SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year
ended December 31, 1997 Commission file no. 0-15966
JMB INCOME PROPERTIES, LTD. - XI
(Exact name of registrant as specified in its charter)
Illinois 36-3254043
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ X ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings. . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote
of Security Holders. . . . . . . . . . . . . 6
PART II
Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . 6
Item 6. Selected Financial Data. . . . . . . . . . . 7
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 11
Item 7A. Quantitative and Qualitative
Disclosures about Market Risk. . . . . . . . 15
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 16
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 62
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 62
Item 11. Executive Compensation . . . . . . . . . . . 65
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 66
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 67
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 67
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 70
i
<PAGE>
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Financial Statements
contained in this report. Capitalized terms used herein, but not defined,
have the same meanings as used in the Notes.
The registrant, JMB Income Properties, Ltd. - XI (the "Partnership"),
is a limited partnership formed in 1983 and currently governed under the
Revised Uniform Limited Partnership Act of the State of Illinois to invest
in improved income-producing commercial and residential real property. The
Partnership sold $173,406,000 in limited partnership interests (the
"Interests") commencing on July 11, 1984, pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933 (Registration No.
2-90503). A total of 173,406 Interests were sold to the public at $1,000
per Interest. The offering closed on November 30, 1984. No Investor has
made any additional capital contribution after such date. The Investors in
the Partnership share in the benefits of ownership of the Partnership's
real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are or have been held by fee title and/or through joint
venture partnership interests. The Partnership's real estate investments
are located throughout the nation and it has no real estate investments
located outside the United States. A presentation of information about
industry segments, geographic regions, raw materials or seasonality is not
applicable and would not be material to an understanding of the
Partnership's business taken as a whole. Pursuant to the Partnership
agreement, the Partnership is required to terminate no later than
October 31, 2034. The Partnership is self-liquidating in nature. At sale
of a particular property, the net proceeds, if any, are generally
distributed or reinvested in existing properties rather than invested in
acquiring additional properties. As discussed further in Item 7, the
Partnership currently expects to conduct an orderly liquidation of its
remaining investment portfolio as quickly as practicable and to wind up its
affairs not later than December 31, 1999, barring any unforeseen economic
developments.
The Partnership has made the real property investments set forth in
the following table:
<PAGE>
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1997,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (d) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. Riverside Square
Mall
Hackensack,
New Jersey. . . . . 341,000 10-19-83 15% fee ownership of land
sq.ft. and improvements (b)(d)(e)
g.l.a.
2. Bank of Delaware
Office Building
Wilmington,
Delaware. . . . . . 314,000 12-14-84 11-15-94 fee ownership of land
sq.ft. and improvements
n.r.a.
3. Genesee Valley
Center
Flint, Michigan . . 358,000 12-21-84 6-29-90 fee ownership of land
sq.ft. and improvements
g.l.a.
4. Park Center
Financial Plaza
San Jose,
California. . . . . 408,000 06-20-85 26% fee ownership of land
sq.ft. and improvements
n.r.a. (through a joint
venture partnership)
(c)(g)(h)
5. Royal Executive
Park-II
Rye Brook,
New York. . . . . . 270,000 02-12-87 12-19-97 fee ownership of land
sq.ft. and improvements
n.r.a. (through a joint
venture partnership)
(c)(f)
<PAGE>
<FN>
- -----------------------
(a) The computation of this percentage for properties held at
December 31, 1997 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.
(b) Reference is made to the Notes and Schedule III for the current
outstanding principal balance and a description of the long-term mortgage
indebtedness secured by the Partnership's real property investments.
(c) Reference is made to the Notes for a description of the joint
venture partnership through which the Partnership has made this real
property investment.
(d) Reference is made to Item 8 - Schedule III filed with this annual
report for further information concerning real estate taxes and
depreciation.
(e) Reference is made to Item 6 - Selected Financial Data for
additional operating and lease expiration data concerning this investment
property.
(f) Reference is made to the Notes for a description of the sale of
this investment property.
(g) In March 1996, the joint venture sold the 190 San Fernando
building, one of the buildings in the Park Center Financial Plaza office
complex comprising approximately 5% of the total occupied space, to an
independent third party, and transferred title to one of the parking garages
to the City of San Jose. The original invested capital percentage reflected
for this property in the table has not been adjusted for such transactions.
Reference is made to the Notes for a description of such transactions.
(h) The joint venture sold the remaining buildings in the Park Center
Financial Plaza office complex on February 24, 1998. Reference is made to
the Notes for a description of the sale.
</TABLE>
<PAGE>
The Partnership's remaining real property investment is subject to
competition from similar types of properties (including, in certain areas,
properties owned by affiliates of the General Partners) in the respective
vicinities in which it is located. Such competition is generally for the
retention of existing tenants. Additionally, the Partnership is in
competition for new tenants in its market where significant vacancies are
present. Reference is made to Item 7 below for a discussion of competitive
conditions and future renovation and capital improvement plans of the
Partnership and its investment property. Approximate occupancy levels for
the properties owned in 1997 are set forth in the table in Item 2 below to
which reference is hereby made. The Partnership maintains the suitability
and competitiveness of its property in its market primarily on the basis of
tenant mix, property aesthetics, effective rents, tenant allowances and
service provided to tenants. In the opinion of the Managing General Partner
of the Partnership, the remaining investment property held at December 31,
1997 is adequately insured. Although there is earthquake insurance coverage
for a portion of the value of the Partnership's investment property, the
Managing General Partner does not believe that such coverage for the entire
replacement cost of the investment property is available on economic terms.
Reference is made to the Notes for a schedule of minimum lease payments
to be received in each of the next five years, and in the aggregate
thereafter, under leases in effect at the Partnership's properties as of
December 31, 1997.
On December 19, 1997, the Partnership, through its joint venture, sold
the Royal Executive Park II office complex located in Rye Brook, New York.
Reference is made to the Notes for a further description of such
transaction.
On February 24, 1998, the Partnership, through its joint venture, sold
the remaining buildings in the Park Center Financial Plaza office complex
located in San Jose, California. Reference is made to the Notes for a
further description of such transaction.
The Partnership has no employees other than personnel performing on-
site duties at certain of the Partnership's properties, none of whom are
officers or directors of the Managing General Partner of the Partnership.
The terms of transactions between the Partnership, the General Partners
and their affiliates of the Partnership are set forth in Item 11 below to
which reference is hereby made for a description of such terms and
transactions.
ITEM 2. PROPERTIES
The Partnership owns or owned directly or through joint venture
partnerships the properties or interests in the properties referred to under
Item 1 above to which reference is hereby made for a description of said
properties.
The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1997 and 1996 for the Partnership's investment properties owned during
1997:
<PAGE>
<TABLE>
<CAPTION>
1996 1997
------------------------- -------------------------
Principal At At At At At At At At
Business 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> <C>
1. Park Center
Financial Plaza
San Jose,
California (1). . . . . . Accounting/
Telecommunications 85% 85% 87% 85% 86% 87% 87% 90%
2. Riverside Square Mall
Hackensack,
New Jersey. . . . . . . . Retail 77% 88% 88% 91% 92% 92% 93% 93%
3. Royal Executive
Park II
Rye Brook,
New York. . . . . . . . . Communications 97% 97% 98% 98% 98% 99% 99% N/A
<FN>
- --------------
Reference is made to Item 6, Item 7 and to the Notes for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.
An "N/A" indicates that the property was sold and was not owned by the Partnership at the end of the quarter.
(1) Reference is made to the Notes for a description of the February 24, 1998 sale of this investment
property.
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
1997 or 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1997, there were 13,428 record holders of Interests
of the Partnership. There is no public market for Interests and it is not
anticipated that a public market for Interests will develop. Upon request,
the Managing General Partner may provide information relating to a
prospective transfer of Interests to an investor desiring to transfer his
Interests. The price to be paid for the Interests, as well as any other
economic aspects of the transaction, will be subject to negotiation by the
investor. There are certain conditions and restrictions on the transfer of
Interests, including, among other things, the requirement that the
substitution of a transferee of Interests as a Limited Partner of the
Partnership be subject to the written consent of the Managing General
Partner, which, may be granted or withheld in its sole and absolute
discretion. The rights of a transferee of Interests who does not become a
substituted Limited Partner will be limited to the rights to receive his
share of profits or losses and cash distributions from the Partnership, and
such transferee will not be entitled to vote such Interests or have other
rights of a Limited Partner. No transfer will be effective until the first
day of the next succeeding calendar quarter after the requisite transfer
form, satisfactory to the Managing General Partner, has been received by
the Managing General Partner. The transferee, consequently, will not be
entitled to receive any cash distributions or any allocable share of
profits or losses for tax purposes until such succeeding calendar quarter.
Profits or losses from operations of the Partnership for a calendar year in
which a transfer occurs will be allocated between the transferor and the
transferee based upon the number of quarterly periods in which each was
recognized as the holder of Interests, without regard to the results of
Partnership's operations during particular quarterly periods and without
regard to whether cash distributions were made to the transferor or
transferee. Profits or losses arising from the sale or other disposition
of Partnership properties will be allocated to the recognized holder of the
Interests as of the last day of the quarter in which the Partnership
recognized such profits or losses. Cash distributions to a holder of
Interests arising from the sale or other disposition of Partnership
properties will be distributed to the recognized holder of the Interests as
of the last day of the quarterly period with respect to which distribution
is made.
Reference is made to Item 6 below for a discussion of cash distribu-
tions made to the Investors.
Reference is made to Item 7 for a discussion of unsolicited tender
offers received from unaffiliated third parties.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
YEARS ENDED DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . $ 14,218,708 13,403,472 12,915,285 14,048,836 14,618,038
============ =========== =========== =========== ===========
Earnings (loss) before
gain on sale or
disposition of invest-
ment property . . . . . $ 5,750,839 1,810,139 1,856,294 2,652,603 (2,584,139)
Partnership's share of
gain on sale of invest-
ment properties of
unconsolidated venture. 13,349,139 1,412,610 -- -- --
Gain on disposition of
investment property . . -- -- -- 447,650 --
------------ ----------- ----------- ----------- -----------
Earnings (loss) before
extraordinary item. . . 19,099,978 3,222,749 1,856,294 3,100,253 (2,584,139)
Extraordinary item. . . . -- -- -- (2,206,791) --
------------ ------------ ----------- ----------- -----------
Net earnings (loss) . . . $ 19,099,978 3,222,749 1,856,294 893,462 (2,584,139)
============ ============ =========== =========== ===========
Net earnings (loss)
per Interest (b):
Earnings (loss)
before gain on
sale or disposition
of investment
property. . . . . . $ 31.84 10.02 10.28 14.60 (15.65)
Partnership's share of
gain on sale of
investment properties
of unconsolidated
venture . . . . . . 76.21 8.06 -- -- --
Gain on disposition
of investment
property. . . . . . -- -- -- 2.56 --
Extraordinary item. . -- -- -- (12.22) --
------------ ------------ ----------- ----------- -----------
Net earnings (loss) . . . $ 108.05 18.08 10.28 4.94 (15.65)
============ ============ =========== =========== ===========
<PAGE>
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- -----------
Total assets. . . . . . . $118,582,025 102,106,160 106,800,004 106,201,665 88,391,802
Long-term debt. . . . . . $ 33,820,205 34,404,477 34,942,100 35,436,797 11,297,315
Cash distributions
per Interest (c). . . . $ 12.00 15.00 12.00 12.00 12.00
============ ============ =========== =========== ===========
<FN>
- -------------
(a) The above selected financial data should be read in conjunction with the financial statements and the
related notes appearing elsewhere in this annual report.
(b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of the
period (173,411).
(c) Cash distributions from the Partnership are generally not equal to Partnership income (loss) for
financial reporting or Federal income tax purposes. Each Partner's taxable income (or loss) from the Partnership
in each year is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to
the cash generated or distributed by the Partnership. Accordingly, cash distributions to the Limited Partners
since the inception of the Partnership have not resulted in taxable income to such Limited Partners and have
therefore represented a return of capital.
</TABLE>
<PAGE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1997
<CAPTION>
Property
- --------
Riverside Square
Mall a) The gross leasable area ("GLA") occupancy rate and average base rent per square foot as
of December 31 for each of the last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1993 . . . . . 81% $31.26
1994 . . . . . 81% 18.10 (2)
1995 . . . . . 80% 18.69
1996 . . . . . 91% 17.15
1997 . . . . . 93% 19.35
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
(2) Average base rent per square foot decreased in 1994 due to the Saks Fifth Avenue
space (acquired in 1994) being included in the gross leasable area beginning in 1994.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Saks Fifth Avenue 107,000 $90,000 6/2012 N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Riverside Square Mall:
Annualized Percent of
Number of Approx. Total Base Rent Total 1997
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 5 16,400 $526,600 8.5%
1999 4 12,000 403,500 6.6%
2000 5 12,200 412,700 6.7%
2001 4 15,200 405,600 6.6%
2002 1 2,300 87,100 1.4%
2003 7 25,700 823,400 13.4%
2004 16 22,700 1,017,100 16.5%
2005 8 22,700 766,200 12.4%
2006 9 24,400 645,700 10.5%
2007 1 1,200 6,600 0.1%
<FN>
(1) Excludes leases that expire in 1998 for which renewal leases or leases with
replacement tenants have been executed as of January 9, 1998.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of interests as described in Item
1, the Partnership had approximately $156,493,000 after deducting selling
expenses and other offering costs, with which to make investments in
commercial real property, to pay legal fees and other costs (including
acquisition fees) related to such investments and for working capital. A
portion of such proceeds was utilized to acquire the properties described
in Item 1 above.
During 1996, 1997 and early 1998, some of the Limited Partners in the
Partnership received from unaffiliated third parties unsolicited tender
offers to purchase up to 4.9% of the Interests in the Partnership at
between $130 and $400 per Interest. The Partnership recommended against
acceptance of these offers on the basis that, among other things, the offer
prices were inadequate. All of such offers expired. As of the date of
this report, the Partnership is aware that 5.46% of the Interests have been
purchased by such unaffiliated third parties either pursuant to such tender
offers or through negotiated purchases. In addition, it is possible that
other offers for Interests may be made by unaffiliated third parties in the
future, although there is no assurance that any other third party will
commence an offer for Interests, the terms of any such offer or whether any
such offer, if made, will be consummated, amended or withdrawn. The board
of directors of JMB Realty Corporation ("JMB") the managing general partner
of the Partnership, has established a special committee (the "Special
Committee") consisting of certain directors of JMB to deal with all matters
relating to tender offers for Interests in the Partnership, including any
and all responses to such tender offers. The Special Committee has
retained independent counsel to advise it in connection with any potential
tender offers for Interests and has retained Lehman Brothers Inc. as
financial advisor to assist the Special Committee in evaluating and
responding to these and any additional potential tender offers for
Interests.
At December 31, 1997, the Partnership had cash and cash equivalents of
approximately $42,298,000. These funds include retained cash proceeds of
approximately $1,800,000 from the sale in 1996 of the 190 San Fernando
Building and one of the parking structures at San Jose, and temporarily
retained cash proceeds of approximately $28,448,000 from the sale in 1997
of the Royal Executive Park II office complex. Such remaining funds may be
utilized for distributions to partners, potential obligations related to
representations and warranties given pursuant to the sale of the Royal
Executive Park II office complex, and for working capital requirements
including operating deficits, costs of re-leasing vacant space, and certain
capital improvements. Additionally, funds may be utilized to fund a
potential theatre expansion at the Riverside Square Mall investment
property, which is in the preliminary stages of investigation. The
Partnership's wholly-owned property has currently budgeted in 1998
approximately $2,155,000 for tenant improvements and other capital
expenditures. Actual amounts expended in 1998 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 is expected to
be through net cash generated by the Riverside Square Mall and through its
sale and/or refinancing. In such regard, reference is made to the
Partnership's property specific discussions below and also to the
Partnership's disclosure of certain property lease expirations in Item 6.
Commencing in 1996, the Partnership changed from a quarterly
distribution of cash flow from operations to a semi-annual distribution in
May and November of each year. In May 1997, the Partnership paid an
operating distribution of $1,040,466 ($6 per Interest) for the first and
second quarters of 1997 to the Limited Partners. In November 1997, the
Partnership paid an operating distribution of $1,040,466 ($6 per Interest)
<PAGE>
for the third and fourth quarters of 1997 to the Limited Partners. In
February 1998, the Partnership made a distribution of sale proceeds related
to the sale of the Royal Executive Park II office complex of $28,439,404
($164 per Interest) and paid an operating distribution of $2,774,576 ($16
per Interest), to the Limited Partners. The General Partners have been
deferring receipt of distributions in accordance with the subordination
requirements of the Partnership Agreement as discussed in the Notes. The
Partnership's and its ventures' mortgage obligations are separate non-
recourse loans secured individually by the investment properties and are
not obligations of other investments. The Partnership and its ventures are
not personally liable for the payment of the mortgage indebtedness.
SAN JOSE
During August 1994, JMB/San Jose Associates ("San Jose") received
notification from the Redevelopment Agency of the City of San Jose of its
offer to purchase one of the parking garage structures in the office
building complex, for an approved Agency project, for $4,090,000. The
price offered was deemed by the Agency to be just compensation in
compliance with applicable laws governing eminent domain. During 1995, the
Agency filed a condemnation action in court to proceed to obtain the garage
pursuant to such laws. In late 1995, San Jose and the Agency reached a
mutually acceptable agreement on the transfer of the garage. In March
1996, the sale was consummated. Reference is made to the Notes for a
description of such sale.
During March 1996, San Jose sold the 190 San Fernando Building and a
parking garage structure to an independent third party. The sale price of
the building was $1,753,000 (before selling costs), paid in cash at
closing. Reference is made to the Notes for a description of such sale.
The aggregate net sale proceeds to San Jose from both sales was
approximately $5,800,000 after selling costs and prorations, of which the
Partnership's share was approximately $2,900,000.
Due to the proposed sales, the San Jose venture had classified the
parking garage structures and the 190 San Fernando Building as held for
sale or disposition as of January 1, 1996. The remaining assets were
classified as held for sale as of December 31, 1996, and have, therefore,
not been subject to continued depreciation beyond such date.
As previously reported, in 1996 San Jose completed a voluntary seismic
upgrade to the 130 Park Center Financial Plaza building and the parking
garage below the 100-130 buildings. The cost of the structural upgrade was
approximately $860,000 (of which the Partnership's share was approximately
$430,000).
On February 24, 1998, San Jose sold the remaining assets of the Park
Center Financial Plaza office complex to an independent third party for
$76,195,000 (before selling costs). San Jose received approximately
$49,400,000 of net sale proceeds at closing (after the repayment by San
Jose of the mortgage loans secured by the 170 Almaden, 150 Almaden and 185
Park Avenue buildings with a balance of approximately $23,300,000, loan
prepayment premiums of approximately $2,422,000 and closing costs), of
which the Partnership's share was approximately $24,700,000. Reference is
made to the Notes for a further description of such sale.
RIVERSIDE SQUARE MALL
As previously disclosed, the Partnership completed a renovation of the
Riverside Square Mall and a restoration of the parking deck at a total cost
of approximately $23,000,000 which was incurred in 1995 and 1996. In
addition, the Partnership is continuing to add new tenants in order to
remerchandise the center. In connection with the renovation, the
Partnership, in early 1994, signed 15-year operating covenant extensions
with both Saks and Bloomingdale's, the latter of which owns its own store.
In return for the additional 15-year commitment to the center, the
Partnership reimbursed Saks in 1994 for its store renovation in the amount
of $6,100,000; and in August 1995, the Partnership escrowed $5,000,000 (all
<PAGE>
of which had been released as of December 31, 1996) for Bloomingdale's
store renovation, which was fully completed in September 1997. Interest
earned on the escrowed funds was remitted to the Partnership in 1996 upon
termination of the escrow account. In connection with the payment to Saks,
the Partnership also acquired title to the Saks building which had
previously been owned by Saks.
During the third quarter of 1994, the Partnership finalized a
refinancing of the existing mortgage loan with a new loan in the amount of
$36,000,000. The refinancing resulted in net proceeds of approximately
$22,300,000 (after retirement of the previous mortgage loan with an
outstanding balance of approximately $13,000,000, and payment of a
prepayment penalty of approximately $650,000 as discussed in the Notes).
Of such proceeds, approximately $11,200,000 was escrowed by the lender
pursuant to the loan agreement to fund certain costs of the renovation,
restoration and remerchandising as discussed above. The full amount,
including interest earned, was released as of December 31, 1996. The
remaining $11,100,000 of loan proceeds were used to replenish the
Partnership's working capital reserve for amounts paid to or escrowed on
behalf of Saks and Bloomingdale's for their store renovations as discussed
above.
During the first quarter of 1996, the Partnership executed a new lease
agreement with Pottery Barn for the space previously occupied by Conran's,
a tenant occupying approximately 28,000 square feet or 12% of the building
that had filed for bankruptcy in 1994. The Pottery Barn lease, with a term
of 15 years, required expenditures in 1996 for tenant allowances of
approximately $2,250,000, which was funded through the tenant improvement
escrow described above.
ROYAL EXECUTIVE PARK II
On December 19, 1997, the Partnership, through its Royal Executive
joint venture, sold the land and related improvements of the Royal
Executive Park II office complex located in Rye Brook, New York for
$36,000,000. The joint venture received approximately $35,446,000 of net
sale proceeds at closing, of which the Partnership's share was
approximately $28,448,000. Reference is made to the Notes for a further
description of such transaction.
GENERAL
The Partnership continues to conserve its working capital. All
expenditures are carefully analyzed and certain capital projects are
deferred when appropriate. In an effort to reduce partnership operating
expenses, the Partnership elected to make semi-annual rather than quarterly
distributions of available operating cash flow commencing with the 1996
distributions. By conserving working capital, the Partnership will be in a
better position to meet the future needs of its remaining property since
the availability of satisfactory outside sources of capital may be limited
given current debt levels. The Partnership has held its remaining
investment property longer than originally anticipated in an effort to
maximize the return to the Limited Partners. However, after reviewing the
remaining property and the marketplace in which it operates, the General
Partners of the Partnership expect to be able to conduct an orderly
liquidation of its remaining investment property as quickly as practicable.
Therefore, the affairs of the Partnership are expected to be wound up no
later than December 31, 1999 (sooner if the property is sold in the near-
term), barring unforeseen economic developments.
<PAGE>
RESULTS OF OPERATIONS
The increase in cash and cash equivalents and the related decrease in
the Partnership's investment in unconsolidated ventures at December 31,
1997 as compared to December 31, 1996 is primarily due to the sale in 1997
of the Royal Executive Park II office complex as more fully discussed in
the Notes.
The increase in rents and other receivables as of December 31, 1997 as
compared to December 31, 1996 is primarily due to the timing of payment of
rentals at the Riverside Square Mall investment property.
The increase in escrow deposits as of December 31, 1997 as compared to
December 31, 1996 is primarily due to an overfunding of the real estate tax
escrow based on the lender's funding requirements, at the Riverside Square
Mall investment property. It is anticipated that such overfunded balance
on the escrow will be reduced by future reduced monthly escrow
contributions.
The increase in rental income for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 and December 31, 1996 as
compared to December 31, 1995 is primarily due to an increase in base
rentals as a result of an increase in tenant occupancies in 1997 and 1996
at the Riverside Square Mall investment property.
The decrease in interest income for the years ended December 31, 1997
and 1996 as compared to the year ended December 31, 1995 is primarily due
to the utilization of escrowed cash, previously invested in interest
bearing instruments, for the renovation and remerchandising at the
Riverside Square Mall as discussed above.
The decrease in depreciation expense for the year ended December 31,
1997 as compared to the year ended December 31, 1996 is primarily due to
the Riverside Square Mall investment property being identified as held for
sale or disposition as of September 30, 1997, and therefore, no longer
subject to depreciation beyond such date. The increase in depreciation
expense for the year ended December 31, 1996 as compared to the year ended
December 31, 1995 is primarily due to the increases in fixed assets due to
the renovation at the Riverside Square Mall as discussed above and in the
Notes.
The decrease in property operating expenses for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 is
primarily due to the decrease in snow removal and other administrative
expenses and certain maintenance and repair projects (partially recoverable
from tenants) at the Riverside Square Mall. However, the decrease is
partially offset by an increase in certain other property operating
expenses as a result of higher tenant occupancies in 1997 at the Riverside
Square Mall. The increase in property operating expenses for the year
ended December 31, 1996 as compared to the year ended December 31, 1995 is
primarily due to an increase in real estate taxes (partially recoverable
from tenants) of approximately $470,000 due to an increase in the assessed
value of the Riverside Square Mall property as a result of the renovation
as discussed above. The increase is also due to the increase in snow
removal expenses (partially recoverable from tenants) of approximately
$280,000 at the Riverside Square Mall.
The decrease in professional services for the year ended December 31,
1997 as compared to the year ended December 31, 1996 is primarily due to
expenses incurred in 1996 in connection with tender offer matters as
discussed above.
The increase in amortization of deferred expenses for the years ended
December 31, 1997 and 1996 as compared to the year ended December 31, 1995
is primarily due to the commencement in the fourth quarter of 1995 of
amortization of $5,000,000 of deferred leasing costs paid to Bloomingdales
for its renovation at the Riverside Square Mall.
<PAGE>
The increase in general and administrative expenses for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 and the
decrease for the year ended December 31, 1996 as compared to the year ended
December 31, 1995 is primarily due to the timing of the incurrence of
reimbursable costs to affiliates of the General Partners.
The increase in the Partnership's share of operations of
unconsolidated ventures for the year ended December 31, 1997 as compared to
the year ended December 31, 1996 is primarily due to such unconsolidated
ventures being identified as held for sale or disposition as of December
31, 1996, and therefore, no longer subject to depreciation beyond such
date. The increase in the Partnership's share of operations of
unconsolidated ventures for the year ended December 31, 1996 as compared to
the year ended December 31, 1995 is primarily due to the receipt of a lease
termination fee of approximately $210,000 in May 1996 at the Royal
Executive Park II investment property, as well as a cessation of mortgage
interest expense at the 100-130 Park Center Financial Plaza investment
property, due to repayment of the mortgage loans in 1995.
The Partnership's share of gain on sale of investment properties of
unconsolidated ventures of $13,349,139 in 1997 is due to the gain
recognized on the sale of the Royal Executive Park II office complex. The
Partnership's share of gain on sale of investment properties of
unconsolidated ventures of $1,412,610 in 1996 is due to the gain recognized
on the sale of the 190 San Fernando Building and one of the parking
structures at the Park Center Financial Plaza investment property.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
Inflation is not expected to significantly impact future operations
due to the expected liquidation of the Partnership by 1999. However, to
the extent that inflation in future periods would have an adverse impact on
property operating expenses, the effect would generally be offset by
amounts recovered from tenants as many of the long-term leases at the
Partnership's remaining commercial property have escalation clauses
covering increases in the cost of operating and maintaining the property as
well as real estate taxes. Therefore, there should be little effect from
inflation on operating earnings if the property remains substantially
occupied. In addition, substantially all of the leases at the Partner-
ship's shopping center investment contain provisions which entitle the
Partnership to participate in gross receipts of tenants above fixed minimum
amounts.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1997 and 1996
Statements of Operations, years ended December 31, 1997, 1996 and 1995
Statements of Partners' Capital Accounts (Deficit), years ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows, years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
SCHEDULE
--------
Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1997 and 1996
Statements of Operations, years ended December 31, 1997, 1996 and 1995
Statements of Partners' Capital Accounts, years ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows, years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
SCHEDULES NOT FILED:
All schedules have been omitted as the required information is
inapplicable or the information is presented in the financial statements or
related notes.
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1997 and 1996
Statements of Operations, years ended December 31, 1997, 1996 and 1995
Statements of Partners' Capital Accounts, years ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows, years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
SCHEDULE
--------
Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
JMB INCOME PROPERTIES, LTD. - XI:
We have audited the financial statements of JMB Income Properties,
Ltd. - XI (a limited partnership) as listed in the accompanying index. In
connection with our audits of the financial statements, we also have
audited the financial statement schedule as listed in the accompanying
index. These financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of JMB Income
Properties, Ltd. - XI at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in the Notes to the financial statements, in 1996, the
Partnership changed its method of accounting for long-lived assets and
long-lived assets to be disposed of to conform with Statement of Financial
Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1998
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 42,298,264 11,548,195
Rents and other receivables, net of allowance for
doubtful accounts of $210,024 in 1997 and
$642,633 in 1996. . . . . . . . . . . . . . . . . . . . . . . . . 2,552,231 2,010,246
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 88,948 91,506
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,171,271 786,706
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . 46,110,714 14,436,653
------------ -----------
Investment property - Schedule III:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 3,796,561
Building and improvements . . . . . . . . . . . . . . . . . . . . . -- 75,476,781
------------ -----------
-- 79,273,342
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . -- 17,321,842
------------ -----------
Property held for investment, net of accumulated
depreciation. . . . . . . . . . . . . . . . . . . . . . . . -- 61,951,500
Property held for sale or disposition . . . . . . . . . . . . . . . . 60,929,336 --
------------ -----------
Total investment properties . . . . . . . . . . . . . . . . . 60,929,336 61,951,500
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 6,711,162 20,367,302
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 4,830,813 5,350,705
------------ -----------
$118,582,025 102,106,160
============ ===========
<PAGE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICIT)
----------------------------------------------------
1997 1996
------------ -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 584,273 537,623
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 782,274 774,790
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 243,502 243,139
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . 1,610,049 1,555,552
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 88,133 101,539
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 33,820,205 34,404,477
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 35,518,387 36,061,568
Partners' capital accounts (deficit):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . 5,794,671 5,431,146
Cumulative cash distributions . . . . . . . . . . . . . . . . . (6,631,429) (6,631,429)
------------ -----------
(835,758) (1,199,283)
------------ -----------
Limited partners (173,411 interests):
Capital contributions, net of offering costs. . . . . . . . . . 156,493,238 156,493,238
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . 49,295,508 30,559,055
Cumulative cash distributions . . . . . . . . . . . . . . . . . (121,889,350) (119,808,418)
------------ -----------
83,899,396 67,243,875
------------ -----------
Total partners' capital accounts. . . . . . . . . . . . . . . 83,063,638 66,044,592
------------ -----------
$118,582,025 102,106,160
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $13,500,646 12,711,885 11,822,997
Interest income . . . . . . . . . . . . . . . . . 718,062 691,587 1,092,288
----------- ----------- -----------
14,218,708 13,403,472 12,915,285
----------- ----------- -----------
Expenses:
Mortgage and other interest . . . . . . . . . . . 2,897,399 2,936,882 2,976,655
Depreciation. . . . . . . . . . . . . . . . . . . 1,892,003 2,394,772 1,975,902
Property operating expenses . . . . . . . . . . . 7,851,075 8,835,327 8,110,731
Professional services . . . . . . . . . . . . . . 190,646 262,322 277,837
Amortization of deferred expenses . . . . . . . . 519,892 458,744 191,592
General and administrative. . . . . . . . . . . . 440,946 308,471 399,979
----------- ----------- -----------
13,791,961 15,196,518 13,932,696
----------- ----------- -----------
426,747 (1,793,046) (1,017,411)
Partnership's share of operations of
unconsolidated ventures . . . . . . . . . . . . . 5,324,092 3,603,185 2,873,705
----------- ----------- -----------
Earnings (loss) before gain on sale or
disposition of investment property. . . . 5,750,839 1,810,139 1,856,294
Partnership's share of gains on sale of investment
properties of unconsolidated ventures . . . . . . 13,349,139 1,412,610 --
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . . . $19,099,978 3,222,749 1,856,294
=========== =========== ===========
<PAGE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS - CONTINUED
1997 1996 1995
------------ ------------ ------------
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gain on sale or
disposition of investment property. . . $ 31.84 10.02 10.28
Partnership's share of gains on sale
of investment properties of
unconsolidated ventures . . . . . . . . 76.21 8.06 --
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . $ 108.05 18.08 10.28
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
--------------------------------------------------- --------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficit)
at Decem-
ber 31,
1994 . . . . $1,000 5,270,362 (6,631,429) (1,360,067) 156,493,238 25,640,796 (115,126,321) 67,007,713
Cash distri-
butions
($12 per
limited
partnership
interest). . -- -- -- -- -- -- (2,080,932) (2,080,932)
Net earnings
(loss) . . . -- 74,252 -- 74,252 -- 1,782,042 -- 1,782,042
------ ---------- ---------- ---------- ----------- ----------- ------------ -----------
Balance
(deficit)
at Decem-
ber 31,
1995 . . . . 1,000 5,344,614 (6,631,429) (1,285,815) 156,493,238 27,422,838 (117,207,253) 66,708,823
Cash distri-
butions
($15 per
limited
partnership
interest). . -- -- -- -- -- -- (2,601,165) (2,601,165)
Net earnings
(loss) . . . -- 86,532 -- 86,532 -- 3,136,217 -- 3,136,217
------ ---------- ---------- ---------- ----------- ----------- ------------ -----------
<PAGE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICIT) - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS
--------------------------------------------------- --------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
Balance
(deficit)
at Decem-
ber 31,
1996 . . . . 1,000 5,431,146 (6,631,429) (1,199,283) 156,493,238 30,559,055 (119,808,418) 67,243,875
Cash distri-
butions
($12 per
limited
partnership
interest). . -- -- -- -- -- -- (2,080,932) (2,080,932)
Net earnings
(loss) . . . -- 363,525 -- 363,525 -- 18,736,453 -- 18,736,453
------ ---------- ---------- ---------- ----------- ----------- ------------ -----------
Balance
(deficit)
at Decem-
ber 31,
1997 . . . . $1,000 5,794,671 (6,631,429) (835,758) 156,493,238 49,295,508 (121,889,350) 83,899,396
====== ========== ========== ========== =========== =========== ============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $19,099,978 3,222,749 1,856,294
Items not requiring (providing) cash or
cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . 1,892,003 2,394,772 1,975,902
Amortization of deferred expenses . . . . . . . 519,892 458,744 191,592
Partnership's share of operations of uncon-
solidated ventures, net of distributions. . . (5,324,092) 944,935 1,008,416
Partnership's share of gain on sale of invest-
ment properties of unconsolidated ventures. . (13,349,139) (1,412,610) --
Changes in:
Rents and other receivables . . . . . . . . . . (541,985) 308,757 (334,608)
Prepaid expenses. . . . . . . . . . . . . . . . 2,558 (11,885) --
Escrow deposits . . . . . . . . . . . . . . . . (384,565) (64,859) (820,114)
Accounts payable. . . . . . . . . . . . . . . . 7,484 272,820 16,506
Accrued interest payable. . . . . . . . . . . . 363 (3,442) (3,167)
Tenant security deposits. . . . . . . . . . . . (13,406) 17,408 4,249
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . 1,909,091 6,127,389 3,895,070
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of
short-term investments. . . . . . . . . . . . . -- -- 7,530,660
Net escrow draws for construction
related costs . . . . . . . . . . . . . . . . . -- 4,949,435 2,223,117
Additions to investment properties. . . . . . . . (869,839) (5,484,550) (11,813,978)
Partnership's distributions from
unconsolidated ventures . . . . . . . . . . . . 32,329,371 3,588,000 1,250,000
Partnership's contributions to
unconsolidated ventures . . . . . . . . . . . . -- -- (1,233,436)
Payment of deferred expenses. . . . . . . . . . . -- (59,731) (577,118)
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . 31,459,532 2,993,154 (2,620,755)
----------- ----------- -----------
<PAGE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows from financing activities:
Bank overdraft. . . . . . . . . . . . . . . . . . -- -- (415,003)
Principal payments on long-term debt. . . . . . . (537,622) (494,697) (455,199)
Distributions to limited partners . . . . . . . . (2,080,932) (2,601,165) (2,080,932)
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . (2,618,554) (3,095,862) (2,951,134)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . 30,750,069 6,024,681 (1,676,819)
Cash and cash equivalents,
beginning of year . . . . . . . . . . . 11,548,195 5,523,514 7,200,333
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . $42,298,264 11,548,195 5,523,514
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . $ 2,897,036 2,940,324 2,979,823
=========== =========== ===========
Non-cash investing and financing activities:
Increase in deferred costs due to escrow
of funds for payment of inducement . . . . . . $ -- -- 5,000,000
Net increase in other liabilities. . . . . . . . -- -- (4,434,509)
----------- ----------- ----------
Payments of inducement from
escrowed funds. . . . . . . . . . . . . $ -- -- 565,491
=========== =========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (either directly or through joint ventures)
investments in United States real estate. Business activities consist of
rentals to a variety of commercial and retail companies, and the ultimate
sale or disposition of such real estate. The Partnership currently expects
to conduct an orderly liquidation of its remaining investment portfolio and
wind up its affairs not later than December 31, 1999, barring unforeseen
economic developments.
The equity method of accounting has been applied in the accompanying
financial statements with respect to the Partnership's interest in Royal
Executive Park II ("Royal Executive") (which investment was sold in
December 1997) and JMB/San Jose Associates ("San Jose"). Accordingly, the
accompanying financial statements do not include the accounts of Royal
Executive and San Jose.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying 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"). Such
GAAP adjustments are not recorded on the records of the Partnership. The
net effect of these items for the years ended December 31, 1997 and 1996 is
summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
1997 1996
------------------------------ ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $118,582,025 130,569,209 102,106,160 122,747,292
Partners' capital accounts
(deficit):
General partners. . . . . . . . (835,758) (1,339,241) (1,199,283) (1,451,001)
Limited partners. . . . . . . . 83,899,396 96,831,579 67,243,875 88,203,901
Net earnings (loss):
General partners. . . . . . . . 363,525 111,760 86,532 27,590
Limited partners. . . . . . . . 18,736,453 10,708,610 3,136,217 1,366,601
Net earnings (loss) per
limited partnership
interest. . . . . . . . . . . . . 108.05 61.75 18.08 7.88
=========== ============ =========== ===========
</TABLE>
<PAGE>
The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of the
period (173,411). Deficit capital accounts will result, through the
duration of the Partnership, in net gain for financial reporting and income
tax purposes.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions from unconsolidated ventures are considered cash
flow from operating activities only 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
($42,703,440 and $8,217,261 at December 31, 1997 and 1996, respectively) as
cash equivalents, which includes investments in an institutional mutual
fund which holds U.S. Government obligations, with any remaining amounts
(generally with original maturities of one year or less) reflected as
short-term investments being held to maturity.
Deferred expenses consist primarily of loan fees and lease commissions
and an inducement which are amortized over the terms stipulated in the
related agreements using the straight-line method.
Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due and/or increases in the
minimum lease payments over the term of the lease, rental income is accrued
for the full period of occupancy on a straight-line basis.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments" (as amended),
requires certain large public entities to disclose the SFAS 107 value of
all financial assets and liabilities for which it is practicable to
estimate. Value is defined in the Statement as the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership
believes the carrying amount of its financial instruments classified as
current assets and liabilities (excluding current portion of long-term
debt) approximates SFAS 107 value due to the relatively short maturity of
these instruments. There is no quoted market value available for any of
the Partnership's other instruments. The debt, with a carrying balance of
$34,404,478, has been calculated to have an SFAS 107 value of $36,424,417
by discounting the scheduled loan payments to maturity. Due to
restrictions on transferability and prepayment and the inability to obtain
comparable financing due to current levels of debt, previously modified
debt terms or other property specific competitive conditions, the
Partnership would likely be unable to refinance these properties to obtain
such calculated debt amounts reported. The Partnership has no other
significant financial instruments.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the Partners rather than the
Partnership. However, in certain instances, the Partnership has been
required or may in the future be required under applicable law to remit
directly to the tax authorities amounts representing withholding from
distributions paid to partners.
<PAGE>
The Partnership has acquired, either directly or through joint
ventures, two shopping centers and three office complexes. In June 1990,
the Partnership sold its interest in the Genesee Valley Shopping Center.
In November 1994, the lender realized upon its security interest and took
title to the Bank of Delaware building via a deed in lieu of foreclosure.
In March 1996, the San Jose venture sold its interest in the 190 San
Fernando Building and one of the parking structures at the Park Center
Financial Plaza investment property. In December 1997, the Royal Executive
venture sold the Royal Executive Park II office complex. All of the
remaining properties were in operation at December 31, 1997. The cost of
the investment properties represents the total cost to the Partnership plus
miscellaneous acquisition costs.
Depreciation on the properties has been provided over the estimated
useful lives of the various components as follows:
YEARS
-----
Building and Improvements -- straight-line . . . 30
Personal property -- straight-line . . . . . . . 5
==
The investment properties are pledged as security for the long-term
debt, for which there is no recourse to the Partnership.
Maintenance and repairs are generally charged to operations as
incurred. Significant betterments and improvements are capitalized and
depreciated over their estimated useful lives.
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 in March 1995. The Partnership
adopted SFAS 121 as required in the first quarter of 1996. SFAS 121
requires that the Partnership record an impairment loss on its properties
to be held for investment whenever their carrying value cannot be fully
recovered through estimated undiscounted future cash flows from their
operations and sale. The amount of the impairment loss to be recognized
would be the difference between the property's carrying value and the
property's estimated fair value. The Partnership's policy is to consider a
property to be held for sale or disposition when the Partnership has
committed to a plan to sell or dispose of such property and active
marketing activity has commenced or is expected to commence in the near
term. In accordance with SFAS 121, any properties identified as "held for
sale or disposition" are no longer depreciated. Adjustments for impairment
loss for such properties (subsequent to the date of adoption of SFAS 121)
are made in each period as necessary to report these properties at the
lower of carrying value or fair value less costs to sell.
The results of operations for properties held for sale or disposition
as of December 31, 1997 or sold or disposed of during the past three years
were $443,271, ($1,551,773) and ($975,671), respectively, for the years
ended December 31, 1997, 1996 and 1995. In addition, the accompanying
financial statements include $5,324,092, $3,603,185 and $2,873,705,
respectively, of the Partnership's share of total property operations of
$6,901,490, $4,209,143 and $3,435,566 of unconsolidated properties held for
sale or disposition as of December 31, 1997 or sold or disposed of in the
past three years.
During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued. These standards became
effective for reporting periods after December 15, 1997. As the
Partnership's capital structure only has general and limited partnership
interests, the Partnership will not experience any significant impact on
its financial statements.
Certain 1996 and 1995 amounts have been reclassed to conform to 1997
presentation.
<PAGE>
INVESTMENT PROPERTIES
RIVERSIDE SQUARE MALL
During October 1983, the Partnership acquired an existing enclosed
regional shopping center in Hackensack, New Jersey. The Partnership's
purchase price for the mall was $36,236,282. The Partnership made a cash
down payment at closing of $20,000,000 with the balance of the purchase
price represented by a first mortgage loan. During the third quarter of
1994, the Partnership finalized a refinancing of the first mortgage loan
with a new loan in the amount of $36,000,000 which resulted in net proceeds
of approximately $22,300,000. Of such proceeds, approximately $11,200,000
was escrowed by the lender pursuant to the loan agreement and released as
required, including interest, to fund certain costs of the renovation and
restoration as discussed below. The full amount of the escrow had been
released as of December 31, 1996. The remaining $11,100,000 of loan
proceeds were used to replenish the Partnership's working capital for
amounts paid to or escrowed on behalf of Saks and Bloomingdale's for their
store renovations as discussed below.
The Partnership completed its renovation of the Riverside Square Mall
as well as its restoration of the parking deck (at final costs of
approximately $13,500,000 and $7,000,000, respectively) and is continuing
to remerchandise the center. In such regard, the Partnership has budgeted
in 1998 approximately $2,155,000 for tenant improvements and capital
expenditures. In connection with the renovation, the Partnership, in early
1994, signed 15-year operating covenant extensions with both Saks and
Bloomingdale's, the latter of which owns its own store. In return for the
additional 15-year commitment to the center, the Partnership reimbursed
Saks for its store renovation in the amount of $6,100,000; and in August
1995, the Partnership escrowed $5,000,000, reflected as a deferred expense
in the accompanying balance sheet, (the full amount of which was released
as of December 31, 1996) for Bloomingdale's store renovation, which was
fully completed in September 1997. Interest earned on the escrowed funds
was remitted to the Partnership upon termination of the escrow account. In
connection with the payment to Saks, the Partnership also acquired title to
the Saks building which had previously been owned by Saks.
As the Partnership had committed to a plan to sell the property, the
property was classified as held for sale or disposition as of September 30,
1997, and therefore, has not been subject to continued depreciation beyond
such date.
An affiliate of the General Partners of the Partnership manages the
shopping center for a fee equal to 4% of the fixed and percentage rents of
the shopping center plus leasing and operating covenant commissions,
subject to deferral if in excess of an aggregate annual maximum amount of
6% of the gross receipts of the property.
VENTURE AGREEMENTS - GENERAL
The Partnership at December 31, 1997 is a party to one operating
venture agreement (San Jose) and made capital contributions to the
respective ventures 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.
<PAGE>
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.
SAN JOSE
The Partnership acquired, through San Jose, an interest in an existing
office building complex in San Jose, California (Park Center Financial
Plaza) consisting of ten office buildings, a parking and retail building
(185 Park Avenue) and two parking garage structures.
In September 1986, San Jose obtained a mortgage loan in the amount of
$25,000,000 secured by the 150 Almaden and 185 Park Avenue buildings and
certain parking areas. Due to the scheduled maturity of the loan, San
Jose, during the fourth quarter of 1994, finalized a loan extension and
modification with the mortgage lender. The refinancing resulted in the
1994 partial paydown of the outstanding principal balance in the amount of
$2,500,000.
After reviewing and analyzing San Jose's potential options with regard
to its investment in the 100-130 Park Center Plaza portion of the complex,
San Jose determined that it was in the best interest of the venture to
repay the mortgage obligations secured by this portion of the complex and
did so in October 1995. The outstanding principal balances, at the time of
repayment, were $2,418,722 of which the Partnership's share was $1,209,361.
The property is managed by an unaffiliated third party for a fee
calculated as 3% of gross receipts.
The partners of San Jose are the Partnership and JMB Income
Properties, Ltd.-XII, another partnership sponsored by the Managing General
Partner of the Partnership ("JMB-XII"). The terms of San Jose's
partnership agreement generally provide that contributions, distributions,
cash flow, sale or refinancing proceeds and profits and losses will be
distributed or allocated to the Partnership and JMB-XII in their respective
50% ownership percentages.
During August 1994, San Jose received notification from the
Redevelopment Agency of the City of San Jose of its offer to purchase one
of the parking garage structures in the office building complex, for an
approved Agency project for $4,090,000. The price offered was deemed by
the Agency to be just compensation in compliance with applicable laws
concerning eminent domain. During 1995, the Agency filed a condemnation
action in court to proceed to obtain the garage pursuant to such laws. In
late 1995, San Jose and the Agency reached a mutually acceptable agreement
on the transfer of the garage. In March 1996, the sale was consummated.
Under the transfer agreement, San Jose received replacement parking spaces
for its tenants in a nearby city-owned parking structure for a term of
fifty-five years in addition to the aforementioned purchase price of
$4,090,000. San Jose recognized a gain of approximately $2,036,000 and
$1,857,000, respectively, for financial reporting and Federal income tax
purposes in 1996, of which approximately $1,018,000 and $928,500,
respectively, was allocated to the Partnership.
In March 1996, San Jose sold the 190 San Fernando Building to an
independent third party. The sale price of the building was $1,753,000
(before selling costs), and was paid in cash at closing. San Jose
recognized a gain of approximately $789,000 and $21,000, respectively, for
financial reporting and Federal income tax purposes in 1996, of which
approximately $394,500 and $10,500, respectively, was allocated to the
Partnership.
<PAGE>
At September 30, 1994, San Jose made provisions for value impairment
on the 100-130 Park Center Plaza buildings and certain parking areas and
the 170 Almaden building of $944,335 in the aggregate. Such provisions
were recorded to reduce the net carrying values of these buildings to the
then outstanding balances of the related non-recourse financing.
As San Jose had committed to a plan to sell the properties, the 190
San Fernando Building and the parking structure were classified as held for
sale or disposition as of January 1, 1996 and therefore were not subject to
continued depreciation. The San Jose venture subsequently committed to a
plan to sell the balance of the complex, and classified the remaining
assets as held for sale as of December 31, 1996 and these assets have
therefore no longer been subject to continued depreciation beyond such
date.
On February 24, 1998, San Jose sold the land, building, related
improvements and personal property of the remaining assets of the Park
Center Financial Plaza office complex to an unaffiliated third party for a
sale price of $76,195,000 (before selling expenses and prorations). The
sale will result in a gain in 1998 of approximately $41,000,000 (due to
provisions for value impairment totaling $45,811,547 recorded between 1991
and 1994) and $23,000,000 for financial reporting and Federal income tax
purposes, respectively, of which approximately $20,500,000 and $11,500,000
of gain will be allocated to the Partnership, respectively. In addition,
in connection with the sale of the property, as is customary in such
transactions, San Jose agreed to certain representations, warranties, and
covenants with a stipulated survival period that expires November 15, 1998.
Although it is not expected, San Jose and the Partnership may ultimately
have some liability under such representations, warranties and covenants.
ROYAL EXECUTIVE PARK II
In December 1985, the Partnership entered into a commitment to fund a
$27,000,000 convertible first mortgage note on a three building office park
then under construction in Rye Brook, New York (Royal Executive Park II).
The first mortgage note called for monthly installments of interest only at
a rate of 10% through the period of equity conversion.
During February 1987, the Partnership exercised its option of
converting the $27,000,000 mortgage into an ownership position. Upon the
conversion of the mortgage note, the Partnership entered into a joint
venture (Royal Executive) with the borrower (joint venture partners).
Pursuant to the terms of the venture agreement, until certain rental
achievement levels were attained, the Partnership was entitled to a
cumulative preferred annual return equal to $2,430,000 per year. The next
$2,439,732 of annual cash flow was distributable to the joint venture
partners, on a non-cumulative basis, with any remaining cash flow
distributable 49.9% to the Partnership and 50.1% to the joint venture
partners. Therefore, the Partnership's receipt of cash distributions was
subject to the actual operations of the property. The Partnership was
entitled to any deficiency in its preferred annual return plus interest at
9% on a cumulative basis as an annual priority distribution from future
available operating cash flow before any cash flow distributions were made
to the venture partner. The cumulative deficiency in the preferred annual
return was approximately $1,498,000 at the December 19, 1997 sale date. In
accordance with the Royal Executive venture agreement, the Partnership
received its priority level of distribution of sale and refinancing
proceeds of $27,000,000 plus the cumulative deficiency in its preferred
annual return upon sale of the property, as discussed below.
Net operating income (as defined) of the joint venture, in general,
was allocated in proportion to, and to the extent of, distributions and
then based on relative ownership percentages. Operating losses, in
general, were first allocated to the joint venture partners to the extent
of any additional contributions made to fund operations or the
Partnership's guaranteed return. Remaining losses, if any, were allocated
based upon relative ownership interests. Depreciation and amortization was
allocated based upon the relative ownership interests.
<PAGE>
Due to uncertainty about the ability to recover the net carrying value
of the property through future operations and sale, Royal Executive made a
provision for value impairment of $25,378,894 at September 30, 1994 to
reduce the net carrying value of the property to the then estimated fair
value. The provision for value impairment has been allocated fully to the
venture partner to reflect their subordination to the Partnership in
distributions with regard to future operation and sale or financing
proceeds as discussed above.
As there had been a commitment to sell this property, the Royal
Executive Venture classified this property as held for sale or disposition
at December 31, 1996, and therefore, the property was not subject to
continued depreciation beyond such date.
On December 19, 1997, the Royal Executive venture sold the land,
buildings, related improvements and personal property of the Royal
Executive Park office complex to an unaffiliated third party for a sale
price of $36,000,000 (before selling expenses and prorations). The sale
resulted in a gain in 1997 of $13,905,818 (due to the provision for value
impairment recorded in 1994, as discussed above) and $18,927,388 for
financial reporting and Federal income tax purposes, respectively, of which
$13,349,139 and $10,701,810 of gain was allocated to the Partnership,
respectively. In addition, in connection with the sale of the property, as
is customary in such transactions, the joint venture agreed to certain
representations, warranties and covenants with a stipulated survival period
that expires November 15, 1998. Although it is not expected, the joint
venture and the Partnership may ultimately have some liability under such
representations, warranties and covenants, but such liability has been
limited in the sale agreement to actual damages in an amount not to exceed
$2,000,000 in the aggregate.
Concurrently with the sale of Royal Executive Park-II, two other
office parks, Royal Executive Park I ("Royal I") and Royal Executive Park
III ("Royal III") were sold. Royal I was owned by a joint venture between
JMB Income Properties-X (a partnership sponsored by the Partnership's
General Partner) and the Partnership's unaffiliated venture partner in
Royal Executive Park-II. Royal III was owned entirely by the unaffiliated
venture partner in Royal Executive Park-II and Royal I. The purchase price
for each office park was separately negotiated with the buyer.
The joint venture had determined that one of the property's
underground storage tanks had discharged an amount of fuel oil into the
ground. The joint venture believed that such discharge had been the result
of normal operations of the property and not the result of actions of
tenants or other third parties. The joint venture had received a cost
estimate of approximately $200,000 for remediation of the contaminated
soil, of which approximately $121,000 was incurred through the date of
sale. As part of the sale agreement discussed above, the purchaser is
required to hold the joint venture harmless for any future clean-up costs
or claims resulting from the contaminated soil.
Effective July 1, 1994, management and leasing activities at the
complex were transferred to an affiliate of the General Partners of the
Partnership, who managed the property until December 1994 for a fee
computed as a percentage of certain revenues. In December 1994, this
affiliated property manager 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 was acting as the manager
of the property on the same terms that existed prior to the assignment.
In February 1998, the Partnership made a distribution of sale proceeds
related to the sale of the Royal Executive Park II office complex of
$28,439,404 ($164 per Interest) and paid an operating distribution of
$2,774,576 ($16 per Interest), to the Limited Partners.
<PAGE>
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and
1996:
1997 1996
---------- ----------
8.35% mortgage note, secured by the Riverside
Square Mall in Hackensack, New Jersey;
payable in monthly installments of
principal and interest of $286,252
through December 1, 2006, the scheduled
maturity date at which time the unpaid
principal and interest is due. . . . . . . $34,404,478 34,942,100
Less current portion of long-term debt. . . 584,273 537,623
----------- ----------
Total long-term debt. . . . . . . $33,820,205 34,404,477
=========== ==========
Five year maturities of long-term debt are summarized as follows for
the years ending:
1998. . . . . . . . . . . $584,273
1999. . . . . . . . . . . 634,971
2000. . . . . . . . . . . 690,068
2001. . . . . . . . . . . 749,945
2002. . . . . . . . . . . 815,019
========
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale or
refinancing of investment properties will be allocated to the General
Partners: (i) to the greater of 1% of such profits or the amount of cash
distributable to the General Partner from any such sale or refinancing (as
described below); and (ii) in order to reduce deficits, if any, in the
General Partners' capital accounts to a level consistent with the gain
anticipated to be realized from the sale of properties. Losses from the
sale or refinancing of investment properties will be allocated 1% to the
General Partners. The remaining sale or refinancing 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. In general, distributions of cash from operations will
be made 90% to the Limited Partners and 10% to the General Partners.
However, a portion of such distributions to the General Partners is
subordinated to the Limited Partners' receipt of a stipulated return on
capital.
The Partnership Agreement provides that the General Partners shall
receive as a distribution from the sale of a real property by the
Partnership amounts equal to the cumulative deferrals of any portion of
their 10% cash distribution and 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, notwithstanding such allocations, the Limited Partners shall
receive 100% of such net sale proceeds until the Limited Partners (i) have
received cash distributions of sale or refinancing proceeds in an amount
equal to the Limited Partners' aggregate initial capital investment in the
Partnership, (ii) have received cumulative cash distributions from the
Partnership's operations which, when combined with sale or refinancing
proceeds previously distributed, equal a 7% annual return on the Limited
Partners' average capital investment for each year (their initial capital
investment as reduced by sale or refinancing proceeds previously
distributed) commencing with the first fiscal quarter of 1985 and (iii)
<PAGE>
have received cash distributions of sale and refinancing proceeds and of
the Partnership operations, in an amount equal to the Limited Partners'
initial capital investment in the Partnership plus a 10% annual return on
the Limited Partners' average capital investment. As the above levels of
return are not expected to be achieved, the General Partners have waived
their right to receive any portion of the proceeds from the sales of
property by the Partnership.
LEASES
At December 31, 1997, the Partnership's principal asset is one
shopping center. The Partnership has determined that all leases relating
to this property are properly classified as operating leases; therefore,
rental income is reported when earned and the cost of the property,
excluding the cost of the land, is depreciated over the estimated useful
life. Leases with tenants range in term from one to thirty-five years and
provide for fixed minimum rent and partial reimbursement of operating
costs. In addition, substantially all of the leases with shopping center
tenants provide for additional rent based upon percentages of tenants'
sales volumes. A substantial portion of the ability of retail tenants to
honor their leases is dependant upon the retail economic sector.
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit, to be received
in the future under the operating leases are as follows:
1998 . . . . . . . . . . . $ 5,695,086
1999 . . . . . . . . . . . 5,391,421
2000 . . . . . . . . . . . 4,952,935
2001 . . . . . . . . . . . 4,725,812
2002 . . . . . . . . . . . 4,542,212
Thereafter . . . . . . . . 14,663,482
-----------
Total. . . . . . . . . $39,970,948
===========
Contingent rent (based on sales by property tenants) included in
rental income was as follows:
1995. . . . . . . . $210,903
1996. . . . . . . . 312,727
1997. . . . . . . . 203,448
========
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Managing General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1997 and for the years ended December
31, 1997, 1996 and 1995 are as follows:
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- ------- ------- ------------
Property management
and leasing fees . . . . $244,256 229,333 236,845 --
Insurance commissions . . 44,126 42,093 44,370 --
Reimbursement (at cost)
for accounting services. 22,452 9,825 99,195 11,659
Reimbursement (at cost)
for portfolio manage-
ment services. . . . . . 35,743 23,498 19,685 10,138
<PAGE>
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- ------- ------- ------------
Reimbursement (at cost)
for legal services . . . 7,442 4,691 4,942 1,882
Reimbursement (at cost)
for administrative
charges and other
out-of-pocket expenses . 208 -- 124,906 --
-------- ------- ------- -------
$354,227 309,440 529,943 23,679
======== ======= ======= =======
During 1994, certain officers and directors of the Managing General
Partners acquired interests in a company which provides certain property
management services to a property owned by the Partnership. The fees
earned by such company from the Partnership for the years ended
December 31, 1997, 1996 and 1995 were approximately $32,500, $39,000 and
$30,000 respectively, all of which has been paid at December 31, 1997.
The General Partners have deferred receipt of certain of their
distributions of net cash flow of the Partnership. The amount of such
deferred distributions aggregated $2,075,000 as of December 31, 1997. The
amount is being deferred in accordance with the subordination requirements
of the Partnership Agreement as discussed above. The Partnership does not
expect that the subordination requirements of the Partnership agreement
will be satisfied to permit payment of the majority of these amounts. In
addition, in 1994, an affiliate of the General Partner deferred $300,000 in
leasing fees at the Riverside Square Mall pursuant to the management
agreement, of which the final $33,000 was paid in February 1997.
INVESTMENT IN UNCONSOLIDATED VENTURES
Summary combined financial information for San Jose and Royal
Executive as of and for the years ended December 31, 1997 and 1996 are as
follows:
1997 1996
------------ -----------
Current assets. . . . . . . . . $ 5,677,624 5,535,189
Current liabilities . . . . . . (792,509) (625,146)
------------ -----------
Working capital . . . . . . 4,885,115 4,910,043
------------ -----------
Investment property, net. . . . 30,803,149 49,157,299
Other assets, net . . . . . . . 1,204,478 1,287,622
Long-term debt. . . . . . . . . (22,961,889) (23,338,875)
Other liabilities . . . . . . . (181,229) (247,868)
Venture partners' equity. . . . (7,038,462) (11,400,919)
------------ -----------
Partnership's capital . . . $ 6,711,162 20,367,302
============ ===========
Represented by:
Invested capital. . . . . . . $ 77,738,617 77,738,617
Cumulative distributions. . . (81,831,137) (49,501,766)
Cumulative losses . . . . . . 10,803,682 (7,869,549)
------------ -----------
$ 6,711,162 20,367,302
============ ===========
Total income. . . . . . . . . . $ 16,288,755 16,333,533
============ ===========
<PAGE>
1997 1996
------------ -----------
Expenses applicable to
operating earnings. . . . . . $ 9,387,265 12,124,390
============ ===========
Gain on disposition of
investment property . . . . . $ 13,905,818 2,825,220
============ ===========
Net earnings (loss) . . . . . . $ 20,807,308 7,034,363
============ ===========
The total income, expenses related to operating earnings and net
earnings for the above-mentioned ventures for the year ended December 31,
1995 were $15,525,621, $12,090,055 and $3,435,566, respectively.
<PAGE>
<TABLE>
SCHEDULE III
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) ACQUISITION AT CLOSE OF PERIOD (B)
----------------------- -------------- -------------------------------------
BUILDINGS BUILDINGS BUILDINGS
AND AND AND
ENCUMBRANCE LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL (C)
----------- ----------- ------------ -------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTER:
Hackensack,
New Jersey. . $34,404,478 3,796,561 30,880,649 45,465,971 3,796,561 76,346,620 80,143,181
=========== ========= ========== ========== ========= ========== ==========
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1997
ACCUMULATED DATE OF DATE OPERATION REAL ESTATE
DEPRECIATION(D) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTER:
Hackensack,
New Jersey. . . . . . . . . . . . $19,213,845 1977 10-19-83 5-30 years 2,314,503
=========== =========
- -------------
<FN>
Notes:
(A) The initial cost to the Partnership represents the original purchase price of the
properties (net of unamortized discount based upon an imputed interest rate), including amounts
incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1997 for Federal income tax
purposes was $83,183,293.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(C) Reconciliation of real estate owned:
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . $79,273,342 74,461,800 65,406,740
Additions during period. . . . . . . . . . . . . . 869,839 4,811,542 9,055,060
Dispositions during period . . . . . . . . . . . . -- -- --
----------- ----------- ----------
Balance at end of period . . . . . . . . . . . . . $80,143,181 79,273,342 74,461,800
=========== =========== ==========
(D) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . . $17,321,842 14,927,070 12,951,168
Depreciation expense . . . . . . . . . . . . . . . 1,892,003 2,394,772 1,975,902
----------- ----------- ----------
Balance at end of period . . . . . . . . . . . . . $19,213,845 17,321,842 14,927,070
=========== =========== ==========
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Royal Executive Park II:
We have audited the financial statements of Royal Executive Park II (a
general partnership) as listed in the accompanying index. These financial
statements are the responsibility of the General Partners of the
Partnership. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Royal Executive
Park II at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
As discussed in the Notes to the financial statements, in 1996 the
Partnership changed its method of accounting for long-lived assets and
long-lived assets to be disposed of to conform with Statement of Financial
Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1998
<PAGE>
<TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 842,403 439,499
Rents and other receivables, net of allowance for
doubtful accounts of $0 in 1997 and
$82,032 in 1996 . . . . . . . . . . . . . . . . . . . . . . . . 15,549 557,570
----------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . 857,952 997,069
----------- -----------
Investment property held for sale or disposition. . . . . . . . . . -- 20,726,634
----------- -----------
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . -- 327,630
----------- -----------
$ 857,952 22,051,333
=========== ===========
<PAGE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
1997 1996
------------ ------------
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 173,172 168,640
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . 173,172 168,640
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . -- 168,269
----------- -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . 173,172 336,909
Partners' capital accounts. . . . . . . . . . . . . . . . . . . . . 684,780 21,714,424
----------- -----------
$ 857,952 22,051,333
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $ 6,854,125 7,044,108 6,281,703
Interest income . . . . . . . . . . . . . . . . . 29,947 51,257 61,472
Gain on sale of investment property . . . . . . . 13,905,818 -- --
----------- ----------- -----------
20,789,890 7,095,365 6,343,175
----------- ----------- -----------
Expenses:
Depreciation. . . . . . . . . . . . . . . . . . . -- 915,666 912,943
Property operating expenses . . . . . . . . . . . 2,913,669 3,107,719 3,041,478
Amortization of deferred expenses . . . . . . . . 79,959 85,802 371,516
----------- ----------- -----------
2,993,628 4,109,187 4,325,937
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . . $17,796,262 2,986,178 2,017,238
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
UNAFFILIATED
VENTURE JMB-XI TOTAL
------------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1994. . . . . . . . . . . . . . $ 6,400,728 18,435,662 24,836,390
Capital contributions . . . . . . . . . . . . . . . . . 304,860 -- 304,860
Cash distributions. . . . . . . . . . . . . . . . . . . -- (3,882,121) (3,882,121)
Net earnings (loss) . . . . . . . . . . . . . . . . . . (147,303) 2,164,541 2,017,238
----------- ----------- -----------
Balance at December 31, 1995. . . . . . . . . . . . . . 6,558,285 16,718,082 23,276,367
Cash distributions. . . . . . . . . . . . . . . . . . . -- (4,548,121) (4,548,121)
Net earnings (loss) . . . . . . . . . . . . . . . . . . (5,524) 2,991,702 2,986,178
----------- ----------- -----------
Balance at December 31, 1996. . . . . . . . . . . . . . 6,552,761 15,161,663 21,714,424
Cash distributions. . . . . . . . . . . . . . . . . . . (6,496,535) (32,329,371) (38,825,906)
Net earnings (loss) . . . . . . . . . . . . . . . . . . 628,554 17,167,708 17,796,262
----------- ----------- -----------
Balance at December 31, 1997. . . . . . . . . . . . . . $ 684,780 -- 684,780
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $17,796,262 2,986,178 2,017,238
Items not requiring (providing) cash:
Depreciation. . . . . . . . . . . . . . . . . . -- 915,666 912,943
Amortization of deferred expenses . . . . . . . 79,959 85,802 371,516
Gain on sale of investment property . . . . . . (13,905,818) -- --
Changes in:
Rents and other receivables . . . . . . . . . . 542,021 460,777 561,279
Prepaid expenses. . . . . . . . . . . . . . . . -- 11,316 4,370
Accounts payable. . . . . . . . . . . . . . . . 4,532 (87,595) (156,596)
Tenant security deposits. . . . . . . . . . . . (168,269) 621 --
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . 4,348,687 4,372,765 3,710,750
Cash flows from investing activities:
Cash sale proceeds from sale of investment
property, net of selling expenses . . . . . . . 35,445,723 -- --
Net sales and maturities (purchases)
of short-term investments . . . . . . . . . . . -- -- 98,281
Additions to investment property. . . . . . . . . (559,799) (93,083) (186,896)
Payment of deferred expenses. . . . . . . . . . . (5,801) -- (65,900)
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . 34,880,123 (93,083) (154,515)
----------- ----------- -----------
<PAGE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows from financing activities:
Capital contributed to venture. . . . . . . . . . -- -- 304,860
Distributions to partners . . . . . . . . . . . . (38,825,906) (4,548,121) (3,882,121)
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . . (38,825,906) (4,548,121) (3,577,261)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . . 402,904 (268,439) (21,026)
Cash and cash equivalents,
at beginning of year. . . . . . . . . . . 439,499 707,938 728,964
----------- ----------- -----------
Cash and cash equivalents,
at end of year. . . . . . . . . . . . . . $ 842,403 439,499 707,938
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . $ -- -- --
=========== =========== ===========
Non-cash investing and financing activity . . . . $ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The accompanying financial statements have been prepared for the
purpose of complying with Rule 3.09 of Regulation S-X of the Securities and
Exchange Commission. They include the accounts of the unconsolidated joint
venture, Royal Executive Park II venture ("Venture"), in which JMB Income
Properties, Ltd.-XI ("JMB Income-XI" or "Partnership") and an unaffiliated
venture are the partners.
Royal Executive Park II held an equity investment in commercial real
estate property in the City of Rye Brook, New York. Business activities
consisted of rentals to a wide variety of commercial companies, and the
ultimate sale or disposition of such real estate in December 1997.
As the Royal Executive venture had determined to sell the property,
the property was classified as held for sale or disposition as of December
31, 1996, and therefore, had not been subject to continued depreciation.
The results of operations of the property included in the accompanying
financial statements were profits of $3,890,444, $2,986,178 and $2,017,238
for the years ended December 31, 1997, 1996 and 1995, respectively.
On December 19, 1997, the Royal Executive venture sold the land and
related improvements of the Royal executive Park II office complex for
$36,000,000. A description of the sale of the property is contained in the
Notes of the financial statements of JMB Income - XI. Such notes are
incorporated herein by reference.
The accounting policies of the Venture are the same as those of the
Partnership. Accordingly, reference is made to the Notes to the
Partnership's financial statements filed with this annual report. Such
notes are incorporated herein by reference.
<PAGE>
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
VENTURE AGREEMENT
A description of the acquisition of the property and the venture
agreement is contained in the Notes of the financial statements of JMB
Income - XI. Such notes are incorporated herein by reference.
MANAGEMENT AGREEMENT
Effective July 1, 1994, management and leasing activities at the
complex were transferred to an affiliate of the General Partners of the
Partnership, who managed the property until December 1994. In December
1994, this affiliated property manager 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.
TRANSACTIONS WITH AFFILIATES
There were no fees, commissions and other expenses required to be paid
by the Venture to the General Partners and their affiliates as of December
31, 1997 or for the years ended December 31, 1997, 1996 and 1995.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
JMB/SAN JOSE ASSOCIATES:
We have audited the financial statements of JMB/San Jose Associates (a
general partnership) as listed in the accompanying index. In connection
with our audits of the financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of JMB/San Jose
Associates at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
As discussed in the Notes to the financial statements, in 1996 the
Partnership changed its method of accounting for long-lived assets and
long-lived assets to be disposed of to conform with Statement of Financial
Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1998
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 2,783,007 2,260,010
Rents and other receivables, net of allowance for
doubtful accounts of $0 in 1997 and $1,648,319
in 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,849,882 2,111,845
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 89,913 92,041
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 96,870 74,223
----------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 4,819,672 4,538,119
----------- -----------
Investment property held for sale or disposition. . . . . . . . . . . 30,803,149 28,430,666
----------- -----------
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,204,478 959,992
----------- -----------
$36,827,299 33,928,777
=========== ===========
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
1997 1996
----------- -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 376,986 92,988
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 79,396 199,955
Accrued interest payable. . . . . . . . . . . . . . . . . . . . . . 162,955 163,563
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . 619,337 456,506
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 181,229 79,599
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 22,961,889 23,338,875
----------- -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 23,762,455 23,874,980
Partners' capital accounts. . . . . . . . . . . . . . . . . . . . . . 13,064,844 10,053,797
----------- -----------
$36,827,299 33,928,777
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $ 9,249,115 9,125,251 9,071,667
Interest income . . . . . . . . . . . . . . . . . 155,568 112,917 110,779
Gain on sale of investment property . . . . . . . -- 2,825,220 --
----------- ----------- -----------
9,404,683 12,063,388 9,182,446
----------- ----------- -----------
Expenses:
Mortgage and other interest . . . . . . . . . . . 1,958,848 1,965,892 2,202,191
Depreciation. . . . . . . . . . . . . . . . . . . -- 1,044,296 1,114,143
Property operating expenses . . . . . . . . . . . 4,160,963 4,728,651 4,237,476
Amortization of deferred expenses . . . . . . . . 273,825 276,364 210,308
----------- ----------- -----------
6,393,636 8,015,203 7,764,118
----------- ----------- -----------
Net earnings. . . . . . . . . . . . . . . $ 3,011,047 4,048,185 1,418,328
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
AFFILIATED
JMB-XI PARTNER TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1994. . . . $ 6,076,945 5,719,465 11,796,410
Capital contributions . . . . . . . 1,233,436 1,233,437 2,466,873
Cash distributions. . . . . . . . . (1,250,000) (1,250,000) (2,500,000)
Net earnings. . . . . . . . . . . . 709,165 709,164 1,418,329
----------- ----------- -----------
Balance at December 31, 1995. . . . 6,769,546 6,412,066 13,181,612
Cash distributions. . . . . . . . . (3,588,000) (3,588,000) (7,176,000)
Net earnings. . . . . . . . . . . . 2,024,093 2,024,092 4,048,185
----------- ----------- -----------
Balance at December 31, 1996. . . . 5,205,639 4,848,158 10,053,797
Net earnings. . . . . . . . . . . . 1,505,523 1,505,524 3,011,047
----------- ----------- -----------
Balance at December 31, 1997. . . . $ 6,711,162 6,353,682 13,064,844
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . . . . $ 3,011,047 4,048,185 1,418,328
Items not requiring (providing) cash:
Depreciation. . . . . . . . . . . . . . . . . . -- 1,044,296 1,114,143
Amortization of deferred expenses . . . . . . . 273,825 276,364 210,308
Gain on sale of investment property . . . . . . -- (2,825,220) --
Changes in:
Rents and other receivables . . . . . . . . . . 261,963 398,749 (19,820)
Prepaid expenses. . . . . . . . . . . . . . . . 2,128 (20,632) --
Escrow deposits . . . . . . . . . . . . . . . . (22,647) 232,577 (268,535)
Accounts payable. . . . . . . . . . . . . . . . (120,559) 134,662 (323,557)
Accrued interest payable. . . . . . . . . . . . (608) (562) (32,398)
Tenant security deposits. . . . . . . . . . . . 101,630 30,729 (23,223)
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . 3,506,779 3,319,148 2,075,246
----------- ----------- -----------
Cash flows from investing activities:
Additions to investment property. . . . . . . . . (2,372,483) (1,485,395) (156,254)
Payment of deferred expenses. . . . . . . . . . . (518,311) (402,481) (218,059)
Proceeds from sale of investment property . . . . -- 5,824,041 --
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . (2,890,794) 3,936,165 (374,313)
----------- ----------- -----------
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . (92,988) (85,989) (374,973)
Paydowns on long-term debt. . . . . . . . . . . . -- -- (2,418,722)
Capital contributed to venture. . . . . . . . . . -- -- 2,466,873
Distributions to partners . . . . . . . . . . . . -- (7,176,000) (2,500,000)
----------- ----------- -----------
Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . (92,988) (7,261,989) (2,799,822)
----------- ----------- -----------
Net increase (decrease) increase
in cash and cash equivalents. . . . . . . 522,997 (6,676) (1,098,889)
----------- ----------- -----------
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . 2,260,010 2,266,686 3,365,575
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . . $ 2,783,007 2,260,010 2,266,686
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . $ 1,959,456 1,966,455 2,234,589
Non-cash investing and financing activities:
Cash sale proceeds, net of selling expenses . . $ -- 5,824,041 --
Reduction in investment property, net . . . . . -- (2,966,325) --
Reduction in other assets and liabilities . . . -- (32,496) --
----------- ----------- -----------
Gain recognized on sale of property . . . $ -- 2,825,220 --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
The accompanying financial statements have been prepared for the
purpose of complying with Rule 3.09 of Regulation S-X of the Securities and
Exchange Commission. They include the accounts of the unconsolidated joint
venture, JMB/San Jose Associates ("San Jose"), in which JMB Income
Properties, Ltd.-XI ("JMB Income-XI" or "Partnership") and JMB Income
Properties, Ltd.-XII ("JMB Income-XII" or "Affiliated Partner") are the
partners.
San Jose holds an equity investment in a commercial office complex in
San Jose, California. Business activities consist of rentals to a wide
variety of commercial companies and governmental entities, and the ultimate
sale or disposition of such real estate.
As San Jose had determined to sell the complex, all portions of the
office complex have been classified as held for sale or disposition as of
or during the period ended December 31, 1996. Therefore, the complex is
not subject to continued depreciation. Certain portions of the office
complex were sold during 1996. The results of operations of the complex
included in the accompanying financial statements were earnings of
$2,855,479, $1,110,048 and $1,307,549 for the years ended December 31,
1997, 1996 and 1995, respectively.
On February 24, 1998, San Jose sold the land and related improvements
of the remaining assets of the Park Center Financial Plaza office complex
for $76,195,000. San Jose received approximately $49,400,000 of net sale
proceeds at closing (after the repayment by San Jose of the mortgage loans
secured by the 170 Almaden, 150 Almaden and 185 Park Avenue buildings with
a balance of approximately $23,300,000, loan prepayment premiums of
approximately $2,422,000 and closing costs), of which the Partnership's
share was approximately $24,700,000. A description of the sale of the
property is contained in the Notes of the financial statements of JMB
Income - XI. Such notes are incorporated herein by reference.
The Partnership uses the allowance method of accounting for doubtful
accounts. Provisions for uncollectible tenant receivables in the amounts
of $0, $588,052 and $783,417 were recorded in 1997, 1996 and 1995,
respectively. Bad debt expense is included in Property Operating Expenses.
The preparation of financial statements in accordance with GAAP
requires San Jose to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual amounts could differ from those
estimates.
The accounting policies of San Jose are the same as those of the
Partnership. Accordingly, reference is made to the Notes to the
Partnership's consolidated financial statements filed with this annual
report. Such notes are incorporated herein by reference.
VENTURE AGREEMENT
A description of the venture agreement and the management agreement
is contained in the Notes to Consolidated Financial Statements of JMB
Income - XI. Such note is incorporated herein by reference.
<PAGE>
MANAGEMENT AGREEMENT
In December 1994, the property manager, an affiliate of the General
Partners of the Partnership, sold substantially all of its assets and
assigned its interest in the management contracts to an unaffiliated third
party who continues to manage the complex. In addition, certain of the
management personnel of the property manager became management personnel of
the purchaser and its affiliates.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and
1996:
1997 1996
---------- ----------
7.85% mortgage note; secured by
the 170 Almaden Building in
San Jose, California; principal
and interest payments of $13,537
are due monthly through
September 2003 when the remaining
principal of approximately
$169,000 is due. . . . . . . . . $ 838,875 931,863
8.4% mortgage note; secured by the
150 Almaden and 185 Park Avenue
buildings, and certain related
parking improvements in San Jose,
California; interest only payments
of $157,500 are due monthly through
December 1997; principal and
interests payments of $179,663 are
due monthly through November 2001
when the entire principal of approx-
imately $21,421,000 is due . . . 22,500,000 22,500,000
----------- ----------
Total debt. . . . . . . . 23,338,875 23,431,863
Less current portion
of long-term debt. . . . 376,986 92,988
----------- ----------
Total long-term debt. . . $22,961,889 23,338,875
=========== ==========
Five year maturities of long-term debt are as follows:
1998. . . . . . . . . . $ 376,986
1999. . . . . . . . . . 409,305
2000. . . . . . . . . . 444,398
2001. . . . . . . . . . 21,723,357
2002. . . . . . . . . . 137,509
===========
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by San Jose
to the General Partners and their affiliates as of December 31, 1997 and
for the years ended December 31, 1997, 1996 and 1995 were as follows:
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- -------- -------- ------------
Property management
and leasing fees. . $ 65,012 77,870 60,000 --
Insurance commissions 23,530 25,768 30,140 --
-------- ------- ------- ------
$ 88,542 103,638 90,140 --
======== ======= ======= ======
<PAGE>
<TABLE>
SCHEDULE III
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) COSTS AT CLOSE OF PERIOD (B)
------------------------------ CAPITALIZED ------------------------------------------
BUILDINGS SUBSEQUENT TO BUILDINGS
AND ACQUISITION AND
ENCUMBRANCE LAND IMPROVEMENTS (C) (D) LAND IMPROVEMENTS TOTAL (E)
----------- ----------- ------------ -------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BLDS:
San Jose,
California $23,338,875 21,078,745 62,309,815 (19,621,073) 5,867,750 42,688,742 48,556,492
=========== ========== ========== =========== ========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1997
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
San Jose, 6/20/85
California . . . . . . . $17,753,343 1970 and 5/2/86 5-30 years 528,193
=========== =======
<FN>
- --------------
Notes:
(A) The initial cost to San Jose represents the original purchase price of the property, including amounts incurred
subsequent to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1997 for Federal income tax purposes was approximately
$89,267,717.
(C) Through December 31, 1997, San Jose has recorded provisions for value impairment totaling $45,811,547.
(D) During 1996, San Jose sold the 190 San Fernando Building and one of the parking garage structures in the
complex in two separate transactions as described more fully in the Notes to Consolidated Financial Statements
of the Partnership.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(E) Reconciliation of real estate owned:
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . $46,184,009 49,530,107 49,373,853
Additions during period. . . . . . . . . . . . . 2,372,483 1,485,395 156,254
Sales of investment property. . . . . . . . . . -- (4,831,493) --
----------- ----------- -----------
Balance at end of period . . . . . . . . . . . . $48,556,492 46,184,009 49,530,107
=========== =========== ===========
(F) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . $17,753,343 18,574,214 17,460,071
Sales of investment property. . . . . . . . . . -- (1,865,167) --
Depreciation expense . . . . . . . . . . . . . . -- 1,044,296 1,114,143
----------- ----------- -----------
Balance at end of period . . . . . . . . . . . . $17,753,343 17,753,343 18,574,214
=========== =========== ===========
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during 1996
and 1997.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Managing General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. Substantially all of the
outstanding shares of JMB are owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates.
JMB has responsibility for all aspects of the Partnership's operations.
The Associate General Partner of the Partnership is Income Associates-XI,
L.P., an Illinois limited partnership with JMB as its sole general partner.
The limited partners of Income Associates-XI, L.P. are generally officers,
directors and affiliates of JMB or its affiliates. The Partnership is
subject to certain conflicts of interest arising out of its relationships
with the General Partners and their affiliates as well as the fact that the
General Partners and their affiliates are engaged in a range of real estate
activities. Certain services have been and may in the future be provided
to the Partnership or its investment properties by affiliates of the
General Partners, including property management services and insurance
brokerage services. In general, such services are to be provided on terms
no less favorable to the Partnership than could be obtained from
independent third parties and are otherwise subject to conditions and
restrictions contained in the Partnership Agreement. The Partnership
Agreement permits the General Partners and their affiliates to provide
services to, and otherwise deal and do business with, persons who may be
engaged in transactions with the Partnership, and permits the Partnership
to borrow from, purchase goods and services from, and otherwise to do
business with, persons doing business with the General Partners or their
affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants and/or for the sale of property.
Because the timing and amount of cash distributions and profits and losses
of the Partnership may be affected by various determinations by the General
Partners under the Partnership Agreement, including whether and when to
sell a property, the establishment and maintenance of reasonable reserves,
the timing of expenditures and the allocation of certain tax items under
the Partnership Agreement, the General Partners may have a conflict of
interest with respect to such determinations.
The names, positions held and length of service therein of each
director and the executive and certain other officers of the Managing
General Partner of the Partnership are as follows:
<PAGE>
SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 8/01/93
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Managing General Partner to be held on
June 3, 1998. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Managing General Partner to be held on June 3,
1998. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-XI
("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XII
("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV
("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"),
Carlyle Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real
Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners,
Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV
("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus")
and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the
managing general partner of JMB Income Properties, Ltd.-IV ("JMB
Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income
Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X
("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB
Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties,
Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole general partner of the
associate general partner of most of the foregoing partnerships. Most of
the foregoing directors and officers are also officers and/or directors of
various affiliated companies of JMB including Arvida/JMB Managers, Inc.
(the general partner of Arvida/JMB Partners, L.P. ("Arvida")) and Income
Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced
Income Growth, Ltd. ("IDS/BIG")). Most of such directors and officers are
also partners, directly or indirectly, of certain partnerships which are
associate general partners in the following real estate limited partner-
ships: the Partnership, Carlyle-VII, Carlyle-XI, Carlyle-XII,
Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB
Income-VII, JMB Income-X, JMB Income-XII, JMB Income-XIII, Mortgage
Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income
Plus-II and IDS/BIG.
<PAGE>
The business experience during the past five years of each such
director and officer of the Managing General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 60) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is also a director of Urban Shopping Centers,
Inc. ("USC, Inc."), an affiliate of JMB that is a real estate investment
trust in the business of owning, managing and developing shopping centers.
He is a Certified Public Accountant.
Neil G. Bluhm (age 60) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August, 1970. Mr. Bluhm is a principal of Walton Street Real Estate Fund
I, L.P. and a director of USC, Inc. He is a member of the Bar of the State
of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 59) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 56) has been associated with JMB since July,
1972. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 64) has been associated with JMB since December,
1972. He is also President and a director of JMB Insurance Agency, Inc.
John G. Schreiber (age 51) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is President of Schreiber Investments, Inc.,
a company which is engaged in the real estate investing business. He is
also a senior advisor and partner of Blackstone Real Estate Advisors L.P.,
an affiliate of the Blackstone Group, L.P. Mr. Schreiber is also a
director of USC, Inc., a trustee of Amli Residential Property Trust and a
director of a number of investment companies advised or managed by T. Rowe
Price Associates and its affiliates. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 48) has been associated with JMB since March,
1982. He holds a J.D. degree from Northwestern Law School and is a member
of the Bar of the State of Illinois.
Glenn E. Emig (age 50) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters Degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 45) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 49) has been associated with JMB since March 1982.
He holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.
Howard Kogen (age 62) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The General Partners of
the Partnership are entitled to receive a share of cash distributions, when
and as cash distributions are made to the Investors, and a share of profits
or losses. Reference is also made to the Notes for a description of such
transactions, distributions and allocations. In 1997, 1996 and 1995, no
cash distributions were paid to the General Partners.
Affiliates of the Managing General Partner provided property
management services to the Partnership for 1996 for the Riverside Square
Mall in Hackensack, New Jersey at a fee not to exceed 4% of the fixed and
percentage rent of property, plus leasing commissions. In 1997, such
affiliates earned property management and leasing fees amounting to
$244,256 which was paid as of December 31, 1997. As set forth in the
Prospectus of the Partnership, the Managing General Partner must negotiate
such agreements on terms no less favorable to the Partnership than those
customarily charged for similar services in the relevant geographical area
(but in no event at rates greater than 6% of the gross receipts from a
property), and such agreements must be terminable by either party thereto,
without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Managing General
Partner, earned and received insurance brokerage commissions in 1997
aggregating $44,126 in connection with the provision of insurance coverage
for certain of the real property investments of the Partnership and its
venture. Such commissions are at rates set by insurance companies for the
classes of coverage provided.
The General Partners of the Partnership may be reimbursed for their
salaries, salary-related and direct expenses relating to the administration
of the Partnership and the operation of the Partnership's real property
investments. In 1997, an affiliate of the General Partners earned
reimbursement for such expenses in the amount of $65,845 of which $23,679
was unpaid at December 31, 1997.
The Partnership is permitted to engage in various transactions
involving affiliates of the Managing General Partner of the Partnership.
The relationship of the Managing General Partner (and its directors and
officers) to its affiliates is set forth above in Item 10 above and Exhibit
21 hereto.
<PAGE>
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Managing General Partner, its officers and directors and the Associate General Partner own the
following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership JMB Realty Corporation 5 Interests (1) Less than 1%
Interests and Assignee
Interests Therein indirectly
Limited Partnership Managing General 5 Interests (1) Less than 1%
Interests and Assignee Partner, its indirectly
Interests Therein officers and
directors and
the Associate
General Partner
as a group
<FN>
- --------------
(1) Includes 5 Interests owned by the Initial Limited Partner of the Partnership for which JMB Realty
Corporation, as its indirect majority shareholder, is deemed to have sole voting and investment power.
No officer or director of the Managing General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Managing General Partner.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
</TABLE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Managing General Partner, affiliates or their management other than
those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements (See Index to Financial Statements
filed with this annual report).
2. Exhibits.
3-A. The Prospectus of the Partnership dated July 11,
1984 as supplemented July 24, 1984 and November 26, 1984, as filed with the
Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated
herein by reference. Certain pages of the prospectus are hereby
incorporated herein by reference to Exhibit 3-A to the Partnership's Report
on Form 10-K for December 31, 1992 (File No. 0-15966) dated March 19, 1993.
3-B. Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the Prospectus, which agreement is
hereby incorporated herein by reference to Exhibit 3-B to the Partnership's
Report on Form 10-K for December 31, 1992 (File No. 0-15966) dated
March 19, 1993.
4-A. Mortgage loan agreement, Mortgage and Security
Agreement, Secured Promissory Note B, Secured Promissory Note A and
Assignment of Leases and Rents relating to Riverside Square Mall between
the Partnership and Principal Mutual Life Insurance Company dated August
30, 1994 are hereby incorporated herein by reference to the Partnership's
Report on Form 10-K for December 31, 1994 (File No. 0-15966) dated
March 27, 1995.
4-B. Mortgage loan agreement between San Jose and
Connecticut General Life Insurance Co. dated June 20, 1985 relating to Park
Center Plaza are hereby incorporated by reference to the Partnership's
Report on Form 8-K (File No. 0-15966) dated June 20, 1985.
4-C. Mortgage loan agreement, Amended and Restated
Deed of Trust, Security Agreement with assignment of Rents and Fixture
Filing and Real Estate tax escrow and Security Agreement between San Jose
and Connecticut General Life Insurance Co. dated November 30, 1994 is
hereby incorporated herein by reference to the Partnership's Report of
Form 10-K for December 31, 1994 (File No. 0-15966) dated March 27, 1995.
<PAGE>
10-A. Acquisition documents relating to the purchase by
the Partnership of Riverside Square in Hackensack, New Jersey are hereby
incorporated by reference to the Partnership's prospectus on Form S-11
(File No. 2-90503) dated July 11, 1984.
10-B. Acquisition documents including the venture
agreement relating to the purchase by the Partnership of Park Center Plaza
in San Jose, California are hereby incorporated by reference to the
Partnership's Report on Form 8-K (File No. 0-15966) dated June 20, 1985.
10-C. Deed in Lieu of Foreclosure Agreement and
Memorandum of Mutual Releases dated November 15, 1994 between Three Hundred
Delaware Avenue Associates, L.P. and EML Associates are hereby incorporated
by reference to the Partnership's Report on Form 8-K (File No. 0-15966)
dated November 15, 1994.
10-D. Request for Full Reconveyance relating to the
repayment of the mortgage indebtedness by San Jose to Connecticut General
Life Insurance Company dated October 31, 1995 is hereby incorporated herein
by reference to the Partnership's Report on Form 10-K (File No. 0-15966)
dated March 25, 1996.
10-E. Purchase - Sale Agreement with exhibits dated
December 5, 1997 relating to the sale by the Partnership, through its joint
venture, of the Royal Executive Park office complex in Rye Brook, New York
between Royal Executive Park I, Royal Executive Park II, Royal Executive
III and Reckson Operating Partnership, L.P. are filed herewith.
10-F. First Amendment to the Purchase - Sale Agreement
dated February 10, 1998 relating to the sale by San Jose of the Park Center
Financial Plaza office complex in San Jose, California between JMB/San Jose
Associates and Divco West Properties, LLC are filed herewith.
10-G. Purchase - Sale Agreement with exhibits dated
December 3, 1997 relating to the sale by San Jose of the Park Center
Financial Plaza office complex in San Jose, California between JMB/San Jose
Associates and Divco West Properties, LLC are filed herewith.
21. List of Subsidiaries
24. Powers of Attorney
27. Financial Data Schedule
--------------
<PAGE>
(b) No reports on Form 8-K were required or filed since the
beginning of the last quarter of the period covered by this report.
No annual report or proxy material for the year 1997 has been sent to
the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - XI
By: JMB Realty Corporation
Managing General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Managing General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 25, 1998
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1998
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1998
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 25, 1998
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1998
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1998
By: STUART C. NATHAN*
Stuart C. Nathan, Executive Vice President
and Director
Date: March 25, 1998
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 25, 1998
<PAGE>
JMB INCOME PROPERTIES, LTD. - XI
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE Page
------------ ----
3-A. Certain pages of the Prospectus
dated July 11, 1984 Yes --
3-B. Amended and Restated Agreement
of Limited Partnership Yes --
4-A. Mortgage loan agreement
related to Riverside Square Yes --
4-B. Mortgage loan agreement
related to Park Center
Financial Center Yes --
4-C. Mortgage loan agreement
related to Park Center Plaza Yes --
10-A. Acquisition documents
related to Riverside Square Yes --
10-B. Acquisition documents
related to Park Center Plaza Yes --
10-C. Disposition documents related
to Bank of Delaware Yes --
10-D. Request for Full Reconveyance
related to San Jose Yes --
10-E. Purchase and Sale Agreement related to
the Royal Executive Park office complex No --
10-F. First Amendment to the Purchase
and Sale Agreement related
to San Jose No --
10-G. Purchase and Sale Agreement with
exhibits related to San Jose No --
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 10-E
- ------------
(J-XI)
SALE-PURCHASE AGREEMENT
-----------------------
BETWEEN
ROYAL EXECUTIVE PARK I
ROYAL EXECUTIVE PARK II
AND
ROYAL EXECUTIVE PARK III,
SELLERS,
AND
RECKSON OPERATING PARTNERSHIP, L.P.
BUYER.
PREMISES
--------
ROYAL EXECUTIVE PARK PHASES 1, 2 AND 3
RYE BROOK, NEW YORK
DATED AS OF DECEMBER 5, 1997
Handsman & Kaminsky
609 Fifth Avenue, 6th Floor
New York, New York 10017
(212) 750-3636
<PAGE>
SALE-PURCHASE AGREEMENT (the "Agreement"), made as of the 5th day of
December, 1997, among ROYAL EXECUTIVE PARK I ("REP I"), ROYAL EXECUTIVE
PARK II ("REP II") and ROYAL EXECUTIVE PARK III ("REP III"), each a general
partnership formed under the laws of the State of New York (individually, a
"Seller" and collectively, the "Sellers"), having an office c/o London &
Leeds Development Corporation, One Wall Street Court, New York, New York
10005, and RECKSON OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership, having an office at 225 Broadhollow Road, Melvillle, New York
11747-0983 ("Buyer").
W I T N E S S E T H :
---------------------
1. SALE-PURCHASE.
In consideration of the mutual covenants and agreements hereinafter
set forth, each Seller agrees to sell and convey to Buyer, and Buyer agrees
to purchase from Sellers, all of such Seller's right, title and interest in
and to (a) those certain plots, pieces or parcels of land located in the
Village of Rye Brook, Towns of Rye and Harrison, County of Westchester and
State of New York and partly in the Town of Greenwich, County of Fairfield
and State of Connecticut, more particularly described on Exhibits "A-1"
through "A-3" annexed hereto and made a part hereof (collectively, the
"Land"); (b) all easements, rights of way, privileges, permits,
governmental grants of authority, appurtenances and other rights pertaining
thereto; (c) all buildings and improvements thereon (collectively, the
"Buildings"), and all fixtures, machinery, personal property and equipment
used in connection therewith which are owned by such Seller and currently
located on the Land or in the Buildings, except trade fixtures and property
owned by space or other tenants, if any; and (d) all right, title and
interest, if any, of such Seller in and to any land lying in the bed of any
street, road or avenue opened or proposed, public or private, in front of
or adjoining the Land to the center line thereof (the Land, the Buildings
and other rights, improvements and property heretofore mentioned being
hereinafter collectively referred to as the "Property")(the portion of the
Property on the Land described on Exhibit "A-1" is hereinafter referred to
as "Phase 1", the portion of the Property on the Land described on Exhibit
"A-2" is hereinafter referred to as "Phase 2", the portion of the Property
on the Land described on Exhibit "A-3" is hereinafter referred to as "Phase
3") .
2. PURCHASE PRICE.
A. The purchase price for the Property (the "Purchase Price") is
EIGHTY-ONE MILLION UNITED STATES DOLLARS ($81,000,000.00), payable as
follows:
(i) TWO MILLION DOLLARS ($2,000,000.00) (the "Initial
Downpayment"), simultaneously with the execution and delivery of this
Agreement, at the option of Buyer, either by (1) a good certified or
official bank check, payable to the order of Commonwealth Land Title
Insurance Company as Escrow Agent ("Escrow Agent"), or (2) federal funds
wire transfer of immediately available funds to a bank account designated
by Escrow Agent;
(ii) TWO MILLION DOLLARS ($2,000,000.00) (the "Additional
Downpayment"), not later than the expiration of the Review Period
(hereinafter defined), time being of the essence, at the option of Buyer,
either by (1) a good certified or official bank check, payable to the order
of Escrow Agent, or (2) federal funds wire transfer of immediately
available funds to a bank account designated by Escrow Agent (the Initial
Downpayment and, once paid to the Escrow Agent, the Additional Downpayment
are hereinafter referred to as the "Escrow Deposit"); and
<PAGE>
(iii) SEVENTY-SEVEN MILLION DOLLARS ($77,000,000.00) (the
"Balance of the Purchase Price"), on the Closing Date (hereinafter
defined), by federal funds wire transfer of immediately available funds to
a bank account or accounts designated by Sellers.
B. The Escrow Deposit shall be held and disbursed by the Escrow
Agent in accordance with the provisions of Paragraph 3 of this Agreement.
For purposes hereof, the Escrow Deposit, together with all interest earned
thereon, is hereinafter collectively referred to as the "Deposit".
C. The aggregate amount of the Purchase Price shall be allocated
among Phases 1, 2, and 3 comprising the Property as follows:
Phase 1 $37,000,000
Phase 2 $36,000,000
Phase 3 $ 8,000,000
Notwithstanding the foregoing allocations, the Property will be purchased
and sold only in its entirety and no individual Phase or Phases thereof may
be separately purchased.
3. ESCROW.
The Deposit shall be held by the Escrow Agent, in trust, on the terms
hereinafter set forth:
A. The Escrow Agent shall deposit the Escrow Deposit in treasury
bills, treasury backed repurchase agreements or as otherwise directed in
writing by Sellers and Buyer.
B. The Escrow Agent shall not commingle the Deposit with any other
funds of the Escrow Agent or others and shall promptly advise Buyer and
Sellers of the number of any bank account in which the Escrow Deposit has
been deposited.
C. If the Closing takes place under this Agreement (the "Closing"),
then, on the Closing Date, the Escrow Agent shall deliver the Deposit to,
or upon the instructions of, Sellers. In such event, any interest earned on
the Escrow Deposit shall be credited against the Balance of the Purchase
Price due from Buyer hereunder.
D. If this Agreement is terminated in accordance with the terms
hereof, then the Escrow Agent shall pay the Deposit to, or upon the
instructions of, the party entitled thereto in accordance with the
provisions of this Agreement.
E. If the Closing does not take place under this Agreement by reason
of the failure of either party to comply with its obligations hereunder,
then the Escrow Agent shall pay the Deposit to the party entitled thereto
in accordance with the provisions of this Agreement.
F. It is agreed that the duties of the Escrow Agent are only as
herein specifically provided, and, subject to the provisions of
subparagraph G below, are purely ministerial in nature, and that the Escrow
Agent shall incur no liability whatever except for willful misconduct or
gross negligence, as long as the Escrow Agent has acted in good faith.
Sellers and Buyer each release the Escrow Agent from any act done or
omitted to be done by the Escrow Agent in good faith in the performance of
its duties hereunder. Each of the Sellers and Buyer jointly and severally
agrees to indemnify and hold the Escrow Agent harmless from any and all
costs, expenses, claims or actions which may be incurred or asserted by or
against the Escrow Agent, including without limitation claims or actions by
any of them (except to the extent resulting from the Escrow Agent's willful
misconduct or gross negligence).
<PAGE>
G. The Escrow Agent is acting as a stakeholder only with respect to
the Deposit. If there is any dispute as to whether the Escrow Agent is
obligated to deliver the Escrow Deposit or interest earned thereon or as to
the party whom said Escrow Deposit and interest earned thereon is to be
delivered, the Escrow Agent shall not make any delivery, but in such event
the Escrow Agent shall hold same until receipt by the Escrow Agent of an
authorization in writing, signed by all the parties having interest in such
dispute, directing the disposition of same, or in the absence of such auth-
orization the Escrow Agent shall hold the Deposit until the final
determination of the rights of the parties in an appropriate proceeding.
If such written authorization is not given, or proceedings for such
determination are not begun within thirty (30) days of the Closing Date and
diligently continued, the Escrow Agent may, but is not required to, bring
an appropriate action or proceeding for leave to deposit the Deposit in
court pending such determination. The Escrow Agent shall be reimbursed for
all costs and expenses of such action or proceeding including, without
limitation, reasonable attorneys' fees and disbursements, by the party
determined not to be entitled to the Deposit. Upon making delivery of the
Deposit in the manner herein provided, the Escrow Agent shall have no
further liability hereunder.
H. The Escrow Agent has executed this Agreement in order to confirm
that the Escrow Agent will hold the Deposit in escrow, pursuant to the
provisions hereof.
4. PERMITTED EXCEPTIONS.
The Property shall be conveyed to Buyer subject to the following
(collectively, the "Permitted Exceptions"):
(i) Zoning regulations and ordinances, municipal building
restrictions, environmental quality or land use restrictions or regulations
and all other laws, ordinances, regulations, restrictions or other action
of any public authority or other body having or exercising jurisdiction
over the Property;
(ii) Consents by Sellers or any former owner of the Property for the
erection of any structure or structures on, under or above any street or
streets on which the Property may abut;
(iii) Any state of facts as would be shown by an accurate
current survey or inspection of the Property, provided the same do not
interfere with or prohibit the use of the Property as presently utilized,
except that to the extent that improvements (a) on any parcel adjacent to
the Property shall encroach upon the Property, such encroachment shall not
be or be deemed to be an objection to title if such encroachment does not
materially interfere with the present use and maintenance of the Property;
and (b) on the Property shall encroach on any adjacent parcel or any street
abutting the Property, such encroachment shall not be or be deemed to be an
objection to title if the Title Company (as hereinafter defined) shall
insure (without additional cost to Buyer) that such encroachment may remain
as long as the relevant Building shall stand;
(iv) Covenants, restrictions, reservations, conditions, easements
and agreements of record, as set forth on Exhibits B-1, B-2 and B-3 hereof
or otherwise furnished to Buyer during the Review Period;
(v) Utility and telephone company rights and easements of record to
maintain, install or remove poles, wires, cables, pipes, boxes and other
facilities and equipment in, over and upon the Property;
(vi) The lien of franchise taxes of any corporation in the chain of
title to the Property, or the lien of any judgment, transfer tax,
inheritance tax, estate tax or any other similar lien, provided the Title
Company will, at the Closing, insure (at no additional cost to Buyer) Buyer
against collection of such judgment, taxes or liens from the Property;
<PAGE>
(vii) Rights of tenants, licensees or other permittees of the
Property set forth in Exhibit "F" annexed hereto (and subtenant and
licensees thereof) under the terms and conditions of all leases, options or
rights of first refusal to purchase and the other agreements affecting any
space in the Property (collectively, the "Leases");
(viii) Easements that affect any land in the bed of any street,
road, or avenue, opened or proposed, in front of or adjoining the Property,
provided same are not violated by the existing Buildings and the present
use thereof;
(ix) Liens for taxes not yet due and payable, water charges, sewer
rents and other governmental charges for which adjustment is to be made at
the Closing;
(x) Rights and easements for the installation, maintenance and
replacement of water mains and sewer lines and facilities and equipment in,
over and upon the Property, provided same are not violated by existing
Buildings and the present use thereof;
(xi) Mechanic's liens arising out of work performed or materials
furnished to any tenants of the Buildings of which Sellers have no
knowledge as of the date hereof;
(xii) Financing statements and agreements made by, or judgments
entered against, any tenant of the Buildings of which Sellers have no
knowledge as of the date hereof;
(xiii) Any violations of law or municipal ordinances, orders or
requirements which have been noted in or issued by, the departments of
building, fire, labor, health or other Federal, State, County or Municipal
departments having jurisdiction against or affecting the Property and any
other violations, whether or not of record; and
(xiv) the matters set forth on Exhibit "B-1" through "B-3" annexed
hereto and made a part hereof.
5. CLOSING DATE.
The Closing shall take place at 10:00 A.M. at the offices of Handsman
& Kaminsky LLP, 609 Fifth Avenue, 6th Floor, New York, New York 10017, on
December 19, 1997, or on such other date fixed by Sellers in accordance
with the provisions of Paragraph 10 hereof (each of the aforesaid dates, as
adjourned by mutual agreement of the parties, being referred to herein as
the "Closing Date"). By giving notice to the other party, either party
may adjourn the Closing Date to a date not more than three (3) business
days after such scheduled Closing Date. Time shall be of the essence as to
Buyer's obligation to close title hereunder by the aforesaid Closing Date,
as same may be so adjourned. The respective attorneys of the parties
hereto, as herein identified, are hereby authorized to agree (on behalf of
their respective clients) in writing to adjournments of the Closing.
6. VIOLATIONS.
Buyer agrees that title to the Property shall be conveyed subject to,
and Sellers shall have no obligation in respect of, any and all violations
of law or municipal ordinances, orders or requirements, whether or not of
record. Upon request made by Buyer, Sellers shall furnish Buyer with any
required authorization to make violation searches.
<PAGE>
7. REVIEW PERIOD.
A. PROPERTY DUE DILIGENCE SCHEDULE. Buyer acknowledges that it has
completed and approved its local market reviews and studies. Buyer shall
have until 5:00 p.m., eastern standard time, on December 15, 1997 (the
"Review Period"), time being of the essence, to complete its other reviews
and inspections of the Property, which reviews and inspections may include
an analysis of, but not limited to (i) the tenant leases, contracts, survey
and title documents affecting the Property, (ii) using non-invasive tests
and observations, the environmental and physical condition of the Property
and the Property's compliance with applicable law and (iii) the financial
condition of the Property. On or before the end of the Review Period (time
being of the essence), Buyer either (x) will notify Sellers and Escrow
Agent in writing that Buyer elects to proceed with this transaction or (y)
will notify Sellers and Escrow Agent in writing that Buyer for any reason
whatsoever is not interested in purchasing the Property, whereupon in the
case of the failure to receive the notice in clause (x) on or before the
end of the Review Period or the receipt of the notice in clause (y) on or
before the end of the Review Period, the Escrow Agent shall immediately
return the Deposit to Buyer and except as otherwise provided herein neither
party shall have any further rights or obligations hereunder. If Buyer
fails to deliver such notice to Sellers prior to the expiration of the
Review Period time being of essence, then Buyer shall conclusively be
deemed to have terminated this Agreement and such failure to notify shall
have the same force and effect as if actual written notice to terminate
this Agreement were received by Sellers. Buyer acknowledges that Sellers
have informed it of certain existing environmental conditions at the
Property, including without limitation the matters set forth in that
certain project report numbered T-1775 (the "Report"), dated June 30, 1997,
prepared by TETHYS Consultants, Inc., of Harrisburg Pennsylvania and
certain incidents of oil spillage, Buyer understands that, if Buyer elects
to proceed, Buyer shall assume and indemnify Sellers from and against all
loss, cost, damage, liability and expense, including, without limitation,
reasonable attorneys' fees and disbursements, arising from or relating to
the remediation (or a request for remediation by any governmental
authority) of the matters contained in such Report or with respect to such
oil spillage incidents (and any other environmental matters of which Buyer
has received written notice prior to the expiration of the Review Period or
any other environmental matters arising after the Closing), provided,
however, that if Sellers (as opposed to a third party) shall notify Buyer
of any such additional environmental matters later than December 12, 1997,
then the Review Period shall be extended until December 17, 1997 and the
Closing shall occur within four (4) business days thereafter, as designated
by Buyer (time being of the essence as to such dates), provided, however,
that either party may adjourn the Closing by notice to the other party for
not more than three (3) business days thereafter for any reason whatsoever,
time being of the essence as to Buyer's obligation to close by such date.
Buyer covenants that it will diligently perform and prosecute to completion
as soon as reasonably practicable following the Closing, at its sole cost
and expense, all work necessary to remedy the environmental conditions set
forth in the Report or in connection with the aforesaid oil spillage
incidents in accordance with applicable laws and regulations and to deliver
documentary evidence of such compliance to Sellers, in form reasonably
satisfactory to Sellers and Sellers' consultants. Buyer will commence its
due diligence promptly upon the receipt of a fully executed counterpart of
this Agreement and diligently work toward its completion. Buyer hereby
waives any and all rights of contribution or other rights or remedies
against Sellers under the Comprehensive Environmental Response Compensation
and Liability Act or any other applicable environmental laws, rules or
regulations. Buyer shall promptly notify Sellers if at any time during the
Review Period Buyer determines that Buyer is not interested in purchasing
Property. If Buyer shall determine to not proceed with this transaction as
aforesaid, then upon written request of Sellers, Buyer shall promptly
provide Sellers with complete copies of all materials arising from Buyer's
<PAGE>
due diligence activities other than Buyer's internally generated analyses,
reports and memoranda. Buyer agrees to indemnify and hold harmless Sellers
from and against all loss, cost, damage, expense or other liability
resulting from the conduct of Buyer's inspections, tests, investigations or
other due diligence, which indemnity shall survive the termination of this
Agreement.
B. INSPECTION. Subject to the rights of tenants, employees
(including without limitation Tenant's employees and employees of Service
Providers (hereinafter defined)) and workers at the Property, Sellers shall
permit Buyer reasonable access to the Property and appropriate documents in
order to complete its due diligence inspections and reviews. All
inspections and reviews will be conducted at reasonable times agreed upon
in advance by Sellers and Buyer, and at Sellers' election, Sellers may have
a representative present at such inspections and reviews. Buyer will
conduct its inspections and reviews in such a manner so as not to cause any
damage, interruption, loss, cost or expense to, or claims against Sellers
or the Property, and Buyer will indemnify, defend and hold Sellers,
tenants, licensees, any of the respective direct or indirect partners of
Sellers, any of their respective advisors, shareholders, officers,
directors, trustees, beneficiaries, employees, agents and contractors and
the Property harmless from and against any such damage, interruption, loss,
cost or expense or claim. During the Review Period, Buyer shall not
interview or discuss any matter with the union or non-union employees of
Sellers, the Service Providers or the property management company at the
Property (other than, upon prior notice to Sellers and the senior property
manager on site). Additionally, during the Review Period Buyer shall not
interview or discuss any matter with Tenants at the Property, provided,
however, that Buyer, with Sellers' representative present, may interview
MCI Telecommunications Corporation ("MCI"), Market Data, Entex Information
Services, Inc. and Compass Group USA, Inc. (such tenants are hereinafter
referred to as the "Major Tenants") regarding their respective tenancies
and the condition of the Property. Sellers, upon reasonable prior notice,
shall reasonably cooperate with Buyer in conducting such interviews. Buyer
shall make no invasive tests of the Property or any part thereof without
the Sellers' express written consent in each instance (which consent shall
not be unreasonably withheld).
C. CONFIDENTIALITY. Except to the extent required by Buyer's legal
or other regulatory requirements, prior to Closing, Buyer (for itself and
its agents, legal or financial advisors, or prospective lenders) agrees to
keep all information obtained by or on behalf of Buyer with respect to the
Property, Sellers and any tenant leases or in connection with Buyer's due
diligence, in confidence, and not to disclose any such information to any
person, governmental entity or other entity other than Buyer or its agents,
legal or financial advisors, or prospective lenders, without Sellers' prior
written consent in each instance, it being understood that in cases where
disclosure is required by legal or regulatory requirements applicable to
Buyer, Buyer will describe the Property in general terms and not disclose
or reference information that could be used to identify the specific
location of the Property or the identity of the Sellers or any partner of
any Seller. Buyer agrees that it shall not directly or indirectly engage
in or authorize any discussions with MCI, or any affiliate thereof,
regarding the purchase and/or sale of the Property or any portion thereof,
provided, however, that Buyer may interview MCI solely for the purposes
specified in paragraph B above in accordance therewith. Sellers shall
refrain from negotiating with any other prospective buyer of all or any
portion of the Property (other than MCI) until November 26, 1997.
<PAGE>
D. "AS-IS" SALE; DISCLAIMER.
(i) The Property will be sold to Buyer in its "AS IS" condition
and Buyer shall rely upon Buyer's own due diligence in determining whether
the Property is suitable for purchase by Buyer. Buyer represents, warrants
and agrees (a) that Buyer shall have examined the Property and all of the
articles of personal property and fixtures (if any) included as part of the
Property prior to the expiration of the Review Period, (b) at the
expiration of such Review Period, Buyer will be familiar with the physical
and environmental condition of the Property and the operation thereof, the
revenues and expenses of the Property, the zoning and other laws,
regulations and rules applicable to the Property and the compliance of the
Property therewith, the Leases and the rents payable thereunder and the
quantity, quality and condition of the articles of personal property and
fixtures agreed to be sold with the Property and any other matters related
to the Property or the transactions contemplated hereby which Buyer deemed
relevant in connection with its decision to proceed with this transaction
(the "Pertinent Matters"), and (c) that no Seller nor any of Sellers'
employees, agents or attorneys nor any of their respective direct or
indirect partners, nor any of their respective officers, directors,
advisors, employees, agents, trustees, shareholders, beneficiaries,
contractors or representatives is making or shall be deemed to have made
any express or implied representation or warranty of any kind or nature,
and, in particular, that no representations or warranties have been made
with respect to the Pertinent Matters, except as and solely to the extent
herein specifically set forth. Subject to the provisions of Paragraph 14
hereof, Buyer agrees to accept the Property "as is", in its present
condition, subject to reasonable use, wear, tear and natural deterioration
between the date hereof and the Closing Date, and further agrees that
Sellers shall not be liable for any latent or patent defects in the
Property or bound in any manner by guarantees, promises, projections,
operating statements, set-ups, or other information pertaining to the
Property made, furnished or claimed to have been made or furnished by
Sellers or any other person or entity, including any employee, agent,
attorney or other person representing or purporting to represent Sellers,
whether verbally or in writing, except as and solely to the extent that the
same is expressly set forth herein.
(ii) Except as and solely to the extent otherwise provided
herein, Buyer hereby acknowledges and agrees that it shall not be entitled
to, and shall not, rely on Sellers, its agents, employees or
representatives, and Sellers hereby disclaim any representations or
warranties of any kind, either express or implied, either under common law,
by statute, or otherwise, as to (a) the quality, nature, adequacy or
physical condition of the Property including, but not limited to, any
structural elements, foundation, roof, appurtenances, access, landscaping,
parking facilities or any electrical, mechanical, heating, ventilating and
air-conditioning, plumbing, sewage or utility systems, facilities or
appliances at the Property; (b) the quality, nature, adequacy or physical
condition of soils and ground water or the existence of ground water at the
Property; (c) the existence, quality, nature, adequacy or physical
condition of any utilities serving the Property; (d) the development
potential of the Property, its value, its profitability, its habitability,
merchantability or fitness, suitability or adequacy of the Property for any
particular purpose; (e) the zoning or other legal status of the Property;
(f) the compliance of the Property or its operations with any applicable
codes, statute, law, ordinance, rule, regulation, covenant, permit,
authorization, standard, condition or restriction of any governmental or
regulatory; (g) the presence or absence of asbestos containing material,
radon, urea formaldehyde or other potentially hazardous substances, wastes,
chemicals, pollutants or contaminants, including without limitation those
identified under the Comprehensive Environmental Response, Compensation,
and Liability Act , 42 U.S.C. Section 9601 et seq.; (h) the quality of any
labor or materials relating in any way to the Property; (i) the square
footage or acreage of the Property; (j) the leasing, physical or financial
<PAGE>
status of the Property or the Property's compliance with applicable laws;
(k) the accuracy or completeness of any information or data provided or to
be provided by Sellers including, without limitation, copies of any reports
or documents prepared for Sellers whether by third parties or otherwise
which may be included with such information; or (l) any other matter
relating to the Property or Sellers.
(iii) Buyer acknowledges and agrees that Sellers have not made,
do not make and will not make any representation or warranty with regard to
the past, present or future condition or compliance of the Property, or
compliance of past owners and operators of the Property, with respect to
any past, present or future environmental laws or land use laws, rules,
regulations, orders or requirements.
(iv) Buyer acknowledges and agrees that by the expiration of
the Review Period, Buyer will have had an adequate opportunity to make such
legal, factual and other inquiries and investigations as Buyer deems
necessary, desirable or appropriate with respect to the Property. Such
inquiries and investigations of Buyer shall be deemed to include an
environmental audit of the Property, an inspection of the physical
components and general condition of all portions of the Property, such
state of facts as an accurate survey and inspection would show, the present
and future zoning and land use ordinances, resolutions and regulations of
the city, town, county and state where the Property is located and the
value and marketability of the Property.
E. TENANT PURCHASE RIGHTS. Buyer acknowledges and understands that
its rights to purchase and hold title to the Property hereunder are subject
to (a) the continuing rights of MCI Telecommunications Corporation ("MCI")
and MCI International ("MCI International") to acquire certain portions of
the Property pursuant to the terms of their respective Leases at the
Property, and (b) New York Telephone's continuing right to acquire a
portion of Phase III pursuant to the terms of its lease at the Property.
Sellers represent to Buyer that they have previously delivered the right of
first refusal notices required by the terms of the MCI Lease. Buyer
acknowledges that it has reviewed the terms of the MCI International Lease,
has determined that the transaction contemplated by this Agreement is not
subject to the purchase right contained therein and agrees not to raise an
objection to title on account of such purchase right. If MCI shall
exercise its right to purchase any portion of the Property, then thereafter
neither Buyer nor Sellers shall have any further rights or obligations
hereunder (except for those matters which expressly survive the termination
hereof) and the Deposit immediately will be returned to Buyer. As a
condition precedent to Buyer's obligation to close on the Closing Date, REP
II shall deliver to Buyer and to Buyer's title insurance companies copies
of the notices which REP II caused to be delivered to MCI pursuant to MCI's
right of first refusal, which copies shall be certified as true and correct
by the general partners of REP II, which certification shall include the
date such notices were sent by REP II and the method(s) of delivery thereof
and that to the best of REP II's knowledge such notices substantially
comply with the right of first refusal notice requirements of the MCI
lease. It shall be a condition of Closing that Buyer's Title Insurance
Company agree to omit or issue affirmative insurance that the instant
transaction is not subject to the MCI right of first refusal, provided
however that in no event shall any Seller pay any additional premium for
such omission or affirmative insurance. In lieu of the Sellers' compliance
with the preceding two sentences, Sellers may deliver to Buyer a written
notice from MCI stating to the effect that MCI has received notice of the
instant transaction and is not exercising MCI's right of first refusal in
connection therewith, whereupon the provisions of the preceding two
sentences shall be deemed satisfied and Buyer shall raise no objection to
title based upon the MCI right of first refusal.
F. SURVIVAL. The provisions of this Paragraph 7 shall survive
the termination of this Agreement and the Closing.
<PAGE>
8. APPORTIONMENTS AND PAYMENTS.
A. The following are to be apportioned between Sellers and Buyer
as of the Closing Date and the net amount thereof shall either be paid by
Buyer to Sellers (with such amount to be paid to Sellers by Buyer's good
certified or official bank check, payable to the order of Sellers, or wire
transfer of immediately available funds), or credited by Sellers against
the Balance of the Purchase Price, as the case may be, at the Closing:
(i) real property taxes;
(ii) water charges;
(iii) sewer taxes and rents;
(iv) annual permit, license and inspection fees, if any, on
the basis of the fiscal year for which levied, if rights thereunder with
respect thereto are transferable to Buyer;
(v) fuel, steam and all other utilities;
(vi) fixed, additional and escalation rents (including,
without limitation, common area maintenance payments) payable under any
Leases (as hereinafter defined) between Sellers and space tenants
(collectively the "Rent"), if, as and when collected;
(vii) interest and permitted administrative charges, if any, on
tenants' security deposits;
(viii) supplies on hand in the Property in unopened cartons,
at Sellers' cost;
(ix) wages, vacation pay, pension and welfare benefits and
other fringe benefits of all persons employed at the Property;
(x) amounts payable under any Contracts (as hereinafter
defined) assumed by Buyer; and
(xi) all other items customarily apportioned in connection
with similar conveyances in the County of Westchester, State of New York.
B. If the Closing Date shall occur before the real property taxes,
water rates and charges and sewer taxes and rents are finally fixed, the
apportionments thereof made at the Closing shall be upon the basis of the
tax or water rates for the preceding year applied to the latest assessed
valuation, but after the real property taxes, water rates and charges and
sewer taxes and rents are finally fixed, Sellers and Buyer shall make a
recalculation of the apportionment of same, and Sellers or Buyer, as the
case may be, shall make an appropriate payment to the other based on such
recalculation.
C. Sellers shall arrange for a final reading of all master utility
meters (covering steam, gas, electricity and water and the derivative sewer
charges based on meters). Sellers and Buyer shall jointly execute a letter
to each of such utility companies advising such utility companies of the
termination of Sellers' responsibility for such charges for utilities
furnished to the Property from and after the Closing Date. If a bill is
obtained from any of such utility companies before the Closing Date,
Sellers shall pay such bill on or before the Closing and deliver proof of
payment thereof to Buyer. If such bill shall not have been obtained before
the Closing, Sellers shall pay all such utility, water and sewer charges as
evidenced by the last bill or bills relating to the period prior to the
Closing Date and Buyer shall pay all such utility charges relating to the
period after the Closing Date. Any bill which shall be rendered which
shall cover a period both before and after the Closing Date shall be
apportioned between Buyer and Sellers as of the Closing Date. An amount
equal to all security deposits, prepayments or credits accrued with Service
<PAGE>
Providers under the assigned Contracts, or with utilities, water and sewer
companies or other parties relating to the Property shall be paid to
Sellers by Buyer at the Closing, provided that if such security deposits,
prepayments or credits shall not be transferable to Buyer, Buyer shall
cooperate with Sellers' efforts to collect and enjoy such amounts.
D. The amount of any unpaid taxes, assessments, water rates and
charges and sewer taxes and rents which Sellers are obligated to pay and
discharge, with interest and penalties thereon to the second business day
after the Closing Date, may, at the option of Sellers, be allowed to Buyer
out of the Balance of the Purchase Price, provided that official bills
therefor, with interest and penalties thereon, are furnished by Sellers at
the Closing. If there are any other liens or encumbrances which Sellers
are obligated to pay and discharge, Sellers may use any remaining portion
of the Balance of the Purchase Price to satisfy the same, provided that
Sellers shall deliver to Buyer, at the Closing, instruments in recordable
form sufficient to satisfy such liens and encumbrances of record, together
with a check for the cost of recording or filing said instruments. Buyer,
if request is made at least three (3) business days prior to the Closing,
agrees to provide Sellers at the Closing, with separate certified and/or
official bank checks, payable as directed by Sellers, to facilitate the
satisfaction of any of the aforesaid taxes, assessments, water rates and
charges, sewer taxes and rents, liens and encumbrances.
E. If Sellers receive Rent payments from tenants at the Property
after the Closing Date which are for any period subsequent to the Closing
Date, Sellers shall remit to Buyer the amount of such Rent. If any past-
due Rent is owing as of the Closing Date, or if any Rent for the period
prior to the Closing Date shall have accrued although the same is not then
due and payable, Buyer agrees that the first monies received by Buyer from
tenants owing such past-due or accrued Rent, in an amount not exceeding one
month's Rent shall be received by Buyer, as trustee for Sellers, on account
or in payment of, such past-due or accrued Rent, and Buyer shall forthwith
remit to Sellers the amount of such past-due or accrued Rent out of such
first monies received by Buyer (the "General Rule"). Buyer acknowledges
that MCI International currently owes Sellers approximately $141,691.15 for
certain items of additional rental under its Lease and for certain sidewalk
repair work performed at the Property. If Sellers shall not have been paid
such amounts from MCI International prior to Closing, then Buyer shall
forthwith remit to Sellers, out of the first monies received by Buyer from
MCI International an amount equal to the lesser of (i) $141,691.15 or (ii)
the amount of one month's fixed and escalation Rent under the MCI
International Lease, it being understood that Sellers shall not receive
monies under the General Rule in payment of said $141,691.15 by MCI
International to the extent that Sellers have been paid monies on account
of such $141,691.15 under this sentence. Buyer agrees that Sellers shall
be entitled to retain any monies paid by J.B. Hanauer & Co. ("Hanauer") in
connection with the release of such tenant from its obligations under its
Lease or otherwise. Nothing herein contained shall preclude Sellers from
asserting separate and independent claims against such tenants, but only if
each such claim to be asserted exceeds $5,000.00, including, but not
limited to, the institution of such actions as Sellers shall deem necessary
or advisable for the purpose of collecting such past due rentals, the right
(but not the obligation) to do any of which is hereby reserved by Sellers.
Buyer shall cooperate with Sellers to collect any Rents (including, without
limitation, escalation additional rents) owing to Sellers in accordance
herewith.
<PAGE>
F. Subject to the provisions of subparagraph E above, to the
extent that Rent cannot be determined on the Closing Date, or is collected
after the Closing Date for any period prior thereto, the amount of such
Rent for the period ending on the Closing Date, and all accountings showing
the calculations thereof, shall be paid and furnished to Sellers by Buyer
if, as and when received after the Closing Date. The portion of the Rent
consisting of additional rent and escalation rent shall be apportioned on a
calendar year or fiscal year basis (depending upon which is appropriate
under each Lease) so that the amount thereof under any of the Leases to
which Sellers shall be entitled shall be an amount which bears the same
ratio to the total additional and escalation rents due thereunder for the
current period as the number of days in said period which shall have
elapsed prior to the Closing Date bears to the total number of days in said
period. In furtherance thereof, Buyer shall pay to Sellers all escalation
additional Rent (i.e., tax, operating expense and other escalation
additional Rent) payable under the Leases which relate to the period from
January 1, 1997 through the actual Closing Date as and when collected by
Buyer. Escalation additional Rent for calendar year 1997 shall be billed
by Buyer on or about April 1, 1998, and Buyer shall pay to Sellers any
portion thereof to which Sellers are entitled as aforesaid, as and when
collected by Buyer. Sellers agree to make available for Buyer's
examination, all records, statements and accounts bearing on or relating to
Rent and, on the Closing Date, to furnish Buyer with a comprehensive and
complete statement of prepaid Rent and uncollected Rent. Subsequent to the
Closing and until all apportionments shall have been finally determined,
Buyer agrees to make available for Sellers' examination, all records,
statements and accounts bearing on or relating to Rent. Any prepaid Rents
received by Sellers on or before the Closing Date covering any period of
time subsequent thereto shall be credited to Buyer at the Closing.
G. At the Closing, Sellers shall deliver to Buyer a good certified
or official bank check, payable to the order of Buyer (or grant Buyer a
credit against the Balance of the Purchase Price due at Closing), in the
aggregate amount of any security deposits held under any Leases between
Sellers and space tenants, together with any accrued interest earned
thereon and credited to Sellers' security deposit account (adjusted
pursuant to Paragraph 8(A) hereof). Buyer shall execute a receipt for the
amount of all security deposits so paid over. If any tenant of the
Property having a security deposit is in default under the terms of its
Lease and either (x) notices of default and termination of such tenant's
Lease shall have been duly given or (y) such estoppel certificate executed
by the tenant acknowledges that the security deposit held by the landlord
under the Lease has been reduced by reason of the tenant's default or fails
to state a claim that the landlord is in default of such tenant's Lease by
reason of such reduction in the security deposit, Sellers may retain so
much of the security deposited by such tenant and the interest accrued
thereon as shall be sufficient to cover Sellers' loss by reason of such
tenant's default.
H. At the Closing, Sellers shall pay their own counsel fees, deed
stamps, transfer taxes and such other closing costs as are customarily paid
by a seller and Sellers shall execute and deliver any appropriate return or
form as may be required in connection therewith. Buyer shall pay its
counsel fees, title insurance and survey costs, sales taxes (if any) and
such other closing costs as are customarily paid by a buyer and execute and
deliver any appropriate return or form as may be required in connection
therewith. In addition, any costs relating to Buyer's due diligence,
including, without limitation, those relating to appraisers, inspectors,
auditors and environmental or engineering consultants, shall be Buyer's
sole responsibility. Sellers shall have the option to grant to Buyer a
credit against the Balance of the Purchase Price, at the Closing, in an
amount equal to the amount of any deed stamps and transfer taxes payable by
Sellers. If such adjustment is made by Sellers, Buyer agrees to pay the
amount of such deed stamps and transfer taxes.
<PAGE>
I. Fuel oil, if any, owned by Sellers and on the Property on the
date as of which adjustments shall be made, shall be adjusted at the cost
price thereof to Sellers, as reflected in Sellers's last bill, plus taxes
paid thereon. The amount of fuel oil is to be estimated in writing by the
fuel company currently supplying fuel to the Property, as of a date which
is not more than three (3) business days prior to the Closing Date.
J. If, on the Closing Date, the Property or any part thereof shall
be affected by any assessments which are payable in installments, then
installments payable prior to the Closing Date shall be paid by Sellers
(subject to apportionment as provided for herein), and installments payable
after the Closing Date shall be paid by Buyer (subject to apportionment as
provided herein). Any such installments payable by Buyer shall not be
objections to title whether or not the same constitute liens on the Closing
Date.
K. Sellers have instituted prior to the Closing Date tax reduction
proceedings seeking to reduce the assessed valuation of the Property (a
"tax reduction proceeding") for certain periods before and after the
Closing Date. Subsequent to the Closing, Sellers shall be permitted to
continue such tax reduction proceedings, whether in the name of Sellers or
Buyer. Any refund of taxes which results from a tax reduction proceeding
commenced by Sellers ("refund") shall be the sole property of Sellers,
except that Buyer shall be entitled to that portion of the refund (after
deduction from the full refund of all of Sellers' expenses incurred in
connection therewith, including without limitation attorneys' fees and
expenses) which is refundable to tenants under the Leases, and that portion
of such refund which relates to the period subsequent to the Closing.
Sellers shall have the right to settle any tax reduction proceeding without
Buyer's consent, except to the extent Buyer will be bound by any settlement
for any tax year following the Closing and for any tax reduction proceeding
relating solely to the tax year in which the Closing occurs, for which
Buyer's prior written consent shall be required, which consent Buyer agrees
not to unreasonably withhold or delay. Buyer shall execute and deliver any
documents that may be reasonably required by Sellers in connection with
such tax reduction proceeding and any recovery had thereunder, all without
charge or expense to Sellers.
L. The parties hereto agree that any errors or omissions in
computing apportionments at the Closing shall be corrected promptly after
their discovery. In furtherance thereof, the parties agree to recalculate
apportionments and make appropriate payments to each other on or about the
ninetieth (90) day following the Closing.
M. The parties hereto agree that Buyer's attorneys shall be "the
real estate reporting person" with respect to this transaction who is
responsible for the completion of form 1099S or such other successor form
as may be prescribed by the Internal Revenue Service and for fulfilling all
of the obligations and requirements of Section 6045(e) of the Internal
Revenue Code of 1986, as amended.
N. Sellers shall be responsible for paying $771,450 on account of
tenant improvement work in connection with Compass Group USA, Inc. Lease,
and $13,617 representing brokerage commission in connection with the
failure of MCI to exercise a right of termination in the MCI Lease. In
addition, Sellers shall be responsible for all brokerage commissions which
were due and payable or which accrued prior to the date of Closing, it
being understood by way of example that if a lease is signed prior to the
Closing and the brokerage agreement provides for the payment of a $20,000
brokerage commission in two instalments of $10,000, the first instalment
payable before the Closing and the second instalment payable after the
Closing, the Sellers shall nevertheless be responsible for the payment of
both $10,000 instalments, unless the second instalment relates to
circumstances (such as the tenant's failure to terminate or exercise of an
<PAGE>
expansion or renewal right) which by their nature will not occur until
after the Closing in which latter case the Sellers shall pay the first
$10,000 instalment and the Buyer shall pay the second $10,000 instalment.
Notwithstanding the foregoing example, in all cases where a brokerage
commission is claimed with respect to a current or future Lease and the
right to earn the commission is or may be affected by events that occur or
fail to occur subsequent to the Closing, Buyer shall be responsible for all
such commissions.
O. The provisions of this Paragraph 8 shall survive the Closing
Date.
9. CLOSING DOCUMENTS.
A. At the Closing, and upon payment by Buyer of the Balance
of the Purchase Price (plus any other sums which Buyer has agreed herein to
pay to Sellers at the Closing, but less any credits to which Buyer may be
entitled to hereunder), each Seller shall deliver to Buyer the following
with respect to the portion of the Property owned by such Seller:
(i) A bargain and sale deed (without covenants) from each
Seller (collectively, the "Deeds"), in proper statutory form for recording,
which shall be duly executed and acknowledged so as to convey to Buyer
title to that portion of the Property owned by each Seller, subject to the
Permitted Exceptions. Specifically, subject to and in accordance with the
terms hereof, REP I shall convey title, to that portion of the Property
described on Exhibit "A-1" annexed hereto, REP II shall convey title to
that portion of the Property described on Exhibit "A-2" annexed hereto and
REP III shall convey title to that portion of the Property described on
Exhibit "A-3" annexed hereto;
(ii) An assignment and assumption of the Leases, in the form
attached hereto as Exhibit "C";
(iii) An assignment and assumption of Contracts in the form
attached hereto as Exhibit "D". Sellers, at Buyer's written request, shall
terminate by notice given at the Closing any Contracts (other than all
applicable brokerage or commission agreements with respect to tenants or
Leases at the Property, none of which shall be terminable by Buyer) which
Buyer elects not to assume, it being understood that Buyer shall be
responsible for and indemnify Sellers against any amounts due under such
terminated Contracts for the period subsequent to the Closing through the
effective date of termination, it being further understood that Buyer shall
notify Sellers as to which Contracts it elects not to assume by the Closing
Date;
(iv) Notices executed by Sellers addressed to all tenants in
the Buildings, advising them of the within sale, the assignment of their
respective Lease security deposit (including interest) (if held by such
Seller) and the assumption by Buyer of the obligations as landlord
thereunder, directing them to send Rent to Buyer or Buyer's managing agent,
and containing such other information as may be required in order to
relieve such Sellers from any liability to such tenants with respect to the
security deposits delivered to Buyer, which notices Buyer shall mail, at
Buyer's sole cost and expense, to each tenant by certified mail, return
receipt requested;
<PAGE>
(v) As a condition to Closing, Sellers shall deliver executed
estoppel certificates, substantially in the form of the estoppel
certificate attached hereto as Exhibit "E" or in the form required by the
applicable lease with no material omissions therefrom or material changes
thereto or new provisions or statements added thereto, any of which are
materially adverse to the rights or interests of the landlord under the
lease of the tenant giving such certificate, from the Major Tenants
(including MCI and MCI International and their affiliates that have a Lease
to occupy space at the Property ) and from tenants occupying not less than
fifty percent (50%) of the balance of the leased space at the Property;
provided, however, that Sellers shall request estoppel certificates from
all tenants in the Building. In the event an estoppel certificate
delivered by a tenant does not conform to the form of the estoppel
certificate attached hereto and if such non-conforming matter can be
remedied by the performance of work or the payment of money, Sellers shall
have the right but not the obligation to cure the non-conforming matter set
forth in such estoppel certificate, by either performing or causing to be
performed the work, paying the money, or by granting Buyer a credit against
the Purchase Price in an amount reasonably necessary to perform such work,
as reasonably determined by the parties. Additionally, if Sellers shall be
unable to deliver an estoppel certificate for any tenant of the Building by
the Closing Date other than the Major Tenants, for which Sellers shall be
required to deliver an estoppel certificate, then Sellers shall have the
right but not the obligation to deliver to Buyer, in substitution for such
estoppel certificate, a certificate from Sellers (a "Sellers'
Certificate"), certifying as to the matters set forth in the form of the
estoppel certificate attached hereto as Exhibit "E" which shall survive the
Closing until November 15, 1998; provided, however, that if Sellers shall
deliver a partially completed estoppel certificate from a particular
tenant, then such Sellers' Certificate shall cover only those matters set
forth in the estoppel certificate which were not confirmed by the
respective tenant. If Sellers deliver an estoppel certificate for a
required tenant subsequent to the Closing Date, then such Sellers'
Certificate shall be deemed canceled to the extent of the matters confirmed
in such estoppel certificate, provided, however, that if the required
estoppel certificate shall have been fully completed, then the Sellers'
Certificate with respect thereto shall be canceled in full;
(vi) Original or certified copies of all Leases, amendments
and other documents relating thereto, rent records and related documents in
the possession or under the control of Sellers (which documents may be
delivered at the Property). Such records shall include a schedule of all
cash security deposits, including any interest thereon, held by Sellers on
the Closing Date under the Leases together with appropriate instruments of
transfer or assignment with respect to any lease securities which are other
than cash and a schedule updating the Lease Schedule and setting forth all
arrears in rents and all prepayments of rents;
(vii) Such affidavits and indemnities as the Title
Company may reasonably require in order to omit from its title insurance
policy all exceptions for (a) judgments, bankruptcies or other returns
against persons or entities whose names are the same as or similar to
Sellers' names; (b) parties in possession (other than tenants pursuant to
the Leases and other occupants under the Contracts); and (c) mechanics'
liens;
(viii) Sellers shall make all tenant files and records
including without limitation all tenant correspondence and billing for
escalations and files and records for the Buildings available to Buyer for
copying, which obligation shall survive the Closing;
<PAGE>
(ix) Original (or photocopies, if originals are
unavailable to Sellers) of all site plans, surveys, soil and substrata
studies, architectural drawings, plans and specifications, engineering
plans and studies, floor plans, landscape plans and other plans or studies
of any kind in the possession or under the control of Sellers that relate
(a) to the Land, the Buildings, including without limitation as-built plans
for tenant improvements, or (b) otherwise to the Property. Sellers shall
also deliver (i) original (or photocopies, if originals are unavailable to
Sellers) of all then effective assignable guaranties and warranties made by
any person for the benefit of Sellers and in the possession or under the
control of Sellers, with respect to the Property or any of its components,
together with an instrument in form and substance reasonably satisfactory
to Buyer assigning the same to Buyer, and (ii) all certificates, licenses,
permits, authorizations and approvals issued for or with respect to the
Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may by substituted if the originals
are posted at the Property.
(x) All keys in Sellers' possession to all entrance
doors to, and any equipment and utility rooms located in, the Property
(appropriately tagged for identification); and
(xi) An executed Affidavit of Non-Foreign Status,
certifying that each Seller is not a "foreign person" pursuant to Section
1445 of the Internal Revenue Code;
B. At the Closing, Buyer shall deliver to Sellers a duly executed
and acknowledged agreement in form and substance reasonably satisfactory to
Sellers whereby Buyer shall (i) assume all of Sellers' obligations under
the Leases (arising from and after the Closing), and (ii) agree to
indemnify Sellers against, and hold Sellers harmless from, any liability,
damages, claims, losses, costs and expenses (including attorneys' fees)
arising from or relating to (x) the Leases or the obligations or
responsibilities of the landlord thereunder with respect only to the period
subsequent to the Closing and the security deposits delivered under such
Leases (but only to the extent same have been delivered to Buyer) and (y)
the Pertinent Matters.
C. The parties acknowledge and agree that no portion of the
Purchase Price is for or allocated to any personal property (if any)
located at the Property. However, if any governmental body deems any part
of the Purchase Price to have been paid for any personal property
transferred hereunder, then Buyer shall pay all such sales tax so payable,
which payment shall be made at the Closing. The provisions of this
subparagraph shall survive the Closing.
10. Title Insurance.
A. Buyer shall order from a reputable title insurance company
which is licensed to do business in the States of Connecticut and New York
(the "Title Company"), within five (5) days after the execution of this
Agreement, time being of the essence, a title report with respect to the
Property and request the Title Company to deliver to the Sellers a copy
thereof promptly upon receipt of the same, but, in all events, not later
than the expiration of the Review Period, time being of essence. If such
title report discloses title defects or exceptions to title which are not
included within the Permitted Exceptions and if, by reason of such title
defects or exceptions, the Sellers shall be unable to convey title to the
Property in accordance with the provisions of this Agreement, then the
Sellers shall have the right, but not the obligation, to attempt to cause
the Title Company to omit such defects or exceptions from the title
insurance policy to be issued to the Buyer and, for such purpose, the
Sellers shall be entitled to one or more adjournments of the Closing for a
period not exceeding sixty (60) days in the aggregate. If the Sellers
refuse or are unable to eliminate any such title defects or exceptions and
convey title to the Property in accordance with the terms of this Agreement
<PAGE>
by the Closing, as the same may be adjourned as aforesaid, then the Buyer,
as its sole and exclusive remedy, may elect by written notice to the
Sellers to either (i) reject title to the Property and terminate this
Agreement, or (ii) accept title to the Property subject to such defects or
exceptions without any abatement of the Purchase Price or liability on the
part of the Sellers. If Buyer shall reject title under subsection (i)
above, then neither party shall have any liability whatsoever to the other
hereunder except that Buyer shall be entitled to a prompt refund of the
Deposit and the net cost of any title commitments and survey charges not
exceeding $15,000.00 in the aggregate. The existence of any condition to
which Buyer agrees to take subject under this Agreement shall not be deemed
or construed to render Sellers' title unmarketable, and notwithstanding
that such conditions may render title unmarketable, Buyer shall not have
the right to reject title by reason thereof, the Purchase Price shall not
in any respect be reduced, and Buyer shall not be entitled to damages
therefor. Anything contained in this subparagraph to the contrary
notwithstanding, the Buyer shall accept such title to the Property as the
Title Company shall be willing to insure, subject only to the Permitted
Exceptions. Notwithstanding anything to the contrary contained herein,
Sellers shall be obligated to remove any title exceptions for mortgages
made by Sellers, tax liens against Sellers or imposed upon the Property,
judgment liens against Sellers, or mechanics liens for work performed at
the request of Sellers and which in each case may be removed by the payment
of a liquidated sum and any title exception (other than the Permitted
Exceptions) created by Sellers' voluntary acts after the date hereof.
B. If a search of the title discloses judgments, bankruptcies or
other returns entered against any other person or entity having a name the
same as or similar to that of Sellers, Sellers shall, at the Closing,
deliver to Buyer affidavits showing that such judgments, bankruptcies or
other returns are not against Sellers.
C. Except as provided in paragraph A above, the Sellers do not
agree to undertake, and nothing herein contained shall be construed to
require Sellers to bring any action or proceeding or otherwise to incur any
expense whatsoever to render title to the Property either acceptable to
Buyer, insurable, or to be in accordance with the provisions of this
Agreement.
D. Except as provided in paragraph A above, the premium for
Buyer's title insurance policy to be issued by the Title Company pursuant
to the Commitment, and all related charges and survey costs incurred in
connection with the Commitment or such policy, shall be paid by Buyer.
11. THE LEASES.
A. Buyer acknowledges that Buyer has examined the Leases set
forth on the lease schedule (the "Lease Schedule") annexed hereto as
Exhibit "F". Sellers represent and warrant that, except as disclosed to
Buyer prior to the end of the Review Period, to the Sellers' actual
knowledge, (i) the Leases set forth on such Lease Schedule constitute all
of the agreements (other than any subleases and the Contracts) which relate
to, affect the occupancy of, or create and/or affect the rights to the
occupancy of, the Property or any portion thereof, and all amendments,
renewals, extensions and modifications thereof, (ii) except as set forth in
the Leases (and any subleases and Contracts), no person or firm has any
right to occupy any portion of the Property, (iii) all of the Leases are in
full force and effect and other than as set forth on the Lease Schedule,
none of them have been modified, amended or extended and no renewal or
expansion options have been granted to tenants except as specifically set
forth in the Leases, (iv) except for MCI, MCI International and New York
Telephone, no tenant has an option to purchase the Property or any part
thereof, (v) except as set forth therein, the rents set forth on the Lease
Schedule are being collected on a current basis and there are no arrearages
<PAGE>
in excess of one month, (vi) except as set forth in the Leases, no tenant
is entitled to rental concessions or abatements for any period subsequent
to the Closing Date, (vii) Sellers have not sent written notice to any
tenant of the Property claiming that such tenant is in default, which
default remains uncured, other than the unpaid Rent sums set forth on the
Lease Schedule, (viii) no action or proceeding instituted against Sellers
by any tenant of the Property is currently pending in any court, except
with respect to claims involving personal injury or property damage which
are covered by insurance and described on Exhibit "G", (ix) there are no
security deposits or prepaid rent in the nature of a security deposit other
than those set forth in the Lease Schedule or the Leases, (x) no rent has
been paid more than thirty (30) days in advance under any of the Leases,
(xi) all tenant improvement work required to be completed or paid for by
Sellers has been or prior to the Closing Date will be completed or paid
for, as the case may be, and (xii) except as set forth in the Leases and on
Exhibits F (Lease Schedules) and H (Contracts), there are no unpaid leasing
commissions or any liability therefor arising from options to expand or
renew contained in any of the Leases.
B. Except as is otherwise provided herein, Sellers agree that
Sellers will not make any modifications of the Leases which affect the
period subsequent to the Closing without the prior written consent of
Buyer, which consent Buyer agrees not to unreasonably withhold or delay.
Buyer acknowledges that Hanauer previously assigned its Lease to American
Progressive Life and Health Insurance Company of N.Y. by Assignment and
Assumption of Lease Agreement, dated September 29, 1997. By Consent to
Assignment, dated October 8, 1997, REP II consented to such assignment.
Buyer agrees that REP II shall have the right to release Hanauer from its
obligations under its Lease and the aforesaid Assignment and Consent and
REP II may receive any amounts payable in connection therewith.
C. The right and privilege is reserved to Sellers to institute
termination and eviction proceedings against any tenant prior to the
Closing based upon such tenant's failure to observe or perform any of its
obligations pursuant to its Lease, but notice thereof shall be given to the
attorneys for Buyer. Sellers do not guarantee or undertake that any tenant
of the Property will be in occupancy on the Closing or that any of the
Leases will be in force or effect on the Closing. Buyer agrees that the
vacating of any portion of the Property by any tenant, or the removal of
any tenant by eviction proceedings, or the termination of any of the
tenants' occupancies, by reason of defaults arising under the Lease or
otherwise, prior to the Closing, shall not give rise to any claim on the
part of Buyer or affect the obligations of Buyer hereunder in any manner
whatsoever.
D. If any of the rentable space in the Property is currently
vacant or becomes vacant between the date of this Agreement and the
Closing, the same shall not be relet, nor shall any extension or renewal of
any lease be made, nor shall any modification of the terms of any lease or
rental agreement be made (other than the Weston Insurance Brokerage, Inc.
Amendment of Lease) and Hanauer release, except with the prior written
consent of Buyer, which shall not be unreasonably withheld or delayed.
12. ACCEPTANCE OF DEED; REPRESENTATIONS AND WARRANTIES.
A. The acceptance of the Deeds by Buyer shall be deemed to be an
acknowledgment by Buyer that Sellers have fully performed, discharged and
complied with all of Sellers' obligations, representations, warranties,
covenants and agreements hereunder, that Sellers are discharged therefrom
and that Sellers shall have no further liability with respect thereto,
except for (i) the post-closing adjustments (if any) required hereunder,
and (ii) those, if any, which are herein specifically stated to survive the
Closing.
<PAGE>
B. Sellers and Buyer represent and warrant to each other that the
execution, delivery and performance of this Agreement have been duly
authorized and, except as otherwise provided herein, no other action or
approval is required in order to enable each respective party to consummate
the transaction contemplated by this Agreement.
C. Each Seller as to its portion of the Property to its actual
knowledge hereby represents and warrants to Buyer that:
(i) Such Seller has full right, power and authority in
accordance with law to sell and convey its interest in the Property to
Buyer as provided herein, subject to the purchase rights set forth in
Paragraph 7 above.
(ii) Sellers know of no pending or threatened actions or
proceedings regarding condemnation of the Property or any part thereof.
(iii) Except as set forth on Exhibit "G" annexed hereto,
pending tax certiorari proceedings, matters in the Report and the oil
spillage incidents referenced in Paragraph 7(A), there is no action, suit,
litigation, claim, administrative or governmental or quasi-governmental
investigation or proceeding pending against or relating to the Property.
(iv) Exhibit "H" annexed hereto lists all service,
maintenance, supply and management contracts (collectively, the
"Contracts") known to Sellers affecting the Property, and the information
set forth therein is accurate and complete as of the date hereof. Except
as otherwise specifically set forth in Exhibit "H" or elsewhere in this
Agreement (1) all of the Contracts are in full force and effect and none of
them have been modified, amended or extended, (2) Sellers have not sent
written notice to, or received written notice from, any management company,
maintenance or service provider (collectively, the "Service Providers")
claiming default under any Contracts, and (3) no action or proceeding
instituted by Sellers against any Service Providers or by any Service
Providers against Sellers is currently pending in any court.
(v) There are no employees of Seller employed at the Property
and no union contracts affecting the Property except as noted on Exhibit H
(Contracts).
(vi) As of the Closing Date, there will be no outstanding
rights of first refusal, rights of first offer, options or similar rights
to purchase all or any portion of the Property other than the respective
MCI, MCI International and New York Telephone's continuing options to
purchase a portion of the Property or portions thereof as set forth in its
lease, copies of which will be delivered to Buyer for its review during the
Review Period.
During the Review Period Sellers may notify Buyer of any matter that is the
subject of any Seller's representation or warranty (including, without
limitation, any matter related to brokerage or other Contracts and the
Leases), which noticed matter will be deemed an exception to such
representation or warranty and shall be deemed included in the appropriate
obligations to be assumed by Buyer, provided, however, that if Sellers (as
opposed to a third party) shall notify Buyer of any such additional matters
later than December 12, 1997, then the Review Period shall be extended
until December 17, 1997, and the Closing shall occur within four (4)
business days thereafter, as designated by Buyer (time being of the essence
as to such dates), provided, however, that either party may adjourn the
Closing by notice to the other party for not more than three (3) business
days thereafter for any reason whatsoever, time being of the essence as to
Buyer's obligation to close by such date
<PAGE>
D. Anything to the contrary contained in this Agreement
notwithstanding, the covenants, representations and warranties of each
Seller shall survive until November 15, 1998, whereupon all covenants,
representations and warranties of Sellers shall be deemed fully observed,
paid and performed, and Buyer shall have no further rights or remedies with
respect thereto, except for the breach of those covenants, representations
and warranties that are the subject of (x) a notice given on or before
November 15, 1998, from Buyer to Sellers in writing that describes with
specificity the nature of the breach and the damages arising therefrom, and
(y) litigation of the breach described in such notice that is duly
commenced on or before the fifteenth (15th) day) after the notice is given
pursuant to clause (x) and at all times prosecuted diligently thereafter,
as to which notice and litigation dates time shall be of the essence.
E. For purposes of this Agreement, all references to "knows,"
"known" or "knowledge" of any of the Sellers shall mean the actual
knowledge without further inquiry as of the date of the relevant
representation or warranty of the following individuals:
For REP I: Douglas Welker or Thomas J. Collins,
For REP II: Douglas Welker or Thomas J. Collins, and
For REP III: Thomas J. Collins,
it being understood that each Seller currently relies upon the knowledge of
such individuals as representatives of the general partner of each Seller
who are generally familiar with major current matters affecting the
Property owned by such Seller (other than matters known to the property
manager, the property engineer or other specialists entrusted with specific
matters or responsibilities concerning the Property, to the extent that (x)
the knowledge of such specialists has not been imparted to Messrs. Welker
or Collins in writing and (y) such writing is not disclosed to the Buyer
prior to the end of the Review Period).
13. BROKER
Buyer represents and warrants to Sellers that Buyer has had no
dealings with respect to this transaction with any real estate broker, firm
or salesman, or any other person or corporation, except Richard Ellis LLC,
Inc. (the "Broker"), and Sellers agree to pay the brokerage commission due
to the Broker in accordance with the terms of a separate written agreement
with said Broker. Buyer agrees to indemnify Sellers against, and defend
Sellers and save Sellers harmless from and against any and all claims, and
Sellers' reasonable expenses related thereto (including attorneys' fees),
for brokerage commissions, fees or other compensation by any person, firm
or corporation (other than the Broker) who shall allege to have acted in
this transaction with Buyer or dealt with Buyer in connection herewith.
Sellers agree to indemnify Buyer against, and defend Buyer and save Buyer
harmless from any and all claims, and Buyer's reasonable expenses related
thereto (including reasonable attorneys' fees), for brokerage commissions,
fees or other compensation by any person, firm or corporation who shall
allege to have acted in this transaction with Sellers or dealt with Sellers
in connection herewith. The provisions of this Paragraph shall survive the
Closing and any termination of this Agreement.
14. CONDEMNATION AND DESTRUCTION.
A. If, prior to the Closing Date, all or any significant portion
of the Property is taken by eminent domain or is the subject of a pending
taking which has not been consummated (collectively, a "Taking"), Sellers
shall notify Buyer of such fact and Buyer shall have the option to
terminate this Agreement upon notice to Sellers given not later than ten
(10) business days after receipt of Sellers's notice, time being of the
essence. If this Agreement is terminated, as aforesaid, then the Deposit
<PAGE>
shall be returned to Buyer, and thereupon neither party shall have any
further rights or obligations to the other hereunder except such
obligations as survive termination of this Agreement. If Buyer elects not
to terminate this Agreement as aforesaid, or if an "insignificant portion"
(i.e., any Taking which does not materially interfere with access to the
Property and does not serve to decrease in any material respect the size of
any of the Buildings) of the Property is taken by eminent domain, there
shall be no abatement of the Purchase Price, but Sellers shall assign and
turn over at the Closing, and Buyer shall be entitled to receive and keep,
all awards for such taking by eminent domain.
B. If, prior to the Closing, a material part of any of the
Buildings is destroyed or damaged by fire or other casualty ("material"
being deemed to be any destruction greater than "immaterial", as defined
below, or permitting Tenants paying Rents of more than ten percent (10%) of
the aggregate Rents of the Property to terminate their leases), Sellers
shall notify Buyer of such fact and Buyer shall have the option to
terminate this Agreement upon notice to Sellers given not later than twenty
(20) days after receipt of Sellers's notice. If this Agreement is
terminated as aforesaid, then the Deposit shall be returned to Buyer, and
thereupon neither party shall have any further rights or obligations to the
other hereunder except such obligations as survive the termination of this
Agreement. If Buyer elects not to terminate this Agreement as aforesaid,
or if there is damage to or destruction of an "immaterial" part of any of
the Buildings by fire or other casualty, then Sellers shall assign and turn
over, and Buyer shall be entitled to receive and keep, all insurance
proceeds paid or to be paid, and relating to the damage to the Property
caused by such casualty (the "Proceeds"), which remain after payment or
reimbursement is made for the work (if any) performed by Sellers in
connection with such casualty together with a check for the deductible
amount under Sellers' insurance policy (if any), without further abatement
of the Purchase Price, provided, however, that in no event shall Sellers be
obligated to restore any portion of the Property that is damaged by
casualty. Sellers agree to maintain in force and effect until the Closing
Date any existing casualty insurance coverage on the Property. Sellers
represent and warrant to Buyer that its existing casualty insurance covers
the Buildings for 100% of the replacement value thereof (less a reasonable
deductible). An "immaterial" part of the Buildings shall be deemed to have
been damaged or destroyed if either (i) the cost of repair or replacement
shall be $2,500,000 or less, or (ii) the damage to the Buildings may be
repaired (without regard to the cost therefor) within the period expiring
one hundred twenty (120) days after the Closing Date as scheduled prior to
such casualty, as reasonably determined by a reputable architect who is
jointly selected by Sellers and Buyer.
15. DEFAULTS.
A. If Sellers shall tender the Deeds in compliance with the
Sellers' obligations hereunder, and Buyer shall fail or refuse to close
title hereunder as required by the terms of this Agreement, then the Escrow
Agent shall deliver the Deposit to Sellers (pro rata in proportion to the
allocation of the Purchase Price set forth in Paragraph 2(C)), and the
Sellers shall be entitled to retain the Deposit, free of any claim thereto
of Buyer, as liquidated damages, as their sole and exclusive remedy
hereunder, and neither party shall have any further rights or obligations
to the other hereunder (other than those obligations which expressly
survive the closing or termination hereof). In connection with the
foregoing, the parties recognize that Sellers will incur expense in
connection with the transaction contemplated by this Agreement and that the
Property will be removed from the market; further, that it is extremely
difficult and impracticable to ascertain the extent of detriment to Sellers
caused by the breach by Buyer under this Agreement and the failure of the
consummation of the transaction contemplated by this Agreement or the
amount of compensation Sellers should receive as a result of Buyer's breach
or default. In the event the sale of the Property shall not be consummated
on account of Buyer's default, then the retention of the Deposit shall be
Sellers' sole and exclusive remedy under this Agreement by reason of such
default.
<PAGE>
B. If the transaction herein provided shall not be closed by
reason of Sellers' default under this Agreement or the failure to satisfy
the conditions set forth in this Agreement or the termination of this
Agreement in accordance with the terms hereof, then the Deposit shall be
returned to Buyer, and neither party shall have any further obligation or
liability to the other; provided, however, if the transaction hereunder
shall fail to close solely by reason of a material or wilful default by
Sellers, Buyer shall have fully performed its obligations hereunder and
shall be ready, willing and able to close, then Buyer shall be entitled to
specifically enforce this Agreement; and provided further however, if
Sellers shall willfully take actions so as to attempt to prevent the
availability of a specific performance to Buyer, then Buyer shall, at its
option, in lieu of specific performance, be entitled to a return of the
Deposit and reimbursement of its actual out-of-pocket costs paid to third
parties in connection with the transactions hereunder (such reimbursement
not to exceed $50,000 in the aggregate). Except as set forth above, no
other actions, for damages or otherwise, shall be permitted in connection
with any default by Sellers. Notwithstanding anything to the contrary
contained herein, if the closing of the transaction hereunder shall have
occurred (and Buyer shall not have waived, relinquished or released any
applicable rights in further limitation), the aggregate liability of
Sellers arising to or in connection with the representations, warranties,
indemnifications, covenants or other obligations (whether express or
implied) of Sellers under this Agreement (or any document executed or
delivered in connection herewith) shall not exceed $2,000,000.00, which
amount shall be maintained by Sellers in Sellers' names until November 15,
1998, at which time, if no claim has been asserted by Buyer against
Sellers, Sellers may distribute such funds. If a claim has been timely
made such funds (up to the amount that might be necessary to satisfy such
claim) shall continue to be held by Sellers until resolution of the claim.
C. The liability of Sellers hereunder for damages or otherwise
shall be limited to Sellers' interest in the Property including, without
limitation, the proceeds of any insurance policies covering or relating to
the Property, any awards payable in connection with any condemnation of the
Property or any part thereof, and any other rights, privileges, licenses,
claims, causes of actions or other interests, sums or receivables
appurtenant to the Property. Sellers shall have no personal liability
beyond Sellers' interest in the Property, and no other property or assets
of Sellers shall be subject to levy, execution or other enforcement
procedure for the satisfaction of Buyer's claims. In no event shall
Sellers' officers, partners, trustees, directors, agents, employees or
shareholders have personal liability in connection with the transactions
hereunder or otherwise. No constituent partner in or agent of Sellers, nor
any advisor, trustee, director, officer, employee, beneficiary,
shareholder, participant, representative or agent of any corporation or
trust that is or becomes a constituent partner in Sellers (including, but
not limited to, JMB Realty Corporation or London & Leeds Development
Corporation or any affiliates thereof) shall have any personal liability,
directly or indirectly, under or in connection with this Agreement or any
agreement made or entered into under or pursuant to the provisions of this
Agreement, or any amendment or amendments to any of the foregoing made at
any time or times, heretofore or hereafter, and Buyer and its successors
and assigns and, without limitation, all other persons and entities, shall
look solely to Sellers' interest in the Property for payment of any claim
or for any performance, and Buyer, on behalf of itself and its successors
and assigns, hereby waives any and all such personal liability.
Notwithstanding anything to the contrary contained in this Agreement,
neither the negative capital account of any constituent partner in Sellers,
nor any obligation of any constituent partner in Sellers to restore a
negative capital account or to contribute capital to Sellers (or any
constituent partner of Sellers), shall at any time be deemed to be the
property or an asset of Sellers or any constituent partner thereof, and
neither Buyer nor any of its successors or assigns shall have any right to
collect, enforce or proceed against or with respect to any such negative
capital account or partner's obligation to restore or contribute.
<PAGE>
16. ENTIRE AGREEMENT.
This Agreement contains all of the terms agreed upon between the
parties with respect to the subject matter hereof, and all understandings
and agreements heretofore had or made between the parties hereto are merged
in this Agreement which alone fully and completely expresses the agreement
of said parties.
17. AMENDMENTS.
This Agreement may not be changed, modified, supplemented or
terminated, nor may any obligations hereunder be waived, except by an
instrument executed by the party hereto which is or will be affected by the
terms of such change, modification, supplementation or termination.
18. WAIVER.
No waiver by either party of any failure or refusal by the other
party to comply with its obligations shall be deemed a waiver of any other
or subsequent failure or refusal to so comply.
19. SUCCESSORS AND ASSIGNS.
The covenants, agreements, representations, and warranties herein
contained shall inure to the benefit of, and shall bind, the heirs,
administrators, successors and permitted assigns of the respective parties
hereto. Anything contained herein to the contrary notwithstanding, each
Seller shall be responsible only for, and be deemed to make, the covenants,
conditions, representations and warranties of Sellers solely with respect
to and to the extent of such Seller's interest in each of Phase 1, Phase 2
or Phase 3.
20. PARTIAL INVALIDITY.
If any term or provision of this Agreement or the application thereof
to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall be valid and be enforced to
the fullest extent permitted by law.
21. GOVERNING LAW.
A. This Agreement shall be governed by, interpreted under, and
construed and enforced in accordance with, the laws of the State of New
York applicable to agreements made and to be performed wholly within said
State without regard to principles of conflicts of laws.
B. Sellers and Buyer hereby irrevocably consent and agree that any
legal action, suit or proceeding arising out of or in any way connected
with this Agreement shall be instituted or brought in the courts of the
State of New York, in the County of New York, or in the United States
District Court serving such jurisdiction, and by execution and delivery of
this Agreement, Sellers and Buyer hereby irrevocably accept and submit, for
itself and in respect of its property, generally and unconditionally, to
the exclusive jurisdiction of either of such courts, and to all proceedings
in such courts. In addition to any method provided by applicable law,
Sellers and Buyer irrevocably consent to service of any summons and/or
legal process by registered or certified United States mail, postage
prepaid, in accordance with the provisions of Paragraph 25 hereof, such
method of service to constitute, in every respect, sufficient and effective
service of process in any such legal action or proceeding.
C. If any action or proceeding is brought by Sellers against Buyer
(or Buyer against Sellers) in connection with this Agreement and the
transactions contemplated hereby, then the losing party shall pay the
reasonable attorneys' fees and disbursements incurred by the prevailing
party in connection with such action or proceeding.
<PAGE>
22. ASSIGNMENT.
Buyer may not assign Buyer's interest in this Agreement without the
prior written consent of Sellers, except that Sellers' consent shall not be
required for an assignment to any Affiliate (hereinafter defined) of Buyer.
As used herein, "Affiliate" shall mean any subsidiary corporation or
partnership or other entity, at least a majority of which is owned,
directly or indirectly, by Buyer. No assignment of Buyer's interest under
this Agreement shall release Buyer from any of its obligations hereunder.
Except as aforesaid, the parties hereto do not intend to confer any right
or benefit hereunder to or on any other person, firm or corporation other
than the parties hereto.
23. PARAGRAPH HEADINGS.
The headings of the various paragraphs of this Agreement have been
inserted solely for the purposes of convenience, are not part of this
Agreement and shall not be deemed in any manner to modify, explain, expand
or restrict any of the provisions of this Agreement.
24. BINDING EFFECT.
This Agreement does not constitute an offer to sell and shall not
bind Sellers unless and until Sellers, in Sellers' sole discretion, elect
to be bound hereby by executing and unconditionally delivering to Buyer an
original or an original counterpart hereof.
25. NOTICES.
All notices, demands or requests (collectively, "notices") made
pursuant to, under or by virtue of this Agreement must be in writing and
sent to the party or parties to whom or to which such notice, demand or
request is being sent, by certified mail, return receipt requested or
delivered by hand with receipt acknowledged in writing or by facsimile
(followed the next business day with a copy delivered by national overnight
courier) or national overnight courier, as follows:
To Sellers:
c/o London & Leeds Development Corporation
One Wall Street Court
New York, New York 10005
Attn: Thomas J. Collins, Esq.
Facsimile: 212-344-5166
with a copy to:
Edward A. Kaminsky, Esq.
Handsman & Kaminsky LLP
609 Fifth Avenue, Sixth Floor
New York, New York 10017
Facsimile: 212-750-4699
and
c/o JMB Realty Corporation
900 North Michigan Avenue - Suite 1900
Chicago, Illinois 60611
Attn: Gary Nickele, Esq.
Facsimile: 312-915-1023
<PAGE>
with a copy to:
Pircher, Nichols & Meeks
1999 Avenue of the Stars - Suite 2600
Los Angeles, California 90067
Attn: Gary M. Laughlin, Esq.
Facsimile: 310-201-8922
To Buyer:
c/o Reckson Associates Realty Corporation
225 Broad Hollow Road
Melville, New York 11747
Attn: Jason Barnett, Esq.
Facsimile: 516-694-6952
with a copy to:
Herrick Feinstein LLP
Two Park Avenue - 20th Floor
New York, New York 10016
Attn: Richard Brown, Esq.
Facsimile: 212-889-7577
To Escrow Agent:
c/o Commonwealth Land Title Insurance Company
655 Third Avenue
New York, New York 10017
Attn: William N. Deatley
Facsimile: 212-986-3049
All notices (i) shall be deemed given when received in accordance herewith
and (ii) may be given either by a party or such party's attorney-at-law.
Notices also may be given by telephone facsimile transmission, provided
that an original copy of said transmission shall be sent to the addressee
by nationally utilized overnight delivery services following such
transmission. Telephone facsimiles shall be deemed delivered on the date of
such transmission. Extensions of time and/or adjournments of dates may be
granted by a party or such party's attorney-at-law as identified herein.
26. NO RECORDING OR NOTICE OF PENDENCY.
The parties agree that neither this Agreement nor any memorandum or
notice thereof shall be recorded and Buyer agrees not to file any notice of
pendency against the Property unless (i) Sellers shall have defaulted in
its obligations hereunder, (ii) Buyer shall have given Sellers written
notice of same, and (iii) Sellers shall have failed to remedy same within
thirty (30) days of said notice. In such event, Sellers shall timely
provide Buyer with any acknowledgments necessary for recordation.
<PAGE>
27. SELLERS' COVENANT.
Sellers covenant and agree to continue to operate the Property
between the date hereof and the Closing Date in a manner substantially
equivalent to that manner in which the Property was operated by the Sellers
in the past, provided however that in no event shall Sellers be obligated
to make any capital expenditure at the Property.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date above set forth.
SELLERS:
Tax ID#13-3120808 ROYAL EXECUTIVE PARK I
By: JMB Income Properties, LTD.-X,
a limited partnership, general partner
By: JMB Realty Corporation, a Delaware
Corporation, general partner
By:
Name:
Title:
By: London & Leeds-Rye
Corporation, general partner
By:
Thomas J. Collins, vice president
Tax ID #13-3202306 ROYAL EXECUTIVE PARK II
By: JMB Income Properties, Ltd-XI,
a limited partnership,
general partner
By: JMB Realty Corporation,
a Delaware Corporation,
managing general partner
By:
Name:
Title:
By: London & Leeds-Rye
Corporation, General Partner
By:
Thomas J. Collins, vice president
Tax ID #13-3379584 ROYAL EXECUTIVE PARK III
By: London & Leeds-Rye
Corporation, General Partner
By:
Thomas J. Collins, vice president
BUYER:
Tax ID #- RECKSON OPERATING PARTNERSHIP, L.P.
By:
Name:
Title:
<PAGE>
As to its obligations under
Paragraph 3 hereof
Commonwealth Land Title Insurance Company, Escrow Agent
By:________________
Name: Melvyn Mitzner
Title:
<PAGE>
Exhibit A-1
-----------
Legal Description - Phase 1
<PAGE>
Exhibit A-2
- ----------
Legal Description - Phase 2
<PAGE>
Exhibit A-3
- -----------
Legal Description - Phase 3
<PAGE>
Exhibit B-1, B-2 & B-3
- ----------------------
Permitted Exceptions
The standard printed exceptions and exceptions numbered 1 through 7, 14
through 17, 20 through 23, and 25 through 27 as shown on the Title Report,
dated November 24, 1997, of Commonwealth Land Title Insurance Company
(Title No. WP971062), and
Exceptions numbered 13 through 15 as shown on the Title Report, dated
November 24, 1997, of First American Title Insurance Company of New York
(Title No. 221-W-6813).
Together with all matters disclosed to Buyer prior to the end of the Review
Period.
<PAGE>
Exhibit "C"
-----------
ASSIGNMENT AND ASSUMPTION OF LEASES
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, [ROYAL EXECUTIVE PARK I][ROYAL EXECUTIVE PARK
II][ROYAL EXECUTIVE PARK III], having an office c/o London & Leeds
Development Corporation, One Wall Street Court, New York, New York 10005
("Assignor") hereby sells, assigns and transfers to RECKSON OPERATING
PARTNERSHIP, L.P., a New York limited partnership, having an office at 225
Broadhollow Road, Melville, New York 11747-0983 ("Assignee") all its
rights, title and interest in and to all the leases affecting the premises
located at 6 International Drive, Royal Executive Park, Rye Brook, New York
10573 (collectively, the "Leases") and more particularly described on
Schedule A attached hereto, with all security deposits and interest
received thereon relating to said Leases listed on Schedule A attached
hereto.
This Assignment is made without recourse to Assignor and without
covenant or warranty, express or implied, by Assignor, except as otherwise
set forth herein or in the Sale-Purchase Agreement pursuant to which this
Assignment is made.
TO HAVE AND TO HOLD the Leases and said security deposits and
interest received thereon unto the Assignee and its successors and
assignees forever.
Assignee hereby accepts said assignment and agrees to assume all of
the obligations of "Landlord" under the Leases arising from and after the
date hereof. Assignee hereby agrees to indemnify and hold harmless
Assignor from any and all liabilities accruing under said Leases from and
after the date hereof. Assignor hereby agrees to indemnify and hold
harmless Assignee from any and all liabilities accruing under said Leases
prior to the date hereof, subject to the provisions and limitations on
Assignor's liability as set forth in the Sale-Purchase Agreement pursuant
to which this Assignment is made (including without limitation Paragraph 15
(B) thereof).
IN WITNESS WHEREOF, Assignor and Assignee have duly executed this
Assignment as of the __ day of December, 1997.
ASSIGNOR:
[ROYAL EXECUTIVE PARK I
By: JMB Income Properties, LTD.-X,
a limited partnership, general partner
By: JMB Realty Corporation, a Delaware
Corporation, general partner
By:
Name:
Title:
By: London & Leeds-Rye
Corporation, general partner
By:
Thomas J. Collins, vice president]
<PAGE>
[ROYAL EXECUTIVE PARK II
By: JMB Income Properties, Ltd-XI,
a limited partnership, general partner
By: JMB Realty Corporation, a Delaware
Corporation, managing general partner
By:
Name:
Title:
By: London & Leeds-Rye
Corporation, General Partner
By:
Thomas J. Collins, vice president]
[ROYAL EXECUTIVE PARK III
By: London & Leeds-Rye
Corporation, General Partner
By: Thomas J. Collins, vice president]
ASSIGNEE:
RECKSON OPERATING PARTNERSHIP, L.P.
By:
Name:
Title:
<PAGE>
Schedule A
- ----------
Leases
<PAGE>
Exhibit "D"
-----------
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, [ROYAL EXECUTIVE PARK I][ROYAL EXECUTIVE PARK
II][ROYAL EXECUTIVE PARK III], having an office c/o London & Leeds
Development Corporation, One Wall Street Court, New York, New York 10005
("Assignor") hereby sells, assigns and transfers to RECKSON OPERATING
PARTNERSHIP, L.P., a New York limited partnership, having an office at 225
Broadhollow Road, Melville, New York 11747-0983 ("Assignee"), the
following:
1. All of Assignor's interest in and to those certain contracts
listed on Schedule A, attached hereto (the "Contracts") between Assignor
and those certain contractors (the "Contractors"), which contracts relate
to the operation and maintenance of buildings located at Rye Brook, New
York, commonly known as Phase [I][II][III] of the Royal Executive Park
(collectively, the "Premises").
2. Assignee hereby assumes, from and after the date hereof, the
performance of all of the terms, covenants and conditions of the Contracts
herein sold, assigned and transferred by Assignor which are the owner's
obligation thereunder and are to be performed by the owner from and after
the date hereof, and will defend with counsel approved by Assignor, save
harmless and indemnify Assignor from and against all claims, demands and
liabilities and all costs and expenses arising out of any failure of
Assignee to so perform from and after the date hereof or arising out of any
breach of this Assignment.
4. Assignor hereby agrees to defend, with counsel approved by
Assignee, save harmless and indemnify Assignee from and against all claims,
demands and liabilities and all costs and expenses arising out of any
failure of Assignor to perform any obligations of the owner thereunder
arising under any of the Contracts prior to the date hereof, subject to the
provisions and limitations on Assignor's liability as set forth in the
Sale-Purchase Agreement pursuant to which this Assignment is made
(including without limitation Paragraph 15 (B) thereof).
5. With respect to any actions now or hereafter being made against
Assignor in connection with any of the Contracts, Assignor reserves all
rights to the extent necessary to defend against any claims brought by any
third parties and to assert counterclaims against such third parties, in
circumstances where such third parties have asserted claims against
Assignor (whether such claims are in response to a suit brought by Assignee
or otherwise).
6. Assignor and Assignee from time to time will execute and
deliver all such instruments and take all such action as the other may
reasonably request in order further to effectuate the purposes of this
instrument and to carry out the terms hereof.
This Assignment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have dully executed this
Assignment the __ day of December, 1997.
ASSIGNOR:
[ ROYAL EXECUTIVE PARK I
By: JMB Income Properties, LTD.-X,
a limited partnership, general partner
By: JMB Realty Corporation, a Delaware
Corporation, general partner
By:
Name:
Title:
By: London & Leeds-Rye
Corporation, general partner
By: Thomas J. Collins,
vice president]
[ROYAL EXECUTIVE PARK II
By: JMB Income Properties, Ltd-XI,
a limited partnership, general partner
By: JMB Realty Corporation, a Delaware
Corporation, managing general partner
By:
Name:
Title:
By: London & Leeds-Rye
Corporation, General Partner
By: Thomas J. Collins,
vice president]
[ROYAL EXECUTIVE PARK III
By: London & Leeds-Rye
Corporation, General Partner
By: Thomas J. Collins, vice president]
ASSIGNEE:
RECKSON OPERATING PARTNERSHIP, L.P.
By:
Name:
Title:
<PAGE>
Schedule A
- ----------
Contracts
<PAGE>
Exhibit E
- ---------
Form of Tenant Estoppel Certificate
- ----------------------------------
<PAGE>
Exhibit F
- ----------
Lease Schedule
- -------------
<PAGE>
Exhibit G
- ---------
Pending Actions
- ---------------
<PAGE>
Exhibit H
---------
ROYAL EXECUTIVE PARK I & II CONTRACT LIST
EXHIBIT 10-F
- ------------
(J-XI)
FIRST AMENDMENT TO PURCHASE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
(Park Center Plaza, San Jose, California)
THIS FIRST AMENDMENT TO PURCHASE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS (this "First Amendment"), is made as of February 10, 1998, by
and between JMB/SAN JOSE ASSOCIATES, an Illinois general partnership
("Seller"), and DIVCO WEST PROPERTIES, LLC, a Delaware limited liability
company ("Buyer"), with reference to the following facts:
Seller and Buyer entered into that certain Purchase Agreement and
Joint Escrow Instructions, dated as of December 3, 1997 (the "Purchase
Agreement"). Each capitalized term used in this First Amendment, but not
defined herein, shall have the meaning ascribed to it in the Purchase
Agreement.
Seller and Buyer desire to amend the Purchase Agreement as set forth
in the First Amendment.
NOW, THEREFORE, the parties agree as follows:
Purchase Price.
Price Reduction. Paragraph 2A of the Purchase Agreement is hereby
deleted in its entirety and the following Paragraph 2A is hereby inserted
in the place thereof: "The purchase price (the "Purchase Price") for the
Property shall be the sum of Seventy-Six Million One Hundred Ninety-Five
Thousand Dollars ($76,195,000.00)." Seller and Buyer hereby agree that the
reduction to the Purchase Price represented by the foregoing has been
agreed upon based on discussions by Seller and Buyer of Buyer's due
diligence examinations, reviews and inspections and Buyer acknowledges that
such adjustment appropriately and adequately takes such due diligence
matters into account (including, without limitation, all roof, plaza
basement pumping system and other physical matters, all environmental
matters and all financial matters relating to such due diligence reviews).
Environmental Matters. Without limitation on the foregoing matters, Buyer
acknowledges that a portion of the foregoing Purchase Price reduction
related to the alleged presence of Hazardous Material in groundwater at the
Property and the alleged non-compliance with permitting requirements
related to the discharge of pumped groundwater from the Property.
Notwithstanding any other provision of the Purchase Agreement to the
contrary, Buyer waives any and all rights it has or may have against Seller
(including, without limitation, contribution rights under CERCLA) with
respect to any Hazardous Material in groundwater at or from the Property,
or with respect to any non-compliance with permitting requirements related
to the discharge of pumped groundwater from the Property. At Closing,
Buyer shall obtain from Zurich American/Steadfast Insurance Company the
environmental liability insurance policy described in those certain letters
dated January 23, 1998, and February 10, 1998, attached hereto as Schedule
"I", such policy to have a liability limit of not less than $5,000,000, a
deductible not to exceed $250,000, a term of not less than 10 years and an
endorsement in favor of Seller. In the event that Buyer obtains such
policy, Seller shall provide Buyer with a proration credit at Closing in an
amount equal to the sum of Ten Thousand Dollars ($10,000). However, in the
event Buyer fails to obtain such policy within sixty (60) days after the
Closing, Buyer shall immediately refund to Seller the sum of Two Hundred
and Fifty-Five Thousand Dollars ($255,000).
<PAGE>
Additional Escrow Deposit. The parties hereto agree that Buyer shall
deliver the Additional Escrow Deposit to Escrow Holder within two (2)
business days following the complete execution and delivery of this First
Amendment. Notwithstanding anything to the contrary contained in the
Purchase Agreement, the Additional Escrow Deposit shall not be an uncashed
check of Buyer but shall be made by bank or cashier's check drawn on a
major national money center banking institution (or by other delivery of
good funds reasonably acceptable to Seller), the proceeds of which shall be
held by Escrow Holder as part of the Escrow Deposit under the Purchase
Agreement.
Satisfaction of Certain Conditions.
A. Due Diligence Period. Buyer hereby acknowledges that the Due
Diligence Period has expired and that condition precedent set forth in
Paragraph 4B of the Purchase Agreement has been satisfied or waived.
Without limitation thereon, Buyer hereby acknowledges that Buyer has
approved all title and survey matters and waives the provisions of
Paragraph 4A(1) of the Purchase Agreement.
B. Estoppel Certificates. Buyer hereby acknowledges that Buyer
has received, reviewed and approved all Tenant Estoppel Certificates
delivered to Buyer and that the condition set forth in Paragraph 4C of the
Purchase Agreement is deemed satisfied. Without limitation thereon, Buyer
acknowledges that the Stephenz Group estoppel contains certain claims
related to proposed amendments which Buyer elected not to approve and, as a
result, Seller has not executed (and Buyer agrees to acquire the Property
subject to such claims, and releases Seller from any liability or
obligation to Buyer or its successor and assigns in connection therewith).
Buyer further acknowledges that no Seller's Estoppel shall be required at
closing under the Purchase Agreement.
Closing Date and Procedure. Notwithstanding anything to the contrary
provided in the Purchase Agreement, including, without limitation, the
provisions of Paragraph 5 thereof, the "Closing Date" shall mean
February 24, 1998. Notwithstanding the Escrow closing provisions of the
Purchase Agreement, Buyer hereby acknowledges that Seller shall have the
right, upon not less than three (3) business days' prior written notice, to
require that the closing of the purchase and sale transactions occur at a
closing conference to be held on the Closing Date at the offices of Buyer's
counsel, Orrick, Herrington & Sutcliffe at 400 Sansome Street, San
Francisco, California 94111-3143.
Heritage Bank Lease. Buyer hereby acknowledges that Buyer has
approved the Heritage Bank of Commerce lease pursuant to that certain Lease
Agreement dated November 18, 1997. In that connection, Buyer shall pay all
third party leasing commissions (including those payable to Heitman) not to
exceed the sum of Forty-Two Thousand Five Hundred Dollars ($42,500.00) and
third party tenant improvements costs with respect to such extension
agreement. Buyer further agrees that the rent commencement date may be
extended for up to two (2) months after the original date specified in such
extension agreement.
Termination of Parking Lease. Seller covenants and agrees to
terminate effective as of the Closing that certain parking agreement dated
as of October 23, 1986 between Seller and Standard Parking Corporation, a
California corporation, as amended by those certain amendments dated as of
March 17, 1987, December 27, 1991, August 17, 1995 and April 3, 1996.
Miscellaneous. Seller hereby approves an assignment of the Purchase
Agreement (as amended hereby) to Park Center Plaza, LLC, a Delaware limited
liability company formed by Buyer (the "Buyer Entity"), provided (i) such
assignment shall be effective only at Closing, and (ii) Buyer Entity
assumes the obligations of Buyer under the Purchase Agreement (as amended
hereby). References in the Purchase Agreement to Seller being a "limited"
partnership are hereby amended to reflect that Seller is a "general"
partnership. The Exhibits attached hereto as Schedule "II" represent the
final Exhibits to be attached to the Purchase Agreement (provided, however,
Buyer acknowledges that such Exhibits are hereby supplemented by matters
disclosed in the Tenant Estoppel Certificates delivered to Buyer prior to
the date hereof).
<PAGE>
No Other Amendment; Conflict. Except as set forth in this First
Amendment, the provisions of the Purchase Agreement shall be, and remain,
in full force and effect (such Purchase Agreement being hereby ratified and
confirmed by the parties hereto notwithstanding any prior termination
thereof). If any provision of this First Amendment conflicts with any
provision of the Purchase Agreement, then the provisions of this First
Amendment shall prevail.
Counterparts. This First Amendment may be signed in multiple
counterparts (including facsimile counterparts) which, when signed by all
parties, shall constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first written above.
BUYER:
DIVCO WEST PROPERTIES, LLC,
a Delaware limited liability company
By: David A. Taran
Member
SELLER:
JMB/SAN JOSE ASSOCIATES,
an Illinois limited partnership
By: JMB Income Properties, Ltd.-XI,
an Illinois general partnership,
General Partner
By: JMB Realty Corporation,
a Delaware corporation,
General Partner
By:
Its:
By: JMB Income Properties, Ltd.-XII,
an Illinois general partnership,
General Partner
By: JMB Realty Corporation,
a Delaware corporation,
General Partner
By:
Its:
<PAGE>
Schedule "I"
to first amendment to purchase agreement
and joint escrow instructions"
See Attached
<PAGE>
Schedule "II"
to first amendment to purchase agreement
and joint escrow instructions"
See Attached
EXHIBIT 10-G
- ------------
(J-XI)
PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
(Park Center Plaza; San Jose, California)
THIS AGREEMENT is made and entered into as of December ___, 1997 (the
"Effective Date") by and between JMB/SAN JOSE ASSOCIATES, an Illinois
limited partnership (hereinafter called _xe "Seller":"Seller"), and DIVCO
WEST PROPERTIES LLC, a Delaware limited liability company (hereinafter
called _xe "\"Buyer\":"_"Buyer").
R E C I T A L S
A. Seller is the owner of that certain real property located in
the City of San Jose, County of Santa Clara, State of California,
consisting primarily of an office complex and related parking facilities
sometimes known as "Park Center Plaza".
B. Buyer desires to purchase such premises on the terms and
conditions hereinafter documented.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. Purchase and Sale. Seller shall sell to Buyer, and Buyer shall
purchase from Seller, the following:
A. That certain real property located in San Jose,
California and commonly known as the Park Center Plaza, and being more
particularly described on Exhibit "A" attached hereto (the "Real
Property");
B. All of Seller's right, title and interest in and to any
rights, privileges and easements appurtenant to the Real Property,
including, without limitation, all minerals, oil, gas and other hydrocarbon
substances on and under the Real Property, as well as all development
rights, air rights, water, water rights, riparian rights and water stock
relating to the Real Property and any rights-of-way or other appurtenances
used in connection with the beneficial use and enjoyment of the Real
Property, and all of Seller's right, title and interest in and to all roads
and alleys adjoining or servicing the Real Property (collectively, the
"Appurtenances");
C. All of Seller's right, title and interest in and to all
improvements and fixtures located on the Real Property, including, without
limitation, all buildings and structures presently located on the Real
Property, all apparatus, equipment and appliances used in connection with
the operation or occupancy of the Real Property, such as heating and air
conditioning systems and facilities used to provide any utility,
refrigeration, ventilation, garbage disposal, landscaping and cleaning
equipment, or other services on the Real Property, and along with all on-
site parking (collectively, the "Improvements");
D. All personal property owned by Seller located at the
Property and utilized in connection with the operation or maintenance of
the Property (the "Personal Property"); and
E. All right, title and interest of Seller in and to the
name "Park Center Plaza", any lease and occupancy rights (including,
without limitation, the lessor's interest in and to all tenant leases,
including all amendments, modifications and agreements and all material
correspondence and other documents affecting in any way any of the parties'
obligations under each such lease (the "Leases"), and Seller's interest in
all refundable security deposits and prepaid rent, if any, under the Leases
<PAGE>
and any and all guaranties, letters of credit or other credit enhancement
relating to the Leases), any and all licenses, permits, certificates of
occupancy, development rights, plans and specifications, utility contracts
and, to the extent approved by Buyer pursuant to this Agreement, all other
agreements relating to the ownership, use and operation of the Property, as
defined below (collectively, the "Intangible Property").
All of the items referred to in subparagraphs A, B, C, D and E
above are collectively referred to as the "Property".
2. Purchase Price.
A. The purchase price (the _xe "\"Purchase
Price\":"_"Purchase Price") for the Property shall be the sum of Seventy-
Eight Million Two Hundred Fifty Thousand and No/100 Dollars ($78,250,000).
3. Payment of Purchase Price. The Purchase Price shall be paid to
Seller by Buyer as follows:
A. Escrow Deposit. Within two (2) business days of the
Effective Date, Buyer shall deliver $250,000 (together with all interest
thereon, the _xe "\"Escrow Deposit\":"_"Initial Escrow Deposit") to Chicago
Title Insurance Company, 110 West Taylor Street, San Jose, California 95110
Attention: Linda Tugade (which company or such other national title
insurance company selected by Buyer within two (2) business days of the
Effective Date, and reasonably approved by Seller, in its capacity as
escrow holder hereunder, is called _xe "\"Escrow Holder\":"_"Escrow
Holder"). In addition, if Buyer shall deliver the "Approval Notice" prior
to the expiration of the "Due Diligence Period", as provided (and defined)
in paragraph 4B hereof, Buyer shall concurrently therewith deliver Buyer's
check in the amount of $500,000 (the "Additional Escrow Deposit") to Escrow
Holder. The Additional Escrow Deposit shall be in the form of Buyer's
check which shall be held uncashed by the Escrow Holder until such time as
the Closing occurs or, pursuant to the terms hereof, Seller notifies Escrow
Holder and Buyer that Seller believes in its good faith discretion that it
is entitled to the Escrow Deposit. The Initial Escrow Deposit to be made
hereunder shall be made by a bank or cashier's check drawn on a major
national money center banking institution (or by other delivery of good
funds reasonably acceptable to Seller), and the amounts so deposited shall
be held by Escrow Holder as a deposit against the Purchase Price in
accordance with the terms and provisions of this Agreement. The parties
hereto hereby acknowledge that the closing of the transactions hereunder
(the "Closing") will occur not later than December 30, 1997, and that the
parties will reasonably cooperate to most effectively and efficiently cause
the delivery of all sums hereunder so as to avoid multiple wires or
deliveries of funds hereunder. As used herein, the term "Escrow Deposit"
means the Initial Escrow Deposit and, from and after the delivery of good
funds, the Additional Escrow Deposit, together with all interest earned on
such deposits while the same are held in escrow hereunder. At all times in
which the Escrow Deposit is being held by the Escrow Holder, the Escrow
Deposit shall be invested by Escrow Holder in the following investments
(_xe "\"Approved Investments\":"_"Approved Investments"): (i) United
States Treasury obligations, (ii) United States Treasury-backed repurchase
agreements issued by a major national money center banking institution
reasonably acceptable to Seller, or (iii) such other manner as may be
reasonably agreed to by Seller and Buyer. The Escrow Deposit shall be
disposed of by Escrow Holder only as provided in this Agreement.
Notwithstanding anything to the contrary contained herein the Escrow Holder
shall not be obligated or entitled to cash the Buyer's check for the
Additional Escrow Deposit until such time as the Closing occurs or Seller
notifies Escrow Holder and Buyer that Seller believes in its good faith
discretion that it is entitled to received the Escrow Deposit pursuant to
the terms hereof. In the event that pursuant to the terms hereof Buyer is
entitled to the return of the Escrow Deposit, Buyer's check for the
Additional Escrow Deposit shall be returned to Buyer uncashed.
<PAGE>
B. Closing Payment. The balance of the Purchase Price
(i.e., the Purchase Price less the sum of the Escrow Deposit available as
of the date thereof in good funds, as such amounts shall be adjusted by the
prorations and credits specified herein) shall be paid by wire transfer
through "Escrow" as hereinafter provided of immediately available federal
funds on the Closing Date (the amount to be paid under this subparagraph B
being herein called the "Closing Payment").
4. Conditions Precedent.
A. Title Matters.
Title Report.
(a) Buyer has received a copy of a preliminary title report (_xe
"\"Preliminary Title Report\":"_"Preliminary Title Report") covering the
Property from Chicago Title Insurance Company (which company, or such other
national title insurance company selected by Buyer within two (2) business
days of the Effective Date and reasonably approved by Seller, in its
capacity as title insurer hereunder, is herein called the _xe "\"Title
Company\":"_"Title Company"). In addition, Seller has ordered (and will
use good faith efforts to cause the delivery to Buyer on or before December
15, 1997) an update of that certain survey of the Property prepared by
Mountain Pacific Surveys, which survey shall be certified in customary form
to Buyer and Title Company (_xe "\"Survey\":"_"Survey"). If Buyer shall
fail to deliver a "Title Objection Notice" (as hereinafter defined) setting
forth those title and survey matters to which Buyer objects in its sole and
absolute discretion on or before the date which is five (5) business days
prior to the end of the "Due Diligence Period", as hereinafter defined (the
"Title Review Period"), Buyer shall be deemed to have disapproved the
exceptions to title shown on the Preliminary Title Report and the matters
disclosed on any survey(s) obtained or delivered hereunder.
(b) Additional Title Matters. Approval by Buyer in its sole and
absolute discretion of any additional exceptions to title matters first
disclosed to or discovered by Buyer after the delivery of the Title
Objection Notice shall be a condition precedent to Buyer's obligation to
purchase the Property. Unless Buyer gives written notice that it approves
any such additional exceptions to title or survey matters, stating the
exceptions so approved, on or before the sooner to occur of three (3)
business days after receipt of written notice thereof and the Closing Date,
Buyer shall be deemed to have disapproved said additional title exception
matters.
(c) Title Objections. If Buyer shall not approve any title or
survey matters which Buyer is permitted to disapprove hereunder, Buyer
shall have the right to give written notice thereof ("Title Objection
Notice") to Seller within the time periods provided for in
Paragraphs 4A(1)(a) or (b), as applicable. Upon receipt by Seller of a
Title Objection Notice given in a timely manner (or a deemed title
disapproval under Paragraphs 4A(1)(a) or (b) above), then Seller shall have
until the sooner to occur of (1) three (3) business days from receipt of
such Title Objection Notice (or from the date of Buyer's deemed disapproval
as aforesaid) and (2) the Closing Date, within which to notify Buyer as to
each properly disapproved matter either that (i) Seller elects not to cause
such disapproved matter to be removed as of the Closing Date (or otherwise
take any action with respect thereto), or (ii) Seller intends to either (a)
use commercially reasonable efforts to cause such disapproved matter to be
removed on the Closing Date, or (b) obtain a title endorsement (if
available) reasonably acceptable to Buyer insuring over such disapproved
matter; provided, however, Seller shall have no liability if for any
reason, after electing under (ii) above, such additional disapproved
matters are not removed or insured over in a form reasonably acceptable to
<PAGE>
Buyer as of the Closing Date. Failure to deliver any written notification
by Seller of its election within such period shall be deemed to be an
election not to cause any such additional disapproved matters to be
removed. If Seller elects not to cause any or all such additional
disapproved matters to be removed or insured over as aforesaid, Buyer shall
have until the sooner to occur of (1) three (3) business days from receipt
of written notice thereof (or from the date of Seller's deemed election as
aforesaid) and (2) the Closing Date, within which to notify Seller in
writing either that (x) Buyer revokes its disapproval and will proceed with
the purchase of the Property without any reduction in the Purchase Price
and will take subject to such matters, or (y) Buyer terminates this
Agreement (and thereupon the Escrow Deposit shall be delivered to Buyer).
Failure to deliver any written notification by Buyer of its election within
such period shall be deemed to be an election to terminate this Agreement.
(d) Permitted Exceptions. All matters set forth on the Preliminary
Title Report which are approved by Buyer pursuant to the terms are herein
called the "Permitted Exceptions". The term "Permitted Exceptions" shall
additionally include (i) any title matters objected to by Buyer, which
objections are subsequently waived in writing by Buyer, and (ii) any title
matters objected to by Buyer, which objections are removed or which are
otherwise satisfactorily cured as determined by Buyer in its sole and
absolute discretion. Buyer shall have the option to waive the condition
precedent set forth in this paragraph 4A(1) by written notice to Seller.
In the event of such waiver, such condition shall be deemed satisfied.
(2) Exceptions to Title. Buyer shall be obligated to accept
title to the Property, subject to the following exceptions to title:
(a) Real estate taxes and assessments not yet due and
payable;
(b) The standard printed exceptions of the standard form ALTA
owner's policy of title insurance with so-called "extended coverage" issued
by Title Company in the State of California; and
(c) The Permitted Exceptions.
Conclusive evidence of the availability of such title shall be the
irrevocable commitment of Title Company to issue to Buyer on the Closing
Date a standard ALTA owner's policy of title insurance with so-called
"extended coverage" ("Owner's Policy"), in the face amount of the Purchase
Price, which policy shall (i) show title to the Property to be vested of
record in Buyer, (ii) show the Permitted Exceptions to be the only
exceptions to title, and (iii) contain such endorsements or additional
coverage as Buyer may have requested and Title Company shall have committed
to issue in writing during the Due Diligence Period to issue.
B. Due Diligence Reviews. Buyer shall have until 5:00 p.m.
(Pacific time) on December 26, 1997 (the _xe "\"Due Diligence
Period\":"_"Due Diligence Period"), within which to perform and complete
all of Buyer's due diligence examinations, reviews and inspections of all
matters pertaining to the purchase of the Property, including all leases,
service contracts, survey and title matters, and all physical,
environmental, structural, zoning, land use and compliance matters and
conditions respecting the Property and any other matters Buyer deems
relevant in its sole and absolute discretion. During the Due Diligence
Period, Seller shall provide Buyer with reasonable access to the Property
upon reasonable advance notice. Prior to the Effective Date, Seller shall
have delivered to Buyer or made available to Buyer at the office of the
Property in San Jose, California all leases, service contracts, third party
reports or studies, correspondence with tenants or service providers and
all other material documents respecting the Property (to the extent the
same are known to Seller and are in Seller's possession or reasonably
available to Seller). Buyer shall at all times conduct its due diligence
review, inspections and examinations in a manner so as to not cause
material damage, loss, cost or expense to Seller or the Property and so as
to not materially interfere with or disturb any tenant at the Property, and
<PAGE>
Buyer will indemnify, defend, and hold Seller and the Property harmless
from and against any such damage, loss, cost or expense (the foregoing
obligation surviving any termination of this Agreement); provided, however,
nothing contained in the foregoing shall impose any liability upon Buyer
for the mere discovery by Buyer of any pre-existing conditions. Without
limitation on the foregoing, in no event shall Buyer (a) make any intrusive
physical testing (environmental, structural or otherwise) at the Property
(such as soil borings, water samplings or the like) without Seller's
express written consent. Buyer will coordinate any tenant contact with
Seller and comply with any reasonable requirements of Seller in connection
therewith (including scheduling tenant contacts toward the end of the Due
Diligence Period). Seller shall have the right, at its option, to cause a
representative of Seller to be present at all inspections, reviews and
examinations conducted hereunder. Buyer shall promptly deliver to Seller
true, accurate and complete copies of any final written reports relating to
the Property prepared for or on behalf of Buyer by any third party (without
representation or warranty of any kind by Buyer with respect thereto) and
in the event of termination hereunder, shall return all documents and other
materials furnished by Seller hereunder. Buyer shall keep all information
or data received or discovered in connection with any of the inspections,
reviews or examinations strictly confidential. If, on or before the
expiration of the Due Diligence Period, based upon such review, examination
or inspection, Buyer shall determine in its sole and absolute discretion
that it intends to proceed with the acquisition of the Property, then Buyer
shall promptly notify Seller and Escrow Holder of such determination in
writing (such notice being herein called the "Approval Notice") and
concurrently therewith Buyer shall deliver the Additional Escrow Deposit to
Escrow Holder (and thereafter, Buyer shall have no further right to
terminate this Agreement pursuant to this paragraph 4B). If, however, on
or before the expiration of the Due Diligence Period, based upon such
review, examination or inspection, Buyer shall determine in its sole and
absolute discretion that it no longer intends to acquire the Property, then
Buyer shall promptly notify Seller of such determination in writing (such
notice being herein called the "Termination Notice"), whereupon the Escrow
Deposit shall be returned to Buyer and this Agreement, and the obligations
of the parties hereunder, shall terminate. In the event that, on or before
the expiration of the Due Diligence Period, Buyer shall fail to have
delivered the Approval Notice to Seller (and concurrently therewith deposit
the Additional Escrow Deposit with Escrow Holder as provided for in this
Agreement), Buyer shall be deemed to have elected not to proceed with the
acquisition of the Property whereupon the Escrow Deposit shall be returned
to Buyer and this Agreement, and the obligations of the parties hereunder,
shall terminate.
C. Estoppel Certificates. Receipt of estoppel certificates
("Tenant Estoppel Certificates"), from all tenants leasing more than 10,000
square feet of space, together with such additional tenants as may be
required so that Tenant Estoppel Certificates are received from tenants
leasing, in the aggregate, not less than 80% of the net rentable square
feet of space covered by leases in effect as of the date hereof, shall be a
condition precedent to Buyer's obligation to purchase the Property
hereunder. Each Tenant Estoppel Certificate shall either be substantially
in the form provided in Exhibit "C" attached hereto and made a part hereof
or in the form, if any, prescribed in the applicable tenant lease and shall
disclose no material defaults or other adverse information which is
materially inconsistent with the leases or the "Rent Roll" (as hereinafter
defined). Seller's sole obligation hereunder shall be to utilize
commercially reasonable efforts to obtain a Tenant Estoppel Certificate
from each tenant at the Property (such reasonable efforts obligations not
including any obligation to institute legal proceedings or to expend monies
therefor), but such obligation shall not affect the provision of such
Tenant Estoppel Certificates as a condition precedent to closing. Without
<PAGE>
limiting the condition that Buyer received the Estoppel Certificates
described above, Seller shall deliver at the Closing a Seller's estoppel
certificate ("Seller's Estoppel") for each tenant that does not deliver a
Tenant Estoppel Certificate. The Seller's Estoppel shall state that (i)
attached to such estoppel is a true, correct and complete copy of the
applicable tenant lease (including all amendments or modifications
thereto), (ii) there is no default under the applicable lease, (iii) the
rent and other charges payable under the applicable lease, (iv) the
commencement and termination date of the applicable lease, and (v) the
suite number and square footage covered by the applicable lease. The
Seller's Estoppel shall be subject to the limitations on survival contained
in paragraph 7C hereof and the limitations on liability contained in
paragraph 9B hereof.
5. Closing Procedure. The sale and purchase herein provided shall
be consummated on the Closing Date through escrow ("Escrow") with the Title
Company. As used herein, _xe "\"Closing Date\":"_"Closing Date" means
December 30, 1997, or such earlier date as may be agreed upon by Buyer and
Seller; provided, however, if any of the conditions to Closing set forth in
this Agreement is not satisfied on or before the Closing Date or if Buyer
shall claim that Seller in is default or has otherwise breached its
obligations under this Agreement, Seller shall have the right, at its sole
option, to extend the Closing Date for up to ten (10) days in order to
attempt to satisfy such conditions or cure such defaults or breaches.
A. Escrow. On or before the Closing Date, the parties shall
deliver to Title Company the documents described below. Such deliveries
shall be made pursuant to escrow instructions (_xe "\"Escrow
Instructions\":"_"Escrow Instructions") to be executed among Buyer, Seller
and Title Company in form reasonably acceptable to such parties in order to
effectuate the intent hereof.
B. Delivery by Parties.
(1) Seller Deliveries. Seller shall deliver to Escrow the
following:
(a) By Seller, a duly executed and acknowledged grant deed
(_xe "\"Deed\":"_"Deed") in the form of Exhibit "D" attached hereto and
made a part hereof,
(b) A duly executed and acknowledged bill of sale, assignment
and assumption agreement (_xe "\"Assignment and Assumption
Agreement\":"_"Assignment and Assumption Agreement") in the form of Exhibit
"E" attached hereto and made a part hereof;
(c) Duly executed and acknowledged certificates sufficient
for State and Federal law purposes) regarding the "non-foreign" status of
Seller;
(d) To the extent in Seller's possession or control,
originals (or copies certified as true and complete, if originals are
unavailable) of all tenant leases, Service Agreements, Parking Agreements
and Rooftop Agreements. In addition, Seller shall deliver copies of all
guaranties, warranties, licenses, permits, certificates of occupancy, plans
and specifications, keys and other applicable management material
respecting the Property (provided the foregoing items may be delivered by
Seller causing the same to be retained at the Property);
(e) Notices to tenants in form reasonably acceptable to
Seller and Buyer informing tenants of the sale of the Property to Buyer and
the transfer of security deposits ("Tenant Notices");
(f) A signed "Closing Statement" (as hereinafter defined);
(g) Evidence reasonably satisfactory to Buyer and Title
Company respecting the due organization of Seller and the due authorization
and execution of this Agreement and the documents required to be delivered
hereunder; and
<PAGE>
(h) Such additional documents as may be reasonably required
by Buyer and Title Company in order to consummate the transactions
hereunder (provided the same do not materially increase the costs to, or
liability or obligations of, Seller in a manner not otherwise provided for
herein).
(2) Buyer Deliveries. Buyer shall deliver to Escrow the
following:
(a) The Closing Payment in immediately available federal
funds;
(b) A duly executed and acknowledged Assignment and
Assumption Agreement;
(c) A signed Closing Statement;
(d) Evidence reasonably satisfactory to Seller and Title
Company respecting the due organization of Buyer and the due authorization
and execution of this Agreement and the documents required to be delivered
hereunder; and
(e) Such additional documents as may be reasonably required
by Seller and Title Company in or to consummate the transactions hereunder
(provided the same do not materially increase the costs to, or liability or
obligations of, Buyer in a manner not otherwise provided for herein).
(3) Delivery to Parties. Upon the satisfaction of the
conditions set forth in the Escrow Instructions, then (x) the Deed shall be
delivered to Buyer by Title Company's depositing the same for recordation,
(y) the Closing Payment (and the Escrow Deposit) shall be delivered by
Title Company to Seller and (z) the other deliveries appropriately
exchanged and delivered to the parties.
C. Closing Costs. Seller shall pay (i) the title insurance
premium for the Owner's Policy at a rate not in excess of standard issue
rates (but excluding any additional or extended coverage or endorsements
requested by Buyer), (ii) any documentary transfer tax imposed by the
County of Santa Clara and attributable to the Deed (the "County Tax"),
(iii) one-half of any local transfer taxes (other than the County Tax)
attributable to the Deed, (iv) the costs to update the Survey and (v) one-
half of any escrow or recording charges attributable to the Deed. Buyer
shall pay (i) the costs of any ALTA or so called "extended coverage" in
connection with, or endorsements to, the Owner's Policy, together with the
cost of any other title insurance coverage (such as lender's insurance
policies), (ii) one-half of any local transfer taxes (other than the County
Tax) attributable to the Deed, (iii) one-half of any escrow or recording
charges and (iv) all fees, costs or expenses incurred by Buyer in
connection with Buyer's due diligence reviews hereunder. Each of Seller
and Buyer shall pay its own attorneys' fees and its respective share of
prorations as hereinafter provided. Notwithstanding the foregoing, in the
event the sale contemplated hereby does not close on the Closing Date, then
each party shall pay all costs incurred by it.
D. Prorations.
(1) Items to be Prorated. The following shall be prorated
between Seller and Buyer such that items of income and expense through the
day prior to the Closing Date shall be allocated to Seller, and items of
income and expense for the Closing Date and thereafter shall be allocated
to Buyer:
<PAGE>
(a) All real estate taxes and assessments on the Property for
the current year on a per diem basis. In no event shall Seller be charged
with or be responsible for any increase in the taxes on the Property
resulting from the sale of the Property or from any improvements made or
leases entered into on or after the Closing Date. If any assessments on
the Property are payable in installments, then the installment for the
current period shall be prorated (with Buyer assuming the obligation to pay
any installments due after the Closing Date).
(b) All fixed and additional rentals under the leases,
security deposits and other tenant charges. Seller shall deliver or
provide a credit in an amount equal to all prepaid rentals for periods
after the Closing Date and all refundable security deposits (to the extent
the foregoing are held by Seller and are not applied or forfeited prior to
the Closing Date) to Buyer on the Closing Date. Rents which are delinquent
as of the Closing Date shall not be prorated on the Closing Date. Buyer
shall include such delinquencies in its normal billing and shall diligently
pursue the collection thereof in good faith after the Closing Date (but
Buyer shall not be required to litigate or declare a default in any lease).
To the extent Buyer receives rents on or after the Closing Date, such
payments shall be applied first toward then current rent owed to Buyer in
connection with the applicable lease for which such payments are received,
and any excess monies received shall be applied toward the payment of any
delinquent rents, with Seller's share thereof being promptly delivered to
Seller within fifteen (15) days after receipt of the same by Buyer. Buyer
may not waive any delinquent rents nor modify a lease so as to reduce or
otherwise affect amounts owed thereunder for any period in which Seller is
entitled to receive a share of charges or amounts without first obtaining
Seller's written consent. Seller hereby reserves the right to pursue any
damage remedy (but in no action for eviction or lease termination) against
any tenant owing delinquent rents and any other amounts to Seller. Buyer
shall reasonably cooperate with Seller in any collection efforts hereunder
(but shall not be required to litigate or declare a default in any lease).
With respect to delinquent rents and any other amounts or other rights of
any kind respecting tenants who are no longer tenants of the Property as of
the Closing Date, Seller shall retain all rights relating thereto.
Reimbursement amounts due Seller under any reciprocal easement agreements
affecting the Property shall be prorated in the same manner as rents
hereunder.
(c) All operating expenses, including those under any
reciprocal easement agreements affecting the Property.
(2) Calculation. The prorations and payments shall be made
on the basis of a written statement submitted to Buyer and Seller by Escrow
Holder prior to the Close of Escrow and approved by Buyer and Seller. In
the event any prorations or apportionments made under this subparagraph D
shall prove to be incorrect for any reason, then any party shall be
entitled to an adjustment to correct the same provided written notice of
such inaccuracy and request for correction is given within six months after
the date hereof. Any item which cannot be finally prorated because of the
unavailability of information shall be tentatively prorated on the basis of
the best data then available and reprorated when the information is
available. The obligations of Seller and Buyer under this paragraph 5D(2)
shall survive the closing until June 15, 1998 (and all reprorations shall
be finalized prior to such date).
<PAGE>
6. Risk of Loss. If any of the Property is damaged or destroyed
prior to the Closing Date, and such damage or destruction would cost less
than Two Hundred Fifty Thousand Dollars ($250,000) to repair or restore and
is covered by insurance (other than the deductible amount, if any), then
this Agreement shall remain in full force and effect and Buyer shall
acquire the Property upon the terms and conditions set forth herein. In
such event, Buyer shall receive a credit against the Purchase Price equal
to any deductible under Seller's property damage insurance policy and
Seller shall assign to Buyer all of Seller's right, title and interest in
and to all proceeds of insurance other than amounts expended to repair any
damage or destruction and loss of rent proceeds attributable to the period
prior to Closing on account of such damage or destruction. If any of the
Property is damaged or destroyed prior to the Closing, and the cost of
repair would exceed Two Hundred Fifty Thousand Dollars ($250,000), or if
such cost of repair would not exceed $250,000 but such casualty damage is
uninsured (and Seller shall elect not to credit Buyer with the amount
necessary to repair the same, Seller having the right but not the
obligation to so credit), or condemnation proceedings are commenced against
any of the Property, then, Buyer shall have the right, at its election,
either to terminate this Agreement or to not terminate this Agreement and
purchase the Property. Buyer shall have the sooner to occur of the Closing
Date or ten (10) business days after Seller notifies Buyer in writing that
an event described in the immediately preceding sentence has occurred to
make such election by delivery to Seller of an election notice (the
"Election Notice"). Buyer's failure to deliver the Election Notice within
such period shall be deemed an election to terminate this Agreement. If
this Agreement is terminated by delivery of notice of termination to
Seller, then Buyer and Seller shall each be released from all obligation
hereunder, except as otherwise expressly provided to the contrary herein.
If Buyer continues this Agreement, Buyer shall receive a credit against the
Purchase Price equal to any deductible under Seller's property damage
insurance policy and Seller shall assign to Buyer all of Seller's right,
title and interest in and to all insurance proceeds (other than amounts
expended to repair any damage or destruction and any loss of rent proceeds
attributable to the period prior to the Closing, which shall remain the
property of Seller) or condemnation awards on account of such damage,
destruction or taking, and Buyer shall accept the Property as damaged or
destroyed, on condemned, as the case may be, and the closing shall occur on
the terms and conditions contained in this Agreement. As used in this
paragraph 6, the cost to repair or restore shall include the cost of lost
rental revenue, including additional rent and base rent, occurring after
the Closing, if any.
7. Representations, Warranties and Covenants.
A. Representations, Warranties and Covenants of Seller.
(1) General Disclaimer. Except as specifically set
forth in Paragraph 7A(2) below, the sale of the Property hereunder is and
will be made on an "as is" basis, without representations and warranties of
any kind or nature, express, implied or otherwise, including, but not
limited to, any representation or warranty concerning title to the
Property, the physical condition of the Property (including, but not
limited to, the condition of the soil or the Improvements), the
environmental condition of the Property (including, but not limited to, the
presence or absence of hazardous substances on or respecting the Property),
the compliance of the Property with applicable laws and regulations
(including, but not limited to, zoning and building codes or the status of
development or use rights respecting the Property), the financial condition
of the Property or any other representation or warranty respecting any
income, expenses, charges, liens or encumbrances, rights or claims on,
affecting or pertaining to the Property or any part thereof. Buyer
acknowledges that, during the Due Diligence Period, Buyer will have had the
<PAGE>
opportunity to examine, review and inspect all matters which in Buyer in
its sole and absolute judgment bears upon the Property and its value and
suitability for Buyer's purposes. Except as to matters specifically set
forth in Paragraph 7A(2) below, Buyer will acquire the Property solely on
the basis of its own physical and financial examinations, reviews and
inspections and the title insurance protection afforded by the Owner's
Policy. Without limitation thereon, Buyer agrees that it will not pursue
any rights of contribution or other rights or remedies against Seller under
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or any other applicable environmental laws, rules or
regulations. The provisions of the preceding sentence shall not in any way
limit Buyer's right to seek contribution or other rights or remedies
against Seller under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") or any other applicable environmental laws,
rules or regulations in the event that any claim is made against Buyer
under the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") or any other applicable environmental laws, rules or
regulations by any governmental agency or any third party based on any
facts or circumstances arising prior to the Closing (such rights or
remedies in all events being subject to the limitations on liabilities set
forth in this Agreement, including those set forth in paragraph 9B hereof).
(2) Limited Representations and Warranties of Seller. Seller
hereby represents and warrants that, except as set forth in Exhibit "F"
attached hereto and made a part hereof, Seller has no knowledge that any of
the following statements is untrue (and, for this purpose, Seller's
knowledge shall mean only the present actual knowledge of Andrea Backman
without any duty to investigate (other than to make inquiry of Bob
Bronstein of Seller's third party property management company) and with any
imputed or constructive knowledge being excluded):
(a) Rent Roll. Attached as Exhibit "G" and made a part
hereof is a true, complete and accurate list, as of the date thereof, of
all tenant leases respecting the Property. Seller has made available, or
during the Due Diligence Period will make available, to Buyer true and
correct copies of the tenant leases. Seller has not received any written
notice of a material default under any of such tenant leases that remains
uncured. Notwithstanding anything to the contrary contained herein, if any
of the foregoing matters are confirmed as correct in any Tenant Estoppel
Certificate which may be delivered hereunder and thereafter the applicable
tenant takes an inconsistent position with respect to such matters, Buyer
shall look solely to such tenants for any liability or obligation in
connection with such matters.
(b) Litigation. There is no pending action, litigation,
condemnation or other proceeding against the Property or against Seller
with respect to the Property.
(c) Compliance. Seller has received no written notice from
any governmental authority having jurisdiction over the Property to the
effect that the Property is not in compliance with applicable laws and
ordinances.
(d) Agreements Affecting the Property. Other than the leases
or matters of record, Seller has not entered into any contracts or other
agreements (other than as set forth in this Agreement) relating to the
Property which will be in force on the Closing Date, except for the service
agreements described in Exhibit "H-1" (the "Service Agreements"), the
parking easements and agreements described in Exhibit "H-2" (the "Parking
Agreements") and the rooftop agreements described in Exhibit "H-3" (the
"Rooftop Agreements"). Seller has not received any written notice of any
default under any of the foregoing agreements that remains uncured.
<PAGE>
(e) Due Authority. This Agreement and all agreements,
instruments and documents herein provided to be executed or to be caused to
be executed by Seller are and on the Closing Date will be duly authorized,
executed and delivered by and are binding upon Seller. Seller is a
partnership, duly organized and validly existing under the laws of the
State of Illinois, and is duly authorized and qualified to do all things
required of it under this Agreement. Seller has the capacity and authority
to enter into this Agreement and consummate the transactions herein
provided.
(f) Environmental Matters. Except as set forth in the
reports described in Exhibit "I" attached hereto and made a part hereof
(the "Environmental Reports"), Seller has received no written notice of the
existence, deposit, storage, removal, burial or discharge of any material
known to Seller to be a "Hazardous Material" at, upon, under or within the
Property, in an amount which would, as of the date hereof, give rise to an
"Environmental Compliance Cost". The term "Hazardous Material" shall mean
(i) asbestos, petrochemicals or hydrocarbons and any chemicals, flammable
substances or explosives, any radioactive materials (including radon), any
hazardous wastes or substances which have, as of the date hereof, been
determined by any applicable Federal, State or local government law to be
hazardous or toxic by the U.S. Environmental Protection Agency, the U.S.
Department of Transportation, and/or any instrumentality now or hereafter
authorized to regulate materials and substances in the environment which
has jurisdiction over the Property ("Environmental Agency"), and (ii) any
oil, petroleum or petroleum derived substance, any drilling fluids,
produced waters and other wastes associated with the exploration,
development or production of crude oil, which materials listed under items
(i) and (ii) above cause the Property (or any part thereof) to be in
violation of any applicable environmental laws or the regulations of any
Environmental Agency; provided, however, that the term "Hazardous Material"
shall not include motor oil and gasoline contained in or discharged from
vehicles not used primarily for the transport of motor oil or gasoline or
any materials such as cleaning supplies, photocopy equipment supplies and
other similar materials in quantities commonly stored, found or maintained
for similar uses in properties similar to the Property. The term
"Environmental Compliance Cost" means any out-of-pocket cost, fee or
expense incurred directly to satisfy any requirement imposed by an
Environmental Agency to bring the Property into compliance with applicable
Federal, State and local laws and regulations directly relating to the
existence on the Property of any Hazardous Material. Buyer hereby
acknowledges that it is acquiring the Property subject to the matters
disclosed in the Environmental Reports, and Buyer shall at Closing, assume
the obligations for, and release Seller from any liability relating to
(whether under local, state or federal law), any matters disclosed in the
Environmental Reports; provided, however, nothing in the foregoing shall
constitute an indemnification by Buyer in favor of Seller for any third
party claims with respect to such matters and in the event that any claim
is made against Buyer by any governmental agency or any third party based
on any violation of environmental laws or any contamination of the Property
by Hazardous Materials prior to the Closing Buyer shall be entitled to seek
contribution or indemnification from Seller on account thereof in
accordance with any applicable laws, rules, regulations or statutes (such
rights or remedies in all events being subject to the limitations on
liabilities contained in this Agreement, including those set forth in
paragraph 9B hereof).
(g) Options. Seller has not given or granted (nor does
Seller have any knowledge of the existence of) any rights of first refusal,
rights of first offer or other options to acquire the Property in whole or
in part.
(h) Structural Condition. Except as otherwise disclosed to
Buyer, Seller has not received any written notice from any governmental
authorities or any third party structural reports or studies that indicate
that there are any material structural problems or deficiencies in the
Property or any part thereof.
<PAGE>
B. Representations and Warranties of Buyer. Buyer hereby
represents and warrants that this Agreement and all agreements, instruments
and documents herein provided to be executed or to be caused to be executed
by Buyer are and on the Closing Date will be duly authorized, executed and
delivered by and are binding upon Buyer; Buyer is a limited liability
company, duly organized and validly existing and in good standing under the
laws of the State of Delaware, and is duly authorized and qualified to do
all things required of it under this Agreement; and Buyer has the capacity
and authority to enter into this Agreement and consummate the transactions
herein provided.
C. Survival. Any cause of action of a party for a breach of
the foregoing representations and warranties shall survive until
November 15, 1998, at which time such representations and warranties (and
any cause of action resulting from a breach thereof not then in litigation)
shall terminate. Notwithstanding the foregoing, if Buyer shall have actual
knowledge as of the Closing Date that any of the representations or
warranties of Seller contained herein are false or inaccurate or that
Seller is in breach or default of any of its obligations under this
Agreement, and Buyer nonetheless closes the transactions hereunder and
acquires the Property, then Seller shall have no liability or obligation
respecting such false or inaccurate representations or warranties or other
breach or default (and any cause of action resulting therefrom shall
terminate upon such closing hereunder).
D. Interim Covenants of Seller. Until the Closing Date or
the sooner termination of this Agreement:
(1) Seller shall maintain the Property in the same manner as
prior hereto pursuant to its normal course of business (such maintenance
obligations not including extraordinary capital expenditures or
expenditures not incurred in such normal course of business), subject to
reasonable wear and tear and further subject to destruction by casualty or
other events beyond the control of Seller.
(2) Seller shall not enter into any additional service
contracts or other similar agreements without the prior consent of Buyer,
except those deemed reasonably necessary by Seller which are cancelable on
thirty (30) days' notice.
(3) Seller shall have the right to continue to offer the
Property for lease in the same manner as prior hereto pursuant to its
normal course of business and, upon request, shall keep Buyer reasonably
informed as to the status of leasing prior to the Closing Date. After the
Effective Date, Seller shall not enter into any new leases or material
modifications of existing leases thereafter without the consent of Buyer
(which consent, may be given or withheld in Buyer's sole and absolute
discretion). In connection therewith, Buyer shall respond to Seller's
request to enter into a new lease or a material modification within
five (5) business days after Buyer's receipt of such request. In the event
that Buyer fails to respond to such a request within such five (5) business
day period, Buyer shall be deemed to have approved the new lease or
material modification. In no event shall Seller have any obligation to
enter into any new lease or modify any existing lease unless Buyer shall
agree to pay or reimburse Seller on the Closing Date for all landlord
costs, legal costs, tenant improvement costs and leasing commissions
incurred by Seller under or in connection therewith.
<PAGE>
9. DISPOSITION OF DEPOSIT. IF THE TRANSACTION HEREIN PROVIDED
SHALL NOT BE CLOSED BY REASON OF SELLER'S DEFAULT UNDER THIS
AGREEMENT OR
THE FAILURE OF SATISFACTION OF THE CONDITIONS DESCRIBED IN PARAGRAPH
4
HEREOF OR THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH
PARAGRAPH 6
HEREOF, THEN THE ESCROW DEPOSIT SHALL BE RETURNED TO BUYER, AND
NEITHER
PARTY SHALL HAVE ANY FURTHER OBLIGATION OR LIABILITY TO THE OTHER;
PROVIDED, HOWEVER, IF THE TRANSACTIONS HEREUNDER SHALL FAIL TO CLOSE
BY
REASON OF SELLER'S DEFAULT, AND BUYER SHALL BE READY, WILLING AND
ABLE TO
CLOSE, THEN BUYER SHALL BE ENTITLED TO SPECIFICALLY ENFORCE THIS
AGREEMENT;
AND PROVIDED FURTHER THAT, IF FOLLOWING OR IN CONNECTION WITH A
DEFAULT BY
SELLER, SELLER SHALL TAKE ACTIONS SO AS TO EITHER PREVENT THE
AVAILABILITY
OF SPECIFIC PERFORMANCE TO BUYER OR WHICH MATERIALLY ADVERSELY
IMPACT THE
VALUE OF THE PROPERTY SUCH THAT SPECIFIC PERFORMANCE WOULD NOT
PROVIDE
BUYER SUBSTANTIALLY WITH THE BENEFITOF THE BARGAIN CONTEMPLATED IN
THIS
AGREEMENT, AND THE OTHER CONDITIONS SET FORTH ABOVE SHALL BE
SATISFIED,
BUYER SHALL BE ENTITLED TO A RETURN OF THE ESCROW DEPOSIT AND
REIMBURSEMENT
OF ITS ACTUAL OUT-OF-POCKET COSTS PAID TO THIRD PARTIES IN CONNECTION
WITH
THE TRANSACTIONS HEREUNDER (SUCH REIMBURSEMENT NOT TO EXCEED
$150,000 IN
THE AGGREGATE). EXCEPT AS SET FORTH ABOVE, NO OTHER ACTIONS, FOR
DAMAGES
OR OTHERWISE, SHALL BE PERMITTED IN CONNECTION WITH ANY DEFAULT BY
SELLER
IN THE EVENT THE TRANSACTIONS HEREUNDER SHALL FAIL TO CLOSE. IN THE
EVENT
THE TRANSACTION HEREIN PROVIDED SHALL NOT CLOSE FOR ANY REASON
OTHER THAN
THE FAILURE OF SATISFACTION OF THE CONDITIONS DESCRIBED IN PARAGRAPH
4
HEREOF OR THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH
PARAGRAPH 6
HEREOF OR THE DEFAULT OF SELLER, THEN THE ESCROW DEPOSIT SHALL BE
DELIVERED
TO SELLER AS FULL COMPENSATION AND LIQUIDATED DAMAGES UNDER AND IN
CONNECTION WITH THIS AGREEMENT. IN THE EVENT THE TRANSACTION HEREIN
PROVIDED SHALL CLOSE, THE ESCROW DEPOSIT SHALL BE APPLIED AS A
PARTIAL
PAYMENT OF THE PURCHASE PRICE. IN CONNECTION WITH THE FOREGOING, THE
PARTIES RECOGNIZE THAT SELLER WILL INCUR EXPENSE IN CONNECTION WITH
THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND THAT THE PROPERTY
WILL BE
REMOVED FROM THE MARKET; FURTHER, THAT IT IS EXTREMELY DIFFICULT AND
IMPRACTICABLE TO ASCERTAIN THE EXTENT OF DETRIMENT TO SELLER CAUSED
BY THE
BREACH BY BUYER UNDER THIS AGREEMENT AND THE FAILURE OF THE
CONSUMMATION OF
THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR THE AMOUNT OF
COMPENSATION SELLER SHOULD RECEIVE AS A RESULT OF BUYER'S BREACH OR
DEFAULT. IN THE EVENT THE SALE OF THE PROPERTY SHALL NOT BE
CONSUMMATED ON
ACCOUNT OF BUYER'S DEFAULT, THEN THE RETENTION OF THE ESCROW DEPOSIT
SHALL
BE SELLER'S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT BY
REASON OF
SUCH DEFAULT, SUBJECT TO THE PROVISIONS OF PARAGRAPH 9I HEREOF.
Seller's Initials Buyer's Initials
9. Miscellaneous.
A. Brokers.
(1) Except as provided in subparagraphs (2) and (3) below,
Seller represents and warrants to Buyer, and Buyer represents and warrants
to Seller, that no broker or finder has been engaged by it, respectively,
in connection with any of the transactions contemplated by this Agreement
or to its knowledge is in any way connected with any of such transactions.
In the event of a claim for broker's or finder's fee or commissions in
connection herewith, then Seller shall indemnify and defend Buyer from the
same if it shall be based upon any statement or agreement alleged to have
been made by Seller, and Buyer shall indemnify and defend Seller from the
same if it shall be based upon any statement or agreement alleged to have
been made by Buyer. The indemnification obligations under this Paragraph
9A(1) shall survive the closing of the transactions hereunder or the
earlier termination of this Agreement.
(2) If and only if the sale contemplated herein closes,
Seller agrees to pay a brokerage commission to Richard Ellis, LLC and
Alexis A. Fafenrodt (collectively, the "Seller's Broker") pursuant to
separate written agreements between Seller's Broker and Seller. The
foregoing payments shall be the sole commissions, fees or payments payable
to Seller's Broker in connection with the transactions hereunder.
<PAGE>
(3) If and only if the sale contemplated herein closes, Buyer
agrees to pay a brokerage commission to B.T. Commercial (the "Buyer's
Broker") pursuant to separate written agreements between Buyer's Broker and
Buyer. The foregoing payments shall be the sole commissions, fees or
payments payable to Buyer's Broker in connection with the transactions
hereunder.
B. Limitation of Liability.
(1) Notwithstanding anything to the contrary contained
herein, if the closing of the transactions hereunder shall have occurred
(and Buyer shall not have waived, relinquished or released any applicable
rights in further limitation), the aggregate liability of Seller arising
pursuant to or in connection with the representations, warranties,
indemnifications, covenants, contribution or other obligations (whether
express or implied) of, or rights or remedies against Seller under this
Agreement (or any document executed or delivered in connection herewith) or
otherwise in connection with the Property shall not exceed $2,500,000.
(2) No constituent partner in or agent of Seller, nor
any advisor, trustee, director, officer, employee, beneficiary,
shareholder, participant, representative or agent of any corporation or
trust that is or becomes a constituent partner in Seller (including, but
not limited to, JMB Realty Corporation) shall have any personal liability,
directly or indirectly, under or in connection with this Agreement or any
agreement made or entered into under or pursuant to the provisions of this
Agreement, or any amendment or amendments to any of the foregoing made at
any time or times, heretofore or hereafter, and Buyer and its successors
and assigns and, without limitation, all other persons and entities, shall
look solely to Seller's assets for the payment of any claim or for any
performance, and Buyer, on behalf of itself and its successors and assigns,
hereby waives any and all such personal liability. Notwithstanding
anything to the contrary contained in this Agreement, neither the negative
capital account of any constituent partner in Seller (or in any other
constituent partner of Seller), nor any obligation of any constituent
partner in Seller (or in any other constituent partner of Seller) to
restore a negative capital account or to contribute capital to Seller (or
to any other constituent partner of Seller), shall at any time be deemed to
be the property or an asset of Seller or any such other constituent partner
(and neither Buyer nor any of its successors or assigns shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account of partner's obligation to restore or contribute).
C. Entire Agreement. This Agreement contains the entire
agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements between the parties hereto respecting such
matters. This Agreement may not be modified or amended except by written
agreement signed by both parties.
D. Time of the Essence. Time is of the essence of this
Agreement.
E. Interpretation. Paragraph headings shall not be used in
construing this Agreement. Each party acknowledges that such party and its
counsel, after negotiation and consultation, have reviewed and revised this
Agreement. As such, the terms of this Agreement shall be fairly construed
and the usual rule of construction, to the effect that any ambiguities
herein should be resolved against the drafting party, shall not be employed
in the interpretation of this Agreement or any amendments, modifications or
exhibits hereto or thereto.
F. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of California.
<PAGE>
G. Successors and Assigns. Buyer may not assign or transfer
its rights or obligations under this Agreement without the prior written
consent of Seller, (in which event such transferee shall assume in writing
all of the transferor's obligations hereunder, and transferor shall
thereupon be released from any obligations hereunder first arising
thereafter) provided, however, effective at, and conditioned upon, Closing
hereunder, Buyer may assign its interest in this Agreement to an entity
affiliated or associated with David Taran and/or Stuart Shiff. No consent
given by Seller to any transfer or assignment of Buyer's rights or
obligations hereunder shall be construed as a consent to any other transfer
or assignment of Buyer's rights or obligations hereunder. No transfer or
assignment in violation of the provisions hereof shall be valid or
enforceable. Subject to the foregoing, this Agreement and the terms and
provisions hereof shall inure to the benefit of and be binding upon the
successors and assigns of the parties.
H. Notices. Any notice, consent or approval required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given upon (i) hand delivery, (ii) delivery or refused
delivery if deposited with Federal Express or another reliable overnight
courier service, (iii) transmission if transmitted by facsimile telecopy
(as evidenced by a printed confirmation slip), or (iv) delivery or refused
delivery if deposited in the United States mail, registered or certified
mail, postage prepaid, return receipt required (as evidenced by the return
receipt), and addressed as follows:
To Buyer:
c/o Divco West Properties, LLC
111 W. St. John Street
Suite 1010
San Jose, California 95113
Attention: Mr. David A. Taran
Facsimile: (408) 293-9690
Telephone: (408) 293-9600
With Copy To:
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, California 94111
Attention: William G. Murray, Esq.
Facsimile: (415) 773-5759
Telephone: (415) 773-5802
To Seller:
c/o JMB Realty Corporation
900 North Michigan Avenue
12th Floor
Chicago, Illinois 60611
Attention: Ms. Andrea Backman
Facsimile: (312) 915-2502
Telephone: (312) 915-2367
With Copy To:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (GML)
Facsimile: (310) 201-8922
Telephone: (310) 201-8900
<PAGE>
I. Legal Costs. The parties hereto agree that they shall
pay directly any and all legal costs which they have incurred on their own
behalf in the preparation of this Agreement, all deeds and other agreements
pertaining to this transaction and that such legal costs shall not be part
of the closing costs. In addition, if either Buyer or Seller brings any
suit or other proceeding with respect to the subject matter or the
enforcement of this Agreement, the prevailing party (as determined by the
court, agency or other authority before which such suit or proceeding is
commenced), in addition to such other relief as may be awarded, shall be
entitled to recover reasonable attorneys' fees, expenses and costs of
investigation actually incurred. The foregoing includes, but is not
limited to, attorneys' fees, expenses and costs of investigation
(including, without limitation, those incurred in appellate proceedings),
costs incurred in establishing the right to indemnification, or in any
action or participation in, or in connection with, any case or proceeding
under Chapter 7, 11 or 13 of the Bankruptcy Code (11 United States Code
Sections 101 et seq.), or any successor statutes.
J. Counterparts; Facsimile Signatures. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same document.
Each party hereto (i) has agreed to permit the use, from time to time and
where appropriate, of telecopied signatures in order to expedite the
transaction contemplated by this Agreement, (ii) intends to be bound by its
respective telecopied signature, (ii) is aware that the other party will
rely on the telecopied signature, and (iv) acknowledges such reliance and
waives any defenses to the enforcement of documents and notices effecting
the transaction contemplated by this Agreement based on the fact that a
signature or notice was sent by telecopy.
K. Waiver of Jury Trial and Consent to Venue. To the
fullest extent permitted by law, Buyer and Seller hereby waive their
respective right to trial by jury in any action, proceeding and/or hearing
on any matter whatsoever arising out of, or in any way connected with this
Agreement or any matter arising hereunder. Neither party will seek to
consolidate any such action in which a jury has been waived, with any other
action in which a jury trial cannot or has not been waived. In addition,
each party consents to venue and jurisdiction in the Superior Court for the
County of Santa Clara or the federal District Court sitting in San Jose.
Each party acknowledges that it has received the advice of counsel with
respect to this waiver.
L. Exhibits. The parties acknowledge that Exhibits to be
attached hereto have not yet been finalized and agreed upon. In that
connection, the parties agree that they shall endeavor in good faith to
finalize and attach such Exhibits as they shall each approve within ten
(10) days of the Effective Date. Upon such agreement, the Exhibits shall
be a part of and shall be deemed incorporated herein as a part of this
Agreement. If the parties are unable to agree on such Exhibits within such
ten (10) day period, then this Agreement, and the obligations of the
parties to close hereunder, shall thereupon terminate (and the Deposit
shall be promptly returned to Buyer).
THE SUBMISSION OF THIS AGREEMENT FOR EXAMINATION IS NOT INTENDED
TO
NOR SHALL CONSTITUTE AN OFFER TO SELL, OR A RESERVATION OF, OR OPTION
OR
PROPOSAL OF ANY KIND FOR THE PURCHASE OF THE PROPERTY. IN NO EVENT
SHALL
ANY DRAFT OF THIS AGREEMENT CREATE ANY OBLIGATION OR LIABILITY, IT
BEING
UNDERSTOOD THAT THIS AGREEMENT SHALL BE EFFECTIVE AND BINDING ONLY
WHEN A
COUNTERPART HEREOF HAS BEEN EXECUTED AND DELIVERED BY EACH PARTY
HERETO TO
THE OTHER PARTY.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the Effective Date.
SELLER:
JMB/SAN JOSE ASSOCIATES,
An Illinois limited partnership
By: JMB INCOME PROPERTIES, LTD.-XI,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: _________________________
Name: _______________________
Title: ________________________
By: JMB INCOME PROPERTIES, LTD.-XII,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: _________________________
Name: _______________________
Title: ________________________
BUYER:
DIVCO WEST PROPERTIES, LLC,
a Delaware limited liability company
By:
Name: David A. Taran
Title: Member
<PAGE>
ESCROW HOLDER'S ACKNOWLEDGEMENT
The undersigned hereby executes this Agreement to evidence its
agreement to act as Escrow Holder in accordance with the terms of this
Agreement.
Effective Date: ________, 1997 CHICAGO TITLE INSURANCE COMPANY,
a corporation
By:__________________________________
Name: _______________________________
Title: ________________________________
"Escrow Holder"
<PAGE>
EXHIBIT LIST
"A" - Property Description
"B" - Intentionally Deleted
"C" - Form of Tenant Estoppel Certificate
"D" - Deed
"E" - Assignment and Assumption Agreement
"F" - Exceptions to Seller's Representations and Warranties
"G" - Rent Roll
"H-1" - Service Agreements
"H-2" - Parking Agreements
"H-3" - Rooftop Agreements
"I" - Environmental Reports
"J" - Exception List for Tenant Options
<PAGE>
EXHIBIT "A"
PROPERTY DESCRIPTION
All that certain Real Property in the City of San Jose, County of
Santa Clara, State of California, described as follows:
All of Parcels 2, 3 and 4, as shown upon that certain Map entitled,
Parcel Map of a portion of Parcel "A" as shown on record of Survey,
recorded in Book 237 of Maps, at Page 24, Santa Clara County Records, which
Map was filed for record in the Office of the Recorder of the County of
Santa Clara, State of California on November 28, 1983 in Book 520 of Maps,
at Pages 39, 40, 41 and 42.
<PAGE>
EXHIBIT "B"
INTENTIONALLY DELETED
<PAGE>
EXHIBIT "C"
FORM OF TENANT ESTOPPEL CERTIFICATE
<PAGE>
EXHIBIT "D"
DEED
<PAGE>
Recording Requested By and |
When Recorded Mail To: |
|
_____________________________ |
____________________________ |
____________________________ |
____________________________ |
Attention: ________________ |
|
|_____________________________________
APN No.: _________________
DOCUMENTARY TRANSFER TAX - SEE SEPARATE TRANSFER TAX STATEMENT
GRANT DEED
FOR VALUE RECEIVED, , a
("Grantor"), grants to
,
a ____________________________________ ("Grantee"), all that certain real
property (the "Property") situated in the City of , County
of , State of California, and more particularly described
in Exhibit A attached hereto and incorporated herein by reference.
MAIL TAX STATEMENTS TO:
_________________________________
_________________________________
_________________________________
Attention: ________________________
The Property is conveyed to Grantee subject to all matters of
record.
IN WITNESS WHEREOF, the undersigned has executed this Grant
Deed on _______________, 199__.
,
a __________________
By:
Name:
Title:
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
<PAGE>
EXHIBIT "E"
ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
BILL OF SALE, ASSIGNMENT AND ASSUMPTION
( , )
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
the undersigned, , a
("Seller"), hereby sells, transfers, assigns and conveys to ,
a ("Buyer"), the following:
1. Personal Property. All right, title and interest of Seller in
and to all personal property owned by Seller and used in connection with
the ownership, use, operation or maintenance of the Property described
below, including without limitation, those items of tangible personal
property described in Exhibit "A" attached hereto and made a part hereof
("Personal Property"), located upon, and used in the operation of, that
certain property commonly known as " ",
located in the City of , County of ,
State of (collectively, the "Property").
2. Leases. All right, title and interest of Seller in and to all
leases ("Leases") relating to the Property and described in Exhibit "B"
attached hereto.
3. Service Agreements. All right, title and interest of Seller in
and to all service agreements ("Service Agreements") relating to the
Property, or any part of the same and described in Exhibit "C" attached
hereto.
4. Intangible Property. All right, title and interest of Seller,
to the extent assignable, in and to the name "Park Center Plaza", Seller's
interest in all refundable security deposits and prepaid rent, if any,
under the Leases and any and all guaranties, letters of credit or other
credit enhancement relating to the Leases), any and all licenses, permits,
certificates of occupancy, development rights, plans and specifications,
utility contracts and, to the extent approved by Buyer pursuant to this
Agreement, all other agreements relating to the ownership, use and
operation of the Property (collectively the "Intangible Property").
This Bill of Sale, Assignment and Assumption is given pursuant to
that certain purchase agreement captioned "PURCHASE AGREEMENT" dated as of
, 199__ (as amended, the "Agreement"), between the Seller
and Buyer, providing for, among other things, the assignment of the
Personal Property, Leases, Service Agreements and Intangible Property. The
covenants, agreements, and limitations (including, but not limited to, the
limitations of liability provided in paragraph 9B of the Agreement)
provided in the Agreement with respect to the property conveyed hereunder
are hereby incorporated herein by this reference as if herein set out in
full and shall inure to the benefit of and shall be binding upon Seller and
Buyer, and their respective successors and assigns. Said property is
conveyed "as is" without warranty or representation, except as expressly
provided in (and subject to the limitations of) the Agreement.
<PAGE>
This Bill of Sale, Assignment and Assumption may be executed in one or more
counterparts, each of which shall constitute an original, and all of which,
when taken together, shall constitute one and the same instrument.
Buyer hereby accepts the foregoing assignment of Personal Property,
Leases, Service Agreements and Intangible Property assigned hereby and
agrees to assume and discharge, in accordance with the terms thereof, all
of the burdens and obligations of Seller thereunder, to the extent the same
arise from and after the date hereof. Seller shall continue to be
responsible for all burdens and obligations of Seller under the Personal
Property, Leases, Service Agreements and Intangible Property for the period
prior to the date hereof and Buyer shall have no liability therefor.
DATED: As of ________, 199__
SELLER:
a
By:
Name:
Title:
BUYER:
a
By:
Name:
Title:
<PAGE>
EXHIBIT "F"
EXCEPTIONS TO SELLER'S REPRESENTATIONS AND WARRANTIES
NONE.
<PAGE>
EXHIBIT "G"
RENT ROLL
Mitsui Manufacturers Bank
Lease Dated September 1983
First Amendment Dated February 13, 1985
Consent to Sublease Dated October 15, 1990
Sublease Dated October 9, 1990
Consent to Sublease Dated February 12, 1996
Sublease Dated February 12, 1996
Letter Agreement Dated February 12, 1996
First Amendment to Sublease Agreement Dated June 4, 1997
Second Amendment to Sublease Agreement Dated June 17, 1997
Consent to Modification of Sublease Agreement Dated June 17,
1997
Price Waterhouse LLP
Lease Dated July 31, 1984
Amendment Dated March 1, 1985 (unexecuted)
Amendment Dated March 12, 1986
Storage Agreement Dated October 1, 1988
Lease Extension Dated February 10, 1993
Subordination, Nondisturbance and Attornment Agreement Dated
April, 1993
Tenant Expansion Dated September 30, 1994
Tenant Expansion Dated July 20, 1995
Tenant Expansion Dated October 25, 1995
Tenant Expansion Dated February 19, 1997
The Stephenz Group
Lease Dated November 28, 1995
Subordination, Nondisturbance and Attornment Agreement Dated
November 28, 1995
Grant Thornton LLP f/k/a Alexander Grant and Company
Lease Dated November 9, 1984
First Amendment to Office Lease Dated February 10, 1986
Lease Extension Agreement Dated December 29, 1994
Subordination, Nondisturbance and Attornment Agreement Dated
February 22, 1995
Tenant Expansion Agreement Dated October 31, 1995
Neuronetics Corporation Inc. (Suites 750, 760 and 1380)
Lease Dated May 22, 1996
Tenant Expansion Agreement Dated September 11, 1997
Browning Ferris Industries of California, Inc.
Suites 800/900
Lease Dated December 16, 1988
Addendum to Office Lease Dated December 16, 1988
Amendment No. 1 to Office Lease Dated December 16, 1988
Subordination, Nondisturbance and Attornment Agreement Dated
December 31, 1988
Amendment No. 2 to Office Lease and Amendment No. 1 to Work
Agreement Dated April 3, 1989
Office Sublease Dated December 16, 1994
Consent to Sublease Dated December 20, 1994
Suites 850
Lease Dated December 16, 1988
Addendum to Office Lease Dated December 16, 1988
Amendment No. 1 to Office Lease Dated December 16, 1988
Subordination, Nondisturbance and Attornment Agreement Dated
December 31, 1988
Office Sublease Dated December 16, 1994
Consent to Sublease Dated December 20, 1994
TCSI Corporation
Lease Agreement Dated January 31, 1996
People.Com Consultants, Inc.
Lease Dated January 11, 1996
Expansion and Extension Agreement Dated December 6, 1996
PR Newswire Association, Inc.
Lease Dated November 11, 1988
Lease Extension Agreement Dated November 16, 1993
Lease Extension Agreement Dated March 14, 1997
ITJ America, Inc.
Lease Dated October 13, 1997
Michael P. Groom, Thomas R. Cave, Michael P. Groom as Trustee
and Linda P. Cave a/k/a Groom and Cave
Lease Dated May 10, 1988
Short Form Lease Dated May 27, 1988
Addendum to Office Lease Dated July 31, 1987
Relocation Agreement Dated February 16, 1995
The Golden 1 Credit Union
Lease Dated January 18, 1996
Lease Extension Agreement Dated November 26, 1996
Asahi Shimbun America, Inc.
Lease Dated November 22, 1996
Valley Credit Union
Lease Dated September 21, 1990
Lease Extension Agreement Dated January 22, 1996
Kaplan Educational Centers, Inc. f/k/a Stanley H. Kaplan
Educational Center, Ltd.
Lease Dated August 16, 1990
Term Commencement Agreement Dated March 13, 1991
Haworth, Inc.
Lease Dated June 1, 1989
Lease Extension Agreement Dated August 10, 1994
Lease Extension Agreement Dated August 9, 1996
Landmark Education Corporation
Lease Dated September 8, 1997
Ghassan and Suhair Joudy d/b/a O' Deli
Lease Dated May 15, 1989
Lease Amendment Dated April 1, 1993
Assignment of Lease Dated May 15, 1993
Pacific Bell Directory
Lease Dated June 17, 1991
Lease Extension and Amendment Dated January 19, 1996
Term Commencement Agreement Dated March 27, 1996
Frequency Technology, Inc.
Lease Dated December 23, 1996
C&H Travel and Tours, Inc.
Lease Dated February 7, 1997
Heritage Bank Of Commerce
Lease Dated October 9, 1996 (Suite 110)
Subordination, Nondisturbance and Attornment Agreement Dated
October 9, 1996 (Suite 110)
Lease Dated March 18, 1997 (Suite 430)
Lease Dated November 18, 1997 (Suite 300)
De Leuw, Cather & Company
Lease Dated March 16, 1989
Letter Agreement Dated May 16, 1989
Tenant Expansion Agreement Dated September 19, 1990
Assignment of Lease Dated July 18, 1995
Tenant Expansion Agreement Dated November 16, 1995
Lease Extension Agreement Dated July 29, 1996
Tenant Expansion Agreement Dated March 19, 1997
Extension and Space Reduction Agreement Dated June 12, 1995
Costantini, Dana & Immer, an accountancy corp. a/k/a Bondi &
Danna
Lease Dated January 20, 1989
Lease Expansion/Extension Dated January 11, 1993
Westin Engineering, Inc.
Lease Dated June 15, 1990
Term Commencement Agreement Dated November 29, 1990
Lease Extension Agreement Dated April 5, 1995
Letter Regarding Expansion Rights Dated September 11, 1995
Rollins Hudig Hall Of Northern California/Aon Risk Services,
Inc.
Lease Dated April 11, 1995
Lease Termination Notice Dated November 17, 1997
Steven R. Manchester Incorporated & John L. Williams
Incorporated
Lease Dated June 15, 1990
Lease Extension Agreement Dated April 19, 1995
Letter Agreement Regarding Base Rent Abatement (undated)
Ann B. Rundquist and J. Rudy Hale, individuals
Lease Dated July 27, 1992
Relocation Agreement Lease Dated February 7, 1994
Tenant Expansion Agreement Dated May 24, 1994
Lease Extension Agreement Dated February 19, 1997
Assignment of Lease Dated October 13, 1995
Advanced Systems Control, Inc.
Lease Dated October 8, 1996
Lease Extension Agreement Dated October 10, 1997
Caspr Library Systems Inc.
Lease Dated December 7, 1995
The County Of Santa Clara
Lease Dated November 13, 1989
Amendment Dated December 4, 1990
Expansion Agreement Dated March 8, 1994
Expansion Agreement Dated November 16, 1994
Amendment Dated May 23, 1995
City Year, Inc.
Lease Dated May 5, 1994
Lease Extension Dated August 22, 1994
Tar Chair, Maykir Yen, Ted S. Lam and Tiffany M. Lam as
assignee of PBRB Inc. d/b/a Caffe Dolce
Lease Dated December 18, 1995
Assignment of Lease Dated March 21, 1996
Federal Express Corporation
Lease Dated November 15, 1993
Amendment Dated March 14, 1995
TKW Enterprises Inc. d/b/a Yeung's Sung Yuan Restaurant
Lease Dated June 27, 1994
Tam Enterprises Inc. d/b/a Sir Speedy Printing Center
Lease Dated February 28, 1994
Team Ravioli's, Inc.
Lease Dated March 30, 1992
Lease Amendment Dated June 24, 1992
Manpower, Inc./California Peninsula
Lease Dated April 17, 1991
Lease Extension Agreement Dated March 5, 1996
Scott's San Jose d/b/a Scott's Seafood Restaurant
Lease Dated October 17, 1985
Amendment No. 1 Dated September 15, 1992
Imwalle Stegner
Lease Dated October 22, 1990
Lease Extension Agreement Dated February 8, 1996
Lease Extension Agreement Dated February 27, 1997
Biagini Properties, Inc.
Lease Dated January 8, 1992
Lease Extension Agreement Dated June 10, 1997
Sublease Dated July 10, 1997
Comms People, Inc.
Lease Dated May 28, 1997
Scott P. Feldman, O.D.
Lease Dated April 11, 1989
Letter Agreement Regarding Partial Base Rent Abatement Dated
May 11, 1989
Lease Extension Agreement Dated August 24, 1995
Oracle Corporation
Lease Dated September 12, 1997
<PAGE>
EXHIBIT "H(1)"
SERVICE AGREEMENTS
Diversified Fire Products_MTM
Browning Ferris Industries of California, Inc._MTM
Four Seasons Landscape and Maintenance, Inc._MTM
Johnson Controls, Inc._MTM
Montgomery KONE, Inc._06/30/00
Service By Medallion, Inc._06/30/98
Plantscaping_12/31/98
The Asset Assurance Co._MTM
Valley Building Maintenance_MTM
Xerox Corporation _06/30/02
Terminix Commercial_MTM
Pitney Bowes Fax_07/23/99
Protection Service Industries
(Fire monitoring, 185 Building)_03/19/98
Diversified Fire Products
(Fire Monitoring, 100 Park Center Plaza, 150 Almaden and 190 Park Center
Plaza)_MTM
Diversified Fire Products
(Fire Monitoring 130 Park Center Plaza)_12/17/98
<PAGE>
EXHIBIT "H(2)"
PARKING AGREEMENTS
Agreements Date of Agreements
- ---------- ------------------
Grant of Reciprocal Easement and
Agreement for Maintenance September 22, 1970
Grant of Easements September 29, 1970
Agreement for Apportionment of Parking
Revenue and Expense March 1, 1972
Parking Agreement November 22, 1972
Settlement Agreement February 14, 1973
Lease of Parking Spaces February 28, 1973
Lease of Parking Spaces Parcel C
Parking Garage February 28, 1973
Grant of Easement October 22, 1973
Joinder in Grant of Reciprocal
Easement and Agreement for
Maintenance October 22, 1973
Amendment of Lease of Parking Spaces December 15, 1973
Assignment Agreement December 15, 1973
Declaration of Covenants June 10, 1974
Grant of Avigation Easement November 12, 1985
Joinder in Grant of Reciprocal Easement
and Agreement for Maintenance August 6, 1976
Parcel Map with Certification
of the Real Property Owners October 17, 1983
Grant of Easement December 14, 1983
Agreement Among Partners of
Park Center Plaza Parcel C March 26, 1985
Parking Garage, Park Center Plaza-
The Bank of California Building,
Almaden-San Fernando Partnership Agreement
Among Partners of New Almaden Associates March 26, 1985
<PAGE>
EXHIBIT "H(2)"
PARKING AGREEMENTS
Parking Agreement between JMB/San Jose Associates, an Illinois general
partnership and New Almaden Associates, a California General Partnership
recorded June 20, 1985 in Book J377, page 1946, Official Records.
Supplemental Parking Agreement between JMB/San Jose Associates, an Illinois
general partnership, and New Almaden Associates.
Public Parking Covenant and Easement by JMB/San Jose Associates, an
Illinois general partnership, recorded October 23, 1985 in Book J494, page
1602, Official Records.
Parking Agreement between Seller and Principal Mutual Life Insurance
Company (undated).
Parking Agreement among Park Center Plaza, Wells Fargo Bank and Wolff-
Sesnon-Buttery dated August 26, 1985, as amended by First Amendment to
Lease between Wells Fargo Bank and Seller dated October 27, 1997.
Parking Sublease between Redevelopment Agency of the City of San Jose
("Redevelopment Agency") and Seller dated March 19, 1996, as amended by
First Amendment to Parking Sublease between Redevelopment Agency and Seller
dated October 27, 1997.
Parcel 2 Public Parking Covenant and Easement between New Almaden
Associates and Redevelopment Agency recorded October 23, 1985 as Instrument
No. 8566697, as amended by First Amendment to Parcel 2 Public Parking
Covenant and Agreement between Seller and Redevelopment Agency dated
October 27, 1997, recorded on October 31, 1997, as Instrument No. 13919902.
Parcel 1, 3 and 4 Public Parking Covenant and Easement between Seller and
Redevelopment Agency, recorded October 23, 1985, as Instrument No. 8566696,
as amended by First Amendment to Parcels 1, 3 and 4 Public Parking Covenant
and Easement recorded on October 31, 1997, as Instrument No. 13919903.
Lease of Parking Spaces between Seller and ALTA Broadcasting Company dated
March 19, 1996.
Parking Lease between West Park Center Plaza and United California Bank
dated January 15, 1972, as amended by agreement dated June 1, 1981.
Reciprocal Easement Agreement between Seller and ALTA intended to be
recorded immediately prior to closing.
<PAGE>
EXHIBIT "H(3)"
ROOFTOP AGREEMENTS
Asahi Shimbun America, Inc.
Roof License Agreement Dated August 13, 1997 (150 Almaden)
Destineer Corporation
Roof License Agreement Dated March 18, 1994
Addendum to Roof License (undated)
Lease Amendment Dated September 15, 1994
Lease Extension Agreement Dated September 11, 1997
GTE Mobilnet of California
Roof License Agreement Dated April 1, 1990
Roof License Amendment Dated March 25, 1992
License Extension Agreement Dated March 1, 1995
GWcom
Roof License Agreement Dated November 7, 1997
<PAGE>
EXHIBIT "I"
ENVIRONMENTAL REPORTS
Law Engineering Testing Company - August 13, 1987
Health Science Associates - June 1, 1989
Blasland, Bouck & Lee, Inc. - August 1994
Cygna Consulting Engineers (Building 100) - September 17, 1992
Cygna Consulting Engineers (Building 102-130) - September 17, 1992
Nabih Youssef & Associates - September 1992
Marx/Okubo & Associates - September 7, 1994
Nabih Youssef & Associates - February 1995
Nabih Youssef & Associates - January 12, 1998
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a general partner in JMB/San Jose Associates,
an Illinois general partnership which holds title to Park Center Financial
Plaza. The Partnership is a general partner in Royal Executive Park-II,
a New York general partnership which held title to Royal Executive Park II
prior to its sale in December 1997. Reference is made to the Notes to
Financial Statements filed with this annual report for a summary
description of the terms of such partnership agreements. The
Partnership's interest in the foregoing joint venture partnerships,
and the results of their operations are included in the financial
statements of the Partnership filed with this annual report.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the managing general partner of JMB INCOME PROPERTIES,
LTD. - XI, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1997, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1998.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1997,
and any and all amendments thereto, the 30th day of January, 1998.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the managing general partner of JMB INCOME PROPERTIES,
LTD. - XI, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1997, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1998.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1997,
and any and all amendments thereto, the 30th day of January, 1998.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 42,298,264
<SECURITIES> 0
<RECEIVABLES> 3,812,450
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,110,714
<PP&E> 60,929,336
<DEPRECIATION> 0
<TOTAL-ASSETS> 118,582,025
<CURRENT-LIABILITIES> 1,610,049
<BONDS> 33,820,205
<COMMON> 0
0
0
<OTHER-SE> 83,063,638
<TOTAL-LIABILITY-AND-EQUITY>118,582,025
<SALES> 13,500,646
<TOTAL-REVENUES> 14,218,708
<CGS> 0
<TOTAL-COSTS> 10,262,970
<OTHER-EXPENSES> 631,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,897,399
<INCOME-PRETAX> 5,750,839
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,750,839
<DISCONTINUED> 0
<EXTRAORDINARY> 13,349,139
<CHANGES> 0
<NET-INCOME> 19,099,978
<EPS-PRIMARY> 108.05
<EPS-DILUTED> 108.05
</TABLE>
