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, 1994
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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 0-14353
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BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3244978
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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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 Realty Investors 85-Series I A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1983 under the laws of the
State of Illinois. The Registrant raised $82,697,000 from sales of Limited
Partnership Interests. The Registrant's operations consist exclusively of
investment in and operation of income-producing real property, and all
financial information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire ten real property
investments and minority joint venture interests in three additional
properties. The Registrant has disposed of three of these properties. The seven
properties and three minority joint venture interests held at December 31, 1994
are described under Item 2. Properties. The Partnership Agreement generally
provides that the proceeds of any sale or refinancing of the Registrant's
properties will not be reinvested in new acquisitions.
During 1994, institutionally owned and managed multi-family residential
properties in many markets continued to experience favorable operating
conditions combined with relatively low levels of new construction. These
favorable operating conditions were supported by the strong pattern of national
economic growth which contributed to job growth and rising income levels in
most local economies. However, some rental markets continue to remain extremely
competitive; therefore, the General Partner's goals are to maintain high
occupancy levels, while increasing rents where possible, and to monitor and
control operating expenses and capital improvement requirements at the
properties. All of the Registrant's seven remaining properties and one of the
three minority joint venture interests generated positive cash flow during
1994, while the other two joint ventures generated marginal cash flow deficits.
Historically, real estate investments have experienced the same cyclical
characteristics affecting most other types of long-term investments. While real
estate values have generally risen over time, the cyclical character of real
estate investments, together with local, regional and national market
conditions, has resulted in periodic devaluations of real estate in particular
markets, as has been experienced in the last few years. As a result of these
factors, it has become necessary for the Registrant to retain ownership of many
of its properties for longer than the holding period for the assets originally
described in the prospectus. The General Partner examines the operations of
each property and each local market in conjunction with the Registrant's long-
term dissolution strategy when determining the optimal time to sell each of the
Registrant's properties.
North Hill Apartments is owned by a joint venture consisting of the Registrant
and an affiliate. During 1994 the joint venture completed the refinancing of
the North Hill Apartments mortgage loan. The Registrant also completed the
refinancings of two other mortgage notes in 1994. See Note 6 of Notes to
Financial Statements and Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for additional information.
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 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 Partners-XVI, 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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<PAGE>
In 1984, Pinebrook Apartments was acquired by a joint venture (the "Joint
Venture") consisting of the Registrant and an affiliate (the "Affiliate"). The
Registrant and the Affiliate hold participating percentages in the Joint
Venture of 48.43% and 51.57%, respectively. The Joint Venture utilized
$2,959,230 towards the purchase of the property, including $1,559,230 from the
Registrant. The remainder of the purchase price was payable in the form of a
$5,185,000 purchase money note (the "Note") collateralized by a wrap-around
mortgage on the property. The Note wrapped around four subordinate mortgage
loans held by unaffiliated parties and was collateralized by the property. In
1992, another joint venture consisting of the Registrant and the Affiliate
("Pinebrook"), purchased one of the subordinate loans at a discount for
$220,000, of which $106,546 was the Registrant's share.
In November 1992 the Joint Venture suspended debt service payments on the Note,
and subsequently, in December 1992, filed for protection under Chapter 11 of
the U.S. Bankruptcy Code. In May 1994, the Joint Venture's plan of
reorganization became effective. Pursuant to the plan of reorganization, the
Joint Venture was required to sell the property within two years.
On February 2, 1995, the Joint Venture sold the property to TGM Pinebrook Inc.,
a Delaware corporation, for a sale price of $6,140,000. From the proceeds of
the sale, the Joint Venture paid approximately $5,097,952, including accrued
interest, to the third party mortgage holders in full satisfaction of the
outstanding amount of the loans. Additionally, the Joint Venture paid
approximately $758,299 to Pinebrook in full satisfaction of the outstanding
amount of its loan, of which the Registrant's share is $367,244. The Joint
Venture paid $184,200 as a brokerage commission to an unaffiliated party and
approximately $25,975 representing closing and other costs.
<PAGE>
Item 2. Properties
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As of December 31, 1994, the Registrant owned the seven properties described
below:
Location Description of Property
- -------- -----------------------
Chesterfield County, Boulder Springs Apartments: a 284-unit
Virginia complex located on approximately 32 acres.
Arlington, Texas Forest Ridge Apartments (Phase I): a 332-unit
complex located on approximately 14 acres.
East Baton Rouge Parish, Forestwood Apartments: a 272-unit complex
Louisiana located on approximately 11 acres.
Oklahoma City, Oklahoma Heather Ridge Apartments: a 356-unit complex
located on approximately 16 acres.
Colorado Springs, Colorado Templeton Park Apartments: a 496-unit complex
located on approximately 21 acres.
Altamonte Springs, Florida Timberlake Apartments (Phase I): a 480-unit
complex located on approximately 43 acres.
Town & Country, Missouri Willow Bend Apartments: a 208-unit complex
located on approximately 21 acres.
The Registrant also held minority joint venture interests in North Hill
Apartments, DeKalb County, Georgia; Pinebrook Apartments, Lexington, Kentucky;
and Seabrook Apartments, Orange County, Florida.
Each of the above properties is held subject to various forms of financing.
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
- --------------------------
The Registrant is not subject to any material pending legal proceedings, nor
were any such proceedings terminated during the fourth quarter of 1994.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1994.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop; therefore, the
market value of the Limited Partnership Interests cannot reasonably be
determined. For information regarding distributions see Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
As of December 31, 1994, the number of record holders of Limited Partnership
Interests of the Registrant was 7,719.
Item 6. Selected Financial Data
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Year ended December 31,
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1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
Total income $15,205,707 $15,678,441 $17,331,431 $16,137,937 $17,253,472
Income (loss)
before gains
on sales of
assets and
extraordinary
items 529,539 (465,069) (1,653,732) (2,904,684) (4,177,702)
Net income (loss) 663,204 7,210,490 (1,653,732) (2,904,684) (778,462)
Net income (loss)
per Limited
Partnership
Interest 7.94 86.32 (19.80) (34.77) (9.32)
Total assets 59,911,923 58,158,518 75,012,096 76,644,481 83,039,493
Mortgage notes
payable 57,381,930 55,919,126 79,230,302 79,520,953 83,198,635
Distributions per
Limited Partner-
ship Interest 5.00 None None None None
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Summary of Operations
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As a result of the foreclosure of Suncrest Village Apartments and sale of
Sahara Palms Apartments in 1993, Balcor Realty Investors 85 - Series I A Real
Estate Limited Partnership (the "Partnership") recognized gains which resulted
in significantly higher net income in 1993 as compared to 1994, as well as net
income during 1993 as compared to a loss in 1992.
The dispositions of these properties, which were generating losses, coupled
with improved operations at certain of the Partnership's remaining properties,
contributed to improvements in results of operations before gain on sale of
property and extraordinary items resulting in income in 1994 as compared to a
loss in 1993, and decreased losses in 1993 as compared to 1992.
Further discussion of the Partnership's operations is summarized below.
Operations
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<PAGE>
1994 Compared to 1993
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As a result of the Suncrest Village Apartments foreclosure in May 1993 and the
Sahara Palms Apartments sale in July 1993, rental and service income, interest
expense, depreciation expense, property operating expense, maintenance and
repairs expense, real estate taxes and property management fees decreased
during 1994 as compared to 1993.
Increased rental and/or occupancy rates during 1994 at all of the Partnership's
seven remaining properties partially offset the decrease in rental and service
income due to the 1993 property dispositions.
The increase in cash flow from the Partnership's properties, the proceeds from
the July 1993 sale of Sahara Palms Apartments, and the net proceeds received in
connection with the refinancing of the mortgage loan on Heather Ridge
Apartments in July 1994 caused the Partnership's cash balances to increase.
This, together with higher interest rates, resulted in an increase in interest
income on short-term investments during 1994 as compared to 1993.
In addition to the decrease resulting from the 1993 property dispositions,
interest expense decreased during 1994 as compared to 1993 due to the
refinancing of the Timberlake - Phase I Apartments mortgage loan in October
1993, as well as the contractual decrease in the interest rate on the Templeton
Park Apartments mortgage loan, effective December 1993. The decrease in
interest expense was partially offset by increased interest expense for the
Forest Ridge - Phase I and Heather Ridge loans due to higher principal balances
resulting from the refinancings during 1994. In conjunction with the 1994
Forest Ridge - Phase I and Heather Ridge refinancings, the remaining deferred
expenses were written-off and this combined with the amortization of expenses
related to the 1993 Forestwood and Timberlake - Phase I mortgage refinancings
caused amortization of deferred expenses to increase during 1994 as compared to
1993.
Property operating expense decreased during 1994 as compared to 1993 primarily
as a result of the 1993 property dispositions. However, increases in carpet
replacement at Forest Ridge - Phase I, Forestwood, Timberlake - Phase I and
Willowbend apartment complexes as well as higher insurance expense at all of
the Partnership's properties partially offset the decrease for 1994 as compared
to 1993.
In addition to the decrease resulting from the 1993 property dispositions,
maintenance and repairs expense also decreased during 1994 as compared to 1993
due to maintenance and repairs expenses incurred in 1993 at the Forestwood
Apartments for which the Partnership received an insurance reimbursement in
1994.
North Hill Apartments is owned by a joint venture consisting of the Partnership
and an affiliate. In connection with the December 1994 North Hill Apartments
refinancing, the joint venture received a refund relating to prior year
payments made to Mutual Benefit Life Insurance Company representing its 1%
guaranty fee on the original North Hills Apartments mortgage loan. As a result,
the joint venture recognized a $534,659 extraordinary gain on forgiveness of
debt in 1994, of which $133,665 represents the Partnership's share.
As a result of the sale of Sahara Palms Apartments in July 1993 and the
relinquishment of title through foreclosure of Suncrest Village Apartments in
May 1993, the Partnership recognized a gain on sale of property of $4,194,237
in 1993 and extraordinary gain on foreclosure of property of $3,118,578 in
1993, respectively.
In October 1993, the Partnership completed the refinancing of the Timberlake-
Phase I first mortgage loan, and obtained a new first mortgage loan from an
unaffiliated lender. The Partnership received a $362,744 discount from the
previous lender for prepayment of the mortgage note and consequently recognized
an extraordinary gain on debt forgiveness in 1993.
<PAGE>
1993 Compared to 1992
- ---------------------
As a result of the foreclosure of Suncrest Village Apartments in May 1993 and
the sale of Sahara Palms Apartments in July 1993, rental income, interest
expense, depreciation expense, amortization of deferred expenses, property
operating expense, maintenance and repairs expense, real estate tax expense and
property management fees decreased during 1993 as compared to 1992.
Rental and service income decreased during 1993 as compared to 1992 due to the
dispositions of Sahara Palms and Suncrest Village apartment complexes. This
decrease was partially offset by increased rental and/or occupancy rates at all
of the Partnership's seven remaining properties.
The improved cash flow at five of the Partnership's seven remaining properties,
the proceeds from the sale of Sahara Palms Apartments, and the cash retained as
a result of the suspension of debt service and real estate tax payments on
Suncrest Village Apartments caused the Partnership's cash balance to increase.
This resulted in an increase in interest income on short-term investments
during 1993 when compared 1992.
The Partnership reached settlements with the sellers of the Forest Ridge -
Phase I, Highpoint - Phase II, and Sahara Palms apartment complexes in 1992.
Settlement income of $481,861 was recognized in connection with these
transactions.
The decrease in property operating expense during 1993 as compared to 1992 as a
result of the dispositions of the Sahara Palms and Suncrest Village apartment
complexes was partially offset by higher payroll costs at the Willow Bend and
Templeton Park apartment complexes.
In addition to the decrease from the dispositions of the Sahara Palms and
Suncrest Village apartment complexes, maintenance and repairs expense also
decreased during 1993 as compared to 1992 due to higher exterior painting
expenses at the Heather Ridge Apartments during 1992. This decrease in
maintenance and repairs expense was partially offset by increased carpet
replacement costs at the Templeton Park Apartments and increased carpet
replacement and asphalt paving at the Forestwood Apartments.
As a result of improved operations at North Hill Apartments, in which the
Partnership holds a minority joint venture interest, participation in losses of
joint ventures with affiliates decreased for 1993 as compared to 1992.
During 1993 the Partnership sold the Sahara Palms Apartments and recognized a
$4,194,237 gain on sale of property.
In October 1993, the Partnership completed the refinancing of the Timberlake -
Phase I first mortgage loan and obtained a new first mortgage loan from an
unaffiliated lender. The Partnership received a $362,744 discount from the
previous lender for prepayment of the mortgage note and consequently recognized
an extraordinary gain on debt forgiveness.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $3,346,000 as
of December 31, 1994 as compared to December 31, 1993. The Partnership's cash
flow provided by operating activities during 1994 was generated primarily from
the Partnership's properties, and was partially offset by the payment of
administrative expenses. The Partnership's net cash used in investing
activities consisted of a net contribution to joint ventures with affiliates.
The Partnership received cash flow from financing activities which consisted of
net proceeds from the refinancing of the underlying mortgage loans on both the
Forest Ridge - Phase I and Heather Ridge apartment complexes. A portion of
these proceeds were used for the payment of deferred expenses and funding of
improvement escrows in connection with the two refinancings. Cash was used in
<PAGE>
other financing activities for principal payments on mortgage notes payable and
a distribution to the Limited Partners.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit, or a significant deficit, each after
consideration of debt service payments. A deficit is considered to be
significant if it exceeds $250,000 annually or 20% of the property's rental and
service income. The Partnership defines cash flow generated from its properties
as an amount equal to the property's revenue receipts less property related
expenditures, which include debt service payments. During 1994 and 1993, all
seven of the Partnership's properties generated positive cash flow. Of the
three properties in which the Partnership holds minority joint venture
interests, the North Hill Apartments generated positive cash flow during 1994
and 1993. The Seabrook and Pinebrook apartment complexes generated marginal
cash flow deficits during 1994 as compared to positive cash flow for 1993,
primarily due to plumbing repairs at the Seabrook Apartments and default
interest expense and legal fees incurred in connection with the bankruptcy plan
of reorganization at the Pinebrook Apartments.
While the cash flow of certain of the Partnership's remaining properties has
improved, the General Partner continues to pursue a number of actions aimed at
further improving the cash flow of the Partnership's properties including
refinancing of mortgage loans, improving property operating performance, and
seeking rent increases where market conditions allow. As of December 31, 1994,
the occupancy rates of the Partnership's properties ranged from 88% to 98%.
Despite recent improvements in the local economies and rental markets where
certain of the Partnership's properties are located, the General Partner
believes that continued ownership of many of the properties is in the best
interest of the Partnership in order to maximize potential returns to Limited
Partners. As a result, the Partnership will continue to own these properties
for longer than the holding period for the assets originally described in the
prospectus.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. The $7,787,000 Boulder Springs
mortgage loan matures in 1995 and the Partnership expects to refinance this
loan prior to its maturity. See Note 3 of Notes to Financial Statements for
information concerning outstanding balances, maturity dates, interest rates and
other terms related to each of these mortgage loans. In certain instances it
may be difficult for the Partnership to refinance a property in an amount
sufficient to retire in full the current mortgage financing with respect to the
property. In the event negotiations with the existing lender for a loan
modification or with new lenders for a refinancing are unsuccessful, the
Partnership may sell the collateral property or other properties to satisfy an
obligation or may relinquish title to the collateral property in satisfaction
of the outstanding mortgage loan balance.
During 1994, the Heather Ridge and Forest Ridge - Phase I first mortgage loans
were refinanced. Proceeds from the two new loans which totalled $12,890,000
were used to pay the existing loans totalling $10,563,000. See Note 3 of Notes
to the Financial Statements for additional information.
The Pinebrook Apartments were owned by a joint venture ("Joint Venture")
consisting of the Partnership and an affiliate, and were financed with a
$5,185,000 wrap-around mortgage payable, which matured in July 1993. In
December 1992, the Joint Venture filed for protection under the U.S. Bankruptcy
Code and in 1994, a plan of reorganization was approved by the Bankruptcy
Court. Pursuant to the plan, the Joint Venture was required to sell the
property within two years. Consequently, in February 1995, the Partnership sold
the Pinebrook Apartments in an all cash sale for $6,140,000. From the proceeds,
the Partnership paid $5,058,226 to the third party mortgage holders in full
satisfaction of the first, second and fourth mortgage loans. See Note 6 of
Notes to Financial Statements and Item 1. Other Information for additional
information.
<PAGE>
North Hill Apartments are owned by a joint venture ("Joint Venture") consisting
of the Partnership and an affiliate. The $18,700,000 tax exempt bond issue
which funded the first mortgage financing collateralized by the property went
into technical default in July 1991 due to the insolvency of the guarantor of
the bonds. In April 1993, the Joint Venture and the trustee for the bondholders
entered into an agreement in which the loan was modified and the trustee agreed
to forebear from commencing foreclosure proceedings while the Joint Venture
sought alternative financing. In conjunction with the subsequent extension of
the agreement,the Joint Venture agreed to pay 50% of monthly net cash flow into
an escrow account to be applied to amounts due under the mortgage loan upon
refinancing. In December 1994, the Joint Venture refinanced the mortgage loan.
In conjunction with the refinancing, $828,605 held in escrow representing the
50% of net cash flow and the guarantee fee previously paid to the trustee, but
not paid to the guarantor due to its insolvency, were released to the Joint
Venture, a portion of which was used to repay the previous bond financing. In
addition, the Joint Venture received proceeds of $1,350,000 from a non-
affiliated party which was also used to repay the previous bond financing. See
Note 6 of Notes to Financial Statements for additional information.
In January 1995, the Partnership made a distribution of $413,485 ($5.00 per
Interest) to the holders of Limited Partnership Interests for the fourth
quarter of 1994. The Partnership made its first distribution to Limited
Partners of $5.00 per Limited Partnership Interest in October 1994. The General
Partner expects to continue quarterly distributions to Limited Partners.
However, the level of future distributions, if available, will depend on cash
flow from the Partnership's remaining properties, the successful refinancing of
certain mortgage loans and proceeds from future property sales, as to all of
which there can be no assurances. In light of results to date and current
market conditions, the General Partner does not anticipate that investors will
recover all of their original investment.
The General Partner has recently completed the outsourcing of the financial
reporting and accounting services, transfer agent and investor records
services, and computer operations and systems development functions that
provided services to the Partnership. All of these functions are now being
provided by independent third parties. Additionally, Allegiance Realty Group,
Inc., which has provided property management services to all of the
Partnership's properties, was sold to a third party. Each of these transactions
occurred after extensive due diligence and competitive bidding processes. The
General Partner does not believe that the cost of providing these services to
the Partnership, in the aggregate, will be materially different to the
Partnership during 1995 when compared to 1994.
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.
<PAGE>
Item 8. Financial Statements and Supplementary Data
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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, 1994 December 31, 1993
------------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- --------- ---------- ---------
Total assets $59,911,923 $48,360,939 $58,158,518 $45,508,342
Partners' capital
(deficit) accounts:
General Partner (716,180) (1,589,662) (722,812) (1,557,623)
Limited Partners 1,828,563 (11,454,275) 1,585,476 (9,746,864)
Net income (loss):
General Partner 6,632 (32,039) 72,105 1,064,002
Limited Partners 656,572 (1,293,926) 7,138,385 10,248,616
Per Limited Part-
nership Interest 7.94 (15.65) 86.32 123.93
Item 9. Changes in and Disagreements with Accountants on Accounting and
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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
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(a) Neither the Registrant nor Balcor Partners-XVI, its General Partner, has
either a Board of Directors or a Board of Advisors.
(b, c & e) The names, ages and business experiences 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
Executive Vice President, Allan Wood
Chief Financial Officer and
Chief Accounting Officer
Senior Vice President Alexander J. Darragh
First Vice President Daniel A. Duhig
First Vice President Josette V. Goldberg
First Vice President Alan G. Lieberman
First Vice President Brian D. Parker
and Assistant Secretary
First Vice President John K. Powell, Jr.
First Vice President Reid A. Reynolds
First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) 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.
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.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief
Financial Officer and Chief Accounting Officer, is responsible for the
financial and administrative functions. He is also a Director of The Balcor
Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor,
he was employed by Price Waterhouse where he was involved in auditing public
and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has
primary responsibility for the Portfolio Advisory Group. He is responsible for
due diligence analysis and real estate advisory services in support of asset
management, institutional advisory and capital markets functions. Mr. Darragh
has supervisory responsibility of Balcor's Investor Services, Investment
Administration, Fund Management and Land Management departments. Mr. Darragh
received masters' degrees in Urban Geography from Queens's University and in
Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is
responsible for the Asset Management Department relating to real estate
investments made by Balcor and its affiliated partnerships, including
negotiations for modifications or refinancings of real estate mortgage
investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's administrative and MIS departments.
Ms. Goldberg has been designated as a Senior Human Resources Professional
<PAGE>
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified
Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for
Balcor's corporate and property accounting, treasury and budget activities.
Mr. Parker is a Certified Public Accountant and holds an M.S. degree in
Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for the administration of the investment portfolios of Balcor's
partnerships and for Balcor's risk management functions. Mr. Powell received a
Master of Planning degree from the University of Virginia. He 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.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with
the asset management of residential properties for Balcor. Mr. Reynolds is a
licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has
responsibility for various Asset Management functions, including oversight of
the residential portfolio. From January 1986 through September 1994, Mr. Selby
was Regional Vice President and then Senior Vice President of Allegiance Realty
Group, Inc., an affiliate of Balcor providing property management services.
Mr. Selby was responsible for supervising the management of residential
properties in the western United States.
(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 1994.
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. Certain of these
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 8 of Notes to Financial
Statements for the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Balcor Partners-XVI and its officers and partners own as a group the
following Limited Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership
Interests 880 Interests 1.06%
<PAGE>
Relatives and affiliates of the officers and partners of the General Partner
own an additional fifteen 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 8 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
See Note 2 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(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
is set forth as Exhibit 3 to Amendment No. 1 to the Registrant's Registration
Statement on Form S-11 dated November 29, 1984 (Registration No. 2-92777), and
said Agreement and Certificate is incorporated herein by reference.
(4) The Subscription Agreement as set forth as Exhibit 4.1 to Amendment No. 1
to Registrant's Registration Statement on Form S-11 dated November 29, 1984
(Registration No. 2-92777) and Form of Confirmation regarding Interests in the
Partnership as set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q
for the quarter ended June 30, 1992 (Commission File No. 0-14353) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(99) Agreement of Sale relating to the sale of Pinebrook Apartments, Lexington,
Kentucky is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedule: See Index to Financial Statements and
Financial Statement Schedule in this Form 10-K.
<PAGE>
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.
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Allan Wood
--------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Partners-XVI,
the General Partner
Date: March 27, 1995
--------------
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 Partners-
/s/Thomas E. Meador XVI, the General Partner March 27,1995
- -------------------- --------------
Thomas E. Meador
Executive Vice President, and
Chief Accounting and Financial
Officer (Principal Accounting
and Financial Officer) of
Balcor Partners-XVI, the
/s/Allan Wood General Partner March 27, 1995
- -------------------- --------------
Allan Wood
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital, for the years ended December 31, 1994, 1993
and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1994
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Realty Investors 85-Series I
A Real Estate Limited Partnership:
We have audited the financial statements and the financial statement schedule
of Balcor Realty Investors 85-Series I 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 Realty Investors
85-Series I A Real Estate Limited Partnership at December 31, 1994 and 1993,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1994, 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.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 4, 1995
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
------------- ------------
Cash and cash equivalents $ 6,475,393 $ 3,129,791
Accounts and accrued interest receivable 28,827 455,823
Escrow deposits 1,140,420 621,838
Deferred expenses, net of accumulated
amortization of $213,273 in 1994 and
$300,956 in 1993 973,153 731,862
------------- ------------
8,617,793 4,939,314
------------- ------------
Investment in real estate:
Land 12,380,326 12,380,326
Buildings and improvements 65,940,832 65,940,832
------------- ------------
78,321,158 78,321,158
Less accumulated depreciation 27,027,028 25,101,954
------------- ------------
Investment in real estate, net of
accumulated depreciation 51,294,130 53,219,204
------------- ------------
$ 59,911,923 $58,158,518
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 133,743 $ 104,513
Due to affiliates 75,413 79,562
Accrued liabilities, principally real
estate taxes and interest 366,628 369,386
Security deposits 288,084 299,099
Losses in excess of investments in joint
ventures with affiliates 553,742 524,168
Mortgage notes payable 57,381,930 55,919,126
------------- ------------
Total liabilities 58,799,540 57,295,854
Partners' capital (82,697 Limited
Partnership Interests issued and
outstanding) 1,112,383 862,664
------------- ------------
$ 59,911,923 $58,158,518
============= ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1994, 1993 and 1992
Partners' Capital(Deficit) Accounts
----------------------------------------
General Limited
Total Partner Partners
------------- ------------- ------------
Balance at December 31, 1991 $ (4,694,094) $ (778,380) $(3,915,714)
Net loss for the year
ended December 31, 1992 (1,653,732) (16,537) (1,637,195)
------------- ------------- ------------
Balance at December 31, 1992 (6,347,826) (794,917) (5,552,909)
Net income for the year
ended December 31, 1993 7,210,490 72,105 7,138,385
------------- ------------- ------------
Balance at December 31, 1993 862,664 (722,812) 1,585,476
Cash distribution (A) (413,485) (413,485)
Net income for the year
ended December 31, 1994 663,204 6,632 656,572
------------- ------------- ------------
Balance at December 31, 1994 $ 1,112,383 $ (716,180) $ 1,828,563
============= ============= ============
(A)A distribution of $5.00 per Limited Partnership Interest was made in
the fourth quarter of 1994.
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- ------------
Income:
Rental and service $ 14,972,425 $ 15,565,175 $16,756,049
Interest on short-term
investments 233,282 113,266 93,521
Settlement income 481,861
------------- ------------- ------------
Total income 15,205,707 15,678,441 17,331,431
------------- ------------- ------------
Expenses:
Interest on mortgage
notes payable 4,969,653 5,853,947 7,612,695
Depreciation 1,925,074 2,216,451 2,565,255
Amortization of deferred
expenses 154,912 96,490 100,493
Property operating 3,618,794 3,702,971 4,215,101
Maintenance and repairs 1,366,497 1,668,294 1,686,221
Real estate taxes 991,624 1,051,338 1,167,480
Property management fees 747,795 778,849 838,046
Administrative 584,187 581,139 543,572
Participation in losses of
joint ventures with
affiliates before
extraordinary item 317,632 194,031 256,300
------------- ------------- ------------
Total expenses 14,676,168 16,143,510 18,985,163
------------- ------------- ------------
Income (loss) before gain
on sale of property and
extraordinary items 529,539 (465,069) (1,653,732)
Gain on sale of property 4,194,237
------------- ------------- ------------
Income (loss) before
extraordinary items 529,539 3,729,168 (1,653,732)
------------- -------------
Extraordinary items:
Gain on forgiveness of debt 362,744
Gain on foreclosure of property 3,118,578
Participation in gain on
forgiveness of debt from joint
venture with an affiliate 133,665
------------- -------------
Total extraordinary items 133,665 3,481,322
------------- ------------- ------------
Net income (loss) $ 663,204 $ 7,210,490 $(1,653,732)
============= ============= ============
Income (loss) before
extraordinary items allocated
to General Partner $ 5,295 $ 37,292 $ (16,537)
============= ============= ============
Income (loss) before
extraordinary items allocated
to Limited Partners $ 524,244 $ 3,691,876 $(1,637,195)
============= ============= ============
Income (loss) before
<PAGE>
extraordinary items per Limited
Partnership Interest (82,697
issued and outstanding) $ 6.34 $ 44.64 $ (19.80)
============= ============= ============
Extraordinary items allocated
to General Partner $ 1,337 $ 34,813 None
============= ============= ============
Extraordinary items allocated
to Limited Partners $ 132,328 $ 3,446,509 None
============= ============= ============
Extraordinary items per Limited
Partnership Interest (82,697
issued and outstanding) $ 1.60 $ 41.68 None
============= ============= ============
Net income (loss) allocated to
General Partner $ 6,632 $ 72,105 $ (16,537)
============= ============= ============
Net income (loss) allocated to
Limited Partners $ 656,572 $ 7,138,385 $(1,637,195)
============= ============= ============
Net income (loss) per Limited
Partnership Interest (82,697
issued and outstanding) $ 7.94 $ 86.32 $ (19.80)
============= ============= ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- ------------
Operating activities:
Net income (loss) $ 663,204 $ 7,210,490 $(1,653,732)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Gain on forgiveness
of debt (362,744)
Gain on foreclosure
of property (3,118,578)
Gain on sale of property (4,194,237)
Participation in losses of
joint ventures with
affiliates before
extraordinary item 317,632 194,031 256,300
Participation in gain on
forgiveness of debt from
joint venture with an
affiliate (133,665)
Depreciation of properties 1,925,074 2,216,451 2,565,255
Amortization of deferred
expenses 154,912 96,490 100,493
Accrued interest expense
due at maturity 366,050
Net change in:
Accounts and accrued
interest receivable 426,996 (203,405) 351,655
Escrow deposits 29,178 (360,225) (56,278)
Accounts payable 29,230 (244,111) 306,735
Due to affiliates (4,149) (4,061) (20,417)
Accrued liabilities (2,758) (494,386) (124,417)
Security deposits (11,015) (78,091) 21,552
------------- ------------- ------------
Net cash provided by operating
activities 3,394,639 657,624 2,113,196
------------- ------------- ------------
Investing activities:
Capital contributions to joint
ventures with affiliates (280,003) (49,751) (230,457)
Distributions from joint
ventures with affiliates 125,610 91,904 102,702
Improvements to properties (118,767)
Proceeds from sale of
real estate 13,200,000
Payment of selling costs (99,559)
------------- ------------- ------------
Net cash used in or provided
by investing activities (154,393) 13,023,827 (127,755)
------------- ------------- ------------
Financing activities:
<PAGE>
Distribution to Limited
Partners $ (413,485)
Repayment of mortgage notes
payable (10,563,000) $(29,604,431)
Proceeds from issuance of
mortgage notes payable 12,890,000 17,600,000
Principal payments on
mortgage notes payable (864,196) (465,471) $ (656,701)
Payment of deferred expenses (396,203) (684,351) (39,122)
Funding of improvement escrows (547,760)
------------- ------------- ------------
Net cash provided by or used
in financing activities 105,356 (13,154,253) (695,823)
------------- ------------- ------------
Net change in cash and cash
equivalents 3,345,602 527,198 1,289,618
Cash and cash equivalents at
beginning of year 3,129,791 2,602,593 1,312,975
------------- ------------- ------------
Cash and cash equivalents at
end of year $ 6,475,393 $ 3,129,791 $ 2,602,593
============= ============= ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using the straight-line method. Rates used
in the determination of depreciation are based upon the following estimated
useful lives:
Years
-----
Buildings and improvements 30
Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
The Partnership records its investments in real estate at cost, and
periodically assesses possible impairment to the value of its properties. In
the event that the General Partner determines that a permanent impairment in
value has occurred, the carrying basis of the property is reduced to its
estimated fair value.
When 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.
(b) Deferred expenses consist principally of loan refinancing and modification
fees which are amortized over the terms of the respective agreements.
(c) Investment in joint ventures with affiliates represents the Partnership's
48.4%, 25% and 15.4% interests in the Pinebrook Apartments, North Hill
Apartments and Seabrook Apartments, respectively, recorded under the equity
method of accounting. Under this method, the Partnership records its initial
investment at cost and adjusts its investment account for additional capital
contributions, distributions and its share of joint venture income or loss.
Depreciation recognized in connection with the ownership of real estate by the
joint ventures has resulted in the Partnership's share of cumulative losses
exceeding the net amounts invested in the joint ventures. This has resulted in
the classification of the investment as "Losses in excess of investments in
joint ventures with affiliates" in the accompanying financial statements.
(d) Cash equivalents include all unrestricted highly liquid investments with a
maturity of three months or less when purchased.
(e) 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.
2. Partnership Agreement:
The Partnership was organized on August 1, 1983. The Partnership Agreement
provides for Balcor Partners-XVI to be the General Partner and for the
admission of Limited Partners through the sale of up to 100,000 Limited
Partnership Interests at $1,000 per Interest, 82,697 of which were sold through
April 30, 1985, the termination date of the offering.
The Partnership Agreement generally provides that the General Partner will be
allocated 1% of the profits and losses. One hundred percent of Net Cash
Receipts available for distribution shall be distributed to the holders of
Interests in proportion to their participating percentages as of the record
<PAGE>
date for such distributions. However, there shall be accrued for the benefit of
the General Partner as its distributive share from operations, an amount
equivalent to approximately 1% of the total Net Cash Receipts being
distributed, which will be paid only out of distributed Net Cash Proceeds in
excess of total Adjusted Original Capital plus a 6% Cumulative Distribution.
Under certain circumstances, the General Partner may participate in the Net
Cash Proceeds of the sale or refinancing of Partnership properties. The General
Partner's participation is limited to 15% of excess Net Cash Proceeds after the
return of Original Capital plus a Cumulative Distribution of 6% to the holders
of Interests, as defined in the Partnership Agreement.
<PAGE>
3. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1994 and 1993 consisted of the
following:
Carrying Carrying Current Final
Property Amount of Amount of Inter- Matur- Current Estimated
Pledged as Notes at Notes at est ity Monthly Balloon
Collateral 12/31/94 12/31/93 Rate Date Payment Payment
- -------------- ---------- ---------- ------ ------ -------- ----------
Apartment Complexes:
Boulder Springs $7,813,574 $7,887,784 12.875% 1995 $90,457 $7,787,000
Forest Ridge
Phase I (A) 7,668,517 6,741,000 8.963% 2001 61,671 7,206,000
Forestwood (B) 5,836,145 5,877,537 9.130% 2001 48,026 5,465,000
Heather Ridge (C) 5,212,157 3,848,723 8.950% 2001 41,653 4,872,000
Templeton Park (D) 13,385,348 13,918,175 6.381% 2016 97,701 None
Timberlake Phase I
(E) 11,579,411 11,683,431 7.750% 2003 83,820 10,210,000
Willow Bend 5,886,778 5,962,476 9.500% 1997 53,230 5,714,000
----------- -----------
Total $57,381,930 $55,919,126
=========== ===========
(A) In July 1994, this loan was refinanced. The interest rate decreased from
9.025% to 8.963%, the maturity date was extended from November 1994 to August
2001 and the monthly payments increased from $50,698 to $61,671. A portion of
the proceeds from the new $7,690,000 first mortgage loan was used to repay the
existing first mortgage loan of $6,741,000.
(B) In May 1993, this loan was refinanced. The interest rate decreased from
10.5% to 9.13%, the maturity date was extended from November 1994 to June 2001
and the monthly payments decreased from $49,927 to $48,026. A portion of the
proceeds from the new $5,900,000 first mortgage loan was used to repay the
existing first mortgage loan of $5,627,810.
(C) In July 1994, this loan was refinanced. The interest rate decreased from
9.025% to 8.95%, the maturity date was extended from November 1994 to August
2001 and the monthly payments increased from $28,745 to $41,653. A portion of
the proceeds from the new $5,200,000 first mortgage loan was used to repay the
existing first mortgage loan of $3,822,000.
(D) In accordance with the 1989 loan modification, the interest rate will be
adjusted on certain "adjustment dates". The next adjustment date is June 1,
1998 with subsequent adjustments every five years thereafter. In addition, 50%
of property cash flow must be paid annually and will be applied against the
outstanding principal on the loan. Upon the sale or refinancing of the
property, the lender will participate in a percentage of the proceeds in excess
of the outstanding mortgage debt.
(E) In October 1993, this loan was refinanced. The interest rate decreased from
9.875% to 7.75%, the maturity date was extended from October 1993 to November
2003 and the monthly payments decreased from $110,160 to $83,820. The proceeds
from the new $11,700,000 first mortgage loan were used to repay the existing
first mortgage loan of $12,091,471.
During 1994, 1993 and 1992, the Partnership incurred interest expense on
mortgage notes payable to unaffiliated parties of $4,969,653, $5,853,947 and
$7,612,695 and paid interest expense of $4,969,653, $6,213,241 and $7,304,710,
respectively.
The Partnership's loans described above all require current monthly payments of
principal and interest.
<PAGE>
Five-year scheduled maturities of the mortgage notes payable are approximately
as follows:
1995 $ 8,478,000
1996 715,000
1997 6,386,000
1998 723,000
1999 777,000
4. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership are
managed by a third-party management company. These management agreements
provide for annual fees of 5% of gross operating receipts.
5. Settlement of Litigation:
In June 1992, the Partnership reached a settlement with the seller of the
Forest Ridge - Phase I and Highpoint - Phase II apartment complexes. Under the
terms of the settlement, the Partnership received cash of $426,000 and the
Partnership and seller released all claims against one another. Settlement
income of $426,000 was recognized in connection with this transaction.
The Partnership also reached a settlement with the seller of the Sahara Palms
Apartments for proration amounts the seller owed the Partnership pursuant to
the original management and guarantee agreement. The Partnership received
$145,767 in 1992 pursuant to the settlement. The Partnership also received a
payment of $393,641 in August 1992 from the General Partner, who voluntarily
agreed to reimburse the Partnership for a portion of the seller's obligations
due to the contract dispute with the seller. Settlement income of $55,861 was
recognized in connection with this transaction.
6. Investment in Joint Ventures with Affiliates:
The Partnership owns 48.4%, 25% and 15.4% joint venture interests in Pinebrook
Apartments, North Hill Apartments and Seabrook Apartments, respectively. The
joint venturers are affiliates of the Partnership with investment objectives
similar to those of the Partnership. During 1994 and 1992, the Partnership made
net capital contributions of $154,393 and $127,755, respectively and during
1993, the Partnership received a net capital distribution of $42,153.
Pinebrook Apartments was acquired by a joint venture ("Joint Venture")
consisting of the Partnership and an affiliate. The Partnership and the
affiliate hold participating percentages in the Joint Venture of 48.43% and
51.57%, respectively. In February 1995, the Joint Venture sold the property for
a sale price of $6,140,000. From the proceeds of the sale, the Joint Venture
paid approximately $5,097,952, including accrued interest, to the third party
mortgage holders in full satisfaction of the outstanding amount of the loans.
Additionally, the Joint Venture paid approximately $758,299 to Pinebrook
Limited Partnership in full satisfaction of the outstanding amount of its loan,
of which the Partnership's share is $367,244. The Joint Venture paid $184,200
as a brokerage commission to an unaffiliated party and approximately $25,975
representing closing and other costs and in 1995 will recognize a gain of
$1,814,970. The Joint Venture received proceeds of $13,315 from the sale of the
property.
North Hill Apartments is owned by a joint venture ("Joint Venture") in which
the Partnership and an affiliate have participating percentages of 25% and 75%,
respectively. The $18,700,000 tax-exempt bond issue which funded the first
mortgage financing collateralized by the property was in technical default due
to the insolvency of the guarantor of the bonds. In April 1993, the Joint
Venture and the trustee for the bondholders entered into an agreement in which
the loan was modified and the trustee agreed to forebear from commencing
foreclosure proceedings while the Joint Venture sought alternate financing. In
December 1994, the bonds which funded the previous North Hill Apartments
mortgage loan were repaid. The interest rate increased from 6.75% to 8.09% and
<PAGE>
the maturity date was extended from December 1994 to December 2024. As a
condition of the new agreement, on January 1, 2005, at the discretion of both
the Joint Venture and the lender, the bonds will either be repaid or
remarketed. Under the terms of the loan, monthly payments increased from
$105,188 to $124,920. The Joint Venture repaid the existing mortgage loan of
$18,700,000 with proceeds from the new mortgage loan of $16,795,600, which was
net of a discount of $84,400, proceeds of a $1,350,000 note from an
unaffiliated party, and Joint Venture cash reserves, which included amounts
previously held in escrow by the trustee which were refunded to the Joint
Venture in conjunction with the refinancing (see Note 9 of Notes to Financial
Statements).
The $1,350,000 note to an unaffiliated party is non-interest bearing, is not
collateralized by the property, and will be repaid only to the extent net sales
proceeds exceed a certain predetermined level.
7. 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, will differ from the
tax return 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 1994 in the financial statements is $1,989,169 more than the
tax loss of the Partnership for the same period.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Property management fees $738,965 None $790,418 $59,512 $834,668 $71,081
Reimbursement of
expenses to General
Partner at cost:
Accounting 61,640 25,026 58,782 4,865 44,257 3,234
Data processing 53,294 10,763 32,212 6,338 35,212 2,919
Investor
communications 20,271 8,230 18,986 1,571 11,713 856
Legal 12,118 4,920 9,444 782 18,522 1,353
Other 15,653 6,355 19,649 1,626 25,258 1,846
Portfolio management 49,554 20,119 59,473 4,868 31,938 2,334
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all
7 of 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. The Partnership's premiums to the deductible
insurance program were $146,555 $98,035 and $117,746 for 1994, 1993 and 1992,
respectively.
9. Extraordinary Items:
(a) North Hill Apartments is owned by a joint venture consisting of the
Partnership and an affiliate. In connection with the December 1994 North Hill
Apartments refinancing, the joint venture received a refund of the escrow
<PAGE>
account held by the trustee representing the amount which would have been paid
to Mutual Benefit Life Insurance Company as its 1% guaranty fee on the original
mortgage loan. As a result, the joint venture recognized a $534,659
extraordinary gain on forgiveness of debt in 1994, of which $133,665 represents
the Partnership's share.
(b) During 1993, title to the Suncrest Village Apartments was relinquished
through foreclosure. The Partnership had suspended debt service payments in
February 1993 in an attempt to modify the terms of the mortgage loan, which
would have matured in 1994. The Partnership wrote-off the mortgage loan balance
of $10,478,532, accrued real estate taxes of $140,710, security deposit of
$27,716, and the property basis of $7,528,380, net of accumulated depreciation
of $3,495,674. The Partnership recognized an extraordinary gain of $3,118,578
during 1993 for financial statement purposes.
(c) During 1993, the Partnership completed the refinancing of the $12,091,471
Timberlake - Phase I first mortgage loan and obtained a new first mortgage loan
from an unaffiliated lender in the amount of $11,700,000. The Partnership
received a $362,744 discount from the previous lender for prepayment of the
mortgage note which was recognized as an extraordinary gain on debt
forgiveness.
10. Property Sale:
During 1993, the Partnership sold the Sahara Palms Apartments for an all cash
sale price of $13,200,000. From the proceeds of the sale, the Partnership paid
$12,356,625 in full satisfaction of the property's mortgage loans. The basis of
the property was $8,906,204, net of accumulated depreciation of $4,134,055, and
the Partnership recognized a gain on the sale of the property of $4,194,237.
11. Subsequent Event:
In January 1995, the Partnership made a distribution of $413,485 ($5.00 per
Interest) to the holders of Limited Partnership Interests for the fourth
quarter of 1994.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<CAPTION>
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>
Boulder Springs Apts.,
284 units in Chester-
field County, VA (e) $ 510,000 $ 9,075,000 None $ 515,911 $ (160,228)
Forest Ridge Apts.-
Phase I, 332 units
in Arlington, TX (e) 2,613,810 8,655,190 $ 49,065 1,340,138 (357,486)
Forestwood Apts., 272
units in E. Baton
Rouge Parish, LA (e) 1,619,744 6,449,256 118,767 1,184,934 (426,027)
Heather Ridge Apts.,
356 units in
Oklahoma City, OK (e) 1,346,000 9,632,000 48,217 1,732,505 (5,569,794)(g)
Templeton Park Apts.,
496 units in
Colorado Springs, CO (e) 2,001,000 13,658,000 None 1,677,310 (344,256)
Timberlake Apts. I,
480 units in Alta-
monte Springs, FL (e) 4,018,000 10,498,000 None 2,398,388 (1,693,410)
Willow Bend Apts.,
208 units in Town
& Country, MO (e) 1,500,000 5,925,000 None 1,003,705 (697,581)
---------- ---------- -------- ---------- ------------
Total $13,608,554 $63,892,446 $216,049 $9,852,891 $ (9,248,782)
=========== =========== ======== ========== ============
</TABLE>
See notes (a) through (g)
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Cont.)
<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>
Boulder Springs Apts.,
284 units in Chester-
field County, VA $ 502,769 $ 9,437,914 $ 9,940,683 $ 3,650,844 1986 5/84 (f)
Forest Ridge Apts.-
Phase I, 332 units
in Arlington, TX 2,544,132 9,756,585 12,300,717 3,938,516 1984 10/83 (f)
Forestwood Apts., 272
units in E. Baton
Rouge Parish, LA 1,546,252 7,400,422 8,946,674 2,894,268 1985 6/84 (f)
Heather Ridge Apts.,
356 units in
Oklahoma City, OK 711,948 6,476,980 7,188,928 3,362,190 1984 11/83 (f)
Templeton Park Apts.,
496 units in
Colorado Springs, CO 1,958,223 15,033,831 16,992,054 5,932,931 1984 1/84 (f)
Timberlake Apts. I,
480 units in Alta-
monte Springs, FL 3,742,819 11,478,159 15,220,978 4,871,819 1985 9/83 (f)
Willow Bend Apts.,
208 units in Town
& Country, MO 1,374,183 6,356,941 7,731,124 2,376,460 1986 1/85 (f)
------------ ----------- ------------ -----------
Total $12,380,326 $65,940,832 $ 78,321,158 $27,027,028
=========== =========== ============ ===========
</TABLE>
See notes (a) through (g)
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
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 and capitalized construction period interest.
(b) Guaranteed income earned on properties under the terms of certain
management and guarantee agreements was recorded by the Partnership as a
reduction of the basis of the property to which the guaranteed income related.
(c) The aggregate cost of land for Federal income tax purposes is $13,595,151
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $63,571,184. The total of these is $77,166,335.
(d) Reconciliation of Real Estate
-----------------------------
1994 1993 1992
---------- ---------- ----------
Balance at beginning of year $78,321,158 $102,266,703 $102,266,703
Additions during year:
Improvements None 118,767 None
Deductions during year:
Foreclosure of investment
property None (11,024,054) None
Cost of real estate sold None (13,040,258) None
----------- ------------ ------------
Balance at close of year $78,321,158 $ 78,321,158 $102,266,703
============ ============ ============
Reconciliation of Accumulated Depreciation
------------------------------------------
1994 1993 1992
---------- ---------- ----------
Balance at beginning of year $25,101,954 $30,515,232 $27,949,977
Depreciation expense for the
year 1,925,074 2,216,451 2,565,255
Accumulated depreciation of
foreclosed investment
property None (3,495,674) None
Accumulated depreciation of
real estate sold None (4,134,055) None
------------ ------------ ------------
Balance at close of year $27,027,028 $25,101,954 $30,515,232
============ ============ ============
(e) See descriptions of the mortgage notes payable in Note 3 of Notes to
Financial Statements.
(f) Depreciation expense is computed based upon the estimated useful lives of
30 years for buildings and improvements and five years for furniture and
fixtures.
(g) This amount consists primarily of a reduction of basis due to a provision
<PAGE>
for investment property write down during 1989.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 507
<SECURITIES> 5968
<RECEIVABLES> 29
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7645
<PP&E> 78321
<DEPRECIATION> 27027
<TOTAL-ASSETS> 59912
<CURRENT-LIABILITIES> 864
<BONDS> 57382
<COMMON> 0
0
0
<OTHER-SE> (1112)
<TOTAL-LIABILITY-AND-EQUITY> 59912
<SALES> 0
<TOTAL-REVENUES> 15206
<CGS> 0
<TOTAL-COSTS> 7042
<OTHER-EXPENSES> 2664
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4970
<INCOME-PRETAX> 530
<INCOME-TAX> 0
<INCOME-CONTINUING> 530
<DISCONTINUED> 0
<EXTRAORDINARY> 133
<CHANGES> 0
<NET-INCOME> 663
<EPS-PRIMARY> 7.94
<EPS-DILUTED> 7.94
</TABLE>
EXHIBIT 99
AGREEMENT OF SALE
THIS AGREEMENT, entered into as of the 4th day of January, 1995, by and
between TGM REALTY CORP. #4 ("Purchaser") and PINEBROOK INVESTORS, an Illinois
Joint Venture ("Seller").
WITNESSETH:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price (the "Purchase Price") of Six Million One Hundred Forty Thousand
and No/100 Dollars ($6,140,000.00), all of the following property
(collectively, the "Property"):
a. That certain parcel of real property having a street address of 3650
Tates Creek Road, Lexington, Kentucky, more particularly described on Exhibit A
attached hereto (the "Land");
b. The personal property set forth on Exhibit B, which shall be
transferred to Purchaser at Closing (as hereinafter defined) by a Bill of Sale
in the form of Exhibit F attached hereto;
c. All rights and appurtenances pertaining to the Land, including,
without limitation, any and all rights of Seller in and to all air and
development rights, roads, alleys, easements, streets and ways adjacent to the
Land, rights of ingress and egress thereto, any strips and gores within or
bounding the Land and in profits or rights or appurtenances pertaining to the
Land;
d. The buildings and all other improvements, structures and fixtures
placed, constructed or installed on the Land (collectively, the
"Improvements");
e. All leases, licenses and other occupancy agreements (collectively,
the "Leases") covering space situate at or within the Land and Improvements and
any claim or right to claim as a tenant or occupant (collectively, the
"Tenants") under any existing Lease and all security deposits paid or deposited
by Tenants in respect of the Leases;
f. All of Seller's rights in and to contractual rights and intangibles
with respect to the operation, maintenance, repair and improvement of the Land
and the Improvements, including service and maintenance agreements,
construction, material and labor contracts, utility agreements and other
contractual arrangements, all to the extent designated by the provisions of
this Agreement (collectively, the "Contracts"); assignable governmental
permits, licenses, certificates and approvals in connection with the ownership
of the Property (collectively, the "Licenses") and warranties of any
contractor, manufacturer or materialman;
g. Seller's right, if any, to the use of the trade name "Pinebrook
Apartments" (the "Trade Name") in connection with the Property;
h. The right, if assignable, to the use of all telephone numbers used by
Seller at the Property; and
i. All rights to any award made or to be made or settlement in lieu
thereof for damage to the Land or Improvements by reason of condemnation,
eminent domain, exercise of police power or change of grade of any street.
2. PURCHASE PRICE. The Purchase Price shall be paid as follows:
a. Upon the execution of this Agreement, the sum of $300,000.00 (said
sum, together with all interest accrued thereon, is herein called the "Earnest
Money") payable to the "Escrow Agent" (as defined in the Escrow Agreement) to
be held in escrow by the Escrow Agent, by and in accordance with the provisions
of the Escrow Agreement ("Escrow Agreement") attached hereto as Exhibit C;
<PAGE>
b. On the Closing Date (as hereinafter defined), $6,140,000.00 (less a
credit for all Earnest Money) adjusted in accordance with the prorations by
federally wired "immediately available" funds delivered to the Escrow Agent's
account as set forth in the Escrow Agreement no later than 12:00 Noon Eastern
Time on the Closing Date.
3. TITLE COMMITMENT AND SURVEY.
a. Attached hereto as Exhibit D is a title commitment dated November 28,
1994 and updated December 7, 1994 ("Title Commitment") for an owner's standard
coverage title insurance policy ("Title Policy") issued by Chicago Title
Insurance Company ("Title Insurer"). The owner's Title Policy issued at
Closing will be in the amount of the Purchase Price subject only to real estate
taxes not yet due and payable and the title exceptions set forth in the Title
Commitment as marked thereon, and shall contain the endorsements attached to
the Title Commitment, if any. The exception with reference to the tenants will
be modified to read "Rights of parties in possession as shown on the attached
rent roll, as tenants only." All of the above are herein referred to as the
"Permitted Exceptions". The Title Commitment shall be conclusive evidence of
good title as therein shown as to all matters insured by the policy, subject
only to the exceptions therein stated. On the Closing Date, Seller shall cause
the Title Insurer to issue the Title Policy or a "marked up" commitment in
conformity with the Title Commitment. Purchaser and Seller shall equally share
the costs of the Title Policy; however, (i) Purchaser shall pay the costs of
any special endorsements which Purchaser requires, and (ii) Seller shall pay
the cost of any Title Indemnity (as hereinafter defined).
b. Purchaser acknowledges receipt of a survey ("Survey") of the Land and
the Improvements prepared by C.J. Fuller Consulting Engineers, Inc. dated July
2, 1984. Seller has ordered an update of the Survey ("Updated Survey") which
will be certified to the Purchaser or its designee and the Title Insurer. The
cost of the Updated Survey will be equally shared by Purchaser and Seller. If
Purchaser elects to terminate this Agreement pursuant to Paragraph 16b hereof,
then the Earnest Money plus all accrued interest shall be delivered to
Purchaser, and thereupon, neither party shall have any further liability
hereunder.
4. CONDITION OF TITLE/CONVEYANCE. Seller agrees to convey fee simple title
to the Property by the Deed ("Deed") in the form of Exhibit E attached hereto
and in recordable form subject only to the Permitted Exceptions. If Seller is
unable to convey title to the Property subject only to the Permitted Exceptions
because of the existence of an additional title exception ("Unpermitted
Exception"), then Purchaser can elect to take title to the Property subject to
the Unpermitted Exception or terminate this Agreement. Notwithstanding the
foregoing, if there shall be any Unpermitted Exceptions which (i) were caused
by, resulted from or arose out of (a) a default by Seller of any of its
obligations under this Agreement, including but not limited to Seller's failure
to pay real estate taxes, or (b) Seller creating or suffering to exist any
lien, charge or encumbrance on the Property, including, but not limited to the
grant by Seller to any person or entity of a mortgage, deed of trust or other
security interest affecting the Property, judgments which are a lien against
the Property, or any other affirmative act of Seller, including, without being
limited to, the performance of work on behalf of Seller upon all or any portion
of the Property, then Seller shall take all such actions as may be necessary
(including, without limitation, the commencement of and the diligent
prosecution of legal proceedings and the payment of money) to remove such
Unpermitted Exceptions, or cause the Title Insurer to issue a Title Indemnity
to Purchaser in form and substance reasonably satisfactory to Purchaser,
insuring against loss or damage or (ii) are not of the type described in clause
(i) of this sentence, but are removable by the payment of a definite or
ascertainable sum not to exceed, in the aggregate $25,000.00 (hereinafter
referred to as the "Maximum Amount"), then Seller shall cause such Unpermitted
Exceptions to be removed from the Owner's Policy, or cause the Title Insurer to
issue a Title Indemnity to Purchaser in form and substance reasonably
satisfactory to Purchaser, insuring against loss or damage. If Seller fails to
remove any Unpermitted Exceptions in accordance with the provisions of the
<PAGE>
immediately preceding sentence or if there exists any Unpermitted Exception
which Seller is not obligated to remove pursuant to clause (ii) of the
immediately preceding sentence because the payment of funds or the costs of the
Title Indemnity in excess of the Maximum Amount would be required to cure the
same, Purchaser, nevertheless, may elect (at or prior to the Closing) to
consummate the transaction provided for herein subject to any such Unpermitted
Exception as may exist as of the Closing with a credit against the Purchase
Price equal to (a) the sum necessary to remove such Unpermitted Exceptions
which can be satisfied by a liquidated amount, and (b) the reasonably estimated
reduction in the fair market value of the Property resulting from any
Unpermitted Exceptions which cannot be satisfied by the payment of a liquidated
amount, not to exceed the Maximum Amount (in the event of an Unpermitted
Exception of the type described in clause (ii) of the immediately preceding
sentence); provided, however, if Purchaser makes such election, Purchaser shall
not be entitled to any other credit, nor shall Seller bear any further
liability, with respect to any Unpermitted Exceptions of the type described in
clause (ii) of the immediately preceding sentence. If Purchaser elects to
terminate this Agreement, then the Earnest Money plus all accrued interest
shall be delivered to the Purchaser, and thereupon, neither party shall have
any further liability hereunder. Notwithstanding anything contained herein to
the contrary, the Property shall be sold and transferred to Purchaser free and
clear of all liens, encumbrances, security interests, assignments and all other
adverse interests, including without limitation, all claims (as such term is
defined in Section 101(5) of the "Bankruptcy Code" [as such term is defined in
Paragraph 29 hereof], except for Permitted Exceptions. If Seller is unable to
transfer and sell the Property to the Purchaser free and clear of all such
liens, encumbrances, security interests, assignments and other adverse
interests, except for the Permitted Exceptions, then at Purchaser's election,
this Agreement may be terminated, in which event, the Earnest Money shall be
promptly returned to Purchaser, and thereupon the parties shall have no further
rights or obligations hereunder.
5. PAYMENT OF CLOSING COSTS. Purchaser and Seller shall equally share the
costs of the Updated Survey, Title Policy, title company escrow fees (not to
exceed $550.00), transfer taxes, recording charges for the Deed and the UCC
Search (as hereinafter defined). However, Purchaser shall pay for all costs in
connection with any mortgage loan Purchaser obtains and the title costs for any
special endorsements which Purchaser requires. Each party shall pay its own
attorneys' fees. The amount of transfer taxes will be deposited with the Title
Insurer to be used to pay for the transfer taxes in the event the recorder
refuses to accept the Deed for recording without payment of those taxes.
6. DAMAGE, CASUALTY AND CONDEMNATION.
a. If the Property suffers damage as a result of any casualty prior to
the Closing Date and can be repaired or restored for $75,000 or less, then
Purchaser shall accept the Property in its damaged condition together with a
credit at Closing in the amount of the damaged Property. If the Property
suffers damage as a result of any casualty prior to the Closing Date and cannot
be repaired or restored for $75,000 or less, then, at Purchaser's election, to
be exercised within ten (10) days after Purchaser is notified of such casualty,
this Agreement shall be terminated.
b. If the Property suffers damage from a casualty prior to the Closing
Date, but is discovered by Purchaser within 90 days after the Closing Date,
then Seller shall promptly file a claim with its insurance carrier and will
assign the proceeds (if any) of that claim to the Purchaser and pay Purchaser
the amount of the deductible on its policy.
c. If condemnation proceedings ("Proceedings") have been instituted
against the Property or any governmental authority shall take any steps
preliminary thereto (by the giving of a written notice of intent to institute
such proceedings), then Purchaser can elect to either take the Property subject
to the Proceedings and an assignment of Seller's interest in the Proceedings or
terminate this Agreement. If Purchaser elects to terminate this Agreement, it
shall be by notice to the Seller within ten (10) days after Seller notifies
<PAGE>
Purchaser of the Proceedings.
d. If this Agreement is terminated pursuant to this Paragraph 6, then
the Earnest Money plus all accrued interest shall be delivered to the
Purchaser, and thereupon, neither party shall have any further liability
hereunder.
7. AS-IS CONDITION.
a. Purchaser acknowledges and agrees that it will be purchasing the
Property based solely upon its inspection and investigations of the Property
and that Purchaser will be purchasing the Property "AS IS" and "WITH ALL
FAULTS" based upon the condition of the Property as of the date of this
Agreement, subject to reasonable wear and tear and loss by fire or other
casualty or condemnation from the date of this Agreement until the Closing
Date. 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 other
representations or warranties of any kind upon which Purchaser is relying as to
any matters concerning the Property, including, but not limited to, the
condition of the Land or any Improvements, the existence or nonexistence of
asbestos, lead in water, lead in paint, radon, underground or above ground
storage tanks, petroleum, toxic waste or any Hazardous Materials or Hazardous
Substances (as such terms are defined below), the Tenants of the Property or
the Leases affecting the Property, 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, environmental or building laws, rules or regulations
affecting the Property. Seller makes no representation that the Property
complies with Title III of the Americans With Disabilities Act or any fire
codes or building codes. Purchaser hereby releases Seller from any and all
liability in connection with any claims which Purchaser may have against
Seller, and Purchaser hereby agrees not to assert any claims, for damage, loss,
compensation, contribution, cost recovery or otherwise, against Seller, whether
in tort, contract, or otherwise, relating directly or indirectly to the
existence of asbestos or Hazardous Materials or Hazardous Substances on, or
environmental conditions of, the Property, or arising under the Environmental
Laws (as such term is hereinafter defined), or relating in any way to the
quality of the indoor or outdoor environment at the Property. This release
shall survive the Closing. As used herein, the term "Hazardous Materials" or
"Hazardous Substances" means (i) hazardous wastes, hazardous materials,
hazardous substances, hazardous constituents, toxic substances or related
materials, whether solids, liquids or gases, including but not limited to
substances defined as "hazardous wastes," "hazardous materials," "hazardous
substances," "toxic substances," "pollutants," "contaminants," "radioactive
materials," or other similar designations in, or otherwise subject to
regulation under, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. Section 9601 et seq.;
the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1802; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601, et seq.; the
Clean Water Act ("CWA"), 33 U.S.C. Section 1251 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C.
Section 7401 et seq.; and in any permits, licenses, approvals, plans, rules,
regulations or ordinances adopted, or other criteria and guidelines promulgated
pursuant to the preceding laws or other similar federal, state or local laws,
regulations, rules or ordinance now or hereafter in effect relating to
environmental matters (collectively the "Environmental Laws"); and (ii) any
other substances, constituents or wastes subject to any applicable federal,
state or local law, regulation or ordinance, including any Environmental Law,
now or hereafter in effect, including but not limited to (A) petroleum,
(B) refined petroleum products, (C) waste oil, (D) waste aviation or motor
vehicle fuel, (E) asbestos, (F) lead in water, paint or elsewhere, (G) radon,
(H) Polychlorinated Biphenyls (PCB's) and (I) ureaformaldehyde.
<PAGE>
b. 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. 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 from any liability with respect
to such historical information.
8. CLOSING. The closing ("Closing") of this transaction shall be on the
tenth (10th) day after the expiration of the Approval Period (as hereinafter
defined) ("Closing Date"), at the office of the Purchaser's attorneys, Bachner,
Tally, Polevoy & Misher, 380 Madison Ave., New York, New York, at which time
Seller shall deliver possession of the Property to Purchaser in accordance with
this Agreement.
9. CLOSING DOCUMENTS.
a. On the Closing Date, Purchaser shall deliver to Seller an executed
closing statement prepared by the Seller and approved by Purchaser, the balance
of the Purchase Price, 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.
b. On the Closing Date, Seller shall deliver to Purchaser possession of
the Property in accordance with this Agreement; the Deed (in the form of
Exhibit E attached hereto) subject only to the Permitted Exceptions and those
Unpermitted Exceptions waived by Purchaser, if any, which Deed shall contain
the legal description shown on the Updated Survey; an inventory of the Personal
Property which shall include all the Personal Property set forth on Exhibit B
and a Bill of Sale for the same (in the form of Exhibit F attached hereto); an
executed closing statement prepared by Seller and approved by Purchaser; an
executed assignment and assumption of all Contracts (in the form of Exhibit G
attached hereto) together with originals (or copies if originals are not in
Seller's possession) of all instruments evidencing the rights assigned; an
executed assignment and assumption of all Leases and security deposits (in the
form of Exhibit H attached hereto) together with originals of all Leases
assigned (which Leases will be at the managing agent's office at the Property);
an updated rent roll certified by Seller to be correct; a notice to the Tenants
of the transfer of title (in the form of Exhibit I attached hereto); a
non-foreign affidavit (in the form of Exhibit J attached hereto); the Post-
Closing Adjustment Letter dated as of the Closing Date in the form of Exhibit M
annexed hereto; an assignment of intangibles in the form of Exhibit N annexed
hereto; an assignment of the Licenses in the form of Exhibit O annexed hereto,
together with originals or copies of originals which are not in Seller's
possession, of all instruments evidencing the rights assigned; an assignment of
all existing assignable warranties and guarantees (the "Assignment of
Warranties and Guarantees") relating to the Property dated as of the Closing
Date in the form of Exhibit P annexed hereto, together with available originals
or copies if originals are not in Seller's possession, of all instruments
evidencing the rights assigned; the Information for Real Estate 1099-S Report
Filing by the Title Insurer in the form of Exhibit Q attached hereto; an
acknowledgement of receipt of the Information for Real Estate 1099-S Report
Filing by the Title Insurer in the form of Exhibit R attached hereto; evidence
acceptable to the Title Insurer, authorizing the consummation by Seller of the
transaction which is the subject of this Agreement and the execution and
delivery of documents on behalf of Seller; all keys and combinations to all
locks on the Improvements which will be at the Property; all plans,
specifications, mechanical, electrical and plumbing layouts, operating manuals,
in Seller's possession, Tenant lease files, and other files and records in the
<PAGE>
possession of Seller at the leasing office at the Property and Seller's
managing agent and utilized in connection with the operation and maintenance of
the Land and Improvements; current tax bills and, if available, to the extent
in Seller's possession, tax bills for each of the years of Seller's ownership
of the Property; either (i) an instrument assigning to Purchaser any proceeding
for the reduction of real or personal property taxes assessed against any
portion of the Property for the calendar year in which the Closing takes place;
any refund for such year shall be prorated when received, or (ii) a certificate
from Seller that no proceeding for the reduction of real or personal property
taxes is on-going as of the Closing Date; affidavits and certificates as to
facts within the knowledge of Seller as required by the Title Company as to the
condition of title; UCC searches conducted by a UCC search company reasonably
acceptable to Purchaser at the County and State level, searching Seller's name
and the Trade Name, dated to a date not more than thirty (30) days prior to the
Closing evidencing that no portion of the Personal Property is subject to any
UCC filing (the "UCC Search") unless a termination statement for same has been
provided for at the Closing; telephone transfer form; 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.
10. DEFAULT BY PURCHASER. 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 THE CLOSING DOES NOT OCCUR AS A RESULT OF
ANY 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. 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, BY PLACING THEIR INITIALS
BELOW, 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, PLUS ACTUAL DAMAGES NOT TO EXCEED
$100,000.00, AND THIS AGREEMENT SHALL TERMINATE AND THE PARTIES SHALL HAVE NO
FURTHER LIABILITY TO EACH OTHER AT LAW OR IN EQUITY. NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT IS ITS REFUSAL TO DELIVER
THE DEED OR ANY OF THE DOCUMENTS ENUMERATED IN PARAGRAPH 9b OF THIS AGREEMENT,
THEN PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
12. PRORATIONS. The following are to be prorated or adjusted (as
appropriate), as of 11:59 P.M. on the day preceding the Closing Date (the
"Proration Date"):
i. Rents, as and when collected. If as of the Proration Date there are
rents owed by Tenants for the month in which the Closing occurs, then the
first monies received from said Tenant or Tenants shall be received on
account of or in payment of such past due rents and (i) if Purchaser
receives said past due rents, Seller's aforesaid share thereof shall be
remitted by Purchaser to Seller within three (3) business days, and (ii)
if Seller receives such past due rents, Purchaser's aforesaid share
thereof shall be remitted by Seller to Purchaser within three (3) business
days. With respect to any arrears for periods prior to the month in which
the Closing occurs, Purchaser shall pay such arrears to Seller as and when
collected from the monies received from such Tenant provided such Tenant
is otherwise current in its rent. With respect to rents for any period
subsequent to the month in which the Closing occurs that may be received
by Seller, Seller shall promptly remit such rents to Purchaser.
ii. Real estate and personal property taxes, if any, on the basis of the
calendar year for which assessed. If the Closing shall occur before the
tax rate or assessment is fixed for the calendar year in which the Closing
occurs, then the apportionment of such real estate and personal property
taxes at the Closing shall be upon the basis of 110% of the most recent
available tax bill.
<PAGE>
iii. Water, sewer charges, electricity and gas on the basis of the most
recent bills available, but if there are meters on the Property, Seller,
to the extent the same is obtainable, shall obtain a reading effective as
of the Proration Date.
iv. Purchaser shall receive a credit against the cash due at Closing in
an amount equal to all refundable Tenant security deposits and accrued
interest to which Tenants may be entitled pursuant to the Leases which are
to be assigned to Purchaser at the time of Closing.
v. Tax and utility company deposits, if any, and if assignable and
assigned.
vi. Fuel, if any, based on a fuel company letter showing measurement no
more than two (2) days prior to Closing and valued at current prices.
vii. Contracts.
viii. If, at Closing, the Property or any part thereof shall be or
shall have been affected by an assessment or assessments which are or may
become payable in installments, then for purposes of this Agreement, all
unpaid installments of any such assessment, including those which are to
become due and payable and to be liens upon the Property, shall be paid
and discharged by Purchaser.
ix. If such prorations result in a payment due Purchaser, then the
portion of the Purchase Price payable at Closing shall be reduced by such
sum. If such prorations result in a payment due Seller, then the same
shall be paid to Seller in addition to the portion of the Purchase Price
payable at Closing. The parties hereto shall endeavor to prepare a
schedule of prorations no less than one (1) business day prior to Closing.
The parties hereto shall correct any arithmetic errors in prorations as
soon after the Closing as amounts are finally determined. The parties
hereto shall enter into the Post-Closing Adjustment Letter at the Closing
in the form of Exhibit M annexed hereto. If the amount of any of the
items to be prorated is not then ascertainable, the adjustment thereof
shall be on the basis of the most recent ascertainable data. Except with
reference to arithmetic errors, all prorations will be final.
x. The provisions of this Paragraph 12 shall survive the Closing.
13. RECORDING. This Agreement shall not be recorded and the act of recording
by Purchaser shall be an act of default hereunder by Purchaser and shall be
subject to the provisions of Paragraph 10.
14. ASSIGNMENT. The Purchaser shall have the right to assign its interest in
this Agreement to an affiliated entity, provided such assignment is effected at
least five (5) days prior to the Closing Date. In the event of any such
assignment, Seller agrees to deliver any documents referred to in this
Agreement to Purchaser's designee and agrees that all surviving representations
and warranties of Seller hereunder shall be deemed to run in favor of, and be
enforceable by said designee as if it were the Purchaser hereunder. Upon any
assignment, Purchaser agrees that it shall continue to be bound by all of
Purchaser's indemnities under this Agreement. The provisions of this Paragraph
shall survive the Closing.
15. BROKER. The parties hereto acknowledge that CB Commercial Real Estate
Group, Inc. ("Broker") is the only real estate broker involved in this
transaction. Purchaser has not paid and will not pay at any time before, at or
after the Closing, any fee, commission or compensation whatsoever to any person
whomsoever directly or indirectly on account of this Agreement, its
negotiation, or the sale hereby contemplated. Seller agrees to pay Broker a
commission or fee ("Fee") pursuant to a listing agreement between Seller and
Broker. However, this Fee is due and payable only from the proceeds of the
Purchase Price received by Seller. The foregoing does not apply to any fee
which may be paid by Seller to any affiliate of Seller as a result of this
<PAGE>
transaction. Except with respect to the Fee due Broker which shall be paid by
Seller, Purchaser agrees to indemnify, defend and hold harmless the Seller and
any partner, affiliate, parent of Seller, and all shareholders, employees,
officers and directors of Seller or Seller's partner, parent or affiliate (each
of the above is individually referred to as a "Seller Indemnitee") from all
claims, including attorneys' fees and costs incurred by a Seller Indemnitee as
a result of anyone's claiming by or through Purchaser any fee, commission or
compensation on account of this Agreement, its negotiation or the sale hereby
contemplated. Purchaser does now and shall at all times consent to a Seller
Indemnitee's selection of defense counsel. Seller agrees to indemnify, defend
and hold harmless the Purchaser and all shareholders, employees, officers and
directors of Purchaser or Purchaser's parent or affiliate (each of the above is
individually referred to as a "Purchaser Indemnitee") from all claims,
including attorneys' fees and costs incurred by a Purchaser Indemnitee as a
result of anyone's claiming by or through Seller any fee, commission or
compensation on account of this Agreement, its negotiation or the sale hereby
contemplated. Seller does now and shall at all times consent to a Purchaser
Indemnitee's selection of defense counsel.
16. DOCUMENTS, INSPECTION OF PROPERTY AND APPROVAL PERIOD.
a. Seller has delivered to Purchaser copies of the most recent available
tax bills, rent rolls, insurance premiums, and service contracts (collectively
the "Documents") and Purchaser approves the Documents.
b. Only the following shall be subject to further approval by the
Purchaser: the Updated Survey, engineering review of the Property, title
matters, environmental audit, and compliance with zoning (collectively referred
to as the "Due Diligence Matters"). During the period from the date of this
Agreement until the 21st day after the entry of a final and non-appealable Sale
Order (as hereinafter defined) of the Bankruptcy Court (as hereinafter defined)
authorizing the sale of the Property to the Purchaser ("Approval Period"),
Purchaser shall complete its investigation and review of the Due Diligence
Matters. During the Approval Period, upon reasonable notice to the Seller, the
Purchaser shall have the right to perform soil boring samplings and other tests
and engineering inspections as Purchaser deems necessary to determine the
physical condition of the Property, including, but not limited to whether any
Hazardous Materials exist at the Property, and if so, to determine the
appropriate manner and cost of removal or other corrective measures with
respect to the same. During the Approval Period, Seller shall cooperate with
Purchaser in its inspection of the Property, including but not limited to,
furnishing to Purchaser such information, materials and documents as Purchaser
may reasonably request. Purchaser, its engineers, architects, employees,
contractors and agents shall maintain public liability insurance policies
insuring against claims arising as a result of the inspections of the Property
being conducted by Purchaser. Purchaser agrees to indemnify, defend, protect
and hold Seller harmless from any and all loss, costs, including attorneys'
fees, liability or damages which Seller may incur or suffer as a result of
Purchaser's conducting its inspection and investigation of the Property
including the entry of Purchaser, its employees or agents and its lender onto
the Property, including without limitation, liability for mechanics' lien
claims; provided, however, the indemnity which is the subject of this sentence
shall not include claims for damages which Seller may incur or suffer as a
result of the environmental condition of the Property. Purchaser further
agrees to restore any damage to the Property which may arise as a result of
Purchaser's inspection of the Property. The provisions of this subparagraph b
shall survive the termination of this Agreement or the Closing and delivery and
recording of the Deed.
c. If Purchaser (in Purchaser's sole judgment) disapproves any of the
Due Diligence Matters, it must be by a notice ("Notice of Disapproval"),
accompanied by a statement setting forth which Due Diligence Matters are not
approved and the reasons for such disapproval, delivered to Seller and the
Escrow Agent prior to the expiration of the Approval Period. Upon receipt of
the Notice of Disapproval and the aforesaid statement(s), the Earnest Money
plus the interest accrued thereon shall be returned to the Purchaser and
<PAGE>
thereupon the parties shall have no further liability hereunder. If Purchaser
does not deliver a Notice of Disapproval and the aforesaid statement(s) to
Seller, then Purchaser shall have waived its right to terminate this Agreement
pursuant to this Paragraph 16.
17. SURVIVAL OF INDEMNITY. Notwithstanding anything in this Agreement to the
contrary, Purchaser's and Seller's obligations to indemnify, defend and hold
each other harmless under Paragraph 16 of this Agreement shall forever survive
the termination of this Agreement or the Closing and delivery and recording of
the Deed.
18. SELLER'S REPRESENTATIONS AND WARRANTIES.
a. Any reference herein to Seller's knowledge, representation, warranty
or notice of any matter or thing, shall only mean such knowledge or notice that
has actually been received by Will Kralovec, and any representation or warranty
of the Seller is based upon those matters of which Will Kralovec 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 or the individual
partners or the general partner of Seller.
b. Subject to the limitations set forth in subparagraph a above, Seller
hereby makes the following representations and warranties, all of which are
made to the best of Seller's knowledge, each of which shall survive the Closing
and delivery of the Deed for ninety (90) days except for subparagraphs (vi) and
(vii) which shall survive for the statutory period:
i. The present use and occupancy of the Property conform with applicable
building and zoning laws and Seller has received no written notice that
any such laws, rules or regulations are being violated.
ii. The rent rolls which Seller has submitted to the Purchaser and
updated as of the Closing Date are true and accurate.
iii. Seller has no knowledge of any pending or threatened litigation,
claim, cause of action or administrative proceeding concerning the
Property.
iv. There are no real estate tax protests or proceedings affecting the
Property.
v. Seller has received no written notice of any pending or threatened
condemnation or similar proceeding or pending public improvements in or
adjoining the Land which will in any manner affect the Property.
vi. Each person executing and delivering this Agreement and all documents
to be executed and delivered in regard to the consummation of the
transaction which is the subject of this Agreement on behalf of Seller
represents to Purchaser that he has due and proper authority to execute
and deliver same. Seller has the full right, power and authority to sell
and convey the Property to Purchaser as provided herein and to carry out
its obligations hereunder. The consummation by Seller of the transaction
which is the subject of this Agreement will not conflict with or result in
a breach of any of the terms of any agreement or instrument to which
Seller is a party or by which Seller is bound or constitute a default
thereunder. No other party has any right to purchase the Property or any
part thereof.
vii. Seller's sole joint venture partners are Brookpine Investors and
Balcor Realty Investors, Ltd.-84, neither of which is the subject of any
existing, pending, threatened or contemplated bankruptcy, solvency or
other debtor's relief proceeding.
viii. Seller does not have any employees at the Property.
c. As a condition precedent to Purchaser's obligations at Closing, (i)
<PAGE>
all representations and warranties provided in this Agreement to be made by
Seller as of the Closing shall be true as of the Closing, and (ii) the existing
management agreement will be terminated as of the Closing, and (iii) the only
service contracts to be assumed by Purchaser, including any laundry contract,
will be on a month to month basis terminable without penalty or premium.
19. ENVIRONMENTAL REPORT. Attached to this Agreement as Exhibit K is a Phase
I Environmental Site Assessment dated July 21, 1994 prepared by Law Engineering
and Environmental Services ("Report") of the Property, which Seller is
delivering to Purchaser at Purchaser's request. Seller makes no representation
or warranty that the Report is accurate or complete. Purchaser hereby releases
Seller from any liability whatsoever with respect to the Report, including,
without limitation, the matters set forth in the Report or the accuracy and/or
completeness of the Report.
20. LIMITATION OF SELLER'S LIABILITY. No general or limited partner of
Seller, nor any of its respective beneficiaries, shareholders, partners,
officers, agents, 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. However, this provision shall not preclude
Purchaser from instituting and maintaining any legal action against the Seller.
Seller shall not make any distributions from the net proceeds of the Purchase
Price to its partners until ninety (90) days after the Closing Date.
21. PURCHASER'S ORGANIZATIONAL DOCUMENTS. Prior to the Closing, Purchaser
will provide Title Insurer with copies of its organizational documents,
including, to the extent required by the Title Insurer, a certified copy of its
recorded certificate of limited partnership and a true copy of its Partnership
Agreement or a certified copy of its Articles of Incorporation, corporate
resolutions authorizing the transaction, and an incumbency certificate,
whichever is applicable.
22. TIME OF ESSENCE. Time is of the essence of this Agreement.
23. 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 signed by the party giving the same or by its attorneys and shall be
personally delivered or given or made by overnight courier such as Federal
Express or by facsimile or made by United States registered or certified mail
addressed as follows:
TO SELLER: c/o The Balcor Company
4849 West Golf Road
Skokie, Illinois 60077
Attn: Ilona Adams
with copies to: The Balcor Company
4849 West Golf Road
Skokie, Illinois 60077
Attn: Al Lieberman
708/677-2900
708/982-4027 (FAX)
and
Morton M. Poznak
Schwartz & Freeman
Suite 1900
401 North Michigan Avenue
Chicago, Illinois 60611
312/222-0800
312/222-0818 (FAX)
<PAGE>
TO PURCHASER: Mr. Thomas Gochberg
c/o TGM Associates L.P.
650 Fifth Avenue
28th Floor
New York, New York 10019-6108
212/830-9300
212/399-6310 (FAX)
with a copy to: Alan E. Linder
Bachner, Tally, Polevoy & Misher
380 Madison Avenue
New York, New York 10017
212/503-2090
212/682-5729 (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 on the same day if sent by facsimile before 7:00 P.M. Eastern Time,
or on the next day if sent by facsimile after 7:00 P.M. Eastern 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 or by overnight courier or by
facsimile 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 served upon the Escrow Agent.
24. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute three
(3) counterparts of this Agreement and three (3) counterparts of the Escrow
Agreement and forward them to Seller for execution. Purchaser shall wire
transfer the Earnest Money to the Escrow Agent on the day Purchaser executes
this Agreement. Seller will forward one (1) counterpart of the fully executed
Agreement to Purchaser's attorneys and will forward the following to the Escrow
Agent:
a. One (1) fully executed counterpart of this Agreement; and
b. Three (3) counterparts of the Escrow Agreement signed by the parties
with a direction to execute two (2) counterparts of the Escrow Agreement and
deliver a fully executed counterpart to the Purchaser and the Seller. If
Purchaser's attorney has not received one fully executed counterpart of this
Agreement and the Escrow Agreement within four (4) business days after
Purchaser delivers the $300,000 Earnest Money to Escrow Agent, then at
Purchaser's election, the Earnest Money shall be returned to Purchaser.
25. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the State of Kentucky.
26. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes all other
negotiations, understandings and representations made by and between the
parties and the agents, servants and employees.
27. 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.
28. 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.
29. BANKRUPTCY COURT APPROVAL.
a. Seller has advised Purchaser that (i) on December 2, 1992, Seller
<PAGE>
filed a voluntary petition under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
Eastern District of Kentucky (the "Bankruptcy Court"), Case No. 92-52183 (the
"Bankruptcy"), and (ii) the Seller's Second Amended Plan of Reorganization
dated October 22, 1993 (the "Plan") has been confirmed and became effective in
accordance with its terms. The Plan, together with all modifications thereto,
is annexed hereto as Exhibit S.
b. Within seven (7) business days after the date of this Agreement,
Seller shall file and pursue a motion upon notice and a hearing as required
under the Plan (the "Sale Motion") seeking an order from the Bankruptcy Court
authorizing a sale of the Property to Purchaser free and clear of all liens,
encumbrances, security interests, assignments and all other adverse interests
including, without limitation, all claims (as that term is defined in Section
101(5) of the Bankruptcy Code), and any transfer, stamp or similar tax, except
for the Permitted Exceptions, upon the terms and conditions of this Agreement
(the "Bankruptcy Sale"). Seller shall seek in the Sale Motion to have the
Bankruptcy Sale a private sale to Purchaser, not subject to higher and better
offers, unless the Bankruptcy Court so requires.
c. The obligation of Purchaser to purchase the Property under this
Agreement is conditioned expressly on the entry of a final and non-appealable
order of the Bankruptcy Court authorizing the sale of the Property to Purchaser
upon the terms and conditions of this Agreement free and clear of (i) all
liens, encumbrances, security interests, assignments and all claims (as such
term is defined in Section 101(5) of the Bankruptcy Code) except for Permitted
Exceptions and (ii) all transfer, stamp or similar tax (the "Sale Order").
d. Purchaser and Seller agree that:
i. If Seller fails to obtain and deliver to Purchaser's attorneys the
Sale Order for any reason whatsoever by January 30, 1995, then Purchaser
may terminate this Agreement by delivering a written termination notice to
the Title Insurer and Seller. In the event of the termination of this
Agreement pursuant to this Paragraph 29d, all Earnest Money will be
promptly refunded by the Title Insurer to Purchaser, and neither party
will have any further liability or obligation under this Agreement, and
Purchaser will be entitled to no additional rights or remedies.
e. After execution of this Agreement and provided this Agreement is not
terminated, Seller shall not take any action, directly or indirectly, to cause,
promote, authorize or take any other action which would result in the sale or
purchase of the Property by any person other than Purchaser or any other
transaction competing, conflicting or interfering with the completion of the
transaction which is the subject of this Agreement.
f. All "claims" (as such term is defined in Section 101(5) of the
Bankruptcy Code) against Seller in the Bankruptcy shall be paid in full from
the proceeds generated by the sale of the Property pursuant to this Agreement.
30. MODIFICATIONS. This Agreement cannot be changed, modified, discharged or
terminated by any oral agreement or any other agreement and there cannot be any
waiver of the warranties, representations and covenants expressly contained in
this Agreement unless the same is in writing and signed by the party against
whom enforcement of the change, modification, discharge, termination or waiver
is sought.
31. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on, and the
benefits hereof shall inure to the successors and assigns of the parties
hereto.
32. INVALIDITY. If any term or provision of this Agreement, or any part of
such term or provision, or the application thereof to any person or
circumstance shall to any extent be held invalid or unenforceable, the
remainder of this Agreement or the application of such term or provision or
remainder thereof to persons or circumstances other than those as to which it
<PAGE>
is held invalid and unenforceable shall not be affected thereby and each term
and provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
33. EXHIBITS. All Exhibits which are annexed to this Agreement are part of
this Agreement and are incorporated herein by reference.
34. NO THIRD PARTY BENEFICIARY. The provisions of this Agreement are for the
sole benefit of the parties to this Agreement and their successors and assigns
and shall not give rise to any rights by or on behalf of anyone other than such
parties.
35. ATTORNEYS' FEES. In the event that any litigation arises under this
Agreement, the prevailing party shall be entitled to recover, as a part of its
judgment, reasonable attorneys' fees.
36. CORRECTION DEED. Seller will, whenever reasonably requested so to do by
Purchaser, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, a correction deed as may be reasonably necessary in
order to complete the transaction which is the subject of this Agreement and to
carry out the intent and purposes of this Agreement. Such correction deed
shall be satisfactory to the attorneys for Purchaser. The provisions of this
Paragraph shall survive the Closing.
37. OPERATIONS PRIOR TO CLOSING. Seller agrees that between the date hereof
and the Closing Date, Seller will:
a. Continue to operate the Property as heretofore operated.
b. Afford Purchaser and its representatives full access to the Property
and to Seller's books, records and files relating to and maintained at the
Property, at reasonable times, upon forty-eight (48) hours prior notice and
during normal business hours, including but not limited to the date of the
Closing.
c. Not enter into any new Lease, nor amend, modify or terminate any
existing Lease without having obtained the prior written consent of Purchaser
in each such instance. Notwithstanding the foregoing, Seller may enter into
Leases of not more than one year and for rents not less than those charged for
similar apartments at the Property on the standard form lease currently being
used by Seller.
d. Not apply any Tenant's security deposits to the discharge of such
Tenant's obligations unless such Tenant has vacated or been evicted from such
Tenant's demised premises.
e. Advise Purchaser promptly of any litigation or governmental
proceeding to which Seller becomes a party affecting the Property. It shall be
a condition precedent to Purchaser's obligation to accept title, that there
shall be no such litigation or proceeding pending at Closing having a potential
adverse effect upon the Property or Seller's ability to convey the Property to
Purchaser.
f. Not permit any alteration, structural modification or additions to
the Property.
g. Instruct Seller's Bankruptcy attorney to promptly advise Purchaser in
writing of all developments in the Bankruptcy, including but not limited to,
delivering to Purchaser copies of all applications, motions, adversary
proceedings, disclosure statements, plans and orders filed or entered in
connection with the Bankruptcy.
h. Not enter into any new Contract, nor amend, modify or terminate any
existing Contract without the prior consent of Purchaser.
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date set forth above.
<PAGE>
Executed by Purchaser on PURCHASER:
January 4, 1995.
TGM REALTY CORP. #4
By: _______________________________________
Executed by Seller on SELLER:
January 4 1995.
PINEBROOK INVESTORS, an Illinois
joint venture
By: BROOKPINE INVESTORS, an
Illinois limited partnership,
a joint venture partner
By: Balcor Partners-XVI, an
Illinois general partner-
ship, the general partner
of Brookpine Investors
By: RGF-Balcor Associates-II,
an Illinois general partner-
ship, a partner
By: The Balcor Company, a
Delaware corporation, a
partner
By: /s/Al Lieberman
---------------------------------
and
By: BALCOR REALTY INVESTORS
LTD.-84, an Illinois limited partnership,
a joint venture partner
By: Balcor Partners-XV, an
Illinois general partnership,
the general partner of Balcor
Realty Investors Ltd.-84
By: RGF-Balcor Associates-II, an
Illinois general partnership,
a partner
By: The Balcor Company, a
Delaware corporation, a
partner
By: /s/Al Lieberman
---------------------------------
<PAGE>
EXHIBITS
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Deed
F - Bill of Sale
G - Assignment of Service Contracts
H - Assignment of Leases and Security Deposits
I - Notice to Tenants
J - Non-Foreign Affidavit
K - Environmental Report
L - Intentionally Deleted
M - Post-Closing Adjustment Letter
N - Assignment of Intangibles
O - Assignment of Licenses and/or Permits
P - Assignment of Warranties and Guarantees
Q - Information for Real Estate 1099-S Report Filing
R - Acknowledgement of Title Insurer with regard to Real Estate 1099-S
Report Filing
S - Second Amended Plan of Reorganization
