SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1996
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
------------ ------------
Commission file number 0-14332
-------
BALCOR PENSION INVESTORS-VI
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3319330
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
-------------
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
----- -----
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
September 30, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
--------------- ---------------
Cash and cash equivalents $ 49,373,450 $ 16,076,834
Escrow deposits 812,331 557,405
Accounts and accrued interest receivable 2,483,363 2,522,489
Prepaid expenses 437,838 283,525
Deferred expenses, net of accumulated
amortization of $1,354,886 in 1996 and
$1,014,165 in 1995 1,892,024 1,935,041
--------------- ---------------
54,999,006 21,375,294
--------------- ---------------
Investment in loan receivable:
Investment in acquisition loan 4,434,410
Less:
Allowance for potential loan loss 274,594
---------------
Net investment in loan receivable 4,159,816
Real estate held for sale (net of
allowance of $7,700,000 in 1996 and
$7,300,000 in 1995) 107,153,308 130,149,878
Investment in joint ventures with
affiliates 11,710,982 21,214,156
--------------- ---------------
118,864,290 155,523,850
--------------- ---------------
$ 173,863,296 $ 176,899,144
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 916,085 $ 763,742
Due to affiliates 116,381 51,700
Accrued liabilities, principally
real estate taxes 1,225,417 808,262
Security deposits 612,754 665,005
Mortgage note payable 15,524,017 15,657,066
--------------- ---------------
Total liabilities 18,394,654 17,945,775
--------------- ---------------
Affiliates' participation in joint
ventures 20,582,564 19,861,816
--------------- ---------------
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
September 30, 1996 and December 31, 1995
(UNAUDITED)
(Continued)
Limited Partners' capital (1,382,562
Interests issued and
outstanding) 141,770,936 146,274,796
General Partner's deficit (6,884,858) (7,183,243)
--------------- ---------------
Total partners' capital 134,886,078 139,091,553
--------------- ---------------
$ 173,863,296 $ 176,899,144
=============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1996 and 1995
(UNAUDITED)
1996 1995
--------------- ---------------
Income:
Interest on loans receivable and from
investment in acquisition loan $ 313,520 $ 699,106
Income from operations of real estate
held for sale 8,520,091 9,081,223
Interest on short-term investments 823,041 1,211,829
--------------- ---------------
Total income 9,656,652 10,992,158
--------------- ---------------
Expenses:
Provision for potential losses on
loan and real estate 752,753
Amortization of deferred expenses 340,721 228,460
Administrative 1,236,233 940,772
--------------- ---------------
Total expenses 2,329,707 1,169,232
--------------- ---------------
Income before joint venture
participations, equity in loss from
investment in acquisition loan, gain
on disposition of real estate and
extraordinary item 7,326,945 9,822,926
Participation in income (loss) of joint
ventures - affiliates before
extraordinary item 3,293,750 (292,929)
Equity in loss from investment in
acquisition loan (56,481) (23,574)
Affiliates' participation in income of
joint ventures (1,393,416) (1,237,260)
Gains on disposition of real estate 5,153,684
--------------- ---------------
Income before extraordinary item 14,324,482 8,269,163
Extraordinary item:
Participation in debt extinguishment
expense of joint venture - affiliate (65,074)
--------------- ---------------
Net income $ 14,259,408 $ 8,269,163
=============== ===============
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1996 and 1995
(UNAUDITED)
(Continued)
Income before extraordinary item
allocated to General Partner $ 1,432,448 $ 826,916
=============== ===============
Income before extraordinary item
allocated to Limited Partners $ 12,892,034 $ 7,442,247
=============== ===============
Income before extraordinary item per
Limited Partnership Interest (1,382,562
issued and outstanding) $ 9.32 $ 5.38
=============== ===============
Extraordinary item allocated to
General Partner $ (6,507) None
=============== ===============
Extraordinary item allocated to
Limited Partners $ (58,567) None
=============== ===============
Extraordinary item per Limited Partnership
Interest (1,382,562 issued and
outstanding) $ (0.04) None
=============== ===============
Net income allocated to General Partner $ 1,425,941 $ 826,916
=============== ===============
Net income allocated to Limited Partners $ 12,833,467 $ 7,442,247
=============== ===============
Net income per Limited Partnership
Interest (1,382,562 issued and
outstanding) $ 9.28 $ 5.38
=============== ===============
Distributions to General Partner $ 1,127,556 $ 1,013,879
=============== ===============
Distributions to Limited Partners $ 17,337,327 $ 18,000,957
=============== ===============
Distributions per Limited Partnership
Interest $ 12.54 $ 13.02
=============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1996 and 1995
(UNAUDITED)
1996 1995
--------------- ---------------
Income:
Interest on loans receivable and from
investment in acquisition loan $ 79,644 $ 144,024
Income from operations of real estate
held for sale 2,650,735 2,648,795
Interest on short-term investments 411,750 326,775
--------------- ---------------
Total income 3,142,129 3,119,594
--------------- ---------------
Expenses:
Provision for potential losses on
loan and real estate 400,000
Amortization of deferred expenses 79,806 82,125
Administrative 470,420 282,829
--------------- ---------------
Total expenses 950,226 364,954
--------------- ---------------
Income before joint venture
participations, equity in loss from
investment in acquisition loan,
gain on disposition of real estate
and extraordinary item 2,191,903 2,754,640
Participation in income (loss) of joint
ventures - affiliates before
extraordinary item 2,306,927 (752,278)
Equity in loss from investment in
acquisition loan (31,651) (9,141)
Affiliates' participation in income of
joint ventures (485,637) (281,136)
Gains on disposition of real estate 3,597,779
--------------- ---------------
Income before extraordinary item 7,579,321 1,712,085
Extraordinary item:
Participation in debt extinguishment
expense of joint venture - affiliate (65,074)
--------------- ---------------
Net income $ 7,514,247 $ 1,712,085
=============== ===============
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1996 and 1995
(UNAUDITED)
(Continued)
Income before extraordinary item
allocated to General Partner $ 757,932 $ 171,208
=============== ===============
Income before extraordinary item
allocated to Limited Partners $ 6,821,389 $ 1,540,877
=============== ===============
Income before extraordinary item per
Limited Partnership Interest (1,382,562
issued and outstanding) $ 4.93 $ 1.11
=============== ===============
Extraordinary item allocated to
General Partner $ (6,507) None
=============== ===============
Extraordinary item allocated to
Limited Partners $ (58,567) None
=============== ===============
Extraordinary item per Limited Partnership
Interest (1,382,562 issued and
outstanding) $ (0.04) None
=============== ===============
Net income allocated to General Partner $ 751,425 $ 171,208
=============== ===============
Net income allocated to Limited Partners $ 6,762,822 $ 1,540,877
=============== ===============
Net income per Limited Partnership
interest (1,382,562 issued and
outstanding) $ 4.89 $ 1.11
=============== ===============
Distribution to General Partner $ 513,084 $ 399,407
=============== ===============
Distribution to Limited Partners $ 10,618,076 $ 9,014,304
=============== ===============
Distribution per Limited Partnership
Interest $ 7.68 $ 6.52
=============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1996 and 1995
(UNAUDITED)
1996 1995
--------------- ---------------
Operating activities:
Net income $ 14,259,408 $ 8,269,163
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for potential losses on
loan and real estate 752,753
Amortization of deferred expenses 340,721 228,460
Participation in (income) loss of
joint ventures - affiliates
before extraordinary item (3,293,750) 292,929
Participation in debt extinguishment
expense of joint venture -
affiliate 65,074
Equity in loss from investment in
acquisition loan 56,481 23,574
Affiliates' participation in income
of joint ventures 1,393,416 1,237,260
Gains on disposition of real estate (5,153,684)
Payment of leasing commissions (297,704) (192,712)
Net change in:
Escrow deposits (254,926)
Accounts and accrued interest
receivable 39,126 128,999
Prepaid expenses (154,313) (369,316)
Accounts payable 152,343 498,538
Due to affiliates 64,681 (119,590)
Accrued liabilities 417,155 1,001,236
Security deposits (52,251) (2,094)
--------------- ---------------
Net cash provided by operating
activities 8,334,530 10,996,447
--------------- ---------------
Investing activities:
Proceeds from sale of investment in
acquisition loan 3,803,640
Cost incurred in connection with sale
of investment in acquisition loan (53,058)
Distributions from joint ventures -
affiliates 12,731,850 645,060
Contribution to joint ventures -
affiliates (138,899)
Improvements to properties (520,828)
Proceeds from disposition of real
estate 28,650,000
<PAGE>
BALCOR PENSION INVESTORS-VI
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1996 and 1995
(UNAUDITED)
(Continued)
Costs incurred in connection with
disposition of real estate (899,746)
--------------- ---------------
Net cash provided by or used
in investing activities 44,232,686 (14,667)
--------------- ---------------
Financing activities:
Distributions to Limited Partners (17,337,327) (18,000,957)
Distributions to General Partner (1,127,556) (1,013,879)
Distributions to joint venture
partners - affiliates (894,796) (833,699)
Capital contributions by joint venture
partners - affiliates 222,128
Principal payments on mortgage
note payable (133,049)
--------------- ---------------
Net cash used in financing activities (19,270,600) (19,848,535)
--------------- ---------------
Net change in cash and cash equivalents 33,296,616 (8,866,755)
Cash and cash equivalents at beginning
of period 16,076,834 31,007,746
--------------- ---------------
Cash and cash equivalents at end of
period $ 49,373,450 $ 22,140,991
=============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the nine months and quarter
ended September 30, 1996, and all such adjustments are of a normal and
recurring nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
nine months and quarter ended September 30, 1996 are:
Paid
-----------------------
Nine Months Quarter Payable
------------ --------- ----------
Mortgage servicing fees $8,338 $2,594 None
Reimbursement of expenses to
the General Partner, at cost 168,123 37,435 $116,381
3. Investment in Joint Ventures with Affiliates:
As of September 30, 1996, the Partnership owned a 41.30% joint venture interest
in the 45 West 45th Street Office Building and a 46.50% joint venture interest
in the Jonathan's Landing Apartments.
The following information has been summarized from the September 30, 1996
financial statements of the joint ventures:
Net investment in real estate $25,140,860
Total liabilities 290,641
Total income 4,728,566
Net income 1,123,321
4. Property Sales:
(a) In June 1996, the Partnership sold the Hawthorne Heights Apartments in an
all cash sale for $8,300,000. From the proceeds of the sale, the Partnership
paid $309,525 in selling costs. The basis of the property was $6,517,570. For
financial statement purposes, the Partnership recognized a gain of $1,472,905
from the sale of this property.
(b) The Sand Pebble Village Apartments - Phase I was owned by a joint venture
consisting of the Partnership and an affiliate. The Partnership and the
affiliate hold participating percentages in the joint venture of 44.64% and
55.36%, respectively. In August 1996, the joint venture sold the property in an
all cash sale for $19,411,765. From the proceeds of the sale, the joint venture
<PAGE>
paid $431,822 in selling costs. The joint venture recognized no gain or loss on
the sale of this property for financial statement purposes; however, the joint
venture recognized a recovery of the allowance for losses of $2,080,943 in
connection with the sale of this property, of which $928,933 is the
Partnership's share.
(c) The Sand Pebble Village Apartments - Phase II was owned by a joint venture
consisting of the Partnership and an affiliate. The Partnership and the
affiliate hold participating percentages in the joint venture of 44.64% and
55.36%, respectively. In August 1996, the joint venture sold the property in an
all cash sale for $12,088,235. From the proceeds of the sale, the joint venture
paid $4,859,155 to the third party mortgage holder in full satisfaction of the
first mortgage loan, paid a prepayment penalty of $145,775 and paid $272,701 in
selling costs. For financial statement purposes, the joint venture recognized a
gain of $2,458,085 from the sale of this property, of which $1,097,289 is the
Partnership's share.
(d) In August 1996, the Partnership sold the Woodscape Apartments in an all
cash sale for $9,550,000. From the proceeds of the sale, the Partnership paid
$299,421 in selling costs. The basis of the property was $6,629,000. For
financial statement purposes, the Partnership recognized a gain of $2,621,579
from the sale of this property.
(e) In September 1996, the Partnership sold the Shoal Run Apartments in an all
cash sale for $10,800,000. From the proceeds of the sale, the Partnership paid
$290,800 in selling costs. The basis of the property was $9,450,000. For
financial statement purposes, the Partnership recognized a gain of $1,059,200
from the sale of this property.
5. Sale of Acquisition Loan Receivable:
In August 1996, the Noland Fashion Square acquisition loan, in which the
Partnership held a participating interest, was sold. The Partnership's share of
the sale price was $3,803,640. From the proceeds of the sale, the Partnership
paid $53,058 as its share of the selling costs. The carrying value of the loan
was $4,377,929 and the remaining loan balance was written off against the
previously established allowance for losses.
6. Contingency:
A proposed settlement has been reached with respect to the class action
complaint, Paul Williams and Beverly Kennedy, et al, v. Balcor Pension
Investors, et al. between counsel for the Class and counsel for the defendants.
Notice of the proposed settlement terms was sent to class members in September
1996. A final hearing on the proposed settlement is expected to be held in
November 1996. The General Partner does not believe that the proposed
settlement will have a material adverse impact on the Partnership.
7. Extraordinary Item:
In connection with the sale of Sand Pebble Village Apartments- Phase II in
August 1996, the joint venture incurred a prepayment penalty in the amount of
$145,775 which was recognized as an extraordinary item and classified as debt
extinguishment expense. The Partnership's share of the extraordinary item is
$65,074.
<PAGE>
8. Subsequent Events:
(a) In October 1996, the Partnership made a distribution of $36,637,893 ($26.50
per Interest) to the holders of Limited Partnership Interests for the third
quarter of 1996. This amount includes the regular quarterly distribution from
Cash Flow of $2.00 per Interest, a special distribution from Cash Flow reserves
of $2.00 per Interest and a special distribution of Mortgage Reductions of
$22.50 per Interest from proceeds received in connection with the August 1996
sales of Woodscape Apartments and Sand Pebble Village Apartments - Phases I and
II, the August 1996 sale of the Noland Fashion Square acquisition loan and the
September 1996 sale of Shoal Run Apartments.
(b) The 45 West 45th Street Office Building was owned by a joint venture
consisting of the Partnership and three affiliates. The Partnership held a
participating percentage in the joint venture of 41.30%. In November 1996, the
joint venture sold the property in an all cash sale for $10,300,000. From the
proceeds of the sale, the joint venture paid $579,075 in selling costs. For
financial statement purposes, the joint venture will recognize a gain of
approximately $2,934,000 from the sale of this property during the fourth
quarter of 1996, of which approximately $1,212,000 will be the Partnership's
share.
<PAGE>
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors - VI (the "Partnership") is a limited partnership
formed in 1984 to invest in first mortgage loans and, to a lesser extent,
wrap-around loans and junior mortgage loans. The Partnership raised
$345,640,500 through the sale of Limited Partnership Interests and utilized
these proceeds to fund thirty-one loans. The Partnership sold three properties
and its interest in an acquisition loan during 1996. In addition, three
properties in which the Partnership held minority joint venture interests with
affiliates were also sold during 1996. Currently, the Partnership owns eight
properties acquired through foreclosure and holds minority joint venture
interests with affiliates in one other property.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
The Partnership sold the Hawthorne Heights, Woodscape and Shoal Run apartment
complexes in June, August and September 1996, respectively. In connection with
the sale of each property, the Partnership recognized a gain on disposition of
real estate. Additionally, the Partnership and an affiliate sold the Sand
Pebble Village Apartments - Phases I and II in August 1996 and recognized a
recovery of loss on real estate and gain on sale, respectively. These events
caused participation in income of joint ventures with affiliates in 1996 as
compared to a loss in 1995. As a result, net income increased substantially for
the nine months and quarter ended September 30, 1996 as compared to the same
periods in 1995. Further discussion of the Partnership's operations is
summarized below.
1996 Compared to 1995
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to both the nine months and quarters ended September 30, 1996 and 1995.
Interest income on loans receivable and from investment in acquisition loan
decreased in 1996 as compared to 1995 as a result of the July 1995 foreclosure
of the Jonathan's Landing Apartments loan and the August 1996 sale of the
Noland Fashion Square acquisition loan.
Income from operations of real estate held for sale represents the net
operations of the properties acquired by the Partnership through foreclosure.
<PAGE>
As of September 30, 1996, the Partnership was operating eight properties.
Original funds advanced by the Partnership totals approximately $126,000,000
for the remaining eight properties. The Partnership sold the Hawthorne Heights,
Woodscape and Shoal Run apartment complexes in June, August and September 1996,
respectively, and recognized gains on disposition of real estate of $5,153,684.
The property sales also resulted in income from operations of real estate held
for sale decreasing during 1996 when compared to 1995. In addition, increased
tenant related expenditures at Park Central Office Building and decreased
rental and service income at Flamingo Pines Plaza due to lower occupancy rates
in 1996 contributed to the decrease in income from operations of real estate
held for sale. These decreases were partially offset by an increase in
operations at Sun Lake Apartments during 1996 as a result of exterior painting
at the property during 1995.
Interest income on short-term investments decreased during the nine months
ended September 30, 1996 as compared to the same period in 1995 as a result of
lower average cash balances available for investment in 1996 due to special
distributions paid to the Limited Partners in 1995. This decrease was fully
offset and the Partnership recognized an increase in interest income during the
quarter ended September 30, 1996 as compared to the same period in 1995 as a
result of proceeds received in 1996 in connection with the above mentioned
property sales and the Noland Fashion Square acquisition loan sale.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties or in a borrower's
ability to repay a loan or in the value of the collateral property.
Determinations of fair value are made periodically on the basis of performance
under the terms of the loan agreement and assessments of property operations.
Determinations of fair value represent estimations based on many variables
which affect the value of real estate, including economic and demographic
conditions. The Partnership recognized provisions of $352,753 and $400,000 for
potential losses related to the Noland Fashion Square acquisition loan and the
Flamingo Pines Shopping Center, respectively, during the nine months ended
September 30, 1996 and no provisions during the same period in 1995. In
addition, allowances of $627,347 relating to the Noland Fashion Square
acquisition loan were written off during the third quarter of 1996 in
connection with the sale of the loan.
Amortization expense recognized during the second quarter of 1996 related to a
settlement of disputed leasing commissions at the Perimeter 400 Office Building
resulted in increased amortization expense during the nine months ended
September 30, 1996 as compared to the same period in 1995.
The Partnership incurred increased legal, consulting, printing, postage and
investor processing costs in connection with its responses to a tender offer
and certain related litigation during 1996. As a result, administrative
expenses increased during 1996 as compared to 1995.
Participation in income of joint ventures with affiliates represents the
Partnership's share of the operations of the Sand Pebble Village Apartments -
Phases I & II, Jonathan's Landing Apartments and the 45 West 45th Street Office
Building. Participation in income of joint ventures with affiliates increased
in 1996 as compared to 1995, primarily due to the recovery of losses recognized
<PAGE>
in prior years and gain on sale recognized in connection with the sales of Sand
Pebble Village Apartments - Phases I & II, respectively. In addition, the July
1995 foreclosure of the Jonathan's Landing Apartments loan and higher rental
income along with lower interior maintenance and repairs at the 45 West 45th
Street Office Building during 1996 contributed to this increase. Additionally,
in connection with the sale of the Sand Pebble Village Apartments - Phase II,
the Partnership incurred its share of a prepayment penalty in the amount of
$65,074, which was recognized as an extraordinary item and classified as debt
extinguishment expense.
The Sun Lake Apartments and the Perimeter 400 Office Building are both owned by
joint ventures with affiliates. As a result of a decrease in exterior
painting expense at Sun Lake Apartments and increased rental income at
Perimeter 400 Office Building, affiliates' participation in income of joint
ventures increased during 1996 as compared to 1995.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $33,297,000 as
of September 30, 1996 when compared to December 31, 1995 primarily as a result
of the Partnership's share of the net proceeds received in connection with the
sales of five properties and an acquisition loan. Operating activities
generated cash of approximately $8,335,000, primarily as a result of cash flow
from the operations of the Partnership's properties and interest income earned
from short-term investments and from the Partnership's investment in an
acquisition loan, net of the payment of administrative expenses. Cash received
from investing activities consisted of net proceeds of approximately $3,751,000
received from the sale of the Noland Fashion Square acquisition loan,
distributions of cash flow and sale proceeds from joint venture partners of
approximately $12,732,000 and net proceeds from the sales of Hawthorne Heights,
Shoal Run and Woodscape apartment complexes of approximately $27,750,000.
Financing activities consisted of distributions paid to Partners of
approximately $18,465,000, net distributions paid to joint venture partners of
approximately $673,000 and principal payments on mortgage note payable of
approximately $133,000.
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 unless otherwise indicated. A deficit is
considered 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. The Sun Lake
Apartments is the Partnership's only property with underlying debt.
During 1996 and 1995, all eight of the Partnership's properties owned at
September 30, 1996, as well as the properties in which the Partnership holds
minority joint venture interests with affiliates, generated positive cash flow.
In addition, the Hawthorne Heights, Woodscape and Shoal Run apartment
complexes, sold in June, August, and September 1996, respectively, also
generated positive cash flow in 1995 and prior to their sales in 1996. The 45
<PAGE>
West 45th Street Office Building, in which the Partnership holds a minority
joint venture interest, incurred significant leasing costs in 1995 which were
not included in classifying the cash flow performance of the property. Had
these nonrecurring expenditures been included, the property would have
generated a significant deficit in 1995. As of September 30, 1996, the
occupancy rates of the Partnership's commercial properties ranged from 89% to
98%, with the exception of the occupancy at Flamingo Pines Plaza which was 84%.
The occupancy rate for Sun Lake Apartments was 98%.
Many rental markets continue to be 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.
In June 1996, the Partnership sold the Hawthorne Heights Apartments in an all
cash sale for $8,300,000. From the proceeds of the sale, the Partnership paid
$309,525 in selling costs. Pursuant to the terms of the sale, $250,000 of the
proceeds were retained by the Partnership until October 1996. The remaining
proceeds were distributed to the Limited Partners in July 1996. See Note 4 of
Notes to Financial Statements for additional information.
The Sand Pebble Village Apartments - Phase I was owned by a joint venture
consisting of the Partnership and an affiliate. In August 1996, the joint
venture sold the property in an all cash sale for $19,411,765. From the
proceeds of the sale, the joint venture paid $431,822 in selling costs. The net
proceeds of the sale were $18,979,943 of which $8,472,647 was the Partnership's
share. The proceeds were distributed to the Limited Partners in October 1996.
See Note 4 of Notes to Financial Statements for additional information.
The Sand Pebble Village Apartments - Phase II was owned by a joint venture
consisting of the Partnership and an affiliate. In August 1996, the joint
venture sold the property in an all cash sale for $12,088,235. From the
proceeds of the sale, the joint venture paid $4,859,155 to the third party
mortgage holder in full satisfaction of the first mortgage loan, paid a
prepayment penalty of $145,775 and paid $272,701 in selling costs. The net
proceeds of the sale were $6,810,604, of which $3,040,254 was the Partnership's
share. The proceeds were distributed to the Limited Partners in October 1996.
See Notes 4 and 7 of Notes to Financial Statements for additional information.
In August 1996, the Partnership sold the Woodscape Apartments in an all cash
sale for $9,550,000. From the proceeds of the sale, the Partnership paid
$299,421 in selling costs. Pursuant to the terms of the sale, $500,000 of the
proceeds will be retained by the Partnership until December 1996. The remaining
proceeds were distributed to Limited Partners in October 1996. See Note 4 of
Notes to Financial Statements for additional information.
In August 1996, the Partnership sold its interest in the Noland Fashion Square
acquisition loan for $3,803,640. From the proceeds of the loan sale, the
Partnership paid $53,058 in selling costs. The proceeds were distributed to the
Limited Partners in October 1996. See Note 5 of Notes to Financial Statements
for additional information.
<PAGE>
In September 1996, the Partnership sold the Shoal Run Apartments in an all cash
sale for $10,800,000. From the proceeds of the sale, the Partnership paid
$290,800 in selling costs. The proceeds were distributed to the Limited
Partners in October 1996. See Note 4 of Notes to Financial Statements for
additional information.
The 45 West 45th Street Office Building was owned by a joint venture consisting
of the Partnership and three affiliates. In November 1996, the joint venture
sold the property in an all cash sale for $10,300,000. From the proceeds of the
sale, the joint venture paid $579,075 in selling costs. The net proceeds from
the sale were $9,720,925, of which approximately $4,014,742 was the
Partnership's share. Pursuant to the terms of the sale, $500,000 of the
proceeds will be retained by the joint venture until April 1997. See Note 8 of
Notes to Financial Statements for additional information.
The General Partner believes that the market for multifamily housing and office
properties is favorable to sellers of these properties. As described above, the
Partnership sold the Hawthorne Heights, Woodscape and Shoal Run apartment
complexes in June, August and September 1996, respectively. In addition, the
Partnership and affiliates have sold the Sand Pebble Village Apartments -
Phases I and II in August 1996 and the 45 West 45th Street Office Building in
November 1996. Currently, the Partnership has entered into contracts to sell
the Sun Lake Apartments and the Flamingo Pines Plaza for sale prices of
$24,000,000 and $10,200,000, respectively. In addition, the General Partner has
entered into a contract to sell the Jonathan's Landing Apartments, in which the
Partnership holds a minority joint venture interest, for a sale price of
$21,300,000. The General Partner is also exploring the sale of the
Partnership's remaining commercial properties. The General Partner examines
each property individually by property type and market in determining the
optimal time to sell each property.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
The Noland Fashion Square Shopping Center loan had been recorded by the
Partnership as an investment in acquisition loan. The Partnership had recorded
its share of the collateral property's operations as equity in loss from
investment in acquisition loan. The Partnership's share of operations has no
effect on the cash flow of the Partnership, and amounts representing
contractually required debt service were recorded as interest income. The
Partnership and its affiliates sold this loan in August 1996. See Note 5 of
Notes to Financial Statements for additional information.
In October 1996, the Partnership paid a distribution of $36,637,893 ($26.50 per
Interest) to the holders of Limited Partnership Interests. This amount includes
the regular quarterly distribution from Cash Flow of $2.00 per Interest, a
special distribution from Cash Flow reserves of $2.00 per Interest and a
special distribution of Mortgage Reductions of $22.50 per Interest from
proceeds received in connection with the August 1996 sales of Woodscape
Apartments and Sand Pebble Village Apartments - Phases I and II, the August
1996 sale of the Noland Fashion Square acquisition loan and the September 1996
<PAGE>
sale of Shoal Run Apartments. The level of the regular quarterly distribution
is consistent with the amount distributed for the second quarter of 1996.
Including the October 1996 distribution, Limited Partners have received cash
distributions totaling $240.36 per $250 Interest. Of this amount, $137.86
represents Cash Flow from operations and $102.50 represents a return of
Original Capital. In October 1996, the Partnership also paid $460,854 to the
General Partner as its distributive share of the Cash Flow distributed for the
third quarter of 1996 and made a contribution to the Early Investment Incentive
Fund of $153,618.
The Partnership expects to continue making cash distributions, however, the
level of future distributions is dependent on cash flow from property
operations and future property sales, less fees to the General Partner and
administrative expenses. The General Partner, on behalf of the Partnership, has
retained what it believes is an appropriate amount of working capital to meet
current cash or liquidity requirements which may occur.
During the nine months ended September 30, 1996, the General Partner on behalf
of the Partnership used amounts placed in the Early Investment Incentive Fund
to repurchase 8,533 Interests from Limited Partners at a cost of $981,877.
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 sale 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>
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Proposed Class and Derivative Action Lawsuits
- ---------------------------------------------
On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the "Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Partnership, the "Affiliated
Partnerships"), as well as the Affiliated Partnerships, as defendants.
Additional defendants were Insignia Management Group ("Insignia") and Walton
Street Capital Acquisition II, LLC ("Walton") and certain of their affiliates
and principals (collectively, the "Walton and Insignia Defendants"). The
complaint alleged, among other things, that the tender offers for the purchase
of limited partnership interests in the Affiliated Partnerships made by a joint
venture consisting of affiliates of Insignia and Walton were coercive and
unfair.
On July 1, 1996, another proposed class action complaint was filed in the same
court, Anderson vs. Balcor Mortgage Advisors (Case No. 96 CH 06884) (the
"Anderson Case"). An amended complaint consolidating the Dee and Anderson
Cases (the "Dee/Anderson Case") was filed on July 25, 1996.
The complaint seeks to assert class and derivative claims against the Walton
and Insignia Defendants and alleges that, in connection with the tender offers,
the Walton and Insignia Defendants misused the Balcor Defendants' and
Insignia's fiduciary positions and knowledge in breach of the Walton and
Insignia Defendants' fiduciary duty and in violation of the Illinois Securities
and Consumer Fraud Acts. The plaintiffs amended their complaint on October 8,
1996, adding additional claims. The plaintiffs request certification as a class
and derivative action, unspecified compensatory damages and rescission of the
tender offers. Each of the defendants have filed motions to dismiss the
complaint. The court has not yet ruled on these motions.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. Management of each of the Balcor Defendants
believes they have meritorious defenses to contest the claims. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the Partnership.
<PAGE>
Item 5. Other Information
- --------------------------
Jonathan's Landing Apartments
- -----------------------------
As previously reported, a limited partnership in which the Partnership and an
affiliate hold interests and which owns Jonathan's Landing Apartments, Kent,
Washington, contracted to sell the property to an unaffiliated party,
Commercial Ventures, Inc., a Delaware corporation, for a sale price of
$22,000,000. Pursuant to a First Amendment to Agreement of Sale, the
Partnership and the purchaser have agreed to reduce the sale price to
$21,300,000. In addition, the closing has been extended from October 12, 1996
to November 15, 1996.
45 West 45th Street Office Building
- -----------------------------------
As previously reported, on July 29, 1996, a limited partnership (the "Limited
Partnership") in which the Partnership and three affiliates hold interests and
which owns the 45 West 45th Street Office Building, New York City, New York,
contracted to sell the property to an unaffiliated party, Olmstead Properties,
Inc., a New York corporation, for a sale price of $10,300,000. The sale closed
November 6, 1996. From the proceeds of the sale, the Limited Partnership paid
$257,500 to an unaffiliated party as a brokerage commission and closing costs
of $321,575. The Limited Partnership received the remaining $9,720,925 of
proceeds. Of such amount, $500,000 will be retained by the Limited Partnership
and will not be available for use or distribution by the Limited Partnership
until 150 days after closing. The Partnership's share of the total net proceeds
is $4,014,742.
Sun Lake Apartments
- -------------------
In 1989, the Partnership and an affiliate funded a $11,300,000 second mortgage
loan collateralized by the Sun Lake Apartments, Lake Mary, Florida. The
Partnership's share of the loan was $7,000,000 for a participating percentage
of 61.95%. In 1992, a limited partnership (the "Limited Partnership") in which
the Partnership and the affiliate each hold an interest equal to its
participating percentage in the loan obtained title to the property through
foreclosure.
On October 30, 1996, the Limited Partnership contracted to sell the property
for a sale price of $24,000,000 to an unaffiliated party, Ambassador
Apartments, L.P., a Delaware limited partnership. The purchaser has deposited
$300,000 into an escrow account as earnest money. It is expected that the
purchaser will assume the existing first mortgage loan, which was funded
through the sale of revenue bonds. The bonds are expected to have an
outstanding principal balance of approximately $15,509,000 at closing,
scheduled for November 15, 1996. However, the closing may be extended to
December 15, 1996 by (i) the Limited Partnership for any reason upon written
notice to the purchaser or by (ii) the purchaser in order to obtain the consent
of the holder of the bonds to the assumption. From the proceeds of the sale,
<PAGE>
the Limited Partnership will pay $300,000 to an unaffiliated party as a
brokerage commission and $180,000 to an affiliate of the third party providing
property management services for the property as a fee for services rendered in
connection with the sale of the property. The Limited Partnership will receive
the remaining proceeds of approximately $8,011,000, less closing costs. Of such
proceeds, $300,000 is being retained by the Limited Partnership and will not be
available for use or distribution by the Partnership until December 23, 1996.
The Partnership's share of the total net proceeds is expected to be
approximately $4,963,000, less the Partnership's share of closing costs.
Neither the General Partner nor any affiliate will receive a brokerage
commission in connection with the sale of the property. The General Partner
will be reimbursed by the Partnership for its actual expenses incurred in
connection with the sale.
The closing is subject to the satisfaction of numerous terms and conditions,
including the consent of the holder of the bonds. There can be no assurance
that all of the terms and conditions will be complied with and, therefore, it
is possible that the sale of the property may not occur.
Flamingo Pines Plaza
- --------------------
In 1987, the Partnership funded a $14,500,000 first mortgage loan
collateralized by the Flamingo Pines (formerly known as Pembroke Pines) Plaza,
Pembroke Pines, Florida. The Partnership acquired title to the property through
foreclosure in 1990.
On October 31, 1996, the Partnership contracted to sell the property for a sale
price of $10,200,000 to an unaffiliated party, Dane Real Estate, Inc., a
Florida corporation. The purchaser has deposited $50,000 into an escrow account
as earnest money and is obligated to deposit an additional $350,000 upon the
completion of the purchaser's due diligence review. The remainder of the sale
price will be payable in cash at closing, scheduled for on or before March 31,
1997. From the proceeds of the sale, the Partnership will pay $255,000 as a
brokerage commission to an affiliate of the third party providing property
management services for other properties owned by the Partnership. The
Partnership will receive the remaining proceeds of approximately $9,945,000,
less closing costs. Neither the General Partner nor any affiliate will receive
a brokerage commission in connection with the sale of the property. The General
Partner will be reimbursed by the Partnership for its actual expenses incurred
in connection with the sale.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible that the sale of the property may not
occur.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated January 4,
1985 (Registration No. 2-93840) and Form of Confirmation regarding Interests in
the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q
for the quarter ended June 30, 1992 (Commission File No. 0-14332) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1996 is attached hereto.
(99)(a) Agreement of Sale relating to the contract to sell Flamingo Pines
Plaza, Pembroke, Florida, is attached hereto.
(99)(b) Agreement of Sale relating to the contract to sell Sun Lake Apartments,
Lake Mary, Florida, is attached hereto.
(99)(c) First Amendment to Agreement of Sale relating to the sale of Jonathan's
Landing Apartments, Kent, Washington, is attached hereto.
(b) Reports on form 8-K:
A Current Report on Form 8-K dated August 12, 1996 was filed reporting the
extension of the closing date of the sale of the 45 West 45th Street Office
Building in New York City, New York, the closing of the sale of the loan
collateralized by the Noland Fashion Square Shopping Center in Independence,
Missouri, the closing of the sale of the Woodscape Apartments in Raleigh, North
Carolina, the contract to sell the Jonathan's Landing Apartments in Kent,
Washington and the contract and closing of the sale of Shoal Run Apartments in
Birmingham, Alabama.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-VI
By: /s/ Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-VI, the General Partner
By: /s/ Jayne A. Kosik
-----------------------------
Jayne A. Kosik
Vice President, and Chief Financial Officer
(Principal Accounting Officer) of Balcor
Mortgage Advisors-VI, the General Partner
Date: November 14, 1996
---------------------------
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 31st
day of October, 1996, by and between DANE REAL ESTATE, INC., a Florida
corporation ("Purchaser"), and PEMBROKE ASSOCIATES LIMITED PARTNERSHIP, an
Illinois limited partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of Ten Million Two Hundred Thousand and No/100 Dollars
($10,200,000.00) (the "Purchase Price"), that certain property commonly known
as Flamingo Pines Plaza, Pembroke Pines, Florida legally described on Exhibit A
attached hereto (the "Property"). Included in the Purchase Price is all of the
personal property set forth on Exhibit B attached hereto (the "Personal
Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Upon the execution of this Agreement, the sum of Fifty Thousand and
No/100 Dollars ($50,000.00) (the "Earnest Money") to be held by the Miami
office of "Title Insurer" (hereinafter defined) in escrow by and in accordance
with the provisions of the Escrow Agreement ("Escrow Agreement") attached
hereto as Exhibit C;
2.2. On or before the expiration of the "Inspection Period" (hereinafter
defined), Purchaser shall deposit an additional Three Hundred Fifty Thousand
and No/100 Dollars ($350,000.00) to be held by the Miami office of Title
Insurer in escrow by and in accordance with the provisions of the Escrow
Agreement and upon the deposit of such sum all references to "Earnest Money"
herein shall mean Four Hundred Thousand and No/100 Dollars ($400,000.00); and
2.3. On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 11:00 a.m Chicago time.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by Chicago Title Insurance
Corporation (hereinafter referred to as "Title Insurer") dated 10/1/96
for the Property (the "Title Commitment"). For purposes of this Agreement,
"Permitted Exceptions" shall mean: (a) general real estate taxes, association
assessments, special assessments, special district taxes and related charges
not yet due and payable; (b) matters caused by the actions of Purchaser; and
(c) the title exceptions set forth in Exhibit B of the Title Commitment
approved by Purchaser by written notice to Seller no later than twenty (20)
days after Purchaser's receipt of the "Updated Survey" (hereinafter defined),
subject to the terms of Paragraph 3.3 herein. All other exceptions to title
shall be referred to as "Unpermitted Exceptions". The Title Commitment shall
be conclusive evidence of good title as therein shown as to all matters to be
insured by the title policy, subject only to the exceptions therein stated.
<PAGE>
On the Closing Date, Title Insurer shall deliver to Purchaser a standard title
policy in conformance with the previously delivered Title Commitment, subject
to Permitted Exceptions and Unpermitted Exceptions waived by Purchaser (the
"Title Policy"). Purchaser shall pay for the costs of the Title Commitment and
Title Policy and Purchaser shall pay for the cost of any endorsements to, or
extended coverage on, the Title Policy.
3.2. Purchaser has received a survey of the Property prepared by
Schwebke-Shiskin and Associates, Inc., and dated December 31, 1986 (the
"Existing Survey"). Purchaser shall each pay for the costs of updating the
Existing Survey and Seller shall deliver the updated survey (the "Updated
Survey") to Purchaser within 14 days after the date hereof. Purchaser hereby
acknowledges that all matters disclosed by the Existing Survey are acceptable
to Purchaser.
3.3. Purchaser and Seller shall use good faith efforts to attempt to agree
upon a definitive list of Permitted Exceptions on or before the expiration of
the fourteen (14) day period following the delivery of Purchaser's notice
contained in Paragraph 3.1. If the parties cannot agree upon a mutually
acceptable list of Permitted Exceptions on or before the expiration of said
fourteen (14) day period, then either party shall have the right to terminate
this Agreement by notice to the other party within ten (10) days following the
expiration of said fourteen (14) day period; provided, however, Purchaser shall
have the right to vitiate Seller's notice of termination by notice to Seller
within three (3) business days after Seller's notice to terminate. If either
party terminates this Agreement in accordance with the terms of this Paragraph
3.3, this Agreement shall become null and void without further action of the
parties and all Earnest Money theretofore deposited into the Escrow by
Purchaser, together with any interest accrued thereon, shall be returned to
Purchaser, and neither party shall have any further liability to the other,
except for Purchaser's obligation to indemnify Seller and restore the Property,
as more fully set forth in Paragraph 7.
3.4. The obligation of Purchaser to pay various costs set forth in
Paragraphs 3.1 and 3.2 shall survive the termination of this Agreement.
3.5. Notwithstanding the foregoing, Seller will discharge at Closing the
following Schedule B-2 exceptions to title listed on the Title Commitment:
Items 32, 33 and 34. Seller will use good faith efforts to remove all Schedule
B-1 requirements shown on the Title Commitment prior to Closing, to wit: 1(a),
4, 5, 6, 7, 8, 9, 10, 11, 12, 15, and 17. Seller shall provide the necessary
mechanics' lien/party in possession/GAP affidavit (as necessary to remove the
standard exceptions for said items), except Purchaser acknowledges that
Purchaser will take subject to tenants-in-possession under written leases
provided that none of said leases contains any option to purchase any portion
of the Property. Tenant shall terminate any recorded notice of commencement
and provide appropriate documentation to delete any exception for the same from
the Title Policy. Subsequent to the effective date of the Title Commitment,
Seller will not cause any documents to be placed of record without Purchaser's
consent, which consent shall not be unreasonably withheld.
4. PAYMENT OF CLOSING COSTS. In addition to the costs set forth in
Paragraphs 3.1 and 3.2, Seller shall pay for the costs of the documentary or
transfer stamps to be paid with reference to the "Deed" (hereinafter defined)
<PAGE>
and all other stamps, intangible, transfer, documentary, recording, sales tax
and surtax imposed by law with reference to any other sale documents delivered
in connection with the sale of the Property to Purchaser. Purchaser shall pay
all other charges of the Title Insurer in connection with this transaction.
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to the
Title Commitment discloses any new Unpermitted Exception, Seller shall have
thirty (30) days from the date of the date-down to the Title Commitment, as
applicable, at Seller's expense, to (i) bond over, cure and/or have any
Unpermitted Exceptions which, in the aggregate, do not exceed $75,000.00 (a
"Minor Unpermitted Exception"), removed from the Title Commitment or to have
the Title Insurer commit to insure against loss or damage that may be
occasioned by such Unpermitted Exceptions, or (ii) have the right, but not the
obligation, to bond over, cure and/or have any Unpermitted Exceptions which, in
the aggregate, equal or exceed $75,000.00, removed from the Title Commitment or
to have the Title Insurer commit to insure against loss or damage that may be
occasioned by such Unpermitted Exceptions. In such event, the time of Closing
shall be delayed, if necessary, to give effect to said aforementioned time
periods. If Seller fails to cure or have said Unpermitted Exception removed or
have the Title Insurer commit to insure as specified above within said thirty
(30) day period or if Seller elects not to exercise its rights under (ii) in
the preceding sentence, Purchaser may terminate this Agreement upon notice to
Seller within five (5) days after the expiration of said thirty (30) day
period; provided, however, and notwithstanding anything contained herein to the
contrary, if the Unpermitted Exception which gives rise to Purchaser's right to
terminate was recorded against the Property as a result of the affirmative,
willful action of Seller (and not by any unrelated third party) or if Seller is
able to bond over, cure or remove a Minor Unpermitted Exception for a cost not
to exceed $75,000 or the Title Insurer is willing to insure over a Minor
Unpermitted Exception for a cost not to exceed $75,000 in accordance with the
terms hereof and Seller fails to expend said funds in either case, then
Purchaser shall have the additional rights contained in Paragraph 11 herein.
Absent notice from Purchaser to Seller in accordance with this Paragraph 5.1,
Purchaser shall be deemed to have elected to take title subject to said
Unpermitted Exception. If Purchaser terminates this Agreement in accordance
with the terms of this Paragraph 5.1, this Agreement shall become null and void
without further action of the parties and all Earnest Money theretofore
deposited into the escrow by Purchaser together with any interest accrued
thereon, shall be returned to Purchaser, and neither party shall have any
further liability to the other, except for Purchaser's obligation to indemnify
Seller and restore the Property, as more fully set forth in Paragraph 7.
5.2. Seller agrees to convey fee simple title to the Property to
Purchaser by special warranty deed (the "Deed") in recordable form subject only
to the Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in
Paragraph 7.1 of this Agreement, Seller shall bear all risk of loss with
respect to the Property up to the earlier of the dates upon which either
<PAGE>
possession or title is transferred to Purchaser in accordance with this
Agreement. Notwithstanding the foregoing, in the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of which
would cost less than or equal to $200,000.00 (as determined by Seller and
Purchaser in good faith) Purchaser shall not have the right to terminate its
obligations under this Agreement by reason thereof, but Seller shall have the
right to elect to either repair and restore the Property (in which case the
Closing Date shall be extended until completion of such restoration) or to
assign and transfer to Purchaser on the Closing Date all of Seller's right,
title and interest in and to all insurance proceeds paid or payable to Seller
on account of such fire or casualty and Seller shall pay to Purchaser at the
Closing the amount of Seller's insurance deductible. Seller shall promptly
notify Purchaser in writing of any such fire or other casualty and Seller's
determination of the cost to repair the damage caused thereby. In the event of
damage to the Property by fire or other casualty prior to the Closing Date,
repair of which would cost in excess of $200,000.00 (as determined by Seller
and Purchaser in good faith), then this Agreement may be terminated at the
option of Purchaser, which option shall be exercised, if at all, by Purchaser's
written notice thereof to Seller within ten (10) business days after Purchaser
receives written notice of such fire or other casualty and Seller's and
Purchaser's determination of the amount of such damages, and upon the exercise
of such option by Purchaser this Agreement shall become null and void, the
Earnest Money deposited by Purchaser shall be returned to Purchaser together
with interest thereon, and neither party shall have any further liability or
obligations hereunder. Seller shall deliver to Purchaser a copy of all
correspondence received by Seller from Seller's insurance carrier in connection
with any casualty. In the event that Purchaser does not exercise the option
set forth in the preceding sentence, the Closing shall take place on the
Closing Date and Seller shall assign and transfer to Purchaser on the Closing
Date all of Seller's right, title and interest in and to all insurance proceeds
paid or payable to Seller on account of the fire or casualty and Seller shall
pay to Purchaser at the Closing the amount of Seller's insurance deductible.
6.2. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately notify Purchaser of such
occurrence. In the event that the taking of any part of the Property shall:
(i) impair access to the Property; (ii) cause any material non-compliance with
any applicable law, ordinance, rule or regulation of any federal, state or
local authority or governmental agencies having jurisdiction over the Property
or any portion thereof; or (iii) adversely impair the use of the Property as it
is currently being operated (hereinafter collectively referred to as a
"Material Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease;
or
6.2.2. proceed with the Closing, in which event Seller shall assign
to Purchaser all of Seller's right, title and interest in and to any award made
in connection with such condemnation or eminent domain proceedings.
<PAGE>
6.3. Purchaser shall then notify Seller, within ten (10) business days
after Purchaser's receipt of Seller's notice, whether Purchaser elects to
exercise its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be
delayed, if necessary, until Purchaser makes such election. If Purchaser fails
to make an election within such ten (10) business day period, Purchaser shall
be deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on October 7, 1996 and ending at 5:00
p.m. Chicago time on December 16, 1996 (said period being herein referred to as
the "Inspection Period"), Purchaser and the agents, engineers, employees,
contractors and surveyors retained by Purchaser may enter upon the Property, at
any reasonable time and upon reasonable prior notice to Seller, to inspect the
Property, including a review of leases located at the Property, and to conduct
and prepare such studies, tests and surveys as Purchaser may deem reasonably
necessary and appropriate. In connection with Purchaser's review of the
Property, Seller agrees to deliver to Purchaser within five (5) days after the
date of Seller's execution hereof copies of the current rent roll for the
Property, the most recent tax and insurance bills, utility account numbers,
service contracts, unaudited year end 1994, 1995 and year-to-date (August 31,
1996) operating statements, a list of personal property and copies of leases
affecting the Property. Furthermore, if the following are reasonably available
to Seller, Seller shall deliver to Purchaser plans and specifications and aged
receivable reports. Within five (5) days from the date hereof and up until the
expiration of the Inspection Period, the Seller shall permit Purchaser to
examine all books and records of Seller reflecting the net operating income of
the Property at Seller's business office upon 72 hours prior notice from
Purchaser to Seller.
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Property to the condition existing
prior to the performance of such tests or investigations by or on behalf of
Purchaser. Purchaser shall defend, indemnify and hold Seller and any
affiliate, parent of Seller, and all shareholders, employees, officers and
directors of Seller or Seller's affiliate or parent (hereinafter collectively
referred to as "Affiliate of Seller") harmless from any and all liability, cost
and expense (including without limitation, reasonable attorney's fees, court
costs and costs of appeal) suffered or incurred by Seller or Affiliates of
Seller for injury to persons or property caused by Purchaser's investigations
and inspection of the Property. Purchaser shall undertake its obligation to
defend set forth in the preceding sentence using attorneys selected by Seller,
in Seller's sole discretion.
<PAGE>
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied (in Purchaser's sole discretion) with the
results of the tests, studies or investigations performed or information
received pursuant to this Paragraph 7.1, Purchaser shall have the right to
terminate this Agreement by giving written notice of such termination to Seller
at any time prior to the expiration of the Inspection Period. If written
notice is not received by Seller pursuant to this Paragraph 7.1 prior to the
expiration of the Inspection Period, then the right of Purchaser to terminate
this Agreement pursuant to this Paragraph 7.1 shall be waived. If Purchaser
terminates this Agreement by written notice to Seller prior to the expiration
of the Inspection Period: (i) Purchaser shall promptly deliver to Seller copies
of all studies, reports and other investigations obtained by Purchaser in
connection with its due diligence during the Inspection Period; and (ii) the
Earnest Money deposited by Purchaser shall be immediately paid to Purchaser,
together with any interest earned thereon, and neither Purchaser nor Seller
shall have any right, obligation or liability under this Agreement, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in this Paragraph 7.1. Notwithstanding anything contained
herein to the contrary, the terms of this Paragraph 7.1 shall survive the
Closing and the delivery of the Deed and termination of this Agreement.
7.2. Seller acquired title to the Property by foreclosure (or
deed-in-lieu thereof) and, therefore, Seller can make no representations or
warranties relating to the condition of the Property or the Personal Property,
except as specifically set forth herein to the contrary. Except as
specifically set forth herein to the contrary, Purchaser acknowledges and
agrees that it will be purchasing the Property and the Personal Property based
solely upon its inspections and investigations of the Property and the Personal
Property, and that Purchaser will be purchasing the Property and the Personal
Property "AS IS" and "WITH ALL FAULTS", based upon the condition of the
Property and the Personal Property as of the date of this Agreement, wear and
tear and loss by fire or other casualty or condemnation excepted. Without
limiting the foregoing, Purchaser acknowledges that, except as may otherwise be
specifically set forth elsewhere in this Agreement, neither Seller nor its
consultants, brokers or agents have made any representations or warranties of
any kind upon which Purchaser is relying as to any matters concerning the
Property or the Personal Property, including, but not limited to, the condition
of the land or any improvements comprising the Property, the existence or
non-existence of "Hazardous Materials" (as hereinafter defined), economic
projections or market studies concerning the Property, any development rights,
taxes, bonds, covenants, conditions and restrictions affecting the Property,
water or water rights, topography, drainage, soil, subsoil of the Property, the
utilities serving the Property or any zoning or building laws, rules or
regulations or "Environmental Laws" (hereinafter defined) affecting the
Property. Seller makes no representation or warranty that the Property
complies with Title III of the Americans with Disabilities Act or any fire code
or building code. Purchaser hereby releases Seller and the Affiliates of
<PAGE>
Seller from any and all liability in connection with any claims which Purchaser
may have against Seller or the Affiliates of Seller, and Purchaser hereby
agrees not to assert any claims for contribution, cost recovery or otherwise,
against Seller or the Affiliates of Seller, relating directly or indirectly to
the existence of asbestos or Hazardous Materials on, or environmental
conditions of, the Property, whether known or unknown. As used herein,
"Environmental Laws" means all federal, state and local statutes, codes,
regulations, rules, ordinances, orders, standards, permits, licenses, policies
and requirements (including consent decrees, judicial decisions and
administrative orders) relating to the protection, preservation, remediation or
conservation of the environment or worker health or safety, all as amended or
reauthorized, or as hereafter amended or reauthorized, including without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq.,
the Emergency Planning and Community Right-to-Know Act ("Right-to-Know Act"),
42 U.S.C. Section 11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. Section
7401 et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33
U.S.C. Section 1251 et seq., the Toxic Substances Control Act ("TSCA"), 15
U.S.C. Section 2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water
Act"), 42 U.S.C. Section 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C.
Section 2011 et seq., the Occupational Safety and Health Act ("OSHA"),
29 U.S.C. Section 651 et seq., and the Hazardous Materials Transportation Act
(the "Transportation Act"), 49 U.S.C. Section 1802 et seq. As used herein,
"Hazardous Materials" means: (1) "hazardous substances," as defined by CERCLA;
(2) "hazardous wastes," as defined by RCRA; (3) any radioactive material
including, without limitation, any source, special nuclear or by-product
material, as defined by AEA; (4) asbestos in any form or condition; (5)
polychlorinated biphenyls; and (6) any other material, substance or waste to
which liability or standards of conduct may be imposed under any Environmental
Laws. Notwithstanding anything contained herein to the contrary, the terms of
this Paragraph 7.2 shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
<PAGE>
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Seller makes no representation or
warranty that such material is complete or accurate or that Purchaser will
achieve similar financial or other results with respect to the operations of
the Property, it being acknowledged by Purchaser that Seller's operation of the
Property and allocations of revenues or expenses may be vastly different than
Purchaser may be able to attain. Purchaser acknowledges that it is a
sophisticated and experienced purchaser of real estate and further that
Purchaser has relied upon its own investigation and inquiry with respect to the
operation of the Property and releases Seller and the Affiliates of Seller from
any liability with respect to such historical information. Notwithstanding
anything contained herein to the contrary, the terms of this Paragraph 7.3
shall survive the Closing and the delivery of the Deed and termination of this
Agreement.
7.4. Seller has provided to Purchaser the following existing report:
Report of Preliminary Environmental Site Assessment and Limited Asbestos Survey
prepared by Law Engineering dated October 12, 1990 ("Existing Report").
Seller makes no representation or warranty concerning the accuracy or
completeness of the Existing Report. Purchaser hereby releases Seller and the
Affiliates of Seller from any liability whatsoever with respect to the Existing
Report, or, including, without limitation, the matters set forth in the
Existing Report, and the accuracy and/or completeness of the Existing Report.
Furthermore, Purchaser acknowledges that it will be purchasing the Property
with all faults disclosed in the Existing Report. Notwithstanding anything
contained herein to the contrary, the terms of this Paragraph 7.4 shall survive
the Closing and the delivery of the Deeds and termination of this Agreement.
8. CLOSING. The closing of this transaction (the "Closing") shall be on or
before March 31, 1997 (the "Closing Date"), at the office of Title Insurer,
Miami, Florida at which time Seller shall deliver possession of the Property to
Purchaser. Purchaser shall have the right to accelerate the Closing Date upon
notice to Seller setting a Closing Date no sooner than ten (10) business days
after Seller's receipt of said notice provided that Purchaser has waived all of
its rights to terminate the Agreement of Sale pursuant to Paragraph 7. This
transaction shall be closed through an escrow with Title Insurer, in accordance
with the general provisions of the usual and customary form of deed and money
escrow for similar transactions in Florida or at the option of either party,
the Closing shall be a "New York style" closing at which the Purchaser shall
wire the Purchase Price to Title Insurer on the Closing Date and prior to the
release of the Purchase Price to Seller, Purchaser shall receive the Title
Policy or marked up commitment dated the date of the Closing Date. In the
event of a New York style closing, Seller shall deliver to Title Insurer any
customary affidavit in connection with a New York style closing.
Notwithstanding the foregoing, if the Closing Date falls on a Saturday, Sunday
or legal holiday, the Closing Date shall occur on the immediately following
business day.
<PAGE>
9. CLOSING DOCUMENTS.
9.1. On or prior to the Closing Date, Seller and Purchaser shall execute
and deliver to one another a joint closing statement. In addition, Purchaser
shall deliver to Seller the balance of the Purchase Price, an assumption of the
documents set forth in Paragraph 9.2.3 and 9.2.4 (which assumption shall be for
obligations only with respect to matters that arise subsequent to the Closing
Date) and such other documents as may be reasonably required by the Title
Insurer in order to consummate the transaction as set forth in this Agreement.
9.2. On the Closing Date, Seller shall deliver to Purchaser the
following:
9.2.1. the Deed (in the form of Exhibit E attached hereto), subject
to Permitted Exceptions and those Unpermitted Exceptions waived by Purchaser;
9.2.2. a quit claim bill of sale conveying the Personal Property (in
the form of Exhibit F attached hereto);
9.2.3. assignment and assumption of intangible property (in the form
attached hereto as Exhibit G), including, without limitation, the service
contracts listed in Exhibit H;
9.2.4. an assignment and assumption of leases and security deposits
(in the form attached hereto as Exhibit I);
9.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.6. original, and/or copies of, leases affecting the Property in
Seller's possession (which shall be delivered at the Property);
9.2.7. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.8. possession of the Property to Purchaser, subject to the terms
of leases;
9.2.9. evidence of the termination of the management and leasing
agreement;
9.2.10. notice to the tenants of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the leases
and the obligation to refund the security deposits (in the form of Exhibit K);
and
9.2.11. an updated rent roll.
10. PURCHASER'S DEFAULT. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
<PAGE>
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, 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, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7 AND PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL, DOCUMENTED
THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF ITS DUE DILIGENCE
HEREUNDER, THE PREPARATION OF THIS AGREEMENT AND SYNDICATION OF THE
TRANSACTION, NOT TO EXCEED $200,000 IN THE AGGREGATE. NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT IS (i) ITS (AND NOT AN
UNRELATED THIRD PARTY'S) AFFIRMATIVE, WILLFUL ACTION WHICH RESULTS IN THE
RECORDING OF AN ENCUMBRANCE AGAINST THE PROPERTY IN ACCORDANCE WITH THE TERMS
HEREOF AND WHICH GIVES RISE TO PURCHASER'S RIGHT TO TERMINATE THIS AGREEMENT
PURSUANT TO PARAGRAPH 5 HEREOF; (ii) ITS FAILURE TO EXPEND UP TO $75,000 IF (a)
SELLER IS ABLE TO BOND OVER, CURE OR REMOVE A MINOR UNPERMITTED EXCEPTION FOR A
COST NOT TO EXCEED $75,000 OR (b) THE TITLE INSURER IS WILLING TO INSURE OVER A
MINOR UNPERMITTED EXCEPTION FOR A COST NOT TO EXCEED $75,000 IN ACCORDANCE WITH
THE TERMS HEREOF WITH THE TERMS HEREOF OR (iii) ITS WILLFUL REFUSAL TO DELIVER
THE DEED OR OTHER CLOSING DOCUMENTS SET FORTH HEREIN, THEN PURCHASER WILL BE
ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
12. PRORATIONS.
12.1. Rents (exclusive of delinquent rents, but including prepaid rents);
refundable security deposits (which will be assigned to and assumed by
Purchaser and credited to Purchaser at Closing); water and other utility
charges; fuels; prepaid operating expenses; real and personal property taxes
which shall be prorated on a "net" basis with respect to Eckards and Publix
(i.e. adjusted for Eckards' and Publix' liability, if any, for such items) and
taking into account the full discount available for payment of real estate
taxes; 100% of operating expenses which are reimbursable by Eckards and Publix
and 75% of the operating expenses which are reimbursable by the balance of the
tenants for the period prior to the Closing Date less any amount previously
paid by the tenants shall be credited to Seller and excluding Tenant whose rent
is more than thirty (30) days in arrears and also excluding any operating
expense which has not typically been previously charges to Tenants; and other
similar items shall be adjusted ratably as of 11:59 p.m. on the Closing Date,
and credited against the balance of the cash due at Closing. Leasing
commissions are currently due and owing to Insignia with respect to the lease
with Aficionado Premium Cigars, Sunshine Hair and Dr. Ginsburg. Seller shall
pay Insignia in full prior to Closing all outstanding leasing commissions with
respect to the three (3) aforesaid leases. Assessments payable in installments
which are due subsequent to the Closing Date shall be paid by Purchaser. If
the amount of any of the items to be prorated is not then ascertainable, the
adjustments thereof shall be on the basis of the most recent ascertainable
data. All prorations will be final except as to delinquent rent referred to in
Paragraph 12.2 and percentage rent referred to in Paragraph 12.3 below.
Notwithstanding anything contained herein to the contrary, Seller shall retain
all rights against Loffy's Deli, including, without limitation, any claims
against certain escrowed rent payments.
<PAGE>
12.2. All basic rent paid following the Closing Date by any tenant of the
Property who is indebted under a lease for basic rent for any period prior to
and including the Closing Date and any real estate tax liability for any
tenants (other than Eckards and Publix) paid for any period prior to and
including the Closing Date (after the payment to Purchaser of all current basic
rent and real estate tax liability) shall be deemed a "Post-Closing Receipt"
until such time as all such indebtedness is paid in full. Within ten (10) days
following each receipt by Purchaser of a Post-Closing Receipt, Purchaser shall
pay such Post-Closing Receipt to Seller. Purchaser shall use its best efforts
to collect all amounts which, upon collection, would constitute Post-Closing
Receipts hereunder, but Purchaser shall not be required to commence any
litigation proceedings against said tenants. Within 120 days after the Closing
Date, Purchaser shall deliver to Seller a reconciliation statement of
Post-Closing Receipts through the first 90 days after the Closing Date. Upon
the delivery of the Post-Closing Receipts reconciliation, Purchaser shall
deliver to Seller any Post-Closing Receipts owing to Seller and not previously
delivered to Seller in accordance with the terms hereof less any actual
out-of-pocket cost of collection. Seller retains the right to conduct an
audit, at reasonable times and upon reasonable notice, of Purchaser's books and
records to verify the accuracy of the Post-Closing Receipts reconciliation
statement and upon the verification of additional funds owing to Seller,
Purchaser shall pay to Seller said additional Post-Closing Receipts and the
cost of performing Seller's audit. Paragraph 12.2 of this Agreement shall
survive the Closing and the delivery and recording of the deed.
Notwithstanding anything contained herein to the contrary, if Purchaser has not
collected any of the Post-Closing Receipts after said 120 day period, Seller
may, at Seller's expense, commence litigation to collect such unpaid
arrearages; provided, however, that Seller shall have no right to commence any
proceeding to evict the tenant or recover possession of any tenant space or
interfere with the tenant's ability (other than the financial impact resulting
from such litigation) to conduct business.
12.3. Percentage rent payable under the leases shall be prorated as of
the Closing Date as follows:
12.3.1. Any percentage rent attributable to a specified period
("Percentage Rent Period") ending prior to the Closing Date shall be promptly
paid over to the Seller if and when collected. Seller shall be entitled to all
percentage rent attributable to the period prior to Closing Date for any
Percentage Rent Period ending prior to Closing Date.
12.3.2. Percentage rent payable with respect to a Percentage Rent
Period a portion of which occurs prior to the Closing Date and a portion of
which occurs subsequent to the Closing Date shall be apportioned between
Purchaser and Seller on the basis of their respective period of ownership
during the applicable Percentage Rent Period. Seller shall be entitled to
percentage rent determined by multiplying the total percentage rent for such
Percentage Rent Period by a fraction, the numerator of which shall be the total
number of days in such Percentage Rent Period prior to the Closing Date and the
denominator of which shall be the total number of days in the Percentage Rent
Period. Purchaser shall be entitled to the remainder of such percentage rent.
The amount of such percentage rent allocated to Seller shall be adjusted by the
<PAGE>
parties and paid by Purchaser or Seller to the other, as appropriate, upon a
final reconciliation on April 15, 1997 for calendar year 1996 and for calendar
year 1997 (with percentage rent for calendar year 1997 being based on 75% of
the percentage rent payable in calendar year 1996 with no other reproration).
Seller shall have similar audit rights as contained in Paragraph 12.2 above.
Purchaser agrees to furnish to Seller statements of monthly and annual gross
sales (or other required reports or statements) received by Purchaser from
tenants with respect to any Percentage Rent Period a portion of which occurs
both prior and subsequent to the Closing Date; likewise, Seller agrees to
furnish to Purchaser any such statements and reports received by Seller prior
to Closing with respect to such Percentage Rent Period.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest
in this Agreement without the prior written consent of the Seller. Any
assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement shall be an act of default hereunder by Purchaser
and subject to the provisions of Paragraph 10 hereof. Notwithstanding the
foregoing, Purchaser may assign its interest in this Agreement without the
consent of Seller to any entity affiliated with Purchaser, or the principals of
Purchaser, or to any fund sponsored by Purchaser (e.g., Dim Vastgoed N.V.) or
its affiliate or to a Florida limited partnership in which Jan W. Dane and
Barry Ross (and/or entities which they control) own the stock of the corporate
general partner of said partnership, provided that Purchaser remains liable for
and the assignee assumes the obligations of Purchaser hereunder. If any
assignee of Purchaser under this Agreement petitions or applies for relief in
bankruptcy or Assignee is adjudicated as a bankrupt or insolvent, or Assignee
files any petition, application for relief or answer-seeking or acquiescing in
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future federal,
state or other statute, law, code or regulation relating to bankruptcy,
insolvency, or other relief for debtors (collectively, a "Bankruptcy Filing")
on or before the Closing Date, said Bankruptcy Filing shall be a default under
this Agreement and Purchaser shall indemnify Seller for all costs, attorney's
fees and expenses of Seller resulting from Seller's efforts to obtain the
Earnest Money as liquidated damages and to clear title to the Property from any
encumbrance resulting from the Bankruptcy Filing.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Insignia Mortgage and Investment Company, Inc. ("Insignia") (to
be paid by Seller), Aztec Group, Inc. ("Aztec") ($100,000 to be paid by
Purchaser if, and only if, the transaction set forth herein closes) and Ross
Realty Investments, Inc. ("Ross") (to be paid by Purchaser if, and only if, the
transaction set forth herein closes). Seller's commission to Insignia shall
only be payable out of the proceeds of the sale of the Property in the event
the transaction set forth herein closes. Purchaser and Seller shall indemnify,
defend and hold the other party hereto harmless from any claim whatsoever
(including without limitation, reasonable attorney's fees, court costs and
costs of appeal) from anyone claiming by or through the indemnifying party any
<PAGE>
fee, commission or compensation on account of this Agreement, its negotiation
or the sale hereby contemplated other than to Insignia, Aztec and Ross. The
indemnifying party shall undertake its obligations set forth in this Paragraph
15 using attorneys selected by the indemnifying party and reasonably acceptable
to the indemnified party. The provisions of this Paragraph 15 will survive the
Closing and delivery of the Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter
or thing shall only mean such knowledge or notice that has actually been
received by James Mendelson (the "Seller's Representative"), and any
representation or warranty of the Seller is based upon those matters of which
the Seller's Representative has actual knowledge. Any knowledge or notice
given, had or received by any of Seller's agents, servants or employees shall
not be imputed to Seller, the general partner or limited partners of Seller,
the subpartners of the general partner or limited partners of Seller or
Seller's Representative.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties: (i) Seller has no
knowledge of any pending or threatened litigation, claim, condemnation, cause
of action or administrative proceeding concerning the Property; (ii) Seller has
the power to execute and deliver this Agreement and consummate the transactions
contemplated herein; (iii) to Seller's knowledge the rent roll attached hereto
as Exhibit M, which Seller will update, to its knowledge, as of the Closing
Date, is accurate as of the date set forth thereon; (iv) Seller has received no
notice of any cancellation of its insurance policies affecting the Property;
(v) to Seller's knowledge, except as may have been set forth in the Existing
Report, Seller has not received any notice from any governmental authority
having jurisdiction over the Property of any uncured violation of any
Environmental Law with respect to the Property; and (vi) to Seller's knowledge,
except as set forth in Paragraph 12.1, there are no outstanding brokerage
commissions which are due and owing and there are no obligations of Seller for
uncompleted tenant improvements.
16.3. Purchaser hereby represents and warrants to Seller that Purchaser
has the full right, power and authority to execute and deliver this Agreement
and consummate the transactions contemplated herein.
16.4. Seller will not terminate, modify or extend any lease on the
Property and will not accept surrender of any lease on the Property without the
prior written consent of Purchaser, which consent shall not be unreasonably
withheld, unless the tenant is in default for the non-payment of rent in an
amount equal to or greater than two (2) months rent or the default by the
tenant causes a default by the Seller under the terms of other leases on the
Property. Seller shall provide Purchaser notice of any such termination within
three (3) business days of the date of such termination.
16.5. Seller covenants to operate and manage the Property in the same
manner that it has managed, maintained and operated the Property during the
period of Seller's ownership, subject to reasonable wear and tear and casualty.
<PAGE>
16.6. If at any time after the execution of this Agreement, either
Purchaser or Seller become aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question to
become untrue in any material respect, said party shall not be in default under
this Agreement and the sole remedy of the other party shall be to terminate
this Agreement. Notwithstanding anything contained herein to the contrary, if
the status of any of the tenancies changes from the date of the rent roll
attached hereto and the date of the rent roll delivered at Closing, provided
the change in status is not caused by a breach of Seller's covenants contained
in Paragraph 16.5 herein or Paragraph 26, then Purchaser shall not have the
right to terminate this Agreement or make any claim for a breach of a
representation or warranty hereunder involving the rent roll or tenancies
thereunder. Purchaser and Seller are prohibited from making any claims against
the other party hereto after the Closing with respect to any breaches of the
other party's representations and warranties contained in this Agreement that
the claiming party has actual knowledge of prior to the Closing.
16.7. The parties agree that the representations and warranties contained
herein shall survive Closing for a period of ninety (90) days (i.e., the
claiming party shall have no right to make any claims against the other party
for a breach of a representation or warranty after the expiration of ninety
(90) days immediately following Closing).
17. LIMITATION OF LIABILITY. Neither Seller, nor any Affiliate of Seller, nor
any of their respective beneficiaries, shareholders, partners, officers,
directors, agents or employees, heirs, successors or assigns shall have any
personal liability of any kind or nature for or by reason of any matter or
thing whatsoever under, in connection with, arising out of or in any way
related to this Agreement and the transactions contemplated herein, and
Purchaser hereby waives for itself and anyone who may claim by, through or
under Purchaser any and all rights to sue or recover on account of any such
alleged personal liability.
18. TIME OF ESSENCE. Time is of the essence of this Agreement.
19. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
<PAGE>
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James Mendelson
(847) 317-4367
(847) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Dane Real Estate, Inc.
1650 S.E. 17th Street
Suite 310
Fort Lauderdale, Florida 33316
Attention: Jan W. Dane
(954) 523-2070
(954) 463-0515 (FAX)
and one copy to: Murai Wald Biondo & Moreno
25 S.E. 2nd Avenue
Suite 900
Ingraham Building
Miami, Florida 33131
Attention: Gerald Biondo, Esq.
(305) 358-5900
(305) 358-9490 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or the same day as given if sent by facsimile transmission and
received by 5:00 p.m. Chicago time or on the 4th business day after the same is
deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be served upon the Escrow Agent.
20. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward
the following to the Escrow Agent:
<PAGE>
(A) Earnest Money;
(B) One (1) fully executed copy of this Agreement; and
(C) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
21. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the State of Florida, except that with respect to the retainage of the
Earnest Money as liquidated damages the laws of the State of Illinois shall
govern.
22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
23. 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.
24. 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.
25. RADON GAS. RADON IS A NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN IT
HAS ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH
RISKS TO PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT EXCEED
FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN FLORIDA.
ADDITIONAL INFORMATION REGARDING RADON AND RADON TESTING MAY BE OBTAINED FROM
YOUR COUNTY PUBLIC HEALTH UNIT. THIS PARAGRAPH IS PROVIDED FOR INFORMATIONAL
PURPOSES PURSUANT TO SECTION 404.056(8), FLORIDA STATUTES, (1988).
26. NEW LEASES. Prior to the expiration of the Inspection Period, Seller
agrees to deliver to Purchaser five (5) days prior to the expiration of the
Inspection Period any new leases executed by Seller. Any such leases executed
by Seller prior to the expiration of the Inspection Period shall be with
bonafide, arms-length tenants, at market rental rates for a basic term not to
exceed five (5) years and on Seller's standard form of lease, for uses which
are compatible with the Property and are not prohibited by other existing
leases and shall contain concession packages that do not exceed the following:
(i) free rent for a period through March 31, 1997, (ii) tenant allowances for
$3.00 per square foot of leasable area, and (iii) leasing commissions for the
first five (5) years of the term at market rates. After the expiration of the
Inspection Period, Seller shall not execute any new lease affecting the
Property without Purchaser's prior written consent. Upon requesting
Purchaser's consent, Seller shall deliver a complete copy of said lease to
Purchaser. Purchaser's consent shall be deemed given if Purchaser has not
responded to the contrary within five (5) business days after receipt of
Seller's written request and the complete copy of said lease. If approved by
Purchaser, a complete copy of any such lease shall be delivered to Purchaser
within ten (10) days of the full execution thereof. All costs incurred in
connection with the negotiation and execution of any new lease, including
<PAGE>
without limitation, leasing costs and commissions, tenant improvement
allowances, and reasonable attorneys' fees, shall be paid by Purchaser or
credited to Seller at Closing if already paid by Seller. Purchaser and Seller
agree that Purchaser shall have the right to represent to prospective tenants
that Purchaser has executed the Agreement and has the right to present lease
transactions to Seller herein. Seller shall in good faith review all lease
transactions presented to Seller by Purchaser and shall execute such leases
which Seller deems suitable subject to the reasonable approval of Seller.
Seller shall have the right to take into account the following factors in
determining whether or not to execute the lease: (i) the creditworthiness of
the prospective tenant; (ii) the reputation and operation history of the
tenant; (iii) the compatibility of the use and any then existing exclusivity
covenants; and (iv) the rental rate and concession package (including, without
limitation, tenant allowance and landlord work and rental concessions). Any
transaction executed by Seller shall be on Seller's standard form subject to
changes reasonably approved by Seller. Notwithstanding anything contained
herein to the contrary, Purchaser hereby approves of the proposed lease
transaction set forth in Exhibit N attached hereto and incorporated herein. To
the extent Purchaser enters into a lease transaction in accordance with the
terms set forth in Exhibit N, Purchaser agrees that all costs incurred in
connection with the negotiation and execution of such lease, including, without
limitation, leasing costs and commissions, tenant improvement allowances of up
to $40,000 and reasonable attorneys' fees, shall be assumed and paid by
Purchaser or credited to Seller at Closing if already paid by Seller.
27. TENANT CERTIFICATE CONDITION TO CLOSING.
27.1. The following terms have been defined as follows for convenience of
reference:
(i) "Tenant Certificate" means a certificate, commonly known as an
estoppel certificate, signed by a tenant with respect to its Lease, either in
the form set forth on Exhibit L hereto or on such other form as is
substantially consistent with the requirements of the tenant's lease for such
certificates.
(ii) "Qualification" means any assertion in a Tenant Certificate
(whether in the form of Exhibit L or otherwise) of (i) a claim, counterclaim,
offset or defense against the landlord, (ii) a default on the part of the
landlord, (iii) unpaid credits, allowances or other sums due from the landlord
prior to the date of the estoppel (other than disclosed in Paragraph 12.1
herein or pursuant to a new lease pursuant to Paragraph 26 herein), (iv) an
unfulfilled construction or other obligation on the part of the landlord prior
to the date of estoppel (other than disclosed in Paragraph 12.1 herein or
pursuant to a new lease pursuant to Paragraph 26 herein), or (v) information
which is contrary (in an adverse respect to the landlord) (x) to the
information contained in the rent roll attached hereto as Exhibit M, or (y) the
information pertaining to tenant allowances and concessions and leasing
commissions contained in Paragraph 12.1;
(iii) "Unacceptable Qualification" means any Qualification other
than the following:
<PAGE>
(a) a Qualification which is expressly disclosed on the rent
roll attached hereto as Exhibit M or a Qualification relating to non-payment of
October, 1996, November, 1996 or December, 1996 rent, provided the same is not
as a result of a default by Landlord; or
(b) a Qualification expressly disclosed in this Agreement or
the Exhibits hereto.
27.2. If a Qualification is not an Unacceptable Qualification, it shall
not affect Purchaser's obligations to close hereunder or give rise to any
liability from Seller to Purchaser.
27.3. Seller shall promptly request a Tenant Certificate in the form of
Exhibit L from all tenants, and shall vigorously, in good faith, pursue the
collection of the same. Seller shall deliver to Purchaser, upon Seller's
receipt thereof, all Tenant Certificates signed by tenants (whether in the form
of Exhibit L or otherwise). Purchaser shall have the right to assist Seller in
obtaining the Tenant Certificates.
27.4. It shall be a condition to Purchaser's obligations hereunder (the
"Estoppel Condition") that Seller deliver to Purchaser, at or prior to 5:00
p.m. Chicago time on December 11, 1996 (i) a Tenant Certificate from Eckards
and Publix and (ii) a Tenant Certificate from tenants occupying at least 75% of
the occupied leasable area of the Property after excluding the leasable area of
Eckards and Publix. Seller shall be required to deliver to Purchaser all
Tenant Certificates received by Seller from the tenants at the Property.
Notwithstanding the foregoing to the contrary, Seller shall not have satisfied
the Estoppel Condition if any of the Tenant Certificates received by Seller,
disclose Unacceptable Qualifications other than Unacceptable Qualifications
with an "Estoppel Qualification Sum" (hereinafter defined) of less than $50,000
in the aggregate. The "Estoppel Qualification Sum" shall mean the following:
(i) if the claim asserted arises out of a defect which can be cured,
with the expenditure of money on a one time basis, such as a physical defect,
then such sum shall be calculated by a reasonable estimate of the cost to
repair or remediate said defect; and
(ii) if the claim asserted affects a continuing obligation of a
tenant under the lease, such as the payment of rent, then the claim shall be
calculated by (i) determining the amount of the claim on a per annum basis,
(ii) multiplying said amount by the number of years or partial years said claim
would affect the monetary obligations under the lease and (iii) discounting
said product on a present value basis using a discount rate of 10% per annum.
If the Unacceptable Qualifications have an Estoppel Qualification Sum of
less than $50,000 in the aggregate, then Seller shall either (i) grant
Purchaser a credit at Closing for an amount equal to the Estoppel Qualification
Sum, or (ii) cure all conditions giving rise to an Unacceptable Qualification
on or before the Closing. The determination to perform the covenant contained
in subparagraphs (i) or (ii) in the preceding sentence shall be made by Seller.
Provided Seller performs its covenant in this Paragraph 27.4, the disclosure of
Unacceptable Qualifications having an Estoppel Qualification Sum of less than
$50,000 in the aggregate shall not affect Purchaser's obligations to close
hereunder or give rise to any additional liability from Seller to Purchaser.
<PAGE>
27.5. If Seller has not satisfied the Estoppel Condition on or before
5:00 p.m. Chicago time on December 11, 1996, then Purchaser shall have the
right to terminate this Agreement by delivering written notice to Seller on or
before 5:00 p.m. Chicago time on December 16, 1996. If Purchaser exercises its
rights to terminate in accordance with the terms of this Paragraph 27.5, this
Agreement shall be null and void without further action of the parties and all
Earnest Money theretofore deposited by Purchaser together with any interest
accrued thereon, shall be returned to Purchaser, and neither party shall have
any further liability to the other, except for Purchaser's obligation to
indemnify Seller and restore the Property, as more fully set forth in Paragraph
7 hereof. If Purchaser does not terminate this Agreement pursuant to the first
sentence of this Paragraph 27.5, the parties shall proceed to Closing and (i)
Purchaser shall receive a credit at Closing equal to the amount of the Estoppel
Qualification Sum of the Unacceptable Qualifications contained in the Tenant
Certificates, up to an aggregate amount of $50,000 or (ii) Seller shall cure
all conditions giving rise to an Unacceptable Qualification Sum up to an
aggregate amount of $50,000. The determination to perform the covenant
contained in subparagraphs (i) or (ii) in the preceding sentence shall be made
by Seller.
27.6. Notwithstanding anything contained herein to the contrary, if
Seller does not satisfy the Estoppel Condition because the estoppel
qualification sum exceeds $50,000 and Purchaser has terminated the Agreement
pursuant to Paragraph 27.5, Seller shall have the right to vitiate Purchaser's
termination by written notice on or before 5:00 p.m. Chicago time on December
20, 1996 in which case the parties shall proceed to Closing and Seller shall
either (i) grant Purchaser at Closing for an amount to the Estoppel
Qualification Sum or (ii) cure all conditions giving rise to an Unacceptable
Qualification on or before the Closing. The determination to perform the
covenant contained in subparagraphs (i) or (ii) in the preceding sentence shall
be made by Seller.
28. SERVICE CONTRACTS. Attached hereto as Exhibit H is a list of service
contracts affecting the Property. Seller shall assign the service contracts to
Purchaser at Closing, and Purchaser shall assume responsibility and obligations
under the service contracts, but only with respect to matters which arise after
the closing. Seller agrees not to enter into any other service contracts
affecting the Property. Seller agrees to terminate any and all management
agreements affecting the Property as of the Closing Date.
29. SUBORDINATION AGREEMENTS. No later than Nov. 15, 1996, Purchaser shall
deliver to Seller the form of Subordination Agreement from Purchaser's
mortgage lender for execution by Publix and Eckards in form complying with
the terms of the respective Publix and Eckards lease and also from all other
Tenants whose lease does not provide for an automatic subordination to any new
mortgage financing. The parties acknowledge that Publix and Eckards are
required by the terms of the lease to provide a Subordination Agreement in
accordance with the terms of their respective leases. Promptly upon receipt
of the Subordination Agreement that complies with the terms of the respective
Publix and Eckards lease, Seller shall deliver the Subordination Agreements
to Publix and Eckards. It shall be a condition of Purchaser's obligations
hereunder that Seller deliver to Purchaser no later than forty-five (45) days
prior to the Closing an executed Subordination Agreement from Eckards and
Publix in a form that complies with the terms of the respective Publix and
Eckards lease ("Subordination
<PAGE>
Condition"). If Seller has not satisfied the Subordination Agreement on or
before forty-five (45) days prior to the Closing, then Purchaser shall have the
right to terminate this Agreement by delivering written notice to Seller on or
before the Closing Date. If Purchaser exercises its rights to terminate in
accordance with the terms of this Agreement, this Agreement shall be null and
void without further action of the parties and all earnest money
heretofore deposited by Purchaser, together with any interest accrued thereon,
shall be returned to Purchaser, and neither party shall have any further
liability to the other, except for Purchaser's obligation to indemnify Seller
and restore the Property, as more fully set forth in Paragraph 7 hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
DANE REAL ESTATE, INC., a Florida corporation
By: /s/ Jan W. Dane
----------------------------------------
Name: Jan W. Dane
----------------------------------------
Its: President
----------------------------------------
SELLER:
PEMBROKE ASSOCIATES LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Pembroke Partners, Inc., an Illinois
corporation, its general partner
By: /s/ John K. Powell, Jr.
----------------------------------------
Name:
----------------------------------------
Its:
----------------------------------------
<PAGE>
of Insignia Mortgage and Investment Company,
Inc.("Seller's Broker") executed this Agreement in its capacity as a real
estate broker and acknowledges that the fee or commission due it from Seller as
a result of the transaction described in this Agreement is as set forth in that
certain Listing Agreement, dated August 5, 1996 between Seller and
Seller's Broker (the "Listing Agreement"). Seller's Broker also acknowledges
that payment of the aforesaid fee or commission is conditioned upon the Closing
and the receipt of the Purchase Price by the Seller. Seller's Broker agrees to
deliver a receipt to the Seller at the Closing for the fee or commission due
Seller's Broker and a release, in the appropriate form, stating that no other
fees or commissions are due to it from Seller or Purchaser.
Insignia Mortgage and Investment Company, Inc.
By: /s/ Alan G. Lieberman
----------------------------------------
Alan G. Lieberman
<PAGE>
of Aztec Group, Inc. ("Purchaser's Broker") executed
this Agreement in its capacity as a real estate broker and acknowledges that
the fee or commission due it from Purchaser as a result of the transaction
described in this Agreement is $100,000.00. Purchaser's Broker also
acknowledges that payment of the aforesaid fee or commission is conditioned
upon the Closing and the receipt of the Purchase Price by the Seller.
Purchaser's Broker agrees to deliver a receipt to the Purchaser at the Closing
for the fee or commission due Purchaser's Broker from Purchaser and a release,
in the appropriate form, stating that no other fees or commissions are due to
it from Seller or Purchaser.
Aztec Group, Inc.
By:
------------------------------------
<PAGE>
of Ross Realty Investments, Inc. ("Purchaser's Consultant")
executed this Agreement in its capacity as a consultant to Purchaser and
acknowledges that the fee due it from Purchaser as a result of the transaction
described in this Agreement is as set forth in that certain Consulting
Agreement between Purchaser and Purchaser's Consultant (the "Consulting
Agreement"). Purchaser's Consultant also acknowledges that payment of the
aforesaid fee or commission is conditioned upon the Closing and the receipt of
the Purchase Price by the Seller. Purchaser's Consultant agrees to deliver a
receipt to the Purchaser at the Closing for the fee due Purchaser's Consultant
from Purchaser and a release, in the appropriate form, stating that no other
fees or commissions are due to it from Seller or Purchaser.
Ross Realty Investments, Inc.
By:
------------------------------------
<PAGE>
EXHIBITS
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Tenant Certificate
M - Rent Roll
N - Proposed New Lease
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 30th
day of October, 1996, by and between AMBASSADOR APARTMENTS, L.P., a Delaware
limited partnership ("Purchaser"), and LAKE SUN PARTNERS LIMITED PARTNERSHIP,
an Illinois limited partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of Twenty Four Million Dollars ($24,000,000.00) (the "Purchase
Price"), that certain property commonly known as The Sun Lake Apartments, Lake
Mary, Florida legally described on Exhibit A attached hereto (the "Property").
The Property shall include:
1.1. All of the land situated in unincorporated Lake Mary, Seminole
County, Florida described on Exhibit A, together with all of the rights,
privileges, profits, easements and appurtenances belonging or appertaining to
such land, including, without limitation, any right, title and interest in and
to streets, alleys, open or proposed roads, and rights-of-way adjacent to such
land and all right, title and interest of Seller, if any, in and to any award
made or to be made in lieu thereof and in any grade of street or otherwise and
in any water, sewer and utility pipes of and facilities in or appurtenant
thereto and all inchoate rights, if any, including without limitation, inchoate
rights of adverse possession (such land and all such rights, privileges,
easements and appurtenances are collectively referred to herein as the "Land").
1.2. The 600 unit apartment complex, ancillary parking lots, and any and
all other improvements and structures located on, over, under or in the Land
and any and all fixtures, facilities and other property attached to such
improvements or structures (hereinafter collectively called the
"Improvements"). The Land and Improvements are collectively referred to as the
"Real Estate".
1.3. The personal property set forth on Exhibit B attached hereto (the
"Personal Property"), together with Seller's right, title and interest, if any,
in fixtures and other personal and tangible property or interests therein owned
by Seller located at the Property, including, but not limited to, in the
heating, sprinkler, plumbing, air conditioning and ventilation systems,
furniture, appliances, blinds, offices, equipment and furniture, supplies,
replacements, computer hardware, machinery, tools, equipment and any other
personal property or interest therein owned by Seller located on the Real
Estate or any portion thereof between the date hereof and the Closing Date
(hereinafter defined), or used in connection with the ownership, operation
management or use of the Real Estate or any portion thereof (collectively,
"Personal Property Rights"), specifically excluding from the definitions of
Personal Property and Personal Property Rights all computer software owned by
Seller or used in connection with the Real Estate.
1.4. To the extent transferrable, all of Seller's right, title and
interest, if any, in any intangible property or interest therein owned or held
by Seller between the date hereof and the Closing Date in connection with the
Real Estate (or any portion thereof), the Personal Property or any business or
<PAGE>
businesses conducted by Seller on the Real Estate (or any portion thereof), in
connection with the ownership, operation or use thereof, including (1) any
trade style or trade name or mark and telephone and facsimile numbers used in
connection with the Real Estate; (2) any contract rights to the Service
Contracts (hereinafter defined); (3) all "as-built" plans and specifications
and other construction drawings of any type in Seller's possession relating to
the Real Estate; (4) all booklets and manuals, utility contracts, guarantees
and warranties (including guarantees and warranties pertaining to the
construction of the Improvements or pertaining to the acquisition of the Real
Estate (or any portion thereof) or any Personal Property; (5) all licenses and
other governmental permits, approvals and permissions (including, without
limitation, certificates of occupancy) relating to the Real Estate (or any
portion thereof) or the ownership, operation or use thereof and (6) all
non-proprietary tests, studies and reports prepared by third parties which are
in Seller's possession relating to the Real Estate (all of the forgoing are
collectively referred to as the "Intangible Property").
1.5. All leases, occupancy, license or concession agreements for any units
or space in the Improvements or any portion of the Real Estate (each, a "Lease"
and collectively, the "Leases");
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Upon the execution of this Agreement, the sum of Three Hundred
Thousand Dollars ($300,000.00) (the "Earnest Money") to be held in escrow by
and in accordance with the provisions of the Escrow Agreement ("Escrow
Agreement") attached hereto as Exhibit C. Notwithstanding anything to the
contrary set forth in this Agreement or any Exhibit, all interest on the
Earnest Money shall accrue for the benefit of the party to whom the Earnest
Money is payable; and
2.2. On the "Closing Date" (hereinafter defined), subject to the
satisfaction or waiver of the conditions for closing set forth in this
Agreement, the balance of the Purchase Price (i.e., $24,000,000.00 less (a) the
then outstanding principal amount of the Bonds (hereinafter defined) and (b)
the amount of the Earnest Money, adjusted in accordance with the prorations),
by federally wired "immediately available" funds, on or before 11:00 a.m
Chicago time.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by First American Title
Insurance Company (the "Title Issuer") dated August 21, 1996 for the Property
(the "Title Commitment"). For purposes of this Agreement, "Permitted
Exceptions" shall mean: (a) the general printed exceptions contained in the
standard title policy to be issued by Title Insurer based on the Title
Commitment; (b) general real estate taxes, association assessments, special
assessments, special district taxes and related charges not yet due and
payable; (c) matters shown on the "Survey" (hereinafter defined) except for
those matters set forth on Schedule 3.1; (d) matters caused by the actions of
Purchaser; (e) the Existing Bond and Mortgage Documents including, without
limitation, the Regulatory Agreement (hereinafter defined); (f) the title
<PAGE>
exceptions set forth in Schedule B-1 of the Title Commitment as Numbers 4 a.
and b. and in Section B-II 8 through 18 inclusive, except for those matters set
forth on Schedule 3.1, to the extent that same affect the Property; and (g)
those Leases set forth in the Rent Roll (hereinafter defined) delivered
pursuant to the provisions of Paragraph 7.1 that have not expired or been
sooner terminated as of the date of Closing and any additional tenant leases
entered into after the date of the Rent Roll in accordance with the provisions
of this Agreement, all as tenants only. All other exceptions to title shall be
referred to as "Unpermitted Exceptions". The Title Commitment shall be
conclusive evidence of good title as therein shown as to all matters to be
insured by the title policy, subject only to the exceptions therein stated. On
the Closing Date, Title Insurer shall deliver to Purchaser a standard title
policy in conformance with the previously delivered Title Commitment, subject
to Permitted Exceptions and Unpermitted Exceptions, if any, waived by Purchaser
(the "Title Policy"). Seller and Purchaser shall share equally the costs of
the Title Commitment and Title Policy (including all search and exam fees), and
Purchaser shall pay for the cost of any endorsements to, or extended coverage
on, the Title Policy.
3.2. Purchaser has received a survey of the Property prepared by Blount
Sikes & Associates dated February 17, 1989 and updated August 28, 1995 and June
21, 1996 (the "Survey"). Seller and Purchaser shall each pay for one-half of
the cost of updating the Survey. Purchaser hereby acknowledges that all
matters disclosed by the Survey are acceptable to Purchaser.
3.3. The obligation of Purchaser to pay various costs set forth in
Paragraphs 3.1 and 3.2 shall not survive the termination of this Agreement.
3.4. Seller will furnish Purchaser searches, dated not more than 2 weeks
prior to the Closing Date, of all Uniform Commercial Code financing statements
and tax liens (including, without limitation, Tangible Taxes) related to the
Property filed against Seller, as debtor, with the appropriate public officials
of the States of Florida and Illinois and the appropriate public officials
(including land records) of Seminole County, Florida (the "Searches").
4. PAYMENT OF CLOSING COSTS.
4.1. In addition to the costs set forth in Paragraphs 3.1 and 3.2, Seller
shall pay the transfer tax associated with the sale, and Purchaser and Seller
shall each pay for one-half of the costs of the documentary stamps to be paid
with reference to the "Deed" (hereinafter defined) and all other stamps,
intangible, mortgage documentary, recording, sales tax and surtax imposed by
law with reference to any other sale documents delivered in connection with the
sale of the Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction not otherwise provided for elsewhere in this
Agreement.
4.2. Purchaser shall pay all costs and expenses incurred in satisfying the
"Conditions Precedent" described in Sections 18.2.1, 18.2.2, 18.2.3 and 18.2.4
hereof.
<PAGE>
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to the
Title Commitment discloses any new Unpermitted Exception, Seller shall have
thirty (30) days from the date of the date-down to the Title Commitment, at
Seller's expense, to (i) bond over, cure and/or have any Unpermitted Exceptions
which, in the aggregate, do not exceed $50,000.00 (a "Minor Unpermitted
Exception"), removed from the Title Commitment or to have the Title Insurer
commit to insure against loss or damage that may be occasioned by such
Unpermitted Exceptions, or (ii) have the right, but not the obligation, to bond
over, cure and/or have any Unpermitted Exceptions which, in the aggregate,
exceed $50,000.00, removed from the Title Commitment or to have the Title
Insurer commit to insure against loss or damage that may be occasioned by such
Unpermitted Exceptions as reasonably satisfactory to Purchaser. In such event,
the time of Closing shall be delayed, if necessary, to give effect to said
aforementioned time periods, but in no event may Closing be extended more than
2 business days after the thirty (30) day period. If Seller fails to cure or
have said Unpermitted Exception removed or have the Title Insurer commit to
insure as specified above within said thirty (30) day period or if Seller
elects not to exercise its rights under (ii) in the preceding sentence,
Purchaser may terminate this Agreement upon notice to Seller within five (5)
days after the expiration of said thirty (30) day period; provided, however,
and notwithstanding anything contained herein to the contrary, if the
Unpermitted Exception which gives rise to Purchaser's right to terminate was
recorded against the Property as a result of the affirmative, willful action of
Seller (and not by an unrelated third party) which prevents the sale of the
Property in accordance with the terms hereof or if Seller is able to bond over,
cure or remove a Minor Unpermitted Exception for a cost not to exceed $50,000
or the Title Insurer is willing to insure over a Minor Unpermitted Exception
for a cost not to exceed $50,000 in accordance with the terms hereof and Seller
fails to expend said funds in either case, then Purchaser shall have the
additional rights contained in Paragraph herein. Absent notice from Purchaser
to Seller in accordance with the preceding sentence, Purchaser shall be deemed
to have elected to take title subject to said Unpermitted Exception. If
Purchaser terminates this Agreement in accordance with the terms of this
Paragraph 5.1, this Agreement shall become null and void without further action
of the parties and all Earnest Money theretofore deposited into the escrow by
Purchaser together with any interest accrued thereon, shall be returned to
Purchaser, and neither party shall have any further liability to the other,
except for Purchaser's obligation to indemnify Seller and restore the Property,
as more fully set forth in Paragraph 7.
5.2. Seller agrees to convey fee simple title to the Real Estate to
Purchaser by special warranty deed (the "Deed") in recordable form subject only
to the Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in Paragraph
7.1 of this Agreement, Seller shall bear all risk of loss with respect to the
Property up to the earlier of the dates upon which either possession or title
is transferred to Purchaser in accordance with this Agreement. Notwithstanding
the foregoing, in the event of damage to the Property by fire or other casualty
<PAGE>
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as initially determined by Seller in good faith and as reasonably
acceptable to Purchaser) Purchaser shall not have the right to terminate its
obligations under this Agreement by reason thereof, but Purchaser shall have
the right to elect (i) to require Seller to repair and restore the Property (in
which case the Closing Date shall be extended until completion of such
restoration, which completion shall be diligently pursued in a good and
workmanlike manner), (ii) to require Seller to assign and transfer to Purchaser
on the Closing Date all of Seller's right, title and interest in and to all
insurance proceeds paid or payable to Seller on account of such fire or
casualty, or (iii) or to take title to the Property in accordance with the
terms of this Agreement, with an abatement of the Purchase Price in the amount
agreed to by Seller and Purchaser, as described above and without an assignment
or transfer of insurance proceeds. Seller shall promptly notify Purchaser in
writing of any such fire or other casualty and Seller's determination of the
cost to repair the damage caused thereby. In the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of which
would cost in excess of $100,000.00 (as initially determined by Seller in good
faith and as reasonably acceptable to Purchaser), then this Agreement may be
terminated at the option of Purchaser, which option shall be exercised, if at
all, by Purchaser's written notice thereof to Seller within five (5) business
days after Purchaser receives written notice of such fire or other casualty and
Seller's determination of the amount of such damages, and upon the exercise of
such option by Purchaser this Agreement shall become null and void, the Earnest
Money deposited by Purchaser shall be returned to Purchaser together with
interest thereon, and neither party shall have any further liability or
obligations hereunder. In the event that Purchaser does not exercise the
option set forth in the preceding sentence, the Closing shall take place on the
Closing Date and Seller shall assign and transfer to Purchaser on the Closing
Date all of Seller's right, title and interest in and to all insurance proceeds
paid or payable to Seller on account of the fire or casualty. In the event
that in accordance with the foregoing provisions the insurance proceeds paid or
payable to Seller are assigned and transferred to Purchaser, (a) Seller shall
pay directly to Purchaser the amount of any deductible, and (b) Seller agrees
to cooperate with Purchaser, at no expense or liability to Seller, in enforcing
any rights under Seller's insurance policies, which obligations shall survive
the Closing and delivery of the Deed.
6.2. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately notify Purchaser of such
occurrence. In the event that, in the opinion of Purchaser, the taking of any
part of the Property may: (i) impair access to the Property; (ii) cause any
non-compliance with any applicable law, ordinance, rule or regulation of any
federal, state or local authority or governmental agencies having jurisdiction
over the Property or any portion thereof; or (iii) adversely impair the use of
the Property as it is currently being operated or used (hereinafter
collectively referred to as a "Condemnation Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease;
or
<PAGE>
6.2.2. proceed with the Closing, in which event Seller shall
assign to Purchaser all of Seller's right, title and interest in and to any
award made in connection with such condemnation or eminent domain proceedings,
whether prior to or at Closing.
6.3. Purchaser shall then notify Seller, within ten (10) business days
after Purchaser's receipt of Seller's notice, whether Purchaser elects to
exercise its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be
delayed, if necessary, until Purchaser makes such election. If Purchaser fails
to make an election within such ten (10) business day period, Purchaser shall
be deemed to have elected to exercise its rights under Paragraph 6.2.1. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Condemnation
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings. In the event that Purchaser exercises its rights under Paragraph
6.2.2, Seller agrees to cooperate with Purchaser, at no expense or liability to
Seller, in enforcing any right in and to any award made in connection with a
condemnation or eminent domain proceeding. In no event shall Seller agree to
settle any claim without the prior written consent of Purchaser. Such
obligations shall survive the Closing and delivery of the Deed.
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on August 1, 1996 and ending at 5:00
p.m. Chicago time on October 4, 1996 (said period being herein referred to as
the "Inspection Period"), Purchaser and the agents, engineers, employees,
contractors and surveyors retained by Purchaser have entered upon the Property,
to inspect the Property, including a review, audit, transcription or copy of
leases, books and records, cash deposit ledgers and maintenance logs maintained
at the Property, and to conduct and prepare such studies, tests and surveys as
Purchaser deemed reasonably necessary and appropriate. Purchaser may continue
to enter upon the Property after the termination of the Inspection Period. In
connection with Purchaser's review of the Property, Seller has delivered to
Purchaser copies of the current rent roll for the Property, the tax and
insurance bills for the last 3 years, utility account numbers, service
contracts, unaudited monthly 1995 and year-to-date operating statements, and
copies of Existing Bond and Mortgage Documents. Furthermore, if the following
are reasonably available to Seller, Seller shall deliver to Purchaser plans and
specifications.
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser are at Purchaser's sole cost and expense
and Purchaser shall restore the Property to the condition existing prior to the
performance of such tests or investigations by or on behalf of Purchaser.
Purchaser shall defend, indemnify and hold Seller and any affiliate, parent of
Seller, and all shareholders, employees, officers and directors of Seller or
Seller's affiliate or parent (hereinafter collectively referred to as
"Affiliate of Seller") harmless from any and all liability, cost and expense
(including without limitation, reasonable attorney's fees, court costs and
costs of appeal) suffered or incurred by Seller or Affiliates of Seller for
<PAGE>
injury to persons or property caused by Purchaser's investigations and
inspection of the Property. Purchaser shall undertake its obligation to defend
set forth in the preceding sentence using attorneys selected by Purchaser, with
the consent of Seller, which consent shall not be reasonably conditioned,
delayed or denied.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
Purchaser shall have no right to terminate this Agreement on account of
the results of its Inspection. However, Purchaser shall have the right to
terminate this Agreement by giving written notice of such termination to Seller
at any time prior to October 30, 1996 if (i) Purchaser's board of directors
does not approve this Agreement on or before October 30, 1996, (ii) or
Purchaser objects to any of the information set forth on Schedule 16.2.1. If
written notice is not received by Seller pursuant to this Paragraph 7.1 prior
to October 30, 1996 at 5:00 p.m., then the right of Purchaser to terminate this
Agreement pursuant to this Paragraph 7.1 on account of the disapproval by
Purchaser's board of directors shall be waived. If Purchaser terminates this
Agreement by written notice to Seller prior to October 30, 1996 at 5:00 p.m.,
the Earnest Money deposited by Purchaser shall be immediately paid to
Purchaser, together with any interest earned thereon, and neither Purchaser nor
Seller shall have any right, obligation or liability under this Agreement,
except for Purchaser's obligation to indemnify Seller and restore the Property,
as more fully set forth in this Paragraph 7.1. Notwithstanding anything
contained herein to the contrary, the terms of this Paragraph 7.1, shall
survive the Closing and the delivery of the Deed and termination of this
Agreement.
7.2. Purchaser acknowledges and agrees that it will be purchasing the
Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that Purchaser
will be purchasing the Property and the Personal Property "AS IS" and "WITH ALL
FAULTS", based upon the condition of the Property and the Personal Property as
of the date of this Agreement, wear and tear and loss by fire or other casualty
or condemnation excepted. Without limiting the foregoing, Purchaser
acknowledges that, except as may otherwise be specifically set forth elsewhere
in this Agreement, neither Seller nor its consultants, brokers or agents have
made any representations or warranties of any kind upon which Purchaser is
relying as to any matters concerning the Property or the Personal Property,
including, but not limited to, the condition of the land or any improvements
comprising the Property, the existence or non-existence of "Hazardous
Materials" (as hereinafter defined), economic projections or market studies
concerning the Property, any development rights, taxes, bonds, covenants,
conditions and restrictions affecting the Property, water or water rights,
topography, drainage, soil, subsoil of the Property, the utilities serving the
Property or any zoning or building laws, rules or regulations or "Environmental
Laws" (hereinafter defined) affecting the Property. Seller makes no
representation or warranty that the Property complies with Title III of the
Americans with Disabilities Act or any fire code or building code. Purchaser
<PAGE>
hereby releases Seller and the Affiliates of Seller from any and all liability
in connection with any claims which Purchaser may have against Seller or the
Affiliates of Seller, and Purchaser hereby agrees not to assert any claims for
contribution, cost recovery or otherwise, against Seller or the Affiliates of
Seller, relating directly or indirectly to the existence of asbestos or
Hazardous Materials on, or environmental conditions of, the Property, whether
known or unknown. As used herein, "Environmental Laws" means all federal,
state and local statutes, codes, regulations, rules, ordinances, orders,
standards, permits, licenses, policies and requirements (including consent
decrees, judicial decisions and administrative orders) relating to the
protection, preservation, remediation or conservation of the environment or
worker health or safety, all as amended or reauthorized, or as hereafter
amended or reauthorized, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et seq., the Resource Conservation and Recovery Act of 1976
("RCRA"), 42 U.S.C. Section 6901 et seq., the Emergency Planning and Community
Right-to-Know Act ("Right-to-Know Act"), 42 U.S.C. Section 11001 et seq., the
Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq., the Federal Water
Pollution Control Act ("Clean Water Act"), 33 U.S.C. Section 1251 et seq., the
Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 260c1 et seq., the
Safe Drinking Water Act ("Safe Drinking Water Act"), 42 U.S.C. Section 300f et
seq., the Atomic Energy Act ("AEA"), 42 U.S.C. Section 2011 et seq., the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. Section 651 et seq., and
the Hazardous Materials Transportation Act (the "Transportation Act"), 49
U.S.C. Section 1802 et seq. As used herein, "Hazardous Materials" means:
(1) "hazardous substances," as defined by CERCLA; (2) "hazardous wastes," as
defined by RCRA; (3) any radioactive material including, without limitation,
any source, special nuclear or by-product material, as defined by AEA; (4)
asbestos in any form or condition; (5) polychlorinated biphenyls; and (6) any
other material, substance or waste to which liability or standards of conduct
may be imposed under any Environmental Laws. Notwithstanding anything
contained herein to the contrary, the terms of this Paragraph 7.2 shall survive
the Closing and the delivery of the Deed and termination of this Agreement.
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Such financial information is the
financial information relied upon by Seller for reporting purposes to Seller's
partners and in the preparation of Seller's tax returns. Seller and Purchaser
hereby acknowledge that such information has been provided to Purchaser at
Purchaser's request solely as illustrative material. Except as otherwise
specifically set forth in this Agreement, Seller makes no representation or
warranty that such material is complete or accurate or that Purchaser will
achieve similar financial or other results with respect to the operations of
the Property, it being acknowledged by Purchaser that Seller's operation of the
Property and allocations of revenues or expenses may be vastly different than
Purchaser may be able to attain. Purchaser acknowledges that it is a
sophisticated and experienced purchaser of real estate and further that
Purchaser has relied upon its own investigation and inquiry with respect to the
operation of the Property and releases Seller and the Affiliates of Seller from
any liability with respect to such historical information. Notwithstanding
anything contained herein to the contrary, the terms of this Paragraph 7.3
shall survive the Closing and the delivery of the Deed and termination of this
Agreement.
<PAGE>
7.4. Seller has provided to Purchaser a true and correct copy the
following existing reports: Phase I Environmental Site Assessment prepared by
Law Associates, Inc. dated October 15, 1991 and the Phase I Environmental
Assessment Report prepared by Consulting Solutions, Inc. dated July 25, 1995
("Existing Reports"). Seller makes no representation or warranty concerning
the accuracy or completeness of the Existing Reports. Seller agrees to
cooperate with Purchaser in obtaining a "reliance letter" from Law Associates,
Inc. Purchaser hereby releases Seller and the Affiliates of Seller from any
liability whatsoever with respect to the Existing Reports, or, including,
without limitation, the matters set forth in the Existing Reports, and the
accuracy and/or completeness of the Existing Reports. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Reports. Notwithstanding anything contained herein to the
contrary, the terms of this Paragraph 7.4 shall survive the Closing and the
delivery of the Deed and termination of this Agreement.
7.5. Between the date of the execution of this Agreement and the Closing
Date, Seller shall:
7.5.1. operate and manage the Property in the same manner that it
has managed, maintained and operated the Property during the period of Seller's
ownership, subject to reasonable wear and tear and casualty (subject to the
provisions of Paragraph 6);
7.5.2. keep and perform all of the material obligations to be
performed by the Seller under each and every of the Leases and the Service
Contracts as performed by Seller in the ordinary course of its business;
7.5.3. neither execute any new lease nor renew or modify any
existing Lease without Purchaser's prior written consent. However, Purchaser's
consent shall not be required if such lease, as entered into, renewed or
modified is made in accordance with each of the following criteria:
(A) such lease is on the form presently used by Seller, a copy of
which has been furnished by Seller's manager to Purchaser;
(B) the terms of such lease is for not less than six (6) months or
more than one (1) year;
(C) such lease provides for the payment of rent in any amount equal
to or greater than the rent charged by Seller under leases for comparable units
in the Property executed within three (3) months preceding the date of this
Agreement, such rent being free of concession or incentives that would result
in more than one month's free rent or have value in excess of one (1) month's
rental; and
(D) the tenant under such lease is not related to or affiliated with
Seller.
No such lease shall violate the terms of any of the Lease or any of the
Existing Bond and Mortgage Documents.
<PAGE>
Subject to the foregoing, Seller shall, in the ordinary course of its
business, seek tenants for all units that are now vacant or that will become
vacant prior to the end of the month following the Closing and render vacant
and unoccupied apartment units market-ready at current market rates. Without
the prior written consent of Purchaser, which consent shall not be unreasonable
withheld, Seller shall not terminate any of the Leases unless the tenant
thereunder shall have defaulted under its lease. Seller shall not accept from
any of the tenants of the Property payment of rent more than one month in
advance or apply any security deposit to rent due for any tenant unless such
tenant shall be in default under its lease. Seller shall furnish Purchaser
with monthly Rent Rolls, which shall show all leases entered into by Seller
after the date hereof;
7.5.4. Not mortgage, hypothecate or further encumber the Property or
any portion thereof or permit any liens on the Property or any portion thereof
to arise by operation of laws, or otherwise;
7.5.5. Maintain its current insurance coverage on the Property, in
full force and effect, through the Closing Date;
7.5.6. Not enter into any new or renewal Service Contract or any
other agreement relating to the Property or extension or cancellation thereof
except in the ordinary course of business and except as may be canceled upon
thirty (30) days notice, without the prior consent of Purchaser, which consent
shall not be unreasonably withheld;
7.5.7. Continue Seller's existing program of maintenance, repair and
replacement, in the ordinary course of Seller's business;
7.5.8. Except in connection with replacements, repairs and
maintenance, not convey or remove from the Property or any portion thereof any
of the Improvements, Personal Property or Intangible Property;
7.5.9. Promptly send to Purchaser copies of all written notices it
receives from governmental or regulatory authorities concerning Seller, or the
Property or the operation, use or maintenance thereof; and
7.5.10. Maintain and repair the Property in the ordinary course of
Seller's business.
8. CLOSING.
8.1. The closing of this transaction (the "Closing") shall be on November
15, 1996 (the "Closing Date"), at the office of Title Insurer, First American
Title Insurance Company, at which time Seller shall deliver possession of the
Property to Purchaser. However, in the event that all of the Conditions
Precedent have not been satisfied prior to September 12, 1996, Seller shall
grant an extension of the Closing Date to December 15, 1996 on the condition
that Purchaser demonstrates to Seller's reasonable satisfaction that it (i) has
submitted all applications required to meet the obligations under Paragraph
18.2; (ii) has submitted all information that any of the Issuer, Trustee,
Berkshire (hereinafter defined), Fannie Mae and any other applicable parties
<PAGE>
have requested as of the date Purchaser has requested such extension from
Seller; (iii) has paid all fees and expenses relating to such applications then
payable to or at the direction of any of the Issuer, Trustee, Berkshire, Fannie
Mae and any other applicable parties; (iv) has provided Seller with copies of
all documents that Purchaser has received from any of the Issuer, Trustee,
Berkshire, Fannie Mae and any other applicable parties; and (v) is using its
commercially reasonable best efforts to obtain the approval of such
applications. Alternatively, Seller may extend the Closing Date, in its sole
discretion, to December 15, 1996, upon written notice to Purchaser to such
effect. This transaction shall be closed with escrow instructions acceptable
to Seller and Purchaser to the Title Insurer, in accordance with the general
provisions of the usual and customary form of deed and money escrow for similar
transactions as a "New York style" closing at which the Purchaser shall wire
the Purchase Price to Title Insurer on the Closing Date and prior to the
release of the Purchase Price to Seller, Purchaser shall receive the Title
Policy or marked up commitment dated the date of the Closing Date. Seller
shall deliver to Title Insurer any customary affidavit in connection with a New
York style closing. Unless otherwise specified in this Agreement, all closing
and escrow fees shall be divided equally between the parties hereto.
8.2. On the Closing Date, the Purchaser shall assume all obligations of
the Seller under the Bonds, including all payment obligations and all other
obligations, arising on or after the Closing Date as evidenced and/or secured
by, among other items, the Indenture (hereinafter defined), the Financing
Agreement (hereinafter defined), the Regulatory Agreement, the Multifamily Note
(hereinafter defined) and the Multifamily Deed to Secure Debt (hereinafter
defined), which Bonds have an outstanding principal balance of approximately
$15,535,000.00 as of November 1, 1996. Purchaser shall not assume or be liable
for any obligation of Seller arising prior to the Closing Date regardless of
when a claim respecting such obligation is first raised. Seller hereby
authorizes Purchaser to discuss any and all issues relating to the Bonds and
the Existing Bond and Mortgage Documents with Fannie Mae, the Issuer, the
Trustee, Berkshire (all such terms, hereinafter defined) and any other
interested parties. Seller will reasonably cooperate with Purchaser in
facilitating such discussions.
9. CLOSING DOCUMENTS.
9.1. On or prior to the Closing Date, Seller and Purchaser shall execute
and deliver to one another a joint closing statement. In addition, Purchaser
shall deliver to Seller the balance of the Purchase Price, an assumption of the
documents set forth in Paragraph 9.2.3, 9.2.4 and 9.2.13 and such other
documents as may be reasonably required by the Title Insurer in order to
consummate the transaction as set forth in this Agreement.
9.2. On the Closing Date, Seller shall deliver to Purchaser the following:
9.2.1. the Deed (in the form of Exhibit E attached hereto), duly
executed and acknowledged by Seller, subject to Permitted Exceptions and those
Unpermitted Exceptions waived by Purchaser;
9.2.2. a special warranty bill of sale as to the Personal Property
and a quit claim bill of sale as to the Personal Property Rights conveying the
Personal Property and Personal Property rights (in the form of Exhibit F
attached hereto), duly executed and acknowledged by Seller;
<PAGE>
9.2.3. an assignment and assumption of Intangible Property (in the
form attached hereto as Exhibit G), duly executed and acknowledged by Seller,
including, without limitation, the service contracts listed in Exhibit H (the
"Service Contracts"). However, if a Service Contract is not assignable or
assumable and Purchaser does not want to assume such Service Contract, Seller
will cooperate with Purchaser, at no cost or expense to Seller, to terminate
such Service Contract;
9.2.4. an assignment and assumption of leases and security deposits
(in the form attached hereto as Exhibit I), duly executed and acknowledged by
Seller;
9.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.6. original, and/or copies of, leases, lease files, service
contracts and all other contracts, agreements or other documentation assigned
to Purchaser in accordance with Paragraphs 9.2.3 and 9.2.4 affecting the
Property in Seller's possession, which shall be delivered at the Property;
9.2.7. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.8. possession of the Property to Purchaser, subject to the terms
of leases;
9.2.9. evidence of the termination of the management agreement;
9.2.10. notice to the tenants of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the leases
and the obligation to refund the security deposits (in the form of Exhibit K);
9.2.11. an updated Rent Roll certified as true and correct and dated
no later than two (2) business days prior to Closing;
9.2.12. originals, to the extent in Seller's possession or control,
or copies of Existing Bond and Mortgage Documents;
9.2.13. an assignment and assumption of Existing Bond and Mortgage
Documents (in the form of Exhibit M) duly executed and acknowledged by Seller;
9.2.14. an opinion of bond counsel approved by Purchaser satisfying
the requirements of Paragraph 18.2.2 below; and
9.2.15. a certificate of Seller recertifying that the representations
and warranties made in this Agreement remain true, in all material respects, as
of the Closing, or specifying such ways in which they do not remain true, and
if any such representations or warranties do not remain true in all material
respects, Purchaser may terminate this Agreement, in which event the Earnest
Money deposited by Purchaser shall immediately be paid to Purchaser, with
interest thereon. The terms of this paragraph 9.2.15 shall survive termination
of this Agreement.
<PAGE>
10. PURCHASER'S DEFAULT. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, 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, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF
SELLER'S DEFAULT IS (i) ITS (AND NOT AN UNRELATED THIRD PARTY'S) AFFIRMATIVE,
WILLFUL ACTION WHICH RESULTS IN THE RECORDING OF AN ENCUMBRANCE AGAINST THE
PROPERTY WHICH PREVENTS THE SALE OF THE PROPERTY IN ACCORDANCE WITH THE TERMS
HEREOF OR WHICH GIVES RISE TO PURCHASER'S RIGHT TO TERMINATE THIS AGREEMENT
PURSUANT TO PARAGRAPH 5 HEREOF; (ii) ITS FAILURE TO EXPEND $50,000 IF (a)
SELLER IS ABLE TO BOND OVER, CURE OR REMOVE A MINOR UNPERMITTED EXCEPTION FOR A
COST NOT TO EXCEED $50,000 OR (b) THE TITLE INSURER IS WILLING TO INSURE OVER A
MINOR UNPERMITTED EXCEPTION FOR A COST NOT TO EXCEED $50,000 IN ACCORDANCE WITH
THE TERMS HEREOF OR (iii) ITS WILLFUL REFUSAL TO DELIVER THE DEED, THEN
PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
12. PRORATIONS.
12.1. Rents (exclusive of delinquent rents, but including prepaid rents);
prepaid associations dues, refundable security deposits (which will be assigned
to and assumed by Purchaser and credited to Purchaser at Closing); interest on
and any fees including, without limitation, credit enhancement, issuer or
trustee fees respecting the Bonds; water and other utility charges, if any;
fuels; prepaid reasonable and customary operating expenses; real and personal
property taxes; and other similar items shall be adjusted ratably as of 11:59
p.m. on the day prior to the Closing Date, and credited against the balance of
the cash due at Closing. To the extent any escrows or bond repayment deposits
for taxes and insurance established in connection with the Bonds or Existing
Bond and Mortgage Documents are not refunded to Seller at Closing, the proceeds
in said escrows shall be assigned to Purchaser and the amounts thereof shall be
a credit to Seller at the Closing. Assessments payable in installments which
are due subsequent to the Closing Date shall be paid by Purchaser. If the
amount of any of the items to be prorated is not then ascertainable, the
adjustments thereof shall be on the basis of the most recent ascertainable
data. All prorations will be final except as to delinquent rent referred to in
Paragraph 12.2 below and except for real estate taxes which will be reprorated
upon receipt of actual bills. If any unit has remained vacant for more than 9
days without being made "rent ready", Seller will give Purchaser a credit of
<PAGE>
$250 for such unit for cleaning, painting touch-up, carpet shampoo and minor
appliance repair. If such a unit requires carpet replacement or other
renovation not covered by the preceding sentence, Purchaser and Seller will
agree on the amount of the credit to Purchaser. If Seller receives a credit
for a utility deposit, Seller shall execute an assignment thereof substantially
in the form attached as Exhibit N.
12.2. All monies received after Closing by Purchaser from any tenant of
the Property who is indebted under a lease for rent for any period prior to the
Closing Date will first be applied to rent or other charges currently due to
Purchaser under the applicable lease. Any balance remaining after the
application of such monies to current rent shall be deemed a "Post-Closing
Receipt", but only to the extent such pre-closing indebtedness has not been
paid in full. Within ten (10) days following each receipt by Purchaser of a
Post-Closing Receipt, Purchaser shall pay such Post-Closing Receipt to Seller.
Purchaser shall use good faith efforts to collect all amounts which, upon
collection, would constitute Post-Closing Receipts hereunder. Within 120 days
after the Closing Date, Purchaser shall deliver to Seller a reconciliation
statement of Post-Closing Receipts through the first 90 days after the Closing
Date. Upon the delivery of the Post-Closing Receipts reconciliation, Purchaser
shall deliver to Seller any Post-Closing Receipts owing to Seller and not
previously delivered to Seller in accordance with the terms hereof. Paragraph
12.2 of this Agreement shall survive the Closing and the delivery and recording
of the Deed.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. Except for any affiliate of Purchaser or an entity that is
directly owned or controlled by Purchaser or an entity in which Purchaser has
an ownership interest and is a general partner with the power and authority
customarily held by a general partner (each, a "Permitted Assignee"), Purchaser
shall not have the right to assign its interest in this Agreement without the
prior written consent of the Seller. Except for any assignment to a Permitted
Assignee, any assignment or transfer of, or attempt to assign or transfer,
Purchaser's interest in this Agreement shall be an act of default hereunder by
Purchaser and subject to the provisions of Paragraph 10 hereof. Seller shall
not assign its rights under or its interest in this Agreement, and any
assignment of proceeds of the sale of the Property shall include a payment
direction executed by Seller.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Cushman & Wakefield of Florida, Inc. (to be paid by Seller).
Seller's commission to Cushman & Wakefield of Florida, Inc. shall only be
payable out of the proceeds of the sale of the Property in the event the
transaction set forth herein closes. Purchaser and Seller shall indemnify,
defend and hold the other party hereto harmless from any claim whatsoever
(including without limitation, reasonable attorney's fees, court costs and
costs of appeal) from anyone claiming by or through the indemnifying party any
fee, commission or compensation on account of this Agreement, its negotiation
or the sale hereby contemplated other than to Cushman & Wakefield of Florida,
<PAGE>
Inc. Seller hereby agrees to indemnify, defend and hold Purchaser harmless
from any claims whatsoever (including, without limitation, reasonable
attorneys' fees, court costs and costs of appeal) from any claim or demand by
Cushman & Wakefield of Florida, Inc. (and its successors and assigns). The
indemnifying party shall undertake its obligations set forth in this Paragraph
15 using attorneys selected by the indemnifying party and reasonably acceptable
to the indemnified party. The provisions of this Paragraph 15 will survive the
Closing and delivery of the Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any
matter or thing shall only mean such knowledge or notice that has actually been
received by Daniel L. Charleston (Vice President, Property Sales for The Balcor
Company) or Michael Becker (Vice President of Asset Management for The Balcor
Company) (together, "Seller's Representative"), and any representation or
warranty of the Seller is based upon those matters of which the Seller's
Representative has actual knowledge. Seller's Representatives shall deliver a
copy of the representations and warranties contained in Paragraph 16.2 below to
the existing day-to-day on-site property manager, for its review and request
the day-to-day on-site property manager inform Seller's Representative of any
inaccuracies contained in such representations and warranties. Any knowledge
or notice given, had or received by any of Seller's agents, servants or
employees shall not be imputed to Seller, the general partner or limited
partners of Seller, the subpartners of the general partner or limited partners
of Seller or Seller's Representative.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties, which
representations and warranties are made to Seller's knowledge as of the date
hereof and as of the date of Seller's recertification in connection with
Closing, and which shall, subject to Paragraph 16.4, be remade at Closing, and
shall survive Closing to the extent set forth in Paragraph 16.4:
16.2.1. Seller has no knowledge of any pending or threatened
litigation, governmental investigation, governmental inquiry, claim, cause of
action or administrative proceeding concerning the Property except as described
in Schedule 16.2.1;
16.2.2. Seller has not received written notice from any governmental
or regulatory authority that the use and operation of the Property is in
violation of applicable codes or laws which has not previously been corrected;
16.2.3. The Rent Roll attached hereto as Exhibit L which Seller will
update as of the Closing Date is true, accurate, correct and complete (as to
the matters shown thereon) as of the date set forth thereon;
16.2.4. Except as may be set forth in the Existing Report, Seller
has not received any written notice from any governmental authority having
jurisdiction over the Property of any uncured violation of any Environmental
Law with respect to the Property;
16.2.5. The Existing Reports are the only environmental report of
the Property provided to or obtained by Seller since October 15, 1991;
<PAGE>
16.2.6. Seller has not received any written notice that Seller is in
default under any of the Existing Bond and Mortgage Documents to which it is a
party;
16.2.7. Seller has all necessary and requisite authority to enter
into this Agreement and to consummate all of the transactions contemplated
hereby, and the persons executing this Agreement and all other documents
required to consummate the transaction contemplated hereby on behalf of Seller
are duly authorized to execute this Agreement and such other documents on
behalf of Seller, and are authorized to bind Seller;
16.2.8. Seller is a limited partnership duly formed and validly
existing under the laws of the State of Illinois and, to the extent required by
law, is qualified to do business in and in good standing as a foreign limited
partnership under the laws of the State of Florida;
16.2.9. Seller is a "United States person", as defined by Internal
Revenue Code Section 1445 and Section 7701;
16.2.10. The execution of this Agreement by Seller does not, and the
performance by Seller of the transaction contemplated by this Agreement will
not, violate or constitute a breach of the partnership agreement or any
partners' resolution of Seller or any contract, permit, license, order or
decree to which Seller is a party or by which Seller or its assets are bound;
16.2.11. Except as shown on the Rent Roll attached hereto as Exhibit
L, as updated as of the Closing Date, no party, person or entity is in
possession of the Property nor any portion thereof except for Seller's manager,
any party to a laundry service contract or cable television contract and no
party, person or entity has any interest in the Property, or any portion
thereof, except Seller, parties to laundry service contracts and cable
television service contracts;
16.2.12. Seller has not received any written notice of a special
assessment or any such special assessment being contemplated;
16.2.13. There are no service contracts affecting the Property other
than the Service Contracts;
16.2.14. There are not outstanding contracts made by Seller (or any
of its agents or affiliates) for the work or materials in connection with the
Property or for any improvements to the Property which have not been, or will
not be on or before the Closing Date, fully paid for on a timely basis;
16.2.15. No person or entity has any right or option to acquire all
or any portion of the Property, other than Purchaser pursuant to this
Agreement;
16.2.16. Seller holds, and at all times through the Closing will
hold, marketable title to the Personal Property, free and clear of any liens,
encumbrances or adverse claims other than the Existing Bond and Mortgage, and
Seller has, and at all times through the Closing will have, the right and
authority to convey or assign to Purchaser all of the Personal Property;
<PAGE>
16.2.17. Seller does not now owe and will not owe any taxes or any
penalties or interest thereon pursuant to any governmental law, statute or
regulation for which Purchaser is or will be obligated to or liable for a
withholding of funds from the Purchaser Price pursuant to any so called "bulk
sales" law or other applicable law, statute or regulation, or which could
subject the Real Estate to any liens or the Purchaser to any liability;
16.2.18. Seller has no employees;
16.2.19. The income and expense schedule and operating and
maintenance budget delivered to Purchaser in accordance with Paragraph 7.1 are
those relied on by Seller in its management of the Property;
16.2.20. The Existing Bond and Mortgage Documents delivered by
Seller to Purchaser are true and complete in all material respects and have not
been modified, supplemented or amended in writing;
16.2.21. Based on information provided by Berkshire, as servicer
under the Existing Bond and Mortgage Documents, as of November 1, 1996, the
principal amount of the bonds outstanding is $15,535,000;
16.2.22. Seller has not received written notice that an
investigation, enforcement proceeding or litigation has been commenced by the
Securities and Exchange Commission or the Internal Revenue Service respecting
the Bonds; and
16.2.23. Seller has made available to Purchaser all books, records,
agreements and Service Contracts kept at the Property.
16.3. If at any time after the execution of this Agreement, either
Purchaser or Seller become aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question to
become untrue in any material respect, said party shall not be in default under
this Agreement and the sole remedy of the other party shall be to terminate
this Agreement, except for Purchaser's obligation to indemnify Seller and
restore the Property, as more fully set forth in Paragraph 7. Notwithstanding
anything contained herein to the contrary, if the status of any of the
tenancies changes from the date of the Rent Roll and the date of the rent roll
delivered at Closing, provided the change in status is not caused by a breach
of Seller's covenants or representations contained in Paragraph herein, then
Purchaser shall not have the right to terminate this Agreement or make any
claim for a breach of a representation or warranty hereunder involving the Rent
Roll or tenancies thereunder. Purchaser and Seller are prohibited from making
any claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in this
Agreement that the claiming party has actual knowledge of prior to the Closing.
16.4. The parties agree that the representations contained herein
shall survive Closing for a period ending 5:00 p.m. central time on December
23, 1996 (i.e., the claiming party shall have no right to make any claims
against the other party for a breach of a representation or warranty after 5:00
p.m. central time on December 23, 1996.
<PAGE>
17. LIMITATION OF LIABILITY. No affiliate of Seller, nor any of Seller or its
affiliate's beneficiaries, shareholders, partners, officers, directors, agents
or employees, heirs, successors or assigns shall have any personal liability of
any kind or nature for or by reason of any matter or thing whatsoever under, in
connection with, arising out of or in any way related to this Agreement and the
transactions contemplated herein, and Purchaser hereby waives for itself and
anyone who may claim by, through or under Seller, any and all rights to sue or
recover on account of any such alleged personal liability.
Notwithstanding anything contained herein to the contrary, Purchaser
hereby agrees that the maximum aggregate liability of Seller, in connection
with, arising out of or in any way related to a breach by Seller under this
Agreement or any document or conveyance agreement in connection with the
transaction set forth herein after the Closing shall be $300,000. Purchaser
hereby waives for itself and anyone who may claim by, through or under
Purchaser any and all rights to sue or recover from Seller any amount greater
than said limit.
Seller agrees to retain and reserve, and not disburse or distribute,
proceeds of the Purchase Price in an amount at least equal to the sum of
$300,000 until 5:01 p.m. (Central Time) on December 23, 1996.
No affiliate of Purchaser, nor any of Purchaser or its affiliate's
beneficiaries, shareholders, partners, officers, directors, agents or
employees, heirs, successors or assigns shall have any personal liability of
any kind or nature for or by reason of any matter or thing whatsoever under, in
connection with, arising out of or in any way related to this Agreement and the
transactions contemplated herein, and Seller hereby waives for itself and
anyone who may claim by, through or under Seller, any and all rights to sue or
recover on account of any such alleged personal liability.
18. CONDITIONS PRECEDENT.
18.1. The Property is currently encumbered by those certain
Multifamily Housing Revenue Refunding Bonds, 1995 Series B (Sun Lakes Apartment
Project) in the original aggregate principal amount of $15,700,000 (the
"Bonds") as evidenced and/or secured by, among other items, the following
documents (collectively with any other documents made in connection with the
Bonds and the financing and/or refinancing relating thereto with respect to the
Property are hereinafter referred to as the "Existing Bond and Mortgage
Documents"): (a) the Multifamily Note made by Seller payable to Berkshire
Mortgage Finance Limited Partnership ("Berkshire") endorsed by Berkshire to the
Federal National Mortgage Association ("Fannie Mae"); (b) that certain Trust
Indenture dated as of October 1, 1995 (the "Indenture") among Orange County
Housing Finance Authority (the "Issuer") and Sun Bank, National Associates (the
"Trustee"); (c) the Replacement Reserve and Security Agreement between Seller
and Berkshire, (d) the Completion/Repair and Security Agreement between Seller
and Berkshire; (e) the Amended and Restated Land Use Restriction Agreement
dated as of October 1, 1995 (the "Regulatory Agreement") among Issuer and
Borrower; (f) the Multifamily Mortgage, Assignment of Rents and Security
Agreement made by Seller for the benefit of Berkshire and assigned to Fannie
Mae; (g) the Assumption of Regulatory Agreement and Deed of Trust dated as of
<PAGE>
October 1, 1996 among Seller, Issuer and Seller; (h) the Financing Agreement
dated October 1, 1995 among Seller, Issuer, Trustee and Berkshire; (i) all
documents evidencing Seller's acquisition of the Property and assumption of the
obligations respecting the Bonds; and (j) those documents listed on Exhibit M
attached hereto.
18.2. Purchaser and Seller agree that the performance of their
obligations under this Agreement shall be subject to the parties (as specified
below) unconditionally procuring, using commercially reasonable efforts, on or
before the Closing Date the following:
18.2.1. Seller and Purchaser obtaining, on terms acceptable to
Purchaser, in Purchaser's sole and absolute discretion, the written consent of
Issuer, Trustee, Berkshire and Fannie Mae and any other applicable parties to
(a) the assignment to and assumption by Purchaser of the Bonds and the Existing
Bond and Mortgage Documents, and (b) the sale of the Property to Purchaser;
18.2.2. Purchaser and Seller satisfying all other conditions to the
assumption of the obligations arising out of the Existing Bond and Mortgage
Documents upon terms acceptable to Purchaser in Purchaser's sole and absolute
discretion, including, without limitation, any bond counsel's opinion or
opinion of Purchaser's counsel required by the Existing Bond and Mortgage
Documents respecting such transfer;
18.2.3. Purchaser and Seller obtaining, on terms acceptable to
Seller in Seller's sole and absolute discretion, the written acknowledgment of
Issuer, Trustee, Berkshire and Fannie Mae to the release of Seller and Seller's
affiliated entities in connection with any and all liabilities and obligations
arising out of the Bonds and Existing Bond and Mortgage Documents; and
18.2.4. Purchaser, at Purchaser's sole cost and expense, an opinion
of nationally recognized bond counsel acceptable to Purchaser to the effect
that (i) the transfer of the Property complies with the provisions of the
Existing Bond and Mortgage Documents, (ii) the transfer of the Property and the
execution of the Assignment and Assumption Agreement do not, in and of
themselves, adversely affect the exclusion of interest on the Bonds from gross
income for purposes of federal income tax, and (iii) income from the Bonds is
excludeable from gross income for purposes of federal income tax.
The foregoing conditions set forth in Paragraphs 18.2.1, 18.2.2, 18.2.3 and
18.2.4 shall hereinafter be referred to as the "Conditions Precedent". Both
Seller and Purchaser shall fully cooperate with each other and use good faith
efforts to satisfy the Conditions Precedent, including, but not limited to,
Purchaser submitting to Issuer, Trustee, Berkshire and Fannie Mae all
reasonably requested financial and other information.
18.3. Except for fees and expenses of Seller's attorneys with respect
to the performance of Paragraph 18.2.1 and 18.2.2, Purchaser shall pay all
costs and expenses associated with the satisfaction of the Conditions
Precedent, the assignment to Purchaser of the Bond Documents, the assumption of
the Bond Documents by Purchaser and obtaining Issuer's and Trustee's consent to
the foregoing. Purchaser shall cooperate with Seller satisfying the conditions
<PAGE>
in Section 18.2.3 so that all submissions and requests by Purchaser made to
satisfy the "Conditions Precedent" under Sections 18.2.1, 18.2.2 and 18.2.4 are
accompanied by the release provided for in Section 18.2.3. In providing such
cooperation, Purchaser shall not be obligated to incur out-of-pocket expenses
on behalf of Seller.
18.4. In the event any of the Conditions Precedent are not satisfied
on or before the Closing Date, then, unless the Closing Date is extended as
provided in Section , this Agreement shall be terminated, and the Earnest Money
shall be immediately paid to Purchaser, together with any interest earned
thereon, and neither Seller nor Purchaser shall have any right, obligation or
liability under this Agreement, except for the indemnities set forth in
Paragraphs 7 and 15 of this Agreement.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
20. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Alan Lieberman
(847) 317-4360
(847) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Ambassador Apartments, L.P.
77 West Wacker Drive
Suite 4040
Chicago, IL 60601
Attention: Richard F. Cavenaugh
(312) 917-4410
(312) 917-9910 (FAX)
<PAGE>
and one copy to: Ballard Spahr Andrews and Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Michael L. Lehr
(215) 864-8318
(215) 864-8999 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or the same day as given if sent by facsimile transmission and
received by 5:00 p.m. Chicago time or on the 4th business day after the same is
deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be served upon the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute three
(3) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward
the following to the Escrow Agent:
(A) Earnest Money;
(B) One (1) fully executed copy of this Agreement; and
(C) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the Florida, except that with respect to the retainage of the Earnest
Money as liquidated damages the laws of the State of Illinois shall govern.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
AMBASSADOR APARTMENTS, L.P., a Delaware
limited partnership
By: Ambassador Apartments, Inc.,
a Maryland corporation
By: /s/ Richard F. Cavenaugh
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
SELLER:
LAKE SUN PARTNERS LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Lake Sun Partners, Inc., an Illinois
corporation, its general partner
By: /s/ Daniel L. Charleston
-------------------------------------
Name: Daniel L. Charleston
-------------------------------------
Its:
-------------------------------------
<PAGE>
Larry D. Richey of Cushman & Wakefield of Florida, Inc.
("Seller's Broker") executed this Agreement in its capacity as a real estate
broker and acknowledges that the fee or commission due it from Seller as a
result of the transaction described in this Agreement is as set forth in that
certain Listing Agreement, dated March 15, 1996 between Seller and Seller's
Broker (the "Listing Agreement"). Seller's Broker also acknowledges that
payment of the aforesaid fee or commission is conditioned upon the Closing and
the receipt of the Purchase Price by the Seller. Seller's Broker agrees to
deliver a receipt to the Seller at the Closing for the fee or commission due
Seller's Broker and a release, in the appropriate form, stating that no other
fees or commissions are due to it from Seller or Purchaser.
Cushman & Wakefield of Florida, Inc.
By:
------------------------------------
<PAGE>
SCHEDULE 3.1
I. Survey
1. Encroachments:
a) sidewalk on the northwest property line;
2. Legal description must match title commitment.
3. Certification must match the one given in The Crossings and should
include the Title Company.
4. Note 3 must refer to the Title Commitment.
5. The six-space parking area at the southeastern corner of the property
is marked as containing six spaces, but lines are drawn only for five.
6. The 100 year flood evaluation must be reverified.
7. Those easements that are plottable must be plotted or where only
approximate locations can be given, such should be given. All easements must
be listed.
II. Title Commitment
1. The reference to Tangible Taxes in Schedule B-II-8 should be deleted.
2. The reference to Maintenance Assessments in Schedule B-II-17 should
be deleted or endorsed over.
<PAGE>
SCHEDULE 16.2.1
None
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Rent Roll
M - List of Bond Documents
N - Assignment of Sewer, Water, and Utilities Permits, Rights and
Deposits
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF SALE
THIS AGREEMENT (this "Agreement"), is entered into as of the 22nd day of
October, 1996, by and between COMMERCIAL VENTURES, INC., a Delaware corporation
("Purchaser"), and JONATHONS LANDING LIMITED PARTNERSHIP, an Illinois limited
partnership ("Seller").
RECITALS
A. Purchaser and Seller entered into an Agreement of Sale dated as of
August 30, 1996 (the "Agreement").
B. Purchaser and Seller desire to amend the Agreement. Terms defined in
the Agreement will have the same meaning when used herein.
NOW THEREFORE, Purchaser and Seller agree as follows:
1. The Purchase Price is changed to $21,300,000.
2. Purchaser acknowledges that all conditions to Purchaser's obligation
to purchase the Property in Sections 7.1 and 9 of the Agreement have been
satisfied or waived by Purchaser. The Earnest Money is non-refundable.
3. The Closing Date will be November 15, 1996.
4. Except as amended hereby, the Agreement will remain in full force and
effect and is ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
COMMERCIAL VENTURES, INC., a Delaware corporation
By: /s/ Richard J. Nathan
------------------------------------
Name: Richard J. Nathan
------------------------------------
Its: President
------------------------------------
SELLER:
JONATHONS LANDING LIMITED PARTNERSHIP, an Illinois
limited partnership
By: Jonathons Landing, Inc., an Illinois corporation,
its general partner
By: /s/ James E. Mendelson
--------------------------------------
Name: James E. Mendelson
--------------------------------------
Its: Sr. VP
--------------------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 49373
<SECURITIES> 0
<RECEIVABLES> 2483
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53107
<PP&E> 107153
<DEPRECIATION> 0
<TOTAL-ASSETS> 173863
<CURRENT-LIABILITIES> 2871
<BONDS> 15524
0
0
<COMMON> 0
<OTHER-SE> 134886
<TOTAL-LIABILITY-AND-EQUITY> 173863
<SALES> 0
<TOTAL-REVENUES> 16711
<CGS> 0
<TOTAL-COSTS> 56
<OTHER-EXPENSES> 1577
<LOSS-PROVISION> 753
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14324
<INCOME-TAX> 0
<INCOME-CONTINUING> 14324
<DISCONTINUED> 0
<EXTRAORDINARY> (65)
<CHANGES> 0
<NET-INCOME> 14259
<EPS-PRIMARY> 9.28
<EPS-DILUTED> 9.28
</TABLE>
