UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------- -------------
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
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
- -----------------
Balcor Pension Investors-VI (the "Registrant") is a limited partnership formed
in 1984 under the laws of the State of Illinois. The Registrant raised
$345,640,500 from sales of Limited Partnership Interests. The Registrant's
operations currently consist of the operation of properties acquired through
foreclosure, and all information included in this report relates to this
industry segment.
The Registrant originally funded thirty-one loans. A portion of the Mortgage
Reductions generated by loan repayments was added to the Registrant's working
capital reserves and the remainder was distributed to Limited Partners. As a
result of the repayments, foreclosures and write-off of thirty-one loans, the
Registrant had no loans in its portfolio as of December 31, 1996. Prior to
1996, thirteen properties and three investments in joint ventures - affiliates
were acquired through foreclosure and an additional investment in joint
venture-affiliate was purchased. The Registrant sold eight of the properties
and all of the investments in joint ventures-affiliates. The Registrant had
five properties in its portfolio as of December 31, 1996. See "Item 2.
Properties" for additional information.
The Registrant's remaining properties face various levels of competition for
retention of their tenants from similar types of properties in the vicinities
in which they are located. The Registrant has no plans to change the current
use of or to renovate any of its remaining properties.
Real estate values, especially for good quality, well located property,
increased significantly during 1996 due to a combination of readily
available capital, low interest rates, and decreased vacancy rates
resulting from steady demand and an acceptable level of new construction.
While 1996 proved to be an excellent year to sell real estate, projected
yields by buyers on new acquisitions have declined significantly due to
competition and rising prices. Although there will be variances by asset
class and geographic area, the investment climate is expected to remain
strong for 1997. However, values could begin to level off as they approach
replacement cost triggering new construction and an increase in
capitalization rates.
Currently, office properties are attracting the most interest from real
estate investors. While new apartment construction has been underway since
1995, the office sector has just entered its development phase in most
markets and new construction is generally only proceeding with strong
tenant pre-leasing. Occupancy rates are at their highest level in years,
reaching the 90s in a vast number of markets. As a result, rents have
finally begun to increase at rates well in excess of inflation in many
markets around the country. As a result of these fundamentals, office
properties have increasingly become in strong demand by investors. Values
increased significantly during 1996 and are expected to do so again in
1997. Suburban properties are attracting attention as well. Still, office
properties remain a highly volatile sector where one new build-to-suit
office building for a major tenant could throw a market into relapse. In
addition, office space is highly vulnerable to corporate restructuring and
the growing "telecommuting" trend. The Registrant believes the combination
<PAGE>
of strong price increases and future volatility make this an excellent
time to sell office assets.
The outlook for the retail sector of the investment real estate industry is
uncertain for 1997. The retail industry is being simultaneously impacted by a
number of factors which are likely to affect values for quite some time. As
retailers battle to gain market dominance, tenant bankruptcies have grown.
Consolidation among retailers has and is expected to continue to occur. Unlike
other asset classes, new construction of power centers went unabated in the
early 1990's, creating an oversupply of space including "big box" anchor tenant
space. Regional malls, which are not the dominant center in the market, face
continued out-migration of retailers to the power centers. Finally shopping
patterns continue to shift due to the aging baby boomers, high consumer debt,
alternative distribution channels, and the greater emphasis on entertainment.
As a result, the capital requirements necessary to maintain a shopping center's
competitiveness are all significant, but with uncertain returns. The Registrant
believes there is significant risk to holding retail assets for future upside
potential.
During 1996, the Registrant sold the Hawthorne Heights, Shoal Run, Sun Lake and
Woodscape apartment complexes, and the Perimeter 400 Center and Symphony Woods
office buildings. The 45 West 45th Street Office Building was owned by a joint
venture consisting of the Registrant and three affiliates and the Jonathan's
Landing and Sand Pebble Village - Phases I and II apartment complexes were
owned by joint ventures consisting of the Registrant and an affiliate. In
1996, the General Partner sold these properties in which the Registrant held a
minority joint venture interest. During February 1997, the Registrant sold the
Park Central Office Building and Flamingo Pines Shopping Center. Currently, the
Registrant has entered into a contract for the sale of the Hammond Aire Plaza
Shopping Center. See "Other Information", below, for additional information.
The Registrant is actively marketing the Brookhollow/Stemmons Center and 420
North Wabash office buildings for sale.
The timing of the termination of the Registrant and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Registrant including, but not limited to
the lawsuit discussed in "Item 3. Legal Proceedings." In the absence of any
contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Registrant for a longer period of time.
During 1996, the Registrant sold six properties in all cash sales totaling
$100,625,000 and its interest in an acquisition loan for $3,803,640. In
addition in 1996, the General Partner sold four properties in which the
Registrant held a minority joint venture interest with affiliates in all cash
sales totaling $63,100,000. During February 1997, the Registrant sold the
Flamingo Pines Shopping Center and Park Central Office Building in all cash
sales for $10,200,000 and $21,471,000, respectively. See Other Information and
Item 7. "Liquidity and Capital Resources" for additional information.
The Registrant received notice of an unsolicited offer for the purchase of
Limited Partnership Interests ("tender offer") on January 1, 1997. The tender
offer was made by First Trust Co., L.P. and stated that their primary motive in
making the offer is to make a profit from the purchase of the interests. First
Trust Co., L.P. is seeking to acquire up to 4.9% of the total interests
outstanding of the Registrant.
<PAGE>
The Registrant received notice of an unsolicited offer for the purchase of
Limited Partnership Interests ("tender offer") on March 6, 1997. The tender
offer was made by Madison Partnership Liquidity Investors XX, LLC and stated
that their primary motive in making the offer is to make a profit from the
purchase of the interests. Madison Partnership Liquidity Investors XX, LLC is
seeking to acquire up to 4.9% of the total interests outstanding of the
Registrant.
The Registrant will incur administrative costs in responding to the tender
offers and may incur additional costs if additional tender offers are made in
the future. The General Partner cannot predict with any certainty what impact
these tender offers or any future tender offers will have on the operations or
management of the Registrant.
The Registrant, by virtue of its ownership of real estate acquired through
foreclosure, is subject to Federal and state laws and regulations covering
various environmental issues. Management of the Registrant utilizes the
services of environmental consultants to assess a wide range of environmental
issues and to conduct tests for environmental contamination as appropriate. The
General Partner is not aware of any potential liability due to environmental
issues or conditions that would be material to the Registrant.
The officers and employees of Balcor Mortgage Advisors-VI, the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Other Information
- -----------------
Park Central Office Building
- ----------------------------
As previously reported, on January 20, 1997, the Registrant contracted to sell
the Park Central Office Building, De Kalb County, Georgia, to an unaffiliated
party, Acquiport Park Central, Inc., a Delaware corporation, for a sale price
of $21,471,000. The closing was extended and the sale closed on February 20,
1997. From the proceeds of the sale, the Registrant paid $429,420 as a
brokerage commission to an affiliate of the third party providing property
management services for the property and $41,471 in closing costs. The
Registrant received the remaining proceeds of approximately $21,000,000. Of
such proceeds, $1,100,000 will be retained by the Registrant and will not be
available for use or distribution by the Registrant until November 1997.
Flamingo Pines Shopping Center
- -------------------------------
As previously reported, on October 31, 1996, the Registrant contracted to sell
the Flamingo Pines Shopping Center, Pembroke Pines, Florida, to an unaffiliated
party, Dane Real Estate, Inc., a Florida corporation, for a sale price of
$10,200,000. The closing was extended and the sale closed on February 28, 1997.
From the proceeds of the sale, the Registrant paid $255,000 as a brokerage
commission to an affiliate of the third party providing management services for
the other properties owned by the Registrant and $91,400 in closing costs. The
Registrant received the remaining proceeds of approximately $9,854,000.
<PAGE>
Hammond Aire Plaza Shopping Center
- ----------------------------------
In 1986, the Registrant funded a $22,000,00 loan collateralized by a first
mortgage on the Hammond Aire Plaza Shopping Center, Baton Rouge, Louisiana.
The borrower defaulted on its obligation under the loan and, in September 1987,
the Registrant obtained title to the property through foreclosure.
On March 18, 1997, the Registrant contracted to sell the property for a sale
price of $14,250,000 to an unaffiliated party, Crosstown Asset Corp. I, a
Delaware corporation. The purchaser has deposited $142,500 into an escrow as
earnest money and is obligated to deposit an additional $114,000 upon
completion of the purchaser's due diligence review. The remaining portion of
the sale proceeds will be payable in cash at the closing, which is scheduled to
occur on April 30, 1997. From the proceeds of the sale, the Registrant will pay
$356,250 as a brokerage commission to an affiliate of the third party providing
property management services for the property. The Registrant will receive the
remaining proceeds of approximately $13,894,000, less closing costs. Of such
proceeds, $712,500 will be retained by the Registrant and will not be available
for use or distribution by the Registrant until November 30, 1997. Neither the
General Partner not any affiliate will receive a brokerage commission in
connection with the sale of the property. The General Partner will be
reimbursed by the Registrant for actual expenses incurred in connection with
the sale.
Affiliates of the Registrant have simultaneously contracted to sell four other
properties to the purchaser.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms will be complied with and,
therefore, it is possible the sale of the property may not occur.
Item 2. Properties
- -------------------
As of December 31, 1996, the Registrant, either directly or though joint
ventures, owned the five properties described below, all of which are owned in
fee simple.
Location Description of Property
- -------- -----------------------
Baton Rouge, Louisiana Hammond Aire Plaza Shopping Center: a regional
shopping center containing approximately 276,000
square feet located on approximately 34 acres.
DeKalb County, Georgia **Park Central Office Building: a ten story office
building containing approximately 210,000 square
feet.
Dallas, Texas * Brookhollow/Stemmons Center Office Complex: an 11
story office building containing approximately
221,000 square feet.
Pembroke Pines, Florida **Flamingo Pines Shopping Center: a regional
shopping center containing approximately 124,500
square feet located on approximately 16 acres.
<PAGE>
Chicago, Illinois 420 North Wabash Office Building: a 7-story
office building containing approximately 120,000
square feet.
* Owned by the Registrant through a joint venture with an affiliate. See Note 9
of Notes to Financial Statements for additional information.
** This property was sold during February 1997. See Note 17 of Notes to
Financial Statements for additional information.
The average occupancy rates and effective average rent per square foot for each
of the last five years for the five commercial properties owned by the
Registrant at December 31, 1996, are described below.
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Hammond Aire
Occupancy rate 91% 91% 96% 92% 94%
Effective rent $8.12 $8.47 $7.67 $7.37 $7.00
Park Central
Occupancy rate 96% 88% 97% 95% 97%
Effective rent $14.69 $15.72 $15.19 $15.58 $12.59
Brookhollow/Stemmons
Occupancy rate 89% 89% 96% 94% 85%
Effective rent $10.40 $11.17 $9.44 $11.24 $11.01
Flamingo Pines
Occupancy rate 83% 92% 97% 94% 94%
Effective rent $10.63 $11.15 $9.47 $9.07 $9.02
420 N. Wabash
Occupancy rate 91% 84% 85% 85% 71%
Effective rent $16.28 $15.97 $14.34 $17.36 $16.98
Information regarding tenants occupying 10% or more of the leasable square feet
of each commercial property is provided below.
Scheduled
Lease Lease
Square Base Rent Expiration Renewal
Property Tenant Feet Per Annum Date Option
Flamingo Publix 55,000 $330,000 9/2006 Yes
Pines Supermarket
(Grocery
Store)
420 North Just B'Claws 18,900 $371,385 5/2009 No
Wabash (Restaurant)
TMP Worldwide 23,504 $130,911 4/2001 No
(Advertising/
Marketing)
WM Gerard 19,629 $351,991 12/1999 No
(Advertising/
Marketing)
<PAGE>
Erikson 19,709 $292,349 7/2003 Yes
Institute
(Training
Facility)
Hammond Aire Steinmart, 40,000 $230,000 1/2008 Yes
Inc.
(Discount
Clothing
Store)
Taylor Office 32,723 $123,600 12/1997 Yes
Supply
(Office
Supplies &
Furniture)
Park Central United 60,547 $983,889 12/2003 Yes
Healthcare
Corporation
(Health Care
- HMO)
Brookhollow/ United States 71,927 $600,000 11/2003 No
Stemmons Postal
Service (Post
Office)
Real estate taxes incurred in 1996 for the above properties totaled $1,141,029.
The Federal tax basis of the Registrant's properties totaled $84,075,494 as of
December 31, 1996. For Federal income tax purposes, the acquisition costs of
the properties are depreciated over a useful life of 40 years, using the
straight-line method. Other minor assets are depreciated over their applicable
recovery periods.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate properties.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
- --------------------------
Williams class action
- ---------------------
In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case No.:
90-C-0726, U.S. District Court, Northern District of Illinois). The Registrant,
the General Partner, seven affiliated limited partnerships (together with the
Registrant, the "Related Partnerships") and other affiliates were the
defendants. The complaint alleged violations of Federal securities laws as to
the adequacy and accuracy of disclosure of information in the offering of
limited partnership interests in the Related Partnerships and alleged breach of
fiduciary duty, fraud, negligence and violations under the Racketeer Influenced
and Corrupt Organizations Act. The complaint sought compensatory and punitive
damages.
<PAGE>
A settlement of these proceedings was approved by the District Court on
November 20, 1996 on the terms previously described in the form of settlement
agreement attached as Exhibit 99 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1996. Distributions to be paid pursuant to the
settlement were paid in February 1997. All proceedings relating to this matter
are now dismissed.
Proposed Class and Derivative Action Lawsuits
- ---------------------------------------------
On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Registrant, the "Affiliated
Partnerships"), as well as the Affiliated Partnerships, as defendants.
Additional defendants were Insignia Management Group ("Insignia") and Walton
Street Capital Acquisition II, LLC ("Walton") and certain of their affiliates
and principals (collectively, the "Walton and Insignia Defendants"). The
complaint alleged, among other things, that the tender offers for the purchase
of limited partnership interests in the Affiliated Partnerships made by a joint
venture consisting of affiliates of Insignia and Walton were coercive and
unfair.
On July 1, 1996, another proposed class action complaint was filed in the
Chancery Court, Anderson vs. Balcor Mortgage Advisors (Case No. 96 CH 06884)
(the "Anderson Case"). An amended complaint consolidating the Dee and Anderson
Cases (the "Dee/Anderson Case") was filed on July 25, 1996.
The complaint seeks to assert class and derivative claims 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 addition claims. The plaintiffs requested certification as a class
and derivative action, unspecified compensatory damages and rescission of the
tender offers. Each of the defendants filed motions to dismiss the complaint.
On January 7, 1997, the Chancery Court denied the plaintiff's motion for leave
to amend the complaint and dismissed the matter with prejudice.
On February 3, 1997, the plaintiffs filed a Notice of Appeal of the Chancery
Court's order to the Appellate Court of Illinois.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. The Registrant believes it has meritorious
defenses to contest the claims. It is not determinable at this time whether or
not an unfavorable decision in this action would have a material adverse impact
on the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1996.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ----------------------------------------------------------------------
Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity and Capital
Resources".
As of December 31, 1996, the number of record holders of Limited Partnership
Interests of the Registrant was 60,394.
Item 6. Selected Financial Data
- --------------------------------
Year ended December 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
Total income $14,782,470 $16,011,025 $16,696,829 $16,941,268 $18,438,167
Recovery of
losses on
loans, real
estate and
accrued interest
receivable 3,351,785 2,465,000 None None None
Provision for
losses on
loans, real
estate and
accrued interest
receivable 2,605,562 1,800,000 3,900,000 4,665,000 18,500,000
Income before extra-
ordinary items 27,120,917 11,582,447 11,040,627 11,817,474 730,590
Net income 26,593,221 11,582,447 11,040,627 11,817,474 730,590
Net income per
Limited Partner-
ship Interest 12.89 7.54 7.18 7.69 .48
Total assets 115,792,938176,899,144 190,674,572 240,813,287 242,357,773
Mortgage notes
payable None 15,657,066 15,700,000 21,257,668 21,572,650
Distributions per
Limited Partner-
ship Interest (A) 39.04 17.40 39.20 8.00 11.00
(A) These amounts include distributions of original capital of $27.70,$8.80,
$29.20 and $.75 per Limited Partnership Interest for the years 1996, 1995, 1994
and 1992, respectively.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- --------------------------------------------------------------------------
Results of Operations
- ---------------------
Operations
- ----------
Summary of Operations
- ---------------------
During 1996, Balcor Pension Investors - VI (the "Partnership") sold six
properties and its minority joint venture interest in four properties. As a
result of the gains recognized for financial statement purposes in connection
with these sales, net income increased significantly during 1996 as compared to
1995.
During 1995, operations improved at several of the properties owned by the
Partnership and the Partnership recognized a recovery for losses related to its
to its real estate held for sale. The Partnership also recognized lower net
interest income on loans and participation income during 1995 as compared to
1994 due to two loan prepayments in 1994. As a result of these combined events,
net income increased slightly during 1995 as compared to 1994. Further
discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
- ---------------------
The July 1995 foreclosure of the Jonathan's Landing Apartments loan and the
August 1996 sale of the Noland Fashion Square acquisition loan resulted in a
decrease in interest income on loans receivable and income from investment in
acquisition loan during 1996 as compared to 1995.
Income from operations of real estate held for sale represents the net
operations of the properties acquired by the Partnership through foreclosure.
As of December 31, 1996, the Partnership was operating five properties.
Original funds advanced by the Partnership totals approximately $88,600,000 for
these five properties. The Partnership sold the Hawthorne Heights, Woodscape,
Shoal Run and Sun Lake apartment complexes in June, August and September and
November 1996, respectively, and the Symphony Woods and Perimeter 400 Center
office buildings in December 1996. The property sales resulted in a decrease in
income from operations of real estate held for sale during 1996 as compared to
1995. This decrease was partially offset by an increase in operations at the
Park Central Office Building and Sun Lake Apartments totaling approximately
$930,000. The increase is attributable to lower tenant related expenditures at
Park Central during 1996 and exterior painting incurred during 1995 at the Sun
Lake Apartments.
Interest income on short-term investments decreased during 1996 as compared to
1995 primarily due to lower average cash balances available for investment in
1996 due to special distributions paid to the Limited Partners in 1995.
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
<PAGE>
which affect the value of real estate, including economic and demographic
conditions. During 1996, the Partnership recognized provisions of $2,252,809,
recoveries of $3,351,785 and a write off of a previously established loss
allowance of $1,386,215 related to its real estate held for sale. The
provisions were recognized to provide for changes in the estimate of the fair
value of the Flamingo Pines and Hammond Aire Plaza shopping centers. In
addition, in 1996 the Partnership recognized a provision of $352,753 and a
write-off of an allowance of $627,347 related to the Noland Fashion Square
acquisition loan. During 1995, the Partnership recognized a provision of
$1,800,000 and a recovery of $2,465,000 related to its real estate held for
sale. The Partnership did not recognize any provisions during 1995 for its
loans.
In connection with the sale of the Perimeter 400 Center, the Partnership wrote
off the remaining unamortized leasing commissions related to the property which
resulted in an increase in amortization expense during 1996 as compared to
1995. Amortization expense related to a settlement of disputed leasing
commissions at the Perimeter 400 Office Building contributed to the increase in
amortization expense.
The Partnership incurred increased legal, consulting, printing, postage and
investor processing costs in connection with its responses to a tender offer
during the second quarter of 1996. As a result, administrative expenses
increased during 1996 as compared to 1995.
Participation in income (loss) of joint ventures with affiliates represents the
Partnership's share of the operations of the Sand Pebble Village - Phases I and
II and Jonathan's Landing apartment complexes and the 45 West 45th Street
Office Building. During 1996, the Partnership recognized its share of gains
recognized in connection with the sales of the Sand Pebble Village - Phase II
and Jonathan's Landing apartment complexes and the 45 West 45th Street Office
Building, and the recovery of a previously established loss allowance related
to the Sand Pebble Village Apartments - Phase I. During 1995, the Partnership
recognized its share of a provision for loss relating to the 45 West 45th
Street Office Building. The combined effect of these events resulted in the
Partnership recognizing participation in income of joint ventures during 1996
as compared to participation in loss during 1995.
The Sun Lake Apartments and Perimeter 400 Center Office Building were both
owned by joint ventures with affiliates. As a result of the gain recognized in
connection with the sale of Perimeter 400 Center and the recovery of a
previously established loss allowance related to Sun Lake Apartments,
affiliates' participation in income of joint ventures increased during 1996 as
compared to 1995.
During 1996, the Partnership sold the Hawthorne Heights, Shoal Run, Woodscape
and Sun Lake apartment complexes and the Perimeter 400 Center and Symphony
Woods office buildings. As a result, the Partnership recognized gains in
connection with these sales totaling $19,443,993 for financial statement
purposes.
In connection with the sale of Sun Lake Apartments, the Partnership wrote off
the remaining unamortized deferred financing fees related to the property of
$746,767, of which $284,145 is the minority joint venture partner's share. In
addition, the Partnership incurred its share of a prepayment penalty paid in
connection with the sale of Sand Pebble Village - Phase II Apartments of
<PAGE>
$65,074. These amounts were recognized as debt extinguishment expense and
classified as extraordinary items.
1995 Compared to 1994
- ---------------------
Interest income on loans receivable decreased during 1995 as compared to 1994
as a result of the 1994 prepayments of the Breckenridge and Highland Green
loans, the dispositions of the Northgate and Gatewood apartment complexes and
the foreclosure of the Jonathan's Landing Apartments loan in July 1995.
Income from operations of real estate held for sale represents the net
operations of the properties acquired by the Partnership through foreclosure.
At December 31, 1995, the Partnership was operating eleven properties. Original
funds advanced by the Partnership totals approximately $145,000,000 for these
properties. Income from operations of real estate held for sale increased
during 1995 as compared to 1994 due to improved operations at nine of the
properties, in particular at the Brookhollow/Stemmons Center Office Complex due
to higher occupancy, at the Woodscape Apartments as the payment of interest
expense ceased due to the repayment of the property's underlying mortgage loan
in May 1994, at the Sun Lake Apartments due to a decrease in interest expense
resulting from the November 1994 remarketing of the underlying revenue bonds
and at the 420 N. Wabash Office Building where real estate tax expense
decreased due to a decrease in the property's assessed value.
The Partnership's loans receivable generally bear interest at contractually-
fixed interest rates. Some loans also provided for additional interest in the
form of participations, usually consisting of either a share in the capital
appreciation of the property securing the Partnership's loan and/or a share in
the increase of gross income of the property above a certain level.
Participation income of $3,000,000 was recognized during 1994 in connection
with loan prepayments.
The Partnership recognized a provision of $3,900,000 during 1994 related to the
Partnership's real estate held for sale to provide for changes in the estimate
of the fair value of certain properties in the Partnership's portfolio. The
Partnership did not recognize any provisions during 1994 related to its loans.
Legal fees incurred in 1994 relating to the disposition of the Partnership's
investment in the Northgate and Gatewood apartment complexes, as well as the
prepayments of the Breckenridge and Highland Green loans, resulted in a
decrease in administrative expenses during 1995 as compared to 1994.
Participation in income (loss) of joint ventures with affiliates represents the
Partnership's share of the operations of the Sand Pebble Village - Phases I and
II and Jonathan's Landing apartment complexes and the 45 West 45th Street
Office Building. The Partnership recognized its share of a provision for loss
relating to the 45 West 45th Street Office Building during 1995. This resulted
in participation in loss of joint ventures with affiliates in 1995 as compared
to participation in income of joint ventures with affiliates in 1994.
During 1994, the Partnership recognized a gain of $818,379 on the disposition
of the Partnership's investment in the Northgate and Gatewood apartment
complexes.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $41,866,000 as
of December 31, 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 six properties and an acquisition loan. Operating activities generated
cash of approximately $9,795,000, 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 $26,516,000, net proceeds of approximately $82,381,000 from the
sales of Hawthorne Heights, Shoal Run, Woodscape and Sun Lake apartment
complexes and the Perimeter 400 Center and Symphony Woods office buildings and
expenditures of approximately $1,479,000 for improvements to the Partnership's
properties. Financing activities consisted of distributions paid to Partners of
approximately $55,869,000, net distributions paid to joint venture partners of
approximately $23,282,000, the release of repair escrows of approximately
$201,000 related to the Sun Lake Apartments and principal payments on the
mortgage note payable of approximately $148,000. In addition, in January 1997
the Partnership made a special distribution of $35,946,612 to Limited Partners
from the net proceeds from the sales of the 45 West 45th Street, Perimeter 400
Center and Symphony Woods office buildings and the Sun Lake and Jonathan's
Landing apartment complexes, all of which occurred during the fourth quarter of
1996.
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 was the Partnership's only property with underlying debt.
During 1996 and 1995, all five of the Partnership's properties owned at
December 31, 1996, as well as the properties in which the Partnership held
minority joint venture interests with affiliates, generated positive cash flow.
The Hawthorne Heights, Shoal Run, Woodscape and Sun Lake apartment complexes,
and the Perimeter 400 Center and Symphony Woods office buildings also generated
positive cash flow during 1995 and prior to being sold in 1996. The 45 West
45th Street Office Building, in which the Partnership held a minority joint
venture interest and which was sold in November 1996, incurred significant
leasing costs in 1995 and 1996 to lease vacant space and renew existing tenant
leases which were scheduled to expire. These nonrecurring expenditures were not
included in classifying the cash flow performance of the property. Had these
expenditures been included, the property would have generated a significant
deficit in 1995 and a marginal cash flow deficit during 1996. As of December
31, 1996, the occupancy rates of the Partnership's remaining commercial
properties ranged from 89% to 96%, with the exception of the Flamingo Pines
Shopping Center which had an occupancy of 83%.
<PAGE>
During 1996, the Partnership sold the Hawthorne Heights, Woodscape, Shoal Run
and Sun Lake apartment complexes, and the Perimeter 400 Center and Symphony
Woods office buildings. The 45 West 45th Street Office Building was owned by a
joint venture consisting of the Partnership and three affiliates and the
Jonathan's Landing and Sand Pebble Village - Phases I and II apartment
complexes were owned by joint ventures consisting of the Partnership and an
affiliate. In 1996, the General Partner sold these properties in which the
Partnership held a minority joint venture interest. During February 1997, the
Partnership sold the Flamingo Pines Shopping Center and Park Central Office
Building. Currently, the Partnership has entered into a contract for the sale
of the Hammond Aire Plaza Shopping Center. See "Item 1. Other Information" for
additional information. The Partnership is actively marketing the
Brookhollow/Stemmons Center and 420 North Wabash office buildings for sale.
The timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to the lawsuit discussed in "Item 3. Legal Proceedings." In the absence of any
contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Partnership for a longer period of time.
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 was retained by the Partnership until October 1996. The remaining
proceeds were distributed to the Limited Partners in July 1996. The holdback
was released in full in October 1996. See Note 12 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 $8,470,749 was the
Partnership's share. The proceeds were distributed to the Limited Partners in
October 1996. See Note 10 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 selling costs of $272,701. The net proceeds
of the sale were $6,810,604, of which $3,039,573 was the Partnership's share.
The proceeds were distributed to the Limited Partners in October 1996. See Note
10 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 was retained by the Partnership until December 1996. The remaining
proceeds were distributed to Limited Partners in October 1996. The holdback was
released in full in December 1996. See Note 12 of Notes to Financial Statements
for additional information.
<PAGE>
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 had no
effect on the cash flow of the Partnership, and amounts representing
contractually required debt service were recorded as interest income. 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 6 of Notes to Financial Statements
for additional information.
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 12 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 $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 10 of Notes to Financial
Statements for additional information.
The Sun Lake Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. In November 1996, the joint venture sold the
property in an all cash sale for $24,000,000. The purchaser took title to the
property subject to the existing first mortgage loan of $15,508,832. From the
proceeds of the sale, the joint venture paid $701,215 in selling costs. The net
proceeds of the sale were $7,789,953, of which $4,825,876 was the Partnership's
share. Pursuant to the terms of the sale, $300,000 of the proceeds was retained
by the joint venture until December 1996. The remainder of the proceeds was
distributed to Limited Partners in January 1997. The holdback was released in
full in December 1996. See Note 12 of Notes to Financial Statements for
additional information.
The Jonathan's Landing Apartments was owned by a joint venture consisting of
the Partnership and an affiliate. In November 1996, the joint venture sold the
property in an all cash sale for $21,300,000. From the proceeds of the sale,
the joint venture paid $796,475 in selling costs. The net proceeds from the
sale were $20,503,525, of which $9,534,139 was the Partnership's share. The
proceeds were distributed to Limited Partners in January 1997. See Note 10 of
Notes to Financial Statements for additional information.
The Perimeter 400 Center Office Building was owned by a joint venture
consisting of the Partnership and three affiliates. In December 1996, the joint
venture sold the property in an all cash sale for $40,700,000. From the
proceeds of the sale, the joint venture paid $882,765 in selling costs. The net
proceeds from the sale were $39,817,235, of which $19,908,618 was the
Partnership's share. Pursuant to the terms of the sale, the Partnership is
required to retain $1,750,000 of the sales proceeds until September 1997. The
remainder of the proceeds was distributed in to Limited Partners in January
1997. See Note 12 of Notes to Financial Statements for additional information.
<PAGE>
In December 1996, the Partnership sold the Symphony Woods Office Building in an
all cash sale for $7,275,000. From the proceeds of the sale, the Partnership
paid $251,836 in selling costs. The proceeds were distributed to Limited
Partners in January 1997. See Note 12 of Notes to Financial Statements for
additional information.
In February 1997, the Partnership sold the Park Central Office Building in an
all cash sale for $21,471,000. From the proceeds of the sale, the Partnership
paid $470,891 in selling costs. Pursuant to the terms of the sale, the
Partnership is required to hold back $1,100,000 of the sales proceeds until
November 1997. The remainder of the proceeds is expected to be distributed in
1997. See Note 17 of Notes to Financial Statements for additional information.
In February 1997, the Partnership sold the Flamingo Pines Shopping Center in an
all cash sale for $10,200,000. From the proceeds of the sale, the Partnership
paid $346,400 in selling costs. The proceeds are expected to be distributed in
1997. See Note 17 of Notes to Financial Statements for additional information.
The Partnership made four distributions totaling $39.04, $17.40 and $39.20 per
Interest in 1996, 1995 and 1994, respectively. See Statement of Partner's
Capital for additional information. Distributions were comprised of $11.34 of
Cash Flow and $27.70 of Mortgage Reductions, $8.60 of Cash Flow and $8.80 of
Mortgage Reductions in 1995 and $10.00 of Cash Flow and $29.20 of Mortgage
Reductions in 1994. Cash Flow distributions increased in 1996 as compared to
1995 due to the payment of special distributions of $1.34 and $2.00 per
Interest from Cash Flow reserves in July and October 1996, respectively. Cash
Flow distributions decreased in 1995 as compared to 1994 primarily due to loan
prepayments received in 1994. Distributions of Mortgage Reductions increased in
1996 as compared to 1995 due to the property sales.
In January 1997, the Partnership paid a distribution of $38,711,736 ($28.00 per
Interest) to the holders of Limited Partnership Interests. This amount includes
the regular quarterly distribution from Cash Flow of $2.00 per Interest and a
special distribution of Mortgage Reductions of $26.00 per Interest from
proceeds received in connection with the sale of the 45 West 45th Street,
Perimeter 400 Center and Symphony Woods office buildings and the Sun Lake and
Jonathan's Landing apartment complexes, all of which occurred during the fourth
quarter of 1996. The level of the regular quarterly distribution is consistent
with the amount distributed for the third quarter of 1996. Including the
January 1997 distribution, Limited Partners have received cash distributions
totaling $268.36 per $250 Interest. Of this amount, $139.86 represents Cash
Flow from operations and $128.50 represents a return of Original Capital. In
January 1997, the Partnership also paid $230,427 to the General Partner as its
distributive share of the Cash Flow distributed for the fourth quarter of 1996
and made a contribution to the Early Investment Incentive Fund of $76,809. In
February 1997, the General Partner made a settlement payment of $207,384($.15
per $250 Interest) to members of the class pursuant to the settlement approved
by the court in November 1996 in the Paul Williams and Beverly Kennedy et. al.
v. Balcor Pension Investors, et. al. class action lawsuit. Future
distributions will be made from remaining reserves and proceeds from sales of
the Partnership's remaining properties, as to all of which there can be no
assurances.
<PAGE>
During 1996, the General Partner on behalf of the Partnership used amounts
placed in the Early Investment Incentive Fund to repurchase 16,967 Interests
from Limited Partners at a cost of $1,684,405. In February 1997, the
Partnership discontinued the repurchase of Interests from Limited Partners.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or 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.
Certain statements in this Form 10-K constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include projections of revenues, income or losses, capital
expenditures, plans for future operations, financing plans or requirements, and
plans relating to properties of the Partnership, as well as assumptions
relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ materially
from any future results, performance or achievements expressed or implied by
the forward-looking statements.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
On September 14, 1995 the Registrant approved the engagement of Coopers &
Lybrand L.L.P. as its independent accountants for the fiscal year ending
December 31, 1995 to replace the firm of Ernst & Young LLP, who were dismissed
as auditors of the Registrant effective September 14, 1995. The General
Partner of the Registrant approved the change in auditors.
The reports of Ernst & Young LLP on the Registrant's financial statements for
each of the two fiscal years ended December 31, 1994 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
In connection with the audits of the Registrant's financial statements for each
of the two years ended December 31, 1994, and in the subsequent interim period,
there were no disagreements with Ernst & Young LLP on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope and
procedures which, if not resolved to the satisfaction of Ernst & Young LLP
would have caused Ernst & Young LLP to make reference to the matter in their
report.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
(a) Neither the Registrant nor Balcor Mortgage Advisors-VI, its General
Partner, has a Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President James E. Mendelson
Senior Vice President John K. Powell, Jr.
Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 49) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company. He
is also Senior Vice President of American Express Company and is responsible
for its real estate operations worldwide. Prior to joining Balcor, Mr.
Meador was employed at the Harris Trust and Savings Bank in the commercial
real estate division where he was involved in various lending activities.
Mr. Meador received his M.B.A. degree from the Indiana University Graduate
School of Business.
Alexander J. Darragh (age 42) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility
for Balcor's environmental matters. Mr. Darragh received masters' degrees in
Urban Geography from Queen's University and in Urban Planning from
Northwestern University.
James E. Mendelson (age 34) joined Balcor in July 1984 and is responsible
for Balcor's property sales activities. He also has supervisory
responsibility for Balcor's accounting, financial, treasury, investor
services and investment administration functions. From 1989 to 1995, Mr.
Mendelson was Vice President - Transaction Management and Vice President -
Senior Transaction Manager and had responsibility for various asset
management matters relating to real estate investments made by Balcor,
including negotiations for the restructuring of mortgage loan investments.
Mr. Mendelson received his M.B.A. degree from the University of Chicago.
<PAGE>
John K. Powell, Jr. (age 46) joined Balcor in September 1985 and is
responsible for portfolio and asset management matters relating to Balcor's
partnerships. Mr. Powell also has supervisory responsibility for Balcor's
risk management function. He received a Master of Planning degree from the
University of Virginia. Mr. Powell has been designated a Certified Real
Estate Financier by the National Society for Real Estate Finance and is a
full member of the Urban Land Institute.
Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and
private partnerships. She is also Treasurer and a Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1996.
Item 11. Executive Compensation
- --------------------------------
The Registrant paid $12,170 in 1996 with respect to one of the executive
officers and directors of Balcor Mortgage Advisors-VI, the General Partner.
Certain of the remaining officers receive compensation from The Balcor Company
(but not from the Registrant) for services performed for various affiliated
entities, which may include services performed for the Registrant. The
Registrant has not paid and does not intend to pay any remuneration to the
remaining executive officers and directors of the General Partner. However, the
General Partner believes that any such compensation attributable to services
performed for the Registrant is immaterial to the Registrant. See Note 11 of
Notes to Financial Statements for the information relating to transactions with
affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) The following entities are the sole Limited Partners which own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Title of Class Owner Ownership Class
- ---------------- ----------- ---------- ------------
Limited Walton Street 63,355.14 4.54%
Partnership Capital Acquisition Limited
Interests Co. II, L.L.C. Partnership
Chicago Interests
Illinois
Limited Beattie 34,115.70 2.44%
Partnership Place Limited
Interests Greenville, Partnership
South Carolina Interests
<PAGE>
While Walton Street Capital Acquisition Co. II, L.C.C. and Beattie Place
individually own less than 5% of the Interests, for purposes of this Item 12,
Walton Street Capital Acquisition Co. II, L.L.C. is an affiliate of Beattie
Place and, collectively, they own 6.98% of the Interests.
(b) Balcor Mortgage Advisors-VI and its officers and partners own as a group
through the Early Investment Incentive Fund and otherwise the following Limited
Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership
Interests 70,714 Interests 5.1%
Relatives and affiliates of the officers and partners of the General Partner do
not own any additional interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 11 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits and Reports on Form 8-K
- ------------------------------------------
(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
previously filed as Exhibit 3 to Amendment No. 1 to the Registrant's
Registration Statement on Form S-11 dated January 14, 1985 (Registration No.
2-93840), is incorporated herein by reference.
(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 14,
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 are incorporated herein by reference.
(10) Material Contracts:
(a) Agreement of Sale and attachment thereto relating to the sale of Perimeter
400 Center, Fulton County, Georgia, as previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated December 2, 1996 is incorporated
herein by reference.
(b)(i) Agreement of Sale and attachment thereto relating to the sale of the
Park Central Office Building, DeKalb County, Georgia, as previously filed as
Exhibit (2) to the Registrant's Current Report on Form 8-K dated December 18,
1996 is incorporated herein by reference.
(b)(ii) Letter Agreement relating to the sale of the Park Central Office
building, De Kalb County, Georgia, is attached hereto.
(c) Agreement of Sale and attachment thereto relating to the sale of Hammond
Aire Plaza Shopping Center, Baton Rouge, Louisiana, is attached hereto.
(16) Letter from Ernst & Young LLP dated September 19, 1995 regarding the
change in the Registrant's certifying accountant previously filed as Exhibit 16
to the Registrant's Report on Form 8-K/A dated October 27, 1995 is hereby
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1996 is attached hereto.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: None.
(99)(a)(i) Second Amendment to Agreement of Sale relating to the sale of
Flamingo Pines Plaza, Pembroke Pines, Florida, is attached hereto.
(99)(a)(ii) Third Amendment to Agreement of Sale relating to the sale of
Flamingo Pines Plaza, Pembroke Pines, Florida, is attached hereto.
<PAGE>
(99)(a)(iii) Fourth Amendment to Agreement of Sale relating to the sale of
Flamingo Pines Plaza, Pembroke Pines, Florida, is attached hereto.
(99)(b) Form of Notice of Proposed Class Action Settlement and Hearing
relating to Paul Williams and Beverly Kennedy, et al. vs. Balcor Pension
Investors, et al. previously filed as Exhibit (99)(b) to the Registrant's
Report on From 10-Q for the quarter ended June 30, 1996 is incorporated herein
by reference.
(b) Reports on form 8-K:
(i) A Current Report on Form 8-K dated December 2, 1996 was filed reporting the
contract to sell the Perimeter 400 Center Office Building in Fulton County,
Georgia, and the closing of the sales of Jonathan's Landing Apartments in Kent,
Washington and the Sun Lake Apartments in Lake Mary, Florida, is incorporated
herein by reference.
(ii) A Current Report on Form 8-K dated December 18, 1996 was filed reporting
the contract to sell the Park Central Office Building in DeKalb County, Georgia
and the closing of the sales of Perimeter 400 Center Office Building in Fulton
County, Georgia and the Symphony Woods Office Building in Columbia, Maryland,
is incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-VI
By: /s/Jayne A. Kosik
-----------------------------------
Jayne A. Kosik
Managing Director and Chief Accounting
and Financial Officer (Principal Accounting
Officer) of Balcor Mortgage
Advisors-VI, the General Partner
Date: March 28, 1997
----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------------------- ------------------------------- ------------
Executive and Chief Executive
Officer (Principal Executive
Officer) of Balcor Mortgage
/s/Thomas E. Meador Advisors-VI, the General Partner March 28, 1997
- --------------------- --------------
Thomas E. Meador
Managing Director and Chief Accounting
and Financial Officer (Principal
Accounting Officer) of Balcor Mortgage
/s/Jayne A. Kosik Advisors-VI, the General Partner March 28, 1997
- -------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1996 and 1995
Statements of Partners' Capital, for the years ended December 31, 1996, 1995
and 1994
Statements of Income and Expenses, for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows, for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
Audited Financial Statements for the significant subsidiary investments in
joint ventures are omitted since the properties were sold and the Partnership
is in its liquidation phase.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Pension Investors-VI:
We have audited the accompanying balance sheets of Balcor Pension Investors-VI
(An Illinois Limited Partnership) as of December 31, 1996 and 1995, and the
related statements of partners' capital, income and expenses and cash flows for
each of the two years in the period ended December 31, 1996. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Pension Investors-VI
(An Illinois Limited Partnership) at December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
As described in Note 2 to the financial statements, the Partnership Agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests. The Partnership is presently marketing for sale its
remaining real estate assets. Upon disposition of its remaining real estate
assets and resolution of the litigation described in Note 14 to the financial
statements, the Partnership intends to cease operations and dissolve.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 26, 1997
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Pension Investors-VI:
We have audited the accompanying statements of partners' capital, income and
expenses and cash flows of Balcor Pension Investors-VI (An Illinois Limited
Partnership) for the year ended December 31, 1994. These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Balcor
Pension Investors-VI for the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
March 11, 1995
<PAGE>
BALCOR PENSION INVESTORS-VI
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
--------------- ----------------
Cash and cash equivalents $ 57,942,543 $ 16,076,834
Escrow deposits 557,405
Accounts and accrued interest receivable 2,638,571 2,522,489
Prepaid expenses 89,022 283,525
Deferred expenses, net of accumulated
amortization of $380,456 in 1996 and
$1,014,165 in 1995 634,027 1,935,041
--------------- ----------------
61,304,163 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 $4,814,809 in 1996 and
$7,300,000 in 1995) 54,282,276 130,149,878
Investment in joint ventures with
affiliates 206,499 21,214,156
--------------- ----------------
54,488,775 155,523,850
--------------- ----------------
$ 115,792,938 $ 176,899,144
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 926,057 $ 763,742
Due to affiliates 174,426 51,700
Accrued liabilities, principally
real estate taxes 715,520 808,262
Security deposits 256,363 665,005
Mortgage note payable 15,657,066
--------------- ----------------
Total liabilities 2,072,366 17,945,775
--------------- ----------------
Commitments and contingencies
Affiliates' participation in joint<PAGE>
ventures 3,904,307 19,861,816
Limited Partners' capital (1,382,562
Interests issued and
outstanding) 109,967,857 146,274,796
General Partner's deficit (151,592) (7,183,243)
--------------- ----------------
Total partners' capital 109,816,265 139,091,553
--------------- ----------------
$ 115,792,938 $ 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 PARTNERS' CAPITAL
for the years ended December 31, 1996, 1995 and 1994
Partners' Capital (Deficit) Accounts
--------------- ------------- -------------
General Limited
Total Partner Partners
--------------- ------------- -------------
Balance at December 31, 1993 $ 197,578,783 $ (6,588,256) $204,167,039
Cash distributions to:
Limited Partners (A) (54,196,430) (54,196,430)
General Partner (1,536,180) (1,536,180)
Net income for the year
ended December 31, 1994 11,040,627 1,104,063 9,936,564
--------------- ------------- -------------
Balance at December 31, 1994 152,886,800 (7,020,373) 159,907,173
Cash distributions to:
Limited Partners (A) (24,056,579) (24,056,579)
General Partner (1,321,115) (1,321,115)
Net income for the year
ended December 31, 1995 11,582,447 1,158,245 10,424,202
--------------- ------------- -------------
Balance at December 31, 1995 139,091,553 (7,183,243) 146,274,796
Cash distributions to:
Limited Partners (A) (53,975,220) (53,975,220)
General Partner (1,742,028) (1,742,028)
Deemed distribution (B) (151,261) (151,261)
Net income for the year
ended December 31, 1996 26,593,221 8,773,679 17,819,542
--------------- ------------- -------------
Balance at December 31, 1996 $ 109,816,265 $ (151,592) $109,967,857
=============== ============= =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1996 1995 1994
--------------- ------------ -------------
First Quarter $ 2.00 $ 2.00 $ 12.20
Second Quarter 2.86 4.50 12.00
Third Quarter 7.68 6.52 13.00
Fourth Quarter 26.50 4.38 2.00
(B) This amount represents a state withholding tax paid on behalf of the
Limited Partners relating to the gain on the sale of the Perimeter 400 Center
Office Building.
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 years ended December 31, 1996, 1995 and 1994
1996 1995 1994
--------------- ------------- -------------
Income:
Interest on loans
receivable and from
investment in
acquisition loan $ 313,255 $ 816,044 $ 2,362,044
Income from operations
of real estate held
for sale 9,923,126 11,142,276 9,639,905
Interest on short-term
investments 1,194,304 1,587,705 1,694,880
Participation income 3,000,000
Recovery of losses on
loans, real estate
and accrued interest
receivable 3,351,785 2,465,000
--------------- ------------- -------------
Total income 14,782,470 16,011,025 16,696,829
--------------- ------------- -------------
Expenses:
Provision for potential
losses on loans, real
estate and accrued
interest receivable 2,605,562 1,800,000 3,900,000
Amortization of deferred
expenses 851,951 300,935 281,613
Administrative 1,556,744 1,229,199 1,514,676
--------------- ------------- -------------
Total expenses 5,014,257 3,330,134 5,696,289
--------------- ------------- -------------
Income before joint venture
participations, equity in loss
from investment in acquisition
loan, gains on dispositions
of real estate and extraordinary
items 9,768,213 12,680,891 11,000,540
Participation in income (loss)
of joint ventures - affiliates
before extraordinary items 5,573,531 (18,481) 568,147
Equity in loss from
investment in
acquisition loan (56,481) (32,714) (40,410)
Affiliates' participation
in income of joint ventures (7,608,339) (1,047,249) (1,306,029)
Gains on dispositions of
real estate 19,443,993 818,379
--------------- ------------- -------------
Income before extraordinary items 27,120,917 11,582,447 11,040,627
<PAGE>
--------------- ------------- -------------
Extraordinary items:
Debt extinguishment expenses (746,767)
Affiliate's participation in debt
extinguishment 284,145
Participation in debt
extinguishment expense of
joint venture - affiliate (65,074)
---------------
Total extraordinary items (527,696)
--------------- ------------- -------------
Net income $ 26,593,221 $ 11,582,447 $ 11,040,627
=============== ============= =============
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 years ended December 31, 1996, 1995, and 1994
(Continued)
1996 1995 1994
-------------- ------------- -------------
Income before extraordinary
items allocated to
General Partner $ 8,826,449 $ 1,158,245 $ 1,104,063
============== ============= =============
Income before extraordinary
items allocated to
Limited partner $ 18,294,468 $ 10,424,202 $ 9,936,564
============== ============= =============
Income before extraordinary items
per Partnership Interest
(1,382,562 issued and
outstanding) $ 13.23 None None
============== ============= =============
Extraordinary items allocated
to General Partner $ (52,770) None None
============== ============= =============
Extraordinary items allocated
to Limited Partners $ (474,926) None None
============== ============= =============
Extraordinary items per
Limited Partnership Interest
(1,382,562 issued and $ (0.34) None None
outstanding) ============== ============= =============
Net income allocated to
General Partner $ 8,773,679 $ 1,158,245 $ 1,104,063
============== ============= =============
Net income allocated to
Limited Partners $ 17,819,542 $ 10,424,202 $ 9,936,564
============== ============= =============
Net income per Limited
Partnership Interest
(1,382,562 issued and
outstanding) $ 12.89 $ 7.54 $ 7.18
============== ============ =============
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 years ended December 31, 1996, 1995 and 1994
1996 1995 1994
-------------- ------------- -------------
Operating activities:
Net income $ 26,593,221 $ 11,582,447 $ 11,040,627
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Recovery of losses on
loans, real estate
and accrued interest
receivable (3,351,785) (2,465,000)
Provision for
potential losses on
loans, real estate
and accrued interest
receivable 2,605,562 1,800,000 3,900,000
Payment of deferred
expenses (297,704) (264,559) (284,080)
Amortization of
deferred expenses 851,951 300,935 281,613
Participation in (income)
loss of joint ventures-
affiliates (5,573,531) 18,481 (568,147)
Equity in loss from
investment in acquisition
loan 56,481 32,714 40,410
Affiliates' participation
in income of joint
ventures 7,608,339 1,047,249 1,306,029
Gains on dispositions of
real estate (19,443,993) (818,379)
Debt extinguishment expense 746,767
Affiliate's participation
in debt extinguishment
expense (284,145)
Participation in debt
extinguishment expense of
joint venture - affiliate 65,074
Net change in:
Escrow deposits 356,330 (341,703) (281)
Escrow deposits -
restricted 238,983
Accounts and accrued
interest receivable (116,082) 17,251 (455,195)
Prepaid expenses 194,503 (176,701) 24,528
Accounts payable 162,315 258,094 77,072
Due to affiliates 122,726 (122,478) 19,763
Accrued liabilities (92,742) (97,008) (185,427)
Security deposits (408,642) 19,401 (21,219)
-------------- ------------- -------------
<PAGE>
Net cash provided by
operating activities 9,794,645 11,609,123 14,596,297
-------------- ------------- -------------
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 26,576,814 859,648 871,330
Contribution to joint
ventures - affiliates (60,700) (138,899)
Collection of principal
payments on loans
receivable 21,637,000
Improvements to
properties (1,478,867) (521,832) (867,198)
Proceeds from dispositions
of real estate 85,116,168 8,325,000
Cost incurred with
dispositions of real estate (2,735,562)
-------------- ------------- -------------
Net cash provided by
investing activities 111,168,435 198,917 29,966,132
-------------- ------------- -------------
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 years ended December 31, 1996, 1995 and 1994
(Continued)
1996 1995 1994
-------------- ------------- -------------
Financing activities:
Distributions to Limited
Partners $ (53,975,220) $(24,056,579) $(54,196,430)
Distributions to General
Partner (1,742,028) (1,321,115) (1,536,180)
Deemed distribution to
Limited Partners (151,261)
Distributions to joint venture
partners - affiliates (23,769,020) (1,042,505) (1,188,567)
Capital contributions by joint
venture partners-affiliates 487,317 103,285
Refunding of underlying revenue
bonds 15,700,000
Issuance of underlying revenue
bonds (15,700,000)
Release of restricted
investment 700,000
Repayment of mortgage notes
payable (5,434,419)
Principal payments on
mortgage notes payable (148,234) (42,934) (123,249)
Funding of repair escrows (201,075)
Release of repair escrows 201,075
Payment of refinancing fees (774,744)
-------------- ------------- -------------
Net cash used in
financing activities (79,097,371) (26,738,952) (62,375,560)
-------------- ------------- -------------
Net change in cash and cash
equivalents 41,865,709 (14,930,912) (17,813,131)
Cash and cash equivalents
at beginning of year 16,076,834 31,007,746 48,820,877
-------------- ------------- -------------
Cash and cash equivalents
at end of year $ 57,942,543 $ 16,076,834 $ 31,007,746
============== ============= =============
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. Nature of the Partnership's Business:
Balcor Pension Investors-VI (the "Partnership") is engaged principally in the
operation of commercial real estate located in various markets within the
United States.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold the Hawthorne Heights, Shoal
Run, Sun Lake and Woodscape apartment complexes, and the Perimeter 400 Center
and Symphony Woods office buildings. In addition, the Partnership sold its
minority joint venture interests in the 45 West 45th Street Office Building,
and Jonathan's Landing and Sand Pebble Village - Phases I and II apartment
complexes. During February 1997, the Partnership sold the Park Central Office
Building and Flamingo Pines Shopping Center. Currently, the Partnership has
entered into a contract for the sale of the Hammond Aire Plaza Shopping Center.
The Partnership is actively marketing the Brookhollow/Stemmons Center and 420
North Wabash office buildings for sale. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees stemming from litigation
involving the Partnership including, but not limited to, the lawsuit as
discussed in Note 14 of Notes to Financial Statements. In the absence of any
contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Partnership for a longer period of time.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Income on loans was recorded as earned in accordance with the terms of the
related loan agreements. The accrual of interest was discontinued when a loan
became ninety days contractually delinquent or sooner when, in the opinion of
the General Partner, an impairment had occurred in the value of the collateral
property securing the loan. Income on nonaccrual loans or loans which were
otherwise not performing in accordance with their terms was recorded on a cash
basis.
Various loan agreements provided for participation by the Partnership in
increases in value of the collateral property when the loan was repaid or
refinanced. In addition, certain loan agreements allowed the Partnership to
receive a percentage of rental income exceeding a base amount. Participation
income was reflected in the accompanying Statements of Income and Expenses when
received.
<PAGE>
Income from operations of real estate held for sale is reflected in the
accompanying Statements of Income and Expenses net of related direct operating
expenses.
(c) Loan losses on mortgage notes receivable were charged to income and an
allowance account was established when the General Partner believed the loan
balance would not be recovered. The General Partner assessed the collectibility
of each loan on a periodic basis through a review of the collateral property
operations, the property value and the borrower's ability to repay the loan.
Upon foreclosure, the loan net of the allowance was transferred to real estate
held for sale after the fair value of the property, less costs of disposal, was
assessed. Upon the transfer to real estate held for sale, a new basis in the
property was established.
Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of". Under SFAS 121, the
General Partner periodically assesses, but not less than on an annual basis,
the fair value of its real estate properties held for sale. The General Partner
estimates the fair value of its properties based on the current sales price
less estimated closing costs. Changes in the property's fair value is recorded
by an adjustment to the property allowance account and is recognized in the
income statement as an increase or decrease through recovery income or a
provision for loss in the period the change in fair value is determined. The
General Partner considers the methods referred to above to result in a
reasonable measurement of a property's fair value, unless other factors
affecting the property's value indicate otherwise.
(d) Investment in acquisition loan represented a first mortgage loan which,
because the loan agreement included certain specified terms, was accounted for
as an investment in a real estate venture. The investment was therefore
reflected in the accompanying financial statements using the equity method of
accounting. Under this method, the Partnership recorded its investment at cost
(representing total loan fundings) and subsequently adjusted its investment for
its share of property income or loss.
Amounts representing contractually required debt service were recorded in the
accompanying Statements of Income and Expenses as interest income and
participation income. Equity from investment in acquisition loan represented
the Partnership's share of the collateral property's operations, including
depreciation and interest expense. The Partnership's share of operations had no
effect on cash flow of the Partnership.
(e) Investment in joint ventures - affiliates represented the Partnership's
44.63%, 41.3%, and 46.5% interest, under the equity method of accounting, in
joint ventures with affiliates. Under the equity method of accounting, the
Partnership recorded its initial investment at cost and adjusted its investment
account for additional capital contributions, distributions and its share of
joint venture income or loss.
(f) Deferred expenses consist of refinancing fees which are amortized over the
term of the respective agreement, and leasing commissions which are amortized
over the life of each respective lease. Upon sale, any remaining balance is
recognized as debt extinguishment expense and classified as an extraordinary
item.
<PAGE>
(g) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to all
balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate and investment in joint ventures
from its disclosure requirements.
(h) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases is recognized on a straight line
basis over the respective lease term. Service income includes reimbursements
from operating costs such as real estate taxes, maintenance and insurance and
is recognized as revenue in the period the applicable costs are incurred.
(i) Cash and cash equivalents include all unrestricted highly liquid
investments with an original maturity of three months or less when purchased.
Cash is held or invested in one financial institution.
(j) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership's income or loss in his
tax return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(k) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the provisions in the Partnership Agreement.
In order for the capital accounts of the General Partner and Limited Partners
to appropriately reflect their respective remaining economic interests as
provided for in the Partnership Agreement, the General Partner was allocated
additional income in 1996 for financial statement purposes.
(l) Several reclassifications have been made to the previously reported 1994
financial statements to conform with the classifications used in 1996 and 1995.
These reclassifications have not changed the 1994 results.
4. Partnership Agreement:
The Partnership was organized in October 1984. The Partnership Agreement
provides for Balcor Mortgage Advisors-VI to be the General Partner and for the
admission of Limited Partners through the sale of up to 1,450,000 Limited
Partnership Interests at $250 per Interest, 1,382,562 of which were sold on or
prior to October 31, 1985, the termination date of the offering. For financial
statement purposes, the Partnership's results of operations are allocated 90%
to Limited Partners and 10% to the General Partner, of which 2.5% of the
General Partner's share relates to the Early Investment Incentive Fund.
To the extent that Cash Flow is distributed, distributions are made as follows:
(i) 90% of such Cash Flow is distributed to the Limited Partners, (ii) 7.5% of
such Cash Flow is distributed to the General Partner, and (iii) an additional
2.5% of such Cash Flow is distributed to the General Partner and constitutes
the Early Investment Incentive Fund (the "Fund"). An amount not to exceed such
<PAGE>
2.5% share originally allocated will be returned to the Partnership by the Fund
at the dissolution of the Partnership to the extent necessary to enable early
investors to receive upon dissolution of the Partnership a return of their
Original Capital plus a Cumulative Return of 15% for Interests purchased on or
before June 30, 1985, and 14% for Interests purchased between July 1, 1985 and
October 31, 1985.
Amounts placed in the Fund were used to repurchase Interests from existing
Limited Partners, at the sole discretion of the General Partner and subject to
certain limitations. During 1996, the Fund repurchased 16,967 Interests at a
cost of $1,684,405. All repurchases of Interests have been made at 90% of the
current value of such Limited Partnership Interests at the previous quarter
end. In February 1997, the Partnership discontinued the repurchase of Interests
from Limited Partners.
Distributions of Cash Flow and Mortgage Reductions pertaining to such
repurchased Interests were paid to the Fund and were available to repurchase
additional Interests.
5. Mortgage Notes Payable:
In October 1995, the underlying revenue bonds which financed the Sun Lake
Apartments $15,700,000 mortgage note payable, were refunded. The proceeds from
the new bonds were used to repay the prior bonds. The interest rate increased
from 4.5% to 5.375%. The prior bonds were collateralized by a letter of credit
for a fee of 1.7% annually of the letter of credit balance. The new bonds
required payment of guarantee and servicing fees totaling .975% annually of the
letter of credit balance. The monthly principal and interest payment due on the
new bonds was $99,080. The mortgage note payable had a balance of $15,657,066
at December 31, 1995.
Real estate held for sale with an aggregate carrying value of $21,885,000 at
December 31, 1995 was pledged as collateral for repayment of this mortgage
note. In November 1996 this property was sold. See Note 12 of Notes to
Financial Statements for additional information.
In November 1994, the Partnership remarketed the underlying revenue bonds which
financed the Sun Lake Apartments $15,700,000 mortgage note payable, which
reduced the interest rate of the loan from 7.625% to 4.5% effective November 1,
1994. The interest rate remained constant until November 1, 1995, the
remarketing date of the bonds. The bonds were collateralized by an irrevocable
letter of credit. In connection with the remarketing, the letter of credit was
reduced to approximately $16,131,750 and extended one additional year to
November 1, 1995. The Partnership needed to replace the letter of credit or
find an alternate credit facility for the bonds as of such date. The
Partnership paid a fee of approximately 1.7% on the letter of credit balance.
In addition, beginning November 1, 1994, the Partnership was required to remit
excess cash flow payments to the letter of credit provider to be held in trust
for future remarketing expenditures. Unless there was a prior redemption of all
or part of the bonds, the entire principal balance of the loan would have been
due on November 1, 1997.
During the years ended December 31, 1996, 1995 and 1994, the Partnership
incurred interest expense on the mortgage notes payable of $941,895, $959,064
and $1,688,971, respectively, and paid interest expense of $941,895, $1,020,529
and $1,627,506, respectively.
<PAGE>
6. Investment in Acquisition Loan:
In January 1989, the joint venture consisting of the Partnership and two
affiliates entered into a participation agreement to fund a $23,300,000 first
mortgage loan on the Noland Fashion Square. The Partnership participated
ratably in 21.46% of the loan amount, related interest income and participation
income. In August 1996, the Partnership sold its interest in the loan for a
sales price of $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. The Partnership did not recognize a gain or loss in connection with
the sale of this loan. During 1996, the Partnership recognized a provision for
loan losses of $352,753 and wrote off $627,347 against the previously
established loss allowance related to this loan.
The Jonathan's Landing loan receivable was on non-accrual status in 1994 and
prior to the acquisition through foreclosure of the property in 1995. Loans,
and loans whose payment terms have been restructured, were thereafter referred
to as impaired loans. Net interest income relating to impaired loans was
$524,637 in 1995 and $1,049,275 in 1994. Net interest income included in the
accompanying Statements of Income and Expenses amounted to $425,421 in 1995 and
$887,409 in 1994.
7. Allowances for Losses on Loans and Real Estate Held for Sale:
Activity recorded in the allowances for losses on loans and real estate held
for sale during the three years ended December 31, 1996 is described in the
table below:
1996 1995 1994
----------- ----------- -----------
Loans:
Balance at beginning of
year $274,594 $1,308,594 $ 1,308,594
Provision charged to
income 352,753 None None
Direct write-off of
loans against allowance (627,347) (1,034,000) None
----------- ----------- -----------
Balance at the end of
the year None $ 274,594 $ 1,308,594
=========== =========== ===========
Real Estate Held for Sale:
Balance at beginning of
year $7,300,000 $7,965,000 $4,065,000
Provision charged to
income 2,252,809 1,800,000 3,900,000
Recovery of provision
previously charged
to income (3,351,785) (2,465,000) None
Direct write-off of real
estate held for sale
against allowance (1,386,215) None None
----------- ---------- ------------
Balance at the end of
the year $4,814,809 $7,300,000 $7,965,000
=========== =========== ===========
<PAGE>
8. Management Agreements:
As of December 31, 1996, all of the remaining properties owned by the
Partnership are managed by a third-party management company. These management
agreements provide for annual fees of 3% to 6% of gross operating receipts.
9. Affiliates' Participation in Joint Ventures:
(a) The Brookhollow/Stemmons Center Office Complex is owned by the Partnership
and an affiliate. Profits and losses are allocated 72.5% to the Partnership
and 27.5% to the affiliate.
(b) The Perimeter 400 Center Office Building was owned by a joint venture
consisting of the Partnership and three affiliates. Profits and losses were
allocated 50% to the Partnership and 50% among the affiliates. The joint
venture sold this property during 1996. See Note 12 of Notes to Financial
Statements for additional information.
(c) The Sun Lake Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. Profits and losses were allocated 61.95% to the
Partnership and 38.05% to the affiliate. The joint venture sold this property
during 1996. See Note 12 of Notes to Financial Statements for additional
information.
All assets, liabilities, income and expenses of the joint ventures are included
in the financial statements of the Partnership with the appropriate adjustment
of profit or loss for each affiliate's participation.
Net distributions of $23,281,703, $1,042,505 and $1,085,282 were made to joint
venture partners during 1996, 1995 and 1994, respectively. In addition, the
joint venture partners were allocated their pro-rata share of the recovery of
losses in the amount of $977,945 during 1996 and $580,001 during 1995.
Provisions for potential losses in the amount of $684,900 were recognized
during 1995.
10. Investment in Joint Ventures with Affiliates:
(a) Title to the Sand Pebble Village - Phase I Apartments was acquired through
foreclosure sale by a joint venture consisting of the Partnership and an
affiliate in July 1992. The joint venture purchased the adjacent property, the
Sand Pebble Village - Phase II Apartments in October 1993. Profits and losses,
all capital contributions and distributions for both properties were allocated
in accordance with each participant's original funding percentage in the Phase
I loan. The Partnership's ownership percentage was 44.63%.
In August 1996, the joint venture sold Sand Pebble Village Apartments - Phase I
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 basis of the property was
$21,436,000. The joint venture recognized no gain or loss on the sale of this
property. The joint venture recognized a recovery of loss on real estate of
$2,080,943 from the sale of this property, of which $928,725 represents the
Partnership's share.
<PAGE>
In August 1996, the joint venture also sold Sand Pebble Village Apartments -
Phase II 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 selling costs of $272,701. The basis of the property was $9,357,449. The
joint venture recognized a gain of $2,458,085 from the sale of this property,
of which $1,097,043 represents the Partnership's share.
During 1994, the Partnership recognized a loss of $512,000 as its share of a
provision relating to the change in the estimate of the fair value of these
properties.
The Partnership's share of the recovery of the loss allowance in 1996 and
provision for losses in 1994 are included in the Partnership's participation in
income (loss) of joint venture with affiliates. In addition, during 1996, 1995
and 1994, the Partnership received net distributions from these joint ventures
totaling $12,229,052, $855,945, and $871,330, respectively.
(b) In 1995, a joint venture consisting of the Partnership and three
affiliates acquired title to the 45 West 45th Street Office Building. Profits
and losses, all capital contributions and distributions were allocated in
accordance with each participant's original funding percentage in the loan. The
Partnership's ownership percentage was 41.3%.
In November 1996, the joint venture sold the 45 West 45th Street Office
Building 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 basis of the property was
$6,786,740. The joint venture recognized a gain of $2,934,185 and a recovery of
a previously established loss allowance of $2,475,000 from the sale of this
property, of which the Partnership's share is $1,211,818 and $1,021,000,
respectively.
During 1995, the Partnership recognized a loss of $1,021,000 as its share of a
provision for losses relating to the change in the estimate of the fair value
of the property. This amount is included in the Partnership's participation in
income (loss) of joint venture with affiliates. During 1996 the Partnership
received net distributions from the joint venture of $4,121,167. During 1995,
the Partnership made a net contribution of $211,957 to this joint venture.
(c) In 1995, a joint venture consisting of the Partnership and an affiliate
acquired title to the Jonathan's Landing Apartments. Profits and losses, all
capital contributions and distributions were allocated in accordance with each
participant's original funding percentage in the loan. The Partnership's
ownership percentage was 46.5%.
In November 1996, the joint venture sold the Jonathan's Landing Apartments in
an all cash sale for $21,300,000. From the proceeds of the sale, the joint
venture paid $796,475 in selling costs. The basis of the property was
$18,354,120. The joint venture recognized a gain of $2,149,405 from the sale of
this property, of which $999,473 is the Partnership's share.
During 1996 and 1995, the Partnership received net distributions from the joint
venture of $10,165,895 and $76,761, respectively.
The following combined information has been summarized from the December 31,
1996 and 1995 financial statements of the above joint ventures:
<PAGE>
1996 1995
----------- ----------
Net investment in real estate
as of December 31 None $51,397,309
Total liabilities as
of December 31 $108,700 5,324,506
Total income 17,522,704 8,268,086
Income before loss provisions,
gains on sales and
extraordinary items 2,380,073 1,251,627
Provision for potential losses None (2,473,000)
Recovery of loss 4,553,943 None
Gain on sales 9,622,619 None
Extraordinary items:
Debt extinguishment expense 145,775 None
Net income (loss) 16,410,860 (1,221,373)
11. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
---------------- --------------- ----------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees $8,338 None $30,603 $957 $71,937 $4,944
Property management fees None None None None 973,445 None
Reimbursement of expenses
to the General Partner,
at cost:
Accounting 38,973 $26,534 93,992 8,319 122,102 46,741
Data processing 11,596 3,890 74,804 5,848 147,462 33,817
Investor communica-
tions None None 10,982 None 41,294 10,280
Legal 18,825 12,816 35,956 4,294 37,638 14,843
Portfolio management 192,692 131,186 195,656 32,272 121,413 39,432
Other None None 27,456 10 26,545 24,121
Allegiance Realty Group, Inc. an affiliate of the General Partner, managed ten
of the Partnership's eleven properties until the affiliate was sold to a third
party in November 1994.
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program; however, the General Partner is reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $41,553, $169,385 and $219,226 in 1996, 1995 and 1994, respectively.
<PAGE>
12. Property Dispositions:
(a) In December 1996, the Partnership sold Symphony Woods Office Building in an
all cash sale for $7,275,000. From the proceeds of the sale, the Partnership
paid $251,836 in selling costs. The basis of the property was $5,153,837. For
financial statement purposes, the Partnership recognized a gain of $1,869,327
from the sale of this property.
(b) The Perimeter 400 Center Office Building was owned by a joint venture
consisting of the Partnership and three affiliates. The Partnership and the
affiliates held participating percentages in the joint venture of 50%, 22%,
15%, and 13%, respectively. In December 1996, the joint venture sold the
property in an all cash sale for $40,700,000. From the proceeds of the sale,
the joint venture paid $882,765 in selling costs. In addition, the Partnership
paid a state withholding tax of $151,261 relating to the gain on the sale of
this property. The basis of the property was $27,396,252. For financial
statement purposes, the Partnership recognized a gain of $12,420,983 from the
sale of this property, of which $6,210,492 is the minority joint venture
partners' share.
(c) Sun Lake Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. The Partnership and the affiliate held
percentages in the joint venture of 61.95% and 38.05%, respectively. In
November 1996, the joint venture sold the property in an all cash sale for
$24,000,000. The purchaser took title to the property subject to the existing
first mortgage loan of $15,508,832. From the proceeds of the sale, the joint
venture paid $701,215 in selling costs. The basis of the property was
$24,685,000. For financial statement purposes, the joint venture recognized no
gain or loss from the sale of this property. The joint venture recognized a
recovery of loss on real estate of $1,413,785 from the sale of this property,
of which $537,945 is the minority joint venture partner's share, and wrote off
$1,386,215 against the previously established loss allowance related to this
property.
(d) In September 1996, the Partnership sold 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 $1,059,000
from the sale of this property.
(e) 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.
(f) 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.
(g) In August 1994, the Partnership disposed of its investment in the Northgate
and Gatewood apartment complexes which had a basis of $7,506,621. In connection
with the disposition, the Partnership received proceeds of $8,325,000 and the
underlying loans related to the properties of $2,047,463 were repaid. For
<PAGE>
financial statement purposes, the Partnership recognized a gain of $818,379
from the disposition of this investment.
13. Extraordinary Items:
(a) In connection with the November 1996 of the Sun Lake Apartments, the
Partnership wrote off the remaining unamortized deferred financing fees in the
amount of $746,767, of which $284,145 is the minority joint venture partner's
share. This amount was recognized as an extraordinary item and classified as
debt extinguishment expense.
(b) In connection with August 1996 sale of the Sand Pebble Village - Phase II
Apartments, the joint venture paid a prepayment penalty in the amount of
$145,775, of which $65,074 was the Partnership's share. This amount was
recognized as an extraordinary item and classified as debt extinguishment
expense.
14. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the financial position, operations and
liquidity of the Partnership. The Partnership believes it has meritorious
defenses to contest the claims.
15. Settlement of Litigation:
A settlement has received final approval by the court in November 1996 in
the class action, Paul Williams and Beverly Kennedy, et. al. v. Balcor Pension
Investors, et. al. upon the terms described in the notice to class members in
September 1996. The settlement had no material impact on the Partnership.
16. Fair Values of Financial Instruments:
As of December 31, 1996 and 1995, the carrying value of cash and cash
equivalents, accounts and accrued interest receivable, and accounts payable
approximates fair value.
As of December 31, 1995 , the fair value of the Partnership's loan receivable
approximated the carrying value of $4,159,816. In addition, the fair of the
Partnership's mortgage note payable was $13,675,375, and the carrying value was
$15,657,066.
17. Subsequent Events:
(a) In January 1997, the Partnership paid $38,711,736 ($28.00 per Interest) to
Limited Partners representing the regular quarterly distribution of available
Cash Flow of $2.00 per Interest for the fourth quarter of 1996 and a special
distribution of Mortgage Reductions of $26.00 per Interest from proceeds
received in connection with the sale of the 45 West 45th Street, Symphony Woods
and Perimeter 400 Center office buildings and the Sun Lake and Jonathan's
Landing apartment complexes all of which occurred during the fourth quarter of
1996.
(b) In February 1997, the General Partner made a settlement payment of
$207,384($.15 per $250 Interest) to members of the class pursuant to the
settlement approved by the court in November 1996 in the Paul Williams and
Beverly Kennedy et. al. v. Balcor Pension Investors, et. al. class action
lawsuit.
<PAGE>
(c) In February 1997, the Partnership sold the Park Central Office Building in
an all cash sale for $21,471,000. From the proceeds of the sale, the
Partnership paid $470,891 in selling costs. Pursuant to the terms of the sale,
the Partnership is required to retain $1,100,000 of the sales proceeds until
November 1997. The basis of the property was $14,875,198. For financial
statement purposes, the Partnership will recognize a gain of approximately
$6,125,000 in connection with the sale of this property during the first
quarter of 1997.
(d) In February 1997, the Partnership sold the Flamingo Pines Shopping Center
in an all cash sale for $10,200,000. From the proceeds of the sale, the
Partnership paid $346,400 in selling costs. The basis of the property was
$10,242,409. For financial statement purposes, the Partnership will recognize
no gain or loss in connection with the sale of this property. During 1996, the
Partnership recognized a provision of $388,809 related to this property to
provide for changes in the property's fair value based on the terms of the
sale.
<PAGE>
ACQUIPORT PARK CENTRAL, INC.
C/O J.P. MORGAN INVESTMENT MANAGEMENT INC.
522 FIFTH AVENUE, 9TH FLOOR
NEW YORK, NEW YORK, 10036
February 6, 1997
VIA FEDERAL EXPRESS
Park Central Limited Partnership
c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road - Suite A-200
Bannockburn, Illinois 60015
Attention: Ms. Ilona Adams
Re: Park Central Office Building
Atlanta, Georgia
Ladies and Gentlemen:
Reference is hereby made to that certain Agreement of Sale, dated as of January
20, 1997, between the undersigned, as Purchaser, and yourself, as Seller,
covering the captioned property (the "Contract"). All capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in
the Contract.
In accordance with the Paragraph 8 of the Contract, the undersigned hereby
notifies you of its intention to extend the Closing Date to a date no later
than February 28, 1997. Our attorneys will be in touch with you by telephone
to confirm the new Closing Date, which we anticipate will be either February 19
or 20.
Very truly yours,
ACQUIPORT PARK CENTRAL, INC.
By: /s/ Wayne A. Comer
-----------------------------
Wayne A. Comer, V.P.
cc: The Balcor Company
Attention: Mr. James Mendelson
FAX: (847) 317-4462
Katten Muchin & Zavis
Attention: Daniel J. Perlman, Esq.
FAX: (312) 902-1061
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 18th
day of March, 1997, by and between CROSSTOWN ASSET CORP. I, a Delaware
corporation ("Purchaser"), and H-A 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 Fourteen Million Two Hundred Fifty Thousand and No/100 Dollars
($14,250,000.00) (the "Purchase Price"), the following property commonly known
as Hammond Aire Plaza, East Baton Rouge Parish, Louisiana (collectively, the
"Property"):
1.1. The land located in East Baton Rouge Parish, Louisiana, and legally
described on Exhibit A attached hereto, together with all easements,
appurtenances and hereditaments thereto (the "Land") together with all
buildings, structures, fixtures and improvements located thereon (the
"Improvements"). The Land and Improvements are collectively referred to herein
as the "Real Property";
1.2. The items of personal property set forth on Exhibit B attached hereto
(the "Personal Property");
1.3. The tenant leases with respect to the Property listed on the rent
roll attached hereto as Exhibit M (the "Leases");
1.4. All licenses and permits relating to the Real Property or the
Personal Property, including all certificates of occupancy and other permits,
licenses or approvals issued under applicable law set forth on Exhibit P (the
"Permits");
1.5. The service contracts and agreements listed on Exhibit H (the
"Contracts");
1.6. All warranties and guaranties given to, assigned to or benefiting the
Seller, the Real Property or the Personal Property, to the extent assignable
without cost to Seller (the "Warranties"); and
1.7. All records (exclusive of computer software) of Seller relating to
the operation and physical condition of the Property to the extent in Seller's
possession, including (a) all records regarding real estate taxes and
assessments, insurance, maintenance, repairs, capital improvements and
services, (b) all environmental, soil and engineering reports and studies,
including all drafts and letters and other documents which describe or limit
the scope of such tests, reports or studies), (c) all originals and copies of
surveys, blueprints, plans and specifications regarding the Real Property and
the Personal Property, and (d) equipment manuals, excluding all appraisals,
internal memoranda to Seller's asset management committee and all software
(collectively, the "Records").
<PAGE>
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Within two (2) business days after the full execution of this
Agreement, the sum of One Hundred Forty-Two Thousand Five Hundred and No/100
Dollars ($142,500.00) (the "Deposit") to be held in escrow by and in accordance
with the provisions of the Escrow Agreement ("Escrow Agreements") attached
hereto as Exhibit C;
2.2. On or before the expiration of the "Inspection Period" (as
hereinafter defined), Purchaser shall deposit an additional One Hundred
Fourteen Thousand and No/100 Dollars ($114,000.00) to be held by and in
accordance with the provisions of the Escrow Agreement (the "Additional
Deposit", which, to the extent deposited, shall be included within the
definition of "Deposit"); and
2.3. On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 11:00 a.m. Chicago time.
3. TITLE REVIEW.
3.1. Title Evidence. As soon as reasonably practical following the mutual
execution and delivery of this Agreement, Seller shall furnish the following
title evidence to Purchaser ("Title Evidence"):
3.1.1. A commitment to insure title to the Real Property (the
"Commitment") issued by Near North National Title Corporation as agent for
First American Title Insurance Company (the "Title Insurer"). The commitment
shall (a) be issued on ALTA Owner's Form B-1970 (revised 10-17-70) in an amount
equal to the Purchase Price, (b) show Seller as owner of the Real Property, (c)
commit to delete all of the so-called "standard exceptions" to coverage, and
(d) include legible copies of all documents, instruments and matters shown as
exceptions or referenced therein.
3.1.2. A current survey of the Property (the "Survey"), prepared
and certified by a registered land surveyor licensed in the jurisdiction in
which the Real Property is located reasonably satisfactory to Purchaser. The
Survey shall (a) conform to the "Minimum Standard Detail Requirement for Land
Title Surveys" as adopted in 1992 by the American Land Title Association and
the American Congress on Surveying & Mapping, and (b) contain a certification
to Purchaser, Title Insurer and any other party designated by Purchaser
substantially in the form attached hereto as Exhibit D, to the extent
possible..
The Title Evidence shall be deemed received by Purchaser for purposes of
Section 3.2 only when a Commitment and Survey conforming to the foregoing
requirements have been received by Purchaser.
3.2. Purchaser's Objections and Requirements. Purchaser shall be allowed
until the later to occur of (i) the end of the Inspection Period, or (ii) ten
(10) business days after receipt of the last of the Title Evidence, for
examination thereof and making any objections to the form and/or content of the
same. Any objections not made within said period shall be deemed to be waived
by Purchaser and shall be "Permitted Exceptions". Purchaser's objections may
include additional requirements with regard to the Title Evidence based upon
its initial review of the same, including requiring (a) satisfaction of Title
Insurer's requirements as set forth in the Commitment, (b) deletion of all the
<PAGE>
so-called "standard exceptions" to coverage, and (c) affirmative insurance of
any easements appurtenant to the Real Property.
3.3. Correction of Title. Seller shall have the right, but not the
obligation to cure any objections made by Purchaser pursuant to Section 3.2.
Seller shall provide Purchaser with notice within five (5) business days of
Purchaser's objection stating whether Seller intends to cure any objection. If
Seller elects to cure any objection, Seller shall be allowed thirty (30) days
after the making of Purchaser's objections to cure the same and shall
diligently proceed and use all reasonable efforts to do so. Pending such cure,
the Closing shall be postponed to the extent necessary to accommodate such time
period; provided however, Seller shall not be allowed any additional time
beyond the originally scheduled Closing Date to discharge or satisfy any
mortgage, judgment or other monetary lien set forth on the original Commitment.
Upon such cure, the Closing (hereinafter defined) shall be held on the later of
(a) the Closing Date and (b) the first business day occurring five (5) days
after the date such cure is completed. If Seller elects not to cure any
objection or if such cure is not completed within said thirty (30) day period,
Purchaser shall have the option to do any of the following:
3.3.1. Terminate this Agreement.
3.3.2. Withhold from the Purchase Price an amount which in the
reasonable judgement of Title Insurer is sufficient to discharge at Closing any
mortgage, judgment or other monetary lien objected to by Purchaser only in the
event such lien appears on the original Commitment. Any amount so withheld
shall be placed in escrow with Title Insurer pending cure and satisfaction. If
Seller has not discharged such mortgage, judgment or other monetary lien within
thirty (30) days after Closing, Purchaser may then proceed in its discretion to
do so and charge the reasonable costs of cure (including reasonable attorneys'
fees) against the amount so escrowed; or
3.3.3. Waive one or more of its objections and proceed to Closing
and such exceptions to title which are waived by Purchaser shall be deemed
additional "Permitted Exceptions" and Purchaser shall have no right to deduct
any amount against the Purchase Price except in connection with Paragraph
3.3.2.
3.4. Cost of Title Evidence and Title Policy. In the event that the
Closing occurs, Purchaser agrees to reimburse Seller for one-half of the cost
of obtaining the Title Evidence. Seller and Purchaser each agree to pay
one-half of the costs of the Title Policy (as hereinafter defined) and
Purchaser shall pay for all of the costs of any endorsements to, or extended
coverage on, the Title Policy.
3.5. Date Downs to Title. If, prior to Closing but after the end of the
Inspection Period, a date-down to the Commitment discloses any new exception
which is not a Permitted Exception ("Unpermitted Exception"), Seller shall
provide Purchaser with notice within five (5) business days of notice by
Purchaser to Seller of the existence of such Unpermitted Exception stating
whether Seller intends to cure any objection. If Seller elects to cure any
objection, Seller shall have thirty (30) days from the date of receipt by
Seller of such notice, at Seller's expense, to (i) cure and/or, subject to
Purchaser's reasonable approval, have any Unpermitted Exceptions which, in the
aggregate, do not exceed $25,000.00, removed from the Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions, or (ii) have the right, but not the obligation, to
<PAGE>
cure and/or, subject to Purchaser's reasonable approval, have any Unpermitted
Exceptions which, in the aggregate, equal or exceed $25,000.00, removed from
the Commitment or to have the Title Insurer commit to insure against loss or
damage that may be occasioned by such Unpermitted Exceptions. In such event,
the time of Closing shall be delayed, if necessary, to give effect to said
aforementioned time periods. If Seller fails to cure or have said Unpermitted
Exception removed or have the Title Insurer commit to insure as specified above
within said thirty (30) day period or if Seller elects not to exercise its
rights under (ii) in the preceding sentence, Purchaser may terminate this
Agreement upon notice to Seller within five (5) days after the expiration of
said thirty (30) day period. Absent notice from Purchaser to Seller in
accordance with the preceding sentence, Purchaser shall be deemed to have
elected to take title subject to said Unpermitted Exception. If Purchaser
terminates this Agreement in accordance with the terms of this Paragraph 3.5,
this Agreement shall become null and void without further action of the parties
and all Deposit theretofore deposited into the escrow by Purchaser together
with any interest accrued thereon, shall be returned to Purchaser, and neither
party shall have any further liability to the other, except for Purchaser's
obligation to indemnify Seller and restore the Property, as more fully set
forth in Paragraph 7.
4. PAYMENT OF CLOSING COSTS. Purchaser and Seller shall each pay for
one-half of the costs of the documentary or transfer stamps to be paid with
reference to the "Sale" (hereinafter defined) and all other stamps, intangible,
transfer, documentary, recording, sales tax and surtax imposed by law with
reference to any other sale documents delivered in connection with the sale of
the Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction.
5. CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE. The obligations of
Purchaser under this Agreement are contingent upon each of the following:
5.1. Estoppel Certificates. The following terms have been defined as
follows for convenience of reference:
5.1.1. "Tenant Certificate" means a certificate, commonly known as
an estoppel certificate, signed by a tenant with respect to its Lease, either
in the form set forth on Exhibit L hereto or on such other form as is
substantially consistent with the requirements of the tenant's lease for such
certificates.
5.1.2. "Seller Tenant Certificate" means a Tenant Certificate
signed by the Seller with respect to a particular Lease for which the Tenant in
question has failed to execute and deliver a Tenant Certificate, in which case
the Seller Tenant Certificate shall be in the form of Exhibit L, provided that
a Seller Tenant Certificate shall in all cases be limited to Seller's knowledge
as defined in Paragraph 16.1 above.
5.1.3. "Qualification" means any assertion in a Tenant Certificate
or Seller Tenant Certificate (whether in the form of Exhibit L or otherwise) of
(i) a claim, counterclaim, offset or defense against the landlord, (ii) a
default on the part of the landlord, (iii) unpaid credits, allowances or other
sums due from the landlord prior to the date of the estoppel (other than
disclosed on Exhibit M, Exhibit N or Exhibit Q attached hereto), (iv) an
unfulfilled construction or other obligation on the part of the landlord prior
to the date of estoppel (other than disclosed on Exhibit M, Exhibit N or
Exhibit Q attached hereto), (v) information which is contrary (in an adverse
<PAGE>
respect to the landlord) (x) to the information contained in the rent roll
attached hereto as Exhibit M, or (y) to the information pertaining to tenant
allowances and concessions and leasing commissions contained on Exhibit N' or
(vi) the existence of any of the following which are not set forth in the
Lease: rights of tenant to terminate the Lease, rights of tenant to purchase
any part of the Property, rights of tenant to expand the leased premises or
renew the term of the Lease, or rights of tenants to exclusives;
5.1.4. "Unacceptable Qualification" means any Qualification other
than the following:
(a) a Qualification which is expressly disclosed on the rent roll
attached hereto as Exhibit M or the schedules attached hereto as Exhibit N or
Exhibit Q or a Qualification relating to non-payment of March, 1997 or April,
1997 rent, provided the same is not as a result of a default by Seller; or
(b) a Qualification expressly disclosed on the other Exhibits
attached hereto and made a part hereof.
5.1.5. If a Qualification is not an Unacceptable Qualification, it
shall not affect Purchaser's obligations to close hereunder or give rise to any
liability from Seller to Purchaser.
5.1.6. Seller shall promptly upon execution of this Agreement
request a Tenant Certificate in the form of Exhibit L from all tenants, and
shall in good faith pursue the collection of the same. Seller shall deliver to
Purchaser, upon Seller's receipt thereof, all Tenant Certificates signed by
tenants (whether in the form of Exhibit L or otherwise).
5.1.7. It shall be a condition to Purchaser's obligations
hereunder (the "Estoppel Condition") that Purchaser shall have received
estoppel certificates as required pursuant to Paragraph 17. Notwithstanding
the foregoing to the contrary, Seller shall not have satisfied the Estoppel
Condition if any of the Tenant Certificates received by Seller or Seller Tenant
Certificates disclose Unacceptable Qualifications other than Unacceptable
Qualifications that can be cured by the payment of money or for which Purchaser
can be compensated as set forth below and with an "Estoppel Qualification Sum"
(hereinafter defined) of less than $100,000 per tenant and $250,000 in the
aggregate. The "Estoppel Qualification Sum" shall mean the following:
(i) if the claim asserted arises out of a defect which can be cured,
with the expenditure of money on a one time basis, such as a physical defect,
then such sum shall be calculated by a reasonable estimate of the cost to
repair or remediate said defect; and
(ii) if the claim asserted affects a continuing obligation of a
tenant under the lease, such as the payment of rent, then the claim shall be
calculated by (i) determining the amount of the claim on a per annum basis,
(ii) multiplying said amount by the number of years or partial years said claim
would affect the monetary obligations under the lease and (iii) discounting
said product on a present value basis using a discount rate of 10% per annum.
If the Unacceptable Qualifications have an Estoppel Qualification Sum of
less than $100,000 per tenant and $250,000 in the aggregate, then Seller shall
either (i) grant Purchaser a credit at Closing for an amount equal to the
Estoppel Qualification Sum, or (ii) cure all conditions giving rise to an
Unacceptable Qualification on or before the Closing. The determination to
<PAGE>
perform the covenant contained in subparagraphs (i) or (ii) in the preceding
sentence shall be made by Seller in its sole discretion. Provided Seller
performs its covenant in this Paragraph 5.1.7, the disclosure of Unacceptable
Qualifications having an Estoppel Qualification Sum of less than $100,000 per
tenant and $250,000 in the aggregate shall not affect Purchaser's obligations
to close hereunder or give rise to any additional liability from Seller to
Purchaser.
5.1.8. If Seller delivers any Seller Tenant Certificates, then
upon receipt after Closing by Purchaser of a Tenant Certificate from a tenant
under a Lease for whom Seller has executed and delivered a Seller Tenant
Certificate at Closing, the Seller Tenant Certificate executed and delivered by
Seller at Closing shall become null and void and the Tenant Certificate
received from the tenant shall be substituted therefor, solely to the extent
that the information contained in the Tenant Certificate is the same as the
information set forth in the Seller Tenant Certificate. Seller's liability
under Seller Tenant Certificates shall be limited pursuant to Paragraph 18
herein.
5.2. Title Policy. On the Closing Date, Title Insurer shall be
irrevocably committed to issue to Purchaser the title policy pursuant to the
Commitment with respect to the Real Property and any appurtenant easements
designated by Purchaser pursuant to Section 3.2, subject only to the Permitted
Exceptions (the "Title Policy").
5.3. Seller's Representations and Warranties. On the Closing Date, each
of the representations and warranties of Seller in Section 16 shall be true and
correct in all material respects as if the same were made on the Closing Date;
provided, however, that if the status of any of the tenancies changes from the
date of the rent roll attached hereto as Exhibit M and the date of the rent
roll delivered at Closing, provided the change in status is not caused by a
breach by Seller of its obligations under any Lease, then Purchaser shall not
have the right to terminate this Agreement or make any claim for a breach of a
representation or warranty hereunder involving the rent roll or tenancies
thereunder.
5.4. No Material Adverse Charge. On the Closing Date, there shall not
have been any "Material Adverse Change" (as hereinafter defined) with respect
to the Property. For the purposes of this Paragraph 5.4, "Material Adverse
Change" shall mean solely that after the date hereof, any tenant or tenants
leasing in the aggregate in excess of 50,000 square feet of the Property become
entitled to terminate their lease.
5.5. Seller's Obligations. On the Closing Date, Seller shall have
performed all of the obligations required to be performed by Seller under this
Agreement as and when required under this Agreement.
5.6. REA Estoppel Certificates. It shall not be a condition to
Purchaser's obligations hereunder that Purchaser shall have received estoppel
certificates from Albertson's (or its successor or assign) or The Home Depot,
Inc. (or its successor or assign) parties to the "REA" (as hereinafter
defined).
If any conditions in this Paragraph 5 have not been satisfied on or before
the Closing Date, then Purchaser may terminate this Agreement by notice to
Seller on or before the Closing Date. To the extent that any of the conditions
in this Paragraph 5 require satisfaction of Purchaser, such satisfaction shall
<PAGE>
be determined by Purchaser in its reasonable discretion. The conditions in
this Paragraph 5 are specifically stated and for the sole benefit of Purchaser.
Purchaser in its discretion may unilaterally waive (conditionally or
absolutely) the fulfillment of any one or more of the conditions, or any part
thereof, by notice to Seller, without any offset against the Purchase Price or
claim against Seller. Seller shall not take or authorize, directly or
indirectly, any action that modifies or changes the circumstances upon which
the conditions set forth in this Paragraph 5 were deemed satisfied or waived by
Purchaser without Purchaser's consent.
6. DAMAGE AND CASUALTY; CONDEMNATION.
6.1. Damage and Casualty. Except as provided in the indemnity provisions
contained in Paragraph 7.1 of this Agreement, Seller shall bear all risk of
loss with respect to the Property up to the Closing Date. Notwithstanding the
foregoing, in the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as determined by Seller and Purchaser in good faith) Purchaser
shall not have the right to terminate its obligations under this Agreement by
reason thereof, unless otherwise specifically set forth herein, but Seller
shall have the right to elect to either repair and restore the Property (in
which case the Closing Date shall be extended until completion of such
restoration) or to assign and transfer to Purchaser on the Closing Date all of
Seller's right, title and interest in and to all insurance proceeds paid or
payable to Seller on account of such fire or casualty and in addition, Seller
shall pay to Purchaser the amount of any deductible maintained by Seller under
any insurance policy covering such fire or casualty. Seller shall promptly
notify Purchaser in writing of any such fire or other casualty and Seller's
determination of the cost to repair the damage caused thereby. In the event of
damage to the Property by fire or other casualty prior to the Closing Date,
repair of which would cost in excess of $100,000.00 (as determined by Seller
and Purchaser in good faith), then this Agreement may be terminated at the
option of Purchaser, which option shall be exercised, if at all, by Purchaser's
written notice thereof to Seller within fifteen (15) business days after
Purchaser receives written notice of such fire or other casualty (which notice
shall specifically call Purchaser's attention to this Paragraph 6.1 and state
that Purchaser has fifteen (15) business days to respond), and upon the
exercise of such option by Purchaser this Agreement shall become null and void,
the Deposit deposited by Purchaser shall be returned to Purchaser together with
interest thereon, and neither party shall have any further liability or
obligations hereunder. In the event that Purchaser does not exercise the
option set forth in the preceding sentence, the Closing shall take place on the
Closing Date and Seller shall assign and transfer to Purchaser on the Closing
Date all of Seller's right, title and interest in and to all insurance proceeds
paid or payable to Seller on account of the fire or casualty and in addition,
Seller shall pay to Purchaser the amount of any deductible maintained by Seller
under any insurance policy covered by such fire or casualty. Seller
represents, warrants and covenants that it will maintain property damage
insurance insuring the Property for its full replacement cost during the
executory period of this Agreement.
6.2. Condemnation. If between the date of this Agreement and the Closing
Date, any condemnation or eminent domain proceedings are initiated which might
result in the taking of any part of the Property or the taking or closing of
any right of access to the Property, Seller shall immediately notify Purchaser
of such occurrence, which notice shall specifically call Purchaser's attention
to this Paragraph 6.2 and state that Purchaser has fifteen (15) business days
<PAGE>
to respond. In the event that the taking of any part of the Property shall:
(i) materially impair access to or parking on the Property; (ii) cause any
material non-compliance with any applicable law, ordinance, rule or regulation
of any federal, state or local authority or governmental agencies having
jurisdiction over the Property or any portion thereof; or (iii) materially and
adversely impair the use of the Property as it is currently being operated
(hereinafter referred to as a "Material Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Deposit deposited by Purchaser, together with interest thereon,
shall be returned to Purchaser and all rights and obligations of the parties
hereunder with respect to the closing of this transaction will cease; or
6.2.2. proceed with the Closing, in which event Seller shall assign
to Purchaser all of Seller's right, title and interest in and to any award made
in connection with such condemnation or eminent domain proceedings.
Purchaser shall notify Seller, within fifteen (15) business days after
Purchaser's receipt of Seller's notice, whether Purchaser elects to exercise
its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be delayed,
if necessary, until Purchaser makes such election. If Purchaser fails to make
an election within such fifteen (15) business day period, Purchaser shall be
deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. Inspection Period. During the period commencing on January 22, 1997
and ending at 5:00 p.m. Chicago time on April 8, 1997 (said period being herein
referred to as the "Inspection Period"), Purchaser and the agents, engineers,
employees, contractors and surveyors retained by Purchaser may enter upon the
Property, at any reasonable time and upon reasonable prior notice to Seller, to
inspect the Property, and to conduct and prepare such studies, tests and
surveys as Purchaser may deem reasonably necessary and appropriate. In
connection with Purchaser's review of the Property, Seller has delivered to
Purchaser complete and accurate copies of the following: the Leases, the
Contracts, the Permits in Seller's possession, the Warranties in Seller's
possession, the Records in Seller's possession, the current rent roll for the
Property, the most recent tax and insurance bills, utility account numbers, and
year end 1995 and year end 1996 operating statements, and plans and
specifications for the Improvements in Seller's possession.
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Property to the condition existing
prior to the performance of such tests or investigations by or on behalf of
Purchaser. Purchaser shall defend, indemnify and hold Seller and any
affiliate, parent of Seller, and all shareholders, employees, officers and
directors of Seller or Seller's affiliate or parent (hereinafter collectively
referred to as "Affiliates of Seller") harmless from any and all liability,
cost and expense (including without limitation, reasonable attorney's fees,
court costs and costs of appeal) suffered or incurred by Seller or Affiliates
of Seller for injury to persons or property caused by Purchaser's
<PAGE>
investigations and inspection of the Property. Purchaser shall undertake its
obligation to defend set forth in the preceding sentence using attorneys
selected by Purchaser and reasonably acceptable to Purchaser.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph
7.1, Purchaser shall have the right to terminate this Agreement by giving
written notice of such termination to Seller at any time prior to the
expiration of the Inspection Period. If written notice is not received by
Seller pursuant to this Paragraph 7.1 prior to the expiration of the Inspection
Period, then the right of Purchaser to terminate this Agreement pursuant to
this Paragraph 7.1 shall be waived. If Purchaser terminates this Agreement by
written notice to Seller prior to the expiration of the Inspection Period: (i)
Purchaser shall promptly deliver to Seller copies of all studies, reports and
other investigations obtained by Purchaser in connection with its due diligence
during the Inspection Period; and (ii) the Deposit 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 Sale and
termination of this Agreement.
7.2. As-Is. Purchaser acknowledges and agrees that it will be purchasing
the Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that except as
otherwise specifically set forth in this Agreement, Purchaser will be
purchasing the Property and the Personal Property "AS IS" and "WITH ALL
FAULTS", based upon the condition of the Property and the Personal Property as
of the date of this Agreement, wear and tear and loss by fire or other casualty
or condemnation excepted. Purchaser expressly waives the warranty of fitness
and the guarantee against hidden or latent vices (defects in the Property sold
which render it useless or render its use so inconvenient or imperfect that
Purchaser would not have purchased it had it known of the vice or defect)
provided by law in Louisiana, more specifically, that warranty imposed by
Louisiana Civil Code 2520 et seq with respect to Seller's warranty against
latent or hidden defects of the property sold, or any other applicable law, not
even for a return of the purchase price. Purchaser forfeits the right to avoid
the sale or reduce the purchase price on account of a hidden or latent vice or
defect in the Property. This provision has been specifically called to the
attention of the Purchaser and fully explained to the Purchaser, and the
Purchaser acknowledges that it has read and understands this waiver of all
express or implied warranties and accepts the Property without any express or
implied warranties. Without limiting the foregoing, Purchaser acknowledges
that, except as may otherwise be specifically set forth elsewhere in this
Agreement, neither Seller nor its consultants, brokers or agents have made any
representations or warranties of any kind upon which Purchaser is relying as to
any matters concerning the Property or the Personal Property, including, but
not limited to, the Land or the Improvements, the existence or non-existence of
Hazardous Materials (as hereinafter defined), economic projections or market
<PAGE>
studies concerning the Property, any development rights, taxes, bonds,
covenants, conditions and restrictions affecting the Property, water or water
rights, topography, drainage, soil, subsoil of the Property, the utilities
serving the Property or any zoning or building laws, rules or regulations or
"Environmental Laws" (hereinafter defined) affecting the Property. Except as
specifically set forth herein, Seller makes no representation or warranty that
the Property complies with Title III of the Americans with Disabilities Act or
any fire code or building code. Purchaser hereby releases Seller and the
Affiliates of Seller from any and all liability in connection with any claims
which Purchaser may have against Seller or the Affiliates of Seller relating
directly or indirectly to the existence of asbestos or Hazardous Materials on,
or environmental conditions of, the Property, whether known or unknown;
provided, however, that Purchaser may assert claims for contribution or cost
recovery against Seller or the Affiliates of Seller, relating directly or
indirectly to the existence of asbestos or Hazardous Materials on, or
environmental conditions of, the Property, whether known or unknown, only in
the event that Purchaser is sued by a third party in connection therewith. As
used herein, "Environmental Laws" means all federal, state and local statutes,
codes, regulations, rules, ordinances, orders, standards, permits, licenses,
policies and requirements (including consent decrees, judicial decisions and
administrative orders) relating to the protection, preservation, remediation or
conservation of the environment or worker health or safety, all as amended or
reauthorized, or as hereafter amended or reauthorized, including without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq.,
the Emergency Planning and Community Right-to-Know Act ("Right-to-Know Act"),
42 U.S.C. Section 11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. Section
7401 et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33
U.S.C. Section 1251 et seq., the Toxic Substances Control Act ("TSCA"), 15
U.S.C. Section 2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water
Act"), 42 U.S.C. Section 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C.
Section 2011 et seq., the Occupational Safety and Health Act ("OSHA"),
29 U.S.C. Section 651 et seq., and the Hazardous Materials Transportation Act
(the "Transportation Act"), 49 U.S.C. Section 1802 et seq. As used herein,
"Hazardous Materials" means: (1) "hazardous substances," as defined by CERCLA;
(2) "hazardous wastes," as defined by RCRA; (3) any radioactive material
including, without limitation, any source, special nuclear or by-product
material, as defined by AEA; (4) asbestos in any form or condition; (5)
polychlorinated biphenyls; and (6) any other material, substance or waste to
which liability or standards of conduct may be imposed under any Environmental
Laws. Notwithstanding anything contained herein to the contrary, the terms of
this Paragraph 7.2 shall survive the Closing and the delivery of the Sale and
termination of this Agreement.
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Except as expressly set forth herein,
Seller makes no representation or warranty that such material is complete or
accurate or that Purchaser will achieve similar financial or other results with
respect to the operations of the Property, it being acknowledged by Purchaser
that Seller's operation of the Property and allocations of revenues or expenses
may be vastly different than Purchaser may be able to attain. Purchaser
acknowledges that it is a sophisticated and experienced purchaser of real
estate and further that Purchaser has relied upon its own investigation and
<PAGE>
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
Sale and termination of this Agreement.
7.4. Seller has provided to Purchaser the following existing report: Phase
I Environmental Assessment Project No.: C93-027, dated February 17, 1993
prepared by Nova Environmental Services, Inc. ("Existing Report"). Seller
makes no representation or warranty concerning the accuracy or completeness of
the Existing Report, except as expressly set forth herein. 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 Sale and
termination of this Agreement.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
April 30, 1997 (the "Closing Date"), at the office of Seller's attorney,
Chicago, Illinois at which time Seller shall deliver possession of the Property
to Purchaser. This transaction shall be closed through an escrow with Title
Insurer, in accordance with the general provisions of the usual and customary
form of deed and money escrow for similar transactions in Louisiana, or at the
option of either party, the Closing shall be a "New York style" closing at
which the Purchaser shall wire the Purchase Price to Title Insurer on the
Closing Date and prior to the release of the Purchase Price to Seller,
Purchaser shall receive the Title Policy or marked up commitment dated the date
of the Closing Date. In the event of a New York style closing, Seller shall
deliver to Title Insurer any customary affidavit in connection with a New York
style closing. All closing and escrow fees shall be divided equally between
the parties hereto.
9. CLOSING DOCUMENTS.
9.1. Closing Statement. On or prior to the Closing Date, Seller and
Purchaser shall execute and deliver to one another a joint closing statement.
In addition, Purchaser shall deliver to Seller the balance of the Purchase
Price, an assumption of the documents set forth in Paragraph 9.2.3 and 9.2.4
and such other documents as may be reasonably required by the Title Insurer in
order to consummate the transaction as set forth in this Agreement.
9.2. Seller's Deliveries. On the Closing Date, Seller shall deliver to
Purchaser the following:
9.2.1. the Act of Cash Sale (the "Sale") (in the form of Exhibit E
attached hereto), in recordable form conveying fee simple title to the Real
Property to Purchaser subject only to Permitted Exceptions and the Sale shall
be made by Seller with no warranty of title except for claims arising by,
through or under Seller;
9.2.2. a special warranty bill of sale conveying the Personal
Property to Purchaser free and clear of any liens, claims or encumbrances (in
the form of Exhibit F attached hereto);
<PAGE>
9.2.3. an assignment and assumption of intangible property (in the
form attached hereto as Exhibit G), including, without limitation, the
Contracts, the Permits, the Warranties and the Records;
9.2.4. an assignment and assumption of Leases and security
deposits (in the form attached hereto as Exhibit I);
9.2.5. a certificate in the form of Exhibit O certifying that the
representations and warranties set forth in Paragraph 16.2 are true and correct
as of the Closing Date as if made on the Closing Date subject to the
limitations contained in Paragraph 5.3 hereof, and subject to the limitations
on survival and liability set forth herein;
9.2.6. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.7. original copies, or duplicate copies if originals are not
available, of the Leases, the Contracts, the Permits, the Warranties and the
Records (which shall be delivered at the Property);
9.2.8. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.9. possession of the Property to Purchaser, subject to the
terms of the Leases;
9.2.10. evidence of the termination of the management agreement and
any other contracts or agreements which are not Contracts;
9.2.11. notice to the tenants of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the Leases
and the obligation to refund the security deposits (in the form of Exhibit K);
and
9.2.12. an updated rent roll in the same form as Exhibit M
certified by Seller to be true and correct as of the Closing Date;
9.2.13. an original estoppel certificate addressed to Purchaser in
the form of Exhibit L (or containing such modifications as are permitted
hereunder) from each tenant of the Property (or from Seller, to the extent
permitted by Paragraph 17); and
9.2.14. an opinion of Seller's counsel, dated as of the Closing
Date and in form reasonably satisfactory to Purchaser, that Seller has been
duly formed under the laws of the State of Illinois and is in good standing
under the laws of the jurisdiction in which the Property is located, that
Seller is duly qualified to transact business in the jurisdiction in which the
property is located, that Seller has the requisite power and authority to enter
into and perform this Agreement and the documents and instruments required to
be executed and delivered by Seller pursuant to this Agreement, and that such
documents and instruments have been duly authorized by all necessary
partnership action on the part of Seller and have been duly executed and
delivered.
<PAGE>
10. PURCHASER'S DEFAULT. ALL DEPOSIT 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 DEPOSIT AND THE
INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY, EXCEPT
FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET
FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S ACTUAL
DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY DIFFICULT
OR IMPRACTICAL TO DETERMINE. THEREFORE, THE PARTIES ACKNOWLEDGE THAT THE
DEPOSIT 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 DEPOSIT TOGETHER
WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN BECOME NULL
AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER LIABILITY TO
EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY
SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN PARAGRAPH 7 AND
PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL, DOCUMENTED THIRD PARTY
EXPENSES INCURRED IN THE PERFORMANCE OF ITS DUE DILIGENCE HEREUNDER AND THE
PREPARATION OF THIS AGREEMENT, NOT TO EXCEED $75,000 IN THE AGGREGATE.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT
IS ITS REFUSAL TO DELIVER THE CLOSING DOCUMENTS SET FORTH IN PARAGRAPH 9.2.1-8,
and 9.2.10-12 HEREOF, THEN PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC
PERFORMANCE.
12. PRORATIONS.
12.1. Prorations Generally. Rents (exclusive of delinquent rents, but
including prepaid rents); refundable security deposits (which will be assigned
to and assumed by Purchaser and credited to Purchaser at Closing); water and
other utility charges; fuels; prepaid operating expenses; management fees
payable to Insignia Management Co. not to exceed 6% of gross rent; real and
personal property taxes prorated on a "net" basis (i.e. adjusted for all
tenants' liability, if any, for such items); operating expenses which are
reimbursable by the tenants for the period prior to the Closing Date less any
amount previously paid by the Tenants shall be credited to Seller; and other
similar items shall be adjusted ratably as of 11:59 p.m. on the Closing Date,
and credited against the balance of the cash due at Closing. Assessments
payable in installments which are due subsequent to the Closing Date shall be
paid by Purchaser. Where the Leases impose on tenants obligations for taxes,
common area expenses, operating expenses or additional charges of any other
nature, and where Seller shall have collected any portion thereof in excess of
amounts incurred by Seller for such items for the period prior to the Closing
Date, then there shall be an adjustment and credit given to Purchaser at the
Closing for such excess amounts collected. In addition, prorations shall be
made at Closing as required pursuant to Paragraph 26 hereof. If the amount of
any of the items to be prorated is not then ascertainable, the adjustments
thereof shall be on the basis of the most recent ascertainable data. All
prorations will be final except as to delinquent rent referred to in Paragraph
12.2 below.
12.2. Post-Closing Receipts. In the event that any rentals for any of
the Leases remain unpaid at the Closing Date, Purchaser shall use reasonable
efforts after the Closing Date to collect such rentals and promptly deliver all
rentals so collected ("Post-Closing Receipts") to Seller; provided, however,
that Purchaser shall not be required to institute any legal actions as a means
<PAGE>
of attempting to collect such rentals. In the event that any tenant's legal
right to possession has been terminated prior to the end of the Inspection
Period, Seller retains all rights to any delinquent rent from such tenant,
including the right to institute any legal actions as a means of attempting to
collect such rentals. In the event that any tenant is delinquent in the
payment of rent by more than 60 days as of the end of the Inspection Period,
but such tenant's legal right to possession has not been terminated, all such
delinquent rent received by Purchaser after Closing shall belong to Purchaser.
All other delinquent rentals received by Purchaser prior to November 30, 1997
shall be applied first to amounts owing Seller, and then to pay any current
obligations of the tenant(s) in question, and Seller waives the right to
institute any legal actions as a means of attempting to collect such rentals.
Seller retains the right to conduct an audit, at reasonable times and upon
reasonable notice, but not after December 31, 1997, of Purchaser's books and
records to verify the accuracy of the Post-Closing Receipts reconciliation
statement and upon the verification of additional funds owing to Seller,
Purchaser shall pay to Seller said additional Post-Closing Receipts and the
cost of performing Seller's audit. Paragraph 12.2 of this Agreement shall
survive the Closing and the delivery and recording of the Sale.
12.3. Percentage Rent. Percentage rent payable under the Leases shall
be prorated as of the Closing Date as follows:
12.3.1. Any percentage rent attributable to a specified period
("Percentage Rent Period") ending prior to the Closing Date shall be promptly
paid over to the Seller if and when collected. Seller shall be entitled to all
percentage rent attributable to the period prior to Closing Date for any
Percentage Rent Period ending prior to Closing Date. Paragraph 12.3.1 of this
Agreement shall survive the Closing and the delivery and recording of the Sale.
12.3.2. Percentage rent payable with respect to a Percentage Rent
Period a portion of which occurs prior to the Closing Date and a portion of
which occurs subsequent to the Closing Date shall be apportioned between
Purchaser and Seller on the basis of their respective period of ownership
during the applicable Percentage Rent Period and shall be calculated in the
following manner. Seller shall be entitled to a percentage rent proration
determined by (x) multiplying the amount of the total gross sales from the most
recently completed and not estimated Percentage Rent Period by the applicable
formula for percentage rent contained in the applicable Lease, (y) multiplying
such product by 80% (reflecting a discount rate of 20%), and (z) then
multiplying such product by a fraction, the numerator of which shall be the
total number of days in the current Percentage Rent Period prior to the Closing
Date and the denominator of which shall be the total number of days in the
current Percentage Rent Period (in order to allocate the correct time period to
each party). Purchaser shall be entitled to the remainder of such percentage
rent. Notwithstanding the foregoing, Seller shall not receive any proration of
percentage rent pursuant to this paragraph 12.3.2 with respect to any tenant
which has gone dark prior to Closing. This percentage rent proration will
obviate the need to perform a future reconciliation.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest
in this Agreement without the prior written consent of the Seller.
Notwithstanding the foregoing, Purchaser shall have the right to assign its
<PAGE>
interest in this Agreement without the prior written consent of the Seller to
any entity which, directly or indirectly, controls, is controlled by or is
under common control with Purchaser or Cargill Financial Services Corporation,
but such assignment shall not release Purchaser from its obligations hereunder.
If any assignee of Purchaser under this Agreement petitions or applies for
relief in bankruptcy or said assignee is adjudicated as a bankrupt or
insolvent, or said assignee files any petition, application for relief or
answer-seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
present or future federal, state or other statute, law, code or regulation
relating to bankruptcy, insolvency, or other relief for debtors (collectively,
a "Bankruptcy Filing") on or before the Closing Date, said Bankruptcy Filing
shall be a default under this Agreement and Purchaser shall indemnify Seller
for all costs, attorney's fees and expenses of Seller resulting from Seller's
efforts to obtain the Deposit as liquidated damages and to clear title to the
Property from any encumbrance resulting from the Bankruptcy Filing.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Insignia Mortgage and Investment Company, Inc. (to be paid by
Seller). Seller's commission to Insignia Mortgage and Investment Company, Inc.
shall only be payable out of the proceeds of the sale of the Property in the
event the transaction set forth herein closes. Purchaser and Seller shall
indemnify, defend and hold the other party hereto harmless from any claim
whatsoever (including without limitation, reasonable attorney's fees, court
costs and costs of appeal) from anyone claiming by or through the indemnifying
party any fee, commission or compensation on account of this Agreement, its
negotiation or the sale hereby contemplated other than to Insignia Mortgage and
Investment Company, Inc. The indemnifying party shall undertake its
obligations set forth in this Paragraph 15 using attorneys selected by the
indemnifying party and reasonably acceptable to the indemnified party. The
provisions of this Paragraph 15 will survive the Closing and delivery of the
Sale.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter
or thing shall only mean such knowledge or notice that has actually been
received by Michael Conter (the asset manager responsible for the Property) or
Seller's property manager responsible for the management of the Property (the
"Seller's Representative"), and any representation or warranty of the Seller
that is qualified by Seller's knowledge is based upon those matters of which
the Seller's Representative has actual knowledge. Any knowledge or notice
given, had or received by any of Seller's agents, servants or employees shall
not be imputed to Seller, the general partner or limited partners of Seller,
the subpartners of the general partner or limited partners of Seller or
Seller's Representative. Seller hereby covenants to deliver a copy of this
Agreement to Seller's property manager, and to instruct such property manager
to review the Agreement and notify Seller's Representative of any and all
information known to such property manager regarding the representations and
warranties contained herein.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties:
16.2.1.Seller has not entered into any contracts for the sale of any
of the Property other than this Agreement. Seller has received no notice of
<PAGE>
and has no knowledge of any rights of first refusal or first offer, options to
purchase any of the Property or any other rights or agreements which may delay
or prevent this transaction.
16.2.2.To Seller's knowledge, there has been no labor or material of
any kind furnished to or for the benefit of the Property at Seller's request
for which payment in full has not been made, except in connection with tenant
improvements as set forth on Exhibit N attached hereto.
16.2.3.No person or entity is entitled to possession of any of the
Property, other than Seller, the tenants under the Leases or otherwise pursuant
to a recorded instrument.
16.2.4.Seller has received no notice of and has no knowledge of any
pending or threatened condemnation or transfer in lieu thereof affecting any of
the Property, nor has Seller agreed or committed to dedicate any of the
Property.
16.2.5.Seller has received no notice of and has no knowledge of any
pending or threatened action which would impair access to the Property.
16.2.6.Seller has received no notice and has no knowledge of any
actual or threatened curtailment, cancellation or suspension of any utilities
serving the Property.
16.2.7.Seller has received no notice of and has no knowledge of any
action, litigation, investigation or proceeding of any kind pending or
threatened against Seller or any of the Property which materially and
adversely affect the value of the Property, except as disclosed in Exhibit Q
attached hereto. Notwithstanding anything contained herein to the contrary,
Seller reserves all rights to pursue its claims against Stein Mart and
Clothestime, Inc. in the matters disclosed in Exhibit Q relating to Stein Mart
and Clothestime, Inc., respectively.
16.2.8.Seller has received no notice of and has no knowledge of any
uncured default under that certain Declaration of Restrictions and Grant of
Easements dated May 16, 1984 originally executed by Albertson's, Inc., Jimmy C.
Thompson and The Home Depot, Inc., as amended (the "REA") or any easement
agreement or joint operation agreement affecting the Property, and Seller has
no knowledge of any amendment or modification to such agreements except as of
record.
16.2.9.Seller has not received written notice of any violation of
any Environmental Laws, statute, rule, law, obligation, ordinance, or other
legal regulation or requirement pertaining to the use, maintenance, ownership,
or operation of the Property, which such violation has not been cured without
waiver or variance of the applicable Environmental Laws.
16.2.10. To Seller's knowledge, there are no leases or
possessory rights in favor of any party, service or maintenance contracts,
equipment leases or other contracts regarding any of the Property except for
the Leases, the Contracts and any matters of record.
16.2.11. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Contract and their
respective amendments. Seller has received no notice and has no knowledge that
either Seller or any other party under a Contract is in default of their
<PAGE>
respective obligations and liabilities thereunder. To Seller's knowledge,
except for the Contracts, there are no other service or maintenance contracts,
equipment leases or other contracts regarding any of the Property which will
not be terminated on or before the Closing Date.
16.2.12. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of the Records.
16.2.13. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Lease and their respective
amendments. To Seller's knowledge, the information regarding the Leases
contained in the rent roll attached as Exhibit M is true, correct and complete
as of the date set forth therein. Seller has received no notice and has no
knowledge that either Seller or the applicable tenant is in default of their
respective obligations and liabilities under any of the Leases, including those
provisions relating to bankruptcy or insolvency.
16.2.14. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Permit in Seller's
possession and their respective amendments. Seller has received no notice and
has no knowledge (a) that Seller is in default of its obligations and
liabilities under any of the Permits, or (b) of any actual or threatened
cancellation or suspension of any Permit, or (c) that any additional licenses
or permits are required under applicable law to operate the Property as it is
now operated.
16.2.15. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Warranty in Seller's
possession and their respective amendments. Seller has received no notice that
either Seller or the applicable warrantor is in default of their respective
obligations and liabilities under any of the Warranties.
16.2.16. No management, leasing or maintenance personnel or
agents employed in connection with the operation of the Property have the right
to continue such employment after Closing except pursuant to a Contract. No
person or entity is entitled to claim any brokerage or leasing commissions or
other payments with respect to any of the Property, including regarding any of
the Leases, except as set forth in Exhibit N.
16.2.17. Seller has been duly formed under the laws of the
State of Illinois and is in good standing under the laws of the jurisdiction in
which the Property is located, is duly qualified to transact business in the
jurisdiction in which the Property is located, and has the requisite power and
authority to enter into and perform this Agreement and the document sand
instruments required to be executed and delivered by Seller pursuant hereto.
This Agreement has been duly executed and delivered by Seller and is a valid
and binding obligation of Seller enforceable in accordance with its terms.
This Agreement and the documents and instruments required to be executed and
delivered by Seller pursuant hereto have each been duly authorized by all
necessary partnership action on the part of Seller and that such execution,
delivery and performance does and will not conflict with or result in a
violation of Seller's partnership agreement or any judgment, order or decree of
any court or arbiter to which Seller is a party, or any agreement to which
Seller and/or any of the Property is bound or subject including the Contracts
and the Leases.
<PAGE>
16.2.18. Seller has not (i) made a general assignment for the
benefit of creditors, (ii) filed any involuntary petition in bankruptcy or
suffered the filing of any involuntary petition by its creditors, (iii)
suffered the appointment of a receiver to take possession of all or
substantially all of its assets, (iv) suffered the attachment or other judicial
seizure of all or substantially all of its assets, (v) admitted in writing its
inability to pay its debts as they come due, or (vi) made an offer of
settlement, extension or composition to its creditors generally.
16.2.19. Seller is not a "foreign person", "foreign
partnership", "foreign trust" or "foreign estate" as those terms are defined in
Section 1445 of the Internal Revenue Code.
16.2.20. Seller shall at all times prior to the Closing operate
and maintain the Property in substantially the same manner as it is now
operated and maintained, ordinary wear and tear and damage by fire and casualty
excepted.
16.3. Purchaser hereby represents and warrants to Seller that
Purchaser has the full right, power and authority to execute and deliver this
Agreement and consummate the transactions contemplated herein.
16.4. If at any time after the execution of this Agreement, either
Purchaser or Seller becomes aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question to
become untrue in any material respect, said party shall not be in default under
this Agreement and the sole remedy of the other party shall be to terminate
this Agreement. Except as set forth in Paragraph 5.4, if the status of any of
the tenancies changes from the date of the rent roll attached hereto and the
date of the rent roll delivered at Closing, provided the change in status is
not caused by a breach by Seller of its obligations under any Lease, then
Purchaser shall not have the right to terminate this Agreement or make any
claim for a breach of a representation or warranty hereunder involving the rent
roll or tenancies thereunder. Purchaser and Seller are prohibited from making
any claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in this
Agreement that the claiming party has actual knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein
shall survive Closing until November 30, 1997. The claiming party shall have
no right to make any claims against the other party for a breach of a
representation or warranty unless the claiming party delivers written notice of
such claim to the other party before November 30, 1997.
17. ESTOPPEL CERTIFICATES. Promptly following the mutual execution and
delivery of this Agreement, Seller shall diligently proceed and use its
diligent efforts to obtain estoppel certificates in the form of Exhibit L from
each of the tenants under the Leases. If a tenant shall fail or refuse to
deliver an estoppel certificate with respect to its Lease on or before the
Closing Date, Seller shall execute and deliver to Purchaser at Closing an
estoppel certificate with respect to such Lease in substitution from such
tenant based on the knowledge of Seller as set forth in Paragraph 16.1;
provided, however, such certificate of Seller shall not be deemed to have
satisfied the condition in Paragraph 5.1, except as to Leases of up to 50% of
<PAGE>
the rentable square feet leased pursuant to Leases of 7,500 square feet or
less. Seller's liability under Seller Tenant Certificates shall be limited
pursuant to Paragraph 16.5 and 18 herein.
18. LIMITATION OF LIABILITY. None of the Affiliates of Seller, nor any of
Seller's or the Affiliates of Seller's respective beneficiaries, shareholders,
partners, officers, directors, agents or employees, heirs, successors or
assigns shall have any personal liability of any kind or nature for or by
reason of any matter or thing whatsoever under, in connection with, arising out
of or in any way related to this Agreement and the transactions contemplated
herein, and Purchaser hereby waives for itself and anyone who may claim by,
through or under Purchaser any and all rights to sue or recover on account of
any such alleged personal liability. Notwithstanding anything contained herein
to the contrary, Purchaser hereby agrees that the maximum liability of Seller
after the Closing, in connection with, arising out of or in any way related to
a breach by Seller under this Agreement or any document or conveyance agreement
in connection with the transaction, shall be $712,500.00. Seller further
agrees not to distribute $712,500.00 of the proceeds of the Purchase Price to
its partners until the later of (i) November 30, 1997 and (ii) final resolution
of any claims by Purchaser and asserted in writing against Seller prior to
November 30, 1997 in accordance with the terms of this Agreement ("Claims");
provided, however, that if any Claims are disputed by Seller, Seller shall have
the right, by written notice to Purchaser, to require Purchaser to file suit in
a court of competent jurisdiction within ninety (90) days after such notice to
Purchaser. If no suit is filed by such date, said notice with respect to the
Claim in question shall no longer prevent Seller from distributing the
proceeds.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
20. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James Mendelson
(847) 317-4367
(847) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
<PAGE>
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: c/o Ellis Partners, Inc.
351 California Street, Suite 1150
San Francisco, CA 94104
Attention: Harold A. Ellis, Jr.
(415) 391-9800
(415) 391-4711 (FAX)
with copies to: Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, MN 55345
Attention: Tim Clark
(612) 984-3449
(612) 984-3905 (FAX)
and to: Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Matthew R. Bogart
(612) 336-3435
(612) 336-3026 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or the same day as given if sent by facsimile transmission and
received by 5:00 p.m. Chicago time or on the 4th business day after the same is
deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be sent to the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution. Seller will forward one (1) copy of the
executed Agreement to Purchaser and will forward the following to the Escrow
Agent:
(A) One (1) fully executed copy of this Agreement; and
(B) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
Within two (2) business days after its receipt of a fully-executed counterpart
of this Agreement and the Escrow Agreement, Purchaser agrees to deposit the
Deposit with Escrow Agent pursuant to the terms of the Escrow Agreement.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of Louisiana.
<PAGE>
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
26. NEW LEASES. On or before ten (10) business days prior to the expiration
of the Inspection Period, Seller may execute any new lease or modify or renew
any existing lease affecting the Property without Purchaser's consent. Seller
shall deliver a copy of any such new lease or existing lease modification or
renewal (together with an estimation of the "New Lease Costs" (as hereinafter
defined)), as applicable, to Purchaser within ten (10) business days of
execution by Seller and the new tenant or existing tenant, as applicable, but
in any event on or before ten (10) business days prior to the expiration of the
Inspection Period. In the event Purchaser disapproves of such new lease or
existing lease modification or renewal, Purchaser's sole remedy shall be to
terminate this Agreement in accordance with Paragraph 7 hereof. In the event
that Purchaser does not terminate this Agreement as aforesaid, Purchaser shall
be responsible for the costs of all tenant improvements and leasing commissions
associated with the negotiation and execution of any such new lease or existing
lease modification or renewal ("New Lease Costs") and Purchaser shall assume
all such obligations at the Closing. Seller shall receive a credit at Closing
for any New Lease Cost incurred by Seller prior to Closing.
After the date ten (10) business days prior to the expiration of the
Inspection Period, Seller shall not execute any new lease or existing lease
modification or renewal affecting the Property without Purchaser's prior
written consent. Purchaser's consent shall be deemed given if Purchaser has
not responded to the contrary within ten (10) business days after Seller's
written request and Purchaser's receipt of such new lease or existing lease
modification or renewal (together with an estimation of the New Lease Costs).
If approved by Purchaser, a complete copy of any such new lease or existing
lease modification or renewal shall be delivered to Purchaser within ten (10)
days of the full execution thereof. All New Lease Costs shall be paid by
Purchaser and Purchaser shall assume all such obligations at the Closing and
Seller shall receive a credit at Closing for any New Lease Costs incurred by
Seller prior to Closing.
Purchaser acknowledges that there currently exists the unsatisfied tenant
improvement obligations and leasing commissions set forth on Exhibit N attached
hereto. Seller agrees to pay the unsatisfied leasing commission obligations
and tenant improvement obligations set forth on Exhibit N on or before the
Closing or credit Purchaser for the amount of said unsatisfied obligation and
Purchaser shall assume all obligations therefor at Closing.
27. SELLER'S POSSESSION. All references herein to "Seller's possession" shall
mean in the possession of Seller and the property manager of the Property.
<PAGE>
28. EXECUTION BY THE BALCOR COMPANY. The Balcor Company executes this
Agreement solely for the purpose of assuring to Purchaser that if the Seller
fails to withhold or pay the sums required of Seller pursuant to Paragraph 18
and if Purchaser is successful in any claims asserted against the Seller for a
breach of a representation or warranty, then The Balcor Company shall pay to
Purchaser the amount of such claim(s), the total of which shall not exceed
$712,500.00. Purchaser may name The Balcor Company in any suit against Seller,
provided that Purchaser may not name The Balcor Company in any suit unless
Seller is also named therein.
29. COSTS OF LITIGATION. If either party to this Agreement shall institute an
action or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney fees actually incurred; provided, however, that the
aggregate liability of Seller in connection with this Agreement, including
Seller's liability under this Paragraph 29, shall be limited in accordance with
Paragraph 18 hereof.
30. NEGOTIATION WITH TENANTS. Purchaser shall have the right during the
Inspection Period and at any time prior to the Closing Date to contact and
negotiate with any current, former or potential tenant or occupant of the
Property. Purchaser shall inform such party that it is not the owner of the
Property and any agreement that Purchaser and such party enter into shall
specifically state that it is contingent on Purchaser acquiring the Property.
In the event that Purchaser does not acquire the Property, Purchaser shall
deliver a copy of all such agreements to Seller.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
CROSSTOWN ASSET CORP. I, a Delaware corporation
By: /s/Thomas Haller
-------------------------------------
Name: Thomas Haller
-------------------------------------
Its: Vice President
-------------------------------------
SELLER:
H-A LIMITED PARTNERSHIP, an Illinois limited
partnership
By: H-A Partners, Inc., an Illinois corporation,
general partner
By: /s/John K. Powell, Jr.
-----------------------------------
Name: John K. Powell, Jr.
-----------------------------------
Its: Senior Vice President
-----------------------------------
JOINDER
The undersigned executes this joinder solely for the purposes of
effectuating its obligations arising under Paragraph 28 of this Agreement.
THE BALCOR COMPANY, a Delaware corporation
By: /s/John K. Powell, Jr.
-----------------------------------
Name: John K. Powell
-----------------------------------
Its: Senior Vice President
-----------------------------------
<PAGE>
[Hammond Aire Plaza]
Al Lieberman of Insignia Mortgage and Investment Company, Inc. ("Seller's
Broker") executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated 8/5, 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/Al Lieberman
----------------------------------
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Survey Certification
E - Sale
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Tenant Certificate
M - Rent Roll
N - Leasing Commissions and Tenant Improvements
O - Reaffirmation of Representations and Warranties and Certification of
Rent Roll
P - Permits
Q - Disclosed Litigation
<PAGE>
SECOND AMENDMENT TO AGREEMENT OF SALE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is made and
entered into this 13th day of December, 1996 by and between DANE REAL ESTATE,
INC., a Florida corporation ("Purchaser"), and PEMBROKE ASSOCIATES LIMITED
PARTNERSHIP, an Illinois limited partnership ("Seller").
WITNESSETH:
WHEREAS, Seller and Purchaser are parties to that certain Agreement of
Sale dated October 31, 1996 as amended by First Amendment to Agreement of Sale
dated as of December , 1996 (collectively the "Agreement"), pursuant to
which Purchaser has agreed to purchase and Seller has agreed to sell certain
Property (as defined in the Agreement) legally described and depicted on
Exhibit _A_ attached hereto; and
WHEREAS, Seller and Purchaser desire to amend the Agreement in accordance
with the terms of this Amendment.
NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00) and other mutual
covenants and agreements hereinafter set forth, the receipt and sufficiency of
which is acknowledged, the parties hereto agree as follows:
1. All terms not otherwise defined shall have the meanings ascribed to
each in the Agreement.
2. The dates as set forth in subparagraphs 27.4, 27.5 and 27.6 of the
Agreement are amended as follows:
(a) Wherever the date December 11, 1996 appears, it shall be modified
to read "January 10, 1997."
(b) Wherever the date December 16, 1996 appears, it shall be amended
and modified to read "January 15, 1997."
(b) Wherever the date December 20, 1996 appears, it shall be amended
and modified to read "January 19, 1997."
3. This Amendment may be executed in counterparts, each of which shall be
deemed an original, but all of which, when taken together shall constitute one
and the same instrument. To facilitate the execution of this Amendment, Seller
and Purchaser may execute an exchange by telephone facsimile counterparts of
the signature pages, with each facsimile being deemed an "original" for all
purposes.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
Witnesses: PURCHASER:
/s/ Glenda Rifkin DANE REAL ESTATE, INC., a
- -------------------------- Florida corporation
/s / unreadable
- --------------------------
By: /s/ A. J. Belt
--------------------------------
SELLER:
PEMBROKE ASSOCIATES LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Pembroke Partners, Inc., an Illinois
corporation, its general partner
By: /s/ James E. Mendelson
--------------------------------
<PAGE>
THIRD AMENDMENT TO AGREEMENT OF SALE
THIS THIRD AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is made and
entered into as of this day of December, 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:
WHEREAS, Seller and Purchaser are parties to that certain Agreement of
Sale, dated October 31, 1996 as amended by First and Second Amendments to
Agreement dated as of December __, 1996 and December 13, 1996 respectively
(collectively the "Agreement"), pursuant to which Purchaser has agreed to
purchase and Seller has agreed to sell certain Property (as defined in the
Agreement) legally described and depicted on Exhibit A attached to the
Agreement; and
WHEREAS, Seller and Purchaser desire to amend the Agreement in accordance
with the terms of this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which is acknowledged, the parties hereby agree as follows:
1. All terms not otherwise defined herein shall have the meanings
ascribed to each in the Agreement.
2. Purchaser shall have until December 20, 1996 to obtain (at its sole
expense) its own structural report for the bay formerly occupied by Loffy's
Deli (the "Report") in order to discover any structural damage to the steel
frame of such bay (the "Defects"). Upon receipt of the Report, Seller shall
have the right, by providing Purchaser written notice thereof within five (5)
business days of receipt of the Report from Purchaser, to either cure the
Defects prior to Closing or to credit Purchaser at Closing for the amount of
the Defects identified in the Report as jointly determined by Purchaser and
Seller. If Seller fails to so notify Purchaser in accordance with the
immediately preceding sentence, Purchaser shall then have the right, by giving
Seller written notice thereof within an additional five (5) business days, to
terminate the Agreement and obtain the return of its Earnest Money deposit
whereupon both parties shall be relieved of further obligations under the
Agreement, except as expressly set forth therein.
3. Except as amended hereby, the Agreement shall be and remain unchanged
and in full force and effect in accordance with its terms.
<PAGE>
4. This Amendment may be executed in counterparts each of which shall be
deemed an original, but all of which, when taken together shall constitute one
and the same instrument. To facilitate the execution of this Amendment, Seller
and Purchaser may execute and exchange by telephone facsimile counterparts of
the signature pages, with each facsimile being deemed an "original" for all
purposes.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
PURCHASER:
DANE REAL ESTATE, INC., a Florida corporation
By: /s/ A. J. Belt, III
----------------------------------
Name: A. J. Belt, III
----------------------------------
Its: Vice 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: John K. Powell, Jr.
----------------------------------
Its: Senior Vice President
----------------------------------
<PAGE>
FOURTH AMENDMENT TO AGREEMENT OF SALE
THIS FOURTH AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is made and
entered into as of this 15th day of January, 1997, 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:
WHEREAS, Seller and Purchaser are parties to that certain Agreement of
Sale, dated October 31, 1996 as amended by First, Second and Third Amendments
to Agreement dated as of December , 1996, December , 1996, and December ,
1996 respectively (collectively the "Agreement"), pursuant to which Purchaser
has agreed to purchase and Seller has agreed to sell certain Property (as
defined in the Agreement) legally described and depicted on Exhibit A attached
to the Agreement; and
WHEREAS, Seller and Purchaser desire to amend the Agreement in accordance
with the terms of this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which is acknowledged, the parties hereby agree as follows:
I. All terms not otherwise defined herein shall have the meanings
ascribed to each in the Agreement.
II. Section 27 of the Agreement is hereby deleted and replaced by the
following:
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) "Seller Tenant Certificate" means a Tenant Certificate signed by
the Seller with respect to a particular Lease for which the Tenant in question
has failed to execute and deliver a Tenant Certificate, in which case the
Seller Tenant Certificate shall be in the form of Exhibit L.
(iii) "Qualification" means any assertion in a Tenant Certificate
(whether in the form of Exhibit L or otherwise) or in a Seller Tenant
Certificate 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
<PAGE>
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;
(iv) "Unacceptable Qualification" means any Qualification other than
the following:
(a) a Qualification which is expressly disclosed on the rent
roll attached hereto as Exhibit M or a Qualification relating to non-payment of
October, 1996, November, 1996, December, 1996, or January, 1997 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 February 10, 1997 (i) a Tenant Certificate from Eckerds
and Publix and (ii) either a Tenant Certificate or a Seller Tenant Certificate
from tenants occupying at least 75% of the occupied leasable area of the
Property after excluding the leasable area of Eckerds 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 or Seller 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
<PAGE>
(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.
27.5 If Seller delivers any Tenant Certificates containing no Unacceptable
Qualifications after Closing to Purchaser containing all of the information
herein required from a tenant under a Lease for whom Seller has executed and
delivered a Seller Tenant Certificate at Closing, the Seller Tenant Certificate
executed and delivered by Seller at Closing shall become null and void and the
Tenant Certificate received from the tenant shall be substituted therefor. All
Seller Tenant Certificates shall be to the "knowledge of Seller" as such phrase
is defined in paragraph 16.1 in the Agreement. Seller's liability under all
such Seller Tenant Certificates delivered to Purchaser shall be limited to
$50,000 in the aggregate.
27.6 If Seller has not satisfied the Estoppel Condition on or before 5:00
p.m. Chicago time on February 10, 1997, 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 February 14, 1997. 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 27.6, 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.
<PAGE>
27.7 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 27.6, Seller shall have the right to vitiate Purchaser's termination
by written notice on or before 5:00 p.m. Chicago time on February 19, 1997 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.
III. Except as amended hereby, the Agreement shall be and remain unchanged
and in full force and effect in accordance with its terms.
IV. This Amendment may be executed in counterparts each of which shall be
deemed an original, but all of which, when taken together shall constitute one
and the same instrument. To facilitate the execution of this Amendment, Seller
and Purchaser may execute and exchange by telephone facsimile counterparts of
the signature pages, with each facsimile being deemed an "original" for all
purposes.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
PURCHASER:
DANE REAL ESTATE, INC., a Florida corporation
By: /s/ A. J. Belt, III
--------------------------------------
Name: A. J. Belt, III
--------------------------------------
Its: Vice 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: John K. Powell, Jr.
--------------------------------------
Its: Senior Vice President
--------------------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 57943
<SECURITIES> 0
<RECEIVABLES> 2639
<ALLOWANCES> 4815
<INVENTORY> 0
<CURRENT-ASSETS> 60670
<PP&E> 54282
<DEPRECIATION> 0
<TOTAL-ASSETS> 115793
<CURRENT-LIABILITIES> 2072
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 109816
<TOTAL-LIABILITY-AND-EQUITY> 115793
<SALES> 0
<TOTAL-REVENUES> 26618
<CGS> 0
<TOTAL-COSTS> 56
<OTHER-EXPENSES> 2409
<LOSS-PROVISION> 2606
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 27121
<INCOME-TAX> 0
<INCOME-CONTINUING> 27121
<DISCONTINUED> 0
<EXTRAORDINARY> (528)
<CHANGES> 0
<NET-INCOME> 26593
<EPS-PRIMARY> 12.89
<EPS-DILUTED> 12.89
</TABLE>
