Joliet, Illinois are hereby
incorporated by reference to the Partnership's Report on Form 8-K (File No.
0-15962) dated August 1, 1985.
10-H.* Agreement dated March 25, 1993 between JMB/NYC and
the Olympia & York affiliates regarding JMB/NYC's deficit funding
obligations from January 1, 1992 through June 30, 1993 is hereby
incorporated by reference.
10-I. Settlement Agreement dated March 12, 1993 between the
Resolution Trust Corporation and Carlyle-XIV is hereby incorporated by
reference to the Partnership's Report on Form 10-Q dated May 14, 1993.
10-J. Agreement of Limited Partnership of Carlyle-XIV
Associates, L.P. is hereby incorporated by reference to the Partnership's
Report on Form 10-Q (File No. 0-15962) dated May 14, 1993.
10-K Second Amended and Restated Articles of Partnership
of JMB/NYC Office Building Associates, is hereby incorporated by reference
to the Partnership's report for December 31, 1993 on Form 10-K (File No. 0-
15962) dated March 28, 1994.
10-L. Documents relating to the sale by the Partnership of
its interest in the Old Orchard Urban Venture are hereby incorporated by
reference to the Partnership's report on Form 8-K (File No. 0-15962) for
August 30, 1993, dated November 12, 1993.
10-M. Amended and Restated Certificate of Incorporation of
Carlyle-XIV Managers, Inc., (known as Carlyle Managers, Inc.) is hereby
incorporated by reference to the Partnership's report for December 31, 1993
on Form 10-K (File No 0-15962) dated March 28, 1994.
10-N. Amended and Restated Certificate of Incorporation of
Carlyle-XIII Managers, Inc., (known as Carlyle Investors, Inc.), is hereby
incorporated by reference to the Partnership's report for December 31, 1993
on Form 10-K (File No. 0-15962) dated March 28, 1994.
10-O. $1,200,000 demand note between Carlyle-XIV
Associates, L.P. and Carlyle Managers, Inc., is hereby incorporated by
reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-15962) dated March 28, 1994.
10-P. $1,200,000 demand note between Carlyle-XIV
Associates, L.P. and Carlyle Investors, Inc., is hereby incorporated by
reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-15962) dated March 28, 1994.
10-Q. Proposed Restructure of Two Broadway, 1290 Avenue of
the Americas and 237 Park Avenue, New York, New York and Summary of Terms
dated October 14, 1994, a copy of which is hereby incorporated by reference
to the Partnership's Report for December 31, 1994 on Form 10-K (File No. 0-
15962) dated March 27, 1995.
10-R. Assumption Agreements dated October 14, 1994 made by
237 Park Avenue Associates and by 1290 Associates in favor and for the
benefit of O&Y Equity Company, L.P., O&Y NY Building Corp. and JMB/NYC
Office Building Associates, L.P., copies of which are hereby incorporated
by reference to the Partnership's Report for December 31, 1994 on Form 10-K
(File No. 0-15962) dated March 27, 1995.
10-S. Assumption Agreements dated October 14, 1994 made by
O&Y Equity Company, L.P., and by O&Y NY Building Corp. and by JMB/NYC
Office Building Associates, L.P. in favor and for the benefit of 2 Broadway
Associates and 2 Broadway Land Company, copies of which are hereby
incorporated by reference to the Partnership's Report for December 31, 1994
on Form 10-K (File No. 0-15962) dated March 27, 1995.
10-T. Lockbox and forbearance agreements related to the
mortgage note secured by the Wells Fargo Building, copies of which are
hereby incorporated by reference to the Partnership's Report for December
31, 1994 on Form 10-K (File No. 0-15962) dated March 27, 1995.
10-U. Amendment No. 1 to the Agreement of Limited
Partnership of Carlyle-XIV Associates, L.P. dated January 1, 1994 by and
between Carlyle Investors, Inc. a Delaware corporation, as general partner,
and Carlyle Real Estate Limited Partnership-XIV, an Illinois limited
partnership, as limited partner, is hereby incorporated by reference to the
Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-15962)
dated May 11, 1995.
10-V. Amendment No. 1 to the Second Amended and Restated
Articles of Partnership of JMB/NYC Office Building Associates, L.P. dated
January 1, 1994 by and between Carlyle Managers, Inc. a Delaware
corporation, as general partner, and Carlyle-XIII Associates, L.P. a
Delaware limited partnership, Carlyle-XIV Associates, L.P. a Delaware
limited partnership and Property Partners, L.P. a Delaware limited
partnership, as the limited partners, is hereby incorporated by reference
to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-
15962) dated May 11, 1995.
27. Financial Data Schedule
- -------------------
(b) No reports on Form 8-K have been filed for the quarter
covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: November 9, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: November 9, 1995
PROMISSORY NOTE
Louis Joliet Mall
Joliet, Illinois
$26,000,000.00 September 14, 1995
FOR VALUE RECEIVED, CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV, an Illinois limited partnership (hereinafter referred to
as the "Maker"), promises to pay to the order of CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, a Connecticut corporation, having its principal address
at 900 Cottage Grove Road, Bloomfield, Connecticut 06002, (the "Payee") or
such other place in the United States as the Holder hereof may designate in
writing (the legal holder from time to time of this Note, including Payee
as the initial holder, hereinafter referred to as "Holder"), the principal
sum of Twenty-Six Million and NO/100 Dollars ($26,000,000.00), or so much
thereof as may be advanced to or for the benefit of Maker by Holder
(hereinafter referred to as "Principal Indebtedness"), together with
interest thereon at an annual rate of eight and three one-hundredths
percent (8.03%) (the "Interest Rate"), in accordance with the provisions
hereinafter set forth.
1. TERMS OF PAYMENT. (a) If the date on which Principal
Indebtedness is advanced to Maker ("the Advancement Date") is not the first
day of a calendar month, then Maker shall pay to Holder on the first day of
the first calendar month following the Advancement Date, interest only on
the Principal Indebtedness, at
Page 1
the Interest Rate, calculated on the basis of a 365-day year and the number
of days from and including the Advancement Date to and including the last
day of the calendar month in which the Advancement Date occurs. On the
first day of the second calendar month following the Advancement Date (or
on the first day of the first calendar month following the date of this
Note if the Advancement Date is the first day of a calendar month), and on
the first day of each calendar month thereafter (hereinafter called the
"monthly payment dates") until and including the first day of the
eighteenth calendar month following the Advancement Date (or the first day
of the nineteenth calendar month if the Advancement Date is not the first
day of a calendar month), Maker shall pay to Holder the sum of $173,983.33
to be applied to interest on the Principal Indebtedness from time to time
outstanding at the Interest Rate for the immediately preceding calendar
month. Except as otherwise provided hereinabove, interest shall be
calculated and applied on the basis of a 360-day year consisting of twelve
30-day months.
(b) Commencing on the first day of the nineteenth calendar
month following the Advancement Date (or on the first day of the twentieth
calendar month if the Advancement Date is not the first day of a calendar
month), until October 1, 2002, Maker shall pay to Holder the sum of
$201,189.20, to be applied first to interest on the Principal Indebtedness
from time to time outstanding at the Interest Rate and the balance to be
applied to the reduction of the Principal Indebtedness (based on a 25-year
Page 2
amortization schedule). The interest component of such monthly payments
shall be calculated and applied on the basis of a 360-day year consisting
of twelve 30-day months, except that interest for any partial month shall
be calculated and applied on the basis of a 365-day year and the actual
number of days in such partial month during which the Principal
Indebtedness is outstanding.
(c) On October 1, 2002 (the "Maturity Date"), Maker shall
pay to Holder the entire Principal Indebtedness then remaining unpaid,
together with all accrued and unpaid interest thereon at the Interest Rate,
and any other charges due under this Note, the Mortgage (hereinafter
defined), and any other documents evidencing or securing or pertaining to
the advancement or disbursement of the Principal Indebtedness
(collectively, the "Loan Documents"). The period from and including the
date hereof to the Maturity Date will be referred to hereinafter as the
"Term".
2. PREPAYMENT. Except as specifically provided herein or in the
Mortgage, no prepayment of the Principal Indebtedness shall be allowed
during the first two loan years (as hereinafter defined) (the "Closed
Period"). Maker, whether or not a debtor in a proceeding under Title 11,
United States Code, may prepay the Principal Indebtedness in full, but not
in part, on any monthly payment date after the Closed Period, provided
Maker gives Holder forty-five (45) days prior written notice of Maker's
Page 3
intent to prepay this Note and pays a prepayment fee (the "Prepayment Fee")
as described below.
The Prepayment Fee shall be calculated as follows:
The greater of:
(a) one percent (1%) of the then-existing balance of this Note,
or
(b) Yield Maintenance as defined below.
The loan may be prepaid at par during the last six (6) months of
the Term (the "Six-Month Period"). The loan years shall be consecutive 12-
month periods measured from the initial monthly payment date. The
Prepayment Fee will be due when the loan is prepaid prior to the Six-Month
Period, whether such prepayment is voluntary or results from default,
acceleration or any other cause, except to the extent otherwise set forth
herein or in any other Loan Document.
Notwithstanding anything to the contrary herein, in the event Maker
has negotiated a bona fide third party sale of the Security (hereinafter
defined) in accordance with the provisions of Section 19(a) of the
Mortgage, except that the transferee does not meet the tests set forth in
Section 19(a) of the Mortgage or Holder does not, in its reasonable
discretion, approve such
Page 4
transferee based on the provisions set forth in said Section 19(a) of the
Mortgage, then prepayment shall in such case be allowed with payment of a
prepayment fee equal to the greater of (a) one percent (1%) of the then
existing balance of this Note, or (b) Yield Maintenance, except that the
first variable for the Monthly Interest Shortfall (as defined below) shall
in this case be "(i) the positive difference, if any, of the Semi-Annual
Equivalent Rate (as defined below) less the sum of the Treasury Yield (as
defined below) plus 70 basis points, divided by 12." Any such prepayment
shall require a thirty (30) day prior written notice period and shall be
simultaneous with the actual transfer of the Security. Any failure by
Maker to make any such prepayment following notice given by Maker to Holder
shall constitute a default under the Loan Documents unless (i) Maker shall
have given Holder written notice of prepayment cancellation no later than 5
days before the scheduled date of the prepayment provided for in the notice
of prepayment given in accordance with the preceding sentence and relating
to such prepayment or (ii) Maker shall have failed to make such prepayment
as a result of a default by a third party lender or purchaser under a
commitment from or purchase agreement with such third party lender or
purchaser to provide funds for such prepayment; in the event of either (i)
or (ii) above, no prepayment shall be due hereunder.
YIELD MAINTENANCE: "Yield Maintenance" is defined as the sum of
the present values on the date of prepayment of each of the Monthly
Interest Shortfalls for the remaining Term of the
Page 5<PAGE>
loan discounted at the monthly Treasury Yield plus 50 basis points.
The "Monthly Interest Shortfall" for each month is the product of
(i) the positive difference, if any, of the Semi-Annual Equivalent Rate
less the Treasury Yield, plus 50 basis points, divided by 12, times (ii)
the outstanding principal balance of this Note on each monthly payment date
for each full and partial month remaining in the Term.
The present value of each Monthly Interest Shortfall is then
determined by discounting each such Monthly Interest Shortfall to the date
of prepayment at the Treasury Yield plus 50 basis points, divided by
twelve.
The "Semi-Annual Equivalent Rate" for this loan is 8.17%.
The "Treasury Yield" will be determined by reference to the Federal
Reserve Statistical Release H.15 (519) of Selected Interest Rates (or any
similar successor publication of the Federal Reserve) for the first week
ending not less than two full weeks prior to the prepayment date. If the
remaining Term is less than one year, the Treasury Yield will equal the sum
of the yield for 1-Year Treasury Constant Maturities. If the remaining
Term is equal to one of the maturities of the Treasury Constant Maturities
(e.g., 1-year, 2-year, etc.), then the Treasury Yield will equal the sum of
the yield for the Treasury Constant
Page 6
Maturity with a maturity equalling the remaining Term. If the remaining
Term is longer than one year, but does not equal one of the maturities of
the Treasury Constant Maturities, then the Treasury Yield will equal the
sum of the yield for the Treasury Constant Maturity closest to, but not
exceeding, the remaining Term.
FOR EXAMPLE: If a 9% loan were prepaid with 24 months remaining in
the Term, at a time when Federal Reserve Statistical Release H.15 (519)
reported a two-year Treasury Yield of 7.0%, and the outstanding loan
balance was $10,000,000, then:
Semi-Annual Equivalent Rate .0917
less the Treasury Yield (7.0% plus .50%) - .0750
-------------
equals the positive rate difference .0167
divided by 12
equals the monthly rate differential .001392
times the principal balance x $10.000.000
-------------
equals the Monthly Interest Shortfall $ 13,916.67
=============
The sum of the present values of each Monthly Interest Shortfall
($13,917.00) discounted at the monthly Treasury Yield plus 50 basis points
(7.50% divided by 12 or .625%) equals $309,262.13.
The aforementioned prepayment fee does not constitute a penalty,
but rather represents the reasonable estimate, agreed to between Maker and
Payee, of a fair compensation for the loss that may be sustained by Holder
due to prepayment of the Principal Indebtedness prior to the Maturity Date.
Any prepayment fee required pursuant to the preceding paragraphs shall be
paid without prejudice to the right of Holder to collect any of the amounts
owing under this Note or the Mortgage or otherwise to
Page 7
enforce any of its rights or remedies arising out of an Event of Default
(hereinafter defined) hereunder.
In no event shall the prepayment fee hereunder exceed the maximum
allowed by applicable law.
3. SECURITY. This Note is given to evidence a loan of TWENTY-SIX
MILLION AND 00/100 DOLLARS ($26,000,000.00) made to Maker by Payee (the
Maker's receipt of which from Payee is hereby acknowledged) and is secured
by, among other things, a Mortgage and Security Agreement (the "Mortgage")
of even date herewith (and recorded or intended to be recorded in the
office of the Recorder of Deeds of Will County, Illinois) from Maker for
the benefit of Holder, and constitutes a first lien on certain real estate
and a first priority security interest in personal property and any
leasehold interest in such personal property and an assignment of rents and
leases relating to such real property (hereinafter collectively referred to
as the "Security"), in the City of Joliet, County of Will, State of
Illinois, and specifically described in the Mortgage.
4. LOCATION AND MEDIUM OF PAYMENTS. The sums payable under this
Note or under the Mortgage shall be paid to Holder at its principal address
hereinabove set forth, or at such other place in the United States as
Holder may from time to time hereafter designate to Maker in writing, in
legal tender of the United States of America.
Page 8
5. ACCELERATION OF MATURITY. At the option of Holder, which may
be exercised at any time after one or more of the following events (each
being an "Event of Default") shall have occurred, the whole of the
Principal Indebtedness, together with all interest, the applicable
Prepayment Fee, if any, and other charges due under any of the Loan
Documents, shall immediately become due and payable ("Acceleration of
Maturity"): (a) if any payment of any installment of the Principal
Indebtedness, including, without limitation, a prepayment of all the
Principal Indebtedness following, and in accordance with, a notice of
prepayment by Maker to Holder, and/or interest or of any other sum due
hereunder is not received by Holder within five (5) business days following
the date when such payment was due, or on the scheduled maturity date of
this Note, provided that, except for the payments due on the Maturity Date
of this Note, no more frequently than once in any twelve (12) month period,
Holder shall give Maker notice of nonpayment and five (5) business days
from receipt thereof in which to cure such nonpayment; or (b) if an Event
of Default (as defined in the Mortgage) shall occur under the Mortgage.
For purposes hereof, "business day" means any day other than a
Saturday, Sunday or legal holiday on which national banking institutions
are authorized or required to be closed in Hartford, Connecticut.
Page 9<PAGE>
6. LATE CHARGES; INTEREST FOLLOWING EVENT OF DEFAULT. If any
payment due under this Note, the Mortgage, or any other Loan Document
(other than any payment due on the Maturity Date or upon any acceleration
of the Principal Indebtedness), is not paid when due, without regard to any
cure or grace period, Maker shall pay and Holder shall be entitled to
collect a late payment charge for each month or fraction thereof during
which such payment is not made when due and for each month thereafter that
such sum remains unpaid, equal to the lesser of four percent (4%) of such
late payment or the maximum amount permitted by law, for the purpose of
defraying the expense incurred by Holder in handling and processing such
delinquent payment, and such amount shall be secured by the Loan Documents
securing the Note.
In addition to any late payment charge which may be due under this
Note, Maker shall pay interest on all sums due hereunder at a rate (the
"Default Rate") equal to the lesser of (i) the Interest Rate plus four
percent (4%) per annum, or (ii) the maximum rate permitted by law, from and
after the first to occur of the following events: if Holder elects to cause
the Acceleration of Maturity upon the occurrence of an Event of Default; if
a petition under Title 11, United States Code, shall be filed by Maker or
if Maker shall seek or consent to the appointment of a receiver or trustee
for itself or for any of the Security, file a petition seeking relief under
the bankruptcy or other similar laws of the United States, any state or any
jurisdiction, make a general assignment for the benefit of
Page 10
creditors, or be generally unable to pay its material debts as they become
due; if any involuntary proceeding under the bankruptcy laws or other
similar laws of the United States, any state or other jurisdiction is filed
against Maker and is not dismissed within sixty (60) days following the
filing thereof; if a court shall enter an order, judgment or decree
appointing, with or without the consent of Maker, a receiver or trustee for
it or for any of the Security or approving a petition filed against Maker
which seeks relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, and any such order, judgment or
decree shall remain in force, undischarged or unstayed, sixty (60) days
after it is entered; or if all sums due hereunder are not paid on the
Maturity Date.
7. COLLECTION AND ENFORCEMENT COSTS. Maker, upon demand, shall
pay Holder for all costs and expenses, including without limitation
attorneys' fees, paid or incurred by Holder in connection with the
collection of any sum due hereunder, or in connection with enforcement of
any of Holder's rights or Maker's obligations under this Note, the Mortgage
or any of the other Loan Documents.
8. CONTINUING LIABILITY. Subject to Section 15 hereof, the
obligation of Maker to pay the Principal Indebtedness, interest and all
other sums due hereunder shall continue in full force and effect and in no
ways be impaired, until the actual payment thereof to Holder, and in case
of a sale or transfer of
Page 11
all or any part of the Security, or in case of any further agreement given
to secure the payment of this Note, or in case of any agreement or
stipulation extending the time or modifying the terms of payment above
recited, Maker shall nevertheless continue to be liable on this Note, as
extended or modified by any such agreement or stipulation, unless released
and discharged in writing by Holder.
9. INTENTIONALLY OMITTED.
10. NO ORAL CHANGES: WAIVERS. This Note may not be changed
orally, but only by an agreement in writing signed by the party against
whom enforcement of a change is sought. The provisions of this Note shall
extend and be applicable to all renewals, amendments, extensions,
consolidations, and modifications of the Mortgage and/or the other Loan
Documents, and any and all references herein to the Mortgage and/or the
Loan Documents shall be deemed to include any such renewals, amendments,
extensions, consolidations, or modifications thereof.
Maker and any future endorsers, sureties, and guarantors hereof,
jointly and severally, waive presentment for payment, demand, notice of
nonpayment, notice of dishonor, protest of any dishonor, notice of protest,
and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default (except notice of default
required hereby, if any), or enforcement of the payment of this Note, and
they
Page 12
agree that the liability of each of them shall be unconditional without
regard to the liability of any other party and shall not be in any manner
affected by an indulgence, extension of time, renewal, waiver, or
modification granted or consented to by the Holder; and Maker and all
future indorsers, sureties and guarantors hereof consent to any and all
extensions of time or waivers that may be granted unilaterally by the
Holder hereof and to any renewals or modifications that may be agreed to
between the Holder hereof and Maker, with respect to the payment or other
provisions of this Note, and to the release of the collateral, or any part
thereof, with or without substitution, and agree that additional makers,
endorsers, guarantors, or sureties may become parties hereto without notice
to them or affecting their liability hereunder. The parties hereto
recognize and acknowledge that no endorser, surety, guarantor or additional
maker currently exists hereunder or is presently required under the Loan
Documents.
Holder shall not by any act of omission or commission be deemed to
waive any of its rights or remedies hereunder unless such waiver be in
writing and signed by Holder, and then only to the extent specifically set
forth therein; a waiver on one event shall not be construed as continuing
or as a bar to or waiver of such right or remedy on a subsequent event.
The acceptance by Holder of payment hereunder that is less than payment in
full of all amounts due at the time of such payment shall not without the
express written consent of Holder: (i) constitute a waiver of
Page 13<PAGE>
the right to exercise any of Holder's remedies at that time or at any
subsequent time, (ii) constitute an accord and satisfaction, or (iii)
nullify any prior exercise of any remedy.
No failure to cause an Acceleration of Maturity hereof by reason of
an Event of Default hereunder, acceptance of a past due installment, 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 Holder
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 the laws of the State of Illinois; and, to
the maximum extent permitted by law, Maker 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.
To the maximum extent permitted by law, Maker hereby waives and
renounces for itself, its heirs, successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption, and
appraisement now provided, or which may hereafter be provided, by the
Constitution and laws of the United States of America and of any state
thereof, both as to itself and in and to all of its property, real and
personal,
Page 14
against the enforcement and collection of the obligations evidenced by this
Note.
11. BIND AND INURE. This Note shall bind and inure to the
benefit of the parties hereto and their respective legal representatives,
heirs, successors and assigns.
12. APPLICABLE LAW. The provisions of this Note shall be
construed and enforceable in accordance with the laws of the State of
Illinois.
If any provision of this Note or the application hereof to any
person or circumstance shall, for any reason and to any extent, be invalid
or unenforceable, neither the remainder of this Note nor the application of
such provision to any other person or circumstance shall be affected
thereby, but rather the same shall be enforced to the greatest extent
permitted by law, except that if such provision relates to the payment of a
monetary sum, then the Holder may, at its option, declare the entire
indebtedness evidenced hereby due and payable upon sixty (60) days prior
written notice to Maker and, provided no Event of Default is then
continuing, without the Prepayment Fee or premium; provided that in the
event Maker continues timely to make all payments of principal and interest
due to Holder in accordance with the terms of this Note, whether or not any
term or provision of this Note shall become invalid or unenforceable,
Holder agrees to extend the aforementioned sixty (60) day period
Page 15
to one hundred eighty (180) days, or such shorter period as may be required
by applicable law.
13. It is hereby expressly agreed that if from any circumstances
whatsoever fulfillment of any provision of this Note, at the time
performance of such provision shall be due, shall involve transcending the
limit of validity presently prescribed by any applicable usury statute or
any other law, with regard to obligations of like character and amount,
then IPSO FACTO the obligation to be fulfilled shall be reduced to the
limit of such validity, so that in no event shall any exaction be possible
under this Note that is in excess of the limit of such validity. In no
event shall Maker be bound to pay for the use, forbearance or detention of
the money loaned pursuant hereto, interest of more than the current legal
limit; the right to demand any such excess being hereby expressly waived by
Holder.
14. NOTICE. Any notice, request, demand, statement or consent
made hereunder shall be in writing signed by the party giving such notice,
request, demand, statement or consent, and shall be delivered personally,
delivered to a reputable overnight delivery service providing a receipt, or
deposited in the United States Mail, postage prepaid and registered or
certified return receipt requested, at the address set forth below, or at
such other address within the continental United States of America as may
have theretofore been designated in writing. The effective date of any
notice given as aforesaid shall be the date of
Page 16
personal service, one (1) business day after delivery to such overnight
delivery service, or three (3) business days after being deposited in the
United States Mail, whichever is applicable. For purposes hereof, the
addresses are as follows:
If to Holder:
Connecticut General Life Insurance Company c/o CIGNA Investment
Management - Real Estate 900 Cottage Grove Road
Hartford, CT 06152-2319
Attn: Real Estate Investment Services, S-319
With a copy to:
CIGNA Companies Investment Law Department 900 Cottage Grove
Road Hartford, CT 06152-2215
Attn: Real Estate Division, S-215A
If to Maker:
Carlyle Real Estate Limited Partnership - XIV
900 North Michigan Avenue
Chicago, IL 60611-1575
Attn: Mr. Stephen A. Lovelette
With a courtesy copy to:
Pircher, Nichols & Meeks 1999 Avenue of the Stars 26th Floor
Los Angeles, CA 90067
Attn: Real Estate Notices (EJML)
Notwithstanding the foregoing agreement to provide courtesy copies to
the above-named persons, such copies shall be courtesy copies only, and
failure to provide such courtesy copies shall have absolutely no effect or
entitle Maker to any remedy whatsoever. Any notice duly given to Maker
shall be effective
Page 17
whether or not the courtesy copies were given to the above-named persons.
15. NONRECOURSE. Except as provided hereinafter in this Section
15, Maker (or any direct or indirect partner [or their respective
shareholders] of Maker) shall not be personally liable For the payment of
any sums due hereunder or under the other Loan Documents or the performance
of any obligations of Maker by Maker hereunder or under any of the other
Loan Documents. Without in any way limiting the generality of the
foregoing, no judgment for the repayment of the Principal Indebtedness or
interest thereon or other sums, charges and amounts owed by Maker (or any
direct or indirect partner of Maker [or their respective shareholders]) to
Holder will be enforced against Maker (or any direct or indirect partner
[or their respective shareholders] of Maker) personally or any property of
the Maker (or any direct or indirect partner [or their respective
shareholders] of Maker) other than the Security and any other security
furnished under the Loan Documents in any action to foreclose the Mortgage
or to otherwise realize upon any such security furnished under the Loan
Documents or to collect any amount payable under the Loan Documents.
Notwithstanding the foregoing:
(a) Nothing herein contained shall be construed as
prohibiting Holder from exercising any and all remedies which the Loan
Documents permit or any other remedies available to Holder at law or in
equity, or Holder's rights in the Security,
Page 18
including the right to bring actions or proceedings against Maker and to
enter a judgment against Maker, (but not any direct or indirect partner [or
their respective shareholders] of Maker), so long as the exercise of any
remedy does not extend to execution against or recovery out of any property
of Maker (or any direct or indirect partner [or their respective
shareholders] of Maker) other than the security furnished under the Loan
Documents in any action to foreclose the Mortgage or otherwise to realize
upon any security furnished under the Loan Documents or to collect any
amount payable hereunder, or under any other Loan Document;
(b) Maker (but not any direct or indirect partner [or their
respective shareholders] of Maker) shall be fully and personally liable for
(i) misapplying (i.e., using in a manner other than as required under the
Loan Documents) any condemnation awards or insurance awards attributable to
the Security, but only to the extent of such awards so misapplied, (ii) at
the time of foreclosure or transfer in lieu thereof, failing to turn over
any security deposits attributable to the Security and held by Maker under
the terms of any of the Leases, but only to the extent of such deposits not
turned over, (iii) collecting any rents in advance in violation of any
covenant contained in the Loan Documents, but only to the extent that such
rents so collected in advance are not applied to the Security or the Loan,
(iv) committing fraud, intentional misrepresentation, or waste in
connection with the operation of the Security or the making of the loan
evidenced hereby, but only to the extent of any loss,
Page 19
damage, expense or costs (including reasonable attorneys' fees) incurred by
Holder resulting from such fraud, intentional misrepresentation, or waste,
(v) gross revenues actually collected from the Security, from and after
either (a) nonpayment by Maker of any principal or interest due under this
Note or (b) receipt by Maker of notice from Holder of a nonmonetary or
other monetary default pursuant to the terms of this Note, the Mortgage, or
any of the other Loan Documents, if and only to the extent, such gross
revenues are sufficient to pay any portion of the Principal Indebtedness,
operating and maintenance expenses, insurance premiums, deposits into a
reserve for taxes, insurance, or replacements (if any), or other sums
required by the Loan Documents, and Maker fails to make such payments or
deposits when due, but only to the extent of any funds diverted from such
payments, expenses or deposits.
(c)
There shall be no limitation, in any event, on the Maker's (but not any
direct or indirect partner [or their respective shareholders] of Maker)
personal liability under, and the exercise of any of Holder's rights under
the Environmental Indemnification Agreement of even date herewith from
Maker to Holder with regard to the Security except as may be expressly set
forth therein.
(d)
There shall be no limitation on the rights of Holder to proceed against any
entity or person whatsoever, including Maker, with respect to the
enforcement of any
Page 20
indemnifications or guarantees of the Indebtedness by such person or entity
or other sums due hereunder or under any of the other Loan Documents or any
part thereof, or any master leases by such person or entity, all of which
may be entered into for the benefit of Holder after the date hereof, except
as may be expressly set forth therein.
In no event shall any trustee, advisor, beneficiary, director,
shareholder, officer, or employee of Maker, or any partner in Maker, or any
partner of a partner of Maker, or of JMB Properties Co., Urban Retail
Properties Co., Institutional Realty Corporation, or JMB Realty
Corporation, or their respective affiliates and subsidiaries (collectively,
"JMB") have any personal liability under the Loan Documents, and with
respect to the foregoing exceptions to non-recourse, Holder's recourse
shall be limited to the assets of the Maker.
For purposes hereof, an entity will be deemed to be an "affiliate" of
if such entity controls, is under common control with, or is controlled by
JMB. As used in this definition of "affiliate", "control" (including its
correlative usages, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of the power to direct or cause
the direction of management or policies, whether through ownership of
voting securities, by contract, or otherwise. For purposes of this
definition, any entity that owns, directly or indirectly, 50% or more of
the securities having ordinary voting
Page 21
power for the election of the board of directors of the corporation, or 50%
or more of the ownership interests of any other entity shall be deemed to
control such corporation or other entity. In addition, with respect to any
general or limited partnership, an entity which is the managing or co-
managing partner of such partnership, or which is a general partner with at
least equal power with all general partners to direct and control the
partnership, shall be deemed to control such partnership.
Additionally, and notwithstanding anything to the contrary contained
herein, no negative capital account of any partner of Maker or of any sub-
tier entities of Maker, or any obligation of any such partner or sub-tier
entity to restore a negative capital account or to contribute capital to
Maker or any such partner or sub-tier entity, shall be deemed to be the
property or an asset of Maker or any such partner or sub-tier entity.
Accordingly, neither Holder nor any of its successors or assigns shall have
any right to collect, enforce, or proceed against or with respect to such
negative capital account or obligation to restore or contribute.
The provisions of this Section 15 will not affect other legal or
equitable remedies available to Holder or Holder's rights in and to the
Security or constitute a waiver by Holder or any such remedies or rights in
and to the Security.
Page 22
16. TIME OF THE ESSENCE. Time is of the essence in this Note and
the other Loan Documents.
17. ATTORNEYS' FEES. Any reference to "attorney fees" in this
document includes but is not limited to both the fees, charges and costs
incurred by Holder through its retention of outside legal counsel and the
allocable fees, costs and charges for services rendered by Holder's in-
house counsel. Any reference to "attorney fees" shall also include but not
be limited to those attorneys or legal fees, costs and charges incurred by
Holder in the collection of any Principal Indebtedness, the enforcement of
any obligations hereunder, the protection of the Security, the foreclosure
of the Mortgage, the sale of the Security, the defense of actions arising
hereunder and the collection, protection or setoff of any claim the Holder
may have in a proceeding under Title 11, United States Code. Attorneys fees
provided for hereunder shall be reasonable in amount and shall accrue
whether or not Holder has provided notice of an Event of Default or of an
intention to exercise its remedies for such Event of Default.
18. WAIVER OF TRIAL OF JURY. TO INDUCE HOLDER TO MAKE THE LOAN
EVIDENCED BY THIS NOTE, MAKER AND HOLDER EACH HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHTS WHICH
MAKER OR HOLDER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL
PROCEEDINGS IN WHICH MAKER AND HOLDER ARE
Page 23
ADVERSE PARTIES AS TO ANY MATTER ARISING OUT OF OR CONCERNING
THE SUBJECT MATTER OF THIS NOTE.
19. SEVERABILITY. No determination by any court or governmental
authority that any provision in this Note is invalid, illegal or
unenforceable in any instance shall affect the validity, legality or
enforceability of (a) any other provision hereof, or (b) such provision in
any circumstance not controlled by such determination. Each such provision
shall be valid and enforceable to the fullest extent allowed by, and shall
be construed wherever possible as being consistent with applicable law.
20. REPLACEMENT OF NOTE. Upon receipt of evidence reasonably
satisfactory to Maker of the loss, theft, destruction or mutilation of this
Note, and in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory to Maker or, in the case
of any such mutilation, upon surrender and cancellation of this Note, Maker
will execute and deliver, in lieu thereof, a replacement Note (the
"Replacement Note"), identical in form and substance to this Note and dated
as of the date of this Note.
(Signatures on next page]
Page 24
IN WITNESS WHEREOF, Maker has duly executed this Note as a sealed
instrument as of the day and year first above written.
MAKER:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-
XIV, an Illinois limited partnership
By: JMB Realty Corporation, a Delaware
corporation, its corporate general partner
By: K. JAY WEAVER
Name: K. Jay Weaver
Title: Vice President
Page 25
MORTGAGE AND SECURITY AGREEMENT
LOUIS JOLIET MALL
JOLIET, ILLINOIS
This instrument Date: September 14, 1995
prepared by and after
recording should be returned to:
Andrea F. Levy, Esq.
CIGNA Corporation
Investment Law Department, S-215A
900 Cottage Grove Road
Hartford, CT 06152-2215<PAGE>
MORTGAGE AND SECURITY AGREEMENT
TABLE OF CONTENTS
PAGE
----
1. Payment of Indebtedness. . . . . . . . . . . . . . 10
2. Covenants of Title . . . . . . . . . . . . . . . . 11
3. Usury. . . . . . . . . . . . . . . . . . . . . . . 11
4. Impositions. . . . . . . . . . . . . . . . . . . . 12
5. Tax Deposits . . . . . . . . . . . . . . . . . . . 14
6. Change in Taxes. . . . . . . . . . . . . . . . . . 18
7. Insurance. . . . . . . . . . . . . . . . . . . . . 19
8. Insurance/Condemnation Process . . . . . . . . . . 24
9. Restoration Following Fire and Other Casualty
or Condemnation. . . . . . . . . . . . . . . . . . 27
10. Disposition of Condemnation or Insurance Proceeds. 36
11. Fire and Other Casualty; Self Help . . . . . . . . 42
12. Rent Insurance Proceeds. . . . . . . . . . . . . . 43
13. Intentionally Omitted. . . . . . . . . . . . . . . 44
14. Repair; Alterations; Waste; Environmental. . . . . 44
15. Environmental Indemnification. . . . . . . . . . . 54
16. Independence of Security . . . . . . . . . . . . . 55
17. No Other Liens . . . . . . . . . . . . . . . . . . 56
18. Management . . . . . . . . . . . . . . . . . . . . 62
19. Permitted Transfers. . . . . . . . . . . . . . . . 64
20. Sidewalks, Municipal Charges . . . . . . . . . . . 73
21. Assignment of Rents and Leases . . . . . . . . . . 74
22. Future Leases. . . . . . . . . . . . . . . . . . . 76
23. Mortgagor's Obligations as Lessor. . . . . . . . . 82
24. Leases; Foreclosure. . . . . . . . . . . . . . . . 84
25. Operating Agreement. . . . . . . . . . . . . . . . 84
26. Events of Default. . . . . . . . . . . . . . . . . 88
27. Remedies Upon Default; Foreclosure . . . . . . . . 91
28. Acceleration Interest. . . . . . . . . . . . . . . 98
29. Late Charge. . . . . . . . . . . . . . . . . . . . 100
30. Waiver of Statutory Rights . . . . . . . . . . . . 100
31. Security Interest. . . . . . . . . . . . . . . . . 101
32. Right of Entry . . . . . . . . . . . . . . . . . . 103
33. Estoppel Certificate . . . . . . . . . . . . . . . 103
34. Annual Statements. . . . . . . . . . . . . . . . . 104
35. Rights Cumulative. . . . . . . . . . . . . . . . . 107
36. Subrogation. . . . . . . . . . . . . . . . . . . . 107
37. No Waiver. . . . . . . . . . . . . . . . . . . . . 107
38. Mortgage Extension . . . . . . . . . . . . . . . . 108
39. Indemnification. . . . . . . . . . . . . . . . . . 108
40. Nonrecourse. . . . . . . . . . . . . . . . . . . . 109
MORTGAGE AND SECURITY AGREEMENT
TABLE OF CONTENTS (continued)
PAGE
----
41. Attorneys' Fees. . . . . . . . . . . . . . . . . . 114
42. Administrative Fees. . . . . . . . . . . . . . . . 114
43. Protection of Security; Cost and Expenses. . . . . 115
44. Notices. . . . . . . . . . . . . . . . . . . . . . 118
45. Business Purpose . . . . . . . . . . . . . . . . . 120
46. Aggregate Indebtedness . . . . . . . . . . . . . . 120
47. Applicable Law . . . . . . . . . . . . . . . . . . 120
48. Invalidity . . . . . . . . . . . . . . . . . . . . 120
49. Captions . . . . . . . . . . . . . . . . . . . . . 121
50. Modifications. . . . . . . . . . . . . . . . . . . 122
51. Bind and Inure . . . . . . . . . . . . . . . . . . 122
52. Replacement of Note. . . . . . . . . . . . . . . . 122
53. Time of the Essence. . . . . . . . . . . . . . . . 123
54. Further Assurances . . . . . . . . . . . . . . . . 123
55. Recordation. . . . . . . . . . . . . . . . . . . . 124
56. Receipt of Documents . . . . . . . . . . . . . . . 124
57. Release. . . . . . . . . . . . . . . . . . . . . . 125
58. Remedies Cumulative. . . . . . . . . . . . . . . . 125
59. Heirs, Successors and Assigns Included in Parties. 125
60. WAIVER OF TRIAL BY JURY. . . . . . . . . . . . . . 126
61. CONSENT TO JURISDICTION, SERVICE OF PROCESS. . . . 126
EXHIBIT A - Legal Description
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (the "Mortgage") is made as
of the ________ day of September, 1995 by CARLYLE REAL ESTATE LIMITED
PARTNERSHIP - XIV, an Illinois limited partnership having its principal
place of business at 900 North Michigan Avenue, Chicago, Illinois 60611
(hereinafter referred to as "Mortgagor") whose general partners are JMB
Realty Corporation, a Delaware corporation, and Realty Associates - XIV,
L.P., an Illinois limited partnership, to CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, a specially chartered Connecticut corporation having its
principal place of business at 900 Cottage Grove Road, Bloomfield,
Connecticut 06002 (hereinafter referred to as the "Mortgagee")
WITNESSETH:
That, to secure (i) payment to Mortgagee of the original
principal indebtedness of Twenty-Six Million and No/100 Dollars
($26,000,000.00) together with interest thereon, (hereinafter referred to
as the "Loan") as evidenced by that certain promissory note of even date
herewith, in the original principle amount of Twenty-Six Million and No/100
Dollars ($26,000,000.00), with an interest rate thereon at an annual rate
of eight and three one-hundredths percent (8.03%), and with a maturity date
on October 1, 2002, and any renewals, extensions, modifications,
amendments, or replacements thereof, given by Mortgagor to
Page 1
Mortgagee and made payable to the order of Mortgagee (said note, together
with any such renewals, extensions, modifications, amendments and
replacements being referred to herein as the "Note"), (ii) the performance
of the covenants of Mortgagor herein contained and the payment of any
monies expended by the Mortgagee in connection with this Mortgage in
accordance with the terms and provisions of this Mortgage, (iii) the
payment of all obligations and the performance of all covenants of
Mortgagor under any other loan documents, agreements or instruments given
by Mortgagor to Mortgagee in connection with or related to the Loan, this
Mortgage, or the Note, including, without limitation, the Real Estate Tax
Escrow and Security Agreement of even date herewith delivered by the
Mortgagor to the Mortgagee (the "Tax Escrow Agreement") , the Borrower's
Certificate of even date herewith delivered by Mortgagor to Mortgagee (the
"Borrower's Certificate"), and (iv) any and all additional advances made by
Mortgagee to protect or preserve the Security (as hereinafter defined) in
accordance with the terms and provisions of this Mortgage, or the security
interest created hereby on the Security, or for taxes, assessments, or
insurance premiums as hereinafter provided or for performance of any of
Mortgagor's obligations hereunder, or for any other purpose provided for
Mortgagor's obligations hereunder, or for any other purpose provided herein
(whether or not the original Mortgagor remains the owner of the Security at
the time of such advances) (all of the aforesaid indebtedness and
performance of obligations of Mortgagor being herein called the
"Indebtedness", and all such
Page 2
other documents, agreements and instruments between Mortgagor and Mortgagee
now or hereafter evidencing or securing the repayment of, or otherwise
pertaining to, the Indebtedness, including, without limitation, the Note,
the Mortgage, the Assignment of Rents and Leases of even date herewith from
Mortgagor in favor of Mortgagee, the Borrower's Certificate, the Tax Escrow
Agreement, and the Environmental Indemnification Agreement of even date
herewith from Mortgagor in favor of Mortgagee (the "Environmental
Indemnification") being herein collectively called the "Loan Documents"),
Mortgagor does hereby warrant, mortgage, grant, bargain, sell, assign,
pledge, transfer, and convey its interest unto Mortgagee and to Mortgagee's
successors and assigns forever, all of the following described land,
improvements, real and personal property and rents and leases and all of
its estate, right, title and interest therein (hereinafter collectively
called the "Security"):
The land described in Exhibit A attached hereto and made a part
hereof, situate, lying and being in the City of Joliet, County of Will,
State of Illinois (the "Land");
TOGETHER with all buildings and other improvements now or
hereafter located on said Land or any part thereof, including but not
limited to, all extensions, betterments, renewals, renovations, substitutes
and replacements of, and all additions and appurtenances to the Security
(the "Improvements");
Page 3
TOGETHER with all of the right, title and interest of Mortgagor
in and to the land lying in the bed of any street, road, highway or avenue
in front of or adjoining the Land to the center lines thereof;
TOGETHER with the right to use, in perpetuity, in connection
with the operation of the Security the name "Louis Joliet Mall" and any
other name similar thereto, to the full extent that such rights are held by
Mortgagor;
TOGETHER with all easements now or hereafter located on or
appurtenant to the Land and/or Improvements or under or above the same or
any part thereof, rights-of-way, licenses, permits, approvals, and
privileges, belonging or in any way appertaining to the Land and/or
Improvements including without limitation (i) any drainage ponds or other
like drainage areas not located on the Land which may be required for water
run-off, (ii) any easements necessary to obtain access from the Land to
such drainage areas, or to any other location to which Mortgagor has a
right to drain water or sewage, (iii) any land required to be maintained as
undeveloped land by the zoning rules and regulations applicable to the
Land, and (iv) any easements and agreements which are or may be established
to allow satisfactory ingress to, egress from and operation of the Land
and/or the Improvements;
Page 4
TOGETHER with any and all awards heretofore made and hereafter
to be made by any governmental, municipal or state authorities to the
Present and all subsequent owners of the Security for the taking of all or
any portion of the Security by power of eminent domain, including, without
limitation, awards for damage to the remainder of the Security and any
awards for any change or changes of grade of streets affecting the
Security, which said awards are hereby assigned to Mortgagee, and
Mortgagee, at its option, is hereby authorized, directed and empowered to
collect and receive the proceeds of any such awards from the authorities
making the same and to give proper receipts and acquittances therefor, and
to apply the same toward the payment of the Indebtedness, notwithstanding
the fact that such amount may not then be due and payable subject to the
terms and provisions of this Mortgage; and Mortgagor hereby covenants and
agrees to and with Mortgagee, upon request by Mortgagee, to make, execute
and deliver, at Mortgagor's expense, any and all assignments and other
instruments sufficient for the purpose of assigning the aforesaid awards to
Mortgagee, free, clear and discharged of any and all encumbrances of any
kind or nature whatsoever (all of the foregoing Land, Improvements, rights,
easements, rights-of-way, licenses, privileges, and awards, collectively,
the "Real Property");
TOGETHER with all proceeds, insurance or otherwise, paid for the
damage done to any of the Security and all proceeds of
Page 5
the conversion, voluntarily or involuntarily, of any of the Security into
cash or liquidated claims;
TOGETHER with all fixtures, machinery, equipment, goods, and
every other article of personal property, tangible and intangible, now or
hereafter acquired (including any leased property hereafter purchased),
attached to or used in connection with the Real Property, or placed on any
part thereof and whether or not attached thereto, appertaining or adapted
to the use, management, operation or improvement of the Real Property,
insofar as the same and any reversionary right thereto may now or hereafter
be owned or acquired by Mortgagor, excluding, however, the personal
property that is and continues to be subject to an equipment lease,
including, but without limitation: all partitions; screens; awnings;
shades; blinds; floor coverings; hall and lobby equipment; heating,
lighting, plumbing, ventilating, refrigerating, incinerating, elevator,
escalator, air conditioning and communication plants or systems with
appurtenant fixtures; vacuum cleaning systems; call systems; sprinkler
systems and other fire prevention and extinguishing apparatus and
materials; all equipment, manual, mechanical and motorized, for the
construction, maintenance, repair and cleaning of, and removal of snow
from, parking areas, walks, underground ways, truck ways, driveways, common
areas, roadways, highways and streets; all equipment, manual, mechanical
and motorized, for the transportation of customers or employees to and from
the store facilities on the Real Property; all telephone, computer and
Page 6
other electronic equipment and appurtenances thereto, including software;
and all other machinery, pipes, poles, appliances, equipment, wiring,
fittings, panels and fixtures; and any proceeds therefrom, any replacements
thereof or additions or accessions thereto; and all building materials,
supplies and other property delivered to the Real Property for
incorporation into the Improvements thereon, all of which are declared to
be a part of the realty and covered by the lien hereof, but said lien shall
not cover any fixture, machinery, equipment or article of personal property
which is owned by a tenant or not required for the operation or maintenance
of the Real Property, provided said fixture, machinery, equipment or
article of personal property is not permanently affixed to the realty and
may be removed without material damage thereto and is not a replacement of
any item which shall have been subject to the lien hereof, but said lien
shall include any other fixture, machinery, equipment or article of
personal property so incorporated into the Improvements so as to constitute
realty under applicable law, whether or not owned by Mortgagor;
TOGETHER with all of Mortgagor's books of account and records
relating to the Security, including all of Mortgagor's computers and
software relating thereto;
TOGETHER with all contracts for sale and leases in the nature of
sales of the Real Property, or any portion thereof, now and hereafter
entered into and all right, title and interest of
Page 7
Mortgagor thereunder, including, without limitation, cash or securities
deposited thereunder to secure performance by the lessees or contract
purchasers; all proceeds and revenue arising from or out of the Real
Property or any part thereof; all bank accounts of Mortgagor used for
holding security deposits under leases to the extent of such security
deposits only; any refunds and rebates of taxes and assessments of every
kind and nature imposed on the Security; all licenses, permits, franchises,
governmental approvals and all sanitary sewer, drainage, water and utility
service agreements benefiting the Real Property or any part thereof,
together with all accounts, general intangibles, documents, instruments and
chattel paper arising from or in connection with the Real Property,
including all books and records in connection therewith; and all rights of
Mortgagor under any leases, covenants, agreements, easements, restrictions
or declarations recorded with respect to, or as an appurtenance to, the
Real Property or any part thereof, including, without limitation, all
rights of Mortgagor under any equipment lease or conditional sale contract
(all of the personal property described in this and the two preceding
paragraphs being referred to herein as the "Personal Property");
TOGETHER with all of the right, title and interest of Mortgagor
in and to all and singular the tenements, hereditament and appurtenances
belonging to or in any way pertaining to the Security; all the estate,
right, title and claim whatsoever of Mortgagor, either in law or in equity,
in and to the Security;
Page 8
and any and all other, further or additional title, estate, interest or
right which may at any time be acquired by Mortgagor in or to the Security,
and if Mortgagor shall at any time acquire any further estate or interest
in or to the Security, the lien of this Mortgage shall attach, extend to,
cover and be a lien upon such further estate or interest automatically
without further instrument or instruments, and Mortgagor, upon request of
Mortgagee, shall execute such instrument or instruments as shall reasonably
be requested by Mortgagee to confirm such lien, and Mortgagor hereby
irrevocably appoints Mortgagee as Mortgagor's attorney-in-fact (which
appointment is coupled with an interest), following an Event of Default (as
defined in Section 26 hereof), to execute all such instruments if Mortgagor
shall fail to do so within ten (10) days after demand;
TOGETHER with all easements, appurtenances, rights, privileges
and benefits of the Mortgagor in, to and under that certain Operating
Agreement (as hereinafter defined in Section 25 hereof);
TOGETHER with all cash, instruments, deposits, certificates of
deposit, securities, and other investments held in or pursuant to, and all
rights of Mortgagor in, to and under the Tax Escrow Agreement and all
proceeds thereof.
TO HAVE AND TO HOLD the Security, and each and every part
thereof, unto Mortgagee and its successors and assigns
Page 9
forever, in fee simple, subject only to the operation and effect of those
easements, restrictions, liens, leases and encumbrances listed on Schedule
B of the policy of title insurance delivered to Mortgagee as of the
recordation of this Mortgage (the "Title Policy") (collectively, the
"Permitted Encumbrances"), for the purposes and uses herein set forth.
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are
hereinafter set forth;
AND, Mortgagor hereby further covenants, agrees and warrants as
follows:
1. PAYMENT OF INDEBTEDNESS. Mortgagor will pay the principal
indebtedness and interest thereon in accordance with the provisions of the
Note and all prepayment charges, late charges and fees required thereunder,
if any, and all extensions, renewals, modifications, amendments and
replacements thereof, and will keep and perform all the covenants, promises
and agreements, and pay all sums provided in (i) each of the Note or any
other promissory note or notes at any time hereafter issued to evidence the
Indebtedness, (ii) this Mortgage and (iii) any and all other Loan
Documents, all in the manner herein or therein set forth. Subject to
Section 40 of this Mortgage, each of the persons and/or entities
constituting Mortgagor hereunder shall be fully liable for such payment and
performance, and such liability shall be joint and several.
Page 10
2. COVENANTS OF TITLE. Mortgagor has good and indefeasible
title to the entire Real Property in fee simple, has absolute unencumbered
title to the Personal Property unless leased or financed in accordance with
the provisions of this Mortgage, and has good right and full power to sell,
mortgage and convey the same; the Security is free and clear of easements,
restrictions, liens, leases and encumbrances, except the Permitted
Encumbrances, to which this Mortgage is expressly subject, or which may be
permitted or which may hereafter be created in accordance with the terms
hereof; and Mortgagor will warrant and defend title to the Security against
all claims and demands whatsoever except the Permitted Encumbrances.
Mortgagee shall have the right, at its option and at such time or times as
it, in its sole discretion, shall deem necessary, to take whatever action
it may deem necessary to defend or uphold the lien of this Mortgage or
otherwise enforce any of the rights of Mortgagee hereunder or any
obligation secured hereby, including without limitation, the right to
institute appropriate legal proceedings for such purposes.
3. USURY. It is hereby expressly agreed that if from any
circumstances whatsoever fulfillment of any provision of the Note, this
Mortgage, or any other Loan Documents, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
presently prescribed by any applicable usury statute or any other law, with
regard to obligations of like character and amount, then IPSO FACTO the
Page 11
obligation to be fulfilled shall be reduced to the limit of such validity,
so that in no event shall any exaction be possible under the Loan Documents
that is in excess of the limit of such validity. In no event shall
Mortgagor be bound to pay for the use, forbearance or detention of the
money loaned pursuant to the Loan Documents, interest of more than the
current legal limit; the right to demand any such excess being hereby
expressly waived by Mortgagee.
4. IMPOSITIONS. Subject to the provisions of Section 5 hereof,
Mortgagor will pay, not later than five (5) days before the last day on
which the same may be paid without penalty or interest, all real estate
taxes, sewer rents, water charges and all other municipal and governmental
assessments, rates, charges, impositions and liens (hereinafter referred to
as "Impositions") which now or hereafter are imposed by law upon the
Security, whether relating directly to the Security or to property
adjoining or abutting the Security; provided, however, that in the event
any such Imposition may be paid in installments, the Mortgagor may pay such
Imposition no later than five (5) days prior to the last day on which such
installment may be paid without penalty or interest. If any Imposition is
not paid within the time hereinabove specified, Mortgagee shall have the
right to pay the same, together with any penalty and interest thereon, and
the amount or amounts so paid or advanced shall forthwith be payable by
Mortgagor to Mortgagee and shall be secured by the lien of this Mortgage;
but Mortgagor may in good
Page 12
faith contest, at Mortgagor's own cost and expense, by proper legal
proceedings, the validity or amount of any Imposition, on the condition
that Mortgagor first shall deposit with Mortgagee, as security for the
payment of such contested item, an amount equal to the contested item plus
all penalties and interest which would be payable if Mortgagor is
ultimately required to pay such contested item, or provide a bond for
payment of such sums in form and substance, and issued by a surety,
reasonably acceptable to Mortgagee, and on the further condition that no
amount so contested may remain unpaid for such length of time as shall
permit the Security, or the lien thereon created by the item being
contested, to be sold for the nonpayment thereof, or as shall permit an
action, either of foreclosure or otherwise, to be commenced by the
beneficiary of any such lien. Subject to Section 5 hereof, Mortgagor will,
within thirty (30) days after the final date when any Imposition can be
paid without penalty, furnish Mortgagee with such evidence as may be
reasonably required that all such Impositions have been paid in full.
Mortgagor will not claim any credit on, or make any deduction from the
Indebtedness by reason of the payment of any Imposition.
Mortgagor hereby assigns to Mortgagee all rights of Mortgagor
now or hereafter arising in and to the refund of any Imposition and any
interest thereon. If following receipt of any such refund by Mortgagee,
there exists no Event of Default (as hereinafter defined) hereunder, then
Mortgagee shall pay over the same to Mortgagor promptly after demand; if
there exists an Event
Page 13
of Default hereunder, Mortgagee may apply said refund in reduction of the
Indebtedness in whatever order Mortgagee may elect.
5. TAX DEPOSITS. The provisions set forth in this Section 5
shall only be in effect in the event the Tax Escrow Agreement or any
replacement thereof is no longer in effect. Mortgagor shall deposit with
Mortgagee or with an escrow agent selected by Mortgagee, on the first day
of the calendar month immediately following the date of this Mortgage and
on the first day of each calendar month thereafter (each of which dates is
hereinafter called the "monthly tax deposit date") until the payment in
full of the Indebtedness a sum equal to one-twelfth of the real estate
taxes to be levied, charged, assessed or imposed upon or for the Security
(the "Real Estate Taxes") within one year after said monthly tax deposit
date; provided, however, Mortgagor may at its option deposit more than one-
twelfth of the Real Estate Taxes each month in order to take advantage of
any applicable early payment discount program or installment method payment
program offered by the taxing authority. If on any monthly tax deposit
date the amount of Real Estate Taxes to be levied, charged, assessed or
imposed within the ensuing one year period shall not be fixed, such amount
for the purpose of computing the deposit to be made by Mortgagor hereunder,
shall be reasonably estimated by Mortgagee, based upon the most recent tax
bill; provided, however, Mortgagee agrees that any estimated increase shall
not exceed ten percent (10%) of the amount of the
Page 14
most recent tax bill, with appropriate adjustment when the amount of such
Real Estate Taxes is fixed. If the taxing authority offers a discount for
prepayment of taxes and Mortgagor wishes to obtain such discount, Mortgagor
shall notify Mortgagee of the details of such discount and of Mortgagor's
wish to obtain same, and the monthly escrow amount shall be adjusted to
provide the required funds by the required dates.
The sums deposited by Mortgagor under this Section shall be
held in an interest-bearing account at a bank selected by Mortgagor and
approved by Mortgagee under an agreement satisfactory to all parties
thereto, with interest being retained by Mortgagee and free of trust except
to the extent, if any, that applicable law shall otherwise require and
applied in payment of such Real Estate Taxes when due.
Notwithstanding the foregoing provision and so long as
Mortgagor, an Approved control Party (as defined in Section 19 hereof) or
an approved transferee under Section 19(a) hereof holds title to and
controls the Security, Impositions are paid in full when due, there has
been no Event of Default or failure to pay any sums due under any of the
Loan Documents, and there does not exist any state of facts that with the
passage of time would constitute an Event of Default under the Loan
Documents (notice thereof having been given by Mortgagee to Mortgagor), the
interest earned by such escrows, less reasonable escrow costs, will be paid
to Mortgagor on each real estate tax payment date.
Page 15
If for any reason the sums on deposit with Mortgagee or
escrow agent under this Section shall not be sufficient to pay the Real
Estate Taxes within the time specified in Section 4 hereof, then Mortgagor
shall, immediately after notification by Mortgagee or the escrow holder,
deliver to Mortgagee or the escrow holder, as applicable, a check drawn on
Mortgagor's account which is payable to the appropriate governmental
authority and in an amount necessary to pay the Real Estate Taxes in full
when combined with funds available in the escrow or other account
(exclusive of interest). Mortgagee may reasonably change its estimate of
Real Estate Taxes for any period, on the basis of a change in an assessment
or tax rate or on the basis of a prior miscalculation, in which event
Mortgagor shall deposit with Mortgagee or escrow agent within ten (10) days
after demand the amount of any excess of the deposits which would
theretofore have been payable under the revised estimate over the sums
actually deposited during the applicable period.
If any Real Estate Taxes shall be levied, charged, assessed
or imposed upon or for the Security, or any portion thereof, and if such
Real Estate Taxes shall also be a levy, charge, assessment or imposition
upon or for any other premises not covered by the lien of this Mortgage,
then the computation of the amounts to be deposited under this Section
shall be based upon the entire amount of such Real Estate Taxes and
Mortgagor shall not have the right to apportion any deposit with respect to
such Real Estate Taxes.
Page 16
Upon an assignment of this Mortgage, Mortgagee shall have the
right to arrange to transfer all amounts deposited and still in its or the
escrow agent's possession to the assignee, and Mortgagee shall thereupon be
completely released from all liability with respect to such deposit,
provided such assignee shall have expressly assumed all obligations of
Mortgagee under the Loan Documents, and Mortgagor or the owner of the
Security shall look solely to the assignee or transferee in reference
thereto.
Concurrently with the payment in full by Mortgagor of the
entire Indebtedness, any sums then held by Mortgagee or an escrow agent
under this Section shall be refunded to Mortgagor.
All amounts deposited shall be held by Mortgagee or an escrow
agent as additional security for the sums secured by this Mortgage, and
Mortgagor hereby grants to Mortgagee a security interest in such sums, and
upon the occurrence of an Event of Default hereunder Mortgagee may, in its
sole and absolute discretion, apply said amounts to the payment of the
Indebtedness in whatever order Mortgagee may elect.
Immediately upon receipt of such by Mortgagor, Mortgagor
shall deliver to Mortgagee copies of all notices, demands, claims, bills,
and receipts in relation to the Real Estate Taxes.
Page 17
Notwithstanding the foregoing provisions, Mortgagee will
waive the requirement for deposits as to that portion of Real Estate Taxes
payable directly to the governmental or other authority by tenants under
the terms of Leases (as defined in Section 21, hereof) approved or deemed
approved by Mortgagee, provided satisfactory proof of payment is promptly
furnished to Mortgagee.
6. CHANGE IN TAXES. In the event any tax shall be due or become
due and payable to the United States of America, the State of Illinois or
any political subdivision thereof with respect to the execution and
delivery or recordation of this Mortgage or any other Loan Document or the
interest of Mortgagee in the Security, Mortgagor shall pay such tax at the
time and in the manner required by applicable law and Mortgagor shall hold
Mortgagee harmless and shall indemnify Mortgagee against any liability of
any nature whatsoever as a result of the imposition of any such tax. In
the event of the enactment, after the date of this instrument, of any law
changing in any way the present law as to the taxation of notes or debts
secured by mortgages or deeds of trust, for federal, state, or local
purposes, or the manner of collection of any Impositions, so as to affect
this Mortgage, or the Note, then Mortgagor shall no later than thirty (30)
days following demand by Mortgagee make such payments to Mortgagee and take
such other steps, as may be necessary in Mortgagee's reasonable judgment,
to place Mortgagee in the same financial position as it was prior to any
such enactment, failing which, or
Page 18<PAGE>
if the Mortgagor is not permitted by law to make such payments, the
Indebtedness shall, at the option of Mortgagee, become due and payable at
such date as is specified by Mortgagee, which date shall not be less than
sixty (60) days following the enactment of the law giving rise to
Mortgagee's right to accelerate payment of the Indebtedness; provided that
in the event Mortgagor continues timely to make all payments of
Indebtedness due to Mortgagee in accordance with the terms of the Note,
whether or not any term or provision of the Note, or this Mortgage shall
become invalid or enforceable, Mortgagee agrees to extend the
aforementioned period to one hundred eighty (180) days or such lesser
period as may be required by applicable law.
7. INSURANCE. Mortgagor shall at all times until the
Indebtedness shall be paid in full, keep the Security, exclusive of the
cost of excavations, footings and foundations, insured against loss or
damage for its full replacement cost (which cost shall be reset once a year
at Mortgagee's option in the exercise of its reasonable discretion) under
policies of All Risk Replacement Cost Insurance with Agreed Amount
Endorsement insuring against loss or damage from causes or events which
from time to time are included as covered risk under standard insurance
industry practices within such classification, and specifically against at
least the following perils: loss from damage by fire, windstorm, cyclone,
tornado, hurricane, hail, explosion, riot, riot attending a strike, civil
commotion, malicious mischief, vandalism, aircraft, vehicle, smoke damage
Page 19
and sprinkler leakage (including risks of war and nuclear explosion, if
available), and shall further provide flood insurance (if the Security is
situated in an area which is considered a flood risk area by the U.S.
Department of Housing and Urban Development, steam boiler insurance in a
minimum amount of $250,000 with respect to any one occurrence, machinery
insurance, if applicable, workmen's compensation insurance conforming to
applicable laws and including employer's liability insurance in a minimum
amount of $500,000, rent loss insurance in an amount sufficient to cover
the total of all rents accruing from the Security for a one year period,
comprehensive general liability insurance in a minimum amount of $5,000,000
on account of bodily injuries to or death of one person and a minimum
amount of $5,000,000 in respect of injury or death to any number of persons
arising out of any one occurrence and a minimum amount of $3,000,000 in
respect of any instance of property damage, and excess or umbrella
liability of at least $10,000,000, and during any period of restoration, a
policy or policies of builder's "all risk" insurance in an amount not less
than the full insurable value of the Security against such risks as
Mortgagee may reasonably request, contractual liability insurance, and such
other appropriate insurance as Mortgagee may reasonably require from time
to time in such amounts and with such companies as shall be approved by
Mortgagee with a Best's rating of A:XII or better unless Mortgagee agrees
otherwise, or as provided for in Mortgagor's current insurance program in
effect on June 1, 1995, and will assign and deliver to Mortgagee the
original policy or
Page 20
policies of such insurance or an original certificate from the insurer
(which certificate in the event the policy is a blanket policy which
includes land, improvements, personalty or income other than the Security
or income derived from the Security, shall evidence the allocation of
coverage to the Security and income from the Security). Except as
otherwise hereinafter provided, any changes in insurance decreasing the
amount of coverage, lowering the Best's rating of any company or otherwise
materially or adversely changing the form and substance of Mortgagor's
current insurance program is subject to the prior approval of Mortgagee
which approval shall not be unreasonably withheld; provided, however,
Mortgagee hereby grants Mortgagor the right to renew any of its current
insurance program as aforesaid with a company with a Best's rating of A:X.
If the Operating Agreement (as defined in Section 25 hereof) or any Lease
requires Mortgagor to maintain any other insurance that is not also
required under this Mortgage, then Mortgagor shall also provide such
additional insurance. Each policy maintained by Mortgagor pursuant to this
Section shall:
(i) name Mortgagee as an additional insured, as its interest
may appear, with respect to liability insurance coverage;
(ii) contain the standard non-contributory mortgagee clause
endorsement in favor of Mortgagee with respect to hazard insurance
coverage;
Page 21
(iii) name the Mortgagee as loss payee with respect to
insurance coverage except those pertaining to general and excess liability
coverage;
(iv) include effective waivers (whether under the terms of
any such policy or otherwise) by the insurer of all claims for insurance
premiums against all loss payees and named insureds other than the
Mortgagor (provided that the Mortgagee shall have the right to pay premiums
and continue any insurance upon the failure to do so of the Mortgagor) and
all rights of subrogation against any named insured and, to the extent
required under the terms of any Lease, any lessee under such Lease;
(v) except in the case of public liability insurance and
worker's compensation insurance, provide that any losses shall be payable
notwithstanding (A) any act, failure to act, negligence of, or violation or
breach of warranties, declarations or conditions contained in such policy
by Mortgagor or Mortgagee or any other named insured or loss payee, (B) the
occupancy or use of the insured properties for purposes more hazardous than
those permitted by the terms of the policy, (C) any foreclosure or other
proceeding or notice of sale relating to the insured properties or (D) any
change in the title to or ownership or possession of the insured
properties;
Page 22
(vi) provide that in the event of a loss all proceeds shall
be payable to Mortgagee subject however to the other terms hereof;
(vii) provide that the same nay not be cancelled or modified
except upon thirty (30) days prior written notice to Mortgagee;
(viii) provide that no act or thing done by Mortgagor shall
invalidate the policy as against Mortgagee; and
(ix) shall otherwise be in such form as shall be reasonably
acceptable to Mortgagee, so that at all times until the payment in full of
the Indebtedness, Mortgagee shall have and hold the said policy and
policies as further collateral for the payment of all Indebtedness.
If Mortgagor shall fail to obtain any such policy or policies
required by Mortgagee, or shall fail to assign and deliver the same to
Mortgagee, then Mortgagee may obtain such insurance and pay the premium or
premiums therefor, in which event Mortgagor shall, on demand of Mortgagee,
repay such premium or premiums to Mortgagee and such repayment shall be
secured by the lien of this Mortgage. If Mortgagor fails to maintain the
level of insurance required under this Mortgage, then Mortgagor shall
indemnify Mortgagee to the extent that a casualty occurs
Page 23
and insurance proceeds would have been available had such insurance been
maintained.
Mortgagor shall promptly provide to Mortgagee copies of any
and all notices (including notice of non-renewal), claims, and demands
which Mortgagor receives from insurers of the Security.
In an Event of Default (as defined in Section 26 hereof) by
Mortgagor, Mortgagor hereby assigns to Mortgagee all rights of Mortgagor in
and to any unearned premiums on any insurance policy required to be
furnished by Mortgagor.
The insurance coverage required under this Section 7 may be
effected under a blanket policy or policies covering the Security and other
property and assets not constituting a part of the Security; provided that
any such blanket policy shall specify, except in the case of general
liability insurance, the portion of the total coverage of such policy that
is allocated exclusively to the Security, and any sublimits in such blanket
policy applicable to the Security, which amounts shall not be less than the
amounts required pursuant to this Section 7 and which shall in any case
comply in all other respects with the requirements of this Section 7.
8. INSURANCE/CONDEMNATION PROCEEDS. Mortgagor hereby assigns to
Mortgagee all proceeds of any insurance or
Page 24
condemnation awards which Mortgagor nay be entitled to receive for loss or
damage to, or a taking of, the Security. In the event of loss or damage
to, or a taking of, the Security, the proceeds of said insurance or
condemnation award shall be payable to Mortgagee alone and Mortgagor hereby
authorizes and directs any affected insurance company or taking authority
to make payments of the insurance proceeds or condemnation awards directly
to Mortgagee; provided, however, that if there is then no Event of Default
and the proceeds of said insurance or condemnation awards do not exceed
$1,000,000, the proceeds of said insurance or condemnation awards shall be
payable directly to Mortgagor. In the event that any such insurance
proceeds or condemnation awards are paid directly to Mortgagor, except to
the extent such proceeds or awards are specifically permitted to be paid to
Mortgagor under this Section, Mortgagor shall make such proceeds or awards
available to Mortgagee within five (5) days of Mortgagor's receipt thereof.
No such loss or damage shall itself reduce the Indebtedness.
Mortgagee is authorized to adjust and compromise such loss or
damage without the consent of Mortgagor, to collect and receive such
proceeds or awards in the name of Mortgagee and Mortgagor and to endorse
Mortgagor's name upon any check in payment thereof; provided, however, that
if there is then no Event of Default, such adjustment or compromise shall
be subject to Mortgagor's approval, which approval shall not be
unreasonably withheld or delayed; and further provided, however, that if
there
Page 25
is then no Event of Default, Mortgagor shall have the right, with the
advice of Mortgagee, to lead the negotiation of any such adjustments and
compromises, which adjustments and compromises shall be subject to
Mortgagee's approval thereof, in which case the proceeds or awards shall be
paid to Mortgagee for application in accordance with this Section.
Notwithstanding anything to the contrary herein, if there is then no Event
of Default and the insurance proceeds or condemnation awards do not exceed
$1,000,000, Mortgagor shall have the right to adjust and compromise such
loss or damage without Mortgagee's consent and to collect and receive such
proceeds or awards directly.
Subject to the provisions of this Section and Sections 9, 10,
11 and 12 hereof, such proceeds or awards shall be applied first toward
reimbursement of all reasonable, out-of-pocket costs and expenses of
Mortgagee in collecting said proceeds or awards, then toward payment of the
Indebtedness or any portion thereof, whether or not then due and payable
(without the payment of any Prepayment Fee [as defined in the Note]), in
whatever order Mortgagee may elect, or Mortgagee may, at its option, apply
said insurance proceeds or condemnation awards in whole or in part toward
restoration of the Security for which such insurance proceeds or
condemnation awards shall have been paid.
In the event of foreclosure of this Mortgage or other
transfer of title to the Security and extinguishment, in whole or
Page 26
in part, of the Indebtedness, all right, title, and interest of Mortgagor
in and to any insurance policy, or premiums or payments in satisfaction of
claims or any other rights thereunder then in force, shall pass to the
purchaser or grantee notwithstanding the amount of any bid at such
foreclosure sale. Nothing contained herein shall prevent the accrual of
interest as provided in the Note on any portion of the principal balance
due under the Note until such time as the insurance proceeds or
condemnation awards are actually received and applied to reduce the
principal balance outstanding.
9. RESTORATION FOLLOWING FIRE AND OTHER CASUALTY OR
CONDEMNATION. In the event of damage to the Security by reason of fire or
other hazard or casualty, Mortgagor shall give prompt written notice
thereof to Mortgagee and shall, subject to the requirements, to the extent
applicable, of this Section, proceed with reasonable diligence to perform
repair, replacement and/or rebuilding work (hereinafter referred to as the
"Work") to restore the Security to its condition prior to such damage in
full compliance with all legal requirements. In the event of a taking by
power of eminent domain or conveyance in lieu thereof ("condemnation"), if
restoration is feasible as reasonably determined by Mortgagee, then
Mortgagor shall proceed with reasonable diligence to perform such
restoration (also referred to as the "Work"). In the event the cost of the
Work would exceed $1,000,000, then before commencing the Work, Mortgagor
shall comply with the following requirements:
Page 27
(a) Mortgagor shall furnish to Mortgagee complete plans and
specifications for the Work, for Mortgagee's approval, which approval shall
not be unreasonably withheld or delayed. Said plans and specifications
shall bear the signed approval thereof by an architect reasonably
satisfactory to Mortgagee and shall be accompanied by the architect's
signed estimate, bearing the architect's seal, of the entire cost of
completing the Work, and shall provide that upon completion of the Work,
the Security shall be at least substantially equal in quality of materials
and general utility to its quality of materials and general utility prior
to the damage or destruction or condemnation.
(b) Mortgagor shall furnish to Mortgagee certified or photostatic
copies of all permits and approvals required by law in connection with the
commencement and conduct of the Work.
(c) Mortgagor shall furnish to Mortgagee, prior to the
commencement of the Work, a surety bond for or guaranty of completion of
and payment for the Work, which bond or guaranty shall be in form
reasonably satisfactory to Mortgagee and shall be signed by a surety or
sureties, or guarantor or guarantors, as the case may be, who are
reasonably acceptable to Mortgagee, and in an amount not less than the
architect's estimate of the entire cost of completing the Work, less the
amount of insurance proceeds
Page 28
or condemnation award, if any, then held by Mortgagee and which
Mortgagee shall have elected or shall be required to apply toward
restoration of the Security as provided in Section 10 hereof.
Mortgagor shall not commence any of the Work until Mortgagor
shall have complied with the above requirements, and thereafter Mortgagor
shall perform the Work diligently and in good faith in accordance with the
plans and specifications referred to in subsection (a) above.
If the costs of the Work could not reasonably be estimated to
exceed $1,000,000 as determined by Mortgagee, the insurance and
condemnation proceeds shall be made available to Mortgagor without
retention or holdbacks, to be used to complete the Work, provided there is
no monetary default hereunder, under the Note, or under any of the other
Loan Documents, without regard to any notice, grace, or cure periods, nor
any nonmonetary default hereunder or under any of the aforementioned
documents for which written notice has been provided (and for which
Mortgagee is obligated to give notice hereunder or under any of the other
Loan Documents), without regard to any grace or cure periods. If the costs
of the Work could reasonably be expected to exceed $1,000,000 as determined
by Mortgagee, and as provided in Section 10 hereof, Mortgagee shall have
elected or is required to apply any insurance proceeds or condemnation
awards toward repair or restoration of the Security, then so long as the
Work
Page 29
is being diligently performed by Mortgagor in accordance with the
provisions of this Mortgage, Mortgagee shall disburse such insurance
proceeds or condemnation awards to Mortgagor from time to time during the
course of the Work in accordance with the following provisions:
A. The Work shall be in the charge of an experienced
construction manager reasonably satisfactory to Mortgagee with the
consultation of an architect or engineer.
B. Each request for payment shall not be made more often
than at thirty (30) day intervals, on ten (10) business days prior notice
to Mortgagee, and shall be accompanied by a certificate reasonably
satisfactory to Mortgagee of the architect or engineer, dated not more than
ten (10) days prior to the application for withdrawal of funds, stating:
(i) that all of the Work for which payment is
being requested is in place and has been completed in compliance with the
approved plans and specifications and all applicable legal requirements;
and
(ii) that the sum then requested to be withdrawn
has been paid by Mortgagor and/or is justly due to contractors,
subcontractors, materialmen,
Page 30
engineers, architects or other persons (whose names and addresses
shall be stated) who have rendered or furnished certain services or
materials for the Work and giving a brief description of such services and
materials and the principal subdivisions or categories thereof and the
respective amounts so paid or due to each of said persons in respect
thereof and stating the progress of the Work up to the date of said
certificate.
Each request for payment shall also be accompanied by evidence reasonably
satisfactory to Mortgagee:
(a) that the sum then requested to be withdrawn, plus (i)
all sums previously withdrawn, and (ii) any sums deposited by Mortgagor
with Mortgagee, does not exceed the cost of the Work insofar as actually
accomplished up to the date of such certificate;
(b) that the remainder of the moneys held by Mortgagee will
be sufficient to pay in full for the completion of the Work;
(c) that no part of the cost of the services and materials
described in the foregoing paragraph (ii) of this clause B has been or is
being made the basis of
Page 31
the withdrawal of any funds in any previous or then pending
application; and
(d) that, except for the amounts, if any, specified in the
foregoing paragraph (ii) of this Clause B to be due for services or
materials or held back as a retention, there is no outstanding invoices or
bills known, after due inquiry, which is then due and payable for work,
labor, services or materials in connection with the Work which, if unpaid,
might become the basis of a vendor's, mechanic's, laborer's or
materialman's statutory or other similar lien upon the Security or any part
thereof.
c. Mortgagor shall, upon Mortgagee's request, deliver to
Mortgagee (i) reasonably satisfactory evidence that the work for which
funds are sought to be released has actually been performed; (ii) executed
waivers or releases of mechanics' liens from each general contractor, first
tier subcontractor, vendor or materialman or the bonding thereof or other
satisfactory evidence that no such mechanics' liens exist (or that such
liens are either insured or bonded over in a manner reasonably acceptable
to Mortgagee) or provision for the payment thereof made upon determination
of the amount of such lien; and (iii) any other evidence, documents,
instruments or certificates required to be
Page 32
delivered by Mortgagor to any party under the terns of any Lease.
D. Mortgagor shall deliver to Mortgagee reasonably satisfactory
evidence that the Security and every part thereof, and all materials and
all property described in the certificate furnished pursuant to the
foregoing Clause B, are free and clear of all mortgages, liens (unless
insured or bonded over as provided in the foregoing Clause C), charges or
encumbrances, except (a) encumbrances, if any, securing indebtedness due to
persons (whose names and addresses and the several amounts due them shall
be stated) specified in said certificate furnished pursuant to the
foregoing Clause B, which encumbrances will be discharged upon disbursement
of the funds then being requested, and encumbrances permitted by this
Mortgage (including the Permitted Exceptions), (b) this Mortgage and (c)
any of the other Loan Documents. Mortgagee shall accept as satisfactory
evidence under this Clause C a certificate of a title insurance company
reasonably acceptable to Mortgagee or an endorsement to Mortgagee's
existing loan title policy insuring the lien of this Mortgage, dated as of
the date of the making of the disbursement, confirming the foregoing.
E. Following the completion of any new foundations on the Real
Property, Mortgagor shall deliver to Mortgagee a survey of the Security
dated as of a date within ten (10)
Page 33
days prior to the making of the advance (or revised to a date within
ten days prior to the advance) showing no encroachments other than those,
if any, acceptable to Mortgagee.
F. There shall be no Event of Default by Mortgagor under the
Note or under any of the other Loan Documents.
Mortgagee at its option may waive any of the foregoing
requirements.
Upon compliance by Mortgagor with the foregoing Clauses A, B,
C, D, E, and F (except for such requirements, if any, as Mortgagee at its
option may have waived), Mortgagor shall, to the extent of the insurance
proceeds or condemnation award, if any, which Mortgagee shall have elected
or shall be required to apply to restoration of the Security, pay or cause
to be paid to the persons named in the certificate furnished pursuant to
the foregoing Clause B, the respective amounts stated in said certificate
to be due them, and Mortgagee shall pay to Mortgagor the amounts stated in
said certificate to have been paid by Mortgagor.
If upon completion of the Work there shall be insurance
proceeds or condemnation awards held by Mortgagee over and above the
amounts withdrawn pursuant to the foregoing provisions, then Mortgagee, at
Mortgagee's option, may either retain such proceeds
Page 34
or awards and apply the same in reduction of the Indebtedness (without any
prepayment fee) in whatever order Mortgagee may elect (but only in the
event Mortgagor is in default hereunder), or Mortgagee may pay over such
proceeds or awards to Mortgagor.
Upon completion of the Work, in addition to the requirements
of the foregoing Clauses A, B, C, D, and E, Mortgagor shall promptly
deliver to Mortgagee:
(a) A written certificate of the architect or engineer that
the Work has been fully completed in a good and workmanlike manner in
accordance with the approved plans and specifications;
(b) A written report and policy of a title insurance
company or an endorsement to Mortgagee's existing policy reasonably
acceptable to Mortgagee insuring the Security against mechanics' and
materialmen's liens;
(c) To the extent required by applicable law, a temporary
certificate of occupancy and all other applicable certificates, licenses,
consents and approvals issued by governmental agencies or authorities with
respect to the Security and by the appropriate Board of Fire Underwriters
or other similar bodies acting in and for the locality in which the
Security is situated, provided that within thirty (30) days after
completion of the Work, Mortgagor shall
Page 35
obtain and deliver to Mortgagee a Permanent certificate of occupancy
for the Security;
(d) A final release and waiver of mechanics' or
materialman's liens from each general contractor and first tier
subcontractor, vendor or materialman who has performed work, or provided
labor, services or materials, as the case may be, in connection with the
Work, unless Mortgagor shall have obtained, and furnished evidence thereof
to Mortgagee, a surety bond or other security satisfactory to Mortgagee in
its sole discretion sufficient to release the lien claim of any such
contractor, subcontractor, vendor or materialman.
10. DISPOSITION OF CONDEMNATION OR INSURANCE PROCEEDS. Subject to
the terms and provisions of Sections 8 and 9 above, Mortgagee, in its
absolute discretion, may decide whether and to what extent, if any,
proceeds of insurance or condemnation will be made available to Mortgagor
for repair or restoration of the Security. Notwithstanding the foregoing
or anything to the contrary set forth herein, Mortgagee agrees to make
insurance and condemnation proceeds available to Mortgagor for repair or
restoration if restoration or repair is required under the Operating
Agreement, provided that such proceeds are held by Mortgagee and released
under the terms of Section 9 hereof for repair in accordance with the
Operating Agreement. Further notwithstanding the foregoing, Mortgagee also
agrees to make
Page 36
insurance and condemnation proceeds available for repair or restoration,
provided:
(i) In the case of casualty only, not more than 40% of the
Improvements and Personal Property by either value or square footage as
reasonably determined by Mortgagee, is damaged, and in the case of
condemnation only, the Improvements and Buildings are capable of being
restored to substantially the same size and character as existed
immediately prior to the taking, as determined by Mortgagee in its
reasonable discretion;
(ii) There is then existing no Event of Default hereunder
or under the other Loan Documents, and, if there then exists
a state of facts that with the giving of notice, passage of time, or both,
would constitute an Event of Default, then the proceeds may be held back by
Mortgagee during the cure period provided for in this Mortgage until cure
has been completed, provided that Mortgagor is diligently prosecuting such
cure, and, in the case of a failure to perform under Section 26(b) hereof,
if cure has not been completed within 120 days after notice of failure to
perform, then Mortgagee shall have the right not to make the proceeds
available;
Page 37
(iii) Mortgagor can demonstrate to Mortgagee's reasonable satisfaction
that Mortgagor has the financial ability to make all scheduled
payments when due under the Loan Documents during repair or restoration
from proceeds of rent insurance or otherwise;
(iv) The restoration or repair is greater than $1,000,000 and is capable
of being completed prior to the maturity date of the Note and (a) tenants
demising seventy-five percent (75%) of gross leasable area of the enclosed
mall portion of the Improvements (excluding Sears, Roebuck & Co., J.C.
Penney, Marshall Field & Co., and Carson, Pirie Scott which all own the
land on which their respective stores are located [collectively, the
"Anchor Stores"]) do not have termination rights in their leases as a
result of such casualty or condemnation or agree in writing not to
terminate their leases, (b) after restoration the Anchor Stores agree to
operate under the existing Operating Agreement, and (c) both tenants and
the Anchor Stores will be open within sixty (60) days after completion of
restoration;
(v) The excess of annualized income from the Leases in place
immediately prior to such casualty or condemnation, approved or Deemed
Approved (as hereinafter defined) by Mortgagee, and as to which
Page 38
there is no continuing right to terminate or the tenants or
the Anchor Stores have agreed to continue to operate, over Operating
Expenses (hereinafter defined), shall equal or exceed 1.25 times TADS
(hereinafter defined); and
(vi) The proceeds are released under the escrow/construction
funding arrangements specified in Section 9 hereof.
Notwithstanding anything to the contrary contained herein, in all
events Mortgagee agrees to make casualty insurance proceeds and
condemnation proceeds available to Mortgagor for restoration or repair of
the Real Property if the cost of such restoration or repair is $1,000,000
or less and is capable of being completed prior to the maturity date of the
Note.
"Operating Expenses" shall mean all necessary and ordinary
operating expenses applicable to the Security for the previous 12-month
period, including, without limitation, utilities, administrative, cleaning,
landscaping, security, repairs and maintenance, ground rent payments,
management fees, real estate and other taxes, assessments and insurance,
but excluding therefrom deductions for federal, state and other income
taxes, debt service expense, depreciation or amortization of capital
expenditures and other similar noncash items, the cost of tenant
improvements, and brokerage commissions. Income shall be annualized for a
twelve (12) month period on the basis of the
Page 39
Leases and payments from the Anchor Stores in place immediately prior to
such casualty or condemnation, approved or Deemed Approved by Mortgagee,
and as to which there is no continuing right to terminate, or the tenants
or the Anchor Stores have agreed to continue to operate, and ordinary
operating expenses shall not be prepaid. Documentation of annualized
income and Operating Expenses shall be certified by an officer of the
general partner of Mortgagor, or such other entity which is reasonably
acceptable to Mortgagee, with detail reasonably satisfactory to Mortgagee
and shall be subject to the reasonable approval of Mortgagee. "TADS" shall
mean the sum of (i) the aggregate debt service payments (including
principal and interest) on the loan evidenced by the Note for the
applicable time period, plus (ii) the aggregate debt service payments
(including principal and interest) on any other then-applicable secondary
financing secured by a lien on the Security for the applicable time period.
Subject to the provisions of this Section 10, if Mortgagee
elects not to make the proceeds available for the Work as provided herein,
then such proceeds shall be applied to reduce the Indebtedness in whatever
order Mortgagee may elect. Any application of such proceeds to the
principal indebtedness evidenced by the Note shall be at par and shall
cause a pro rata reduction in payments of interest and, if applicable,
principal, under the Note. In no event shall Mortgagor be obligated to pay
Page 40
any prepayment penalty or premium in connection with the payment of such
proceeds to Mortgagee.
Regardless of whether Mortgagee makes any proceeds of insurance
or condemnation available to Mortgagor for repair or restoration of the
Security, Mortgagor agrees to effect such repair or restoration; provided,
however, Mortgagor shall have no such obligation if Mortgagee is obligated
to make such proceeds available to Mortgagor but fails to do so.
Notwithstanding anything to the contrary contained in this Section 10, if
Mortgagee is obligated to make any proceeds of insurance or condemnation
available to Mortgagor and fails to do so, or if Mortgagee is not obligated
to make any such proceeds available to Mortgagor, Mortgagor shall have the
right, at Mortgagor's option to prepay the Indebtedness in full; provided,
however, no prepayment fee shall be payable in connection therewith. The
foregoing shall not, in any way, be a limitation on Mortgagor's rights and
remedies for any failure by Mortgagee to make such proceeds available to
Mortgagor, but only in the event Mortgagee has an obligation hereunder to
make such proceeds available to Mortgagor.
Notwithstanding anything to the contrary contained in this
Section 10, if the Security or any part thereof is taken or damaged by
reason of any public improvement or condemnation proceeding, or in any
other manner, and there is no Event of Default hereunder or under any of
the other Loan Documents,
Page 41
Mortgagor shall have the right with the advice and prior written consent of
Mortgagee, to negotiate and settle any condemnation proceeding (including,
but not limited to a conveyance in lieu of condemnation), in which case the
condemnation proceeds shall be paid to Mortgagee for application in
accordance with this Section.
11. FIRE AND OTHER CASUALTY; SELF-HELP. If within one hundred
twenty (120) days after the occurrence of any damage to the Security in
excess of $1,000,000 or the condemnation of any portion of the Security in
excess of $1,000,000, Mortgagor shall not have submitted to Mortgagee and
received Mortgagee's approval of plans and specifications for the Work
(which approval shall not be unreasonably withheld or delayed) or shall not
have obtained approval of such plans and specifications from all
governmental authorities whose approval is required, or if, after such
plans and specifications are approved by Mortgagee and all such
governmental authorities, Mortgagor shall fail to promptly commence the
Work, or if thereafter Mortgagor fails to perform the Work diligently or is
delinquent in the payment to mechanics, materialmen or others of the costs
incurred in connection with the Work, or, in the case of any loss or damage
not in excess of $1,000,000, if Mortgagor shall fail to complete the Work
promptly, then, in addition to all other rights herein set forth, and after
giving Mortgagor twenty (20) days written notice of the nonfulfillment of
one or more of the foregoing conditions Mortgagee, or any lawfully
appointed receiver of the Security,
Page 42
may at its respective option, perform or cause the Work to be performed,
and may take such other steps as it deems advisable to perform the Work,
and may enter upon the Security for any of the foregoing purposes, and
Mortgagor hereby waives, for Mortgagor and all others holding under
Mortgagor, any claim against Mortgagee or such receiver arising out of
anything done by Mortgagee or such receiver pursuant to this Section unless
caused by the gross negligence or willful misconduct of Mortgagee or such
receiver, and Mortgagee may apply insurance proceeds (without the need to
fulfill the requirements of Section 9 hereof) to reimburse Mortgagee,
and/or such receiver for all amounts expended or incurred by them,
respectively, in connection with the performance of the Work, and any
excess costs shall be paid by Mortgagor to Mortgagee upon demand and such
payment shall be secured by the lien of this Mortgage.
12. RENT INSURANCE PROCEEDS. Mortgagor hereby assigns the proceeds
of all policies of rent insurance relating to the Security to Mortgagee to
be applied in payment of the Indebtedness in whatever order Mortgagee may
elect. Notwithstanding the foregoing, provided that for so long as
Mortgagor is proceeding diligently and in compliance with the provisions of
Section 9 hereof, and there is no monetary default hereunder, or under the
Note, or any of the other Loan Documents, without regard to any notice,
grace or cure periods, nor any nonmonetary default hereunder or under any
of the other Loan Documents for which written notice has been provided,
without
Page 43
regard to any grace or cure periods, and further provided that Mortgagor
shall have certified to Mortgagee in writing the type and amount of the
operating and maintenance expenses incurred by Mortgagor with respect to
the Security during the preceding month, Mortgagee agrees to pay each month
to Mortgagor out of the rent insurance proceeds held by Mortgagee a sum
equal to that amount, if any, of the rent insurance proceeds paid by the
insurer which is allocable to the rental loss for the preceding month less
the amount of debt service and any other sum due under the Note, and the
other Loan Documents for the same preceding month, including, without
limitation, deposits into escrow for the payment of Real Estate Taxes
pursuant to Section 5 hereof. Mortgagee at its option may waive any of the
foregoing conditions to the payment of rent insurance proceeds. If
Mortgagor does not fulfill the foregoing conditions entitling Mortgagor to
such monthly disbursements of applicable portions of rent insurance
proceeds, then such rent insurance proceeds may be applied by Mortgagee, at
Mortgagee's option to the payment of the Indebtedness in whatever order
Mortgagee may elect, provided, however, no prepayment fee shall be payable
in connection therewith.
13. INTENTIONALLY OMITTED.
14. REPAIR; ALTERATIONS; WASTE; ENVIRONMENTAL. Mortgagor shall keep
all of the Security in good and substantial repair, and expressly agrees
that it will neither permit nor commit any
Page 44
waste upon the Security, nor do any act or suffer or permit any act to be
done, whereby the Security will become less valuable or the lien hereof may
be impaired and shall comply with all zoning laws, building codes,
subdivision laws, environmental laws, and other laws, ordinances, rules and
regulations made or promulgated by any government or municipality, or by
any agency thereof or by any other lawful authority, which are now or may
hereafter impose any duty on Mortgagor with respect to the use, occupancy,
or alteration of the Security or which may otherwise become applicable to
the Security including, without limitation, the Americans with Disabilities
Act of 1990 ("ADA"). Mortgagor hereby represents, warrants and covenants
that the Security does or will comply with all ADA requirements within the
applicable required time periods. Mortgagor shall furnish to Mortgagee,
promptly following Mortgagee's request therefor, a certification by a
consultant approved by Mortgagee that states (a) the Security is then in
compliance with all ADA requirements or (b) the applicable required time
period in which the Security must be in compliance therewith. Mortgagor
shall repair or restore any building now or hereafter under construction on
the Security and complete the same within a reasonable period of time.
Mortgagor agrees not to initiate or acquiesce in any zoning variance or
reclassification, without Mortgagee's prior written consent. Mortgagor
shall not construct any additional building or buildings or make any other
improvements on the Land, nor alter, remove or demolish any building or
other Improvements on the Land, without the prior written consent of
Mortgagee, except for
Page 45
tenant improvements under the Leases (as defined in Section 21 hereof ),
which shall be undertaken in accordance with the terms of such Leases.
If an Event of Default exists under this Section, Mortgagee or a
lawfully appointed receiver of the Security at its option, from time to
time, may perform, or cause to be performed, any and all repairs and such
other work as it deems necessary to bring the Security into compliance with
the provisions of this Section and may enter upon the Security for any of
the foregoing purposes, and Mortgagor hereby waives any claim against
Mortgagee and/or such receiver other than claims resulting from the gross
negligence or willful misconduct of Mortgagee or such receiver, arising out
of such entry or out of any other act carried out pursuant to this Section.
Mortgagor shall upon demand repay to Mortgagee and such receiver all
amounts expended or incurred by them, respectively, in connection with any
action taken pursuant to this Section, and such repayment shall be secured
by the lien of this Mortgage.
Mortgagor represents, warrants and covenants that there are and
at all times during the term of this Mortgage will be the greater of the
number of parking spaces required under the Operating Agreement or the
minimum required under applicable zoning laws (except as may otherwise be
permitted pursuant to Section 10 hereof in the case of any casualty or
condemnation affecting the Security).
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Except as otherwise disclosed in the Phase I Environmental
Assessment prepared by BCM Engineers, Inc. dated June 23, 1995 (Project No.
00-7850-20) (the "Environmental Report"), Mortgagor represents, warrants
and covenants as of the date hereof that Mortgagor has not used and will
not use and, to Mortgagor's actual knowledge, no prior owner or current or
prior tenant, subtenant, or other occupant of all or any part of the
Security has used or is using Hazardous Materials (hereinafter defined) on,
from or affecting the Security in any manner that violates the
Environmental Laws (hereinafter defined), that, to Mortgagor's actual
knowledge, no Hazardous Materials have been disposed of on the Security nor
have any Hazardous Materials migrated onto the Security. For purposes of
the representations and warranties set forth in this Section, "Mortgagor's
actual knowledge" shall mean the actual knowledge of Tom Castagnoli, the
mall manager, Robert Cohen, the regional manager employed by the Property
Manager (as hereinafter defined in the Management Agreement [as hereinafter
defined]), and Doug Welker, the asset manager of the Real Property
(collectively, the "Key Personnel"), who constitute all of the people
currently employed by Mortgagor, Property Manager, or any Affiliate (as
hereinafter defined) of Mortgagor or Property Manager and reasonably
believed by Mortgagor to have been or currently to be actively involved in
the operation or management of the Security and, as a result, to have
actual knowledge with respect to the foregoing matters.
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For purposes of this Section, "Affiliate" shall mean any entity
controlling, controlled by, or under common control with Mortgagor or
Property Manager, as applicable. For purposes hereof, "control" (including
its correlative usages, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of the power to direct or
cause the direction of management or policies, whether through ownership of
voting securities, by contract, or otherwise. For purposes of this
definition, any entity that owns, directly or indirectly, 50% or more of
the securities having ordinary voting power for the election of the board
of directors of the corporation or 50% or more of the ownership interests
of any other entity shall be deemed to control such corporation or other
entity. In addition, with respect to any general or limited partnership,
an entity which is the managing or co-managing partner of such partnership,
or which is a general partner with at least equal power with all general
partners to direct and control the partnership, shall be deemed to control
such partnership.
The Key Personnel will be charged with having actual knowledge of the
contents of the files maintained for the Security by Mortgagor, the general
partners in Mortgagor, and the Property Manager. The Key Personnel shall
have no duty to conduct any investigation beyond review of such files, and
no knowledge of any other person shall be imputed to the Key Personnel.
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For purposes of this Mortgage, the following terms shall have
the definition set forth:
"Hazardous Materials" shall mean and include those elements,
materials, compounds, mixtures, wastes or substances which are contained in
any list of hazardous substances adopted by the United States Environmental
Protection Agency (the "EPA") or any list of toxic pollutants designated by
Congress or the EPA or which are defined as hazardous, toxic, pollutant,
infectious, flammable or radioactive by any of the Environmental Laws
(hereinafter defined).
Notwithstanding anything contained herein to the contrary,
the term "Hazardous Materials" shall not include any ordinary use or
incidental storage of substances reasonably and customarily necessary for
the regular and ordinary maintenance of the Security (including, but not
limited to, common office business machines located at the Security), nor
to gasoline, oil, and other automotive fluids to the extent that they are
contained in the common and ordinary manner in motor vehicles visiting the
Security or used in the ordinary course of business by any so-called tire,
battery and accessory store located on the Security, in each case provided
that the same do not constitute, give rise to, or create any substantial
risk of (i) any violation of any requirements of any Environmental Law
pertaining to the Security, or (ii) any event, occurrence or condition as a
consequence of which, pursuant to any requirements of any
Page 49
Environmental Law, (a) Mortgagor, Mortgagee, or any owner, occupant, or
person having an interest in the Security shall be subject to any material
restriction on use, ownership or transferability of the Security, or (b)
any remedial work pertaining to Hazardous Materials shall be required under
any Environmental Law, at or in connection with the Security.
"Environmental Laws" shall mean and include any applicable
federal, state, or local statute, law, ordinance, code, rule, regulation,
order, decree or policy having the force of law regulating or relating to
protection of human health or the environment, or regulating or imposing
liability or standards of conduct concerning the use, storage, treatment,
transportation, manufacture, refinement, handling, production or disposal
of any Hazardous Materials as now or at any time hereafter in effect
including, without limitation, the Illinois Environmental Protection Act,
as amended, 415 ILCS 5/1 ET. SEQ., the Federal Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. Subsection
9601 ET. SEQ., the Superfund Amendments and Reauthorization Act, 42 U.S.C.
Subsection 9601 ET. SEQ., the Federal Oil Pollution Act of 1990, 33 U.S.C.
Subsection 2701, ET. SEQ., the Federal Toxic Substances Control Act, 15
U.S.C. Subsection 2601 ET. SEQ., the Federal Resource Conservation and
Recovery Act as amended, 42 U.S.C. Subsection 6901 ET. SEQ., the Federal
Hazardous Material Transportation Act 49 U.S.C. Subsection 1801 ET. SEQ.,
the Federal Clean Air Act 42 U.S.C. Section 7401 ET. SEQ., the Federal
Water Pollution Control Act, 33 U.S.C. Section 1251 ET. SEQ., the River
Page 50
and Harbors Act of 1899, 33 U.S.C. Subsection 401 ET. SEQ., and all rules
and regulations of the EPA, the Illinois Environmental Protection Agency,
the Illinois Pollution Control Board, or any other state, county, or
federal department, board, or agency, or any other agency or governmental
board or entity having jurisdiction over the Security, as any of the
foregoing have been, or are hereafter, amended.
Mortgagor shall not permit any lien under any federal, state,
county or municipal law, act, ordinance, rule or regulation with respect to
Hazardous Materials to attach to the Security or any portion thereof or
interest therein. Notwithstanding anything contained herein to the
contrary, if any such lien claim is filed which Mortgagor disputes or
contests, Mortgagor shall have the right to dispute or contest such lien
claim; provided that, Mortgagor promptly obtain and record at its own
expense a surety bond or other security reasonably satisfactory to
Mortgagee sufficient to release such lien claim in the event Mortgagor's
contest of such lien is decided adversely to Mortgagor. Mortgagor
represents, warrants and covenants as of the date hereof that, to the best
of Mortgagor's knowledge, it has not received any written notice from any
governmental agency or any tenant of the Security with regard to Hazardous
Materials, and has received no written notice that the environmental and
ecological condition of the Security is in violation of any Environmental
Law.
Page 51
Mortgagor represents, warrants and covenants as of the date
hereof that, except as otherwise disclosed in the Environmental Report, to
the best of Mortgagor's knowledge and belief, the Security does not
contain, and has not in the past contained, any asbestos containing
material in friable form and there is no current or potential airborne
contamination of the Security by asbestos fiber, including any potential
contamination that would be caused by maintenance or tenant finish
activities in the building(s) constituting the Improvements.
Mortgagor represents, warrants and covenants as of the date
hereof that, to the best of Mortgagor's knowledge, it has not received any
written notice that the soil, surface water, and ground water of or on the
Real Property contain any spills of oil or other solid or liquid waste,
toxic or hazardous substance or contaminate, and Mortgagor has no actual
knowledge of any such spill.
In the event that any investigation, site monitoring,
containment, clean-up, removal, restoration or other remedial work of any
kind or nature (the "Remedial Work") is required under any applicable
Environmental Law, any judicial order, or by any governmental entity
because of, or in connection with, the current or future presence,
suspected presence, release or suspected release of a Hazardous Material in
or about the air, soil, ground water, surface water or soil vapor at, on,
about, under or within the Security (or any portion thereof), Mortgagor
Page 52
shall within thirty (30) days after written demand for performance thereof
by Mortgagee (or such shorter period of time as may be required under any
applicable Environmental Law, order or agreement to which Mortgagor is a
party or by which Mortgagor is obligated), commence and thereafter
diligently prosecute to completion, all such Remedial Work. Except in the
case when the Remedial Work has been ordered by a court or a governmental
entity, the demand for performance shall be accompanied by a report of an
engineer describing in reasonable detail the cause and nature of such
Remedial Work. All Remedial Work shall be performed by contractors
approved in advance by Mortgagee, and under the supervision of a consulting
engineer approved by Mortgagee. All costs and expenses of such Remedial
Work shall be paid by Mortgagor including, without limitation, Mortgagee's
reasonable attorneys' fees, paralegal fees and costs incurred in connection
with monitoring or review of such Remedial Work. In the event Mortgagor
shall fail to timely prosecute to completion, such Remedial Work, following
ten (10) days prior notice to Mortgagor, Mortgagee may, but shall not be
required to, cause such Remedial work to be performed and all costs and
expenses thereof, or incurred in connection therewith, shall be payable by
Mortgagor upon demand or shall, at Mortgagee's option, become part of the
Indebtedness and secured hereby.
Mortgagor shall provide Mortgagee with prompt written notice
(a) upon Mortgagor's becoming aware of any release or threat of release of
any Hazardous Materials upon, under or from
Page 53
the Security; (b) upon Mortgagor's receipt of any written notice from any
federal, state, municipal or other governmental agency or authority in
connection with any Hazardous Materials located upon or under or emanating
from the Security; and (c) upon any of the Knowledge Parties (as
hereinafter defined) obtaining knowledge of any incurrence of expense by
any governmental agency or authority in connection with the assessment,
containment or removal of any Hazardous Materials located upon or under or
emanating from the Security. As used in this subsection (c) the term
"Knowledge Parties" shall mean Tom Castagnoli, the mall manager, Robert
Cohen, the regional manager employed by the Property Manager, and Doug
Welker, the asset manager of the Real Property.
15. ENVIRONMENTAL INDEMNIFICATION. Mortgagor will protect,
indemnify, defend and hold harmless Mortgagee and its assigns and their
respective directors, officers, employees, and agents and their respective
heirs, legal representatives, successors, and assigns, from and against any
and all loss, damage, cost, charge, lien, debt, fine, penalty, injunctive
relief, claim, demand, expense, suit, judgment, adjudication liability, or
injury to person, property or natural resources, including attorney's fees
and consulting fees (any of the foregoing being referred to herein as a
"Claim"), arising out of, attributable to, which may accrue out of, or
which may result from (i) a violation or alleged violation (but only if
such allegation is made by a governmental agency) of the Environmental Laws
in connection with
Page 54
the Security by any person or entity or other source whether related or
unrelated to Mortgagor, or (ii) the actual or alleged (but only if such
allegation is made by a governmental agency) presence, release,
transportation, migration, generation, treatment, processing, storage, use
or disposal (herein collectively referred to as "Disposal") of Hazardous
Materials (whether intentional or unintentional, direct or indirect,
foreseeable or unforeseeable) by any person or entity or other source in
connection with the Security, whether related or unrelated to Mortgagor,
which Disposal is required to be remediated under the Environmental Laws.
16. INDEPENDENCE OF SECURITY. Without Mortgagee's prior written
consent, Mortgagor shall not by act or omission permit any building or
other improvement on any premises not subject to the lien of this Mortgage
to rely on the Security or any part thereof or any interest therein to
fulfill any municipal or governmental requirement. Mortgagor hereby
collaterally assigns to Mortgagee any and all rights to give consent for
all or any portion of the Security or any interest therein to be so used,
it being the intent of the parties that the effect of this collateral
assignment shall be to disable Mortgagor from giving such consent without
the prior written approval of Mortgagee but that such right to give consent
shall not be exercisable by Mortgagee until after commencement of a
foreclosure proceeding. Similarly, no part of the Security shall rely on
any premises not subject to the lien of this Mortgage or any interest
therein to
Page 55
fulfill any governmental or municipal requirement. Mortgagor shall not by
act or omission impair the integrity of the Real Property as a single
zoning lot, and as one or more complete tax parcels, separate and apart
from all other premises. Any act or omission by Mortgagor which would
result in a violation of any of the provisions of this Section shall be
void.
17. NO OTHER LIENS. Except as otherwise set forth herein, Mortgagor
shall not consent, agree to, or permit any mortgage, lien, or security
interest upon or affecting the Security or any part thereof except as
granted or permitted in this Mortgage and any other lien or security
interest granted to Mortgagee.
Notwithstanding anything to the contrary contained herein or
in any other Loan Document, Mortgagor shall have the right to lease or
finance the Personal Property without Mortgagee's prior consent in an
aggregate amount not to exceed $1,000,000.
Notwithstanding the foregoing, however, Mortgagor shall have
the right to borrow additional funds from another lender and to further
encumber the Security with a second priority lien, provided that all of the
following conditions are satisfied:
(i) there shall be no Event of Default hereunder or
under any other Loan Documents at the time of the closing of the secondary
loan transaction;
Page 56
(ii) the proposed secondary financing shall be from an Institutional
Investor (hereinafter defined);
(iii) the Debt Service Coverage (hereinafter defined) with
respect to the Note and the proposed secondary financing shall
exceed 1.35 times based on Mortgagee's reasonable projection of Net
Operating Income (hereinafter defined) for the next twelve (12) month
period;
(iv) the proposed secondary financing shall not be given
in satisfaction of, or to evidence, judgments or claims against
Mortgagor, nor shall any security interest or mortgage securing the
proposed financing be cross defaulted or cross collateralized with any
other security interest in any other property;
(v) at least forty-five (45) days prior to the closing of
such proposed secondary financing, Mortgagor must provide
Mortgagee with all of the material provisions of such financing including
without limitation the proposed date of closing and the name, background
and address of the proposed lender, and the principal amount, rate,
periodic payments, term and other salient features of the financing;
Page 57
(vi) the proposed secondary financing must not call for an
accrual of interest or additional principal and all payments must
be on a current pay basis;
(vii) the Aggregate Loan-to-Value Ratio (as hereinafter defined)
must not exceed 65%; provided, however, that in the event that
Mortgagor or an Affiliate (as hereinafter defined) is providing subordinate
purchase money financing in connection with a permitted transfer of the
Real Property pursuant to Section 19 herein, such Aggregate Loan-to-Value
Ratio must not exceed 75%. For purposes hereof, the Aggregate Loan-to-
Value Ratio shall be determined by adding the then outstanding principal
balance of the Loan to the amount of the proposed secondary financing, and
by dividing the sum thereof by Mortgagee's reasonable estimate of the fair
market value of the Security. Mortgagee shall be provided with such
reasonable information as it may require to determine the same. In the
event Mortgagee determines that the Aggregate-Loan-to-Value Ratio exceeds
65% or 75%, as applicable, at Mortgagor's option, Mortgagee and Mortgagor
shall hire an M.A.I. appraiser mutually satisfactory to both of them, at
Mortgagor's sole expense, to appraise
Page 58
the Security, and Mortgagee and Mortgagor agree that such
appraisal shall be used to determine the fair market value of the Security
for purposes of this clause (vii);
(viii) any transfer of all or any part of Mortgagor's interest
in the Security to the secondary lender by foreclosure, trustee's
sale, deed in lieu thereof or otherwise, or commencement of proceedings or
negotiations concerning any of the foregoing shall be a default under this
Mortgage;
(ix) Mortgagor shall pay for all of Mortgagee's reasonable
costs and expenses associated with such proposed secondary
financing, including without limitation, attorneys' fees charged by
Mortgagee's staff counsel or special counsel; and
(x) the secondary lender shall enter into an intercreditor
agreement with Mortgagee to the following effect:
(a) the secondary lender waives any right to marshalling or to assert
priority over future advances, if any, provided for in the Loan Documents;
Page 59
(b) the secondary lender agrees to be bound by any extensions
or modifications of the Loan Documents and the lien of its mortgage
shall be subordinate to all leases of space in the Security;
(c) the secondary lender agrees that Mortgagee shall in all
cases be paid all sums then due under the Loan Documents before the
secondary lender receives any sums then due under the secondary financing;
(d) the secondary lender, together with Mortgagee, shall agree
to provide each other with a copy of any written notice of default
given to Mortgagor under their respective loan documents at the same time
such notice is delivered to Mortgagor and with an opportunity to cure each
such default during any applicable cure period afforded to Mortgagor under
their respective loan documents;
(e) the secondary lender and Mortgagee shall agree to provide
each other with twenty (20) days written notice prior to the
acceleration of their respective loans or their exercise
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of any of their respective rights or remedies with respect to the
Security; and
(f) the secondary lender shall agree to provide Mortgagee with written
notice of any transfer of its loan to another lender.
"Institutional Investor" shall mean any bank, savings and loan
association, investment bank, trust company, insurance company, pension
fund, investment advisor, credit union, real estate investment trust or
charitable foundation actively engaged in acquiring or financing major
commercial real estate properties and any special purpose entities formed
and owned by any of the foregoing, or Mortgagor, but only in connection
with any subordinate purchase money financing provided by the Mortgagor in
connection with a permitted transfer of the Security pursuant to Section
19(a) hereof.
"Debt Service Coverage" shall mean the ratio, as determined by
Mortgagee, of (a) Net Operating Income from the Security for the applicable
period of time to (b) TADS. "Net Operating Income" shall mean gross income
from operations of the Security for the previous twelve (12) month period
from Leases approved or Deemed Approved by Mortgagee (to the extent
Mortgagee reasonably projects such income will continue for the immediately
succeeding twelve (12) month period), subtracting therefrom all necessary
and ordinary Operating Expenses applicable to the Security for
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such period of time. Gross income shall not be anticipated for any greater
time period than that approved by generally accepted accounting principles
nor shall ordinary operating expenses be prepaid. Documentation of Net
Operating Income shall be certified by an officer of a general partner of
Mortgagor, or such other entity which is reasonably acceptable to
Mortgagee, with detail satisfactory to Mortgagee and shall be subject to
the approval of Mortgagee. "TADS" shall have the same meaning as in
Section 10 herein except that for purposes of clause (ii) thereof, the
aggregate debt service payments for any contemplated secondary financing
shall also be included for purposes of this Section 17.
Except as permitted by this Section or Section 4 hereof,
Mortgagor will promptly pay and discharge any and all amounts which are now
or hereafter become liens against the Security whether or not superior to
the lien hereof or to any assignment of rents and leases given to
Mortgagee. If any lien claim is filed that Mortgagor disputes or contests,
Mortgagor shall, if required by Mortgagee, promptly obtain and record at
its own expense a surety bond or other security satisfactory to Mortgagee
sufficient to release the lien claim.
18. MANAGEMENT. During the term of the Loan secured hereby, the
Security will be managed under a management agreement. Said management
agreement shall be subject to Mortgagee's written approval, and in form and
substance
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reasonably satisfactory to Mortgagee. notwithstanding anything to the
contrary, the following constitute managers pre-approved by Mortgagee:
Urban Retail Properties Co. (the "Property Manager"), or any subsidiary or
affiliate of JMB Realty CorPoration or Urban Shopping Centers, Inc.
("Shopping Centers") (collectively, "Approved Managers"). The Security is
currently managed by the Property Manager pursuant to a management
agreement between Mortgagor and JMB Properties Urban Company dated July 31,
1985, assigned by JMB Properties Urban Company to the Property Manager (the
"Management Agreement"). Mortgagee has approved the Management Agreement.
For purposes of this Section, "affiliate" shall mean any entity
controlling, controlled by, or under common control with JMB Realty
Corporation or Shopping Centers. For purposes hereof, "control",
"controlled by" or "under common control with" shall have the same meanings
as set forth in Section 14 hereof.
In the event Mortgagor elects not to have any of the Approved
Managers manage the Security, then Mortgagee shall have the right to
approve any substitute manager, such approval not to be unreasonably
withheld, taking into consideration, among other things, the following: (i)
the level of regional shopping center management expertise of the manager
in the Mid-Western Region or, if such manager has no such experience in the
Mid-Western Region, the level of national experience; and (ii) the net
worth of the manager in relation to the financial requirements of the
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managerial position. Neither the Management Agreement nor any successor
management agreement(s) entered into in accordance with the provisions of
this Section 18, may be modified or amended without Mortgagee's approval
(which approval shall not be unreasonably withheld), and the Management
Agreement, and any successor management agreement(s) and the payment of any
fees thereunder, shall provide for the subordination to the lien of this
Mortgage, or waiver of all liens held by the Property Manager, or the
Approved Managers, as the case may be, including lease brokerage liens, and
the Management Agreement, and any successor management agreement(s) must be
assigned, with the consent of the Property Manager or the Approved
Managers, as the case may be, to Mortgagee as additional security for the
Indebtedness, which assignment shall be in form and substance reasonably
acceptable to Mortgagee. Mortgagee shall review and approve any such
modifications, amendments or successor management agreement(s) within ten
(10) business days of the receipt thereof by both Mortgagee and its
correspondent (which shall have been designated by written notice to
Mortgagor), together with a written request from Mortgagor to review and
approve within such time frame. If Mortgagee has not advised Mortgagor of
its approval or disapproval within such time when requested to do so by
Mortgagor, then such modification or amendment shall be deemed approved.
19. PERMITTED TRANSFERS. Notwithstanding any other provisions of
this Mortgage or of the Other Loan Documents to the
Page 64
contrary, Mortgagor shall be permitted a one-time transfer in accordance
with the provisions of subsection (a), below, Mortgagor's partners and sub-
tier entities shall be permitted internal transfers as described in
subsection (b), below, and transfers of Mortgagor's partners' interests in
Mortgagor and transfers of interests in Mortgagor's partners and sub-tier
entities shall be permitted as described in Subsection (c), below.
(a) ONE-TIME TRANSFER: Either (i) each general partner
in Mortgagor shall have the right to a one-time sale, transfer, or
assignment in whole or in part of its interest in the partnership that is
the Mortgagor to the same third party or any affiliated third party, or
(ii) Mortgagor shall have the right to a one-time sale, transfer, or
assignment of its entire interest in the Security, subject to the
following:
(i) there is no Event of Default hereunder
or under any other Loan Documents at the time
of transfer;
(ii) a property inspection by Mortgagee
or its designee shows that all reasonably
necessary deferred maintenance on the Security has been completed or as a
part of such transfer, transferee has agreed to complete, and transferee
has further agreed to any
Page 65
guarantees, warranties or escrows with respect to all
reasonably necessary or deferred maintenance, the form and extent of which
shall be reasonably determined by Mortgagee;
(iii) the proposed transferee shall be a Qualified Real
Estate Investor (hereinafter defined);
(iv) the Debt Service Coverage on the Loan and any permitted
secondary financing shall exceed 1.35 times based on
Mortgagee's reasonable projection of Net Operating Income for the next
twelve (12) month period;
(v) the proposed transferee together with its affiliates must own
or manage a minimum of five (5) regional malls with combined gross leasable
area totalling a minimum of 4,500,000 square feet;
(vi) at least forty-five (45) days prior to such a transfer
Mortgagor must provide Mortgagee with all of the material
provisions of such transfer including without limitation the proposed date
of transfer, and the name, net
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worth, background and address of the proposed transferee and
the purchase price;
(vii) Mortgagor shall provide Mortgagee with such evidence as
Mortgagee may require that the proposed transferee shall fulfill each and
every obligation of Mortgagor under the Loan Documents, including, without
limitation, an agreement by the transferee assuming all obligations of
Mortgagor under the Loan Documents (in the case of a transfer of
Mortgagor's entire interest in the Security) or by the transferee partner
(in the case of a transfer of a partnership interest in Mortgagor), and
such transfer shall not affect or impair Mortgagee's security and rights
under the Loan Documents;
(viii) such transfer may not occur during the last loan
year;
(ix) the notice received under (vii) above shall be accompanied by
the payment to Mortgagee of a non-refundable fee in the amount of 1/4 of 1%
of the then outstanding loan balance in cash or certified check to be
retained by Mortgagee in order to induce Mortgagee to
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allow the proposed transferee to assume the obligations of
Mortgagor under the Loan Documents, and such fee shall be returned to
Mortgagor if Mortgagee disapproves of such transfer;
(x) the Aggregate Loan-to-Value Ratio of this Mortgage and any then
applicable secondary financing based on a current appraisal obtained by the
Mortgagor (including, but not limited to, any proposed secondary purchase
money financing to be provided by the Mortgagor in connection with the
permitted transfer of the Security pursuant to this Section 19(a)) at
Mortgagor's expense and acceptable to Mortgagee must not exceed 70%. In the
event Mortgagee determines that the Aggregate-Loan-to-Value Ratio exceeds
70%, at Mortgagor's option, Mortgagee and Mortgagor shall hire an M.A.I.
appraiser mutually satisfactory to both of them, at Mortgagor's sole
expense, to appraise the Security, and Mortgagee and Mortgagor agree that
such appraisal shall be used to determine the Aggregate Loan-to-Value Ratio
for purposes of this clause (x);
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(xi) Mortgagor shall pay for all of Mortgagee's
costs and expenses associated with the transfer, including without
limitation, reasonable attorney's fees charged by Mortgagee's staff counsel
or special counsel.
Notwithstanding the foregoing, in the event the transferee
does not meet the above tests or Mortgagee does not, in its reasonable
discretion, approve such transferee, based on the above parameters, then
Mortgagor shall have the right to prepay the debt evidenced by the Note, in
full but not in part, together with a prepayment fee equal to the greater
of (a) 1% of the then existing balance of the Note, or (b) Yield
Maintenance as defined in the Note, except that the first variable for the
Monthly Interest Shortfall (as defined in the Note) shall in this case be
"the positive difference, if any, of the Semi-Annual Equivalent Rate (as
defined in the Note) less the sum of the Treasury Yield (as defined in the
Note) plus 70 basis points, divided by 12." Any such prepayment shall
require a thirty (30) day written notice period and shall be paid
simultaneously with the actual transfer of the Security.
"Qualified Real Estate Investor" is defined as a bank,
investment bank, trust company, savings and loan association, insurance
company, pension fund, charitable foundation, real estate investment
trust(s), or reputable corporation, partnership, joint venture, joint stock
company, trust, or
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individual which, if only a partial or entire transfer of partnership
interests in Mortgagor is made or a transfer of Mortgagor's entire interest
in the Security, will result in a borrowing entity with itself or its
general partners or any entity under common control with or controlled by
or controlling any of the foregoing, having a minimum net worth of
$30,000,000 and combined real estate assets of $75,000,000, based in the
United States and free from any bankruptcy, reorganization or insolvency
proceedings or any criminal charges or proceedings and shall not have been,
at the time of transfer or in the past, a litigant, plaintiff or defendant
in any suit brought against or by Mortgagee (other than in connection with
a foreclosure or similar action). Mortgagee agrees to be reasonable in the
review of such qualifications.
(b) INTERNAL TRANSFERS: Any entity that owns, directly or
indirectly, an interest in Mortgagor or an interest in a partner of
Mortgagor (including its constituent partners) may transfer, assign, or
hypothecate such interest, with prior notification of Mortgagee (except as
provided for in subsection (c) below) but without Mortgagee's consent,
(except prior notification will not be required for transfers of limited
partnership interests in Mortgagor), so long as Mortgagor remains (i) an
entity advised by JMB (as hereinafter defined) or (ii) directly or
indirectly controlled by or under common control with JMB or (iii) directly
or indirectly controlled by or under common control with Shopping Centers
(each of the entities described in
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the foregoing clauses (i), (ii) and (iii) are hereinafter referred to as an
"Approved Control Party").
For purposes hereof, "control" (including its correlative degree
usages, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies, whether through ownership of voting
securities, by contract, or otherwise. For purposes of this definition,
any entity that owns, directly or indirectly, 50% or more of the securities
having ordinary voting power for the election of the board of directors of
the corporation or 50% or more of the ownership interests of any other
entity shall be deemed to control such corporation or other entity. In
addition, with respect to any general or limited partnership, an entity
which is the managing or co-managing partner of such partnership, or which
is a general partner with at least equal power with all general partners to
direct and control the partnership, shall be deemed to control such
partnership.
In addition, any partner in Mortgagor may transfer, assign
or hypothecate all or any portion of its interest in Mortgagor with prior
notification to Mortgagee but without Mortgagee's consent to any permitted
transferees or assignees as described in Article XVI entitled "TRANSFER OF
PARTNERSHIP INTERESTS" of Mortgagor's partnership agreement, as amended,
but only to the extent set forth in said Article XVI as of the date
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hereof, and Mortgagor shall not be permitted to amend the transfer
provisions of said partnership agreement, including, but not limited to,
said Article XVI, so as to permit any additional transfers, assignments or
hypothecations of any partner's interest in Mortgagor without the prior
written consent of Mortgagee which shall not be unreasonably withheld.
In addition, Mortgagor may transfer the whole of its
interest in the Security to an Approved Control Party with prior
notification of Mortgagee but without Mortgagee's consent, and without any
adjustment to the economic terms and provisions of the Loan Documents or
the payment of any fees to Mortgagee.
The transfers, assignments or hypothecations described in
this Section 19(b) may occur from time to time and without any adjustment
to the economic terms and provisions of the Loan Documents or the payment
of any fees to Mortgagee. Any such transfer, assignment, or hypothecation
shall not be deemed an exercise by Mortgagor of its one time transfer right
pursuant to subsection (a), above, nor relieve Mortgagor or other such
transferor or any other party of its obligations under any guarantee or
indemnification with respect to the Loan (or, with respect to the Loan, of
any obligations of any party for periods prior to an internal transfer in
accordance with this subsection) without Mortgagee's prior written
approval, which approval may be granted or withheld in Mortgagee's sole
discretion.
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(c) TRANSFERS OF INTERESTS OF GENERAL PARTNERS OF MORTGAGOR:
(i) All of the general partners of Mortgagor may sell, transfer, assign,
convey or hypothecate their respective partnership interests in Mortgagor
to each other, and (ii) interests in the general partners of Mortgagor
(including its constituent partners) may be sold, transferred, assigned,
conveyed, or hypothecated to any party without any notification to or
consent by Mortgagee.
20. SIDEWALKS, MUNICIPAL CHARGES. Mortgagor will promptly pay
and discharge any and all license fees and similar charges, with penalties
and interest thereon, which may be imposed by the municipality in which the
Security is situated, for the use of vaults, chutes, areas and other space
beyond the lot line and under or abutting the public sidewalks in front of
or adjoining the Security and which Mortgagor is not contesting in
accordance with Section 17 hereof, and Mortgagor will promptly cure any
violation of applicable law and comply with any order of such municipality
respecting the repair, replacement or condition of the sidewalk or curb in
front of or adjoining the Security, and in default thereof Mortgagee may,
upon five (5) days notice to Mortgagor, pay any and all such license fees
or similar charges, with penalties and interest thereon, and the charges of
the municipality for such repair or replacement, and any amount so paid or
advanced by Mortgagee and all costs and expenses incurred in connection
therewith (including, without limitation, attorneys' fees), with interest
thereon at the Default Rate
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specified in the Note, shall be a demand obligation of Mortgagor to
Mortgagee, and, to the extent permitted by law, shall be added to the
Indebtedness and shall be secured by the lien of this Mortgage.
21. ASSIGNMENT OF RENTS AND LEASES. Mortgagor hereby presently,
irrevocably, absolutely and unconditionally transfers, assigns and sets
over unto Mortgagee all of its right, title and interest in and to all
present and future leases, license agreements, concession agreements, lease
termination agreements and other occupancy agreements of any nature, oral
or written, of Land and of space in the Improvements (collectively, the
"Leases", and individually, a "Lease"), together with all modifications,
supplements, extensions, renewals and replacements thereof now existing or
hereafter made, and also together with the rights to sue for, collect and
receive all rents, prepaid rents, additional rents, royalties, security
deposits, termination fees, option fees, damages payable upon default by
tenant, or other sums in any of said leases provided to be paid to the
lessor thereunder, profits, income, license fees, concession fees, lease
termination fees and issues of the Security (collectively, "Rents"), to be
applied by Mortgagee in payment of the Indebtedness and also together with
any and all guaranties of the obligations of the tenants thereunder and the
rights of Mortgagor to receive, hold and apply all bonds and security in
all of said leases provided to be furnished to the lessor thereunder, and
also together with the rights of Mortgagor
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to enforce any and all of the agreements, terns, covenants and conditions
in all of said leases provided and to give notices thereunder. Mortgagee
may receive and collect the Rents personally or through a receiver upon the
occurrence of an Event of Default and upon written notice to mortgagor, for
so long as such Event of Default shall exist, and during the pendency of
any foreclosure proceeding and during any redemption period. Mortgagor
agrees to consent to a receiver if this is believed necessary or desirable
by Mortgagee to enforce its rights under this Section after the occurrence
of an Event of Default.
Except as may be permitted pursuant to the terms of Section
17 and Section 19 hereof, Mortgagor shall not otherwise assign or pledge,
or contract, expressly or by implication, to assign or pledge, any Lease of
the Land or space in the Improvements or the rights to sue for, collect and
receive any Rents, or the rights to receive, hold and apply any bonds and
security in any of said Leases provided to be furnished to the lessor
thereunder, or the rights to enforce any of the agreements, terms,
covenants or conditions of said leases or to give notices thereunder,
unless in each instance the written consent thereto of Mortgagee be first
obtained.
Nothing in this Mortgage shall be construed to obligate
Mortgagee, expressly or by implication, to perform any of the covenants of
Mortgagor as lessor under any of the Leases
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hereinabove assigned or to pay any sum of money or damages therein provided
to be paid by the lessor.
If Mortgagee shall from time to time suffer or permit
Mortgagor to sue for, collect or receive any Rents, or to receive, hold or
apply any bonds or security thereunder, or to enforce any of the
agreements, terms, covenants or conditions thereunder or to give notices
thereunder, neither such sufferance nor permission shall constitute a
waiver or relinquishment by Mortgagee of the rights hereunder and hereby
assigned to Mortgagee with respect to any subsequent Rents, or with respect
to any subsequent receipt, holding or application of bonds or security or
any subsequent enforcement of such agreements, terms, covenants or
conditions or any subsequent notices.
22. FUTURE LEASES. Mortgagor will not hereafter make any lease
to any tenant, or amend, modify, terminate, renew or extend any Lease
(other than a renewal to which a tenant is entitled under the terms of an
existing Lease or contained in a Lease that is subsequently approved or
Deemed Approved by Mortgagee), affecting the Security unless Mortgagee
shall first consent in writing to the terms of said Lease and the form of
the Lease, which consent shall not be unreasonably withheld. All Leases
shall provide that, in addition to the annual minimum rental specified
therein, the tenant shall pay tenant's pro rata share of operating expenses
and real estate taxes pursuant to additional rent and/or expense escalation
clauses contained in
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each such Lease, which provisions shall be subject to Mortgagee's review
and approval. Notwithstanding the foregoing, and subject to the following
conditions, Mortgagor shall not be required to obtain Mortgagee's prior
written approval of a Lease affecting mall space in the Security that
satisfies the following conditions, or any amendment, modification,
renewal, extension or supplement thereof provided that such Lease as
modified by any such amendment, modification, renewal, extension or
supplement continues to satisfy the following conditions:
(i) the executed Lease does not materially differ from
the Mortgagor's standard form lease approved by Mortgagee prior to the date
hereof or as subsequently modified with Mortgagee's prior written approval,
provided, however, that specific Leases that otherwise meet the standards
of (i) through (v) herein may deviate from such form in a commercially
reasonable manner, but all permanent, material and economic changes to the
standard form lease (including, but not limited to, any material changes to
the subordination and attornment provisions thereof) shall be subject to
Mortgagee's prior written approval, which approval shall not be
unreasonably withheld or delayed;
(ii) the gross leasable area covered by such Lease does
not exceed 5,000 square feet;
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(iii) the length of the initial term of such Lease does
not exceed ten (10) years (except that The Limited Stores and
leases of stores which are either controlled by, under common control with,
or control The Limited Stores may be for an initial term which does not
exceed twelve (12) years);
(iv) the Lease does not: (a) grant the tenant any purchase
option or right of first refusal to purchase the Security;
(b) grant the tenant any interest in the ownership or benefits of ownership
of the Security, nor grant a term, including options, beyond twenty (20)
years; (c) incorporate a schedule of rents that decline over the Lease
term; or (d) otherwise contain terms that would cause a material impairment
of the adequacy of Mortgagee's security;
(v) the Lease shall be an arms-length transaction at market rents
and not be to the Mortgagor or an entity which either controls, is
controlled by, or is under common control with Mortgagor; and
(vi) the tenant shall be obligated to take possession
immediately on completion of any required improvements.
Page 78<PAGE>
A Lease which meets the foregoing parameters shall be deemed approved by
Mortgagee (individually, a "Deemed-Approved Lease", and collectively, the
"Deemed-Approved Leases").
Notwithstanding anything to the contrary herein, Mortgagor shall
have the right to terminate, cancel, accept surrender of, or waive any term
or condition of, any Lease affecting not more than 5,000 square feet of the
Real Property without Mortgagee's prior written consent so long as the
tenant under such Lease is in default, provided that Mortgagor terminates
such Lease or takes any such other action only in a commercially reasonable
manner. Additionally and notwithstanding anything to the contrary herein,
Mortgagor may consent to the assignment of a lessee's interest under any
such Lease and consent to the subletting thereunder without Mortgagee's
prior written consent, provided such Lease as assigned or sublet continues
to satisfy the conditions enumerated in clauses (i) through (v) above.
Further notwithstanding the foregoing, Mortgagor shall be
permitted to alter, modify, amend, change, release, or waive the terms of
any Lease covering up to 5,000 square feet of space, without Mortgagee's
prior written consent, provided that such action is taken in a commercially
reasonable manner and the resulting Lease after giving effect to such
action is a Deemed-Approved Lease. In addition, Mortgagor shall be
permitted to terminate, cancel, or accept surrender of any Lease covering
up to 5,000 square feet of space, where the tenant is not in
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default, without Mortgagee's prior written consent, if contemporaneously
with such action Mortgagor enters into a new Lease with such tenant that is
a Deemed-Approved Lease and the action is otherwise taken in a commercially
reasonable manner. Finally, all material and economic changes to the
standard form lease (which are to be standardized for all future leases)
used by Mortgagor for the Security shall be subject to Mortgagee's written
approval, which approval shall not be unreasonably withheld or delayed.
Mortgagee shall use its best efforts to review any Lease
which is not a Deemed-Approved Lease and approve or disapprove such Lease
and any amendment, modification, renewal, extension, supplement or
termination thereof, that is required to be reviewed by Mortgagee
hereunder, within fifteen (15) business days of the receipt thereof by both
Mortgagee and Julian Toft & Downey, Inc., its correspondent, or such other
correspondent identified by Mortgagee. If Mortgagee has not advised of its
approval or disapproval within twenty (20) business days, such Lease, or
any amendment, modification, renewal, extension, supplement or termination
thereof, shall be deemed approved.
All Leases must be subordinate to the lien of the Mortgage
unless Mortgagee otherwise specifies. Each future Lease must contain a
provision that, upon notice to tenant by Mortgagee, the Lease shall become
superior, in whole or in part, to the lien of the Mortgage. Without
limiting the foregoing,
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Mortgagee hereby reserves the right to subordinate this Mortgage to any
Lease subsequently made by recording with the Office of the Recorder of
Deeds of Will County, Illinois, in which this Mortgage is recorded, a
declaration to that effect, executed by Mortgagee, which declaration once
so recorded shall be binding upon the tenant under such Lease and its
successors and assigns.
Mortgagor will furnish to Mortgagee a true and complete copy
of each Lease, amendment, modification, extension, or renewal of Lease,
hereafter made by Mortgagor with respect to the Land or space in the
Security, within ten (10) days after delivery of each such Lease,
amendment, modification, extension, or renewal by the parties thereto.
Mortgagor shall also use its diligent efforts to furnish to Mortgagee an
original subordination, nondisturbance, and attornment agreement executed
by each tenant under any Lease of 5,000 square feet or more, and shall use
its diligent efforts to furnish to Mortgagee an original estoppel,
addressed to Mortgagee, from each tenant in form and substance reasonably
satisfactory to Mortgagee; provided, however, if after using diligent
efforts, Mortgagor is unsuccessful in obtaining an estoppel from such
tenant, Mortgagor shall furnish to Mortgagee a current certified rent roll
in accordance with the provisions of Section 34 hereof; provided further,
however, that in no event shall Mortgagor be required to furnish to
Mortgagee a certified rent roll more frequently than once for each calendar
quarter during the term of Loan secured hereby.
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Mortgagor will from time to time upon demand of Mortgagee,
confirm in writing the assignment to Mortgagee of any or all Leases of the
Land and space in the Improvements, and such written confirmation shall be
in such form as Mortgagee shall require and as shall be necessary to make
the same recordable.
23. MORTGAGOR'S OBLIGATIONS AS LESSOR. (a) Mortgagor shall, at
Mortgagor's cost and expense, materially perform each and every covenant,
condition, promise and obligation on the part of the lessor to be performed
pursuant to the terms of each and every Lease affecting more than 5,000
square feet of the Real Property (individually and collectively, a "Non-
Minor Lease"), written or oral, now or hereafter made with respect to the
Security or any part or parts thereof, and with respect to Leases that are
not Non-Minor Leases, fulfill, perform, and observe all of the obligations,
covenants, and agreements of lessor the nonfulfillment of which would
materially adversely affect Mortgagee's security interest in the Security.
(b) Mortgagor shall give Mortgagee prompt notice of any
written notice of default or claim of default by Mortgagor given to any
lessee under any Non-Minor Lease and of the receipt by Mortgagor of any
written notice of default from any lessee under any such Non-Minor Lease.
Mortgagor shall also give Mortgagee prompt notice of any material default
given by Mortgagor to any lessee under any Lease other than a Non-Minor
Lease or the receipt by Mortgagor of any written notice of
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material default received from any such lessee under any such Lease.
Mortgagor shall furnish to Mortgagee promptly any and all information which
Mortgagee may request concerning the performance and observance of all
covenants, agreements and conditions contained in any Lease by the lessor
thereunder to be kept, observed and performed and concerning the compliance
with all terms and conditions of such Leases. Mortgagor hereby authorizes
Mortgagee and its representatives to make investigations and examinations
concerning such performance, observance and compliance, and Mortgagor, upon
request, shall promptly deposit with Mortgagee any and all documentary
evidence in Mortgagor's possession or control relating to such performance,
observance and compliance and copies of any and all notices,
communications, plans, specifications or other instruments or documents
received or given by Mortgagor in any way relating to or affecting such
Leases which may concern or affect the estate of the lessor or the lessee
in or under such Leases or in the premises thereby demised.
(c) In the event of any failure by Mortgagor to keep,
observe or perform any covenant, agreement or condition contained in any of
the Non-Minor Leases which would give the tenants thereunder a right to
terminate the Lease or to stop paying all or any part of the rent
thereunder, Mortgagee may, based upon reasonable inquiry based on the
information received pursuant to subparagraph (b) above and without notice
to or consent of Mortgagor, take any and all action Mortgagee deems
necessary or
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appropriate to effect performance, observance or compliance with such
covenant, agreement, or condition or otherwise to comply with the terms of
such Lease. Any and all reasonable costs and expenses incurred by
Mortgagee in connection with any such performance, observance or compliance
by Mortgagee on behalf of Mortgagor shall be added to the Indebtedness and
shall be secured by the lien of this Mortgage.
24. LEASES; FORECLOSURE. Any proceedings or other steps taken by
Mortgagee to foreclose this Mortgage, or otherwise to protect the interests
of Mortgagee hereunder, shall not operate to terminate the rights of any
present or future tenant of space in the Improvements, notwithstanding that
said rights may be subject and subordinate to the lien of this Mortgage,
unless Mortgagee specifically elects otherwise in the case of any
particular tenant, subject however to the terms of any subordination,
nondisturbance and attornment agreement applicable to such tenant's Lease.
The failure to make any such tenant a defendant in any such foreclosure
proceeding and to foreclose such tenant's rights will not be asserted by
Mortgagor or any other defendant in such foreclosure proceeding as a
defense to any proceeding instituted by Mortgagee to foreclose this
Mortgage or otherwise protect the interests of Mortgagee hereunder.
25. OPERATING AGREEMENT. Mortgagor shall, at Mortgagor's cost
and expense, promptly and fully perform each and every material covenant,
condition, promise and obligation of the owner
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of the Security under the Operating Agreement dated December 7, 1977,
between Homart Development Co. ("Homart") (Mortgagor's predecessor in
interest to the Security), Marshall Field & Company ("Field"), Sears,
Roebuck and Co. ("Sears"), P.A. Bergner & Co. ("Bergner") and J.C. Penney
Properties, Inc. ("Penney") as amended or supplemented by the, (i) Joint
Improvement Agreement, dated December 7, 1977, between Homart, Sears,
Field, Penney and Bergner; (ii) Supplement to Operating Agreement and Joint
Improvement Agreement, dated December 7, 1977, between Homart and Sears;
(iii) Supplement to Operating Agreement and Joint Improvement Agreement,
dated December 7, 1977, between Homart and Penney; (iv) Supplement to
Operating Agreement and Joint Improvement Agreement, dated December 7,
1977, between Homart and Field; (v) Supplement to Operating Agreement and
Joint Improvement Agreement, dated December 7, 1977, between Homart and
Bergner; (vi) Letter agreement, dated December 9, 1977, between Homart,
Sears, Field, Penney and Bergner; (vii) Letter agreement, dated March 30,
1978 from Field to Mortgagee re: Paragraph 10 of the Supplement to
Operating Agreement and Joint Improvement Agreement; (viii) First Amendment
to Operating Agreement, dated September 7, 1978, between Homart, Field,
Sears, Penney and Bergner; (ix) Second Amendment to Operating Agreement,
dated October 10, 1979, between Homart, Field, Sears, Penney and Bergner;
(x) Assignment and Assumption, dated August 28, 1982, between Field and BAT
Holdings I Inc.; (xi) Letter dated September 14, 1982, from Field to
Homart, Penney, Bergner, Mortgagee and Sears re: Field assignment; (xii)
Letter dated
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October 1, 1983, from Sears to Homart regarding Sears' decision to take
over management of the common areas located on its parcel; (xiii) An
undated letter agreement between Field, Penney, Bergner and Sears defining
the term "Mall" as used in the operating Agreement; (xiv) Ratification of
Louis Joliet Mall Agreements, dated July 26, 1985, by American National
Bank and Trust Company of Chicago, not individually, but as Trustee under
Trust Agreement dated April 11, 1972, and known as Trust No. 76639; (xv)
Assignment and Assumption of Operating Agreement and Supplemental
Agreements, dated July 31, 1985, between Homart and Mortgagor; (xvi)
Exculpation letter agreement, dated October 7, 1985, from Field to
Mortgagor; (xvii) Exculpation letter agreement, dated October 7, 1985, from
Sears to Mortgagor; (xviii) Exculpation letter agreement, dated November 6,
1985, from Penney to Mortgagor in favor of Mortgagor; (xix) Letter
agreement, dated November 7, 1985, between Penney and Mortgagor re: the
name "Penney"; (xx) Exculpation letter agreement dated November 29, 1985,
from Bergner to Mortgagor; and (xxi) Letter agreement, dated March 29,
1993, between Bergner and JMB Retail Properties Co. re: amendments to
Operating Agreement (collectively, the "Operating Agreement"), and shall
make all payments therein and thereby required to be made by the owner of
the Security. Mortgagor shall not cancel, or amend, or except in
accordance with any permitted secondary financing pursuant to Section 17
hereof, or any permitted transfer of the Security in accordance with
Section 19 hereof, assign or transfer the Operating Agreement without the
prior written consent of
Page 86
Mortgagee which consent shall not be unreasonably delayed, and Mortgagor
shall not consent to the cancellation, transfer, amendment, or assignment
of the Operating Agreement by any other party thereto, without the prior
written consent of Mortgagee, provided, however, that Mortgagee shall grant
its consent so long as the consequences would not be materially adverse to
Mortgagee's liens and security interests hereunder. Mortgagee shall review
and approve any such requests for consent within fifteen (15) business days
of receipt thereof by both Mortgagee and its correspondent (which shall
have been designated by written notice to Mortgagor), together with a
written request from Mortgagor to review and consent within such fifteen
(15) business days. If Mortgagee has not advised Mortgagor of its approval
or disapproval within such time when requested by Mortgagor to do so, then
such consent shall be deemed granted.
Mortgagor shall furnish to Mortgagee, within three (3) days
after receipt thereof, or after the mailing or service thereof by
Mortgagor, as the case may be, a copy of each notice of default which
Mortgagor shall give to, or receive from any person, based upon the
occurrence, or alleged occurrence, of any default or defaults in the
performance of any covenant, condition, promise or obligation under the
Operating Agreement.
Whenever and as often as Mortgagor shall fail to perform,
promptly and fully, at Mortgagor's cost and expense, any material covenant,
condition, promise or obligation on the part
Page 87
of the owner of the Security under and pursuant to the Operating Agreement
after the expiration of any applicable notice and cure period, Mortgagee,
or a lawfully appointed receiver of the Security, may, at their respective
options, enter upon the Security and perform, or cause to be performed,
such work, labor, services, acts or things, and take such other steps and
do such other acts as they may deem advisable, to cure such defaulted
covenant, condition, promise or obligation, and Mortgagor shall reimburse
Mortgagee upon demand for all costs and expenses incurred by Mortgagee and
any such receiver in taking any action pursuant to this Section, which
reimbursement shall be secured by the lien of this Mortgage.
26. EVENTS OF DEFAULT. Each of the following shall constitute an
"Event of Default" hereunder and shall entitle the Mortgagee to exercise
its remedies hereunder and under any of the other Loan Documents or as
otherwise provided by law:
(a) The failure of Mortgagor to pay any installment of
principal or interest due under the Note, or payment of any other sum due
under the Note or any payment under this Mortgage or any escrow amount or
any other payment under the other Loan Documents within five (5) business
days following the date when such payment was due, except that with respect
to payments of principal, interest, and escrow amounts, no more frequently
than once in any 12-month period, Mortgagee shall be obligated to give
Page 88
Mortgagor notice of nonpayment and five (5) days from receipt of notice in
which to cure;
(b) (i) Failure of the Mortgagor in the observance or
performance of any covenant, promise or agreement provided in this
Mortgage, or (ii) failure of the Mortgagor in the observance or performance
of any covenant, promise or agreement provided in any other Loan Document
other than relating to the payment of indebtedness or money and other than
those described in (d) through (g), inclusive, of this Section (a "failure
to perform"), for thirty (30) days after the giving of notice by Mortgagee
to Mortgagor specifying the nature of the failure to perform; provided,
however, that if the nature of such failure to perform is such that the
same cannot reasonably be cured within such thirty (30) day period, such
thirty (30) day period shall be deemed to have been extended for a period
not to exceed one hundred twenty (120) days, so long as Mortgagor shall
within such period commence to cure that failure to perform and thereafter
diligently prosecute the cure to completion; provided, however, Mortgagor
shall be entitled to an additional ninety (90) day cure period for any
failure to perform which cannot be cured with the use of diligent efforts
during the initial one hundred twenty (120) day period and is a
construction related duty such as construction required by applicable law.
Notwithstanding anything contained herein to the contrary, the notice and
cure period provided under this clause (b) shall not be applicable to and
shall not be in addition to any specific notice and cure or
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performance period provided under any other provision of this Mortgage, and
the specific notice and cure or performance period provided for in such
provision shall control, and a failure by Mortgagor to cure a default under
such provision within the applicable cure period shall be an Event of
Default under this Mortgage;
(c) Any representation or warranty of Mortgagor, or
statement of the Mortgagor contained herein or in any of the Loan Documents
including without limitation the Environmental Indemnification Agreement,
or in any writing delivered to Mortgagee by Mortgagor, or any party under
the direction of Mortgagor, or pursuant to the Borrower's Certificate on or
before the execution and delivery of the Loan Documents, proves to be
untrue in any material respect as of the date when made;
(d) Mortgagor shall (i) have an order for relief entered in
a proceeding under Title 11, United States Code, whether such order shall
result from a voluntary or involuntary petition, (ii) seek or consent to
the appointment of a receiver or trustee for itself or for any of the
Security, (iii) file a petition or initiate a proceeding under the
bankruptcy, insolvency, receivership, or similar laws of the United States,
any state or any jurisdiction, or (iv) make a general assignment for the
benefit of creditors;
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(e) A court shall enter an order, judgment or decree
appointing, without the consent of Mortgagor, a receiver or trustee for
Mortgagor, or for any of the Security or approving a petition filed against
Mortgagor which seeks relief under the bankruptcy or other similar laws of
the United States, any state or any jurisdiction, and such order, judgment
or decree shall remain in force, undischarged or unstayed, sixty (60) days
after it is entered;
(f) Except as otherwise set forth herein, without the
prior written consent of Mortgagee, (i) the Security or any portion thereof
or interest therein shall be mortgaged, encumbered, sold, assigned or
otherwise transferred by Mortgagor or by operation of law or (ii) all or
any portion of the interest of any partner or member of Mortgagor is sold
or otherwise transferred; or
(g) a material default by Mortgagor occurs under the
Operating Agreement, which default continues beyond any applicable notice,
grace or cure period, but only in the event such default results in a
termination of such Operating Agreement or a termination of the operating
covenants of the department stores which are parties to the Operating
Agreement.
27. REMEDIES UPON DEFAULT; FORECLOSURE. Immediately upon the
occurrence of any Event of Default, Mortgagee shall have the option, in
addition to and not in lieu of or substitution for all
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other rights and remedies provided in this Mortgage or any other Loan
Document or provided by law or in equity, and is hereby authorized and
empowered by Mortgagor, to do any or all of the following, subject however
to the limitations on recourse liability set forth in Section 40 hereof:
(a) Declare without notice (except as otherwise provided
herein or in any of the other Loan Documents) the entire unpaid amount of
the Indebtedness, including any other unpaid sums accruing under the Note,
immediately due and payable, without present demand, protest or other
notice of any kind, all of which are hereby expressly waived by Mortgagor,
and, at Mortgagee's option, (i) to bring suit therefor, or (ii) to bring
suit for any delinquent payment of or upon the Indebtedness, or (iii) to
take any and all steps and institute any and all other proceedings in law
or in equity that Mortgagee deems necessary to enforce payment of the
Indebtedness and performance of other obligations secured hereunder and to
protect the lien of this Mortgage.
(b) Commence foreclosure proceedings against the
Security, in a single parcel or in several parcels, through judicial
proceedings, by advertisement, or as otherwise provided by law, at the
option of Mortgagee, pursuant to the statutes in such case made and
provided, and to sell the Security or to cause the same to be sold at
public sale, and to convey the same to the purchaser, in accordance with
said statutes in a single parcel or
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in several parcels at the option of Mortgagee. without limitation of the
foregoing, as an alternative to the right of foreclosure for the full
amount of the Indebtedness, after acceleration thereof, Mortgagee shall
have the right to institute partial foreclosure proceedings with respect to
the portion of the Indebtedness so in default, as if under a full
foreclosure, and without declaring all of the Indebtedness to be
immediately due and payable (such proceedings being referred to herein as
"partial foreclosure"), and provided that, if Mortgagee has not elected to
accelerate all of the Indebtedness and a foreclosure sale is made because
of default in payment of only a part of the Indebtedness, such sale may be
made subject to the continuing lien of this Mortgage for the unmatured part
of the Indebtedness. Any sale pursuant to a partial foreclosure, if so
made, shall not in any manner affect the unmatured portion of the
Indebtedness, but as to such unmatured portion, this Mortgage and the lien
thereof shall remain in full force and effect just as though no foreclosure
sale had been made. Notwithstanding the filing of any partial foreclosure
or entry of a decree of sale therein, Mortgagee may elect, at any time
prior to a foreclosure sale pursuant to such decree, to discontinue such
partial foreclosure and to accelerate the Indebtedness by reason of any
Event of Default upon which such partial foreclosure was predicated or by
reason of any other defaults, and proceed with full foreclosure
proceedings. Mortgagee may proceed with one or more partial foreclosures
without exhausting its right to proceed with a full or partial foreclosure
sale for any unmatured portion of the
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Indebtedness, it being the purpose to permit, from time to time a partial
foreclosure sale for any natured portion of the Indebtedness without
exhausting the power to foreclose and to sell the Security pursuant to any
partial foreclosure in respect of any other portion of the Indebtedness
whether matured at the time or subsequently maturing, and without
exhausting at any time the right of acceleration and the right to proceed
with a full foreclosure.
(c) Proceed against the Personal Property in accordance
with Mortgagee's rights and remedies with respect to the Personal Property
including the right to sell the Personal Property together with the
Security separately and without regard to the remainder of the Security in
accordance with Mortgagee's rights and remedies provided by the Illinois
Uniform Commercial Code as well as other rights and remedies available at
law or in equity.
(d) Cause to be brought down to date a title examination
and tax histories of the Security, procure title insurance or title reports
or, if necessary, procure new abstracts and tax histories and procure an
updated or entirely new environmental audit of the Security including
building, soil, ground water and subsurface investigations; and, in the
event a complaint for the foreclosure of this Mortgage has been filed by
Mortgagee, have the Improvements inspected by an engineer or other
qualified inspector and procure a building inspection
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report; procure an MAI or other appraisal of the Security or any portion
thereof; enter upon the Security at any time and from time to time to
accomplish the foregoing and to show the Security to potential purchasers
and potential bidders at foreclosure sale; and make available to potential
purchasers and potential bidders all information obtained pursuant to the
foregoing and any other information in the possession of Mortgagee
regarding the Security; provided, however, that to the extent any of the
foregoing requires entry onto the Security by Mortgagee or its agents,
employees, contractors, or prospective purchasers, such entry shall be
made, and such activity shall be conducted, only upon reasonable notice, at
reasonable times, and without unreasonable interference with the operation
of the Security or the businesses of the tenants thereof.
(e) To the extent permitted by applicable law, Mortgagee
either by itself or by its agent to be appointed by it for that purpose or
by a receiver appointed by a court of competent jurisdiction, as a matter
of strict right, without notice and without regard to the adequacy or value
of any security for the Indebtedness or the solvency of any party bound for
its payment, to the appointment of a receiver of the Security or, at
Mortgagee's option, to take possession of the Security as Mortgagee-in-
possession, in which event the receiver of Mortgagee may enter upon and
take possession of and operate the Security or any part thereof and whether
or not any such receiver or Mortgagee has taken possession of the Security,
exercise any
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assignment of rents to collect and apply the Rents, including those past
due and unpaid, after payment of all necessary charges and expenses, in
reduction of the Indebtedness. Said Rents are hereby assigned to Mortgagee
as further security for the payment of the Indebtedness. The receiver or
Mortgagee as Mortgagee-in-possession shall have all of the rights and
powers permitted under the laws of the State of Illinois. Except for
damage caused by Mortgagee's gross negligence or willful misconduct,
Mortgagor hereby waives any claim Mortgagor may have against Mortgagee for
mismanagement of the Security during Mortgagee's operation of the Security
under this subparagraph or as mortgagee in actual possession under
applicable statutes. Mortgagor will pay Mortgagee upon demand all
reasonable, out-of-pocket expenses, including receiver's fees, attorney's
fees, costs and agent's compensation, incurred pursuant to the provisions
of this subparagraph, and any such amounts paid to Mortgagee shall be
secured by this Mortgage.
(f) Mortgagee may, at its option without waiving any
Event of Default, but subject to any limitations set forth in the Loan
Documents, pay, perform or observe any defaulted term, covenant or
condition contained herein, in any of the leases of any part of the
Security, or the Operating Agreement, and all payments made or costs or
expenses incurred by Mortgagee in connection therewith shall be secured
hereby and shall be, upon demand therefor, immediately repaid by Mortgagor
to Mortgagee with interest thereon at the Default Rate hereunder.
Mortgagee
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shall be the sole judge of the necessity For and such actions and of the
amounts to be paid. Subject to any limitations set forth in the Loan
Documents, Mortgagee is hereby empowered to enter and to authorize others
to enter upon the Security or any part thereof for the purpose of
performing or observing any such defaulted term, covenant or condition
without hereby becoming liable to Mortgagor or any person in possession
holding under Mortgagor.
(g) Apply against the Indebtedness in such order as
Mortgagee shall determine any funds held for the benefit of Mortgagor in
escrow by Mortgagee or by any third-party escrow agent under any of the
Loan Documents, including without limitation any funds held under the
escrow established by Section 5 of this Mortgage.
Upon any foreclosure sale, Mortgagee may bid for and
purchase the Security and shall be entitled to apply all or any part of the
Indebtedness as a credit to the purchase price. In the event of any sale
of the Security by foreclosure, through judicial proceedings, or otherwise,
the proceeds of any such sale which are applied in accordance with this
Mortgage shall be applied in the order following to: (i) all expenses
incurred for the collection of the Indebtedness and the foreclosure of this
Mortgage, including reasonable attorneys' fees, or such attorneys' fees as
are permitted by law; (ii) all sums expended or incurred by Mortgagee
directly or indirectly in carrying out
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the terms, covenants and agreements of the Note or notes evidencing the
Indebtedness, of this Mortgage and any other Loan Documents, together with
interest thereon as therein provided; (iii) all accrued and unpaid interest
upon the Indebtedness; (iv) the unpaid principal amount of the
Indebtedness; and (v) the surplus, if any, to the person or persons legally
entitled thereto.
In the event of any acceleration of the Indebtedness
pursuant to subparagraph (a) of this Section 27, Mortgagor shall pay to
Mortgagee together with the principal indebtedness and interest thereon an
amount equal to the prepayment fee provided for in the Note and such fee
shall be included as part of the Indebtedness.
Failure to exercise any option to accelerate upon the
occurrence of an Event of Default or other circumstance permitting the
exercise of such option, shall not constitute a waiver of the default or of
the right to exercise such option at a later time (unless Mortgagor has
cured such default pursuant to the terms of this Mortgage or any other Loan
Document, or as otherwise provided by applicable law), or a waiver of the
right to exercise such option upon the occurrence of any other Event of
Default or circumstance specified above.
28. ACCELERATION INTEREST. In addition to any late payment
charge which may be due under the Note, Mortgagor shall pay
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interest on all sums due hereunder at a rate (the "Default Rate") equal to
the lesser of (i) the interest rate set forth in the Note plus four percent
(4%) per annum, or (ii) the maximum rate permitted by law, from and after
the first to occur of the following events: if Mortgagee elects to cause
the Acceleration of Maturity (as defined in the Note) upon the occurrence
of an Event of Default, if a petition under Title 11, United States Code,
shall be filed by or against Mortgagor or if Mortgagor shall seek or
consent to the appointment of a receiver or trustee for itself or
themselves, as the case may be, or for any of the Security, file a petition
seeking relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, or make a general assignment for the
benefit of creditors, provided that, in the case of any involuntary
proceeding under the bankruptcy or similar laws of the United States, any
state or other jurisdiction, the proceeding is not dismissed within sixty
(60) days after the filing thereof; if a court shall enter an order,
judgment or decree appointing, with or without the consent of Mortgagor, a
receiver or trustee for it or for any of the Security or approving a
petition filed against Mortgagor which seeks relief under the bankruptcy or
other similar laws of the United States, any state or any jurisdiction, and
any such order, judgment or decree shall remain in force, undischarged or
unstayed, sixty (60) days after it is entered; or if all sums due hereunder
are not paid on the Maturity Date as set forth in the Note.
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29. LATE CHARGE. In the event any sums due under the Note, this
Mortgage, or any other Loan Document, are not paid by Mortgagor to
Mortgagee when due (except any sums due and payable on the Maturity Date or
upon acceleration of the Loan), without regard to any cure or grace period,
Mortgagor shall pay to Mortgagee for the month during which such payment is
not made when due, and for each month thereafter that such sum remains
unpaid, a late charge equal to the lesser of four percent (4%) of such sum
or the maximum amount allowed by law, for the purpose of defraying the
expense incurred by Mortgagee in handling and processing such delinquent
payment, and such amount shall be secured hereby. Such late charge shall
be paid without prejudice to the right of Mortgagee to collect any other
amounts provided to be paid or to declare an Event of Default under this
Mortgage or any other Loan Document.
30. WAIVER OF STATUTORY RIGHTS. Mortgagor agrees, to the full
extent permitted by law, that in an Event of Default on the part of
Mortgagor hereunder, neither Mortgagor nor anyone claiming through or under
Mortgagor will set up, claim, or seek to take advantage of any moratorium,
reinstatement, forbearance, appraisement, valuation, stay, homestead,
extension, exemption or redemption laws now or hereafter in force, in order
to prevent or hinder the enforcement or foreclosure of this Mortgage, or
the sale of the Security or the delivery of possession thereof immediately
after such sale to the purchaser at such sale, and Mortgagor, for itself
and all who may at any time claim through
Page 100
or under it, hereby waives to the full extent that it may lawfully do so,
the benefit of all such laws, and any and all rights to have the assets
subject to the security interest of this Mortgage marshalled upon any
foreclosure or sale under the power granted herein and agrees that
Mortgagee or any court having jurisdiction to foreclose such lien may sell
the Security in part or as an entirety. Mortgagor represents, warrants and
acknowledges that the transaction of which this Mortgage is a part is a
transaction which does not include either agricultural real estate (as
defined in Section 15-1201 of the Illinois Mortgage Foreclosure Law (735
ILCS 5/15 - 1101 ET. SEQ.) (the "Act")) or residential real estate (as
defined in Section 15-1219 of the Act), and, to the full extent now or
hereafter permitted by law, hereby voluntarily and knowingly waives its
rights to reinstatement and redemption as allowed under Section 15-1601 ET.
SEQ. of the Act.
31. SECURITY INTEREST. This Mortgage shall, as to any equipment
and other Personal Property covered hereby, be deemed to constitute a
security agreement, and Mortgagor, as debtor, hereby grants to Mortgagee,
as secured party, a security interest therein pursuant to the Illinois
Uniform Commercial Code. Mortgagor agrees, upon request of Mortgagee, to
furnish an inventory of Personal Property owned by Mortgagor and subject to
this Mortgage and, upon request by Mortgagee, to execute any supplements to
this Mortgage, any separate security agreement and any financing statements
and continuation statements in order to
Page 101
include specifically said inventory of Personal Property or otherwise to
perfect the security interest granted hereby. Upon any Event of Default,
Mortgagee shall have all of the rights and remedies provided in said Code
or otherwise provided by law or by this Mortgage, including but not limited
to the right to require Mortgagor to assemble such Personal Property and
make it available to Mortgagee at a place to be designated by Mortgagee
which is reasonably convenient to both parties, the right to take
possession of such Personal Property with or without demand and with or
without process of law and the right to sell and dispose of the same and
distribute the proceeds according to law. The parties hereto agree that
any requirement of reasonable notice shall be met if Mortgagee sends such
notice to Mortgagor at least five (5) days prior to the date of sale,
disposition or other event giving rise to the required notice, and that the
proceeds of any disposition of any such Personal Property may be applied by
Mortgagee first to the reasonable expenses in connection therewith,
including reasonable attorneys' fees and legal expenses incurred, and then
to payment of the Indebtedness. With respect to the Personal Property that
has become so attached to the Real Property that an interest therein arises
under the real property law of the State, this Mortgage shall also
constitute a financing statement and a fixture filing under the Illinois
Uniform Commercial Code in all fixtures now or hereafter located on the
Land.
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32. RIGHT OF ENTRY. Mortgagee and Mortgagee's representatives
may at all times and without notice to Mortgagor enter upon the Security
and inspect the same, or cause it to be inspected by agents, employees or
independent contractors of Mortgagee, and show the same to others, but
Mortgagee shall not be obligated to make any such entry or inspection.
33. ESTOPPEL CERTIFICATE. Mortgagor, within fifteen (15) days
after written request from Mortgagee, will furnish a signed statement in
writing, duly acknowledged, of the amount of the Principal Indebtedness (as
defined in the Note) hereunder and whether or not any offsets or defenses
exist against the Indebtedness, and if so, specifying such offsets and
defenses. Mortgagee, within fifteen (15) days after written request from
Mortgagor, will furnish Mortgagor with a statement in writing specifying
the Principal Indebtedness and any accrued and unpaid interest then due or
outstanding under the Note, any unpaid late charges, and the date of the
last payment of principal or interest under the Note. Upon request by
Mortgagee, Mortgagor shall exercise any right it may have under the
applicable Lease(s) to request an estoppel certificate from any or all of
the tenants on the Security within five (5) days following Mortgagee's
request; provided, however, that in no event shall Mortgagor be required to
furnish an estoppel certificate more than twice in any consecutive twelve
(12)-month period.
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34. ANNUAL STATEMENTS. Mortgagor shall, within one hundred twenty
(120) days after the end of each fiscal year of Mortgagor, deliver to
Mortgagee (a) annual statements audited and certified by an independent
certified public accountant reasonably satisfactory to Mortgagee and
prepared in accordance with generally accepted accounting principles,
showing in detail (1) a balance sheet for the Security as of the last day
of such fiscal year, (2) a statement of sources and uses from the Security
for such fiscal year showing, among other things, all rents and other
income therefrom and all expenses paid or incurred in connection with the
operation of the Security, (3) an operating cash flow statement for the
Security; and (b) a statement signed by Mortgagor listing all leases of
space in the Improvements as of the last day of such fiscal year, the
respective areas demised thereunder, the names of the tenants, the
respective expiration dates of the leases, the respective rentals provided
for therein, and such other information as may reasonably be requested by
Mortgagee. In addition, Mortgagor agrees upon request to provide Mortgagee
with unaudited cash flow reports for each calendar quarter and a current
rent roll in the detail described in the immediately preceding clause (b)
for such calendar quarter whether or not such rent roll is required to be
furnished pursuant to Section 22 hereof. Mortgagor also agrees to provide
Mortgagee with a copy of its annual 10-K statement within thirty (30) days
after it is filed with the Securities and Exchange Commission.
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Notwithstanding anything herein to the contrary, for so long
as title to the Security remains with Mortgagor and there are no defaults,
or any state of facts which, with the passage of time or giving of notice,
or both, would constitute a default under any of the Loan Documents, then
in lieu of the opinion from certified public accountants, Mortgagee will
accept financial statements containing the information set forth in the
preceding paragraph, in form and substance reasonably satisfactory to
Mortgagee, signed by the general partner of Mortgagor. However, if audited
statements are available with regard to the Security, then Mortgagor shall
provide such statements to Mortgagee.
If an Event of Default as provided for in this Mortgage
occurs under this Section, Mortgagee may elect, in addition to exercising
any remedy for an Event of Default as provided for in this Mortgage, to
make an audit of all books and records of Mortgagor and its beneficiaries,
including without limitation their bank accounts, which in any way pertain
to the Security, and to prepare the statement or statements which Mortgagor
failed to procure and deliver. Such audit shall be made and such
statements shall be prepared by an independent Certified Public Accountant
to be selected by Mortgagee. Mortgagor shall pay all expenses of the audit
and other services, which expenses shall be secured hereby as part of the
Indebtedness and shall be immediately due and payable with interest thereon
at the Default Rate set forth herein.
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Mortgagee shall use reasonable care to afford any
information received pursuant to this Section, or other information
concerning the net worth of Mortgagor or the physical condition of the Real
Property designated in writing by Mortgagor as confidential, whether or not
such information is delivered to Mortgagee by Mortgagor or by a third
party, the same degree of confidentiality that Mortgagee affords similar
information proprietary to Mortgagee; provided, however, that Mortgagee
does not in any way warrant or represent that any such information received
from Mortgagor will remain confidential, and, provided further, that
Mortgagee shall have the unconditional right to disclose, as necessary, any
such information in the event Mortgagee sells, transfers, conveys, or
assigns the Note, in whole or in part, or the Mortgage; and provided
further, however, that Mortgagee may disclose to other persons and entities
any such information (a) as shall have become generally available to the
public, (b) as shall be required or appropriate in any report, statement or
testimony submitted to any municipal, state or federal regulatory body or
to the National Association of Insurance Commissioners or similar
organizations or their successors, (c) as shall be required or appropriate
in response to any summons or subpoena or in connection with any litigation
or (d) to the extent that Mortgagee shall believe it appropriate in order
to protect Mortgagee's investment or in order to comply with any law,
order, regulation or ruling applicable to Mortgagee.
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35. RIGHTS CUMULATIVE. Each right and remedy of Mortgagee under
this Mortgage, the Note, and any other Loan Documents, shall be in addition
to every other right and remedy of Mortgagee and such rights and remedies
may be enforced separately or in any combination.
36. SUBROGATION. To the extent that proceeds of the
Indebtedness are used to pay any outstanding lien, charge or encumbrance
affecting the Security, such proceeds have been advanced by Mortgagee at
Mortgagor's request, and Mortgagee shall be subrogated to all rights,
interest and liens owned or held by any owner or holder of such outstanding
liens, charges and encumbrances, irrespective of whether such liens,
charges or encumbrances are released of record; provided, however, that the
terms and provisions hereof shall govern the rights and remedies of
Mortgagee and shall supersede the terms, provisions, rights, and remedies
under the lien or liens to which Mortgagee is subrogated hereunder.
Mortgagor and Mortgagee agree that the title insurance company
issuing the Title Policy is not a third-party beneficiary of any of the
Loan Documents and shall not have any right of subrogation in connection
therewith.
37. NO WAIVER.Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions hereof
shall not be deemed to be a waiver of any of
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the terms and provisions hereof, and Mortgagee, notwithstanding any such
failure, shall have the right thereafter to insist upon the strict
performance by Mortgagor of any and all of the terms and provisions hereof
to be performed by Mortgagor.
38. MORTGAGE EXTENSION. The lien hereof shall remain in full
force and effect during any postponement or extension of the time of
payment of the Indebtedness, or of any part thereof, and any number of
extensions or modifications hereof, or any additional notes taken by
Mortgagee, shall not affect the lien hereof or the liability of Mortgagor
or of any subsequent obligor to pay the Indebtedness unless and until such
lien or liability be expressly released in writing by Mortgagee.
39. INDEMNIFICATION. Mortgagor shall indemnify and hold
Mortgagee harmless from and against all obligations, liabilities, losses,
costs, expenses, fines, penalties or damages (including attorneys' fees)
which Mortgagee may incur by reason of this Mortgage or with regard to the
Security prior to the exercise of any remedies under this Mortgage.
Mortgagor shall defend Mortgagee against any claim or litigation involving
Mortgagee for the same, and should Mortgagee incur such obligation,
liability, loss, cost, expense, fine, penalty or damage, then Mortgagor
shall reimburse Mortgagee upon demand. Any amount owed Mortgagee under
this provision shall bear interest at the Default Rate set forth herein.
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40. NONRECOURSE. Except as provided hereinafter in this Section
40, Mortgagor (or any direct or indirect partner [or their respective
shareholders] of Mortgagor) shall not be personally liable for the payment
of any sums due hereunder or under the other Loan Documents or the
performance of any obligations of Mortgagor by Mortgagor hereunder or under
any of the other Loan Documents. Without in any way limiting the
generality of the foregoing, no judgment for the repayment of the
Indebtedness or interest thereon or other sums, charges and amounts owed by
Mortgagor (or any direct or indirect partner of Mortgagor [or their
respective shareholders]) to Mortgagee will be enforced against Mortgagor
(or any direct or indirect partner [or their respective shareholders] of
Mortgagor) personally or any property of the Mortgagor (or any direct or
indirect partner [or their respective shareholders] of Mortgagor) other
than the Security and any other security furnished under the Loan Documents
in any action to foreclose this Mortgage or to otherwise realize upon any
such security furnished under the Loan Documents or to collect any amount
payable under the Loan Documents. Notwithstanding the foregoing:
(a) Nothing herein contained shall be construed as
prohibiting Mortgagee from exercising any and all remedies which the Loan
Documents permit or any other remedies available to Mortgagee at law or in
equity, or Mortgagee's rights in the Security, including the right to bring
actions or proceedings against Mortgagor and to enter a judgment against
Mortgagor, (but
Page 109
not any direct or indirect partner for their respective shareholders] of
Mortgagor), so long as the exercise of any remedy does not extend to
execution against or recovery out of any property of Mortgagor (or any
direct or indirect partner [or their respective shareholders] of Mortgagor)
other than the security furnished under the Loan Documents in any action to
foreclose this Mortgage or otherwise to realize upon any security furnished
under the Loan Documents or to collect any amount payable hereunder, or
under any other Loan Document;
(b) Mortgagor (but not any direct or indirect partner [or
their respective shareholders] of Mortgagor) shall be fully and personally
liable for (i) misapplying (i.e., using in a manner other than as required
under the Loan Documents) any condemnation awards or insurance awards
attributable to the Security, but only to the extent of such awards so
misapplied, (ii) at the time of foreclosure or transfer in lieu thereof,
failing to turn over any security deposits attributable to the Security and
held by Mortgagor under the terms of any of the Leases, but only to the
extent of such deposits not turned over, (iii) collecting any rents in
advance in violation of any covenant contained in the Loan Documents, but
only to the extent that such rents so collected in advance are not applied
to the Security or the Loan, (iv) committing fraud, intentional
misrepresentation, or waste in connection with the operation of the
Security or the making of the loan evidenced hereby, but only to the extent
of any loss, damage, expense or costs (including
Page 110
reasonable attorneys' fees) incurred by Mortgagee resulting from such
fraud, intentional misrepresentation, or waste, (v) gross revenues actually
collected from the Security, from and after either (a) nonpayment by
Mortgagor of any principal or interest due under the Note or (b) receipt by
Mortgagor of notice from Mortgagee of a nonmonetary or other monetary
default pursuant to the terms of the Note, this Mortgage, or any of the
other Loan Documents, if and only to the extent, such gross revenues are
sufficient to pay any portion of the Indebtedness, operating and
maintenance expenses, insurance premiums, deposits into a reserve for
taxes, insurance, or replacements (if any), or other sums required by the
Loan Documents, and Mortgagor fails to make such payments or deposits when
due, but only to the extent of any funds diverted from such payments,
expenses or deposits.
(c) There shall be no limitation, in any event, on the
Mortgagor's (but not any direct or indirect partner [or their respective
shareholders] of Mortgagor) personal liability under, and the exercise of
any of Mortgagee's rights under any indemnity from Mortgagor to Mortgagee
including, but not limited to, the Environmental Indemnification Agreement
of even date herewith from Mortgagor to Mortgagee with regard to the
Security except as may be expressly set forth therein.
(d) There shall be no limitation on the rights of
Mortgagee to proceed against any entity or person whatsoever, including
Mortgagor, with respect to the enforcement of any
Page 111
indemnifications or guarantees of the Principal Indebtedness by such entity
or person or other sums due hereunder or under any of the other Loan
Documents or any part thereof, or any master leases by such person or
entity all of which may be entered into for the benefit of Mortgagee after
the date hereof, except as may be expressly set forth therein.
In no event shall any trustee, advisor, beneficiary, director,
shareholder, officer, or employee of Mortgagor, or any partner in
Mortgagor, or any partner of a partner of Mortgagor, or of JMB Properties
Co., Urban Retail Properties Co., JMB Institutional Realty Corporation, or
JMB Realty Corporation, or their respective affiliates and subsidiaries
(collectively, "JMB") have any personal liability under the Loan Documents,
and with respect to the foregoing exceptions to non-recourse, Mortgagee's
recourse shall be limited to the assets of the Mortgagor.
For purposes hereof, an entity will be deemed to be an "affiliate"
of JMB if such entity controls, is under common control with, or is
controlled by JMB. As used in this definition of "affiliate", "control"
(including its correlative usages, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of the power
to direct or cause the direction of management or policies, whether through
ownership of voting securities, by contract, or otherwise. For purposes of
this definition, any entity that owns, directly or
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indirectly, 50% or more of the securities having ordinary voting power for
the election of the board of directors of the corporation, or 50% or more
of the ownership interests of any other entity shall be deemed to control
such corporation or other entity. In addition, with respect to any general
or limited partnership, an entity which is the managing or co-managing
partner of such partnership, or which is a general partner with at least
equal power with all general partners to direct and control the
partnership, shall be deemed to control such partnership.
Additionally, and notwithstanding anything to the contrary
contained herein, no negative capital account of any partner of Mortgagor
or of any sub-tier entities of Mortgagor, or any obligation of any such
partner or sub-tier entity to restore a negative capital account or to
contribute capital to Mortgagor or any such partner or sub-tier entity,
shall be deemed to be the property or an asset of Mortgagor or any such
partner or sub-tier entity. Accordingly, neither Mortgagee nor any of its
successors or assigns shall have any right to collect, enforce, or proceed
against or with respect to such negative capital account or obligation to
restore or contribute.
The provisions of this Section 40 will not affect other legal or
equitable remedies available to Mortgagee or Mortgagee's rights in and to
the Security or constitute a waiver by Mortgagee or any such remedies or
rights in and to the Security.
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41. ATTORNEYS' FEES. Any reference to "attorney fees",
"attorneys' fees", or "attorney's fees" in this document includes but is
not limited to both the fees, charges and costs incurred by Mortgagee
through its retention of outside legal counsel and the allocable fees,
costs and charges for services rendered by Mortgagee's in-house counsel.
Any reference to "attorney fees", "attorneys' fees", or "attorney's fees"
shall also include but not be limited to those attorneys or legal fees,
costs and charges incurred by Mortgagee in the collection of any
Indebtedness, the enforcement of any obligations hereunder, the protection
of the Security, the foreclosure of this Mortgage, the sale of the
Security, the defense of actions arising hereunder and the collection,
protection or setoff of any claim the Mortgagee may have in a proceeding
under Title 11, United States Code. Attorneys fees provided for hereunder
shall be reasonable in amount and shall accrue whether or not Mortgagee has
provided notice of default or of an intention to exercise its remedies for
such default.
42. ADMINISTRATIVE FEES. Mortgagee shall have the right to
charge administrative fees during the term of the Note as Mortgagee may
determine, in its sole reasonable discretion, in connection with any
servicing requests made by Mortgagor requiring Mortgagee's evaluation,
preparation and processing of any such requests. Administrative fees shall
not be charged for routine servicing matters contemplated by the Loan
Documents including, without limitation: processing payments; processing
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insurance and UCC continuation documentation; processing escrow draws;
review of tenant leases, subordination non-disturbance and attornment
agreements and tenant estoppels on standard forms approved by Mortgagee
without material modifications. Such administrative fees shall apply
without limitation to requests for matters not permitted or contemplated by
the Loan Documents (including, without limitation: requests for transfers
or assignments, requests for partial releases; requests for review of new
easements), and to requests, which, while contemplated by the Loan
Documents, because of the nature of the request, will require significantly
more time than an institutional lender, acting reasonably, would
contemplate for such request (including without limitation, requests for
the approval of tenant leases, tenant estoppels and tenant subordination,
non-disturbance and attornment agreements which contain material
differences from Mortgagee's standard forms). Mortgagee shall also be
entitled to reimbursement for professional fees it incurs for such
administration, including without limitation, those of architects,
engineers and attorneys (whether (i) employed by Mortgagee or its affiliate
or (ii) engaged by Mortgagee or its affiliates as independent contractors).
43. PROTECTION OF SECURITY; COSTS AND EXPENSES. Mortgagor shall
appear in and defend any action or proceeding purporting to affect the
security hereof or the rights or powers of the Mortgagee, and shall pay all
costs and expenses, including without limitation cost of evidence of title
and reasonable
Page 115
attorneys' fees, in any such action or proceeding in which Mortgagee may
appear, and in any suit brought by Mortgagee to foreclose this Mortgage or
to enforce or establish any other rights or remedies of Mortgagee
hereunder. If Mortgagor fails to perform any of the covenants or agreements
contained in this Mortgage, and as a result thereof an Event of Default
exists hereunder, or if any action or proceeding is commenced which affects
Mortgagee's interest in the Security or any part thereof, including, but
not limited to, eminent domain, code enforcement, or proceedings of any
nature whatsoever under any federal or state law, whether now existing or
hereafter enacted or amended, relating to bankruptcy, insolvency,
arrangement, reorganization or other form of debtor relief, and a
Triggering Event (as hereinafter defined) occurs and is continuing, then
Mortgagee may, but without obligation to do so and with at least three (3)
days prior notice (the "Prior Notice") to Mortgagor and without releasing
Mortgagor from any obligation hereunder, (a) make such appearances,
disburse such sums and take such action as Mortgagee deems necessary or
appropriate to protect Mortgagee's interest, including, but not limited to,
disbursement of reasonable attorneys' fees, (b) enter upon the Security to
make repairs or take other action to protect the security hereof, and (c)
pay, purchase, contest or compromise of any encumbrance, charge or lien
which in the judgment of either Mortgagee appears to be prior or superior
hereto. Mortgagor acknowledges that the Prior Notice shall not in any way
extend any notice and/or cure rights required to be given under Section 26
(EVENTS OF DEFAULT) as a
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condition to the existence of an Event of Default hereunder and that no
Prior Notice shall be required to be given by Mortgagee to Mortgagor either
(i) under exigent circumstances or in cases where Mortgagee's failure to
immediately take action or proceed would materially impair Mortgagee's
security for the loan evidenced by the Note, or (ii) with respect to
Mortgagee's rights to immediately procure insurance as provided in Section
7 (INSURANCE) hereof.
As used herein, a "Triggering Event" means the occurrence of any
one of the following events: (1) Mortgagor fails to appear in and prosecute
any such proceeding, (2) Mortgagee reasonably determines that Mortgagor's
interests are adverse to the interests of the Mortgagee in such proceeding,
(3) Mortgagor is not diligent in conducting and controlling any such
proceeding, action or litigation, or (4) Mortgagor's conduct and control of
any such proceeding, action or litigation or the positions asserted by
Mortgagor in connection therewith materially impair the security of this
Mortgage, as determined by Mortgagee.
Mortgagor further agrees to pay all reasonable expenses of
Mortgagee (including without limitation reasonable fees and disbursements
of counsel) incident to the protection of the rights of Mortgagee
hereunder, or to enforcement or collection of payment of the Indebtedness,
whether by judicial or non-judicial proceedings, or in connection with any
bankruptcy, insolvency, arrangement, reorganization or other debtor relief
proceeding of
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Mortgagor, or otherwise. Any amounts disbursed by Mortgagee pursuant to
this Section shall be additional indebtedness of Mortgagor secured by the
Loan Documents as of the date of disbursement and shall bear interest at
the Default Rate. All such amounts shall be payable by Mortgagor
immediately without demand. Nothing contained in this Section shall be
construed to require Mortgagee to incur any expense, make any appearance,
or take any other action.
44. NOTICES. Any notice, demand, request, statement or consent
made hereunder shall be in writing, signed by the party giving such notice,
request, demand, statement, or consent, and shall be delivered personally,
delivered to a reputable overnight delivery service providing a receipt or
deposited in the United States mail, postage prepaid and registered or
certified return receipt requested, at the address set forth below, or at
such other address within the continental United States of America as may
have theretofore have been designated in writing. The effective date of
any notice given as aforesaid shall be the date of personal service, one
(1) business day after delivery to such overnight delivery service, or
three (3) business days after being deposited in the United States mail,
whichever is applicable. For purposes hereof, the addresses are as
follows:
Page 118
If to Mortgagee:
CIGNA Corporation
c/o CIGNA Investment Management - Real Estate
900 Cottage Grove Road
Hartford, CT 06152-2319
Attn: Real Estate Investment Services, 5-319
With a copy to:
CIGNA Companies
Investment Law Department,
900 Cottage Grove Road
Hartford, CT 06152-2215
Attn: Real Estate Division, 5-215A
If to Mortgagor:
Carlyle Real Estate Limited Partnership - XIV
900 North Michigan Ave.
Chicago, IL 60611-1575
Attn: Mr. Stephen A. Lovelette
For the purpose of giving notice pursuant to Section 62 hereof only:
JMB Realty Corporation
900 North Michigan Avenue
Chicago, IL 60611-1575
Attn: Mr. Stephen A. Lovelette
With a courtesy copy to:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
26th Floor
Los Angeles, CA 90067
Attn: Real Estate Notices (EJML)
Notwithstanding the foregoing agreement to provide courtesy
copies to the above-named persons, such copies shall be courtesy copies
only, and failure to provide such courtesy copies shall have absolutely no
effect or entitle Mortgagor to any remedy whatsoever. Any notice duly
given to Mortgagor shall be effective whether or not the courtesy copies
were given to the above-named persons.
Page 119
45. BUSINESS PURPOSE. Mortgagee has been advised by its
Mortgagor that the proceeds of the loan secured by this Mortgage will be
used for the purposes specified in Section 4(1) (c) of the Illinois
Interest Act (815 ILCS 205/4), as amended and that the principal obligation
secured hereby constitutes a "business loan" within the purview of said
statute.
46. AGGREGATE INDEBTEDNESS. At all times, regardless of whether
any loan proceeds have been disbursed, this Mortgage secures (in addition
to any loan proceeds disbursed from time to time) the payment of any and
all expenses and advances due to or incurred by Mortgagee in connection
with the Indebtedness secured hereby; provided, however, notwithstanding
anything to the contrary herein, the total aggregate Indebtedness secured
by this Mortgage shall not exceed an amount equal to ten times the face
amount of the Note.
47. APPLICABLE LAW. The provisions hereof shall be construed in
accordance with the laws of the State of Illinois (the "State").
48. INVALIDITY. If any provision of this Mortgage shall be held
inconsistent with any provision of the Illinois Mortgage Foreclosure Law
(735 ILCS 5/15-1101 ET. SEQ.) (herein called the "Act") the provisions of
the Act shall take precedence over the Provisions of this Mortgage, the
same shall not affect in any respect whatsoever the validity of the other
provisions of this
Page 120
Mortgage that can be construed in a manner consistent with the Act, except
that if such provision relates to the payment of a monetary sum, then the
Mortgagee may, at its option, declare the Indebtedness due and payable upon
sixty (60) days prior written notice to Mortgagor and, provided there
exists no Event of Default hereunder, without prepayment fee or premium.
If any provision of this Mortgage shall grant to Mortgagee
any rights or remedies upon default of the Mortgagor with respect to
foreclosure of this Mortgage which are more limited than the rights that
would otherwise be vested in Mortgagee under the Act in the absence of said
provision, Mortgagee shall be vested with the rights granted in the Act to
the full extent permitted by law.
Without limiting the generality of the foregoing, all
expenses incurred by Mortgagee to the extent reimbursable under Sections
15-1510 and 15-1512 of the Act, whether incurred before or after any decree
or judgment of foreclosure, and whether enumerated elsewhere in this
Mortgage, shall be added to the Indebtedness or by the judgment of
foreclosure.
49. CAPTIONS. The captions in this instrument are inserted only
as a matter of convenience and for reference, and are not and shall not be
deemed to be any part hereof.
Page 121
50. MODIFICATIONS. This Mortgage may not be changed or
terminated except in writing signed by both parties. The provisions of
this Mortgage shall extend and be applicable to all renewals, amendments,
extensions, consolidations, and modifications of the other Loan Documents,
and any and all references herein to the Guaranty or the Loan Documents
shall be deemed to include any such renewals, amendments, extensions,
consolidations or modifications thereof.
51. BIND AND INURE. The provisions of this Mortgage shall be
binding on the Mortgagor and its heirs, successors and assigns, and any
subsequent owners of the Security. The covenants of Mortgagor herein shall
run with the land, and this Mortgage and all of the covenants herein
contained shall inure to the benefit of the Mortgagee, its successors and
assigns.
52. REPLACEMENT OF NOTE. Upon receipt of evidence reasonably
satisfactory to Mortgagor of the loss, theft, destruction or mutilation of
the Note, and in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to Mortgagor or,
in the case of any such mutilation, upon surrender and cancellation of the
Note, Mortgagor will execute and deliver, in lieu thereof, a replacement
Note, identical in form and substance to the Note and dated as of the date
of the Note and upon such execution and delivery all references in this
Mortgage to the Note shall be deemed to refer to such replacement Note.
Page 122
53. TIME OF THE ESSENCE. Time is of the essence with respect to
each and every covenant, agreement and obligation of Mortgagor under this
Mortgage, the Note and the other Loan Documents.
54. FURTHER ASSURANCES. Mortgagor will, at the cost of
Mortgagor, and without expense to Mortgagee, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers and assurances as Mortgagee
shall from time to time reasonably require, for the better assuring,
conveying, assigning, transferring and confirming unto Mortgagee the
property and rights hereby conveyed or assigned or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound
to convey or assign to Mortgagee, or for carrying out the intention or
facilitating the performance of the terms of this Mortgage, or for filing,
registering or recording this Mortgage and, on demand, will execute and
deliver, and hereby authorizes Mortgagee after the occurrence of an Event
of Default to execute in the name of Mortgagor to the extent it may
lawfully do so, one or more financing statements, chattel mortgages or
comparable security instruments, to evidence more effectively the lien
hereof upon the Personal Property.
Page 123
55. RECORDATION.
(a) Mortgagor forthwith upon the execution and delivery of
this Mortgage and thereafter from time to time, will cause this Mortgage,
and any security instrument creating a lien or evidencing the lien hereof
upon the Personal Property and each instrument of further assurance, to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and
fully to protect the lien hereof upon, and the interest of Mortgagee in,
the Security.
(b) Mortgagor will pay all filing, registration or recording
fees, and all expenses incident to the preparation, execution and
acknowledgment of this Mortgage, any mortgage supplemental hereto, any
security instrument with respect to the Personal Property encumbered hereby
and any instrument of further assurance and all federal, state, county and
municipal stamp taxes and other taxes, duties, imposts, assessments and
charges arising out of or in connection with the execution and delivery of
the Note, this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the chattels or any instrument of further
assurance.
56. RECEIPT OF DOCUMENTS. Mortgagor hereby acknowledges receipt
of copies of the Loan Documents.
Page 124
57. RELEASE. Upon the satisfaction in full of the Indebtedness,
Mortgagee shall release of record the Security from the lien hereof and
shall surrender this Mortgage and all notes evidencing indebtedness secured
by this Mortgage to Mortgagor. Mortgagor shall pay all costs of
recordation.
58. REMEDIES CUMULATIVE. No right, power or remedy conferred
upon or reserved to Lender by the Note, this Mortgage or any other Loan
Document or any instrument evidencing or securing the Indebtedness is
exclusive of any other right, power or remedy, but each and every such
right, power and remedy shall be cumulative and concurrent and shall be in
addition to any other right, power and remedy given hereunder or under the
Note or any other Loan Document or any instrument evidencing or securing
Mortgagor's liabilities, or now or hereafter existing at law, in equity or
by statute.
59. HEIRS, SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever
Mortgagor or Mortgagee is named or referred to herein, heirs and successors
and assigns of such person or entity shall be included, and all covenants
and agreements contained in this Mortgage shall bind the successors and
assigns of Mortgagor, including any subsequent owner of all or any part of
the Security and inure to the benefit of the successors and assigns of
Mortgagee. This Section shall not be construed to permit an assignment,
transfer, conveyance, encumbrance or other
Page 125
disposition otherwise prohibited by this Mortgage or any other Loan
Document.
60. WAIVER OF TRIAL BY JURY. TO INDUCE MORTGAGEE TO MAKE THE
LOAN SECURED HEREBY, MORTGAGOR AND MORTGAGEE EACH HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHTS WHICH
MORTGAGOR OR MORTGAGEE MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LEGAL
PROCEEDINGS IN WHICH MORTGAGOR AND MORTGAGEE ARE ADVERSE PARTIES, AS TO ANY
MATTER ARISING OUT OF OR CONCERNING THE SUBJECT MATTER OF THE NOTE, THIS
MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS.
61. CONSENT TO JURISDICTION. SERVICE OF PROCESS. TO INDUCE
MORTGAGEE TO MAKE THE LOAN, MORTGAGOR AND EACH PARTNER IN MORTGAGOR HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY AGREE THAT ALL
ACTIONS ARISING DIRECTLY OR INDIRECTLY AS A RESULT OF THE NOTE, THIS
MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS SHALL BE INSTITUTED AND
LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF CHICAGO, ILLINOIS, AND
MORTGAGOR AND EACH PARTNER IN MORTGAGOR HEREBY CONSENT TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND HAVING
SITUS IN SAID CITY OF CHICAGO, AND WAIVE ANY OBJECTION BASED ON FORUM NON
CONVENIENS. MORTGAGOR AND EACH PARTNER IN MORTGAGOR HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE PERSONAL SERVICE OF ANY
AND ALL PROCESS, AND CONSENTS THAT, AT MORTGAGEE'S OPTION, ALL SUCH SERVICE
OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED TO MORTGAGOR
Page 126
AND EACH PARTNER IN MORTGAGOR, AS THE CASE MAY BE, AT THE ADDRESS FOR
MORTGAGOR AND EACH PARTNER IN MORTGAGOR INDICATED IN SECTION 44 HERETO.
IN WITNESS WHEREOF, the Mortgagor has duly executed and
ensealed this Mortgage, or has caused it to be executed and ensealed on its
behalf by its duly authorized representatives, as of September 14, 1995, in
the presence of:
MORTGAGOR:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP -
XIV, an Illinois limited partnership
By: JMB Realty Corporation, a Delaware
corporation, its corporate general partner
By: K. JAY WEAVER
Name: K. Jay Weaver
Title: Vice President
[Attach the Appropriate Acknowledgments]
Page 127
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, LAURA ANN KLENSKE, a Notary Public in and for the
County and State aforesaid, DO HEREBY CERTIFY, that K. JAY WEAVER of JMB
REALTY CORPORATION, a Delaware corporation, a general partner of CARLYLE
REAL ESTATE LIMITED PARTNERSHIP-XIV, an Illinois limited partnership,
personally known to me to be the VICE PRESIDENT this corporation and
personally known to me to be the same person whose name is subscribed to
the foregoing instrument, appeared before me this day in person and
acknowledged that as such VICE PRESIDENT, he signed and delivered this
instrument as VICE PRESIDENT of this corporation, pursuant to authority,
given by the Board of Directors of this corporation as his/her free and
voluntary act and deed, and as the free and voluntary act and deed of JMB
REALTY CORPORATION, as partner on behalf of CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV, for the uses and purposes therein set forth.
Given under my hand and notarial seal this 14TH day of September,
1995.
LAURA ANN KLENSKE
Notary Public
[SEAL]
OFFICIAL SEAL
LAURA ANN KLENSKE
NOTARY PUBLIC, STATE OF ILLINOIS
My Commission Expires: 6-11-99
My Commission Expires: 6-11-99
EXHIBIT A TO MORTGAGE AND SECURITY AGREEMENT
Record Owner:
Legal Description:
PARCEL I
THAT PART OF THE NORTHEAST QUARTER OF SECTION 26 AND THAT PART OF THE
NORTHWEST QUARTER OF SECTION 25, ALL IN TOWNSHIP 36 NORTH, RANGE 9 EAST OF
THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE
NORTHWEST CORNER OF SAID NORTHEAST QUARTER OF SECTION 26; THENCE SOUTH 1
DEGREE 55 MINUTES 08 SECONDS EAST ALONG THE WEST LINE OF THE NORTHEAST
QUARTER OF SAID SECTION 26 A DISTANCE OF 275.01 FEET TO A POINT OF
INTERSECTION WITH THE SOUTH BOUNDARY LINE OF THE COMMONWEALTH EDISON
COMPANY'S PROPERTY CONVEYED BY DEEDS RECORDED AS DOCUMENT NO. 859420 DATED
OCTOBER 14, 1958 AND DOCUMENT NO. 853160 DATED JULY 18, 1958; THENCE NORTH
88 DEGREES 55 MINUTES 41 SECONDS EAST ALONG SAID SOUTH BOUNDARY LINE A
DISTANCE OF 534.66 FEET TO A POINT; THENCE SOUTH 1 DEGREE 04 MINUTES 19
SECONDS EAST ALONG A LINE PERPENDICULAR TO THE LAST DESCRIBED COURSE A
DISTANCE OF 80.00 FEET TO A POINT; THENCE NORTH 88 DEGREES 55 MINUTES 41
SECONDS EAST A DISTANCE OF 364.10 FEET TO THE POINT OF BEGINNING OF THE
FOLLOWING DESCRIBED PARCEL OF LAND; THENCE CONTINUING NORTH 88 DEGREES 55
MINUTES 41 SECONDS EAST A DISTANCE OF 169.90 FEET TO A POINT OF CURVATURE;
THENCE NORTHEASTERLY 315.55 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE
SOUTHEAST AND HAVING A RADIUS OF 740.00 FEET TO A POINT OF REVERSE
CURVATURE; THENCE NORTHEASTERLY 281.44 FEET ALONG THE ARC OF A CIRCLE
CONVEX TO THE NORTHWEST AND HAVING A RADIUS OF 660.0 FEET TO A POINT OF
TANGENCY; THENCE NORTH 88 DEGREES 55 MINUTES 41 SECONDS EAST A DISTANCE OF
48.26 FEET TO A POINT; THENCE SOUTH 1 DEGREE 26 MINUTES 20 SECONDS EAST A
DISTANCE OF 128.29 FEET TO A POINT; THENCE NORTH 88 DEGREES 33 MINUTES 40
SECONDS EAST A DISTANCE OF 64.11 FEET TO A POINT OF CURVATURE; THENCE
SOUTHEASTERLY 161.67 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHEAST
AND HAVING A RADIUS OF 757.00 FEET TO A POINT; THENCE SOUTH 10 DEGREES 47
MINUTES 46 SECONDS WEST A DISTANCE OF 57.00 FEET TO A POINT ON A CURVE;
THENCE NORTHWESTERLY 149.50 FEET ALONG THE ARC OF CIRCLE CONVEX TO THE
NORTHEAST AND HAVING A RADIUS OF 700.00 FEET TO A POINT OF TANGENCY; THENCE
SOUTH 88 DEGREES 33 MINUTES 40 SECONDS WEST A DISTANCE OF 112.10 FEET TO A
POINT; THENCE SOUTH 1 DEGREE 26 MINUTES 20 SECONDS EAST A DISTANCE OF 52.00
FEET TO A POINT; THENCE SOUTH 1 DEGREE 32 MINUTES 29 SECONDS EAST A
DISTANCE OF 200.00 FEET TO A POINT; THENCE NORTH 88 DEGREES 27 MINUTES 31
SECONDS EAST A DISTANCE OF 23.69 FEET; THENCE SOUTH 1 DEGREE 32 MINUTES 29
SECONDS EAST A DISTANCE OF 130.17 FEET TO A POINT; THENCE NORTH 88 DEGREES
27 MINUTES 31 SECONDS EAST A DISTANCE OF 46.65 FEET TO A POINT; THENCE
SOUTH 1 DEGREE 32 MINUTES 29 SECONDS EAST A DISTANCE OF 72.22 FEET TO A
POINT; THENCE SOUTH 46 DEGREES 32 MINUTES 29 SECONDS EAST A DISTANCE OF
75.00 FEET TO A POINT; THENCE SOUTH 43 DEGREES 27 MINUTES 31 SECONDS WEST A
DISTANCE OF 44.50 FEET TO A POINT; THENCE SOUTH 46 DEGREES 32 MINUTES 29
SECONDS EAST A DISTANCE OF 270.00 FEET TO A POINT; THENCE NORTH 43 DEGREES
27 MINUTES 31 SECONDS EAST A DISTANCE OF 6.00 FEET TO A POINT; THENCE SOUTH
46 DEGREES 32 MINUTES 29 SECONDS EAST A DISTANCE OF 22.00 FEET TO A POINT;
THENCE SOUTH 43 DEGREES 27 MINUTES 31 SECONDS WEST A DISTANCE OF 6.00 FEET
TO A POINT; THENCE SOUTH 46 DEGREES 32 MINUTES 29 SECONDS EAST A DISTANCE
OF 10 FEET TO A POINT; THENCE NORTH 43 DEGREES 27 MINUTES 31 SECONDS EAST A
DISTANCE OF 311.87 FEET TO A POINT; THENCE NORTH 88 DEGREES 27 MINUTES 31
SECONDS EAST A DISTANCE OF 239.15 FEET TO A POINT; THENCE SOUTH 18 DEGREES
07 MINUTES 05 SECONDS A DISTANCE OF 49.67 FEET TO A POINT; THENCE
NORTH 71 DEGREES 52 MINUTES 55 SECONDS EAST A DISTANCE OF 82.00 FEET TO A
POINT; THENCE SOUTH 18 DEGREES 07 MINUTES 05 SECONDS EAST A DISTANCE OF
151.58 FEET EAST TO A POINT OF CURVATURE; THENCE SOUTHEASTERLY 607.10 FEET
ALONG THE ARC OF A CIRCLE CONVEX TO THE SOUTHWEST AND HAVING A RADIUS OF
2,143.00 FEET TO A POINT; THENCE SOUTH 55 DEGREES 39 MINUTES 01 SECONDS
WEST A DISTANCE OF 35.00 FEET TO A POINT ON A CURVE; THENCE NORTHWESTERLY
298.75 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE SOUTHWEST AND HAVING A
RADIUS OF 2,178.00 FEET TO A POINT; THENCE SOUTH 43 DEGREES 27 MINUTES 31
SECONDS WEST A DISTANCE OF 73.93 FEET TO A POINT; THENCE NORTH 46 DEGREES
32 MINUTES 29 SECONDS WEST A DISTANCE OF 189.55 FEET TO A POINT; THENCE
SOUTH 43 DEGREES 27 MINUTES 31 SECONDS WEST A DISTANCE OF 287.88 FEET TO A
POINT; THENCE NORTH 46 DEGREES 32 MINUTES 29 SECONDS WEST A DISTANCE OF
10.00 FEET TO A POINT; THENCE SOUTH 43 DEGREES 27 MINUTES 31 SECONDS WEST A
DISTANCE OF 430.00 FEET TO A POINT; THENCE SOUTH 8 DEGREES 36 MINUTES 53
SECONDS EAST A DISTANCE OF 273.60 FEET TO A POINT; THENCE SOUTH 01 DEGREE
22 MINUTES 10 SECONDS EAST A DISTANCE OF 230.00 FEET TO A POINT ON A CURVE;
THENCE EAST 529.44 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE SOUTHEAST
AND HAVING A RADIUS OF 1,500.00 FEET TO A POINT OF COMPOUND CURVATURE;
THENCE NORTHEASTERLY 128.23 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE
SOUTHEAST AND HAVING A RADIUS OF 500.00 FEET TO A POINT; THENCE SOUTH 23
DEGREES 37 MINUTES 22 SECONDS EAST A DISTANCE OF 78.37 FEET TO A POINT OF
CURVATURE; THENCE SOUTHEASTERLY 135.94 FEET ALONG THE ARC OF A CIRCLE
CONVEX TO THE NORTHEAST AND HAVING A RADIUS OF 350.00 FEET TO A POINT OF
TANGENCY; THENCE SOUTH 01 DEGREE 22 MINUTES 07 SECONDS EAST A DISTANCE OF
1.48 FEET TO A POINT; THENCE SOUTH 88 DEGREES 41 MINUTES 54 SECONDS WEST A
DISTANCE OF 55.69 FEET TO A POINT OF CURVATURE; THENCE NORTHEASTERLY 12.14
FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE SOUTHEAST AND HAVING A RADIUS
OF 7.63 FEET TO A POINT OF COMPOUND CURVATURE; THENCE NORTHWESTERLY 100.45
FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHEAST AND HAVING A RADIUS
OF 302.00 FEET TO A POINT OF COMPOUND CURVATURE; THENCE NORTHWESTERLY 43.33
FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHEAST AND HAVING A RADIUS
OF 30.00 FEET TO A POINT; THENCE SOUTH 82 DEGREES 49 MINUTES 24 SECONDS
WEST A DISTANCE OF 67.04 FEET TO A POINT OF A CURVE; THENCE WESTERLY 791.33
FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE SOUTH AND HAVING A RADIUS OF
1,550.00 FEET TO A POINT; THENCE NORTH 1 DEGREE 32 MINUTES 29 SECONDS WEST
A DISTANCE OF 515.6 FEET TO A POINT; THENCE NORTH 5 DEGREES 36 MINUTES 29
SECONDS EAST A DISTANCE OF 71.90 FEET TO A POINT; THENCE NORTH 43 DEGREES
27 MINUTES 31 SECONDS EAST A DISTANCE OF 80.00 FEET TO A POINT; THENCE
NORTH 46 DEGREES 32 MINUTES 29 SECONDS WEST A DISTANCE OF 282.00 FEET TO A
POINT; THENCE SOUTH 43 DEGREES 27 MINUTES 31 SECONDS WEST A DISTANCE OF
54.08 FEET TO A POINT; THENCE SOUTH 80 DEGREES 18 MINUTES 31 SECONDS WEST A
DISTANCE OF 81.23 FEET TO A POINT; THENCE SOUTH 88 DEGREES 27 MINUTES 31
SECONDS WEST A DISTANCE OF 430.32 FEET TO A POINT ON A CURVE; THENCE
SOUTHEASTERLY 132.99 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHEAST
AND HAVING A RADIUS OF 700.00 FEET TO A POINT OF REVERSE CURVE; THENCE
SOUTHEASTERLY 428.66 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE SOUTHWEST
AND HAVING A RADIUS OF 700.00 FEET TO A POINT; THENCE SOUTH 41 DEGREES 19
MINUTES 37 SECONDS WEST, A DISTANCE OF 59.00 FEET TO A POINT ON A CURVE;
THENCE NORTHWESTERLY 464.79 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE
SOUTHWEST AND HAVING A RADIUS OF 759.00 FEET TO A POINT OF REVERSE CURVE;
THENCE NORTHWESTERLY 372.39 FEET ALONG THE ARC OF A CIRCLE CONVEX
TO THE NORTHEAST AND HAVING A RADIUS OF 641.00 FEET TO A POINT OF REVERSED
CURVE; THENCE NORTHWESTERLY 651.99 FEET ALONG THE ARC OF A CIRCLE CONVEX TO
THE SOUTHWEST AND HAVING A RADIUS OF 559.00 FEET TO A POINT; THENCE SOUTH
70 DEGREES 02 MINUTES 40 SECONDS EAST A DISTANCE OF 59.00 FEET TO A POINT
ON A CURVE; THENCE SOUTHWESTERLY 56.75 FEET ALONG THE ARC OF A CIRCLE
CONVEX TO THE NORTHWEST AND HAVING A RADIUS OF 500.00 FEET TO A POINT;
THENCE SOUTH 46 DEGREES 32 MINUTES 29 SECONDS EAST A DISTANCE OF 559.50
FEET TO A POINT; THENCE NORTH 43 DEGREES 27 MINUTES 31 SECONDS EAST A
DISTANCE OF 132.07 FEET TO A POINT; THENCE SOUTH 46 DEGREES 32 MINUTES 29
SECONDS EAST A DISTANCE OF 84.50 FEET TO A POINT; THENCE NORTH 43 DEGREES
27 MINUTES 31 SECONDS EAST A DISTANCE OF 80.00 FEET TO A POINT; THENCE
NORTH 46 DEGREES 32 MINUTES 29 SECONDS WEST A DISTANCE OF 75.00 FEET TO A
POINT; THENCE NORTH 43 DEGREES 27 MINUTES 31 SECONDS EAST A DISTANCE OF
370.72 FEET TO A POINT; THENCE NORTH 01 DEGREES 32 MINUTES 29 SECONDS WEST
A DISTANCE OF 404.83 FEET TO A POINT; THENCE SOUTH 88 DEGREES 33 MINUTES 40
SECONDS WEST A DISTANCE OF 331.49 FEET TO A POINT OF CURVATURE; THENCE
SOUTHWESTERLY 182.48 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHWEST
AND HAVING A RADIUS OF 350.00 FEET TO A POINT OF COMPOUND CURVATURE; THENCE
SOUTHWESTERLY 295.68 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHWEST
AND HAVING A RADIUS OF 750.00 FEET TO A POINT; THENCE NORTH 53 DEGREES 53
MINUTES 58 SECONDS WEST A DISTANCE OF 50.00 FEET TO A POINT ON A CURVE;
THENCE NORTHEASTERLY 236.42 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE
NORTHWEST AND HAVING A RADIUS OF 800.00 FEET TO A POINT; THENCE NORTH 36
DEGREES 19 MINUTES 50 SECONDS WEST A DISTANCE OF 128.87 FEET TO THE HEREIN
ABOVE DESCRIBED POINT OF BEGINNING, IN WILL COUNTY, ILLINOIS.
PIN#: 03-26-200-006
PARCEL II
LOT 1 IN LOUIS JOLIET SOUTHEAST UNIT 1, BEING A SUBDIVISION OF PART OF THE
NORTHWEST QUARTER OF SECTION 25, TOWNSHIP 36 NORTH, RANGE 9 EAST OF THE
THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED AUGUST 8,
1985, AS DOCUMENT NO. R85-36615.
PIN#: 03-25-103-001
PARCEL III
NON-EXCLUSIVE EASEMENT FOR THE BENEFIT OF PARCELS I AND II, FOR STORM
DRAINAGE PURPOSES AS RESERVED IN A DEED DATED NOVEMBER 30, 1982 FROM HOMART
DEVELOPMENT COMPANY TO THE CITY OF JOLIET, RECORDED JUNE 24, 1983 AS
DOCUMENT NO. R83-17525 AND AS SHOWN ON A DUPLICATE EXHIBIT "A" PLAT OF
DEDICATION RECORDED JUNE 7, 1983 AS DOCUMENT NO. R83-15542 TOGETHER WITH
NON-EXCLUSIVE STORM SEWER EASEMENTS OVER, UNDER, ACROSS AND THROUGH THE
FOLLOWING DESCRIBED PARCEL OF LAND: THAT PART OF THE NORTHEAST QUARTER OF
SECTION 26 IN TOWNSHIP 36 NORTH, RANGE 9 EAST OF THE THIRD PRINCIPAL
MERIDIAN IN WILL COUNTY, ILLINOIS, DESCRIBED AS FOLLOWS: COMMENCING AT THE
SOUTHEAST CORNER OF SAID NORTHEAST QUARTER OF SECTION 26, THENCE NORTH 1
DEGREE 52 MINUTES 56 SECONDS WEST ALONG THE EAST LINE OF SAID
NORTHEAST QUARTER OF SECTION 26, A DISTANCE OF 140.98 FEET TO A POINT OF
INTERSECTION WITH THE NORTH LINE OF HENNEPIN DRIVE AS DEDICATED; THENCE
SOUTH 88 DEGREES 41 MINUTES 54 SECONDS WEST ALONG SAID NORTH LINE OF
HENNEPIN DRIVE, A DISTANCE OF 71.80 FEET TO THE POINT OF BEGINNING; THENCE
CONTINUING ALONG SAID NORTH LINE OF HENNIPIN DRIVE SOUTH 88 DEGREES 41
MINUTES 54 SECONDS WEST, A DISTANCE OF 22.92 FEET TO A POINT; THENCE NORTH
28 DEGREES 22 MINUTES 39 SECONDS EAST, A DISTANCE OF 5.88 FEET TO A POINT;
THENCE NORTH 1 DEGREE 23 MINUTES 22 SECONDS WEST, A DISTANCE OF 118.46 FEET
TO A POINT ON A CURVE; THENCE SOUTHEASTERLY 25.25 FEET ALONG THE ARC OF A
CIRCLE CONVEX TO THE NORTHEAST WHOSE RADIUS IS 30 FEET AND WHOSE CHORD OF
24.51 FEET BEARS SOUTH 45 DEGREES 43 MINUTES 57 SECONDS EAST TO A POINT OF
COMPOUND CURVATURE; THENCE SOUTHEASTERLY 8.63 FEET ALONG THE ARC OF A
CIRCLE CONVEX TO THE NORTHEAST, WHOSE RADIUS IS 302.00 FEET AND WHOSE CHORD
OF 8.63 FEET BEARS SOUTH 20 DEGREES 48 MINUTES 06 SECONDS EAST TO A POINT
OF TANGENCY; THENCE SOUTH 1 DEGREE 23 MINUTES 22 SECONDS EAST A DISTANCE OF
97.79 FEET, ALL IN WILL COUNTY, ILLINOIS.
AND ALSO;
THAT PART OF THE EAST QUARTER OF SECTION 26, IN TOWNSHIP 36 NORTH, RANGE 9
EAST OF THE THIRD PRINCIPAL MERIDIAN, IN WILL COUNTY, ILLINOIS, DESCRIBED
AS FOLLOWS: COMMENCING AT THE SOUTHWEST CORNER OF THE NORTHEAST QUARTER OF
SAID SECTION 26; THENCE NORTH 88 DEGREES 54 MINUTES 10 SECONDS EAST, A
DISTANCE OF 1,487.74 FEET TO A POINT; THENCE NORTH 1 DEGREE 05 MINUTES 50
SECONDS WEST, A DISTANCE OF 133.87 FEET TO A POINT; THENCE NORTH 1 DEGREE
27 MINUTES 54 SECONDS WEST, A DISTANCE OF 5.00 FEET TO THE POINT OF
BEGINNING; THENCE CONTINUING NORTH 1 DEGREE 27 MINUTES 54 SECONDS WEST, A
DISTANCE OF 114.98 FEET TO A POINT ON A CURVE; THENCE NORTHEASTERLY 63.34
FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHWEST WHOSE RADIUS IS
265.00 FEET AND WHOSE CHORD OF 63.19 FEET BEARS NORTH 16 DEGREES 59 MINUTES
07 SECONDS EAST TO A POINT; THENCE SOUTH 1 DEGREE 27 MINUTES 54 SECONDS
EAST A DISTANCE OF 177.92 FEET TO A POINT; THENCE SOUTH 12 DEGREES 51
MINUTES 34 SECONDS EAST A DISTANCE OF 0.43 FEET TO A POINT OF INTERSECTION
WITH THE NORTHERLY LINE OF HENNEPIN DRIVE; THENCE SOUTH 88 DEGREES 41
MINUTES 54 SECONDS WEST ALONG SAID NORTHERLY LINE OF HENNIPIN DRIVE A
DISTANCE OF 10.61 FEET TO A POINT OF CURVATURE; THENCE NORTHWESTERLY 10.26
FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE SOUTHWEST WHOSE RADIUS IS
15.00 FEET AND WHOSE CHORD OF 10.06 FEET BEARS NORTH 71 DEGREES 42 MINUTES
00 SECONDS WEST TO THE HEREINABOVE DESIGNATED POINT OF BEGINNING, ALL IN
WILL COUNTY, ILLINOIS.
AS CREATED BY AN INSTRUMENT BY HOMART DEVELOPMENT CO., RECORDED JULY 31,
1985, AS DOCUMENT NO. R85-24389, IN WILL COUNTY, ILLINOIS.
PARCEL IV
EASEMENT FOR THE BENEFIT OF PARCELS I AND II, AS CREATED BY A DEED DATED
JANUARY 31, 1978, RECORDED JANUARY 31, 1978 AS DOCUMENT NO. R78-03592 AND
RE-RECORDED APRIL 17, 1978 AS DOCUMENT NO. R78-13279, FROM AMERICAN
NATIONAL BANK AND TRUST COMPANY, TRUST NO. 76639 TO HOMART DEVELOPMENT CO.
FOR DRAINAGE PURPOSES, OVER THE FOLLOWING DESCRIBED PARCEL OF LAND:
THAT PART OF THE NORTHWEST QUARTER
OF SECTION 25, TOWNSHIP 36 NORTH AND IN RANGE 9 EAST OF THE THIRD PRINCIPAL
MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHWEST CORNER OF THE
NORTHWEST QUARTER OF SAID SECTION 25; THENCE NORTH 89 DEGREES 28 MINUTES 33
SECONDS EAST ALONG THE SOUTH LINE OF THE NORTHWEST QUARTER OF SAID SECTION
25, A DISTANCE OF 25.00 FEET TO THE POINT OF BEGINNING; THENCE NORTH 01
DEGREE 52 MINUTES 56 SECONDS WEST, A DISTANCE OF 25.59 FEET; THENCE NORTH
01 DEGREE 38 MINUTES 14 SECONDS WEST, A DISTANCE OF 60.85 FEET; THENCE
NORTH 88 DEGREES 41 MINUTES 54 SECONDS EAST, A DISTANCE OF 728.80 FEET TO A
POINT OF CURVATURE; THENCE NORTHEASTERLY 819.94 FEET ALONG THE ARC OF A
CIRCLE CONVEX TO THE SOUTHEAST AND HAVING A RADIUS OF 1,040.00 FEET TO A
POINT OF TANGENCY; THENCE NORTH 43 DEGREES 27 MINUTES 31 SECONDS EAST, A
DISTANCE OF 195.75 FEET; THENCE SOUTH 46 DEGREES 32 MINUTES 29 SECONDS
EAST, A DISTANCE OF 431.28 FEET; THENCE NORTH 64 DEGREES 08 MINUTES 21
SECONDS EAST, A DISTANCE OF 56.56 FEET; THENCE NORTH 50 DEGREES 45 MINUTES
58 SECONDS EAST, A DISTANCE OF 49.24 FEET; THENCE NORTH 68 DEGREES 04
MINUTES 32 SECONDS EAST, A DISTANCE OF 229.01 FEET; THENCE NORTH 43 DEGREES
27 MINUTES 31 SECONDS EAST, A DISTANCE OF 41.27 FEET TO A POINT OF
INTERSECTION WITH THE CENTER LINE OF U.S. ROUTE 30; THENCE SOUTH 46 DEGREES
32 MINUTES 29 SECONDS EAST ALONG THE CENTER LINE OF U.S. ROUTE 30; A
DISTANCE OF 40.00 FEET; THENCE SOUTH 43 DEGREES 27 MINUTES 31 SECONDS WEST,
A DISTANCE OF 50.00 FEET; THENCE SOUTH 68 DEGREES 04 MINUTES 32 SECONDS
WEST, A DISTANCE OF 231.65 FEET; THENCE SOUTH 50 DEGREES 45 MINUTES 58
SECONDS WEST, A DISTANCE OF 47.84 FEET; THENCE SOUTH 64 DEGREES 08 MINUTES
21 SECONDS WEST, A DISTANCE OF 88.90 FEET; THENCE NORTH 46 DEGREES 32
MINUTES 29 SECONDS WEST, A DISTANCE OF 388.95 FEET; THENCE SOUTH 43 DEGREES
27 MINUTES 31 SECONDS WEST, A DISTANCE OF 155.75 FEET TO A POINT OF
CURVATURE; THENCE SOUTHWESTERLY A DISTANCE OF 676.75 FEET ALONG THE ARC OF
A CIRCLE CONVEX TO THE SOUTHEAST AND HAVING A RADIUS OF 1,110.00 FEET TO A
POINT; THENCE SOUTH 05 DEGREES 06 MINUTES 46 SECONDS EAST, A DISTANCE OF
19.93 FEET; THENCE SOUTH 89 DEGREES 17 MINUTES 59 SECONDS WEST, A DISTANCE
OF 80.24 FEET; THENCE SOUTH 89 DEGREES 34 MINUTES 36 SECONDS WEST, A
DISTANCE OF 315.62 FEET; THENCE SOUTH 02 DEGREES 56 MINUTES 36 SECONDS
WEST, A DISTANCE OF 28.28 FEET TO A POINT OF INTERSECTION WITH THE SOUTH
LINE OF THE NORTHWEST QUARTER OF SAID SECTION 25; THENCE SOUTH 89 DEGREES
28 MINUTES 33 SECONDS WEST ALONG SAID SOUTH LINE OF THE NORTHWEST QUARTER
OF SAID SECTION 25, A DISTANCE OF 529.04 FEET TO THE POINT OF BEGINNING, IN
WILL COUNTY, ILLINOIS.
PARCEL V
THE RECIPROCAL AND NON-EXCLUSIVE EASEMENTS APPURTENANT TO AND FOR THE
BENEFIT OF PARCEL I FOR THE USE OF THE COMMON AREA, MANAGEMENT, OPERATION,
MAINTENANCE, RECONSTRUCTION AND REPAIR OF THE COMMON AREA, PARKING, RING
ROAD, INGRESS AND EGRESS, ACCESS, ABUTMENT OF MALL AND DEVELOPER BUILDING,
UTILITIES, MAINTENANCE, REPAIR OR RECONSTRUCTION OF FACILITIES AND
STRUCTURES; CONSTRUCTION; RE-CONSTRUCTION, ERECTION AND MAINTENANCE OF
FOOTINGS, FOUNDATIONS, SUPPORTS AND COMMON WALLS, CANOPIES, ROOF AND
BUILDING OVERHANGS OR PROJECTIONS, AWNINGS, ALARM BELLS, SIGNS, LIGHTS AND
LIGHTING DEVICES AND OTHER SIMILAR APPURTENANCES TO PARCEL I, AS CREATED,
DEFINED AND LIMITED BY THE JOLIET OPERATING AGREEMENT
WHICH WAS RECORDED ON DECEMBER 9, 1977 IN THE OFFICE OF THE RECORDER OF
WILL COUNTY, ILLINOIS, AS DOCUMENT NO. R77-48631 AND AS AMENDED BY THE
FIRST AMENDMENT TO OPERATING AGREEMENT, RECORDED NOVEMBER 10, 1978, AS
DOCUMENT NO. R78-45043 AND ALSO AS AMENDED BY THE SECOND AMENDMENT TO
OPERATING AGREEMENT RECORDED NOVEMBER 8, 1979, AS DOCUMENT NO. R79-41766,
AND AS RATIFIED BY AN INSTRUMENT RECORDED JULY 31, 1985, AS DOCUMENT NO.
R85-24383; IN, OVER, UPON UNDER THE SHOPPING CENTER SITE AS SHOWN ON THE
PLAT ATTACHED TO THE AFORESAID OPERATING AGREEMENT (EXCEPT AS TO THAT PART
FALLING IN PARCEL I), ALL IN WILL COUNTY, ILLINOIS.
PARCEL VI
THAT PART OF THE NORTHEAST QUARTER AND THE SOUTHEAST QUARTER OF SECTION 26,
TOWNSHIP 36 NORTH, RANGE 9 EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED
AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER OF THE SOUTHEAST QUARTER OF
SAID SECTION 26, THENCE SOUTH 01 DEGREE 52 MINUTES 56 SECONDS EAST A
DISTANCE OF 25.00 FEET TO A POINT; THENCE SOUTH 87 DEGREES 26 MINUTES 00
SECONDS WEST A DISTANCE OF 40.04 FEET TO THE POINT OF BEGINNING OF THE
FOLLOWING DESCRIBED PARCEL OF LAND; THENCE CONTINUING SOUTH 87 DEGREES 26
MINUTES 00 SECONDS WEST A DISTANCE OF 654.79 FEET TO A POINT OF
INTERSECTION WITH AN ARC OF A CIRCLE; THENCE SOUTHEASTERLY 278.15 FEET
ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHEAST AND HAVING A RADIUS OF
310.00 FEET TO A POINT ON A CURVE; THENCE SOUTHWESTERLY 190.37 FEET ALONG
THE ARC OF A CIRCLE CONVEX TO THE SOUTHEAST AND HAVING A RADIUS OF 840.00
FEET TO A POINT OF REVERSE CURVE; THENCE SOUTHERLY 283.11 FEET ALONG THE
ARC OF A CIRCLE CONVEX TO THE WEST AND HAVING A RADIUS OF 310.00 FEET TO A
POINT OF REVERSE CURVE; THENCE SOUTHERLY 348.96 FEET ALONG THE ARC OF A
CIRCLE CONVEX TO THE NORTHEAST AND HAVING A RADIUS OF 330.00 FEET TO A
POINT OF INTERSECTION WITH A LINE; THENCE SOUTH 01 DEGREE 02 MINUTES 22
SECONDS EAST, A DISTANCE OF 232.32 FEET TO A POINT OF INTERSECTION WITH THE
SOUTH LINE OF THE NORTH HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 26;
THENCE SOUTH 88 DEGREES 57 MINUTES 38 SECONDS WEST ALONG THE SOUTH LINE OF
THE NORTH HALF OF THE SOUTHEAST QUARTER OF SAID 26, A DISTANCE OF 2,009.02
FEET TO THE SOUTHWEST CORNER OF THE NORTH HALF OF THE SOUTHEAST QUARTER OF
SAID SECTION 26; THENCE NORTH ALONG THE WEST LINE OF THE SOUTHEAST QUARTER
OF SAID SECTION 26 A DISTANCE OF 777.05 FEET TO A POINT; THENCE NORTH 88
DEGREES 08 MINUTES 59 SECONDS EAST ALONG A LINE PERPENDICULAR TO THE LAST
DESCRIBED COURSE A DISTANCE OF 260.50 FEET TO A POINT ON A CURVE; THENCE
EASTERLY 91.58 FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTHEAST AND
HAVING A RADIUS OF 220.00 FEET TO A POINT OF REVERSE CURVE; THENCE EASTERLY
327.42 FEET ALONG THE ARC OF A CIRCLE, CONVEX TO THE SOUTH AND HAVING A
RADIUS OF 360.00 FEET TO A POINT OF REVERSE CURVE; THENCE EASTERLY 334.63
FEET ALONG THE ARC OF A CIRCLE CONVEX TO THE NORTH AND HAVING A RADIUS OF
330 FEET TO A POINT OF REVERSE CURVE; THENCE EASTERLY 371.43 FEET ALONG THE
ARC OF A CIRCLE CONVEX TO THE SOUTH AND HAVING A RADIUS OF 460.00 FEET TO A
POINT OF COMPOUND CURVATURE; THENCE NORTHEASTERLY 142.68 FEET ALONG THE ARC
OF A CIRCLE CONVEX TO THE SOUTHEAST AND HAVING A RADIUS OF 90.00 FEET TO A
POINT OF REVERSE CURVE; THENCE NORTHERLY 304.34 FEET ALONG THE ARC OF A
CIRCLE CONVEX TO THE WEST AND HAVING A RADIUS OF 640.00 FEET TO A POINT;
THENCE NORTH 02 DEGREES 18 MINUTES 01 SECONDS WEST A DISTANCE OF 238.2 FEET
TO A POINT; THENCE NORTH 88 DEGREES 41
MINUTES 54 SECONDS EAST A DISTANCE OF 1,212.74 FEET TO A POINT ON A LINE
40.00 FEET WEST OF AND PARALLEL WITH THE EAST LINE OF THE SOUTHEAST QUARTER
OF SAID SECTION 26, WHICH POINT IS 85.55 FEET NORTH OF THE HEREINABOVE
DESIGNATED POINT OF BEGINNING; THENCE SOUTH 01 DEGREE 52 SECONDS EAST A
DISTANCE OF 85.55 FEET TO THE HEREINABOVE DESIGNATED POINT OF BEGINNING, IN
WILL COUNTY, ILLINOIS.
PIN# 03-26-400-004<PAGE>
Promissory Note
[The Promissory Note follows this page]
PROMISSORY NOTE
Louis Joliet Mall
Joliet, Illinois
$26,000,000.00 September 14, 1995
FOR VALUE RECEIVED, CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV, an Illinois limited partnership (hereinafter referred to
as the "Maker"), promises to pay to the order of CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, a Connecticut corporation, having its principal address
at 900 Cottage Grove Road, Bloomfield, Connecticut 06002, (the "Payee") or
such other place in the United States as the Holder hereof may designate in
writing (the legal holder from time to time of this Note, including Payee
as the initial holder, hereinafter referred to as "Holder"), the principal
sum of Twenty-Six Million and NO/100 Dollars ($26,000,000.00), or so much
thereof as may be advanced to or for the benefit of Maker by Holder
(hereinafter referred to as "Principal Indebtedness"), together with
interest thereon at an annual rate of eight and three one-hundredths
percent (8.03%) (the "Interest Rate"), in accordance with the provisions
hereinafter set forth.
1. TERMS OF PAYMENT. (a) If the date on which Principal
Indebtedness is advanced to Maker ("the Advancement Date") is not the first
day of a calendar month, then Maker shall pay to Holder on the first day of
the first calendar month following the Advancement Date, interest only on
the Principal Indebtedness, at
Page 1
the Interest Rate, calculated on the basis of a 365-day year and the number
of days from and including the Advancement Date to and including the last
day of the calendar month in which the Advancement Date occurs. On the
first day of the second calendar month following the Advancement Date (or
on the first day of the first calendar month following the date of this
Note if the Advancement Date is the first day of a calendar month), and on
the first day of each calendar month thereafter (hereinafter called the
"monthly payment dates") until and including the first day of the
eighteenth calendar month following the Advancement Date (or the first day
of the nineteenth calendar month if the Advancement Date is not the first
day of a calendar month), Maker shall pay to Holder the sum of $173,983.33
to be applied to interest on the Principal Indebtedness from time to time
outstanding at the Interest Rate for the immediately preceding calendar
month. Except as otherwise provided hereinabove, interest shall be
calculated and applied on the basis of a 360-day year consisting of twelve
30-day months.
(b) Commencing on the first day of the nineteenth calendar
month following the Advancement Date (or on the first day of the twentieth
calendar month if the Advancement Date is not the first day of a calendar
month), until October 1, 2002, Maker shall pay to Holder the sum of
$201,189.20, to be applied first to interest on the Principal Indebtedness
from time to time outstanding at the Interest Rate and the balance to be
applied to the reduction of the Principal Indebtedness (based on a 25-year
Page 2
amortization schedule). The interest component of such monthly payments
shall be calculated and applied on the basis of a 360-day year consisting
of twelve 30-day months, except that interest for any partial month shall
be calculated and applied on the basis of a 365-day year and the actual
number of days in such partial month during which the Principal
Indebtedness is outstanding.
(c) On October 1, 2002 (the "Maturity Date"), Maker shall
pay to Holder the entire Principal Indebtedness then remaining unpaid,
together with all accrued and unpaid interest thereon at the Interest Rate,
and any other charges due under this Note, the Mortgage (hereinafter
defined), and any other documents evidencing or securing or pertaining to
the advancement or disbursement of the Principal Indebtedness
(collectively, the "Loan Documents"). The period from and including the
date hereof to the Maturity Date will be referred to hereinafter as the
"Term".
2. PREPAYMENT. Except as specifically provided herein or in the
Mortgage, no prepayment of the Principal Indebtedness shall be allowed
during the first two loan years (as hereinafter defined) (the "Closed
Period"). Maker, whether or not a debtor in a proceeding under Title 11,
United States Code, may prepay the Principal Indebtedness in full, but not
in part, on any monthly payment date after the Closed Period, provided
Maker gives Holder forty-five (45) days prior written notice of Maker's
Page 3
intent to prepay this Note and pays a prepayment fee (the "Prepayment Fee")
as described below.
The Prepayment Fee shall be calculated as follows:
The greater of:
(a) one percent (1%) of the then-existing balance of this Note,
or
(b) Yield Maintenance as defined below.
The loan may be prepaid at par during the last six (6) months of
the Term (the "Six-Month Period"). The loan years shall be consecutive 12-
month periods measured from the initial monthly payment date. The
Prepayment Fee will be due when the loan is prepaid prior to the Six-Month
Period, whether such prepayment is voluntary or results from default,
acceleration or any other cause, except to the extent otherwise set forth
herein or in any other Loan Document.
Notwithstanding anything to the contrary herein, in the event Maker
has negotiated a bona fide third party sale of the Security (hereinafter
defined) in accordance with the provisions of Section 19(a) of the
Mortgage, except that the transferee does not meet the tests set forth in
Section 19(a) of the Mortgage or Holder does not, in its reasonable
discretion, approve such
Page 4
transferee based on the provisions set forth in said Section 19(a) of the
Mortgage, then prepayment shall in such case be allowed with payment of a
prepayment fee equal to the greater of (a) one percent (1%) of the then
existing balance of this Note, or (b) Yield Maintenance, except that the
first variable for the Monthly Interest Shortfall (as defined below) shall
in this case be "(i) the positive difference, if any, of the Semi-Annual
Equivalent Rate (as defined below) less the sum of the Treasury Yield (as
defined below) plus 70 basis points, divided by 12." Any such prepayment
shall require a thirty (30) day prior written notice period and shall be
simultaneous with the actual transfer of the Security. Any failure by
Maker to make any such prepayment following notice given by Maker to Holder
shall constitute a default under the Loan Documents unless (i) Maker shall
have given Holder written notice of prepayment cancellation no later than 5
days before the scheduled date of the prepayment provided for in the notice
of prepayment given in accordance with the preceding sentence and relating
to such prepayment or (ii) Maker shall have failed to make such prepayment
as a result of a default by a third party lender or purchaser under a
commitment from or purchase agreement with such third party lender or
purchaser to provide funds for such prepayment; in the event of either (i)
or (ii) above, no prepayment shall be due hereunder.
YIELD MAINTENANCE: "Yield Maintenance" is defined as the sum of
the present values on the date of prepayment of each of the Monthly
Interest Shortfalls for the remaining Term of the
Page 5
loan discounted at the monthly Treasury Yield plus 50 basis points.
The "Monthly Interest Shortfall" for each month is the product of
(i) the positive difference, if any, of the Semi-Annual Equivalent Rate
less the Treasury Yield, plus 50 basis points, divided by 12, times (ii)
the outstanding principal balance of this Note on each monthly payment date
for each full and partial month remaining in the Term.
The present value of each Monthly Interest Shortfall is then
determined by discounting each such Monthly Interest Shortfall to the date
of prepayment at the Treasury Yield plus 50 basis points, divided by
twelve.
The "Semi-Annual Equivalent Rate" for this loan is 8.17%.
The "Treasury Yield" will be determined by reference to the Federal
Reserve Statistical Release H.15 (519) of Selected Interest Rates (or any
similar successor publication of the Federal Reserve) for the first week
ending not less than two full weeks prior to the prepayment date. If the
remaining Term is less than one year, the Treasury Yield will equal the sum
of the yield for 1-Year Treasury Constant Maturities. If the remaining
Term is equal to one of the maturities of the Treasury Constant Maturities
(e.g., 1-year, 2-year, etc.), then the Treasury Yield will equal the sum of
the yield for the Treasury Constant
Page 6
Maturity with a maturity equalling the remaining Term. If the remaining
Term is longer than one year, but does not equal one of the maturities of
the Treasury Constant Maturities, then the Treasury Yield will equal the
sum of the yield for the Treasury Constant Maturity closest to, but not
exceeding, the remaining Term.
FOR EXAMPLE: If a 9% loan were prepaid with 24 months remaining in
the Term, at a time when Federal Reserve Statistical Release H.15 (519)
reported a two-year Treasury Yield of 7.0%, and the outstanding loan
balance was $10,000,000, then:
Semi-Annual Equivalent Rate .0917
less the Treasury Yield (7.0% plus .50%) - .0750
-------------
equals the positive rate difference .0167
divided by 12
equals the monthly rate differential .001392
times the principal balance x $10.000.000
-------------
equals the Monthly Interest Shortfall $ 13,916.67
=============
The sum of the present values of each Monthly Interest Shortfall
($13,917.00) discounted at the monthly Treasury Yield plus 50 basis points
(7.50% divided by 12 or .625%) equals $309,262.13.
The aforementioned prepayment fee does not constitute a penalty,
but rather represents the reasonable estimate, agreed to between Maker and
Payee, of a fair compensation for the loss that may be sustained by Holder
due to prepayment of the Principal Indebtedness prior to the Maturity Date.
Any prepayment fee required pursuant to the preceding paragraphs shall be
paid without prejudice to the right of Holder to collect any of the amounts
owing under this Note or the Mortgage or otherwise to
Page 7
enforce any of its rights or remedies arising out of an Event of Default
(hereinafter defined) hereunder.
In no event shall the prepayment fee hereunder exceed the maximum
allowed by applicable law.
3. SECURITY. This Note is given to evidence a loan of TWENTY-SIX
MILLION AND 00/100 DOLLARS ($26,000,000.00) made to Maker by Payee (the
Maker's receipt of which from Payee is hereby acknowledged) and is secured
by, among other things, a Mortgage and Security Agreement (the "Mortgage")
of even date herewith (and recorded or intended to be recorded in the
office of the Recorder of Deeds of Will County, Illinois) from Maker for
the benefit of Holder, and constitutes a first lien on certain real estate
and a first priority security interest in personal property and any
leasehold interest in such personal property and an assignment of rents and
leases relating to such real property (hereinafter collectively referred to
as the "Security"), in the City of Joliet, County of Will, State of
Illinois, and specifically described in the Mortgage.
4. LOCATION AND MEDIUM OF PAYMENTS. The sums payable under this
Note or under the Mortgage shall be paid to Holder at its principal address
hereinabove set forth, or at such other place in the United States as
Holder may from time to time hereafter designate to Maker in writing, in
legal tender of the United States of America.
Page 8
5. ACCELERATION OF MATURITY. At the option of Holder, which may
be exercised at any time after one or more of the following events (each
being an "Event of Default") shall have occurred, the whole of the
Principal Indebtedness, together with all interest, the applicable
Prepayment Fee, if any, and other charges due under any of the Loan
Documents, shall immediately become due and payable ("Acceleration of
Maturity"): (a) if any payment of any installment of the Principal
Indebtedness, including, without limitation, a prepayment of all the
Principal Indebtedness following, and in accordance with, a notice of
prepayment by Maker to Holder, and/or interest or of any other sum due
hereunder is not received by Holder within five (5) business days following
the date when such payment was due, or on the scheduled maturity date of
this Note, provided that, except for the payments due on the Maturity Date
of this Note, no more frequently than once in any twelve (12) month period,
Holder shall give Maker notice of nonpayment and five (5) business days
from receipt thereof in which to cure such nonpayment; or (b) if an Event
of Default (as defined in the Mortgage) shall occur under the Mortgage.
For purposes hereof, "business day" means any day other than a
Saturday, Sunday or legal holiday on which national banking institutions
are authorized or required to be closed in Hartford, Connecticut.
Page 9
6. LATE CHARGES: INTEREST FOLLOWING EVENT OF DEFAULT. If any
payment due under this Note, the Mortgage, or any other Loan Document
(other than any payment due on the Maturity Date or upon any acceleration
of the Principal Indebtedness), is not paid when due, without regard to any
cure or grace period, Maker shall pay and Holder shall be entitled to
collect a late payment charge for each month or fraction thereof during
which such payment is not made when due and for each month thereafter that
such sum remains unpaid, equal to the lesser of four percent (4%) of such
late payment or the maximum amount permitted by law, for the purpose of
defraying the expense incurred by Holder in handling and processing such
delinquent payment, and such amount shall be secured by the Loan Documents
securing the Note.
In addition to any late payment charge which may be due under this
Note, Maker shall pay interest on all sums due hereunder at a rate (the
"Default Rate") equal to the lesser of (i) the Interest Rate plus four
percent (4%) per annum, or (ii) the maximum rate permitted by law, from and
after the first to occur of the following events: if Holder elects to cause
the Acceleration of Maturity upon the occurrence of an Event of Default; if
a petition under Title 11, United States Code, shall be filed by Maker or
if Maker shall seek or consent to the appointment of a receiver or trustee
for itself or for any of the Security, file a petition seeking relief under
the bankruptcy or other similar laws of the United States, any state or any
jurisdiction, make a general assignment for the benefit of
Page 10
creditors, or be generally unable to pay its material debts as they become
due; if any involuntary proceeding under the bankruptcy laws or other
similar laws of the United States, any state or other jurisdiction is filed
against Maker and is not dismissed within sixty (60) days following the
filing thereof; if a court shall enter an order, judgment or decree
appointing, with or without the consent of Maker, a receiver or trustee for
it or for any of the Security or approving a petition filed against Maker
which seeks relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, and any such order, judgment or
decree shall remain in force, undischarged or unstayed, sixty (60) days
after it is entered; or if all sums due hereunder are not paid on the
Maturity Date.
7. COLLECTION AND ENFORCEMENT COSTS. Maker, upon demand, shall
pay Holder for all costs and expenses, including without limitation
attorneys' fees, paid or incurred by Holder in connection with the
collection of any sum due hereunder, or in connection with enforcement of
any of Holder's rights or Maker's obligations under this Note, the Mortgage
or any of the other Loan Documents.
8. CONTINUING LIABILITY. Subject to Section 15 hereof, the
obligation of Maker to pay the Principal Indebtedness, interest and all
other sums due hereunder shall continue in full force and effect and in no
ways be impaired, until the actual payment thereof to Holder, and in case
of a sale or transfer of
Page 11
all or any part of the Security, or in case of any further agreement given
to secure the payment of this Note, or in case of any agreement or
stipulation extending the time or modifying the terms of payment above
recited, Maker shall nevertheless continue to be liable on this Note, as
extended or modified by any such agreement or stipulation, unless released
and discharged in writing by Holder.
9. INTENTIONALLY OMITTED.
10. NO ORAL CHANGES: WAIVERS. This Note may not be changed
orally, but only by an agreement in writing signed by the party against
whom enforcement of a change is sought. The provisions of this Note shall
extend and be applicable to all renewals, amendments, extensions,
consolidations, and modifications of the Mortgage and/or the other Loan
Documents, and any and all references herein to the Mortgage and/or the
Loan Documents shall be deemed to include any such renewals, amendments,
extensions, consolidations, or modifications thereof.
Maker and any future endorsers, sureties, and guarantors hereof,
jointly and severally, waive presentment for payment, demand, notice of
nonpayment, notice of dishonor, protest of any dishonor, notice of protest,
and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default (except notice of default
required hereby, if any), or enforcement of the payment of this Note, and
they
Page 12
agree that the liability of each of them shall be unconditional without
regard to the liability of any other party and shall not be in any manner
affected by an indulgence, extension of time, renewal, waiver, or
modification granted or consented to by the Holder; and Maker and all
future indorsers, sureties and guarantors hereof consent to any and all
extensions of time or waivers that may be granted unilaterally by the
Holder hereof and to any renewals or modifications that may be agreed to
between the Holder hereof and Maker, with respect to the payment or other
provisions of this Note, and to the release of the collateral, or any part
thereof, with or without substitution, and agree that additional makers,
endorsers, guarantors, or sureties may become parties hereto without notice
to them or affecting their liability hereunder. The parties hereto
recognize and acknowledge that no endorser, surety, guarantor or additional
maker currently exists hereunder or is presently required under the Loan
Documents.
Holder shall not by any act of omission or commission be deemed to
waive any of its rights or remedies hereunder unless such waiver be in
writing and signed by Holder, and then only to the extent specifically set
forth therein; a waiver on one event shall not be construed as continuing
or as a bar to or waiver of such right or remedy on a subsequent event.
The acceptance by Holder of payment hereunder that is less than payment in
full of all amounts due at the time of such payment shall not without the
express written consent of Holder: (i) constitute a waiver of
Page 13
the right to exercise any of Holder's remedies at that time or at any
subsequent time, (ii) constitute an accord and satisfaction, or (iii)
nullify any prior exercise of any remedy.
No failure to cause an Acceleration of Maturity hereof by reason of
an Event of Default hereunder, acceptance of a past due installment, 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 Holder
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 the laws of the State of Illinois; and, to
the maximum extent permitted by law, Maker 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.
To the maximum extent permitted by law, Maker hereby waives and
renounces for itself, its heirs, successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption, and
appraisement now provided, or which may hereafter be provided, by the
Constitution and laws of the United States of America and of any state
thereof, both as to itself and in and to all of its property, real and
personal,
Page 14
against the enforcement and collection of the obligations evidenced by this
Note.
11. BIND AND INURE. This Note shall bind and inure to the
benefit of the parties hereto and their respective legal representatives,
heirs, successors and assigns.
12. APPLICABLE LAW. The provisions of this Note shall be
construed and enforceable in accordance with the laws of the State of
Illinois.
If any provision of this Note or the application hereof to any
person or circumstance shall, for any reason and to any extent, be invalid
or unenforceable, neither the remainder of this Note nor the application of
such provision to any other person or circumstance shall be affected
thereby, but rather the same shall be enforced to the greatest extent
permitted by law, except that if such provision relates to the payment of a
monetary sum, then the Holder may, at its option, declare the entire
indebtedness evidenced hereby due and payable upon sixty (60) days prior
written notice to Maker and, provided no Event of Default is then
continuing, without the Prepayment Fee or premium; provided that in the
event Maker continues timely to make all payments of principal and interest
due to Holder in accordance with the terms of this Note, whether or not any
term or provision of this Note shall become invalid or unenforceable,
Holder agrees to extend the aforementioned sixty (60) day period
Page 15
to one hundred eighty (180) days, or such shorter period as may be required
by applicable law.
13. It is hereby expressly agreed that if from any circumstances
whatsoever fulfillment of any provision of this Note, at the time
performance of such provision shall be due, shall involve transcending the
limit of validity presently prescribed by any applicable usury statute or
any other law, with regard to obligations of like character and amount,
then IPSO FACTO the obligation to be fulfilled shall be reduced to the
limit of such validity, so that in no event shall any exaction be possible
under this Note that is in excess of the limit of such validity. In no
event shall Maker be bound to pay for the use, forbearance or detention of
the money loaned pursuant hereto, interest of more than the current legal
limit; the right to demand any such excess being hereby expressly waived by
Holder.
14. NOTICE. Any notice, request, demand, statement or consent
made hereunder shall be in writing signed by the party giving such notice,
request, demand, statement or consent, and shall be delivered personally,
delivered to a reputable overnight delivery service providing a receipt, or
deposited in the United States Mail, postage prepaid and registered or
certified return receipt requested, at the address set forth below, or at
such other address within the continental United States of America as may
have theretofore been designated in writing. The effective date of any
notice given as aforesaid shall be the date of
Page 16
personal service, one (1) business day after delivery to such overnight
delivery service, or three (3) business days after being deposited in the
United States Mail, whichever is applicable. For purposes hereof, the
addresses are as follows:
If to Holder:
Connecticut General Life Insurance Company c/o CIGNA Investment
Management - Real Estate 900 Cottage Grove Road
Hartford, CT 06152-2319
Attn: Real Estate Investment Services, S-319
With a copy to:
CIGNA Companies Investment Law Department 900 Cottage Grove
Road Hartford, CT 06152-2215
Attn: Real Estate Division, S-215A
If to Maker:
Carlyle Real Estate Limited Partnership - XIV 900 North
Michigan Avenue
Chicago, IL 60611-1575
Attn: Mr. Stephen A. Lovelette
With a courtesy copy to:
Pircher, Nichols & Meeks 1999 Avenue of the Stars 26th Floor
Los Angeles, CA 90067
Attn: Real Estate Notices (EJML)
Notwithstanding the foregoing agreement to provide courtesy copies to
the above-named persons, such copies shall be courtesy copies only, and
failure to provide such courtesy copies shall have absolutely no effect or
entitle Maker to any remedy whatsoever. Any notice duly given to Maker
shall be effective
Page 17
whether or not the courtesy copies were given to the above-named persons.
15. NONRECOURSE. Except as provided hereinafter in this Section
15, Maker (or any direct or indirect partner [or their respective
shareholders] of Maker) shall not be personally liable For the payment of
any sums due hereunder or under the other Loan Documents or the performance
of any obligations of Maker by Maker hereunder or under any of the other
Loan Documents. Without in any way limiting the generality of the
foregoing, no judgment for the repayment of the Principal Indebtedness or
interest thereon or other sums, charges and amounts owed by Maker (or any
direct or indirect partner of Maker [or their respective shareholders]) to
Holder will be enforced against Maker (or any direct or indirect partner
[or their respective shareholders] of Maker) personally or any property of
the Maker (or any direct or indirect partner [or their respective
shareholders] of Maker) other than the Security and any other security
furnished under the Loan Documents in any action to foreclose the Mortgage
or to otherwise realize upon any such security furnished under the Loan
Documents or to collect any amount payable under the Loan Documents.
Notwithstanding the foregoing:
(a) Nothing herein contained shall be construed as
prohibiting Holder from exercising any and all remedies which the Loan
Documents permit or any other remedies available to Holder at law or in
equity, or Holder's rights in the Security,
Page 18
including the right to bring actions or proceedings against Maker and to
enter a judgment against Maker, (but not any direct or indirect partner [or
their respective shareholders] of Maker), so long as the exercise of any
remedy does not extend to execution against or recovery out of any property
of Maker (or any direct or indirect partner [or their respective
shareholders] of Maker) other than the security furnished under the Loan
Documents in any action to foreclose the Mortgage or otherwise to realize
upon any security furnished under the Loan Documents or to collect any
amount payable hereunder, or under any other Loan Document;
(b) Maker (but not any direct or indirect partner [or their
respective shareholders] of Maker) shall be fully and personally liable for
(i) misapplying (i.e., using in a manner other than as required under the
Loan Documents) any condemnation awards or insurance awards attributable to
the Security, but only to the extent of such awards so misapplied, (ii) at
the time of foreclosure or transfer in lieu thereof, failing to turn over
any security deposits attributable to the Security and held by Maker under
the terms of any of the Leases, but only to the extent of such deposits not
turned over, (iii) collecting any rents in advance in violation of any
covenant contained in the Loan Documents, but only to the extent that such
rents so collected in advance are not applied to the Security or the Loan,
(iv) committing fraud, intentional misrepresentation, or waste in
connection with the operation of the Security or the making of the loan
evidenced hereby, but only to the extent of any loss,
Page 19
damage, expense or costs (including reasonable attorneys' fees) incurred by
Holder resulting from such fraud, intentional misrepresentation, or waste,
(v) gross revenues actually collected from the Security, from and after
either (a) nonpayment by Maker of any principal or interest due under this
Note or (b) receipt by Maker of notice from Holder of a nonmonetary or
other monetary default pursuant to the terms of this Note, the Mortgage, or
any of the other Loan Documents, if and only to the extent, such gross
revenues are sufficient to pay any portion of the Principal Indebtedness,
operating and maintenance expenses, insurance premiums, deposits into a
reserve for taxes, insurance, or replacements (if any), or other sums
required by the Loan Documents, and Maker fails to make such payments or
deposits when due, but only to the extent of any funds diverted from such
payments, expenses or deposits.
(c) There shall be no limitation, in any event, on the Maker's
(but not any direct or indirect partner [or their respective shareholders]
of Maker) personal liability under, and the exercise of any of Holder's
rights under the Environmental Indemnification Agreement of even date
herewith from Maker to Holder with regard to the Security except as may be
expressly set forth therein.
(d) There shall be no limitation on the rights of Holder to
proceed against any entity or person whatsoever, including Maker, with
respect to the enforcement of any
Page 20
indemnifications or guarantees of the Indebtedness by such person or entity
or other sums due hereunder or under any of the other Loan Documents or any
part thereof, or any master leases by such person or entity, all of which
may be entered into for the benefit of Holder after the date hereof, except
as may be expressly set forth therein.
In no event shall any trustee, advisor, beneficiary, director,
shareholder, officer, or employee of Maker, or any partner in Maker, or any
partner of a partner of Maker, or of JMB Properties Co., Urban Retail
Properties Co., Institutional Realty Corporation, or JMB Realty
Corporation, or their respective affiliates and subsidiaries (collectively,
"JMB") have any personal liability under the Loan Documents, and with
respect to the foregoing exceptions to non-recourse, Holder's recourse
shall be limited to the assets of the Maker.
For purposes hereof, an entity will be deemed to be an "affiliate" of
if such entity controls, is under common control with, or is controlled by
JMB. As used in this definition of "affiliate", "control" (including its
correlative usages, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of the power to direct or cause
the direction of management or policies, whether through ownership of
voting securities, by contract, or otherwise. For purposes of this
definition, any entity that owns, directly or indirectly, 50% or more of
the securities having ordinary voting
Page 21
power for the election of the board of directors of the corporation, or 50%
or more of the ownership interests of any other entity shall be deemed to
control such corporation or other entity. In addition, with respect to any
general or limited partnership, an entity which is the managing or co-
managing partner of such partnership, or which is a general partner with at
least equal power with all general partners to direct and control the
partnership, shall be deemed to control such partnership.
Additionally, and notwithstanding anything to the contrary contained
herein, no negative capital account of any partner of Maker or of any sub-
tier entities of Maker, or any obligation of any such partner or sub-tier
entity to restore a negative capital account or to contribute capital to
Maker or any such partner or sub-tier entity, shall be deemed to be the
property or an asset of Maker or any such partner or sub-tier entity.
Accordingly, neither Holder nor any of its successors or assigns shall have
any right to collect, enforce, or proceed against or with respect to such
negative capital account or obligation to restore or contribute.
The provisions of this Section 15 will not affect other legal or
equitable remedies available to Holder or Holder's rights in and to the
Security or constitute a waiver by Holder or any such remedies or rights in
and to the Security.
Page 22
16. TIME OF THE ESSENCE. Time is of the essence in this Note and
the other Loan Documents.
17. ATTORNEYS' FEES. Any reference to "attorney fees" in this
document includes but is not limited to both the fees, charges and costs
incurred by Holder through its retention of outside legal counsel and the
allocable fees, costs and charges for services rendered by Holder's in-
house counsel. Any reference to "attorney fees" shall also include but not
be limited to those attorneys or legal fees, costs and charges incurred by
Holder in the collection of any Principal Indebtedness, the enforcement of
any obligations hereunder, the protection of the Security, the foreclosure
of the Mortgage, the sale of the Security, the defense of actions arising
hereunder and the collection, protection or setoff of any claim the Holder
may have in a proceeding under Title 11, United States Code. Attorneys fees
provided for hereunder shall be reasonable in amount and shall accrue
whether or not Holder has provided notice of an Event of Default or of an
intention to exercise its remedies for such Event of Default.
18. WAIVER OF TRIAL OF JURY. TO INDUCE HOLDER TO MAKE THE LOAN
EVIDENCED BY THIS NOTE, MAKER AND HOLDER EACH HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHTS WHICH
MAKER OR HOLDER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL
PROCEEDINGS IN WHICH MAKER AND HOLDER ARE
Page 23
ADVERSE PARTIES AS TO ANY MATTER ARISING OUT OF OR CONCERNING
THE SUBJECT MATTER OF THIS NOTE.
19. SEVERABILITY. No determination by any court or governmental
authority that any provision in this Note is invalid, illegal or
unenforceable in any instance shall affect the validity, legality or
enforceability of (a) any other provision hereof, or (b) such provision in
any circumstance not controlled by such determination. Each such provision
shall be valid and enforceable to the fullest extent allowed by, and shall
be construed wherever possible as being consistent with applicable law.
20. REPLACEMENT OF NOTE. Upon receipt of evidence reasonably
satisfactory to Maker of the loss, theft, destruction or mutilation of this
Note, and in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory to Maker or, in the case
of any such mutilation, upon surrender and cancellation of this Note, Maker
will execute and deliver, in lieu thereof, a replacement Note (the
"Replacement Note"), identical in form and substance to this Note and dated
as of the date of this Note.
(Signatures on next page]
Page 24
IN WITNESS WHEREOF, Maker has duly executed this Note as a sealed
instrument as of the day and year first above written.
MAKER:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-
XIV, an Illinois limited partnership
By: JMB Realty Corporation, a Delaware
corporation, its corporate general partner
By: K. JAY WEAVER
Name: K. Jay Weaver
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND
1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000737291
<NAME> CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 17,937,247
<SECURITIES> 0
<RECEIVABLES> 251,972
<ALLOWANCES> (427,559)
<INVENTORY> 0
<CURRENT-ASSETS> 18,506,202
<PP&E> 112,548,485
<DEPRECIATION> 35,943,191
<TOTAL-ASSETS> 106,171,115
<CURRENT-LIABILITIES> 66,790,772
<BONDS> 32,500,000
<COMMON> 0
0
0
<OTHER-SE> (172,381,576)
<TOTAL-LIABILITY-AND-EQUITY> 106,171,115
<SALES> 13,206,557
<TOTAL-REVENUES> 14,467,617
<CGS> 0
<TOTAL-COSTS> 10,133,005
<OTHER-EXPENSES> 1,898,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,855,956
<INCOME-PRETAX> (48,521,537)
<INCOME-TAX> (48,521,537)
<INCOME-CONTINUING> (48,521,537)
<DISCONTINUED> 14,423,043
<EXTRAORDINARY> 1,382,531
<CHANGES> 0
<NET-INCOME> (1,735,731)
<EPS-PRIMARY> (2.59)
<EPS-DILUTED> (2.59)
</TABLE>
