UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-13348
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BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3314331
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
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Balcor Equity Pension Investors-II A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1984 under the laws of the
State of Illinois. The Registrant raised $234,896,750 from sales of Limited
Partnership Interests. The Registrant's operations consist exclusively of
investing in and operating income-producing real property, and all financial
information included in this report relates to this industry segment.
The Registrant originally funded seven loans and acquired five real property
investments plus a minority joint venture interest in an additional real
property investment. Four loans were prepaid and the Registrant foreclosed on
three loans prior to 1996. The Registrant sold four properties and the
property in which it held a minority joint venture interest during 1996. As of
December 31, 1996, the Registrant owned the four properties described under
"Item 2. Properties". Two of these properties were sold in February 1997. The
Partnership Agreement provides that the proceeds of any sale or refinancing of
the Registrant's properties will not be reinvested in new acquisitions, but
will be distributed to Limited Partners to the extent not required to meet the
Registrant's cash requirements.
The Registrant's remaining properties face various levels of competition for
retention of their tenants from similar types of properties in the vicinities
in which they are located. The Registrant has no plans to change the current
use of or to renovate any of its remaining properties.
Real estate values, especially for good quality, well located property,
increased significantly during 1996 due to a combination of readily available
capital, low interest rates, and decreased vacancy rates resulting from steady
demand and an acceptable level of new construction. While 1996 proved to be an
excellent year to sell real estate, projected yields by buyers on new
acquisitions have declined significantly due to competition and rising prices.
Although there will be variances by asset class and geographic area, the
investment climate is expected to remain strong for 1997. However, values could
begin to level off as they approach replacement cost triggering new
construction and an increase in capitalization rates.
Currently, office properties are attracting the most interest from real estate
investors. While new apartment construction has been underway since 1995, the
office sector has just entered its development phase in most markets and new
construction is generally only proceeding with strong tenant pre-leasing.
Occupancy rates are at their highest level in years, reaching the 90s in a vast
number of markets. As a result, rents have finally begun to increase at rates
well in excess of inflation in many markets around the country. As a result of
these fundamentals, office properties have increasingly become in strong demand
by investors. Values increased significantly during 1996 and are expected to do
so again in 1997. Suburban properties are attracting attention as well. Still,
office properties remain a highly volatile sector where one new build-to-suit
office building for a major tenant could throw a market into relapse. In
addition, office space is highly vulnerable to corporate restructuring and the
growing "telecommuting" trend. The Registrant believes the combination of
strong price increases and future volatility make this an excellent time to
sell office assets.
The outlook for the retail sector of the investment real estate industry is
uncertain for 1997. The retail industry is being simultaneously impacted by a
number of factors which are likely to affect values for quite some time. As
retailers battle to gain market dominance, tenant bankruptcies have grown.
Consolidation among retailers has and is expected to continue to occur. Unlike
other asset classes, new construction of power centers went unabated in the
early 1990's, creating an oversupply of space including "big box" anchor tenant
space. Regional malls, which are not the dominant center in the market, face
continued out-migration of retailers to the power centers. Finally shopping
patterns continue to shift due to the aging baby boomers, high consumer debt,
alternative distribution channels, and the greater emphasis on entertainment.
As a result, the capital requirements necessary to maintain a shopping center's
competitiveness are all significant, but with uncertain returns. The Registrant
believes there is significant risk to holding retail assets for future upside
potential.
During September 1996, the Registrant sold the Spalding Bridge apartment
complex in an all cash sale for $9,872,500. During December 1996, the 1275 K
Street, Denver Centerpoint, and Westech 360 office buildings were sold in all
cash sales for $28,300,000, $15,000,000, and $18,330,000, respectively. The
Registrant owned majority joint venture interests in the 1275 K Street and
Westech 360 office buildings. In addition, during December 1996, the Pacific
Center office building, in which the Registrant held a minority joint venture
interest, was sold in an all cash sale for $15,950,000. During February 1997,
the Registrant sold the Ammendale Technology Park - Phase I and 100 Ashford
Center North office buildings in all cash sales for $7,732,000 and $17,746,000,
respectively. See "Item 7. Liquidity and Capital Resources" for additional
information. See "Other Information" for additional information regarding the
1997 property sales. The Registrant has entered into a contract to sell the
Ross Plaza Shopping Center for a sale price of $10,000,000. See "Other
Information" for additional information regarding the contract. The Registrant
is actively marketing for sale its remaining property, the Bingham Farms Office
Plaza - Phase V.
The timing of the termination of the Registrant and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Registrant, including, but not limited
to, the lawsuits discussed in "Item 3. Legal Proceedings." In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held
by the Registrant for a longer period of time.
The Registrant received notice of an unsolicited offer for the purchase of
Tax-Exempt Limited Partnership Interests ("tender offer") on March 6, 1997. The
tender offer was made by Madison Partnership Liquidity Investors XX, LLC and
stated that their primary motive in making the offer is to make a profit from
the purchase of the Interests. Madison Partnership Liquidity Investors XX, LLC
is seeking to acquire up to 4.9% of the total Interests outstanding in the
Registrant. The Registrant will incur administrative costs in responding
to the tender offer and may incur additional costs if additional tender offers
are made in the future. The General Partner cannot predict with any certainty
what impact this tender offer or any future tender offers will have on the
operations or management of the Registrant.
<PAGE>
The Registrant, by virtue of its ownership of real estate, is subject to
federal and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware
of any potential liability due to environmental issues or conditions that would
be material to the Registrant.
The officers and employees of Balcor Equity Partners-II, the General Partner of
the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Other Information
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100 Ashford Center North Office Building
As previously reported, on January 20, 1997, the Registrant contracted to sell
the 100 Ashford Center North Office Building, Atlanta, Georgia, to an
unaffiliated party, Acquiport Ashford Center North, Inc., a Delaware
corporation, for a sale price of $17,746,000. The closing was extended and the
sale closed on February 20, 1997. From the proceeds of the sale, the
Registrant paid $354,920 as a brokerage commission to an affiliate of the third
party providing property management services for the property and $37,746 in
closing costs. The Registrant received the remaining proceeds of approximately
$17,353,000. The Registrant has retained $1,100,000 of such proceeds which
will not be available for use or distribution by the Registrant until November
1997.
Ammendale Technology Park - Phase I
As previously reported, on November 29, 1996, the Registrant contracted to sell
Ammendale Technology Park - Phase I, Prince George's County, Maryland (the
"Property"), to an unaffiliated party, Writ Limited Partnership. The closing of
the sale was extended from February 19, 1997 and the sale closed on February
28, 1997. The sale price was $7,732,000. From the proceeds of the sale, the
Registrant paid $149,393 in closing costs and a total of $270,620 as a
brokerage commission to two unaffiliated parties, one of which is an affiliate
of the third party providing property management services for the Property.
An affiliate of the Registrant which owned Ammendale Technology Park - Phase II
("Phase II"), located adjacent to the Property, simultaneously sold Phase II to
the purchaser. From the proceeds of the sale of the Property, $229,096 has been
placed in escrow. Additionally, $170,904 has been deposited into the escrow
from the proceeds of the sale of Phase II. These funds will not be disbursed to
the Registrant and/or the affiliate until the later of the settlement of any
claims presented by the purchaser or November 1997.
The Registrant will receive total net proceeds from the sale of the Property of
approximately $7,312,000, including the escrow funds.
Ross Plaza Shopping Center
In 1985, the Registrant acquired the Ross Plaza shopping center (formerly known
as Century Square Shopping Center), Federal Way, Washington, utilizing
approximately $12,218,000 of offering proceeds.
<PAGE>
On March 18, 1997, the Registrant contracted to sell the property for a sale
price of $10,000,000 to an unaffiliated party, Crosstown Asset Corp. I, a
Delaware corporation. The purchaser has deposited $100,000 into an escrow
account as earnest money and is obligated to deposit an additional $80,000 upon
completion of the purchase's due diligence review. The remaining portion of the
sale price will be payable in cash at closing, which is scheduled to occur on
April 30, 1997. From the proceeds of the sale, the Registrant will pay $250,000
as a brokerage commission to an affiliate of the third party providing property
management services for the property. The Registrant will receive the remaining
proceeds of approximately $9,750,000, less closing costs. Of such proceeds,
$500,000 will be retained by the Registrant and will not be available for use
or distribution by the Registrant until November 30, 1997. Neither the General
Partner nor any affiliate will receive a brokerage commission in connection
with the sale of the property. The General Partner will be reimbursed by the
Registrant for actual expenses incurred in connection with the sale.
Affiliates of the Registrant have simultaneously contracted to sell four other
properties to the purchaser.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.
Item 2. Properties
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As of December 31, 1996, the Registrant directly owns the four properties
described below, all of which are owned in fee simple.
Location Description of Property
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Prince George's County, Ammendale Technology Park - Phase I: a
Maryland * one-story office building containing
approximately 47,000 square feet and two
one-story office/warehouse buildings each
containing approximately 60,000 square feet.
Bingham Farms, Michigan Bingham Farms Office Plaza - Phase V: a
four-story office building containing
approximately 193,000 square feet.
Federal Way, Washington Ross Plaza Shopping Center: a three-building,
open-air shopping center containing approximately
170,000 square feet.
Atlanta, Georgia * 100 Ashford Center North Office Building: a
five-story office building containing
approximately 149,000 square feet.
* These properties were sold in February 1997. See Note 16 of Notes to
Financial Statements for additional information.
The average occupancy rates and the effective average rent per square foot for
each of the last five years for the four commercial properties owned by the
Registrant at December 31, 1996, are described below:
<PAGE>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Ammendale Technology Park
Occupancy rate 100% 85% 100% 99% 78%
Effective rent $5.10 $4.07 $5.50 $4.94 $3.23
Bingham Farms
Occupancy rate 94% 83% 71% 95% 96%
Effective rent $13.33 $10.89 $9.20 $15.01 $12.01
Ross Plaza
Occupancy rate 90% 94% 98% 99% 100%
Effective rent $7.55 $7.26 $8.66 $7.58 $7.47
100 Ashford Center
Occupancy rate 100% 100% 98% 93% 94%
Effective rent $16.41 $15.19 $16.41 $20.32 $15.84
Information regarding tenants occupying 10% or more of the leasable square feet
of each commercial property is provided below.
Scheduled
Lease Lease
Square Base Rent Expiration Renewal
Property Tenant Feet Per Annum Date Option
- -------- ------ ------ --------- ------- -------
Ammendale Landis & Gyr 20,031 $175,991 11/1998 Yes
Technology Powers, Inc.
Park (HVAC
Systems)
Expert Office 38,600 $147,855 5/2001 No
Systems
(Office
Products)
Bingham Prime Care 22,705 $343,788 6/2001 Yes
Farms (Health Care)
Office Ticketmaster 16,894 $306,966 3/2000 Yes
Plaza (Ticket
Broker)
Ross Plaza Safeway 37,277 $77,655 2/1999 Yes
Shopping (Grocery
Center Store)
Michaels 20,495 $181,177 7/2001 Yes
(Arts &
Crafts Store)
Ross Dress 26,469 $202,488 1/2001 Yes
for Less
(Discount
Department
Store)
100 Ashford Hyatt, Imler 20,985 $408,255 7/2001 Yes
Center & Blount, PC
North (Law Firm)
Shopping Storage 26,369 $481,420 11/2000 Yes
Center Technology
(Computer
Storage)
Real estate taxes incurred in 1996 for the above commercial properties totaled
$666,913.
The Federal tax basis of the Registrant's properties totaled $73,326,467 as of
December 31, 1996. For Federal income tax purposes, the acquisition costs of
the properties are depreciated over a useful life of 40 years, using the
straight-line method. Other minor assets are depreciated over their applicable
recovery periods.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
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(a) Proposed Class and Derivative Action Lawsuits
- -------------------------------------------------
On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the "Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Registrant, the "Affiliated
Partnerships"), as well as the Affiliated Partnerships, as defendants.
Additional defendants were Insignia Management Group ("Insignia") and Walton
Street Capital Acquisition II, LLC ("Walton") and certain of their affiliates
and principals (collectively, the "Walton and Insignia Defendants"). The
complaint alleged, among other things, that the tender offers for the purchase
of limited partnership interests in the Affiliated Partnerships made by a joint
venture consisting of affiliates of Insignia and Walton were coercive and
unfair.
On July 1, 1996, another proposed class action complaint was filed in the
Chancery Court, Anderson vs. Balcor Mortgage Advisors (Case No. 96 CH 06884)
(the "Anderson Case"). An amended complaint consolidating the Dee and Anderson
Cases (the "Dee/Anderson Case") was filed on July 25, 1996.
The complaint seeks to assert class and derivative claims again the Walton and
Insignia Defendants and alleges that, in connection with the tender offers, the
Walton and Insignia Defendants misused the Balcor Defendants' and Insignia's
fiduciary positions and knowledge in breach of the Walton and Insignia
Defendants' fiduciary duty and in violation of the Illinois Securities and
Consumer Fraud Acts. The plaintiffs amended their complaint on October 8, 1996,
adding additional claims. The plaintiffs requested certification as a class and
derivative action, unspecified compensatory damages and rescission of the
tender offers. Each of the defendants filed motions to dismiss the complaint.
On January 7, 1997, the Chancery Court denied the plaintiffs' motion for leave
to amend the complaint and dismissed the matter with prejudice.
On February 3, 1997, the plaintiffs filed a Notice of Appeal of the Chancery
Court's order to the Appellate Court of Illinois.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. The Registrant believes it has meritorious
defenses to contest the claims. It is not determinable at this time whether or
not an unfavorable decision in this action would have a material adverse impact
on the Registrant.
(b) Proposed class action
- -------------------------
On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al., Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company (together with the
Partnership, the "Affiliated Partnerships"), American Express Company, Lehman
Brothers, Inc., additional limited partnerships sponsored by the predecessor of
Lehman Brothers, Inc. (together with the Registrant and the Affiliated
Partnerships, the "Defendant Partnerships") and Smith Barney Holdings, Inc. are
the named defendants in the action. The complaint was amended on October 18,
1996 to add additional plaintiffs. The amended complaint alleges, among other
things, common law fraud and deceit, negligent misrepresentation, breach of
contract, breach of fiduciary duty and violation of certain New Jersey statutes
relating to the disclosure of information in the offering of limited
partnership interests in the Defendant Partnerships. The amended complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest; general damages for
injuries arising from the defendants' alleged actions; equitable relief,
including rescission, on certain counts; punitive damages; treble damages on
certain counts; recovery from the defendants of all profits received by them as
a result of their alleged actions relating to the Defendant Partnerships;
attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Registrant believes it has meritorious defenses
to contest the claims. It is not determinable at this time whether or not an
unfavorable decision in this action would have a material adverse impact on the
Registrant.
The Registrant is not subject to any other material pending legal proceedings,
nor were any such other proceedings terminated during the fourth quarter of
1996.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1996.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources.
As of December 31, 1996, the number of record holders of Limited Partnership
Interests of the Registrant was 36,381.
Item 6. Selected Financial Data
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Year ended December 31,
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1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
Total income $23,817,831 $21,585,862 $20,684,580 $21,902,189 $19,297,804
Provision for
investment
property
writedowns 968,000 None None 9,810,000 12,300,000
Provisions for loan
receivable
writedown None 768,066 None 1,850,000 None
Provision for
acquisition loan
writedown None None None None 8,071,364
Income (loss) before
net gain on
sales of
properties,
affiliates'
participation in
joint ventures and
equity in loss
from investment
in acquisition
loan 7,402,708 5,707,529 5,808,928 (4,149,426) (16,588,745)
Net income (loss) 19,499,123 4,556,857 4,889,802 (5,456,189) (16,300,985)
Net income (loss)
per Limited Part-
nership Interest 19.73 4.00 4.40 (6.64) (17.89)
Total assets 103,531,343 120,655,642123,673,352 126,764,825 139,125,128
Cash distributions per
per taxable Limited
Partnership Interest 10.40 5.20 5.20 5.35 5.80
Cash distributions per
per tax-exempt Limited
Partnership Interest(A)22.02 6.92 6.92 7.12 7.72
(A) These amounts include distributions of original capital of $8.18 per
tax-exempt Limited Partnership Interest during 1996.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
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Operations
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Summary of Operations
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Balcor Equity Pension Investors - II A Real Estate Limited Partnership (the
"Partnership") recognized gains on the September 1996 sale of the Spalding
Bridge apartment complex and the December 1996 sales of the Denver Centerpoint
and Westech 360 office buildings. During 1996, the Partnership also recognized
its share of a gain on the sale of the Pacific Center office building, in which
the Partnership held a minority joint venture interest. These gains were
partially offset by a loss recognized on the December 1996 sale of the 1275 K
Street office building and a provision for investment property write-down
recognized on the Ammendale Technology Park - Phase I. The combined effect of
these events resulted in higher net income during 1996 as compared to 1995.
During 1995, the Partnership generated higher interest income on short-term
investments primarily as a result of higher interest rates and higher rental
income as a result of improved operations at certain of its properties as
compared to 1994. However, the Partnership recognized a provision for loan
receivable writedown during 1995 in connection with the prepayment of the
Colonial Coach and Castlewood West loan at a discount. The combined effect of
these items resulted in a decrease in net income during 1995 when compared to
1994. Further discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
- ---------------------
Rental income increased by approximately $655,000 during 1996 as compared to
1995 due to lease buy-out income received at the Westech 360 office building,
higher occupancy rates at the 100 Ashford Center North office building and the
Bingham Farms Office Plaza - Phase V office building and higher percentage
rental income at the Ross Plaza Shopping Center. These increases in rental
income were partially offset by lower rental income from the Spalding Bridge
Apartments of approximately $350,000 due to the sale of the property in
September 1996.
In 1995, the Partnership accepted a discounted prepayment on the Colonial Coach
and Castlewood West loan receivable. The Partnership recognized interest
income on this loan receivable prior to the prepayment. In connection with the
discounted prepayment, the Partnership recognized a provision of $768,066 for
loan receivable write-down.
The Partnership recognized its share of the gain on the sale of the Pacific
Center office building, in which it held a joint venture interest, resulting in
an increase in participation in income of joint venture with an affiliate
during 1996 as compared to 1995.
Due to the 1996 sales of the Denver Centerpoint, Westech 360 and 1275 K Street
office buildings, as discussed above, the Partnership fully amortized the
remaining deferred leasing commissions and as a result, amortization of
deferred expenses increased during 1996 as compared to 1995.
The Partnership incurred higher consulting, investor processing, printing and
postage costs in connection with its response to a tender offer and related
litigation during 1996. As a result, administrative expenses increased during
1996 as compared to 1995.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties. Determinations of fair
value are made periodically on the basis of property operations. Determinations
of fair value represent estimations based on many variables which affect the
value of real estate, including economic and demographic conditions. During
December 1996, the Partnership recognized a provision for investment property
writedown of $968,000 to provide for a change in the estimate of fair value of
the Ammendale Technology Park - Phase I.
The Partnership sold the Spalding Bridge Apartments in September 1996 and sold
the Denver Centerpoint, Westech 360 and 1275 K Street office buildings in
December 1996. The Partnership recognized gains totaling $20,627,020 on three
of the property sales and recognized a loss of $5,028,903 on the 1275 K Street
Office Building sale during 1996. See Note 12 of Notes to Financial Statements
for additional information.
The 1275 K Street and Westech 360 office buildings were owned through joint
ventures with affiliates. As a result of the affiliates' share of the gain
recognized on the sale of the Westech 360 office building of approximately
$4,288,000 during 1996, affiliates' participation in income from joint ventures
increased during 1996 as compared to 1995. This increase was partially offset
by the affiliates' share of the loss recognized on the sale of the 1275 K
Street office building of approximately $1,925,000.
1995 Compared to 1994
- ---------------------
Primarily as a result of higher rental rates and higher occupancy at the 1275 K
Street office building and higher rental rates at the Westech 360 office
building, rental income increased during 1995 as compared to 1994.
Additionally, because both of these properties are owned through joint ventures
with affiliates, the affiliates' participation in income of joint ventures
increased during 1995 as compared to 1994.
Higher average cash balances as a result of the Colonial Coach and Castlewood
West loan prepayment described below and higher interest rates resulted in an
increase in interest income on short-term investments during 1995 when compared
to 1994.
As a result of the Colonial Coach and Castlewood West loan prepayment in 1995,
the Partnership received less interest income and fully amortized the remaining
loan application and processing fees, resulting in decreased interest income on
the loan receivable during 1995 as compared to 1994.
Due to a decrease in expenses related to leasing activity completed in 1994 at
the Pacific Center Office Buildings, the Partnership recognized participation
in income of joint venture with an affiliate during 1995 as compared to
participation in loss during 1994.
A refund of 1992 taxes was received in the first quarter of 1994 from the local
taxing authority for the 1275 K Street Office Building due to a decrease in the
assessed tax value of the property. This refund resulted in lower real estate
tax expense during 1994 as compared to 1995.
Liquidity and Capital Resources
- ------------------------------
The cash position of the Partnership increased by approximately $41,850,000 as
of December 31, 1996 as compared to December 31, 1995 primarily due to proceeds
received from the sales of four properties and the property in which the
Partnership held a minority joint venture interest. Cash flow of approximately
$9,284,000 provided by the Partnership's operating activities includes cash
flow from the operations of the properties and interest income on short-term
investments, which were partially offset by the payment of administrative
expenses. Investing activities consisted of net proceeds received from the
sales the Spalding Bridge Apartments and the Denver Centerpoint, Westech 360
and 1275 K Street office buildings totaling approximately $69,518,000, net
distributions received from the joint venture with an affiliate totaling
approximately $3,627,000, less payments made for improvements to certain of the
Partnership's properties of approximately $920,000. Financing activities
consisted of distributions to the Partners of approximately $20,863,000 and to
the affiliated joint venture partners of approximately $18,797,000. In January
1997, the Partnership made a special Net Cash Proceeds distribution to
Tax-Exempt Limited Partners of approximately $57,892,000.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures.
During 1996 and 1995, all of the remaining properties as of December 31, 1996
generated positive cash flow. The Spalding Bridge Apartments, the Denver
Centerpoint, Westech 360 and 1275 K Street office buildings, and the Pacific
Center Office Buildings, in which the Partnership held a minority joint venture
interest, all generated positive cash flow during 1995 and prior to their sales
in 1996. As of December 31, 1996, occupancy rates at the Partnership's
remaining commercial properties ranged from 90% to 100%.
During 1996, the Partnership sold four properties and the property in which the
Partnership held a minority joint venture interest was also sold, as discussed
below. During February 1997, the Partnership sold two additional properties,
as discussed below. The Partnership has entered into a contract to sell the
Ross Plaza Shopping Center for a sale price of $10,000,000. See "Item 1.
Business - Other Information" for additional information regarding the
contract. The Partnership is actively marketing its remaining property, the
Bingham Farms Office Plaza - Phase V.
The timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to, the lawsuits discussed in "Item 3. Legal Proceedings." In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held
by the Partnership for a longer period of time.
<PAGE>
In September 1996, the Partnership sold the Spalding Bridge Apartments in an
all cash sale for $9,872,500. From the proceeds of the sale, the Partnership
paid $267,092 in selling costs. In accordance with the Partnership Agreement,
the Partnership distributed the proceeds to the Tax-exempt Limited Partners in
January 1997. See Note 12 of Notes to Financial Statements for additional
information.
In December 1996, the Partnership sold the Denver Centerpoint Office Buildings
in an all cash sale for $15,000,000. From the proceeds of the sale, the
Partnership paid $327,876 in selling costs. In accordance with the Partnership
Agreement, the Partnership distributed the proceeds to the Tax-exempt Limited
Partners in January 1997. See Note 12 of Notes to Financial Statements for
additional information.
The 1275 K Street office building was owned by a joint venture consisting of
the Partnership and an affiliate. In December 1996, the joint venture sold the
property in an all cash sale for $28,300,000. From the proceeds of the sale,
the joint venture paid $911,470 in selling costs. The net proceeds of the sale
were $27,388,530, of which $16,575,538 was the Partnership's share. Pursuant
to the terms of the sale, $2,287,500 of the proceeds will be retained by the
joint venture until September 1997. In accordance with the Partnership
Agreement, the remaining proceeds received by the Partnership were distributed
to the Tax-exempt Limited Partners in January 1997. See Note 12 of Notes to
Financial Statements for additional information.
The Westech 360 office buildings were owned by a joint venture consisting of
the Partnership and an affiliate. In December 1996, the joint venture sold the
property in an all cash sale for $18,330,000. From the proceeds of the sale,
the joint venture paid $477,652 in selling costs. The net proceeds of the sale
were $17,852,348, of which $10,122,281 was the Partnership's share. Pursuant
to the terms of the sale, $1,395,000 of the proceeds will be retained by the
joint venture until September 1997. In accordance with the Partnership
Agreement, the remaining proceeds received by the Partnership were distributed
to the Tax-exempt Limited Partners in January 1997. See Note 12 of Notes to
Financial Statements for additional information.
The Pacific Center office buildings were owned by a joint venture consisting of
the Partnership and an affiliate. In December 1996, the joint venture sold the
property in an all cash sale for $15,950,000. From the proceeds of the sale,
the joint venture paid $431,045 in selling costs. The net proceeds of the sale
were $15,518,955, of which $3,555,393 was the Partnership's share. In
accordance with the Partnership Agreement, the remaining proceeds received by
the Partnership were distributed to the Tax-exempt Limited Partners in January
1997. See Note 9 of Notes to Financial Statements for additional information.
In February 1997, the Partnership sold the 100 Ashford Center North office
building in an all cash sale for $17,746,000. From the proceeds of the sale,
the Partnership paid $392,666 in selling costs. Pursuant to the terms of the
sale, $1,100,000 of the proceeds will be retained by the Partnership until
November 1997. In accordance with the Partnership Agreement, the Partnership
will distribute the remaining proceeds to the Tax-exempt Limited Partners in
1997.
In February 1997, the Partnership sold the Ammendale Technology Park - Phase I
office building in an all cash sale for $7,732,000. From the proceeds of the
sale, the Partnership paid $420,013 in selling costs. Pursuant to the terms of
the sale, $229,096 of the proceeds will be held in escrow until November 1997.
In accordance with the Partnership Agreement, the Partnership will distribute
the remaining proceeds to the Tax-exempt Limited Partners in 1997.
In January 1997, the Partnership paid $61,046,108 ($2.60 per Taxable Interest
and $73.46 per Tax-exempt Interest) to Limited Partners. Of this amount,
$3,154,170 ($2.60 per Taxable Interest and $3.46 per Tax-exempt Interest)
represents the regular quarterly cash distribution of Net Cash Receipts for the
fourth quarter of 1996. The level of the regular quarterly cash distribution
was consistent with the amount distributed to Limited Partners for the previous
quarter. In addition, $57,891,938 ($70.00 per Tax-exempt Interest) of the cash
distribution represents a special cash distribution of Net Cash Proceeds to
Tax-exempt Limited Partners pursuant to the Partnership Agreement from the 1996
property sales, as discussed above. During January 1997, the Partnership paid
$262,847 to the General Partner, representing its quarterly cash distribution
for the fourth quarter of 1996 and made a contribution of $87,616 to the
Repurchase Fund. To date, including the January 1997 cash distribution, Limited
Partners have received cash distributions aggregating approximately $117 per
$250 Taxable Interest, of which $91 represents Net Cash Receipts and $26
represents Net Cash Proceeds, and $225 per $250 Tax-exempt Interest, of which
$121 represents Net Cash Receipts and $104 represents Net Cash Proceeds. In
light of results to date, the General Partner does not anticipate that taxable
investors will recover all of their original investment.
The Partnership made four distributions totaling $10.40, $5.20 and $5.20 per
Taxable Interest and $22.02, $6.92 and $6.92 per Tax-exempt Interest in 1996,
1995 and 1994, respectively. Distributions to tax-exempt investors were
comprised of $13.84 of Net Cash Receipts and $8.18 of Net Cash Proceeds in 1996
from the Colonial Coach and Castlewood West loan prepayment in 1995, $6.92 of
Net Cash Receipts in 1995 and $6.92 of Net Cash Receipts in 1994. Distributions
to taxable investors were comprised of Net Cash Receipts in all three years.
Net Cash Receipts distributions increased from 1995 to 1996 due to improved
operations at the Partnership's properties. Future cash distributions will be
made from property sales, as to which there can be no assurances.
During 1996, the General Partner, on behalf of the Partnership, used amounts
placed in the Repurchase Fund to repurchase 3,380 interests from Limited
Partners at a cost of $433,367. In February 1997, the Partnership discontinued
the repurchase of Interests from Limited Partners.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements and Financial Statement Schedule in this
Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1996 December 31, 1995
---------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- --------- ---------- ---------
Total assets $103,531,343 $126,008,880 $120,655,642 $206,025,929
Partners' capital
(deficit):
General Partner (428,434) 587,152 11,167 1,299,971
Limited Partners 101,505,282 145,591,916 102,429,946 177,574,399
Net income(loss):
General Partner 962,253 689,035 797,128 971,580
Limited Partners 18,536,870 (12,640,017) 3,759,729 3,076,016
Per Limited Part-
nership Interest 19.73 (A) 4.00 (A)
(A) The net income(loss) is ($16.70) per Tax-exempt Interest and $10.40 per
Taxable Interest for 1996 and $3.01 per Tax-exempt Interest and $5.20 per
Taxable Interest for 1995.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Equity Partners-II, its General Partner,
has a Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President James E. Mendelson
Senior Vice President John K. Powell, Jr.
Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 49) joined Balcor in July 1979. He is Chairman, President
and Chief Executive Officer and has responsibility for all ongoing day-to-day
activities at Balcor. He is a Director of The Balcor Company. He is also Senior
Vice President of American Express Company and is responsible for its real
estate operations worldwide. Prior to joining Balcor, Mr. Meador was employed
at the Harris Trust and Savings Bank in the commercial real estate division
where he was involved in various lending activities. Mr. Meador received his
M.B.A. degree from the Indiana University Graduate School of Business.
Alexander J. Darragh (age 42) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility for
Balcor's environmental matters. Mr. Darragh received masters' degrees in Urban
Geography from Queen's University and in Urban Planning from Northwestern
University.
James E. Mendelson (age 34) joined Balcor in July 1984 and is responsible for
Balcor's property sales activities. He also has supervisory responsibility for
Balcor's accounting, financial, treasury, investor services and investment
administration functions. From 1989 to 1995, Mr. Mendelson was Vice President -
Transaction Management and Vice President - Senior Transaction Manager and had
responsibility for various asset management matters relating to real estate
investments made by Balcor, including negotiations for the restructuring of
mortgage loan investments. Mr. Mendelson received his M.B.A. degree from the
University of Chicago.
<PAGE>
John K. Powell, Jr. (age 46) joined Balcor in September 1985 and is responsible
for portfolio and asset management matters relating to Balcor's partnerships.
Mr. Powell also has supervisory responsibility for Balcor's risk management
function. He received a Master of Planning degree from the University of
Virginia. Mr. Powell has been designated a Certified Real Estate Financier by
the National Society for Real Estate Finance and is a full member of the Urban
Land Institute.
Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief
Financial Officer, is responsible for Balcor's financial, human
resources and treasury functions. From June 1989 until October 1996, Ms.
Kosik had supervisory responsibility for accounting functions relating
to Balcor's public and private partnerships. She is also Treasurer and
a Managing Director of The Balcor Company. Ms. Kosik is a Certified
Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1996.
Item 11. Executive Compensation
- -------------------------------
The Registrant paid $8,667 in 1996 with respect to one of the executive
officers and directors of Balcor Equity Partners-II, the General Partner. The
Registrant has not paid and does not propose to pay any remuneration to the
remaining executive officers and directors of the General Partner. Certain of
the remaining officers receive compensation from The Balcor Company (but not
from the Registrant) for services performed for various affiliated entities,
which may include services performed for the Registrant. However, the General
Partner believes that any such compensation attributable to services performed
for the Registrant is immaterial to the Registrant. See Note 11 of Notes to
Financial Statements for the information relating to transactions with
affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) The following entity is the sole Limited Partner which owns beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant:
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Title of Class Owner Ownership Class
- -----------------------------------------------------------
Limited Walton Street 49,655.25 5.28%
Partnership Capital Limited
Interests Acquisition Partnership
Co. II, L.C.C. Interests
Chicago,
Illinois
<PAGE>
Limited Beattie 26,737.44 2.85%
Partnership Place Limited
Interests Greenville, Partnership
South Carolina Interests
While Walton Street Capital Acquisition Co. II, L.C.C. and Beattie Place
individually own less than 5% of the Interests, for purposes of this Item 12,
Walton Street Capital Acquisition Co. II, L.C.C. is an affiliate of Beattie
Place and, collectively, they own 8.13% of the Interests.
(b) Balcor Equity Partners-II (principally through the Repurchase Fund) and its
officers own as a group the following Limited Partnership Interests of the
Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership
Interests 24,531 Interests Approximately 3%
Relatives and affiliates of the officers of the General Partner do not own any
additional Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 11 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
- ------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership,
previously filed as Exhibit 3 to Amendment No. 2 to the Registrant's
Registration Statement on Form S-11 dated September 20, 1984 (Registration No.
2-91810) and to Amendment No. 1 to the Registrant's Registration Statement on
Form S-11 dated January 24, 1985 (Registration No. 2-95409), are hereby
incorporated herein by reference.
(4) Forms of Subscription Agreements, previously filed as Exhibits 4.1.1 and
4.1.2 to Amendment No. 2 dated September 20, 1984 to the Registrant's
Registration Statement (Registration No. 2-91810) and to Amendment No. 1 dated
January 24, 1985 to the Registrant's Registration Statement (Registration No.
2-95409) and Form of Confirmation regarding Interests in the Registrant set
forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for the quarter
ended June 30, 1992 are incorporated herein by reference.
(10) Material Contracts:
(i) Agreement of Sale and attachments thereto relating to the sale of the 1275
K Street Building, Washington, D.C., previously filed as Exhibit (2) to the
Registrant's Report on Form 8-K dated November 29, 1996, is incorporated herein
by reference.
(ii) (a) Agreement of Sale and attachment thereto relating to the sale of the
100 Ashford Center North office building, Atlanta, Georgia, previously filed as
Exhibit (2) to the Registrant's Report on Form 8-K dated January 20, 1997, is
hereby incorporated herein by reference.
(b) Letter Agreement relating to the sale of the 100 Ashford Center North
Office Building, Atlanta, Georgia, is attached hereto.
(iii) Agreement of Sale and attachment thereto relating to the sale of the
Ross Plaza Shopping Center, Federal Way, Washington, is attached hereto.
(27) Financial Data Schedule of the Registrant for 1996 is attached hereto.
(99) Additional Exhibits:
Fourth Amendment to Agreement of Sale relating to the sale of Ammendale
Technology Park, Phase I, Prince George's County, Maryland, is attached hereto.
(b) Reports on Form 8-K:
<PAGE>
(i) A Current Report on Form 8-K dated November 29, 1996 was filed reporting
the Agreement of Sale and the closing of the sale relating to the 1275 K Street
office building, the Agreement of Sale relating to the Ammendale Technology
Park - Phase I, the Agreement of Sale and the closing of the sale of the Denver
Centerpoint office building, the Agreement of Sale and the closing of the sale
relating to the Westech 360 office buildings, and the closing of the sale
relating to the Pacific Center office buildings.
(ii) A Current Report on Form 8-K dated January 20, 1997 was filed reporting
the Agreement of Sale relating to the 100 Ashford Center North Office Building
and the reduction of the sale price and extension of the closing date relating
to Ammendale Technology Park - Phase I.
(c) Exhibits: See Item 14 (a)(3) above.
(d) Financial Statement Schedule: See Financial Statements and Financial
Statement Schedule in this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/ Jayne A. Kosik
--------------------------
Jayne A. Kosik
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of
Balcor Equity Partners-II,
the General Partner
Date: March 27, 1997
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
/s/ Thomas E. Meador Partners-II, the General Partner March 27, 1997
- -------------------- --------------
Thomas E. Meador
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of
of Balcor Equity Partners-II,
/s/ Jayne A. Kosik the General Partner March 27, 1997
- -------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1996 and 1995
Statements of Partners' Capital, for the years ended December 31, 1996, 1995
and 1994
Statements of Income and Expenses, for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows, for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1996
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein. Audited financial statements for the significant subsidiary
investment in joint venture are omitted since the property was sold and the
Partnership is in its liquidation stage.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Pension Investors-II
A Real Estate Limited Partnership:
We have audited the financial statements and the financial statement schedule
of Balcor Equity Pension Investors-II A Real Estate Limited Partnership (An
Illinois Limited Partnership) as listed in the index of this Form 10-K. These
financial statements and the financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Equity Pension
Investors-II A Real Estate Limited Partnership at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
As described in Note 2 to the financial statements, the Partnership Agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests. The Partnership is currently marketing for sale its
remaining real estate assets. Upon disposition of its remaining real estate
assets and the resolution of the litigation described in Note 15 to the
financial statements, the Partnership intends to cease operations and dissolve.
/s/Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 24, 1997
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
------------ ------------
Cash and cash equivalents $ 66,445,811 $ 24,596,293
Accounts and accrued interest receivable 498,779 538,041
Prepaid expenses 139,249 213,241
Deferred expenses, net of accumulated
amortization of $336,570 in 1996 and
$989,273 in 1995 445,672 740,093
Investment in joint venture with an affiliate 1,336,859
------------ ------------
67,529,511 27,424,527
------------ ------------
Investment in real estate
Land 9,442,435 26,808,775
Buildings and improvements 44,700,462 108,826,412
------------ ------------
54,142,897 135,635,187
Less accumulated depreciation 18,141,065 42,404,072
------------ ------------
Investment in real estate, net of
accumulated depreciation 36,001,832 93,231,115
------------ ------------
$ 103,531,343 $ 120,655,642
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 402,217 $ 282,014
Due to affiliates 117,602 33,578
Accrued real estate taxes 448,030
Security deposits 246,359 467,600
------------ ------------
Total liabilities 766,178 1,231,222
Affiliates' participation in joint ventures 1,688,317 16,983,307
Commitments and contingencies
Limited Partners' capital (939,587 Interests
issued and outstanding) 101,505,282 102,429,946
General Partner's (deficit) capital (428,434) 11,167
------------ ------------
Total partners' capital 101,076,848 102,441,113
------------ ------------
$ 103,531,343 $ 120,655,642
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1996, 1995 and 1994
Partners' Capital (Deficit) Accounts
----------------------------------------
General Limited
Total Partner Partners
------------ ------------ ------------
Balance at December 31, 1993 $ 107,012,990 $ (144,161)$ 107,157,151
Cash distributions to:
Limited Partners (A) (6,308,340) (6,308,340)
General Partner (700,928) (700,928)
Net income for the year
ended December 31, 1994 4,889,802 760,056 4,129,746
------------ ------------ ------------
Balance at December 31, 1994 104,893,524 (85,033) 104,978,557
Cash distributions to:
Limited Partners (A) (6,308,340) (6,308,340)
General Partner (700,928) (700,928)
Net income for the year
ended December 31, 1995 4,556,857 797,128 3,759,729
------------ ------------ ------------
Balance at December 31, 1995 102,441,113 11,167 102,429,946
Cash distributions to:
Limited Partners (A) (19,381,766) (19,381,766)
General Partner (1,401,854) (1,401,854)
Deemed distribution to
Limited Partners (B) (79,768) (79,768)
Net income for the year
ended December 31, 1996 19,499,123 962,253 18,536,870
------------ ------------ ------------
Balance at December 31, 1996 $ 101,076,848 $ (428,434)$ 101,505,282
============ ============ ============
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1996, 1995 and 1994
(Continued)
(A) Summary of cash distributions paid per Interest:
Taxable 1996 1995 1994
------------ ------------ ------------
First Quarter $ 2.60 $ 1.30 $ 1.30
Second Quarter 2.60 1.30 1.30
Third Quarter 2.60 1.30 1.30
Fourth Quarter 2.60 1.30 1.30
Tax-Exempt 1996 1995 1994
------------ ------------ ------------
First Quarter $ 3.46 $ 1.73 $ 1.73
Second Quarter 3.46 1.73 1.73
Third Quarter 3.46 1.73 1.73
Fourth Quarter 11.64 1.73 1.73
(B) This amount represents a state withholding tax paid on behalf of the
Limited Partners relating to the gain on the sale of Spalding Bridge
Apartments.
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------ ------------ ------------
Income:
Rental income $ 18,293,214 $ 17,988,052 $ 17,205,757
Service income 1,966,035 2,004,731 2,123,342
Interest on short-term
investments 1,268,523 1,188,150 755,000
Interest on loan receivable -
first mortgage, net of
amortization of $50,232 in
1995 and $26,207 in 1994 392,298 611,861
Participation in income (loss)
of joint venture with an
affiliate 2,290,059 12,631 (11,380)
------------ ------------ ------------
Total income 23,817,831 21,585,862 20,684,580
------------ ------------ ------------
Expenses:
Depreciation 3,261,148 3,235,980 3,214,233
Amortization of deferred
expenses 578,114 246,167 237,773
Property operating 7,633,003 7,970,936 7,898,977
Real estate taxes 2,193,939 2,057,705 1,836,717
Property management fees 685,822 687,925 723,733
Administrative 1,095,097 911,554 964,219
Provision for investment
property writedown 968,000
Provision for loan receivable
writedown 768,066
------------ ------------ ------------
Total expenses 16,415,123 15,878,333 14,875,652
------------ ------------ ------------
Income before net gain on sales of
properties and affiliates'
participation in joint ventures 7,402,708 5,707,529 5,808,928
Net gain on sales of properties 15,598,117
Affiliates' participation in
income from joint ventures (3,501,702) (1,150,672) (919,126)
------------ ------------ ------------
Net income $ 19,499,123 $ 4,556,857 $ 4,889,802
============ ============ ============
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1996, 1995 and 1994
(Continued)
Net income allocated to
General Partner $ 962,253 $ 797,128 $ 760,056
============ ============ ============
Net income allocated to
Limited Partners $ 18,536,870 $ 3,759,729 $ 4,129,746
============ ============ ============
Net income per Limited
Partnership Interest (939,587
issued and outstanding) $ 19.73 $ 4.00 $ 4.40
============ ============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------ ------------ ------------
Operating activities:
Net income $ 19,499,123 $ 4,556,857 $ 4,889,802
Adjustments to reconcile net
income to net cash provided
by operating activities:
Net gain on sales of
properties (15,598,117)
Affiliates' participation
in income from joint
ventures 3,501,702 1,150,672 919,126
Participation in (income)
loss of joint venture
with an affiliate (2,290,059) (12,631) 11,380
Depreciation of properties 3,261,148 3,235,980 3,214,233
Amortization of deferred
expenses 578,114 246,167 237,773
Amortization of loan
application and
processing fees 50,232 26,207
Provision for investment
property writedown 968,000
Provision for loan
receivable writedown 768,066
Payment of leasing
commissions (283,693) (228,055) (183,543)
Net change in:
Accounts and accrued
interest receivable 39,262 224,025 453,807
Prepaid expenses 73,992 (131,326) 9,262
Accounts payable 120,203 (92,093) (318,881)
Due to affiliates 84,024 (90,961) (65)
Accrued real estate taxes (448,030) 32,059 73,168
Security deposits (221,241) 32,977 25,532
------------ ------------ ------------
Net cash provided by
operating activities 9,284,428 9,741,969 9,357,801
------------ ------------ ------------
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
(Continued)
Investing activities:
Proceeds from sales of
properties $71,502,500
Payment of selling costs (1,984,090)
Capital contributions to joint
venture with an affiliate (54,938) $(48,400)
Distributions from joint
venture with an affiliate 3,681,856 $158,493 17,999
Collection of principal
payment on loan receivable 6,772,920
Improvements and additions to
properties (920,158) (576,364) (694,324)
------------ ------------ ------------
Net cash provided by or (used
in) investing activities 72,225,170 6,355,049 (724,725)
------------ ------------ ------------
Financing activities:
Distributions to
Limited Partners (19,381,766) (6,308,340) (6,308,340)
Distributions to General
Partner (1,401,854) (700,928) (700,928)
Deemed distribution
to Limited Partners (79,768)
Distributions to joint venture
partners - affiliates (18,796,692) (1,597,953) (1,670,887)
------------ ------------ ------------
Cash used in financing
activities (39,660,080) (8,607,221) (8,680,155)
------------ ------------ ------------
Net change in cash and cash
equivalents 41,849,518 7,489,797 (47,079)
Cash and cash equivalents at
beginning of year 24,596,293 17,106,496 17,153,575
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 66,445,811 $ 24,596,293 $ 17,106,496
============ ============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Balcor Equity Pension Investors-II A Real Estate Limited Partnership (the
"Partnership") is engaged principally in the operation of commercial real
estate located in Bingham Farms, Michigan and Federal Way, Washington.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. In 1996, the Partnership sold the Spalding Bridge Apartments and
the 1275 K Street, Denver Centerpoint, and Westech 360 office buildings. The
Partnership owned majority joint venture interests in the 1275 K Street and
Westech 360 office buildings. In addition, the Pacific Center office buildings,
in which the Partnership held a minority joint venture interest, was sold in
1996. The majority of the proceeds from the sales of these properties were
distributed to Tax-Exempt Limited Partners in October 1996 and January 1997.
During February 1997, the Partnership sold the Ammendale Technology Park -
Phase I and 100 Ashford Center North office buildings. The Partnership has
entered into a contract to sell the Ross Plaza Shopping Center. The Partnership
is actively marketing for sale its remaining property, the Bingham Farms Office
Plaza - Phase V. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees stemming from litigation involving the Partnership, including,
but not limited to, the lawsuits discussed in Note 15 of Notes to Financial
Statements. In the absence of any contingency, the reserves will be paid within
twelve months of the last property being sold. In the event a contingency
exists, reserves may be held by the Partnership for a longer period of time.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense is computed using straight-line and accelerated
methods. Rates used in the determination of depreciation are based upon the
following estimated useful lives:
Years
-----
Buildings and improvements 20 to 35
Furniture and fixtures 5
Depreciation expense for tenant improvements is computed using a straight-line
method over the term of the lease.
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
As properties are sold, the related costs and accumulated depreciation are
removed from the respective accounts. Any gain or loss on disposition is
recognized in accordance with generally accepted accounting principles.
(c) Interest income on the loan receivable consisted of monthly payments
received from the borrower, which were recorded in the period they were earned
as determined by the terms of the loan agreement. The accrual of interest was
discontinued when the loan became ninety days contractually delinquent or
sooner, when in the opinion of the General Partner, an impairment had occurred
in the value of the collateral property securing the loan. Once the loan
receivable had been placed on non-accrual status, income was recorded only as
cash payments were received from the borrower. The Partnership received a
prepayment of its last mortgage loan receivable in 1995.
(d) Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121, the
Partnership records its investments in real estate at the lower of cost or fair
value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties based on the current sales price
less estimated closing costs. In the event the General Partner determines an
impairment in value has occurred, and the carrying amount of the real estate
asset will not be recovered, a provision is recorded to reduce the carrying
basis of the property to its estimated fair value. The General Partner
considers the methods referred to above to result in a reasonable measurement
of a property's fair value, unless other factors affecting the property's value
indicate otherwise.
Loan losses on mortgage notes receivable were charged to income when the
General Partner believed the loan balance would not be recovered. The General
Partner assessed the collectibility of each loan on a periodic basis through a
review of the collateral property operations, the property value and the
borrower's ability to repay the loan. Upon foreclosure, the loan balance was
transferred to real estate, after the fair value of the property less costs of
disposal was assessed. Upon the transfer to real estate, a new basis in the
property was established. Consistent with the Partnership's investment
objectives to own income producing real property to be held for long-term
appreciation, real estate acquired through foreclosure was recorded as
investment in real estate.
(e) Deferred expenses currently consist of leasing commissions which are
amortized over the life of each respective lease. Upon a sale of the property,
the remaining balance is written off. Deferred expenses previously included
loan application and processing fees and mortgage brokerage fees which were
amortized over the average term of the loans.
(f) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases is recognized on a straight line
basis over the respective lease term. Service income includes reimbursements
for operating costs such as real estate taxes, maintenance and insurance and is
recognized as revenue in the period the applicable costs are incurred.
(g) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Statement No. 107 does not apply to all balance sheet items and
excludes certain financial instruments and all non-financial instruments such
as real estate and investment in joint ventures from its disclosure
requirements.
(h) Investment in joint venture with an affiliate represented the Partnership's
22.91% interest, under the equity method of accounting, in a joint venture with
an affiliated partnership. Under the equity method of accounting, the
Partnership recorded its initial investment at cost and adjusted its investment
account for additional capital contributions, distributions and its share of
joint venture income or loss.
(i) Cash and cash equivalents include all unrestricted highly liquid
investments with an original maturity of three months or less. Cash is held or
invested in one financial institution.
(j) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
4. Partnership Agreement:
The Partnership was organized on May 29, 1984. The Partnership Agreement
provides for Balcor Equity Partners-II to be the General Partner and for the
admission of Limited Partners through the sale of up to 1,000,000 Limited
Partnership Interests at $250 per Interest, 939,587 of which were sold on or
prior to February 20, 1985, the termination date of the offering.
"Operating Income" of the Partnership is allocated 10% to the General Partner
and 90% to the Limited Partners; however, certain components are specially
allocated as described in the Partnership Agreement. "Operating Losses" and
certain other components are allocated 1% to the General Partner and 99% to the
Limited Partners.
The Partnership Agreement provides for different allocations of profits and
losses and cash distributions to Limited Partners depending on whether the
investor originally acquiring the Interest was a taxable or tax-exempt entity.
"Net Cash Receipts" available for distribution are distributed as follows: 90%
to Limited Partners, 7.5% to the General Partner as its distributive share from
Partnership operations and an additional 2.5% of such "Net Cash Receipts" are
paid to the General Partner for allocation to the Repurchase Fund.
At the sole discretion of the General Partner and subject to certain
limitations as set forth in the Partnership Agreement, amounts placed in the
Repurchase Fund became available, beginning October 15, 1987, to be used to
repurchase Interests from Limited Partners. During 1996, the General Partner
used amounts placed in the Repurchase Fund to repurchase 3,380 Interests from
Limited Partners at a cost of $433,367. All repurchases of Interests have been
made at 90% of the then current valuation of such Limited Partnership Interests
at the previous quarter end less any distributions made after the previous
quarter end. Distributions of "Net Cash Receipts" and "Net Cash Proceeds"
pertaining to such repurchased Interests are paid to the Repurchase Fund and
were utilized to repurchase additional Interests. In February 1997, the
Partnership discontinued the repurchase of Interests from Limited Partners.
An amount not to exceed the dollars originally allocated to the Repurchase Fund
will be returned by the Repurchase Fund to the Partnership at liquidation which
will be accounted for as a capital contribution from the General Partner if
necessary to permit payment to the Limited Partners of their "Original Capital"
plus any deficiency in their "Liquidation Preference" as defined in the
Partnership Agreement.
When and as the Partnership sells or refinances its real properties, or obtains
repayments of its mortgage loans, the "Net Cash Proceeds" resulting therefrom
which are available for distribution will be distributed only to the Limited
Partners until such time as they have received a return of their "Original
Capital" and their "Liquidation Preference"; thereafter, the remaining "Net
Cash Proceeds" will be distributed 90% to the Limited Partners and 10% to the
General Partner. Net Cash Proceeds will be distributed among Taxable and
Tax-Exempt Limited Partners in accordance with the Partnership Agreement. The
General Partner's share shall be returned to the Partnership if necessary to
permit payment to the Limited Partners of any deficiency in the return of their
Original Capital and Preferential Cumulative Distributions.
5. Loan Receivable Prepayment:
The Partnership and an affiliated partnership (together, the "Participants")
funded a first mortgage loan collateralized by the Colonial Coach and
Castlewood West mobile home parks. The Partnership participated in
approximately 88% of the loan amount and interest income.
In 1995, the Partnership accepted a discounted prepayment on the loan for
$6,772,920. The carrying value of the loan was $7,540,986. As a result, the
Partnership recognized a provision for loan receivable writedown of $768,066.
Under the original loan terms, the interest income received relating to this
impaired loan would have been approximately $669,000 in 1995 and $1,003,000 in
1994. Interest income received from this impaired loan and included in the
accompanying Statements of Income and Expenses amounted to approximately
$443,000 in 1995 and $638,000 in 1994.
6. Investment Property Writedown:
In 1996, the Partnership determined that an impairment had occurred to the
asset value of the Ammendale Technology Park - Phase I located in Prince
George's County, Maryland. During 1996, the property was written down to its
current sales price, less estimated closing costs, and a $968,000 provision for
investment property writedown was recognized.
7. Management Agreements:
As of December 31, 1996, all of the properties owned by the Partnership are
under management agreements with a third-party management company. These
management agreements provide for annual fees within a range of 3% to 6% of
gross operating receipts.
8. Affiliate's Participation in Joint Ventures:
The 1275 K Street Office Building and the Westech 360 Office Buildings were
owned by the Partnership and an affiliated partnership. Both of the properties
were sold in 1996. See Note 12 of Notes to Financial Statements for additional
information regarding the sales. For the 1275 K Street Office Building,
profits and losses were allocated approximately 61% to the Partnership and 39%
to the affiliate. For the Westech 360 Office Buildings, profits and losses were
allocated approximately 57% to the Partnership and 43% to the affiliate. All
assets, liabilities, income and expenses of the joint ventures are included in
the financial statements of the Partnership with the appropriate adjustment of
profit or loss for the affiliate's participation. Distributions of
$18,796,692, $1,597,953, and $1,670,887 were made to the joint venture partners
during 1996, 1995, and 1994, respectively.
9. Investment in Joint Venture with an Affiliate:
The Partnership owned approximately a 23% joint venture interest in the Pacific
Center Office Buildings. The joint venture partner was an affiliate with
investment objectives similar to those of the Partnership. In December 1996,
the joint venture sold the property in an all cash sale for $15,950,000. From
the proceeds of the sale, the joint venture paid $431,045 in selling costs.
For financial statement purposes, the joint venture recognized a gain of
$8,881,597 from the sale of this property, of which $2,034,774 is the
Partnership's share.
During 1996 and 1995, the Partnership received net distributions from the joint
venture of $3,626,918, and $158,493, respectively, and made capital
contributions of $30,401 in 1994.
The following unaudited financial information has been summarized from the
December 31, 1996 financial statements of the joint venture:
Total income $2,448,000
Loss before gain on sale (1,847,000)
Gain on sale 8,882,000
Net income 7,035,000
10. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder, and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles (GAAP), will differ
from the tax returns due to the different treatment of various items as
specified in the Internal Revenue Code. The net effect of these accounting
differences is that the net income for 1996 in the financial statements is
$31,450,105 greater than the tax loss for the same period resulting primarily
from higher gains on the sales of properties for GAAP reporting as a result of
lower amounts capitalized to the basis of the properties for GAAP reporting in
prior years.
11. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
<PAGE>
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees None None $15,192 None $ 22,788 $ 1,899
Property management fees None None None None 661,698 None
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $23,466 $16,077 75,593 $ 5,742 98,711 37,288
Data processing 7,630 2,740 52,281 2,906 92,976 22,313
Investment processing None None None None 23,907 1,926
Investor communica-
tions None None 10,517 None 13,023 7,685
Legal 12,513 8,573 31,299 2,388 32,434 14,824
Portfolio management 125,643 86,082 165,535 22,487 134,704 34,201
Other 6,028 4,130 5,983 55 11,238 4,403
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed the
Partnership's properties until the affiliate was sold to a third party in
November 1994.
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program; however, the General Partner is reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $28,112, $104,720 and $107,935 for 1996, 1995 and 1994,
respectively.
12. Property Sales:
(a) In September 1996, the Partnership sold the Spalding Bridge Apartments in
an all cash sale for $9,872,500. From the proceeds of the sale, the
Partnership paid $267,092 in selling costs. In addition, the Partnership paid
a state withholding tax of $79,768 on behalf of the Limited Partners relating
to the gain on the sale of the property which has been recorded as a deemed
distribution for financial statement purposes. The basis of the property was
$6,243,028 which is net of accumulated depreciation of $3,831,256. For
financial statement purposes, the Partnership recognized a gain of $3,362,380
from the sale of the property.
(b) In December 1996, the Partnership sold the Denver Centerpoint Office
Buildings in an all cash sale for $15,000,000. From the proceeds of the sale,
the Partnership paid $327,876 in selling costs. The basis of the property was
$7,312,405 which is net of accumulated depreciation of $6,198,430. For
financial statement purposes, the Partnership recognized a gain of $7,359,719
from the sale of the property.
(c) The 1275 K Street Office Building was owned by a joint venture consisting
of the Partnership and an affiliate. The Partnership and the affiliate hold
participating percentages in the joint venture of approximately 61% and 39%
respectively. In December 1996, the joint venture sold the property in an all
cash sale for $28,300,000. From the proceeds of the sale, the joint venture
paid $911,470 in selling costs. The basis of the property was $32,417,433
which is net of accumulated depreciation of $14,555,713. For financial
statement purposes, the Partnership recognized a loss of $5,028,903 from the
sale of the property, of which $1,924,848 is the minority joint venture
partner's share.
(d) The Westech 360 Office Buildings was owned by a joint venture consisting of
the Partnership and an affiliate. The Partnership and the affiliate hold
participating percentages in the joint venture of approximately 57% and 43%
respectively. In December 1996, the joint venture sold the property in an all
cash sale for $18,330,000. From the proceeds of the sale, the joint venture
paid $477,652 in selling costs. The basis of the property was $7,947,427 which
is net of accumulated depreciation of $2,938,756. For financial statement
purposes, the Partnership recognized a gain of $9,904,921 from the sale of the
property, of which $4,288,415 is the minority joint venture partner's share.
13. Rentals under Operating Leases:
The Partnership receives rental income from the leasing of office and retail
space under operating leases. The minimum future rentals (excluding amounts
representing executory costs such as taxes, maintenance and insurance) to be
received by the Partnership for the Ross Plaza Shopping Center and the Bingham
Farms Office Plaza - Phase V based on operating leases held at December 31,
1996 are approximately as follows:
1997 $3,170,000
1998 3,112,000
1999 2,607,000
2000 1,829,000
2001 919,000
Thereafter 784,000
-----------
$12,421,000
===========
Minimum future rentals do not include amounts which may be received from
certain tenants based upon a percentage of their gross sales in excess of
stipulated minimums. Percentage rentals were not significant during 1996, 1995
and 1994. The Partnership is subject to the usual business risks regarding the
collection of these rentals.
Approximately 15% and 11% of the space at the Bingham Farms Office Plaza -
Phase V is leased to Prime Care and Ticketmaster, respectively. Of the
Partnership's total rental income recognized during 1996, approximately 2%
relates to each of Prime Care and Ticketmaster. Prime Care's lease runs
through June 2001 and Ticketmaster's lease runs through March 2000.
Approximately 20%, 11%, and 14% of the space at the Ross Plaza Shopping Center
is leased to Safeway, Michaels and Ross Dress for Less, respectively. Of the
Partnership's total rental income recognized during 1996, approximately 1%
relates to each of Safeway, Michaels and Ross Dress for Less. Safeway's lease
runs through February 1999, Michaels' lease runs through July 2001, and Ross
Dress for Less' lease runs through January 2001.
14. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1996 and 1995 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable, and accounts payable approximates the fair value.
15. Contingencies:
(a) The Partnership is currently involved in a lawsuit whereby the Partnership,
the General Partner and certain third parties have been named as defendants
seeking damages relating to tender offers to purchase interests in the
Partnership and nine affiliated partnerships initiated by the third party
defendants in 1996. The defendants continue to vigorously contest this action.
The action has been dismissed with prejudice and plaintiffs have filed an
appeal. It is not determinable at this time whether or not an unfavorable
decision in this action would have a material adverse impact on the financial
position, operations and liquidity of the Partnership. The Partnership believes
it has meritorious defenses to contest the claims.
(b) The Partnership is currently involved in a lawsuit whereby the Partnership
and certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning, as well as the marketing efforts related
to, the offering of the Limited Partnership Interests of the Partnership. The
defendants continue to vigorously contest this action. A plaintiff class has
not yet been certified, and no determination of the merits have been made. It
is not determinable at this time whether or not an unfavorable decision in this
action would have a material adverse impact on the financial position,
operations and liquidity of the Partnership. The Partnership believes it has
meritorious defenses to contest the claims.
16. Subsequent Events:
(a) In January 1997, the Partnership made a distribution of $61,046,108 ($2.60
per Taxable Interest and $73.46 per Tax-exempt Interest) to the holders of
Limited Partnership Interests for the fourth quarter of 1996. Of this amount,
$3,154,170 ($2.60 per Taxable Interest and $3.46 per Tax-exempt Interest)
represents the regular quarterly distribution of Net Cash Receipts for the
fourth quarter of 1996. In addition, $57,891,938 ($70.00 per Tax-exempt
Interest) of the distribution represents a special distribution of Net Cash
Proceeds from the 1996 property sales.
(b) In February 1997, the Partnership sold the 100 Ashford Center North office
building in an all cash sale for $17,746,000. From the proceeds of the sale,
the Partnership paid $392,666 in selling costs. For financial statement
purposes, the Partnership will recognize a gain of approximately $6,749,000
from the sale of the property during the first quarter of 1997.
(c) In February 1997, the Partnership sold the Ammendale Technology Park -
Phase I office building in an all cash sale for $7,732,000. From the proceeds
of the sale, the Partnership paid $420,013 in selling costs. For financial
statement purposes, the Partnership will recognize a loss of approximately
$79,000 from the sale of the property during the first quarter of 1997.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<CAPTION> as of December 31, 1996
Col. A Col. B Col. C Col. D
- --------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ----------------------------------------
Buildings Carrying Reduction
Encum- and Im- Improve- Costs of Basis
Description brances Land provements ments (a) (b)
- --------------------- ------- ---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ammendale Technology
Park-Phase I, 167,000
sq. ft. offc./wrhs.
cmplx., Prince George's
County, MD (f)(g) None $6,142,781 $4,315,384 $635,115 $281,465 $(3,268,000)
Bingham Farms Office
Plaza-Phase V, 193,000
sq. ft. bldg., Bingham
Farms, MI (f) None 1,000,000 17,404,255 3,101,009 21,935 (5,200,000)
Ross Plaza, 170,000 sq.
ft. shpg. cntr.,
Federal Way, WA None 2,355,000 9,045,000 2,113,028 836,087
100 Ashford Center North,
149,000 sq. ft. offc.
bldg., Atlanta, GA (g) None 2,554,000 16,431,518 3,856,993 27,327 (7,510,000)
----------- ----------- ----------- ---------- ------------
$12,051,781 $47,196,157 $9,706,145 $1,166,814 $(15,978,000)
=========== =========== =========== ========== =============
</TABLE>
See notes (a) through (h).
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
- ------------------ ---------------------------------- ------------ --------- ------ --------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
---------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (c)(d) tion (d) struction uired is Computed
- ------------------------- ---------- ----------- ----------- ------------ --------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ammendale Technology
Park-Phase I, 167,000
sq. ft. offc./wrhs.
cmplx., Prince George's
County, MD (f)(g) $4,492,446 $3,614,299 $8,106,745 $683,249 1986 1991 (e)
Bingham Farms Office
Plaza-Phase V, 193,000
sq. ft. bldg., Bingham
Farms, MI (f) 746,097 15,581,102 16,327,199 6,441,240 1984 1985 (e)
Ross Plaza, 170,000 sq.
ft. shpg. cntr.,
Federal Way, WA 2,522,217 11,826,898 14,349,115 6,325,740 (h) 1985 (e)
100 Ashford Center North,
149,000 sq. ft. offc.
bldg., Atlanta, GA
(g) 1,681,675 13,678,163 15,359,838 4,690,836 1987 1987 (e)
---------- ----------- ----------- -----------
$9,442,435 $44,700,462 $54,142,897 $18,141,065
========== =========== =========== ===========
See notes (a) through (h).
</TABLE>
<PAGE>
BALCOR EQUITY PENSION INVESTORS-II
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of legal fees, appraisal fees, title costs, other related
professional fees.
(b) Represents a reduction of basis due to a permanent impairment of the asset
value.
(c) The aggregate cost of land for Federal income tax purposes is $12,370,133
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $60,956,334. The total of these is $73,326,467.
(d) Reconciliation of Real Estate
-----------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $135,635,187 $135,058,823 $134,364,499
Additions during year:
Improvements 920,158 576,364 694,324
Reductions during year:
Cost of real estate sold (81,444,448)
Provision for investment
property writedown (968,000)
------------ ------------ ------------
Balance at end of year $54,142,897 $135,635,187 $135,058,823
============ ============ ============
<PAGE>
Reconciliation of Accumulated Depreciation
-------------------------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $42,404,072 $39,168,092 $35,953,859
Depreciation expense
for the year 3,261,148 3,235,980 3,214,233
Accumulated depreciation
of real estate sold (27,524,155)
----------- ----------- -----------
Balance at end of year $18,141,065 $42,404,072 $39,168,092
=========== =========== ===========
(e) Depreciation expense is computed based upon the following estimated useful
lives:
Years
-----
Buildings and improvements 20 to 35
Furniture and fixtures 5
(f) This property has made tenant improvements in order to prepare certain
suites for occupancy.
(g) This property was acquired through foreclosure.
(h) This shopping center was completed in two phases in 1964 and 1981.
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 18th
day of March, 1997, by and between CROSSTOWN ASSET CORP. I, a Delaware
corporation ("Purchaser"), and LABROC II LIMITED PARTNERSHIP, an Illinois
limited partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of Ten Million and No/Dollars ($10,000,000) (the "Purchase
Price"), the following property commonly known as Ross Plaza, Federal Way,
Washington (collectively, the "Property"):
1.1. The land located in King County, Washington, and legally described on
Exhibit A attached hereto, together with all easements, appurtenances and
hereditaments thereto (the "Land") together with all buildings, structures,
fixtures and improvements located thereon (the "Improvements"). The Land and
Improvements are collectively referred to herein as the "Real Property";
1.2. The items of personal property set forth on Exhibit B attached hereto
(the "Personal Property");
1.3. The tenant leases with respect to the Property listed on the rent
roll attached hereto as Exhibit M (the "Leases");
1.4. All licenses and permits relating to the Real Property or the
Personal Property, including all certificates of occupancy and other permits,
licenses or approvals issued under applicable law set forth on Exhibit P (the
"Permits");
1.5. The service contracts and agreements listed on Exhibit H (the
"Contracts");
1.6. All warranties and guaranties given to, assigned to or benefiting the
Seller, the Real Property or the Personal Property, to the extent assignable
without cost to Seller (the "Warranties"); and
1.7. All records (exclusive of computer software) of Seller relating to
the operation and physical condition of the Property to the extent in Seller's
possession, including (a) all records regarding real estate taxes and
assessments, insurance, maintenance, repairs, capital improvements and
services, (b) all environmental, soil and engineering reports and studies,
including all drafts and letters and other documents which describe or limit
the scope of such tests, reports or studies), (c) all originals and copies of
surveys, blueprints, plans and specifications regarding the Real Property and
the Personal Property, and (d) equipment manuals, excluding all appraisals,
internal memoranda to Seller's asset management committee and all software
(collectively, the "Records").
<PAGE>
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Within two (2) business days of the execution of this Agreement, the
sum of One Hundred Thousand and No/Dollars ($100,000) (the "Earnest Money") to
be held in escrow by and in accordance with the provisions of the Escrow
Agreement ("Escrow Agreement") attached hereto as Exhibit C;
2.2. On or before the expiration of the "Inspection Period" (as
hereinafter defined), Purchaser shall deposit an additional Eighty Thousand and
No/Dollars ($80,000) to be held by and in accordance with the provisions of the
Escrow Agreement (the "Additional Earnest Money", which, to the extent
deposited, shall be included within the definition of "Earnest Money"); and
2.3. On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 11:00 a.m. Chicago time.
3. TITLE REVIEW.
3.1. Title Evidence. As soon as reasonably practical following the mutual
execution and delivery of this Agreement, Seller shall furnish the following
title evidence to Purchaser ("Title Evidence"):
3.1.1. A commitment to insure title to the Real Property (the
"Commitment") issued by Near North National Title Corporation as agent for
First American Title Insurance Company (the "Title Insurer"). The commitment
shall (a) be issued on ALTA Owner's Form B-1970 (revised 10-17-70) in an amount
equal to the Purchase Price, (b) show Seller as owner of the Real Property, (c)
commit to delete all of the so-called "standard exceptions" to coverage, and
(d) include legible copies of all documents, instruments and matters shown as
exceptions or referenced therein.
3.1.2. A current survey of the Property (the "Survey"), prepared
and certified by a registered land surveyor licensed in the jurisdiction in
which the Real Property is located reasonably satisfactory to Purchaser. The
Survey shall (a) conform to the "Minimum Standard Detail Requirement for Land
Title Surveys" as adopted in 1992 by the American Land Title Association and
the American Congress on Surveying & Mapping, and (b) contain a certification
to Purchaser, Title Insurer and any other party designated by Purchaser
substantially in the form attached hereto as Exhibit D, to the extent possible.
The Title Evidence shall be deemed received by Purchaser for purposes of
Section 3.2 only when a Commitment and Survey conforming to the foregoing
requirements have been received by Purchaser.
3.2. Purchaser's Objections and Requirements. Purchaser shall be allowed
until the later to occur of (i) the end of the Inspection Period, or (ii) ten
(10) business days after receipt of the last of the Title Evidence, for
examination thereof and making any objections to the form and/or content of the
same. Any objections not made within said period shall be deemed to be waived
by Purchaser and shall be "Permitted Exceptions". Purchaser's objections may
include additional requirements with regard to the Title Evidence based upon
its initial review of the same, including requiring (a) satisfaction of Title
Insurer's requirements as set forth in the Commitment, (b) deletion of all the
so-called "standard exceptions" to coverage, and (c) affirmative insurance of
any easements appurtenant to the Real Property.
3.3. Correction of Title. Seller shall have the right, but not the
obligation to cure any objections made by Purchaser pursuant to Section 3.2.
Seller shall provide Purchaser with notice within five (5) business days of
Purchaser's objection stating whether Seller intends to cure any objection. If
Seller elects to cure any objection, Seller shall be allowed thirty (30) days
after the making of Purchaser's objections to cure the same and shall
diligently proceed and use all reasonable efforts to do so. Pending such cure,
the Closing shall be postponed to the extent necessary to accommodate such time
period; provided however, Seller shall not be allowed any additional time
beyond the originally scheduled Closing Date to discharge or satisfy any
mortgage, judgment or other monetary lien set forth on the original Commitment.
Upon such cure, the Closing (hereinafter defined) shall be held on the later of
(a) the Closing Date and (b) the first business day occurring five (5) days
after the date such cure is completed. If Seller elects not to cure any
objection or if such cure is not completed within said thirty (30) day period,
Purchaser shall have the option to do any of the following:
3.3.1. Terminate this Agreement.
3.3.2. Withhold from the Purchase Price an amount which in the
reasonable judgement of Title Insurer is sufficient to discharge at Closing any
mortgage, judgment or other monetary lien objected to by Purchaser only in the
event such lien appears on the original Commitment. Any amount so withheld
shall be placed in escrow with Title Insurer pending cure and satisfaction. If
Seller has not discharged such mortgage, judgment or other monetary lien within
thirty (30) days after Closing, Purchaser may then proceed in its discretion to
do so and charge the reasonable costs of cure (including reasonable attorneys'
fees) against the amount so escrowed; or
3.3.3. Waive one or more of its objections and proceed to Closing
and such exceptions to title which are waived by Purchaser shall be deemed
additional "Permitted Exceptions" and Purchaser shall have no right to deduct
any amount against the Purchase Price except in connection with Paragraph
3.3.2.
3.4. Cost of Title Evidence and Title Policy. In the event that the
Closing occurs, Purchaser agrees to reimburse Seller for one-half of the cost
of obtaining the Title Evidence. Seller and Purchaser each agree to pay
one-half of the costs of the Title Policy (as hereinafter defined) and
Purchaser shall pay for all of the costs of any endorsements to, or extended
coverage on, the Title Policy.
3.5. Date Downs to Title. If, prior to Closing but after the end of the
Inspection Period, a date-down to the Commitment discloses any new exception
which is not a Permitted Exception ("Unpermitted Exception"), Seller shall
provide Purchaser with notice within five (5) business days of notice by
Purchaser to Seller of the existence of such Unpermitted Exception stating
whether Seller intends to cure any objection. If Seller elects to cure any
objection, Seller shall have thirty (30) days from the date of receipt by
Seller of such notice, at Seller's expense, to (i) cure and/or, subject to
Purchaser's reasonable approval, have any Unpermitted Exceptions which, in the
aggregate, do not exceed $25,000.00, removed from the Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions, or (ii) have the right, but not the obligation, to
cure and/or, subject to Purchaser's reasonable approval, have any Unpermitted
Exceptions which, in the aggregate, equal or exceed $25,000.00, removed from
the Commitment or to have the Title Insurer commit to insure against loss or
damage that may be occasioned by such Unpermitted Exceptions. In such event,
the time of Closing shall be delayed, if necessary, to give effect to said
aforementioned time periods. If Seller fails to cure or have said Unpermitted
Exception removed or have the Title Insurer commit to insure as specified above
within said thirty (30) day period or if Seller elects not to exercise its
rights under (ii) in the preceding sentence, Purchaser may terminate this
Agreement upon notice to Seller within five (5) days after the expiration of
said thirty (30) day period. Absent notice from Purchaser to Seller in
accordance with the preceding sentence, Purchaser shall be deemed to have
elected to take title subject to said Unpermitted Exception. If Purchaser
terminates this Agreement in accordance with the terms of this Paragraph 3.5,
this Agreement shall become null and void without further action of the parties
and all Earnest Money theretofore deposited into the escrow by Purchaser
together with any interest accrued thereon, shall be returned to Purchaser, and
neither party shall have any further liability to the other, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7.
4. PAYMENT OF CLOSING COSTS. Purchaser and Seller shall each pay for
one-half of the costs of the documentary or transfer stamps to be paid with
reference to the "Deed" (hereinafter defined) and all other stamps, intangible,
transfer, documentary, recording, sales tax and surtax imposed by law with
reference to any other sale documents delivered in connection with the sale of
the Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction.
5. CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE. The obligations of
Purchaser under this Agreement are contingent upon each of the following:
5.1. Estoppel Certificates. The following terms have been defined as
follows for convenience of reference:
5.1.1. "Tenant Certificate" means a certificate, commonly known as
an estoppel certificate, signed by a tenant with respect to its Lease, either
in the form set forth on Exhibit L hereto or on such other form as is
substantially consistent with the requirements of the tenant's lease for such
certificates.
5.1.2. "Seller Tenant Certificate" means a Tenant Certificate
signed by the Seller with respect to a particular Lease for which the Tenant in
question has failed to execute and deliver a Tenant Certificate, in which case
the Seller Tenant Certificate shall be in the form of Exhibit L, provided that
a Seller Tenant Certificate shall in all cases be limited to Seller's knowledge
as defined in Paragraph 16.1 above.
5.1.3. "Qualification" means any assertion in a Tenant Certificate
or Seller Tenant Certificate (whether in the form of Exhibit L or otherwise) of
(i) a claim, counterclaim, offset or defense against the landlord, (ii) a
default on the part of the landlord, (iii) unpaid credits, allowances or other
sums due from the landlord prior to the date of the estoppel (other than
disclosed on Exhibit M, Exhibit N or Exhibit Q attached hereto), (iv) an
unfulfilled construction or other obligation on the part of the landlord prior
to the date of estoppel (other than disclosed on Exhibit M, Exhibit N or
Exhibit Q attached hereto), (v) information which is contrary (in an adverse
respect to the landlord) (x) to the information contained in the rent roll
attached hereto as Exhibit M, or (y) to the information pertaining to tenant
allowances and concessions and leasing commissions contained on Exhibit N or
(vi) the existence of any of the following which are not set forth in the
Lease: rights of tenant to terminate the Lease, rights of tenant to purchase
any part of the Property, rights of tenant to expand the leased premises or
renew the term of the Lease, or rights of tenants to exclusives;
5.1.4. "Unacceptable Qualification" means any Qualification other
than the following:
(a) a Qualification which is expressly disclosed on the rent roll
attached hereto as Exhibit M or the schedules attached hereto as Exhibit N and
Exhibit Q or a Qualification relating to non-payment of March, 1997 or April,
1997 rent, provided the same is not as a result of a default by Seller;
(b) a Qualification expressly disclosed on the other Exhibits
attached hereto and made a part hereof; or
(c) Safeway going dark and any other tenant's right to go dark or
terminate its Lease as a result thereof.
5.1.5. If a Qualification is not an Unacceptable Qualification, it
shall not affect Purchaser's obligations to close hereunder or give rise to any
liability from Seller to Purchaser.
5.1.6. Seller shall promptly upon execution of this Agreement
request a Tenant Certificate in the form of Exhibit L from all tenants, and
shall in good faith pursue the collection of the same. Seller shall deliver to
Purchaser, upon Seller's receipt thereof, all Tenant Certificates signed by
tenants (whether in the form of Exhibit L or otherwise).
5.1.7. It shall be a condition to Purchaser's obligations
hereunder (the "Estoppel Condition") that Purchaser shall have received
estoppel certificates as required pursuant to Paragraph 17. Notwithstanding
the foregoing to the contrary, Seller shall not have satisfied the Estoppel
Condition if any of the Tenant Certificates received by Seller or Seller Tenant
Certificates disclose Unacceptable Qualifications other than Unacceptable
Qualifications that can be cured by the payment of money or for which Purchaser
can be compensated as set forth below and with an "Estoppel Qualification Sum"
(hereinafter defined) of less than $100,000 per tenant and $250,000 in the
aggregate. The "Estoppel Qualification Sum" shall mean the following:
(i) if the claim asserted arises out of a defect which can be cured,
with the expenditure of money on a one time basis, such as a physical defect,
then such sum shall be calculated by a reasonable estimate of the cost to
repair or remediate said defect; and
(ii) if the claim asserted affects a continuing obligation of a
tenant under the lease, such as the payment of rent, then the claim shall be
calculated by (i) determining the amount of the claim on a per annum basis,
(ii) multiplying said amount by the number of years or partial years said claim
would affect the monetary obligations under the lease and (iii) discounting
said product on a present value basis using a discount rate of 10% per annum.
If the Unacceptable Qualifications have an Estoppel Qualification Sum of
less than $100,000 per tenant and $250,000 in the aggregate, then Seller shall
either (i) grant Purchaser a credit at Closing for an amount equal to the
Estoppel Qualification Sum, or (ii) cure all conditions giving rise to an
Unacceptable Qualification on or before the Closing. The determination to
perform the covenant contained in subparagraphs (i) or (ii) in the preceding
sentence shall be made by Seller in its sole discretion. Provided Seller
performs its covenant in this Paragraph 5.1.7, the disclosure of Unacceptable
Qualifications having an Estoppel Qualification Sum of less than $100,000 per
tenant and $250,000 in the aggregate shall not affect Purchaser's obligations
to close hereunder or give rise to any additional liability from Seller to
Purchaser.
5.1.8. If Seller delivers any Seller Tenant Certificates, then
upon receipt after Closing by Purchaser of a Tenant Certificate from a tenant
under a Lease for whom Seller has executed and delivered a Seller Tenant
Certificate at Closing, the Seller Tenant Certificate executed and delivered by
Seller at Closing shall become null and void and the Tenant Certificate
received from the tenant shall be substituted therefor, solely to the extent
that the information contained in the Tenant Certificate is the same as the
information set forth in the Seller Tenant Certificate. Seller's liability
under Seller Tenant Certificates shall be limited pursuant to Paragraph 18
herein.
5.2. Title Policy. On the Closing Date, Title Insurer shall be
irrevocably committed to issue to Purchaser the title policy pursuant to the
Commitment with respect to the Real Property and any appurtenant easements
designated by Purchaser pursuant to Section 3.2, subject only to the Permitted
Exceptions (the "Title Policy").
5.3. Seller's Representations and Warranties. On the Closing Date, each
of the representations and warranties of Seller in Section 16 shall be true and
correct in all material respects as if the same were made on the Closing Date;
provided, however, that if the status of any of the tenancies changes from the
date of the rent roll attached hereto as Exhibit M and the date of the rent
roll delivered at Closing, provided the change in status is not caused by a
breach by Seller of its obligations under any Lease, then Purchaser shall not
have the right to terminate this Agreement or make any claim for a breach of a
representation or warranty hereunder involving the rent roll or tenancies
thereunder.
5.4. No Material Adverse Charge. On the Closing Date, there shall not
have been any "Material Adverse Change" (as hereinafter defined) with respect
to the Property. For the purposes of this Paragraph 5.4, "Material Adverse
Change" shall mean solely that after the date hereof, any tenant or tenants
leasing in the aggregate in excess of 50,000 square feet of the Property become
entitled to terminate their lease, but shall not include Safeway going dark or
any other termination rights of other tenants as a result thereof.
5.5. Seller's Obligations. On the Closing Date, Seller shall have
performed all of the obligations required to be performed by Seller under this
Agreement as and when required under this Agreement.
If any conditions in this Paragraph 5 have not been satisfied on or before
the Closing Date, then Purchaser may terminate this Agreement by notice to
Seller on or before the Closing Date. To the extent that any of the conditions
in this Paragraph 5 require satisfaction of Purchaser, such satisfaction shall
be determined by Purchaser in its reasonable discretion. The conditions in
this Paragraph 5 are specifically stated and for the sole benefit of Purchaser.
Purchaser in its discretion may unilaterally waive (conditionally or
absolutely) the fulfillment of any one or more of the conditions, or any part
thereof, by notice to Seller, without any offset against the Purchase Price or
claim against Seller. Seller shall not take or authorize, directly or
indirectly, any action that modifies or changes the circumstances upon which
the conditions set forth in this Paragraph 5 were deemed satisfied or waived by
Purchaser without Purchaser's consent.
6. DAMAGE AND CASUALTY; CONDEMNATION.
6.1. Damage and Casualty. Except as provided in the indemnity provisions
contained in Paragraph 7.1 of this Agreement, Seller shall bear all risk of
loss with respect to the Property up to the Closing Date. Notwithstanding the
foregoing, in the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as determined by Seller and Purchaser in good faith) Purchaser
shall not have the right to terminate its obligations under this Agreement by
reason thereof, unless otherwise specifically set forth herein, but Seller
shall have the right to elect to either repair and restore the Property (in
which case the Closing Date shall be extended until completion of such
restoration) or to assign and transfer to Purchaser on the Closing Date all of
Seller's right, title and interest in and to all insurance proceeds paid or
payable to Seller on account of such fire or casualty and in addition, Seller
shall pay to Purchaser the amount of any deductible maintained by Seller under
any insurance policy covering such fire or casualty. Seller shall promptly
notify Purchaser in writing of any such fire or other casualty and Seller's
determination of the cost to repair the damage caused thereby. In the event of
damage to the Property by fire or other casualty prior to the Closing Date,
repair of which would cost in excess of $100,000.00 (as determined by Seller
and Purchaser in good faith), then this Agreement may be terminated at the
option of Purchaser, which option shall be exercised, if at all, by Purchaser's
written notice thereof to Seller within fifteen (15) business days after
Purchaser receives written notice of such fire or other casualty (which notice
shall specifically call Purchaser's attention to this Paragraph 6.1 and state
that Purchaser has fifteen (15) business days to respond), and upon the
exercise of such option by Purchaser this Agreement shall become null and void,
the Earnest Money deposited by Purchaser shall be returned to Purchaser
together with interest thereon, and neither party shall have any further
liability or obligations hereunder. In the event that Purchaser does not
exercise the option set forth in the preceding sentence, the Closing shall take
place on the Closing Date and Seller shall assign and transfer to Purchaser on
the Closing Date all of Seller's right, title and interest in and to all
insurance proceeds paid or payable to Seller on account of the fire or casualty
and in addition, Seller shall pay to Purchaser the amount of any deductible
maintained by Seller under any insurance policy covered by such fire or
casualty. Seller represents, warrants and covenants that it will maintain
property damage insurance insuring the Property for its full replacement cost
during the executory period of this Agreement.
6.2. Condemnation. If between the date of this Agreement and the Closing
Date, any condemnation or eminent domain proceedings are initiated which might
result in the taking of any part of the Property or the taking or closing of
any right of access to the Property, Seller shall immediately notify Purchaser
of such occurrence, which notice shall specifically call Purchaser's attention
to this Paragraph 6.2 and state that Purchaser has fifteen (15) business days
to respond. In the event that the taking of any part of the Property shall:
(i) materially impair access to or parking on the Property; (ii) cause any
material non-compliance with any applicable law, ordinance, rule or regulation
of any federal, state or local authority or governmental agencies having
jurisdiction over the Property or any portion thereof; or (iii) materially and
adversely impair the use of the Property as it is currently being operated
(hereinafter referred to as a "Material Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease;
or
6.2.2. proceed with the Closing, in which event Seller shall assign
to Purchaser all of Seller's right, title and interest in and to any award made
in connection with such condemnation or eminent domain proceedings.
Purchaser shall notify Seller, within fifteen (15) business days after
Purchaser's receipt of Seller's notice, whether Purchaser elects to exercise
its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be delayed,
if necessary, until Purchaser makes such election. If Purchaser fails to make
an election within such fifteen (15) business day period, Purchaser shall be
deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. Inspection Period. During the period commencing on January 22, 1997
and ending at 5:00 p.m. Chicago time on April 8th, 1997 (said period being
herein referred to as the "Inspection Period"), Purchaser and the agents,
engineers, employees, contractors and surveyors retained by Purchaser may enter
upon the Property, at any reasonable time and upon reasonable prior notice to
Seller, to inspect the Property, and to conduct and prepare such studies, tests
and surveys as Purchaser may deem reasonably necessary and appropriate. In
connection with Purchaser's review of the Property, Seller has delivered to
Purchaser complete and accurate copies of the following: the Leases, the
Contracts, the Permits in Seller's possession, the Warranties in Seller's
possession, the Records in Seller's possession, the current rent roll for the
Property, the most recent tax and insurance bills, utility account numbers, and
year end 1995 and year end 1996 operating statements, and plans and
specifications for the Improvements in Seller's possession.
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Property to the condition existing
prior to the performance of such tests or investigations by or on behalf of
Purchaser. Purchaser shall defend, indemnify and hold Seller and any
affiliate, parent of Seller, and all shareholders, employees, officers and
directors of Seller or Seller's affiliate or parent (hereinafter collectively
referred to as "Affiliates of Seller") harmless from any and all liability,
cost and expense (including without limitation, reasonable attorney's fees,
court costs and costs of appeal) suffered or incurred by Seller or Affiliates
of Seller for injury to persons or property caused by Purchaser's
investigations and inspection of the Property. Purchaser shall undertake its
obligation to defend set forth in the preceding sentence using attorneys
selected by Purchaser and reasonably acceptable to Purchaser.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph
7.1, Purchaser shall have the right to terminate this Agreement by giving
written notice of such termination to Seller at any time prior to the
expiration of the Inspection Period. If written notice is not received by
Seller pursuant to this Paragraph 7.1 prior to the expiration of the Inspection
Period, then the right of Purchaser to terminate this Agreement pursuant to
this Paragraph 7.1 shall be waived. If Purchaser terminates this Agreement by
written notice to Seller prior to the expiration of the Inspection Period: (i)
Purchaser shall promptly deliver to Seller copies of all studies, reports and
other investigations obtained by Purchaser in connection with its due diligence
during the Inspection Period; and (ii) the Earnest Money deposited by Purchaser
shall be immediately paid to Purchaser, together with any interest earned
thereon, and neither Purchaser nor Seller shall have any right, obligation or
liability under this Agreement, except for Purchaser's obligation to indemnify
Seller and restore the Property, as more fully set forth in this Paragraph 7.1.
Notwithstanding anything contained herein to the contrary, the terms of this
Paragraph 7.1, shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
7.2. As-Is. Purchaser acknowledges and agrees that it will be purchasing
the Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that except as
otherwise specifically set forth in this Agreement, Purchaser will be
purchasing the Property and the Personal Property "AS IS" and "WITH ALL
FAULTS", based upon the condition of the Property and the Personal Property as
of the date of this Agreement, wear and tear and loss by fire or other casualty
or condemnation excepted. Without limiting the foregoing, Purchaser
acknowledges that, except as may otherwise be specifically set forth elsewhere
in this Agreement, neither Seller nor its consultants, brokers or agents have
made any representations or warranties of any kind upon which Purchaser is
relying as to any matters concerning the Property or the Personal Property,
including, but not limited to, the Land or the Improvements, the existence or
non-existence of Hazardous Materials (as hereinafter defined), economic
projections or market studies concerning the Property, any development rights,
taxes, bonds, covenants, conditions and restrictions affecting the Property,
water or water rights, topography, drainage, soil, subsoil of the Property, the
utilities serving the Property or any zoning or building laws, rules or
regulations or "Environmental Laws" (hereinafter defined) affecting the
Property. Except as specifically set forth herein, Seller makes no
representation or warranty that the Property complies with Title III of the
Americans with Disabilities Act or any fire code or building code. Purchaser
hereby releases Seller and the Affiliates of Seller from any and all liability
in connection with any claims which Purchaser may have against Seller or the
Affiliates of Seller relating directly or indirectly to the existence of
asbestos or Hazardous Materials on, or environmental conditions of, the
Property, whether known or unknown; provided, however, that Purchaser may
assert claims for contribution or cost recovery against Seller or the
Affiliates of Seller, relating directly or indirectly to the existence of
asbestos or Hazardous Materials on, or environmental conditions of, the
Property, whether known or unknown, only in the event that Purchaser is sued by
a third party in connection therewith. As used herein, "Environmental Laws"
means all federal, state and local statutes, codes, regulations, rules,
ordinances, orders, standards, permits, licenses, policies and requirements
(including consent decrees, judicial decisions and administrative orders)
relating to the protection, preservation, remediation or conservation of the
environment or worker health or safety, all as amended or reauthorized, or as
hereafter amended or reauthorized, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq., the Emergency
Planning and Community Right-to-Know Act ("Right-to-Know Act"), 42 U.S.C.
Section 11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. Section 7401
et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33 U.S.C.
Section 1251 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
Section 2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water Act"),
42 U.S.C. Section 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C.
Section 2011 et seq., the Occupational Safety and Health Act ("OSHA"),
29 U.S.C. Section 651 et seq., and the Hazardous Materials Transportation Act
(the "Transportation Act"), 49 U.S.C. Section 1802 et seq. As used herein,
"Hazardous Materials" means: (1) "hazardous substances," as defined by CERCLA;
(2) "hazardous wastes," as defined by RCRA; (3) any radioactive material
including, without limitation, any source, special nuclear or by-product
material, as defined by AEA; (4) asbestos in any form or condition; (5)
polychlorinated biphenyls; and (6) any other material, substance or waste to
which liability or standards of conduct may be imposed under any Environmental
Laws. Notwithstanding anything contained herein to the contrary, the terms of
this Paragraph 7.2 shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Except as expressly set forth herein,
Seller makes no representation or warranty that such material is complete or
accurate or that Purchaser will achieve similar financial or other results with
respect to the operations of the Property, it being acknowledged by Purchaser
that Seller's operation of the Property and allocations of revenues or expenses
may be vastly different than Purchaser may be able to attain. Purchaser
acknowledges that it is a sophisticated and experienced purchaser of real
estate and further that Purchaser has relied upon its own investigation and
inquiry with respect to the operation of the Property and releases Seller and
the Affiliates of Seller from any liability with respect to such historical
information. Notwithstanding anything contained herein to the contrary, the
terms of this Paragraph 7.3 shall survive the Closing and the delivery of the
Deed and termination of this Agreement.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
April 30, 1997 (the "Closing Date"), at the office of Seller's attorney,
Chicago, Illinois at which time Seller shall deliver possession of the Property
to Purchaser. This transaction shall be closed through an escrow with Title
Insurer, in accordance with the general provisions of the usual and customary
form of deed and money escrow for similar transactions in Washington, or at the
option of either party, the Closing shall be a "New York style" closing at
which the Purchaser shall wire the Purchase Price to Title Insurer on the
Closing Date and prior to the release of the Purchase Price to Seller,
Purchaser shall receive the Title Policy or marked up commitment dated the date
of the Closing Date. In the event of a New York style closing, Seller shall
deliver to Title Insurer any customary affidavit in connection with a New York
style closing. All closing and escrow fees shall be divided equally between
the parties hereto.
9. CLOSING DOCUMENTS.
9.1. Closing Statement. On or prior to the Closing Date, Seller and
Purchaser shall execute and deliver to one another a joint closing statement.
In addition, Purchaser shall deliver to Seller the balance of the Purchase
Price, an assumption of the documents set forth in Paragraph 9.2.3 and 9.2.4
and such other documents as may be reasonably required by the Title Insurer in
order to consummate the transaction as set forth in this Agreement.
9.2. Seller's Deliveries. On the Closing Date, Seller shall deliver to
Purchaser the following:
9.2.1. the special warranty deed (the "Deed") (in the form of
Exhibit E attached hereto), in recordable form conveying fee simple title to
the Real Property to Purchaser subject only to Permitted Exceptions;
9.2.2. a special warranty bill of sale conveying the Personal
Property to Purchaser free and clear of any liens, claims or encumbrances (in
the form of Exhibit F attached hereto);
9.2.3. an assignment and assumption of intangible property (in the
form attached hereto as Exhibit G), including, without limitation, the
Contracts, the Permits, the Warranties and the Records;
9.2.4. an assignment and assumption of Leases and security
deposits (in the form attached hereto as Exhibit I);
9.2.5. a certificate in the form of Exhibit O certifying that the
representations and warranties set forth in Paragraph 16.2 are true and correct
as of the Closing Date as if made on the Closing Date subject to the
limitations contained in Paragraph 5.3 hereof, and subject to the limitations
on survival and liability set forth herein;
9.2.6. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.7. original copies, or duplicate copies if originals are not
available, of the Leases, the Contracts, the Permits, the Warranties and the
Records (which shall be delivered at the Property);
9.2.8. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.9. possession of the Property to Purchaser, subject to the
terms of the Leases;
9.2.10. evidence of the termination of the management agreement and
any other contracts or agreements which are not Contracts;
9.2.11. notice to the tenants of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the Leases
and the obligation to refund the security deposits (in the form of Exhibit K);
and
9.2.12. an updated rent roll in the same form as Exhibit M
certified by Seller to be true and correct as of the Closing Date;
9.2.13. an original estoppel certificate addressed to Purchaser in
the form of Exhibit L (or containing such modifications as are permitted
hereunder) from each tenant of the Property (or from Seller, to the extent
permitted by Paragraph 17); and
9.2.14. an opinion of Seller's counsel, dated as of the Closing
Date and in form reasonably satisfactory to Purchaser, that Seller has been
duly formed under the laws of the State of Illinois and is in good standing
under the laws of the jurisdiction in which the Property is located, that
Seller is duly qualified to transact business in the jurisdiction in which the
property is located, that Seller has the requisite power and authority to enter
into and perform this Agreement and the documents and instruments required to
be executed and delivered by Seller pursuant to this Agreement, and that such
documents and instruments have been duly authorized by all necessary
partnership action on the part of Seller and have been duly executed and
delivered.
10. PURCHASER'S DEFAULT. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, THE PARTIES ACKNOWLEDGE THAT
THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES'
REASONABLE ESTIMATE OF SELLER'S DAMAGES.
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7 AND PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL, DOCUMENTED
THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF ITS DUE DILIGENCE HEREUNDER
AND THE PREPARATION OF THIS AGREEMENT, NOT TO EXCEED $75,000 IN THE AGGREGATE.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT
IS ITS REFUSAL TO DELIVER THE CLOSING DOCUMENTS SET FORTH IN PARAGRAPH 9.2.1-8,
and 9.2.10-12 HEREOF, THEN PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC
PERFORMANCE.
12. PRORATIONS.
12.1. Prorations Generally. Rents (exclusive of delinquent rents, but
including prepaid rents); refundable security deposits (which will be assigned
to and assumed by Purchaser and credited to Purchaser at Closing); water and
other utility charges; fuels; prepaid operating expenses; management fees
payable to Insignia Management Co. not to exceed 6% of gross rent; real and
personal property taxes prorated on a "net" basis (i.e. adjusted for all
tenants' liability, if any, for such items); operating expenses which are
reimbursable by the tenants for the period prior to the Closing Date less any
amount previously paid by the Tenants shall be credited to Seller; and other
similar items shall be adjusted ratably as of 11:59 p.m. on the Closing Date,
and credited against the balance of the cash due at Closing. Assessments
payable in installments which are due subsequent to the Closing Date shall be
paid by Purchaser. Where the Leases impose on tenants obligations for taxes,
common area expenses, operating expenses or additional charges of any other
nature, and where Seller shall have collected any portion thereof in excess of
amounts incurred by Seller for such items for the period prior to the Closing
Date, then there shall be an adjustment and credit given to Purchaser at the
Closing for such excess amounts collected. In addition, prorations shall be
made at Closing as required pursuant to Paragraph 26 hereof. If the amount of
any of the items to be prorated is not then ascertainable, the adjustments
thereof shall be on the basis of the most recent ascertainable data. All
prorations will be final except as to delinquent rent referred to in Paragraph
12.2 below.
12.2. Post-Closing Receipts. In the event that any rentals for any of
the Leases remain unpaid at the Closing Date, Purchaser shall use reasonable
efforts after the Closing Date to collect such rentals and promptly deliver all
rentals so collected ("Post-Closing Receipts") to Seller; provided, however,
that Purchaser shall not be required to institute any legal actions as a means
of attempting to collect such rentals. In the event that any tenant's legal
right to possession has been terminated prior to the end of the Inspection
Period, Seller retains all rights to any delinquent rent from such tenant,
including the right to institute any legal actions as a means of attempting to
collect such rentals. In the event that any tenant is delinquent in the
payment of rent by more than 60 days as of the end of the Inspection Period,
but such tenant's legal right to possession has not been terminated, all such
delinquent rent received by Purchaser after Closing shall belong to Purchaser.
All other delinquent rentals received by Purchaser prior to November 30, 1997
shall be applied first to amounts owing Seller, and then to pay any current
obligations of the tenant(s) in question, and Seller waives the right to
institute any legal actions as a means of attempting to collect such rentals.
Seller retains the right to conduct an audit, at reasonable times and upon
reasonable notice, but not after December 31, 1997, of Purchaser's books and
records to verify the accuracy of the Post-Closing Receipts reconciliation
statement and upon the verification of additional funds owing to Seller,
Purchaser shall pay to Seller said additional Post-Closing Receipts and the
cost of performing Seller's audit. Paragraph 12.2 of this Agreement shall
survive the Closing and the delivery and recording of the Deed.
12.3. Percentage Rent. Percentage rent payable under the Leases shall
be prorated as of the Closing Date as follows:
12.3.1. Any percentage rent attributable to a specified period
("Percentage Rent Period") ending prior to the Closing Date shall be promptly
paid over to the Seller if and when collected. Seller shall be entitled to all
percentage rent attributable to the period prior to Closing Date for any
Percentage Rent Period ending prior to Closing Date. Paragraph 12.3.1 of this
Agreement shall survive the Closing and the delivery of the Deed.
12.3.2. Percentage rent payable with respect to a Percentage Rent
Period a portion of which occurs prior to the Closing Date and a portion of
which occurs subsequent to the Closing Date shall be apportioned between
Purchaser and Seller on the basis of their respective period of ownership
during the applicable Percentage Rent Period and shall be calculated in the
following manner. Seller shall be entitled to a percentage rent proration
determined by (x) multiplying the amount of the total gross sales from the most
recently completed and not estimated Percentage Rent Period by the applicable
formula for percentage rent contained in the applicable Lease, (y) multiplying
such product by 80% (reflecting a discount rate of 20%), and (z) then
multiplying such product by a fraction, the numerator of which shall be the
total number of days in the current Percentage Rent Period prior to the Closing
Date and the denominator of which shall be the total number of days in the
current Percentage Rent Period (in order to allocate the correct time period to
each party). Purchaser shall be entitled to the remainder of such percentage
rent. Notwithstanding the foregoing, Seller shall not receive any proration of
percentage rent pursuant to this paragraph 12.3.2 with respect to any tenant
which has gone dark prior to Closing. This percentage rent proration will
obviate the need to perform a future reconciliation.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest
in this Agreement without the prior written consent of the Seller.
Notwithstanding the foregoing, Purchaser shall have the right to assign its
interest in this Agreement without the prior written consent of the Seller to
any entity which, directly or indirectly, controls, is controlled by or is
under common control with Purchaser or Cargill Financial Services Corporation,
but such assignment shall not release Purchaser from its obligations hereunder.
If any assignee of Purchaser under this Agreement petitions or applies for
relief in bankruptcy or said assignee is adjudicated as a bankrupt or
insolvent, or said assignee files any petition, application for relief or
answer-seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
present or future federal, state or other statute, law, code or regulation
relating to bankruptcy, insolvency, or other relief for debtors (collectively,
a "Bankruptcy Filing") on or before the Closing Date, said Bankruptcy Filing
shall be a default under this Agreement and Purchaser shall indemnify Seller
for all costs, attorney's fees and expenses of Seller resulting from Seller's
efforts to obtain the Earnest Money as liquidated damages and to clear title to
the Property from any encumbrance resulting from the Bankruptcy Filing.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Insignia Mortgage and Investment Company, Inc. (to be paid by
Seller). Seller's commission to Insignia Mortgage and Investment Company, Inc.
shall only be payable out of the proceeds of the sale of the Property in the
event the transaction set forth herein closes. Purchaser and Seller shall
indemnify, defend and hold the other party hereto harmless from any claim
whatsoever (including without limitation, reasonable attorney's fees, court
costs and costs of appeal) from anyone claiming by or through the indemnifying
party any fee, commission or compensation on account of this Agreement, its
negotiation or the sale hereby contemplated other than to Insignia Mortgage and
Investment Company, Inc. The indemnifying party shall undertake its
obligations set forth in this Paragraph 15 using attorneys selected by the
indemnifying party and reasonably acceptable to the indemnified party. The
provisions of this Paragraph 15 will survive the Closing and delivery of the
Deed.
<PAGE>
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter
or thing shall only mean such knowledge or notice that has actually been
received by Michael Conter (the asset manager responsible for the Property) or
Seller's property manager responsible for the management of the Property (the
"Seller's Representative"), and any representation or warranty of the Seller
that is qualified by Seller's knowledge is based upon those matters of which
the Seller's Representative has actual knowledge. Any knowledge or notice
given, had or received by any of Seller's agents, servants or employees shall
not be imputed to Seller, the general partner or limited partners of Seller,
the subpartners of the general partner or limited partners of Seller or
Seller's Representative. Seller hereby covenants to deliver a copy of this
Agreement to Seller's property manager, and to instruct such property manager
to review the Agreement and notify Seller's Representative of any and all
information known to such property manager regarding the representations and
warranties contained herein.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties:
16.2.1.Seller has not entered into any contracts for the sale of any
of the Property other than this Agreement. Seller has received no notice of
and has no knowledge of any rights of first refusal or first offer, options to
purchase any of the Property or any other rights or agreements which may delay
or prevent this transaction.
16.2.2.To Seller's knowledge, there has been no labor or material of
any kind furnished to or for the benefit of the Property at Seller's request
for which payment in full has not been made, except in connection with tenant
improvements as set forth on Exhibit N attached hereto.
16.2.3.No person or entity is entitled to possession of any of the
Property, other than Seller, the tenants under the Leases or otherwise pursuant
to a recorded instrument.
16.2.4.Seller has received no notice of and has no knowledge of any
pending or threatened condemnation or transfer in lieu thereof affecting any of
the Property, nor has Seller agreed or committed to dedicate any of the
Property.
16.2.5.Seller has received no notice of and has no knowledge of any
pending or threatened action which would impair access to the Property.
16.2.6.Seller has received no notice and has no knowledge of any
actual or threatened curtailment, cancellation or suspension of any utilities
serving the Property.
16.2.7.Seller has received no notice of and has no knowledge of any
action, litigation, investigation or proceeding of any kind pending or
threatened against Seller or any of the Property which materially and
adversely affect the value of the Property, except as disclosed in Exhibit Q
attached hereto. Seller hereby reserves the right to pursue any claims against
House of Fabrics in connection with the matters disclosed in Exhibit Q.
16.2.8.Seller has received no notice of and has no knowledge of any
uncured default under any easement agreement or joint operation agreement
affecting the Property, and Seller has no knowledge of any amendment or
modification to such agreements except as of record.
16.2.9.Seller has not received written notice of any violation of
any Environmental Laws, statute, rule, law, obligation, ordinance, or other
legal regulation or requirement pertaining to the use, maintenance, ownership,
or operation of the Property, which such violation has not been cured without
waiver or variance of the applicable Environmental Laws.
16.2.10. To Seller's knowledge, there are no leases or
possessory rights in favor of any party, service or maintenance contracts,
equipment leases or other contracts regarding any of the Property except for
the Leases, the Contracts and any matters of record.
16.2.11. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Contract and their
respective amendments. Seller has received no notice and has no knowledge that
either Seller or any other party under a Contract is in default of their
respective obligations and liabilities thereunder. To Seller's knowledge,
except for the Contracts, there are no other service or maintenance contracts,
equipment leases or other contracts regarding any of the Property which will
not be terminated on or before the Closing Date.
16.2.12. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of the Records.
16.2.13. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Lease and their respective
amendments. To Seller's knowledge, the information regarding the Leases
contained in the rent roll attached as Exhibit M is true, correct and complete
as of the date set forth therein. Seller has received no notice and has no
knowledge that either Seller or the applicable tenant is in default of their
respective obligations and liabilities under any of the Leases, including those
provisions relating to bankruptcy or insolvency.
16.2.14. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Permit in Seller's
possession and their respective amendments. Seller has received no notice and
has no knowledge (a) that Seller is in default of its obligations and
liabilities under any of the Permits, or (b) of any actual or threatened
cancellation or suspension of any Permit, or (c) that any additional licenses
or permits are required under applicable law to operate the Property as it is
now operated.
16.2.15. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Warranty in Seller's
possession and their respective amendments. Seller has received no notice that
either Seller or the applicable warrantor is in default of their respective
obligations and liabilities under any of the Warranties.
16.2.16. No management, leasing or maintenance personnel or
agents employed in connection with the operation of the Property have the right
to continue such employment after Closing except pursuant to a Contract. No
person or entity is entitled to claim any brokerage or leasing commissions or
other payments with respect to any of the Property, including regarding any of
the Leases, except as set forth in Exhibit N.
16.2.17. Seller has been duly formed under the laws of the
State of Illinois and is in good standing under the laws of the jurisdiction in
which the Property is located, is duly qualified to transact business in the
jurisdiction in which the Property is located, and has the requisite power and
authority to enter into and perform this Agreement and the document sand
instruments required to be executed and delivered by Seller pursuant hereto.
This Agreement has been duly executed and delivered by Seller and is a valid
and binding obligation of Seller enforceable in accordance with its terms.
This Agreement and the documents and instruments required to be executed and
delivered by Seller pursuant hereto have each been duly authorized by all
necessary partnership action on the part of Seller and that such execution,
delivery and performance does and will not conflict with or result in a
violation of Seller's partnership agreement or any judgment, order or decree of
any court or arbiter to which Seller is a party, or any agreement to which
Seller and/or any of the Property is bound or subject including the Contracts
and the Leases.
16.2.18. Seller has not (i) made a general assignment for the
benefit of creditors, (ii) filed any involuntary petition in bankruptcy or
suffered the filing of any involuntary petition by its creditors, (iii)
suffered the appointment of a receiver to take possession of all or
substantially all of its assets, (iv) suffered the attachment or other judicial
seizure of all or substantially all of its assets, (v) admitted in writing its
inability to pay its debts as they come due, or (vi) made an offer of
settlement, extension or composition to its creditors generally.
16.2.19. Seller is not a "foreign person", "foreign
partnership", "foreign trust" or "foreign estate" as those terms are defined in
Section 1445 of the Internal Revenue Code.
16.2.20. Seller shall at all times prior to the Closing operate
and maintain the Property in substantially the same manner as it is now
operated and maintained, ordinary wear and tear and damage by fire and casualty
excepted.
16.3. Purchaser hereby represents and warrants to Seller that
Purchaser has the full right, power and authority to execute and deliver this
Agreement and consummate the transactions contemplated herein.
16.4. If at any time after the execution of this Agreement, either
Purchaser or Seller becomes aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question to
become untrue in any material respect, said party shall not be in default under
this Agreement and the sole remedy of the other party shall be to terminate
this Agreement. Except as set forth in Paragraph 5.4, if the status of any of
the tenancies changes from the date of the rent roll attached hereto and the
date of the rent roll delivered at Closing, provided the change in status is
not caused by a breach by Seller of its obligations under any Lease, then
Purchaser shall not have the right to terminate this Agreement or make any
claim for a breach of a representation or warranty hereunder involving the rent
roll or tenancies thereunder. Purchaser and Seller are prohibited from making
any claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in this
Agreement that the claiming party has actual knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein
shall survive Closing until November 30, 1997. The claiming party shall have
no right to make any claims against the other party for a breach of a
representation or warranty unless the claiming party delivers written notice of
such claim to the other party before November 30, 1997.
17. ESTOPPEL CERTIFICATES. Promptly following the mutual execution and
delivery of this Agreement, Seller shall diligently proceed and use its
diligent efforts to obtain estoppel certificates in the form of Exhibit L from
each of the tenants under the Leases. If a tenant shall fail or refuse to
deliver an estoppel certificate with respect to its Lease on or before the
Closing Date, Seller shall execute and deliver to Purchaser at Closing an
estoppel certificate with respect to such Lease in substitution from such
tenant based on the knowledge of Seller as set forth in Paragraph 16.1;
provided, however, such certificate of Seller shall not be deemed to have
satisfied the condition in Paragraph 5.1, except as to Leases of up to 50% of
the rentable square feet leased pursuant to Leases of 7,500 square feet or
less. Seller's liability under Seller Tenant Certificates shall be limited
pursuant to Paragraph 16.5 and 18 herein.
18. LIMITATION OF LIABILITY. None of the Affiliates of Seller, nor any of
Seller's or the Affiliates of Seller's respective beneficiaries, shareholders,
partners, officers, directors, agents or employees, heirs, successors or
assigns shall have any personal liability of any kind or nature for or by
reason of any matter or thing whatsoever under, in connection with, arising out
of or in any way related to this Agreement and the transactions contemplated
herein, and Purchaser hereby waives for itself and anyone who may claim by,
through or under Purchaser any and all rights to sue or recover on account of
any such alleged personal liability. Notwithstanding anything contained herein
to the contrary, Purchaser hereby agrees that the maximum liability of Seller
after the Closing, in connection with, arising out of or in any way related to
a breach by Seller under this Agreement or any document or conveyance agreement
in connection with the transaction, shall be $500,000. Seller further agrees
not to distribute $500,000 of the proceeds of the Purchase Price to its
partners until the later of (i) November 30, 1997 and (ii) final resolution of
any claims by Purchaser and asserted in writing against Seller prior to
November 30, 1997 in accordance with the terms of this Agreement ("Claims");
provided, however, that if any Claims are disputed by Seller, Seller shall have
the right, by written notice to Purchaser, to require Purchaser to file suit in
a court of competent jurisdiction within ninety (90) days after such notice to
Purchaser. If no suit is filed by such date, said notice with respect to the
Claim in question shall no longer prevent Seller from distributing the
proceeds.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
<PAGE>
20. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James Mendelson
(847) 317-4367
(847) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: c/o Ellis Partners, Inc.
351 California Street, Suite 1150
San Francisco, CA 94104
Attention: Harold A. Ellis, Jr.
(415) 391-9800
(415) 391-4711 (FAX)
with copies to: Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, MN 55345
Attention: Tim Clark
(612) 984-3449
(612) 984-3905 (FAX)
and to: Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Matthew R. Bogart
(612) 336-3435
(612) 336-3026 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or the same day as given if sent by facsimile transmission and
received by 5:00 p.m. Chicago time or on the 4th business day after the same is
deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be sent to the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution. Seller will forward one (1) copy of the
executed Agreement to Purchaser and will forward the following to the Escrow
Agent:
(A) One (1) fully executed copy of this Agreement; and
(B) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
Within two (2) business days after its receipt of a fully-executed counterpart
of this Agreement and the Escrow Agreement, Purchaser agrees to deposit the
Earnest Money with Escrow Agent pursuant to the terms of the Escrow Agreement.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of Washington.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
26. NEW LEASES. On or before ten (10) business days prior to the expiration
of the Inspection Period, Seller may execute any new lease or modify or renew
any existing lease affecting the Property without Purchaser's consent. Seller
shall deliver a copy of any such new lease or existing lease modification or
renewal (together with an estimation of the "New Lease Costs" (as hereinafter
defined)), as applicable, to Purchaser within ten (10) business days of
execution by Seller and the new tenant or existing tenant, as applicable, but
in any event on or before ten (10) business days prior to the expiration of the
Inspection Period. In the event Purchaser disapproves of such new lease or
existing lease modification or renewal, Purchaser's sole remedy shall be to
terminate this Agreement in accordance with Paragraph 7 hereof. In the event
that Purchaser does not terminate this Agreement as aforesaid, Purchaser shall
be responsible for the costs of all tenant improvements and leasing commissions
associated with the negotiation and execution of any such new lease or existing
lease modification or renewal ("New Lease Costs") and Purchaser shall assume
all such obligations at the Closing. Seller shall receive a credit at Closing
for any New Lease Cost incurred by Seller prior to Closing.
After the date ten (10) business days prior to the expiration of the
Inspection Period, Seller shall not execute any new lease or existing lease
modification or renewal affecting the Property without Purchaser's prior
written consent. Purchaser's consent shall be deemed given if Purchaser has
not responded to the contrary within ten (10) business days after Seller's
written request and Purchaser's receipt of such new lease or existing lease
modification or renewal (together with an estimation of the New Lease Costs).
If approved by Purchaser, a complete copy of any such new lease or existing
lease modification or renewal shall be delivered to Purchaser within ten (10)
days of the full execution thereof. All New Lease Costs shall be paid by
Purchaser and Purchaser shall assume all such obligations at the Closing and
Seller shall receive a credit at Closing for any New Lease Costs incurred by
Seller prior to Closing.
Purchaser acknowledges that there currently exists the unsatisfied tenant
improvement obligations and leasing commissions set forth on Exhibit N attached
hereto. Seller agrees to pay the unsatisfied leasing commission obligations
and tenant improvement obligations set forth on Exhibit N on or before the
Closing or credit Purchaser for the amount of said unsatisfied obligation and
Purchaser shall assume all obligations therefor at Closing.
27. SELLER'S POSSESSION. All references herein to "Seller's possession" shall
mean in the possession of Seller and the property manager of the Property.
28. EXECUTION BY THE BALCOR COMPANY. The Balcor Company executes this
Agreement solely for the purpose of assuring to Purchaser that if the Seller
fails to withhold or pay the sums required of Seller pursuant to Paragraph 18
and if Purchaser is successful in any claims asserted against the Seller for a
breach of a representation or warranty, then The Balcor Company shall pay to
Purchaser the amount of such claim(s), the total of which shall not exceed
$500,000. Purchaser may name The Balcor Company in any suit against Seller,
provided that Purchaser may not name The Balcor Company in any suit unless
Seller is also named therein.
29. COSTS OF LITIGATION. If either party to this Agreement shall institute an
action or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney fees actually incurred; provided, however, that the
aggregate liability of Seller in connection with this Agreement, including
Seller's liability under this Paragraph 29, shall be limited in accordance with
Paragraph 18 hereof.
30. NEGOTIATION WITH TENANTS. Purchaser shall have the right during the
Inspection Period and at any time prior to the Closing Date to contact and
negotiate with any current, former or potential tenant or occupant of the
Property. Purchaser shall inform such party that it is not the owner of the
Property and any agreement that Purchaser and such party enter into shall
specifically state that it is contingent on Purchaser acquiring the Property.
In the event that Purchaser does not acquire the Property, Purchaser shall
deliver a copy of all such agreements to Seller.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
CROSSTOWN ASSET CORP. I, a Delaware corporation
By: /s/ Thomas Haller
--------------------------------
Name: Thomas Haller
--------------------------------
Its: Vice President
--------------------------------
SELLER:
LABROC II LIMITED PARTNERSHIP, an Illinois
limited partnership
By: Balcor Equity Partners-II, an Illinois
general partnership, its general partner
By: The Balcor Company, a Delaware
corporation, its general partner
By: /s/ John K. Powell, Jr.
-------------------------------
Name: John K. Powell, Jr.
-------------------------------
Its: Senior Vice President
-------------------------------
JOINDER
The undersigned executes this joinder solely for the purposes of
effectuating its obligations arising under Paragraph 28 of this Agreement.
THE BALCOR COMPANY, a Delaware corporation
By: /s/ John K. Powell, Jr.
--------------------------------
Name: John K. Powell, Jr.
--------------------------------
Its: Senior Vice President
--------------------------------
<PAGE>
[Ross Plaza]
Al Lieberman of Insignia Mortgage and Investment Company, Inc. ("Seller's
Broker") executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated 11/20, 1996 between Seller and Seller's Broker (the "Listing
Agreement"). Seller's Broker also acknowledges that payment of the aforesaid
fee or commission is conditioned upon the Closing and the receipt of the
Purchase Price by the Seller. Seller's Broker agrees to deliver a receipt to
the Seller at the Closing for the fee or commission due Seller's Broker and a
release, in the appropriate form, stating that no other fees or commissions are
due to it from Seller or Purchaser.
INSIGNIA MORTGAGE AND
INVESTMENT COMPANY, INC.
By: /s/ Al Lieberman
---------------------------
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Survey Certification
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Tenant Certificate
M - Rent Roll
N - Leasing Commissions and Tenant Improvements
O - Reaffirmation of Representations and Warranties
and Certification of Rent Roll
P - Permits
Q - Litigation
<PAGE>
ACQUIPORT ASHFORD CENTER NORTH, INC.
C/O J.P. MORGAN INVESTMENT MANAGEMENT INC.
522 FIFTH AVENUE, 9TH FLOOR
NEW YORK, NEW YORK, 10036
February 6, 1997
VIA FEDERAL EXPRESS
Ashford-Dunwoody Limited Partnership
c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road - Suite A-200
Bannockburn, Illinois 60015
Attention: Ms. Ilona Adams
Re: 100 Ashford Center North
Atlanta, Georgia
Ladies and Gentlemen:
Reference is hereby made to that certain Agreement of Sale, dated as of January
20, 1997, between the undersigned, as Purchaser, and yourself, as Seller,
covering the captioned property (the "Contract"). All capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in
the Contract.
In accordance with the Paragraph 8 of the Contract, the undersigned hereby
notifies you of its intention to extend the Closing Date to a date no later
than February 28, 1997. Our attorneys will be in touch with you by telephone
to confirm the new Closing Date, which we anticipate will be either February 19
or 20.
Very truly yours,
ACQUIPORT ASHFORD CENTER NORTH, INC.
By: /s/ Wayne A. Comer
-------------------------------
Wayne A. Comer, V.P.
cc: The Balcor Company
Attention: Mr. James Mendelson
FAX: (847) 317-4462
Katten Muchin & Zavis
Attention: Daniel J. Perlman, Esq.
FAX: (312) 902-1061
<PAGE>
FOURTH AMENDMENT TO AGREEMENT OF SALE
(Ammendale I)
THIS FOURTH AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is entered
into as of the 18th day of February, 1997, by and between WRIT LIMITED
PARTNERSHIP ("Purchaser") and AMMENDALE LIMITED PARTNERSHIP ("Seller").
WITNESSETH:
A. Purchaser and Seller have heretofore entered into a certain Agreement
of Sale (Ammendale I) dated November 29, 1996 (as amended, the "Agreement") for
the purchase and sale of the property commonly known as Lot 5, Ammendale
Business Campus, located in Beltsville, Maryland (the "Premises"). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in the Agreement.
B. Purchaser and Seller now desire to amend the Agreement as follows:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The Closing Date, as defined in Paragraph 8 of the Agreement, shall be
changed to February 28, 1997.
2. The Escrow Agreement is hereby modified to conform with Paragraph 1 .
3. Except as specifically modified herein, the terms and conditions of
the Agreement shall remain unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first set forth above.
PURCHASER:
WRIT LIMITED PARTNERSHIP
By: Washington Real Estate Investment Trust,
General Partner
By: /s/ Thomas L. Regnell
-------------------------------
Name: Thomas L. Regnell
-------------------------------
Its: Vice President
-------------------------------
SELLER:
AMMENDALE LIMITED PARTNERSHIP
By: Prince George Partners, Inc.,
its general partner
By: /s/ Jerry M. Ogle
--------------------------------------
Name: Jerry M. Ogle
--------------------------------------
Its: Managing Director and Secretary
--------------------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 66446
<SECURITIES> 0
<RECEIVABLES> 499
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67084
<PP&E> 54143
<DEPRECIATION> 18141
<TOTAL-ASSETS> 103531
<CURRENT-LIABILITIES> 766
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 101077
<TOTAL-LIABILITY-AND-EQUITY> 103531
<SALES> 0
<TOTAL-REVENUES> 35914
<CGS> 0
<TOTAL-COSTS> 10513
<OTHER-EXPENSES> 4934
<LOSS-PROVISION> 968
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<INCOME-PRETAX> 19499
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</TABLE>
