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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM 10-K
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( 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, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 1-8815
EQK REALTY INVESTORS I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Massachusetts 23-2320360
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
</TABLE>
<TABLE>
<S> <C>
5775 Peachtree Dunwoody Road, Suite 200D, Atlanta, GA 30342
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (404) 303-6100
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Shares of Beneficial Interest New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark 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 the 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 )
Indicate by checkmark 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 ____________
The aggregate market value of Shares of Beneficial Interest held by
non-affiliates of the Registrant, based on the closing price of the Shares on
March 23, 1994 on the New York Stock Exchange of $2.50 per Unit, is $18,932,500.
As of March 23, 1994, 9,264,344 Shares of Beneficial Interest were outstanding.
Officers and Trustees of the Company (and certain of their family members) and
Equitable Realty Portfolio Management, Inc., Advisor to the Company, are treated
as affiliates for the purposes of this computation, with no admission being made
that such people or entities are actually affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Proxy Statement relating to its 1994 Annual Meeting of
Shareholders is incorporated in Part III, Items 10, 11, 12 and 13.
<PAGE>
TABLE OF CONTENTS
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<CAPTION>
PAGE
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<S> <C> <C>
PART I
Item 1. Business 2
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for the Registrants' Common Equity and Related Stockholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 15
PART III
Item 10. Directors and Executive Officers of the Registrant 15
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial Owners and Management 15
Item 13. Certain Relationships and Related Transactions 15
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 16
</TABLE>
1
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PART I
ITEM 1. BUSINESS.
General Development of Business
EQK Realty Investors I, a Massachusetts business trust (the 'Company'), was
formed pursuant to a Declaration of Trust dated as of October 8, 1984. Equitable
Realty Portfolio Management, Inc. ('ERPM,' successor in interest to EQK
Partners), acts as the advisor (the 'Advisor') to the Company. ERPM is a wholly
owned subsidiary of Equitable Real Estate Investment Management, Inc.
('Equitable Real Estate'), itself an indirect wholly owned subsidiary of The
Equitable Life Assurance Society of the United States ('Equitable'). The
principal executive offices of the Company and of the Advisor are located at
5775 Peachtree Dunwoody Road, Suite 200D, Atlanta, Georgia, 30342, and their
telephone number is (404) 303-6100.
The Company has adopted a fiscal and taxable year ending December 31. The
Company has transacted its affairs so as to qualify as, and has elected to be
treated as, a real estate investment trust under applicable provisions of the
Internal Revenue Code. Under the Internal Revenue Code, a real estate investment
trust that meets applicable requirements is not subject to Federal income tax on
that portion of its taxable income that is distributed to its shareholders.
The Company consummated the public offering of its Shares of Beneficial
Interest (the 'Shares') on March 12, 1985. The net proceeds to the Company from
such offering, net of underwriting discount, amounted to $170,856,000 before
deducting offering expenses of $1,062,000. Certain of those proceeds aggregating
$167,032,000 were expended to acquire the properties (the 'Properties,'
described below under 'Narrative Description of Business') on March 13, 1985.
The Company initially intended to hold its real estate investments for a
period not to exceed 12 years from the date of acquisition and, after the
twelfth year, to dispose of any remaining investments in an orderly fashion
within a period of two years in order to achieve a complete liquidation of the
Company by March 1999. Actual disposition of the Properties may occur at any
time prior to March 1999, depending on prevailing conditions in the relevant
real estate markets, and the precise timing of dispositions will be in the
discretion of the Trustees.
On December 18, 1985, the Company issued to Salomon Brothers Realty Corp.
its seven-year 10.92% Zero Coupon Note (the '1985 Note') in the principal amount
of $45,000,000 and the face amount of $94,719,904. The 1985 Note was secured by
mortgages on the Properties. The difference between the principal amount of
$45,000,000 received for the 1985 Note and the face amount of $94,719,904 that
was due at maturity on December 18, 1992 represents interest compounded semi-
annually at the rate of 10.92%. The Company utilized the net proceeds from the
sale of the 1985 Note ($44,296,000) to repurchase an aggregate of 2,466,211
Shares in the open market
2
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between February 13, 1986 and May 6, 1986. In 1992 the Company utilized
proceeds from the sale of real estate at Peachtree-Dunwoody Pavilion to
prepay a portion of the Note. Also, in 1992, the Company utilized proceeds
from the issuance of previously repurchased Shares to its Advisor to
prepay a portion of the Note.
On February 4, 1988, the Company issued to Salomon Brothers Realty Corp. a
second Zero Coupon Note (the '1988 Note') in the principal amount of $5,000,000
and the face amount of $7,771,718 payable at its maturity on December 18, 1992.
The 1988 Note was also secured by mortgages on the Properties. The difference
between the principal amount of $5,000,000 received for the 1988 Note and the
face amount of $7,771,718 represents interest compounded semi-annually at the
rate of 9.255%. The Company utilized the proceeds from the 1988 Note to repay
borrowings under the Company's unsecured revolving credit facility. In 1991 the
Company utilized proceeds from the sale of real estate at Castleton Commercial
Park ('Castleton') to prepay a portion of the 1988 Note. In 1992 the Company
utilized proceeds from the sale of real estate at Peachtree-Dunwoody Pavilion to
prepay the remaining portion of the 1988 Note.
The 1985 Note and the 1988 Note, together with the mortgages securing them,
were assigned on February 4, 1988 by Salomon Brothers Realty Corp. to The
Prudential Insurance Company of America ('Prudential').
In December 1992, the Company completed the refinancing of the 1985 Note,
which at that time had a balance of $75,689,000, for a term of three years. The
interest rates on the refinanced Note are 9.54% in the first year, 9.79% in the
second year, and 10.04% in the third year. The new loan agreement requires
monthly payments of interest only at the rate of 8.54% per annum. The additional
interest charges will be accrued and added to principal over the term of the
loan. The amount of principal due at maturity in December 1995 will be
$78,928,000. In addition, the lender received in 1992 and 1993 warrants to
purchase 165,086 and 151,556 Company shares, respectively, for $.0001 per share,
none of which have yet been exercised. The agreement also stipulates that the
lender may purchase up to 50,000 additional Company shares in December 1994,
although the actual number of such additional shares at each date will be
adjusted proportionately with changes to the mortgage balance. The new financing
is collateralized by first mortgage liens on Castleton and Harrisburg East Mall
('Harrisburg') real estate, assignments of leases and rents and certain cash
balances.
In December 1992, the Company also completed the restructuring of its bank
line of credit into a term loan. The balance of the restructured term loan was
$2,859,000 and will also mature in three years. The interest rate on the term
loan is 8.33% per annum. Monthly payments are determined based on the same 8.54%
pay rate applicable to the primary lender's mortgage. The amount of each monthly
payment above the required interest rate is applied to the principal balance of
the loan. The amount of principal due at maturity in December 1995 will be
$2,839,000. The term loan is secured by subordinate liens on each of the
properties and an escrow deposit of $300,000.
3
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In connection with the debt restructuring, the Company issued 1,675,000
previously repurchased Shares of its stock to its Advisor. The Company received
proceeds of $6,700,000, or $4.00 per share, for the Shares. The Company may, at
its discretion, reissue the remaining 791,211 Shares previously repurchased. Any
issuance of Shares in excess of the Shares previously repurchased would require
shareholder approval.
Apart from its initial investments in the Properties, and subject to
certain restrictions, the Company may make additional real estate investments
involving the expansion of existing improvements or the acquisition and
development of additional properties that are in the immediate vicinity of the
Properties. No additional real estate investments are currently contemplated,
other than capital improvements to the existing properties.
The Company may make secured or unsecured borrowings to make distributions
to its shareholders, to make permitted additional real estate investments
described above and for normal working capital needs, including tenant
alterations and/or allowances and the repair and maintenance of properties in
which it has invested. The Declaration of Trust prohibits the Company's
aggregate borrowings from exceeding 75% of its total asset value, as defined.
The Company will not engage in any business not related to its real estate
investments and, in that connection, the Declaration of Trust imposes certain
prohibitions and investment restrictions on various investment practices or
activities of the Company.
Narrative Description of Business
At December 31, 1993, the Company's portfolio consists of two real estate
investments: Castleton Commercial Park ('Castleton' or the 'Park'), an office
park located in Indianapolis, Indiana, and Harrisburg East Mall ('Harrisburg'
or the 'Mall'), a regional shopping center located in Harrisburg, Pennsylvania.
During 1993, the Company sold its two remaining office buildings within its
office complex located in Atlanta, Georgia, formerly known as Peachtree-Dunwoody
Pavilion or 'Peachtree'.
Castleton Commercial Park
Location and Area Overview. The Park is located in the northeast portion of
Marion County, Indiana, approximately 10 miles from downtown Indianapolis,
within a triangle formed by Interstate 465 (the major beltway surrounding the
Indianapolis metropolitan area), Interstate 69 and East 82nd Street (a major
local thoroughfare). The surrounding area is characterized by varied office,
retail, residential and light industrial development. The site has convenient
access from Interstate 465 via the Allisonville Road interchange and from
Interstate 69 via the 82nd Street interchange.
Tenants. At December 31, 1993, there were approximately 200 tenants in the
Park occupying approximately 1,034,000 square feet of net rentable area,
4
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representing an occupancy percentage of 89.4%, and approximately 123,000 square
feet of space were vacant.
Leases covering 157,000 square feet of space are scheduled to expire during
1994. The Company anticipates leases covering approximately 141,000 square feet
will be renewed during 1994.
Competition. The following table provides selected information with respect
to Castleton's primary existing competitors. All the competitive properties
listed below are comprised of one or more office buildings. Each property is
located within 10 miles of the Park.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
YEAR(S) NET RENTABLE
PROPERTY COMPLETED AREA (SQ. FT.)
- ----------------------------------------------------------------------------------- ------------ --------------
<S> <C> <C>
Allison Pointe 1990 214,000
Metroplex 1986 180,000
Castleton Business Park 1984-1986 175,000
Shadeland Station 1983-1986 578,000
Castle Creek 1984-1990 443,000
Keystone Crossing Office Park 1975-1989 1,330,000
North Meridian Street Office Corridor 1975-1982 725,000
Meridian Technology Center 1986 400,000
Hillsdale Tech Centre 1986-1989 300,000
</TABLE>
The Park will continue to be subject to the very competitive market
conditions as a result of a high level of existing vacancy. As of December 31,
1993, the office vacancy rate in the Northeast submarket, of which the Park is a
part, was 17%, down from 21% in 1992. Space absorption in the suburban market
totalled 473,000 square feet in 1993 as compared to 220,000 square feet in 1992.
There is virtually no new space expected to come on-line in 1994. The Company
believes that, over the long term, Castleton will be able to sustain a
relatively high occupancy level due to the quality of the Park, the desirability
of its location, and its competitive rent structure, which is somewhat lower
than comparable new space.
The president of Castleway Management Corp., the current manager of
Castleton, also serves as marketing manager of a similar park, known as the
Precedent, located approximately two and one-half miles from the Park and
developed by an affiliate of the former owners of the Park. The Company believes
that the Precedent will not have a material adverse impact on the Park, based
upon the advantage of the Park's more developed location, as well as the
Company's assessment of general supply and demand conditions in the relevant
market. Moreover, pursuant to the management agreement with the Company,
Castleway Management Corp. must disclose to the Company the terms of any offers
to any major tenant at the Park (20,000 square feet or more) within 10 days
following initial discussions with such tenant and may not conclude an agreement
with such tenant for a period of 30 days thereafter.
5
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Harrisburg East Mall
Location and Area Overview. The Mall is located in Dauphin County,
Pennsylvania, near the intersection of Paxton Street (U.S. Route 322) and
Interstate 83. The Center is adjacent to Pennsylvania Route 441, approximately
five miles from the Pennsylvania Turnpike and three miles from the
central business district of Harrisburg. Access to the site from Interstate 83,
the major north-south traffic corridor serving Harrisburg, is provided by the
Paxton Street interchange. Access from the Pennsylvania Turnpike, the major
east-west traffic corridor serving Harrisburg, is provided by the Interstate
283 interchange.
Tenants. At December 31, 1993, the Mall had 95 mall and outparcel building
tenants (excluding anchor store tenants) occupying approximately 358,000 square
feet of gross leasable area, representing an occupancy rate of 93.0%. Other than
the anchor store tenants (J.C. Penney, Hess's and John Wanamaker), only Toys R
Us, which occupies approximately 51,400 square feet of space, occupies more than
five percent of the gross leasable area of the Mall.
Competition. The following table provides selected information with respect
to the Mall's primary existing competitors. Each property is located within five
miles of the Mall, except for Park City Mall which is 35 miles away. The
inclusion of Park City is due to the lack of major retail space along Interstate
283 between Harrisburg and Lancaster, although its degree of competition with
the Mall is limited.
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<CAPTION>
GROSS LEASABLE
SHOPPING CENTER TYPE OF CENTER AREA (SQ. FT.) ANCHOR STORES
- ------------------------------- ------------------------------- -------------- -------------------------------
<S> <C> <C> <C>
Strawberry Square Enclosed multi-level urban mall 230,000 None
Colonial Park Plaza Enclosed one-level regional 759,000 Sears
mall Bon Tons
Boscov's
Camp Hill Shopping Center Enclosed one-level mall 505,000 Boscov's
Montgomery Ward
PathMark
Capital City Mall Enclosed one-level regional 671,000 Sears
mall Hess's
Ames
Park City Mall Enclosed two-level regional 1,400,000 Bon Tons, Sears
mall J.C. Penney
Watt & Shand
</TABLE>
6
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ITEM 2. PROPERTIES.
Castleton Commercial Park
General. Castleton Commercial Park consists of 44 single-and multi-tenanted
office buildings and mixed-use office/warehouse buildings which have a total
building area of 1,219,914 square feet and net rentable area of 1,157,000 square
feet. It is located immediately northwest of the intersection of Interstate 465
and Interstate 69 in the northeast quadrant of the Indianapolis metropolitan
area.
Approximately 66% of the total building area of the Park is designed solely
for use as office space and the balance is a combination of both office and
warehouse space (including related uses, such as operation of light
manufacturing, product assembly, showroom and distribution facilities). On the
basis of net rentable area, approximately 85% of the Park comprises office
space, with the balance consisting of warehouse space. The Park is located on a
site of approximately 18 acres. The site has paved surface parking for
approximately 5,580 cars (4.9 spaces per 1,000 net rentable square feet).
Harrisburg East Mall
General. Harrisburg East Mall is a two-level enclosed regional shopping
mall located approximately three miles from the central business district of
Harrisburg, Pennsylvania, the state capitol. The Mall contains approximately
872,000 gross leasable square feet and is anchored by three major department
stores: J.C. Penney, Hess's and John Wanamaker. The Mall is located on a site of
approximately 62 acres with paved surface parking for approximately 4,729
automobiles (5.4 spaces per 1,000 gross leasable square feet).
The total building area of the Mall is allocated as shown in the table
below.
<TABLE>
<CAPTION>
NUMBER OF STORE OCCUPANCY
SPACES AT GROSS LEASABLE % OF TOTAL % AT
12/31/93 AREA (SQ. FT.) BUILDING AREA 12/31/93
--------------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
Gross leasable area
Anchor stores 3 486,389 47.7% 100.0%
Mall stores 103 340,305 33.4 92.0
Free-standing building 8 45,455 4.5 100.0
----- -------------- ------- -----------
Total gross leasable area 114 872,149 85.6 96.9%
----- -----------
----- -----------
Common area 146,371 14.4
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Total building area 1,018,520 100.0%
-------------- -------
-------------- -------
</TABLE>
7
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Physical Improvements. Since acquiring the Mall in 1985, the Company has
undertaken several physical improvement programs. In 1987, the Company converted
approximately 51,400 square feet of space in the basement of Hess's department
store into mall tenant space, currently leased to Toys R Us. During 1988, a new
food court with approximately 13,000 square feet of gross leasable area was
completed. In 1991, the Company completed the conversion of 47,960 square feet
of space previously occupied by J.C. Penney into approximately 31,500 square
feet of new leasable area leased at substantially higher rates.
In conjunction with the J.C. Penney conversion, the remaining area of the
J.C. Penney store has been remodeled. In addition, the terms of the amended J.C.
Penney lease required the Company to renovate the common areas and the exterior
facade of the Mall. The renovation was completed in 1993. The project included a
complete refurbishment of the property's interior common area, with new floors,
finishes, and lighting throughout.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the names and positions of the executive
officers of the Company. The term of office of each officer expires at the
annual meeting of the Board of Directors or when the respective successor is
elected and qualifies.
<TABLE>
<CAPTION>
NAME POSITION
- ---------------------------------------- ------------------------------------------------------------
<S> <C>
Phillip E. Stephens President
Gregory R. Greenfield Vice President and Treasurer
William G. Brown, Jr. Vice President and Controller
Scott M. Boggio Vice President
Gary L. Werkheiser Vice President
Linda K. Schear Secretary
</TABLE>
8
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Phillip E. Stephens, age 46, has been President of Compass Retail, Inc., a
subsidiary of Equitable Real Estate, since January of 1992 and was Executive
Vice President of the Compass Retail division of Equitable Real Estate from
January 1990 to December 1991. He has also served as President of Equitable
Realty Portfolio Management, Inc. ('ERPM'), the Company's Advisor and a wholly
owned subsidiary of Equitable Real Estate, since December 1989. Prior to that
date and since October 1987, he was President of EQK Partners, the predecessor
in interest to ERPM. Prior to that date and since its inception in September
1983, he was Senior Vice President of EQK Partners. He is also Senior Vice
President and Treasurer and a director of EQK Green Acres Corp., the former
managing general partner of EQK Green Acres, L.P. (the 'Partnership'),
predecessor to EQK Green Acres Trust (the 'Trust'). On February 28, 1994,
the Partnership merged with and into the Trust. Mr. Stephens is a managing
trustee of the Trust.
Gregory R. Greenfield, age 37, has been Executive Vice President and Chief
Operating Officer of Compass Retail, Inc. since January of 1992 and was Senior
Vice President of the Compass Retail division of Equitable Real Estate from
January 1990 to December 1991. He has also served as Vice President and
Treasurer of ERPM since December 1989. Prior to that date and since November
1988, he was Senior Vice President, General Counsel and Secretary of EQK
Partners. Mr. Greenfield joined EQK Partners in June 1984. From 1981 to 1984, he
was associated with the law firm of Wolf, Block, Schorr and Solis-Cohen. Mr.
Greenfield is also Senior Vice President of EQK Green Acres Corp.
William G. Brown, Jr., age 38, has been Senior Vice President and Chief
Financial Officer of Compass Retail, Inc. since January of 1992 and was Vice
President of the Compass Retail division of Equitable Real Estate from March
1990 to December 1991. He has also served as a Vice President of ERPM since
March 1990. Prior to that date and since November 1988, he was Vice President
and Chief Financial Officer of Envirosafe Services, Inc., a hazardous waste
management company. Mr. Brown joined Envirosafe in July 1987. From 1981 to 1987,
he held financial management positions with IU International Corporation, and
from 1978 to 1981, he was associated with the accounting firm of Coopers &
Lybrand. Mr. Brown is also Vice President and Controller of EQK Green Acres
Corp.
Scott M. Boggio, age 35, has been Vice President of Compass Retail, Inc.
since February 1992 and was Director of Construction and Development of the
Compass Retail division of Equitable Real Estate from January 1990 to January
1992. He has also served as Assistant Vice President of ERPM since December
1989. Prior to that date and since February 1989, he was Vice President of
Construction and Planning of EQK Partners. From 1986 until 1988, he was employed
by VMS Realty Management, Inc. as its Northeast Regional Manager. From 1985 to
1986, he was employed by the Linpro Company in acquisitions and site selection.
Mr. Boggio is also Vice President of EQK Green Acres Corp.
Gary L. Werkheiser, age 34, has been Vice President of Compass Retail, Inc.
since February 1992 and was Director of Asset Management of Equitable Real
Estate
9
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from May 1990 to January 1992. Prior to that date and since August of 1986, he
was the Real Estate Analyst for EQK Partners. Mr. Werkheiser is also Vice
President of EQK Green Acres Corp.
Linda K. Schear, age 41, has been Vice President and General Counsel to
Compass Retail, Inc. since February 1992 and was General Counsel to the Compass
Retail division of Equitable Real Estate from April 1990 to February 1992. She
has also served as Counsel to ERPM and Vice President of Equitable since April
1990. Prior to that date, she was first an associate and then a partner with the
Atlanta law firm of Merritt & Tenney, specializing in commercial real estate.
Ms. Schear also serves as Secretary of EQK Green Acres Corp.
10
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's shares of beneficial interest are traded on the New York
Stock Exchange (symbol EKR). The Company is listed in the stock tables as 'EQK
Rt.' As of February 28, 1994 the record number of shareholders of the Company
was 413 . Although the Company does not know the exact number of beneficial
holders of its shares, it believes the number exceeds 2,100.
The following table presents the high and low prices of the Company's
shares based on the New York Stock Exchange daily composite transactions.
<TABLE>
<S> <C> <C>
HIGH LOW
--------- ---------
YEAR ENDED DECEMBER 31, 1993:
FIRST QUARTER $ 2.875 $ 2.250
SECOND QUARTER 2.625 2.250
THIRD QUARTER 3.125 2.625
FOURTH QUARTER 2.875 2.500
YEAR ENDED DECEMBER 31, 1992:
FIRST QUARTER $ 2.750 $ 2.125
SECOND QUARTER 2.375 1.500
THIRD QUARTER 2.750 1.750
FOURTH QUARTER 2.875 2.125
</TABLE>
There have been no distributions to shareholders during 1992 and 1993.
It is the Company's current policy to reinvest all of its cash flow into the
properties to fund capital expenditures and leasing costs. The Company does not
anticipate a change in this policy.
ITEM 6. SELECTED FINANCIAL DATA.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C> <C> <C> <C> <C>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
Revenues from rental operations $ 18,458 $ 20,900 $ 21,276 $ 20,532 $ 20,939
Loss before gain on sales of real estate and
extraordinary loss (2,351) (9,993) (15,224) (58,609) (1,492)
Gain on sales of real estate 282 1,143 248 -- --
Loss before extraordinary loss (2,069) (8,850) (14,976) (58,609) (1,492)
Extraordinary loss from early retirement of debt (1,711) -- -- -- --
Net loss (3,780) (8,850) (14,976) (58,609) (1,492)
Total assets 93,163 103,690 124,051 133,867 175,827
Long-term obligations:
Mortgage notes payable, net of imputed interest and
discount 78,727 86,713 9,022 9,433 10,059
Zero coupon mortgage notes, net of unamortized discount -- -- 89,410 83,385 75,067
Per share data (a):
Loss per share:
Loss before gain on sales of real estate and
extraordinary loss $ (0.25) $ (1.31) $ (2.00) $ (7.72) $ (0.20)
Loss before extraordinary loss (0.22) (1.16) (1.97) (7.72) (0.20)
Net loss (0.41) (1.16) (1 97) (7.72) (0.20)
Dividends declared -- -- -- 0.10 --
</TABLE>
- ------------------
(a) Calculation is based on 9,264,344 weighted average shares outstanding during
1993, 7,653,415 weighted average shares outstanding during 1992, and
7,589,344 weighted average shares outstanding during all other years.
11
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
NOTES ON PAGES 9-18.
FINANCIAL CONDITION
Capital Resources
In December 1993, the Company completed the sale of its two remaining
buildings within the Peachtree complex which generated net cash proceeds of
$10,552,000 and a gain on sale of real estate of $282,000. The Company's cash
management agreement, which was executed in connection with the December 1992
mortgage refinancing, provides for the application of the net proceeds from real
estate sales against the balances of the mortgage note and the term loan. The
Company negotiated a modification to this provision with its lenders as it
related to the December 1993 Peachtree sale, and used net proceeds of
$9,626,000 to prepay in full the Harrisburg mortgage notes. This modification
allowed the Company to retire debt that was accruing interest for financial
reporting purposes at 14% per annum, and to avoid significant prepayment
penalties associated with the mortgage note payable.
The Company continues to pursue the orderly liquidation of its real estate
portfolio. During this process, the Company will make certain capital
expenditures required to enhance or maintain the value of the properties,
including tenant allowances associated with leasing activity. For 1994, the
Company's capital budget is $2,500,000. One of the conditions of the mortgage
restructuring completed in 1992 was the establishment of a capital reserve
account, which is maintained by a third-party escrow agent and from which
expenditures must be approved by the lender. The balance of this account at
December 31, 1993 was approximately $3,400,000.
Liquidity
During 1993, the Company generated cash flow from operating activities of
$4,792,000, substantially all of which was transferred to the capital reserve
account. Cash flows from operating activities in 1993 were $3,276,000 less than
1992 operating cash flows. This decrease is attributable to the payment of
mortgage interest on a current basis in 1993. This decline was partially offset
by increased cash flows resulting from improved operating results, net of the
effects of results from the buildings at Peachtree which were sold in 1992, and
the nonrecurrence of 1992 payments of approximately $1,500,000 for refinancing
costs. For 1994, the Company expects to continue to satisfy its liquidity needs
solely from operating cash flow. In addition to the capital expenditure
requirements described above, liquidity requirements for 1994 will also include
principal and interest payments of $6,700,000 pursuant to existing loan
agreements.
12
<PAGE>
The Company's cash management agreement stipulates that all rental payments
from tenants are to be made directly to a third-party escrow agent who also
funds monthly operating expenses in accordance with a budget approved by the
lender. The Company believes that its cash flow for 1994 will be sufficient to
fund its various operating requirements, although its discretion with respect to
cash flow management will be limited by the terms of the cash management
agreement.
RESULTS OF OPERATIONS
In 1993, the Company reported a net loss of $3,780,000, or $.41 per share,
compared with net losses of $8,850,000 ($1.16 per share) in 1992 and $14,976,000
($1.97 per share) in 1991. The current year results include an extraordinary
charge to earnings of $1,711,000 ($.19 per share) related to the early
retirement of debt. The prior year results included a write-down of $4,001,000
($.52 per share) of the Company's investment in real estate. Similar
write-downs of $8,448,000 ($1.11 per share) were recorded in 1991.
Revenues from rental operations decreased in 1993 to $18,458,000 from
$20,900,000 in 1992. Revenue decreased at Peachtree in 1993 by approximately
$3,400,000 due primarily to the sale of five buildings in the latter part of
1992. At Castleton, a revenue increase of approximately $456,000 was primarily
attributable to the collection of a $225,000 lease termination fee
received in connection with the loss of a tenant in September 1993.
Anticipated rental revenues in 1994 from this tenant had been $176,000.
Management believes that this tenant space will be re-leased during 1994.
Revenue increased by $500,000 at Harrisburg due to the addition of four large
tenants at the end of 1992. In 1992, revenues from rental operations decreased
from $21,276,000 in 1991. Revenue declines at Peachtree and Castleton that were
attributable to the sale of buildings in the latter part of 1992 and 1991,
respectively, were partially offset by revenues generated from increased
occupancy levels at the remaining Castleton buildings and at Harrisburg.
Net operating expenses declined in 1993 to $6,384,000 from $9,239,000 in
1992, a decrease of 31%. Expenses decreased at Peachtree by approximately
$2,500,000 or 65% due primarily to the sale of five buildings in the latter part
of 1992. Expenses increased slightly at Castleton due to higher net common area
expenses. Net operating expenses at Harrisburg decreased approximately $478,000
due primarily to decreases in bad debt expense and net common area expenses.
Net operating expenses in 1992 decreased from $10,335,000 in 1991. Expenses
decreased at Peachtree by approximately 12% due to the sale of buildings and to
effective cost containment measures. Expenses decreased at Castleton by
approximately 5% due primarily to the effect of a full year of operations
without the two buildings sold in the latter part of 1991. Net operating
expenses at Harrisburg decreased by approximately $300,000 due primarily to
decreased bad debt expense and the absence of certain non-recurring
expenditures incurred in 1991.
13
<PAGE>
Interest expense decreased in 1993 due to lower borrowing levels and lower
interest costs associated with the refinanced mortgage note. Interest expense
will continue to decline in 1994 due to the retirement of Harrisburg mortgage
notes payable. Interest expense increased in 1992 due to amortization of the
discount on the zero coupon mortgage for the period of time it was outstanding
during the year, offset somewhat by lower borrowing levels and lower interest
costs on the bank line of credit.
Other expenses consist of portfolio management fees, other costs related to
the operation of the Trust, and interest income earned on cash balances. Other
expenses decreased approximately $150,000 in 1993 from 1992 due to interest
earned on excess cash balances. There were no significant variations in the
other expenses between 1992 and 1991.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Registrant's financial statements and supplementary data listed in Item
14(a) appear immediately following the signature pages.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference to the Company's Proxy Statement relating to its
1994 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference to the Company's Proxy Statement relating to its
1994 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference to the Company's Proxy Statement relating to its
1994 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference to the Company's Proxy Statement relating to its
1994 Annual Meeting of Shareholders.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C> <C> <C>
(a) The following documents are filed as part of this report:
1. Financial Statements
Balance Sheets at December 31, 1993 and 1992 23
Statements of Operations for the years ended December 31, 1993, 1992 and 1991 24
Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 25
Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 26
Notes to financial statements, including supplementary data 27
2. Financial Statement Schedules
Schedule IX: Short-term Borrowings 35
Schedule X: Supplementary Income Statement Information 35
Schedule XI: Real Estate and Accumulated Depreciation 35
Independent Auditors' Report 36
All other schedules are omitted as the required information is inapplicable or the
information is presented in the financial statements, or the related notes thereto.
3. Exhibits
(2) None.
(3) (a) Form of Amended and Restated Declaration of Trust, as amended. (2)
(b) Trustees' Regulations, as amended. (2)
(4) Form of certificate for Shares of Beneficial Interest. (1)
(9) None.
(10) (a) Form of Advisory Agreement between the Registrant and EQK Partners. (1)
(e) Property management agreement between Salomon Brothers Peachtree Properties
Inc. and Equitable Real Estate Investment Management, Inc. with respect to
Peachtree-Dunwoody Pavilion. (1)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C> <C> <C>
(f) Form of property management agreement between the Registrant and Castleway
Management Corp. with respect to Castleton Commercial Park. (1)
(k) Mortgage encumbering Harrisburg East Mall in favor of Continental Assurance
Company and related documents. (1)
(m) Mortgage encumbering Harrisburg East Mall in favor of The Philadelphia
Savings Fund Society and related documents. (1)
(n) Amended and Restated Zero Coupon Mortgage Note due December 1992 in the
principal amount of $45,000,000. (1)
(o) Mortgage encumbering Harrisburg East Mall in favor of Salomon Brothers Realty
Corp. (2)
(p) Mortgages encumbering Peachtree-Dunwoody Pavilion in favor of Salomon
Brothers Realty Corp. (2)
(q) Mortgages encumbering Castleton Commercial Park in favor of Salomon Brothers
Realty Corp. (2)
(r) Zero Coupon Mortgage Note due December 1992 in the principal amount of
$5,000,000. (3)
(s) Form of Amendments dated February 4, 1988 to Exhibits 10(o), 10(p) and 10(q). (3)
(t) Form of Mortgages securing 10(r). (3)
(u) First Amendment to Advisory Agreement dated as of December 31, 1989. (4)
(v) Form of property management agreement between Registrant and Compass Retail, (5)
a division of Equitable Real Estate Investment Management, Inc.
(w) Agreement of sale dated June 25, 1991 between McCready and Keene, Inc. and (6)
the Registrant
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C> <C> <C>
(x) Agreement for release of collateral between The Prudential Insurance Company
of America and the Registrant dated August 30, 1991. (6)
(y) Agreement of sale dated September 23, 1991 between the Wesleyan Church
Corporation and the Registrant. (6)
(z) Agreement of sale dated June 24, 1992 between Computer Generation
Incorporated and the Registrant (7)
(aa) Purchase and Sale Agreement dated October 21, 1992 between Minneapolis
Investment Associates L.P. and the Registrant (7)
(bb) Second Amended and Restated Note dated as of December 16, 1992 from the
Registrant to The Prudential Insurance Company of America (7)
(cc) Cash Management and Security Agreement dated as of December 15, 1992, among
the Registrant, The Prudential Insurance Company of America and First Union
National Bank of Georgia (7)
(dd) Amended and Restated Deed to Secure Debt and Security Agreement (Peachtree)
dated as of December 16, 1992 by Successor Trustees of the Registrant as
Debtor in favor of The Prudential Insurance Company of America as Secured
Party (7)
(ee) Amended and Restated Open-End Mortgage and Security Agreement (Harrisburg)
dated as of December 15, 1992 by Successor Trustees of the Registrant as
Debtor in favor of The Prudential Insurance Company of America as Secured
Party (7)
(ff) Amended and Restated Mortgage and Security Agreement (Castleton) dated as of
December 15, 1992 by the Registrant as Debtor in favor of The Prudential
Insurance Company of America as Secured Party (7)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C> <C> <C>
(gg) Absolute Assignment of Leases and Rents and Rental Collection Agreement
(Peachtree) dated as of December 16, 1992 among Successor Trustees of the
Registrant as Assignor, The Prudential Insurance Company of America as
Assignee and First Union National Bank of Georgia as Rental Collection Agent (7)
(hh) Absolute Assignment of Leases and Rents and Rental Collection Agreement
(Harrisburg) dated as of December 16, 1992 among Successor Trustees of the
Registrant as Assignor, The Prudential Insurance Company of America as
Assignee and First Union National Bank of Georgia as Rental Collection Agent (7)
(ii) Absolute Assignment of Leases and Rents and Rental Collection Agreement
(Castleton) dated as of December 15, 1992 among the Registrant as Assignor,
The Prudential Insurance Company of America as Assignee and First Union
National Bank of Georgia as Rental Collection Agent (7)
(jj) Warrant Agreement dated as of December 18, 1992 between the Registrant and
The Prudential Insurance Company of America (7)
(kk) Subordination and Intercreditor Agreement dated as of December 16, 1992 among
Provident National Bank, The Prudential Insurance Company of America and the
Registrant (7)
(ll) Second Amended and Restated Loan Agreement dated as of December 16, 1992 from
the Registrant to Provident National Bank (7)
(mm) Amended and Restated Note dated as of December 16, 1992 from the Registrant
to Provident National Bank (7)
(nn) Mortgage and Security Agreement (Castleton) dated as of December 16, 1992
between the Registrant and Provident National Bank (7)
(oo) Deed to Secure Debt and Security Agreement (Peachtree) dated as of December
16, 1992 between the Registrant and Provident National Bank (7)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C> <C> <C>
(pp) Open-End Mortgage and Security Agreement (Harrisburg) dated as of December
16, 1992 between the Registrant and Provident National Bank (7)
(qq) Assignment of Lessor's Interest in Leases (Castleton) dated as of December
16, 1992 between the Registrant and Provident National Bank (7)
(rr) Assignment of Lessor's Interest in Leases (Peachtree) dated as of December
16, 1992 between the Registrant and Provident National Bank (7)
(ss) Assignment of Lessor's Interest in Leases (Harrisburg) dated as of December
16, 1992 between the Registrant and Provident National Bank (7)
(tt) Assignment of Cash Collateral Account and Security Agreement dated as of
December 16, 1992 between the Registrant and Provident National Bank (7)
(uu) Purchase and Sale Agreement dated July 6, 1993 between Lawrence E. Cooper and
the Registrant (7)
(vv) Amendment dated October 1, 1993 to Exhibit 10(cc) (7)
(ww) Amendment dated December 3, 1993 to Exhibits 10(ll) and 10(mm). (7)
(11) See Note 1 to the Financial Statements.
(12) Inapplicable.
(13) Inapplicable.
(16) None.
(18) None.
(21) None.
(22) None.
(23) None.
(24) None.
(28) None.
20
<PAGE>
(b) Reports on Form 8-K
Report on Form 8-K dated December 14, 1993 regarding the sale of the
Company's remaining two office buildings at Peachtree.
(c) See paragraph (a) 3. above
(d) See paragraph (a) 2. above
- ------------------
(1) Incorporated herein by reference to exhibit filed with Registrant's
Registration Statement on Form S-11, File No. 2-93936.
(2) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K dated for fiscal year ended December 31, 1985.
(3) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for fiscal year ended December 31, 1987.
(4) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for fiscal year ended December 31, 1989.
(5) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for fiscal year ended December 31, 1990.
(6) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for fiscal year ended December 31, 1991.
(7) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for fiscal year ended December 31, 1992.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 1994.
EQK Realty Investors I
By: /s/ Phillip E. Stephens
Phillip E. Stephens
President and Trustee
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 29, 1994 by the following persons on behalf of
the Registrant and in the capacities indicated.
</TABLE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ----------------------------------------------------- -----------------------------------------------------
<S> <C>
/s/ Phillip E. Stephens President (Principal Executive Officer) and Trustee
Phillip E. Stephens
/s/ Gregory R. Greenfield Vice President and Treasurer (Principal Financial
Gregory R. Greenfield Officer)
/s/ William G. Brown, Jr. Vice President and Controller
William G. Brown, Jr.
/s/ Sylvan M. Cohen Trustee
Sylvan M. Cohen
/s/ Alton G. Marshall Trustee
Alton G. Marshall
/s/ George R. Peacock Trustee
George R. Peacock
/s/ Robert C. Robb, Jr. Trustee
Robert C. Robb, Jr.
</TABLE>
22
<PAGE>
EQK REALTY INVESTORS I
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
Investments in real estate, at cost:
Castleton Commercial Park, net of valuation allowance of $19,565 $ 60,313 $ 59,223
Peachtree-Dunwoody Pavilion, net of valuation allowance of $14,373 in 1992 -- 13,279
Harrisburg East Mall 46,769 42,164
------------ ------------
107,082 114,666
Less accumulated depreciation 28,118 27,997
------------ ------------
78,964 86,669
Restricted cash 4,308 4,794
Cash and short term investments 1,408 1,771
Other assets 8,483 10,456
------------ ------------
TOTAL ASSETS $ 93,163 $ 103,690
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage note payable, net of debt discount of $651 in 1993 and $392 in 1992 $ 75,874 $ 75,324
Term loan payable to bank 2,853 2,859
Harrisburg mortgage notes payable, net of imputed interest of $1,838 in 1992 -- 8,530
Accounts payable and other liabilities 6,260 5,418
------------ ------------
84,987 92,131
Shareholders' equity:
Shares of beneficial interest, without par value: 10,055,555 shares authorized,
9,264,344 shares issued and outstanding 135,779 135,382
Accumulated deficit (127,603) (123,823)
------------ ------------
8,176 11,559
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 93,163 $ 103,690
------------ ------------
------------ ------------
</TABLE>
See accompanying Notes to Financial Statements
23
<PAGE>
EQK REALTY INVESTORS I
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
--------- --------- ----------
<S> <C> <C> <C>
Revenues from rental operations $ 18,458 $ 20,900 $ 21,276
Operating expenses, net of tenant reimbursements 6,384 9,239 10,335
Depreciation and amortization 4,761 5,328 5,659
Write-downs of investment in real estate -- 4,001 8,448
--------- --------- ----------
Income (loss) from rental operations 7,313 2,332 (3,166)
Interest expense 8,706 11,217 10,999
Other expenses, net of interest income 958 1,108 1,059
--------- --------- ----------
Loss before gain on sales of real estate and extraordinary loss (2,351) (9,993) (15,224)
Gain on sales of real estate 282 1,143 248
--------- --------- ----------
Loss before extraordinary loss (2,069) (8,850) (14,976)
Extraordinary loss from early retirement of debt (1,711) -- --
--------- --------- ----------
Net loss $ (3,780) $ (8,850) $ (14,976)
--------- --------- ----------
--------- --------- ----------
Loss per share:
Loss before gain on sales of real estate and extraordinary loss $ (0.25) $ (1.31) $ (2.00)
Gain on sales of real estate 0.03 0.15 0.03
--------- --------- ----------
Loss before extraordinary loss (0.22) (1.16) (1.97)
Extraordinary loss from early retirement of debt (0.19) -- --
--------- --------- ----------
Net loss $ (0.41) $ (1.16) $ (1.97)
--------- --------- ----------
--------- --------- ----------
</TABLE>
See accompanying Notes to Financial Statements
24
<PAGE>
EQK REALTY INVESTORS I
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL ACCUMULATED
INTEREST DEFICIT TOTAL
----------- -------------- ----------
<S> <C> <C> <C>
Balance, December 31, 1990 $ 128,290 $ (99,997) $ 28,293
Net loss for the year ended December 31, 1991 (14,976) (14,976)
----------- -------------- ----------
Balance, December 31, 1991 128,290 (114,973) 13,317
Net loss for the year ended December 31, 1992 (8,850) (8,850)
Reissuance of 1,675,000 shares 6,700 6,700
Issuance of 165,086 warrants in connection with refinancing 392 392
----------- -------------- ----------
Balance, December 31, 1992 135,382 (123,823) 11,559
Net loss for the year ended December 31, 1993 (3,780) (3,780)
Issuance of 151,556 warrants in connection with financing 397 397
----------- -------------- ----------
Balance, December 31, 1993 $ 135,779 $ (127,603) $ 8,176
----------- -------------- ----------
----------- -------------- ----------
</TABLE>
See accompanying Notes to Financial Statements
25
<PAGE>
EQK REALTY INVESTORS I
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,780) $ (8,850) $ (14,976)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Extraordinary loss from early retirement of debt 1,711 -- --
Write-downs of investment in real estate -- 4,001 8,448
Depreciation and amortization 4,761 5,328 5,659
Amortization of discount on zero coupon mortgage notes -- 9,344 9,229
Imputed and deferred interest 1,434 488 482
Gain on sales of real estate (282) (1,143) (248)
Changes in assets and liabilities:
Increase (decrease) in accounts payable and other liabilities 586 123 (816)
(Increase) decrease in other assets 362 (1,223) (2,050)
---------- ---------- ----------
Net cash provided by operating activities 4,792 8,068 5,728
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sales of real estate 10,552 21,748 3,295
Additions to real estate investments (5,715) (2,364) (5,199)
---------- ---------- ----------
Net cash provided by (used in) investing activities 4,837 19,384 (1,904)
---------- ---------- ----------
Cash flows from financing activities:
Dividends paid -- -- (759)
Mortgage principal payments (846) (787) (722)
Prepayment of zero coupon note -- (23,038) (3,204)
Prepayment of Harrisburg mortgage notes payable (9,626) -- --
Repayments under term loan (6) -- --
Net borrowing (repayments) under bank line of credit -- (4,341) 950
Reissuance of shares -- 6,700 --
---------- ---------- ----------
Net cash used in financing activities (10,478) (21,466) (3,735)
---------- ---------- ----------
Increase (decrease) in cash and short-term investments (849) 5,986 89
Cash and short-term investments, beginning of year 6,565 579 490
---------- ---------- ----------
Cash and short-term investments, end of year $ 5,716 $ 6,565 $ 579
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying Notes to Financial Statements
26
<PAGE>
EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business:
EQK Realty Investors I (the 'Company'), a Massachusetts business trust, was
formed pursuant to a Declaration of Trust dated as of October 8, 1984 to acquire
certain income-producing real estate investments. Commencing with the period
beginning April 1, 1985, the Company qualified for and elected real estate
investment trust status under the provisions of the Internal Revenue Code, and
adopted December 31 as its year end, as required for real estate investment
trusts.
The Company's portfolio at December 31, 1993 consists of two real estate
investments: Castleton Commercial Park ('Castleton'), an office park located in
Indianapolis, Indiana, and Harrisburg East Mall ('Harrisburg' or the 'Mall'), a
regional shopping center located in Harrisburg, Pennsylvania. During 1993, the
Company sold its two remaining office buildings within its office complex in
Atlanta, Georgia, formerly known as Peachtree-Dunwoody Pavilion or 'Peachtree'
(see Note 4).
Capitalization, Depreciation and Amortization:
Property additions are recorded at cost. Costs directly associated with
major renovations and improvements, including interest on funds borrowed to
finance construction, are capitalized to the point of substantial completion.
Depreciation of real estate investments is provided on a straight-line
basis over the estimated useful lives of the related assets, ranging generally
from 5 to 40 years. Intangible assets are amortized on a straight-line basis
over their estimated useful lives.
Other Assets
Other assets primarily consist of deferred leasing costs. Costs incurred in
connection with the execution of a new lease including leasing commissions,
costs associated with the acquisition or buyout of existing leases and legal
fees, are deferred and amortized over the term of the new lease. At December 31,
1993 and 1992, deferred leasing costs, net of accumulated amortization, amounted
to $4,898,000 and $5,513,000, respectively. Included in deferred leasing costs
is a 1990 payment of $5,500,000 made to an anchor tenant at Harrisburg in
exchange for which the tenant relinquished space that was subsequently converted
into leasable area for mall stores.
Net Loss per Share:
Net loss per share is calculated on the basis of the weighted average
number of shares outstanding during each year. For the years ended December 31,
1993, 1992 and 1991, the number of weighted average shares outstanding was
9,264,344, 7,653,415 and 7,589,344, respectively.
27
<PAGE>
EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Share warrants issued in 1993 and 1992 in connection with the Company's
debt restructuring (see Note 2) are considered common share equivalents for
purposes of the calculation of net loss per share. However, the warrants have
not been included in the calculation of net loss per share since the effect on
such calculation would be antidilutive.
In December 1992, the Company prepaid $3,000,000 of debt with proceeds from
the issuance of the Company's shares to its Advisor (see Notes 2 and 8). Net
loss per share for the year ended December 31, 1992 would have been $1.02 had
the related shares been included in average shares outstanding from the
beginning of the year and had interest expense been lower due to a $3,000,000
reduction of outstanding indebtedness for the entire year.
Income Taxes:
The Company distributes 100% of its real estate investment trust taxable
income to its shareholders within certain time limits prescribed by the Internal
Revenue Code. Accordingly, no provision has been made for income tax
liabilities.
Statements of Cash Flows:
Cash equivalents include short-term investments with an original maturity
of three months or less.
Included in the statements of cash flows are cash payments for interest of
$7,439,000 (net of amounts capitalized of $115,000), $1,361,000, and $1,670,000
in 1993, 1992 and 1991, respectively.
As a condition of the Company's debt restructuring (see Note 2), the
Company issued 151,556 and 165,086 share warrants in 1993 and 1992,
respectively, to its primary mortgage lender. Based upon the respective market
values of the Company's shares, the value of the warrants at the time of
issuance was $397,000 and $392,000, respectively. These amounts were recorded as
debt discounts and increases in Shareholders' equity.
Proceeds from the sale of real estate in 1991 exclude a $168,000 note
received as partial consideration on the sale of a building at Castleton (see
Note 4).
Restricted Cash:
The terms of the Company's restructured mortgage loan required the
establishment of a Cash Management Agreement with a third-party escrow agent
(see Note 2). The Company's access to cash balances maintained on deposit with
the escrow agent are restricted in accordance with the terms of this agreement.
In addition, the Company has established a $300,000 escrow account in connection
with the restructuring of its bank line of credit.
28
<PAGE>
EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2: MORTGAGE DEBT AND RESTRUCTURING ACTIVITIES
On February 4, 1988, the Company issued a zero coupon mortgage note with an
original maturity date of December 18, 1992. The original maturity value of the
note was $7,772,500; however, in December 1991 the Company prepaid a portion of
the note with proceeds from the sale of buildings at Castleton reducing the
maturity value to $4,264,000. In September 1992, the Company prepaid the
remainder of the note with proceeds from the sale of a building at Peachtree
(see Note 4). At issuance, the Company received $5,000,000 representing an
effective interest rate of 9.255% compounded semi-annually.
On December 18, 1985, the Company issued a zero coupon mortgage note with
an original face amount of $94,720,000. At issuance, the Company received
$45,000,000 representing an effective interest rate of 10.92% compounded
semi-annually. As described in Note 4, the Company completed property sales in
1992, and, as described in Note 3, the Company issued additional shares to its
Advisor. Proceeds received from these transactions were used to prepay a portion
of the mortgage note, reducing the maturity value to $75,689,000.
Upon maturity of this zero coupon mortgage note in December 1992, the
Company completed a restructuring of its debt. The new financing, which is
collateralized by first mortgage liens on Castleton and Harrisburg, matures in
December 1995. Interest will accrue on the mortgage at 9.54%, 9.79% and 10.04%
per year in the first, second and third loan years, respectively, although
interest is payable at an annual rate of 8.54% for the duration of the loan. The
interest differential between the accrual rates and the payment rate will be
added to principal over the term of the loan, resulting in a final maturity
balance of $78,928,000. The mortgage lender also received in December 1992 and
1993 warrants to purchase 165,086 and 151,556 Company shares, respectively, for
$.0001 per share, none of which have yet been exercised. The agreement also
stipulates that the mortgage lender may purchase up to 50,000 additional
Company shares in December 1994 although the actual number of such additional
shares will be adjusted proportionately with changes to the mortgage balance.
As part of the restructuring, the Company also entered into a Cash
Management Agreement with the mortgage lender and assigned all lease and rent
receipts to the lender as additional collateral. Pursuant to this agreement, a
third-party escrow agent has been appointed to receive all rental payments from
tenants and to fund monthly operating expenses in accordance with a budget
approved by the lender. The agreement also provides for the establishment of a
capital reserve account, which is maintained by the escrow agent. Disbursements
from this account, which was initially funded with a portion of the proceeds
from the sale of shares to the Company's Advisor (see Note 3) and is funded each
month with any excess operating cash flow, are limited to capital expenditures
approved by the lender.
In December 1992, the Company also completed the restructuring of its bank
line of credit into a term loan. The line of credit was an unsecured facility
that bore interest at the bank's prime rate through its original maturity date,
March 23, 1992, and at the prime
29
<PAGE>
EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
rate plus 1 1/4% until restructured. The balance of the restructured term loan
was $2,859,000 and will mature in December 1995. The interest rate on the term
loan is 8.33% per annum. Monthly payments are determined based on the same
8.54% pay rate applicable to the primary lender's mortgage. The amount of each
monthly payment in excess of the required interest payment is applied to the
principal balance of the loan. The amount of principal due at maturity will be
$2,839,000. The term loan is secured by subordinate liens on each of the
properties and by an escrow deposit of $300,000 (see Note 9).
NOTE 3: ISSUANCE OF SHARES
In connection with its debt restructuring, the Company issued 1,675,000
previously repurchased shares to its Advisor. Upon issuance, the Company
received proceeds of $6,700,000, or $4.00 per share. In total, the Advisor owns
1,685,556 shares, or 18.2% of the total shares outstanding.
NOTE 4: VALUATION AND SALES OF REAL ESTATE
The Company is attempting to sell the properties in conjunction with
Management's plans for an orderly liquidation of its real estate portfolio. As
the likelihood of any specific future property sales cannot be predicted, the
Company considers that all of its properties are held for sale. Therefore, to
the extent that the net investment in any property exceeds its current market
value, an allowance is recorded to adjust such net investment to net realizable
value commencing with the date on which the properties were deemed held for
sale. For the year ended December 31, 1993, no such write-down was deemed
necessary. For the year ended December 31, 1992 the Company recorded
write-downs of $4,001,000 to adjust its investment in Castleton to its net
realizable value. For the year ended December 31, 1991, the Company recorded
write-downs totalling $8,448,000 to adjust its investment in Peachtree and
Castleton to their respective net realizable values. Although the determination
of net realizable value involves subjective judgment, as market prices of real
estate can only be determined by negotiation between a willing buyer and seller,
the Company believes that these market values are reasonable approximations of
market prices.
In December 1993, the Company completed the sale of its remaining two
office buildings at Peachtree. In the aggregate, the Company received cash
proceeds of $10,552,000 net of associated costs of $248,000, and recognized a
gain on sale of $282,000.
During 1992, the Company completed the sale of five office buildings at
Peachtree. In the aggregate, the Company received cash proceeds of $21,748,000,
net of associated costs of $888,000, and recognized a gain on sale of
$1,143,000.
In December 1991, the Company completed the sales of two buildings at
Castleton. In connection with these sales, the Company received cash proceeds of
$3,295,000, net of associated costs of $494,000, and a one-year note with a face
amount of $168,000 bearing interest at 9.375% per year. These transactions
resulted in a gain on sale of $248,000.
30
<PAGE>
EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5: LEASING ARRANGEMENTS
The Company leases office, warehouse and shopping center space, generally
under noncancelable operating leases, some of which contain renewal options. The
office and warehouse space leases generally provide for either base rentals plus
annual increases based on the increase in the Consumer Price Index, or base
rentals plus reimbursement to the Company for the increase in certain defined
real estate operating expenses.
The shopping center leases generally provide for minimum rentals, plus
percentage rentals based upon the retail stores' sales volume. Percentage
rentals amounted to $154,000, $268,000 and $453,000 for the years ended December
31, 1993, 1992 and 1991, respectively. In addition, the tenants pay certain
utility charges to the Company and, in most leases, reimburse their
proportionate share of real estate taxes and common area expenses.
Future minimum rentals under existing leases at December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, AMOUNT
- --------------------------------------------------------------------------------------- --------------
<S> <C>
1994 $ 14,753,000
1995 12,816,000
1996 10,328,000
1997 8,432,000
1998 6,815,000
Thereafter 23,465,000
--------------
$ 76,609,000
--------------
--------------
</TABLE>
NOTE 6: INVESTMENT IN REAL ESTATE
The Company's investment in real estate at December 31, 1993 and 1992
consisted of the following:
<TABLE>
<CAPTION>
1993 1992
---------------- ----------------
<S> <C> <C>
Land $ 15,411,000 $ 22,190,000
Buildings and improvements 100,960,000 115,822,000
Tenant improvements 9,981,000 9,513,000
Personal property 198,000 345,000
Construction in progress 97,000 734,000
---------------- ----------------
126,647,000 148,604,000
Less valuation allowance 19,565,000 33,938,000
---------------- ----------------
$ 107,082,000 $ 114,666,000
---------------- ----------------
---------------- ----------------
</TABLE>
31
<PAGE>
EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7: EXTRAORDINARY LOSS ON RETIREMENT OF DEBT
The Company used proceeds of $9,626,000 from the 1993 sale of its remaining
two buildings at Peachtree (see Note 4) to retire the Harrisburg mortgage notes
that had been assumed by the Company in connection with its purchase of the
Mall. The Harrisburg mortgage notes, with stated interest rates of 8.8% and
8.562% per annum, had been discounted for financial reporting purposes using a
market interest rate of 14%. At retirement, the Harrisburg mortgage notes had a
carrying value of $7,975,000, net of a $1,547,000 discount. The Company also
paid accommodation fees of $60,000 to the holders of its mortgage note and term
loan. In connection with the retirement of the Harrisburg mortgage notes, the
Company recognized an extraordinary charge to earnings of $1,711,000.
NOTE 8: ADVISORY AND MANAGEMENT AGREEMENTS
The Company has entered into an agreement with Equitable Realty Portfolio
Management, Inc. (successor in interest to EQK Partners), a wholly owned
subsidiary of Equitable Real Estate Investment Management, Inc. ('Equitable Real
Estate'), to act as its 'Advisor'. The Advisor makes recommendations to the
Company concerning investments, administration and day-to-day operations.
Under the terms of the advisory agreement, as amended in December 1989, the
Advisor receives a management fee that is based upon the average daily per share
price of the Company's shares plus the average daily balance of outstanding
mortgage indebtedness, net of the unamortized discount on the zero coupon
mortgage note. Such fee is calculated using a factor of 42.5 basis points
(0.425%) and is payable monthly without subordination. For the years ended
December 31, 1993, 1992 and 1991, portfolio management fees were $484,000,
$494,000 and $515,000, respectively.
As of December 31, 1989, portfolio management fees of $5,440,000 payable to
the Advisor were deferred in accordance with subordination provisions contained
in the original advisory agreement. Pursuant to the amended advisory agreement,
the Advisor forgave one-half, or $2,720,000, of the deferred balance. The
remaining deferred fees are to be paid upon the disposition of the Company's
properties. If the properties are sold before December 1, 1994, the $2,720,000,
will be discounted by 13% per year from December 1, 1994 to the date on which
the last property is sold. For financial reporting purposes, the deferred
balance is being discounted from December 1, 1996. As of December 31, 1993, the
discounted liability for deferred management fees was $1,894,000.
32
<PAGE>
EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Upon the sale of all or any portion of any real estate investment of the
Company, the Advisor will receive a disposition fee equal to 2% of the gross
sales price (including outstanding indebtedness taken subject to or assumed by
the buyer and any purchase money indebtedness taken back by the Company). The
disposition fee will be reduced by the amount of any brokerage commissions and
legal expenses incurred by the Company in connection with such sales. For the
years ended December 31, 1993, 1992 and 1991, disposition fees paid to the
Advisor amounted to $216,000, $453,000, and $79,000, respectively.
The Company has also entered into agreements for the on-site management of
each of its properties. Harrisburg East Mall is managed by an affiliate of
Equitable Real Estate, as were the buildings at Peachtree up until the time of
their respective sales. Castleton Commercial Park is managed by an unaffiliated
third-party management company.
Management fees paid to each of the Equitable Real Estate management
affiliates are generally based upon a percentage of rents and certain other
charges. For Peachtree, the Company also paid leasing commissions based upon a
percentage of total minimum future rents. Such fees and commissions are
comparable to those charged by unaffiliated third-party management companies
providing comparable services. For the years ended December 31, 1993, 1992 and
1991, management and leasing fees paid to Equitable Real Estate were $204,000,
$707,000 and $473,000, respectively.
NOTE 9: RELATED PARTY TRANSACTIONS
In addition to providing management and advisory services to the Company as
described in Note 8, Equitable Real Estate and certain of its affiliates,
including the Advisor, lease space at Peachtree-Dunwoody Pavilion. As discussed
in Note 4, the Company sold its office buildings at Peachtree during 1992 and
1993. The Company received rent payments of approximately $1,167,000, $879,000
and $846,000 for the years ended December 31, 1993, 1992 and 1991, respectively,
with respect to such leases.
As a condition of the restructured bank term loan, an escrow deposit of
$300,000 was required as additional security for the loan. The Company borrowed
this amount from its Advisor, for which it will pay the Advisor interest at a
rate of 7.5% per annum. The balance of this loan is repayable at such time as
the bank term loan is repaid.
33
<PAGE>
EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for the
years ended December 31, 1993 and 1992.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED
------------------------------------------
1993 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- --------------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from rental operations $ 4,486 $ 4,623 $ 4,599 $ 4,750
Income from rental operations 1,739 2,085 1,650 1,839
Loss before gain on sales of real estate and extraordinary loss (698) (340) (713) (600)
Loss before extraordinary loss (698) (340) (713) (318)
Net loss (698) (340) (713) (2,029)
Per share data:
Loss before gain on sales of real estate and extraordinary loss ($.08) ($.03) ($.08) ($.06)
Loss before extraordinary loss (.08) (.03) (.08) (.03)
Net loss (.08) (.03) (.08) (.22)
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------
1992 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- --------------------------------------------------------------------- --------- --------- --------- ---------
<C> <C> <C> <C>
Revenues from rental operations $ 5,307 $ 5,587 $ 5,177 $ 4,829
Income (loss) from rental operations 1,693 1,798 1,489 (2,648)
Loss before gain on sales of real estate (1,380) (1,348) (1,691) (5,574)
Net loss (1,380) (1,348) (1,691) (4,431)
Per share data:
Loss before gain on sales of real estate ($.18) ($.18) ($.22) ($.71)
Net loss per share (.18) (.18) (.22) (.56)
</TABLE>
The sum of the quarterly per share amounts in 1992 does not equal the
corresponding per share amounts on a full year basis due to the effect on
average shares outstanding of the additional shares issued in December 1992 (see
Note 3). Income (loss) from rental operations includes write-downs of the
Company's investment in Castleton of $4,001,000 in the fourth quarter of 1992
(see Note 4).
34
<PAGE>
FINANCIAL STATEMENT SCHEDULES
DECEMBER 31, 1993
(IN THOUSANDS)
- --------------------------------------------------------------------------------
SCHEDULE IX -- SHORT-TERM BORROWINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
CATEGORY OF BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
AGGREGATE SHORT-TERM END INTEREST DURING DURING DURING THE
BORROWINGS OF PERIOD RATE PERIOD PERIOD(1) PERIOD(2)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revolving credit line payable to bank:
1992 (3) -- $ 7,200 $ 4,631 8.1%
1991 $ 7,200 6.5% $ 8,000 $ 7,733 8.5%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Average of month-end balances outstanding during the period.
(2) Year-to-date interest expense divided by average of month-end balances
outstanding during the period.
(3) Revolving credit line was converted to a term loan in 1992.
- --------------------------------------------------------------------------------
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
YEARS ENDED DECEMBER 31,
-------------------------------
ITEM 1993 1992 1991
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Maintenance and repairs (1) $ 2,341 $ 3,315 $ 3,523
2. Depreciation and amortization of intangible assets, preoperating
costs and similar deferrals $ 949 $ 757 $ 764
3. Taxes, other than payroll and income taxes (1) $ 2,605 $ 3,028 $ 3,222
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Substantially all such costs are recovered from tenants based on the
provisions of the tenants' leases.
- --------------------------------------------------------------------------------
SCHEDULE XI -- REAL ESTATE AND ACCUMULATED DEPRECIATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST GROSS AMOUNT
CAPITALIZED AT WHICH CARRIED
SUBSEQUENT AT CLOSE OF
INITIAL COST TO PERIOD(4)
-------------------- ACQUISITION --------------------
BLDG & ----------- BLDG & ACCUM. DATE OF
DESCRIPTION ENCUMBRANCE LAND IMPROVE. IMPROVEMENTS LAND IMPROVE. TOTAL DEPREC. CONSTRUCTION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Harrisburg East Mall
Harrisburg,
Pennsylvania $ 78,727(1) $ 4,700(2) $31,287(2) $10,782 $ 4,700(2) $42,069(2) $ 46,769 $10,112 1969(5)
Castleton Commercial Park
Indianapolis,
Indiana $ 78,727(1) $11,264 $40,650(3) $ 8,952 $10,711 $49,602(3) $ 60,313 $18,006 1968-1985
- ------------------------------------------------------------------------------------------------------------------
Totals $ 78,727 $15,964 $71,937 $19,734 $15,411 $91,671 $107,082 $28,118
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
LATEST INCOME STMT.
DATE IS
DESCRIPTION ACQUIRED COMPUTED
- -------------------------------------------------
<S> <C> <C>
Harrisburg East Mall
Harrisburg,
Pennsylvania 3/13/85 30 yrs.
Castleton Commercial Park
Indianapolis,
Indiana 3/13/85 40 yrs.
- -------------------------------------------------
Totals
- -------------------------------------------------
</TABLE>
(1) Encumbrance is a mortgage note payable constituting first liens on the
Castleton and Harrisburg real estate and a term loan payable to a bank
constituting subordinated liens on such properties.
(2) Initial cost is net of imputed interest of $5,280 at date of acquisition.
(3) The initial cost is net of unrealized loss recognized through 1993 of
$19,565.
(4) The aggregate tax basis of the Trust's property is $131 million as
of December 31, 1993.
(5) Renovation of Harrisburg was completed in 1993.
<TABLE>
<CAPTION>
RECONCILIATION OF GROSS CARRYING AMOUNT OF REAL ESTATE: RECONCILIATION OF ACCUMULATED DEPRECIATION:
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1990 $150,346 Balance, December 31, 1990 $28,513
Improvements and Additions, 1991 5,199 Depreciation expense, 1991 4,895
Deductions -- costs of real estate sold (4,381) Deductions -- Accumulated depreciation of
real estate sold (1,165)
Valuation allowance (8,448)
--------- ---------
Balance, December 31, 1991 $142,716 Balance, December 31, 1991 $32,243
Improvements and Additions, 1992 2,364 Depreciation expense, 1992 4,571
Deductions -- costs of real estate sold (26,413) Deductions -- Accumulated depreciation of
real estate sold (8,817)
Valuation allowance (4,001)
--------- ---------
Balance, December 31, 1992 $114,666 Balance, December 31, 1992 $27,997
Improvements and Additions, 1993 5,715 Depreciation expense, 1993 3,812
Deductions -- costs of real estate sold (13,299) Deductions -- Accumulated depreciation of
real estate sold (3,691)
--------- ---------
Balance, December 31, 1993 $107,082 Balance, December 31, 1993 $28,118
--------- ---------
--------- ---------
</TABLE>
35
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and
Shareholders of EQK Realty Investors I:
We have audited the accompanying balance sheets of EQK Realty Investors I (a
Massachusetts business trust) as of December 31, 1993 and 1992, and the related
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1993. These financial statements
and financial statement schedules discussed below are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules 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, such financial statements present fairly, in all material
respects, the financial position of EQK Realty Investors I as of December 31,
1993 and 1992, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles. Also, in our opinion, the financial
statement schedules, when consolidated in relation to the basic financial
statements taken as a whole, present fairly in all material respects
the information set forth therein.
Our audits also comprehended the financial statement schedules of EQK Realty
Investors I as of December 31, 1993 and 1992, and for each of the three years
in the period ended December 31, 1993. In our opinion, such financial statement
schedules, when considered in relation to the basic financial statements,
present fairly in all material respects the information shown therein.
Deloitte & Touche
Atlanta, Georgia
March 15, 1994
36
AGREEMENT FOR THE PURCHASE AND SALE OF REAL PROPERTY
THIS AGREEMENT, made as of the 6th day of July, 1993 (being the date
upon which both Seller and Purchaser have fully executed this Agreement and
being hereinafter referred to as the 'Effective Date'), by and among the
TRUSTEES UNDER DECLARATION OF TRUST DATED OCTOBER 8, 1984, AS AMENDED, OF EQK
REALTY INVESTORS I, a Massachusetts business trust (hereinafter called
'Seller'); LAWRENCE E. COOPER, M.D. (hereinafter called 'Purchaser'); and THE
EDWARDS GROUP, INC. (hereinafter called 'Broker').
WITNESSETH THAT:
WHEREAS, Seller is the owner of certain real property outlined on Exhibit
'A' attached hereto and by this reference made a part hereof (hereinafter called
the 'Land'); and
WHEREAS, Seller desires to sell the Land, the buildings and improvements
located thereon, and certain personal property hereinafter described to
Purchaser, and Purchaser desires to purchase the same from Seller;
NOW, THEREFORE, in consideration of the covenants, agreements, and promises
herein contained, and in consideration of the payment of the Earnest Money as
stated hereinafter, the parties hereto do hereby covenant and agree as follows:
1.
AGREEMENT TO BUY AND SELL
Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from
Seller:
a. the Land;
b. the buildings located on the Land, being one five-story office building
('Building F') containing approximately 108,536 rentable square feet and one
six-story office building (Building E') containing approximately 131,820
rentable square feet, together with all fixtures and other improvements now on
the Land or in or on the buildings, including, but not limited to, any signs,
lighting fixtures, security systems (to the extent owned by Seller), sprinkler
systems and HVAC equipment (all of the foregoing
<PAGE>
buildings, fixtures, and other improvements being hereinafter called the
'Buildings' or 'Improvements');
c. all the title, interests, privileges, licenses and easements and other
rights appurtenant to the Land and the Buildings, including, but not limited to,
any right, title and interest of Seller in and to adjacent streets, roads,
alleys, easements, rights-of-way, to the extent that such right, title and
interest exists, and all right, title and interest of Seller under that certain
Easement and Maintenance Agreement dated August 31, 1992, recorded in Deed Book
15695, Page 208, Fulton County, Georgia records and Deed Book 7386, Deed Book
379, DeKalb County, Georgia records;
d. all personal property owned by Seller located on the Land and used in
connection with the operation and maintenance thereof, and all other personal
property owned by Seller and used in the operation of the Improvements and now
located on the Land or in the Improvements to the extent that any exists,
including, but not limited to, all carpeting, drapes, blinds, artwork, furniture
in the lobbies and supplies which are owned by Seller (and not including any
personal property owned by Seller's management agent or any Tenant);
e. all intangible property related to the ownership, maintenance or
operation of the Land or Improvements including, but not limited to, all
licenses, permits, utility service rights, guaranties, warranties, rents,
issues, and profits; provided, however, Seller specifically does not convey to
Purchaser the ownership of the tradename 'Peachtree Dunwoody Pavilion', said
tradename having been previously transferred to Peachtree Dunwoody Partners
L.P. as the purchaser of Buildings A, B, C and D (but Purchaser shall, however,
have the right to use said tradename in its address during the continuing term
of any existing leases);
f. all interest of Seller, as landlord, under the leases with the tenants
in the Buildings (the 'Leases'), including any security deposits or other
deposits of such tenants delivered to Seller.
(Items a. through f. are hereinafter collectively called the 'Property'.)
2.
EARNEST MONEY
Purchaser shall pay to COMMONWEALTH LAND TITLE INSURANCE COMPANY
(hereinafter called 'Escrow Agent') the sum of TWO HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($250,000.00) (hereinafter together with any interest earned
thereon and any additional amounts paid to Escrow Agent pursuant to this
paragraph 2 called
<PAGE>
the 'Earnest Money') by certified or cashier's check immediately upon
execution of this Agreement by all parties hereto. The Earnest Money
shall be held by Escrow Agent in an interest-bearing FDIC money market
account (unless otherwise directed by both Seller and Purchaser) in accordance
with an escrow agreement in a form acceptable to Seller, Purchaser and Escrow
Agent. The Earnest Money shall be applied, delivered to Seller, or refunded to
Purchaser, as the case may be, in accordance with the terms of this Agreement.
In the event that Purchaser elects to extend the date for Closing as provided in
paragraph 7, Purchaser shall pay to Escrow Agent the following additional
amounts as Earnest Money, to be held and applied in the manner described above:
for the First Extension Period (as defined in said paragraph 7), the sum of TWO
HUNDRED THOUSAND AND NO/100THS DOLLARS ($200,000.00); for the Second Extension
Period, the sum of ONE HUNDRED THOUSAND AND NO/100THS DOLLARS ($100,000.00).
3.
PURCHASE PRICE
a. The purchase price (hereinafter called the 'Purchase Price') of the
Property shall be TEN MILLION, EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS
($10,800,000.00).
b. Seller and Purchaser agree that the Purchase Price shall be allocated
among the land, buildings, and personal property, as Purchaser shall reasonably
designate prior to the Closing.
4.
METHOD OF PAYMENT
The entire Purchase Price shall be paid in cash or by Federal Reserve check
or wire transfer, at Seller's option, at Closing (as hereinafter defined). The
Earnest Money shall be credited to the Purchase Price at Closing and all
interest earned thereon shall be paid to Purchaser by Escrow Agent at or
immediately after Closing.
5.
COSTS AND PRORATIONS AT CLOSING
a. Closing Costs. Seller shall pay the Georgia Transfer Tax applicable to
the transaction contemplated hereby. Purchaser shall pay the cost of recording
all documents to be recorded (except title clearance documents, if any).
Purchaser shall also pay for any title examination fees, any premium of title
insurance, engineering fees, or survey fees, to the extent ordered by Purchaser
or its agents or representatives. Each party shall pay its own attorneys' fees.
Seller and Purchaser shall each pay one-half of any escrow fee of Escrow Agent.
b. Taxes. Real and personal property ad valorem taxes assessed against the
Property for the year in which Closing occurs
<PAGE>
shall be prorated as of 12:01 a.m. on the day of Closing. The Property is
currently carried as a separate tax parcel in the public tax records. The
real property ad valorem tax statement for the Property shall be prorated
only on the basis of time. All of the personal property ad valorem taxes
for 1993 shall be paid at Closing, provided that in the event they are for
any reason not payable at Closing, Seller shall deposit with the Escrow Agent
its prorata share of such taxes, and any interest on the amount so deposited
by Seller with Escrow Agent shall accrue to Seller. Escrow Agent shall cause
to be paid the ad valorem taxes due and payable for the year of Closing when
the same become due and shall promptly provide Seller and Purchaser evidence
of payment. The obligations of Seller and Purchaser set forth in this
subparagraph b. shall survive Closing.
c. Utilities. Seller shall notify all utility companies servicing the
Property of the change in ownership and direct that all future billings be made
to Purchaser at the address of the Property, or such other address as Purchaser
may direct, with no interruption of service. Seller shall obtain final meter
readings for all utilities as of the Closing Date and have final bills rendered
directly to Seller. In the event that final meter readings cannot be obtained
due to the utility companies' internal operating procedures, Seller shall
reimburse Purchaser for any payments to any such utilities applicable to the
period prior to the Closing Date immediately upon receipt of evidence of such
payments from Purchaser.
d. Tax Appeals. It is the understanding of the parties that the 1991 and
1992 property tax assessments for Fulton County have not as yet been formally
accepted by the State of Georgia and remain subject to revision and that Seller
has appealed its assessment for such years. Seller shall remain fully
responsible for payment of any additional amounts which may become due for such
years and shall promptly pay same and furnish Purchaser with evidence of such
payment. Any refund of amounts already paid by Seller as to such years as a
result of Seller's appeals or otherwise shall be the sole property of Seller.
e. Rents. Seller and Purchaser agree to prorate rents and operating
expenses as of 12:01 a.m. on the day of Closing. In the event any rents for the
month in which Closing occurs are due and payable but have not, in fact, been
paid to Seller (hereinafter referred to as the 'Delinquent Rents'), the
proration shall nonetheless be calculated as if such rents have been paid and at
such later date as the Delinquent Rents are paid, the amounts so attributed to
Seller shall be remitted to Seller by Purchaser, if received by Purchaser, or
retained by Seller, if received by Seller. Any rents received by Purchaser after
Closing from tenants owing Delinquent Rents shall first be applied by Purchaser
to current rents then due and shall then be applied to such Delinquent Rents. In
the event legal action is initiated against any tenant by Purchaser to collect
the Delinquent Rents and/or other amounts subsequently becoming due, and such
legal action is successful in collecting all or part of the total amount due,
the costs of such
<PAGE>
legal action shall proportionately offset the amount of Delinquent Rents paid
to Seller. Notwithstanding the foregoing, in no event shall any Delinquent
Rents be more than thirty (30) days past due as of the date of Closing.
6.
CONVEYANCE OF TITLE
a. Seller shall convey title to the Property to Purchaser by trustees'
deed, warranting only against persons claiming by, through, or under Seller,
subject only to those matters set forth in Exhibit 'B' attached hereto and made
a part hereof (hereinafter the 'Permitted Title Exceptions').
b. Purchaser shall have the right to examine the title to the Property and
to notify Seller within thirty (30) days after the Effective Date in writing of
any defects in or encumbrances upon Seller's title to the Property appearing on
the public records that are unacceptable to Purchaser. In the event Purchaser
notifies Seller of any such defect or encumbrance, Seller shall have the right,
but not the obligation, for a period of ten (10) days from and after the
Seller's receipt of such notice (even if such 10-day period is beyond the latest
possible date for Closing set forth herein), within which to attempt to satisfy
those title defects and encumbrances of which Purchaser has notified Seller. If
Seller satisfies all such title defects and encumbrances within the aforesaid
10-day period, then the transaction contemplated hereby shall be closed in
accordance with the terms of this Agreement. If Seller does not satisfy all such
title defects and encumbrances within the aforesaid 10-day period (or such
longer period as may be agreed to in writing by Purchaser), then Purchaser shall
elect either: (i) not to close the transaction contemplated hereby, in which
event Earnest Money shall be refunded to Purchaser and, except for the indemnity
provisions of this Agreement, this Agreement shall be void and of no further
force and effect; or (ii) to close the transaction contemplated hereby without
regard to such unsatisfied defects and encumbrances, in which event the
transaction contemplated hereby shall be closed in accordance with its terms,
without a reduction in Purchase Price, and Seller's conveyance of title shall
also be subject to all unsatisfied title defects and encumbrances.
c. Seller covenants and agrees unto Purchaser that except as specifically
notified by Seller, Seller has not since the record examination date specified
in subparagraph b. above, and shall not further, voluntarily encumber the
Property from the Effective Date through the date of expiration or other
termination of this Agreement in accordance with its terms. Purchaser shall also
have the right to examine title to the Property at any time up to Closing for
the purpose of ascertaining whether Seller has further voluntarily encumbered
the Property in violation of Seller's aforesaid covenant and agreement.
7.
CLOSING
Anything contained herein to the contrary notwithstanding, the closing
(herein called 'Closing') of the transaction contemplated hereby shall be held,
if at all, on or before that date which is sixty (60) days from the date of this
agreement (the 'Closing Date'), in the metropolitan Atlanta area during regular
business hours (as may be extended as provided in subparagraph 6.b. of this
Agreement). The exact time, place, and date of Closing shall be selected by
Purchaser by giving notice thereof, written or oral, to Seller at least five (5)
business days prior to Closing. In the event Purchaser does not notify Seller of
the exact time, place and date of Closing as provided in this paragraph 7,
Closing shall be held at 10:00 a.m. on the aforesaid date in the offices of
Seller, 5775-D Peachtree Dunwoody Road, Suite 200, Atlanta, GA 30342. At
Purchaser's option, Purchaser may elect to extend the date for Closing for an
additional sixty (60) day period (the 'First Extension Period'), upon not less
than 15 days' prior written notice to Seller and deposit with Escrow Agent prior
to the commencement date of such First Extension Period of the additional
earnest money set forth in paragraph 2 above. Assuming that Purchaser has
properly exercised its option to extend the date for Closing for the First
Extension Period, at Purchaser's option, Purchaser may elect to extend the date
for Closing for an additional thirty (30) days period (the 'Second Extension
Period'), upon not less than 15 days' prior written notice to Seller and deposit
with the Escrow Agent prior to the commencement date of such Second Extension
Period of the additional earnest money set forth in paragraph 2 above. Purchaser
acknowledges that the terms of the first mortgage on the Property requires
Seller to give the holder thereof a minimum of thirty (30) days' notice of
prepayment and that in the event Purchaser does exercise one or both of its
options to extend the date for Closing and Seller is required to strictly comply
with such prepayment notice provision and is not able to deliver the release of
the Property from such mortgage as of a particular date established by Purchaser
for such extended Closing, then the Closing shall be extended until such date as
Seller is able to deliver such release.
8.
BROKER AND BROKER'S COMMISSION
a. In the event the transaction contemplated hereby is closed in accordance
with its terms, Purchaser shall pay to Broker in cash at Closing a commission
equal to TWO HUNDRED SIXTEEN THOUSAND AND 00/100 DOLLARS ($216,000.00). If the
transaction contemplated hereby is not closed for any reason whatsoever,
Purchaser shall owe no commission to Broker, and Broker hereby waives any and
all claims to a broker's, real estate, or other fee or commission and any claim
of quantum meruit in connection with this Agreement or the transaction
contemplated hereby, except such commission as may become due in strict
accordance with the terms hereof.
<PAGE>
b. Purchaser and Seller each warrant and represent to the other that, with
the exception of Broker identified herein, such party has not employed a real
estate broker or agent in connection with the transaction contemplated hereby.
Purchaser and Seller covenant and agree, each to the other, to indemnify the
other against any loss, liability costs, claims, demands, damages, actions,
causes of action, and suits arising out of or in any manner related to the
alleged employment or use by the indemnifying party of any real estate broker or
agent other than the Broker identified herein.
c. Purchaser and Seller acknowledge and agree that Broker has acted as
agent for Purchaser in this transaction and has not acted as agent for Seller.
9.
SURVEY AND INSPECTION OF THE PROPERTY
a. In exercise of the right of Purchaser and Purchaser's agents, employees
and independent contractors to enter upon the Property prior to Closing, as set
forth below, all at Purchaser's sole cost and expense, Purchaser shall take
reasonable steps to minimize disruption to tenants of the Property and to
minimize damage to the Property. Purchaser hereby covenants and agrees to
indemnify and hold harmless Seller from any and all loss, liability, costs,
claims, demands, damages, actions, causes of action, and suits arising out of or
in any manner related to the exercise by Purchaser of Purchaser's rights under
this paragraph 9.
b. The Property shall be described in the Closing documents as described in
that certain survey to be prepared for Purchaser by Watts & Browning Engineers.
Purchaser has received a survey of the Property last
updated in December 1992, and shall have thirty (30) days after the Effective
Date to obtain a further update thereto, and to review and approve of any
additional matters which may be disclosed by such update. Purchaser agrees to
cause the Survey update to be prepared at Purchaser's sole cost and expense, and
it shall be sufficient in all respects to allow Title Insurer to issue the Title
Policy at the Closing. If Purchaser fails, within such thirty (30) day period,
to disapprove any new matter disclosed by the Survey, by written notice to
Seller, then the Survey shall be deemed approved by Purchaser. Otherwise, the
process for removing and approving the matters disclosed in the Survey shall be
the same as applied to the Title Commitment, as set forth herein.
c. Seller agrees to assist and cooperate with Purchaser in obtaining access
to the Property and certain documents relating thereto for the purposes of
inspection. Except for any contractual rights of any Tenant to deny access to
all or any portion of the Property, Seller agrees to provide Purchaser and its
agents, consultants and employees access to the Property to inspect each and
every part thereof. Purchaser shall have the right, through its agents,
consultants and employees, to contact the Tenants. Seller shall also deliver,
unless previously delivered, to
<PAGE>
Purchaser, within five (5) business days after the Effective Date, the
following documents and records relating to the Property, or make the
same available to Purchaser as herein provided (collectively 'Building
Documents'), for Purchaser to inspect within ten (10) business days of
the receipt thereof, whether such documents are in the possession of
Seller or any of Seller's agents, employees or other persons. In the
event Purchaser finds that any of the information disclosed by the Building
Documents is inconsistent with that previously delivered by Seller and material
to Purchaser's economic assumptions regarding the acquisition of the Property,
then Purchaser shall have the option of terminating this Agreement by written
notice to Seller within said ten (10) day period, in which event the Earnest
Money paid and all interest thereon shall be returned to Purchaser, reduced only
by any fees or expenses charged by the Escrow Agent.
As used herein, the Building Documents shall be:
i. Agreements, Regulations and Orders. Copies of any and all
agreements, regulations and orders affecting the Property and the parking
requirements for the operation of the Property, including, but not limited
to, all such items received by Seller after the date of this Agreement.
ii. Books and Records. Seller need not deliver, except as otherwise
provided herein, but shall make available for Purchaser's review and
copying, all books and records covering the operations of the Property
within Seller's possession from the date any certificate of occupancy
and/or building permit for the Property was originally issued by the
appropriate governmental agency having jurisdiction over the Property,
including, without limitation, monthly operating statements, cash receipt
journals, occupancy reports, and any and all invoices, receipts, and other
items relating to operation, repair, maintenance or management of the
Property.
iii. Information as to Square Footage. All information within Seller's
possession regarding the aggregate number of rentable square feet in the
Buildings available for lease to Tenants on an exclusive basis (excluding
common areas, if any) measured from the exterior surface of exterior walls
and from the center of interior demising walls, including the aggregate
number of rentable space which is not subject to a Lease and the
location(s) and aggregate amount of space of all such space(s).
iv. Construction Contracts. If in the possession of Seller, copies of
the general construction contract relating to the original construction of
the Improvements and any subsequent improvements thereto, the heating,
ventilating and air conditioning subcontract, the roofing subcontract, and
all contracts with any engineer or architect involved in the construction
of the Improvements.
v. Government Reports, Correspondence and Notices. Copies of any and
all reports received within the past three (3)
<PAGE>
years with respect to the Property from any governmental body having
jurisdiction over any part of the Property, which body prepares and
delivers such reports, governmental correspondence relating to the
Property, including, but not limited to, all such notices received
by Seller during the period immediately preceding the date of this
Agreement.
vi. Hazardous Waste Substances. Copies of any and all inspection
reports, letters, test results, advisories and other similar documents
relating to the existence or non-existence of asbestos, PCB transformers,
and other toxic, contaminated, or hazardous materials waste or substance,
and/or underground storage tanks to the extent the same have not already
been delivered to Purchaser during the period preceding execution of this
Agreement.
vii. Inspection Reports. Copies of any and all inspection reports
prepared by or for Seller relating to or referring to the construction
and/or maintenance of the Improvements.
viii. Insurance Policies. A certificate evidencing the insurance
policies maintained by Seller relating to the Property.
ix. Leases and Service Contracts. Copies of all Leases and Service
Contracts, all pertinent correspondence relating to the Leases or Service
Contracts, including any and all Tenant correspondence files and all other
items in possession or control of Seller or its managing agent.
x. Licenses and Permits. Copies of all licenses, all heating,
ventilating, air conditioning, boiler, building and other permits,
authorizations, approvals, certificates and similar items, and all
certificates of occupancy and similar documents required in connection with
the Property and/or the maintenance or operation thereof, owned by or in
the possession of, or reasonably available to, Seller.
xi. Materials Inventory. An inventory of all usable construction
material located at the Property, if any.
xii. Operating Statements. Income and expense statements for the
Property for the three (3) most recent full calendar years prior to the
Closing and, to the extent available, the current year, all of which shall
be certified by an officer of Seller as having been prepared from the books
and records of the Property in accordance with generally accepted
accounting principles (except to the extent prepared on a cash or tax
basis). In addition, Seller shall provide Purchaser, to the extent in
possession or control of Seller or its managing agent, copies of all
deposit journals for, and all checks from, all Tenants relating to the
Property, for the current and prior three (3) calendar years. Included in
such information shall be a copy of any operating budgets for the Property
for the current year and the next succeeding calendar year. Any statements
provided hereunder shall include, to the extent available, (i) itemization
of all capital expenditures made during the respective periods, (ii) Tenant
payment records
<PAGE>
indicating timeliness of Tenant payments, sales figures of tenants
reporting sales and their overage payments, (iii) parking income,
(iv) delinquent accounts, (v) a schedule of free rent given to Tenants
under Leases, (vi) detailed information regarding base year amounts for
expense pass-throughs on a Tenant by Tenant basis, and (vii) the amount and
the identity of all expenditures for tenant improvements by Seller and all
Tenants.
xiii. Photographs. Photographs of the Property, including an aerial
photograph thereof, to the extent available.
xiv. Plans and Specifications. Copies of all existing Plans and
Specifications.
xv. Rent Roll. The Rent Roll.
xvi. Schedule of Personal Property. A current schedule of the Personal
Property, including any identification numbers to the extent available.
Seller also agrees to provide Purchaser with an updated copy of the
schedule with any changes thereto noted, recertified as of the Closing
Date.
xvii. Soil Test and Reports. Copies of any and all soil and geological
tests and reports relating to the Property to the extent the same have not
already been delivered to Purchaser during the period preceding execution
of this Agreement.
xviii. Survey. Copies of the Seller's existing survey of the Property.
xix. Tax Bills. Copies of the current tax bill(s) or notice(s)
affecting the Property, as well as copies of the three (3) immediately
preceding years' tax bills and notices of proposed increases or changes in
the assessed value of the Property and any protects, complaints or appeals
filed with respect thereto during the last three (3) years.
xx. Title Insurance Policies. Copies of any Title Insurance Owner's
Policies.
xxi. Warranties and Guaranties. Copies of any and all written
warranties and/or guaranties pertaining to the landscaping, roofs,
plumbing, mechanical, electrical and heating and air conditioning systems,
parking lots and equipment that are part of the Property.
d. Back-Up Information. In the event a particular Building Document does
not exist, then Purchaser shall accept Seller's written certification that
Seller does not possess such Building Document. Further, Seller shall deliver to
Purchaser or provide Purchaser access to, within five (5) business days
following the written request of Purchaser, such back-up information and
documents relating to the operating records of Seller with respect to the
Property which Purchaser may reasonably request, and which are in the possession
of Seller or reasonably available to Seller.
<PAGE>
Seller shall allow Purchaser such records at Purchaser's sole cost and
expense, both before and after the Closing. After Seller complies with
this paragraph 9 and as Seller receives additional documents or information
relating to the Property, or that would update the information or
documentation that was supplied pursuant to this paragraph 9, Seller shall
immediately provide the same to Purchaser.
e. Return of Building Documents. If this Agreement is terminated, then
promptly following such termination and upon Seller's request, Purchaser shall
return to Seller the Building Documents that Purchaser has received from or
through Seller.
f. Service Contracts. Purchaser acknowledges that Seller is not party to
any of the Service Contracts existing as to the Property and that Compass
Management and Leasing, Inc., as Seller's management agent for the Property, is
a party to any such agreements. Seller agrees, however, to facilitate
communication and cooperation between Purchaser and said agent with regard to
the negotiation of any assignments thereof or other matters involving said
Service Contracts.
g. Repairs, Replacement or Improvement of the Property. Seller shall also
furnish its statement setting forth any repairs, replacements or improvements to
the buildings and other improvements on the Property which it plans to make, and
any schedules it has for the repair, replacement or improvement of the Property.
h. Vacant Space. Purchaser shall have the right to show vacant space to
prospective tenants without the prior consent of Seller.
10.
RISK OF LOSS; CASUALTY AND CONDEMNATION
Seller agrees to give Purchaser prompt notice of any fire or other casualty
affecting the Property or any portion thereof (hereinafter called 'Casualty') or
of any actual or threatened (to the extent that Seller has current actual
knowledge thereof) taking, condemnation or other like proceeding (hereinafter
called 'Condemnation') of the Property or any portion thereof.
If prior to the Closing, there shall occur:
(a) damage to the Property caused by Casualty or Condemnation which
would cost an amount, greater than, or equal to, $50,000 to repair; or
(b) a Condemnation which would materially interfere with the present
use of the Property (including, without limitation, materially impair
access or utility availability, or cause a termination of any existing
leases of the Property; as used herein,
<PAGE>
'material interference' shall include any taking of any portion of
the Buildings or any taking of any parking space included within the
Property); then Purchaser shall elect within ten (10) days from and after
such notice from Seller, by written notice to Seller, either: (i) not to
close the transaction contemplated hereby, in which event Earnest Money
shall be refunded to Purchaser and, except for the indemnity provisions
hereof, this Agreement shall be void and of no further force and effect;
or (ii) to close the transaction contemplated hereby in accordance with
its terms but subject to such Casualty or Condemnation, in which event
the Purchase Price shall be reduced only in the event of Casualty and
only by the deductible amount under Seller's hazard insurance policy,
and Seller shall assign to Purchaser Seller's rights in any insurance
proceeds or condemnation awards. If Purchaser does not make such election
within the aforesaid ten-day period, Purchaser shall be deemed to have
elected to close the transaction contemplated hereby in accordance with
clause (ii) of this paragraph. In the event Seller does assign to
Purchaser its interest under any existing insurance policy, Seller shall
cooperate with Purchaser in any and all reasonable respects in the
preparation and prosecution of Purchaser's claim thereto, including the
taking of any action or completion of any form which must be effected in
Seller's name.
If before Closing there occurs:
(a) damage to the Property caused by Casualty or Condemnation which
would cost less than $50,000 to repair; or
(b) a Condemnation which would not materially interfere with the
present use of the Property;
then, Purchaser may not terminate this Agreement and there shall be assigned to
Purchaser at Closing all interest of Seller in and to any insurance proceeds or
condemnation awards payable to Seller on account of that event, and the Purchase
Price shall be reduced only in the event of Casualty and only by the deductible
amount under Seller's hazard insurance policy. In the event of any such
assignment, Seller agrees to cooperate with Seller as set forth above.
11.
NOTICE
a. Unless otherwise specified in this Agreement, any notice, election, or
other communication required or permitted hereunder shall be delivered by hand
(including overnight or other professional courier service) or by certified
United States mail, return receipt requested, postage and charges prepaid, to
the following addresses:
To Seller:c/o COMPASS Retail, Inc.
5775 Peachtree Dunwoody Road
Suite 200-D
Atlanta, Georgia 30342-1505
Attn: Linda K. Schear, Counsel
<PAGE>
With copy to: Gregory R. Greenfield
(same address as to Seller)
To Purchaser: Lawrence E. Cooper, M. D.
Bentley Investments
2700 Delk Road, Suite 125
Marietta, GA 30067
With copy to: Stanley K. Slutzky, Esq.
Slutzky, Wolfe and Bailey
4000 Cumberland Parkway, NW
Building 1300
Atlanta, GA 30339-4503
To Broker: The Edwards Group
1512 Monarch Plaza
3414 Peachtree Road NE
Atlanta, GA 30326
Attn: Ed Fuchs
b. Any notice, election, or other communication delivered or mailed as
aforesaid shall be effective upon delivery or receipt.
c. Each party hereto may change its address and addressee for notice,
elections, and other communications from time to time by notifying the other
parties hereto of the new address and addressee in the manner provided for
giving notice herein.
12.
CLOSING DOCUMENTS
a. At Closing, Seller shall deliver or cause to be delivered to Purchaser
the following items:
(i) a trustees' deed, duly executed by authorized officers of Seller
in recordable form in the State of Georgia;
(ii) a current rent roll of all original leases which currently affect
the Property, certified to be true and correct to the knowledge of Seller
(hereinafter called the 'Leases');
(iii) Seller's assignment and Purchaser's assumption of the Leases, in
form and content satisfactory to Seller and Purchaser, duly executed by
officers of Seller and acknowledged by Purchaser;
(iv) a bill of sale and Seller's assignment and Purchaser's assumption
of Contracts (as hereinafter defined) and warranties, in form and content
satisfactory to Seller and Purchaser, duly executed by Seller;
<PAGE>
(v) an affidavit or certificate in compliance with Section 1445 of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder, stating under penalty of perjury Seller's United States
identification number and that Seller is not a 'foreign person' as that
term is defined in Section 1445, duly executed by Seller and acknowledged;
provided, however, that if Seller fails to deliver this affidavit or
certificate, Purchaser shall be entitled to withhold from the Purchase
Price and pay to the Internal Revenue Service the amounts required by
Section 1445, and applicable regulations promulgated thereunder;
(vi) keys to all locks located in the Property that are in Seller's
possession or to which Seller has reasonable access;
(vii) a schedule certified by Seller, based on Seller's current actual
knowledge, itemizing all security deposits, prepaid rent and other money
held by Seller for the account of the tenants under the Leases;
(viii) a notice letter to tenants under the Leases informing them of
the sale, in form and content satisfactory to Seller and Purchaser, duly
executed by Seller;
(ix) originals of all Leases, Contracts, plans, governmental approvals
(including zoning and certificates of occupancy, if in Seller's
possession), warranties and guaranties relating to the ownership and
operation of the Property that, to Seller's knowledge, are in Seller's
possession;
(x) evidence of appropriate authorization, satisfactory to Purchaser
and the title company insuring the Property in favor of Purchaser, in its
reasonable discretion, for (a) the sale of the Property in accordance with
this Agreement, (b) the execution and delivery of this Agreement on behalf
of Seller, and (c) the consummation of the transaction contemplated by this
Agreement on behalf of Seller;
(xi) a Settlement Statement, duly executed by Seller;
(xii) an owner's affidavit in standard form required by title
insurance companies in the State of Georgia so as to permit the 'standard
exceptions' to be deleted from an owner's title insurance policy;
(xiii) original tenant Estoppel Letters in form satisfactory to
Purchaser, executed by each tenant under the Leases and dated no more than
45 days prior to the Closing Date; provided, however, if the Closing Date
is extended by Purchaser pursuant to paragraph 7, this time period shall be
increased by one (1) day for each day the Closing Date is so extended;
(xiv) Agreement of Survival of Representations, Warranties and
Covenants, executed by Seller; and
<PAGE>
(xv) such other items reasonably necessary for consummating the
transaction contemplated hereby.
b. Purchaser shall deliver at Closing:
(i) the Purchase Price, as adjusted by prorations and costs as
provided in this Agreement;
(ii) Seller's assignment and Purchaser's assumption of the Leases, in
form and content satisfactory to Seller and Purchaser, duly executed by
Purchaser;
(iii) Seller's assignment and Purchaser's assumption of the Contracts
and warranties, in form and content satisfactory to Seller and Purchaser,
duly executed by Purchaser;
(iv) Settlement Statement, duly executed by Purchaser;
(v) evidence of appropriate authorization satisfactory to Seller, in
its reasonable discretion for (a) the purchase of the Property in
accordance with this Agreement, (b) the execution and delivery of this
Agreement on behalf of Purchaser, and (c) the consummation of the
transaction contemplated by this Agreement on behalf of Purchaser; and
(vi) such other items reasonably necessary for consummating the
transaction contemplated hereby.
13.
BREACH, TERMINATION, AND EXPIRATION
a. In the event Purchaser breaches this Agreement by failing to close its
purchase of the Property, except as permitted herein, the Earnest Money shall be
promptly paid over to Seller as full liquidated damages for
Purchaser's failure or refusal to close in accordance with the terms of this
Agreement (but not in liquidation of Purchaser's continuing obligations to
Seller under the indemnity provisions hereof) and shall be the sole and
exclusive remedy of Seller. The parties hereto acknowledge the difficulty of
ascertaining Seller's actual damages in the event Purchaser breaches this
Agreement, and that such liquidated damages represent the parties best and
reasonable estimate of such damages. The parties hereto expressly acknowledge
and agree that such liquidated damages are not intended as a penalty. In the
event Purchaser breaches this Agreement, no part of the Earnest Money shall
accrue to Broker.
b. In the event Seller breaches this Agreement, including, without
limitation, Seller's refusal to convey title to the Property in accordance with
the terms of this Agreement after any conditions precedent to Seller's
obligation to close have been met, then, subject to and limited by the
provisions of paragraph 29, in such event Purchaser shall have all rights and
remedies available
<PAGE>
at law or in equity for Seller's breach, including, without limitation,
an action for specific performance.
c. In the event the transaction contemplated by this Agreement does not
close within the time set forth in paragraph 7 for any reason other than as
described in paragraphs 13.a. and 13.b. hereinabove, then the Earnest Money
shall be refunded to Purchaser, and, except for the indemnity provisions hereof,
this Agreement shall be void and of no further force and effect.
14.
SELLER'S COVENANTS, REPRESENTATIONS AND WARRANTIES
As an inducement to Purchaser to enter into this Agreement and to purchase
the Property, Seller covenants with, and represents and warrants to, Purchaser,
the matters hereinafter set forth (hereinafter referred to as 'Seller's
Representations and Warranties'). Seller hereby makes its Representations and
Warranties for the benefit of Purchaser and Purchaser's successors and assigns.
Seller's Representations and Warranties contained herein are not intended to
replace or limit in any manner any express or implied warranty provided under
applicable law. Purchaser shall be entitled to rely upon the Seller's
Representations and Warranties, notwithstanding Purchaser's inspection and
investigation of the Property, provided that to the extent Purchaser has actual
knowledge prior to Closing that any of the Seller's Representations and
Warranties is incorrect, whether such actual knowledge is derived from Seller,
information provided by Seller, or from other resources, and Purchaser purchases
the Property without disclosing such knowledge to Seller, Purchaser may not
elect to ignore such knowledge and to claim detrimental reliance upon Seller's
Representations and Warranties or to bring any claim or action against Seller by
reason thereof.
Seller represents and warrants that Seller's Representations and
Warranties, as well as the facts and other matters contained therein, are true
as of the date of this Agreement and shall be true as of the Closing Date.
a. Access. To the best of Seller's knowledge, the Property has full and
free access to and from public streets and roads, and Seller has no actual
knowledge of any facts or conditions that could result in the termination of the
present access from or to the Property to or from any such existing highways and
roads, or in the termination or expiration of any conditional use permits, sign
permits or other governmental permits or approvals necessary for the use and
operation of the Property for the purpose for which the Property is presently
being used and operated.
b. Arm's Length Leases. Seller and Purchaser acknowledge that one of the
Tenants in the Buildings, EQ Services, is an affiliate of Seller, but Seller
represents that the Lease with EQ
<PAGE>
Services and all other Leases were negotiated at arm's length, and that
except for EQ Services, Seller does not have any beneficial or other
ownership interest, directly or indirectly, in any Tenant, nor has Seller
guaranteed in whole or in part, directly or indirectly, any obligation of
a Tenant under a Lease.
c. Authority. Seller is a Massachusetts business trust properly organized
under the laws of the State of Massachusetts, and properly authorized to own
real property in the State of Georgia. Seller is the owner of the Property and
has the right, power, legal capacity and power to enter into this Agreement and
to convey the Property to Purchaser pursuant to the terms and provisions hereof
and perform its other obligations hereunder. The parties and persons executing
this Agreement on behalf of Seller have been duly authorized to execute this
Agreement. The execution of this Agreement by Seller, the performance by Seller
of Seller's obligations hereunder, and the sale, transfer, conveyance and/or
assignments contemplated hereby, do not require the consent of any third party.
d. Conformance with Laws. To the best of Seller's knowledge, the Property,
including the Improvements as constructed and operated by Seller, conforms to,
and is operated, maintained, and leased in accordance with all applicable city,
county, state, federal and other laws, statutes, ordinances, rules and
regulations.
e. Disclosure and Compliance. Seller has no actual knowledge of any suit,
action or arbitration, bond issuance or proposal therefor, proposal for public
improvement assessments, pay-back agreement, paving agreement, road expansion or
improvement agreement, utility moratorium, use moratorium, improvement
moratorium, or legal, administrative, or other proceeding or governmental
investigation or requirement, formal or informal, existing or pending or
threatened that affects the Property or which adversely affects Seller's ability
to perform hereunder, or other charge or expense upon or relating to the
Property, which has not been disclosed to Purchaser in writing prior to the
Effective Date. There is no suit, action, arbitration or other proceeding
affecting or involving Seller and any current Tenant.
f. Disclosure of Adverse Change. Seller shall inform Purchaser in writing
of any material adverse change in the condition of the Property, or the
operation thereof, which occurs at any time prior to Closing. Seller shall
promptly inform Purchaser in writing of any fact which would indicate that any
Tenant occupying the Property is insolvent or is not able to pay its rent or
perform other obligations under the relevant Lease when due.
g. Employees. Seller has no employees at the Property; any and all on-site
staff working at the Property is employed by Seller's management agent and
Seller has the right and authority to terminate its agreement with said
management agent at Closing.
<PAGE>
h. Interest. Seller does not have any obligation to pay any interest or
other charges to any Tenant with respect to any security deposits held for the
benefit of any Tenants.
i. Leases. Seller acknowledges that its management agent has negotiated all
of the Leases and maintains the files of the Tenants. With respect to each of
the Leases, and except as otherwise disclosed in writing to Purchaser, Seller
states that to the best of its knowledge, there is no agreement, document,
understanding or other communication with any Tenant which alters, negates,
limits or otherwise modifies the Leases heretofore delivered by Seller to
Purchaser or the information contained on the Rent Roll prepared by Seller and
delivered to Purchaser. Seller has no actual knowledge of any reason that
Purchaser cannot or should not rely on the accuracy or completion of the Tenant
files maintained by its management agent.
j. No Adverse Soil Conditions. Seller has no actual knowledge of any soil
or geological conditions affecting the Property that could materially and
adversely affect the Property, or the ownership and operation thereof by
Purchaser. To the best of Seller's actual knowledge, the condition of the soil
at the Property is such that it will support all of the Improvements thereon for
the foreseeable life of the Improvements without the need for unusual or new
sub-surface excavations, fill, footings, caissons or other installations. To the
best of Seller's actual knowledge, the Improvements, as built, were constructed
in a manner compatible with soil conditions at the time of construction and all
necessary excavations, fill, footings, caissons or other installations were
provided.
k. No Bankruptcy Proceedings. Seller has not (i) made a general assignment
for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of an involuntary petition by Seller's creditors, (iii)
suffered the appointment of a receiver to take possession of all or
substantially all of Seller's assets, (iv) suffered the attachment or other
judicial seizure of all, or substantially all, of Seller's 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.
l. No Default. Seller has no actual knowledge that it is in default under
the terms of any Lease or any other agreement pertaining to the Property, nor
that any event has occurred that shall constitute a default by Seller under such
documents and instruments following the passage of time, nor has Seller received
any notice of any default under any Lease or other agreement pertaining to the
Property.
m. No Hazardous Waste. Except as may be disclosed by that certain Phase I
Preliminary Assessment dated June 28, 1991, prepared by ATEC Engineering (as
Project No. 32-19136), Seller has no actual knowledge that there are any
'hazardous materials' (as defined below) located on or at the Property and
Seller has
<PAGE>
received no notice of any violation or claimed violation of any law,
rule, or regulation relating to hazardous materials. To the best of Seller's
actual knowledge, the Property has not been used for the storage of hazardous
materials, there have been no spills or leaks of hazardous material on or at the
Property or on any property within one thousand (1,000) feet of the Property
boundaries, and there are no underground storage tanks of any kind at the
Property. To the best of Seller's actual knowledge, the Property has not been
the subject of an environmental audit or assessment, the Property has all
required environmental permits relating to air and water quality, and there are
no abandoned landfills or other closed hazardous materials storage or disposal
sites on or at the Property. The Seller has no actual knowledge that the
Property has been the subject of either an investigation by federal, state or
local officials or private litigation as a result of the handling of hazardous
materials, or that any significant accident or other incident that resulted in
hazardous materials contamination has ever occurred on or at the Property. To
the best of Seller's actual knowledge, (i) no neighboring facilities have ever
been the subject of an investigation by federal, state or local officials or the
subject of private litigation as a result of their handling hazardous materials
and (ii) no accident or other incident resulting in hazardous materials
contamination has ever occurred on neighboring properties. For the purposes of
this Agreement, the phrase 'hazardous materials' shall include, without
limitation, each of the following: asbestos materials; PCB transformers; toxic,
hazardous or contaminated waste, substance or material; oil; petroleum; and oil
and petroleum by-products.
n. No Leasing Fee. Upon consummation of the transactions contemplated by
this Agreement, there shall be no brokerage or leasing fees or commissions or
other compensation due or payable on an absolute or contingent basis to any
person, firm, corporation, or other entity, with respect to or on account of any
of the Leases and no such fees, commissions or other compensation shall, by
reason of any existing agreement, become due during the terms of any of the
Leases or with respect to any renewal or extension thereof or the leasing of
additional space by any Tenant, except as provided on Exhibit D. Seller agrees
that it shall either cash out prior to Closing or assume full responsibility for
payment of those commissions payable after Closing for the two current leases
indicated in section B. of Exhibit 'D'.
o. No Litigation. There is no pending litigation or, to the best of
Seller's actual knowledge, threatened litigation or asserted or unasserted
claims relating to the Property.
p. No Notices. Seller has not received and has no knowledge of, any
notification from any city, county, state or federal authority having
jurisdiction over the Property or of any utility providing service requiring any
work to be done to, or affecting the use of the Property or any portion thereof.
Seller has received no notice from any insurance carrier as to, nor is Seller
aware, of defects or inadequacies in the Property that if
<PAGE>
not corrected would result in termination of insurance coverage or increase in
insurance costs.
q. No Undisclosed Assessments. Seller has no actual knowledge of any taxes,
assessments (special, general or otherwise) or bonds of any nature affecting the
Property, or any portion thereof, except as disclosed in the Title Commitment.
Seller has no understanding or agreement with any taxing authority respecting
the imposition or deferment of any taxes or assessments respecting the Property.
r. No Untrue Statements. Seller has made no material untrue statement or
representation in connection with this Agreement, and all items from Seller
transferred or delivered and/or given to Purchaser, including, but not limited
to, the Building Documents, are genuine, true, correct and complete copies of
what they purport to be to the best of Seller's actual knowledge. Additionally,
to the best of Seller's actual knowledge, (i) said items have not been amended,
modified, or supplemented other than as also transferred or delivered and/or
given to Purchaser, (ii) no item that should have been transferred, delivered
and/or given to Purchaser has not been so transferred, delivered and/or given,
and (iii) all such items fairly present the information set forth in a manner
that is not misleading, Seller has not failed to state or disclose any material
fact in connection with the transaction contemplated by this Agreement. Seller
knows of no facts and Seller has not misrepresented any facts that would prevent
Purchaser from operating the Property after the Closing in the manner in which
the Property is currently being operated and used.
s. No Violation of Other Agreements. Neither this Agreement nor anything
provided to be done hereunder (including, but not limited to, the transfer of
the Property to the Purchaser) violates or shall violate any contract, document,
understanding, agreement or instrument to which Seller is a party or by which
Seller may be bound, or any contract, document, understanding, agreement or
instrument affecting the Property.
t. Operating Statements. All operating statements delivered to Purchaser by
Seller are accurate, true and correct, have been compiled from the books and
records of the Property and set forth the results of the operation of the
Property for the periods covered. There has been no material adverse change in
the condition or operation of the Property since the period covered by the
operating statements. The financial records kept by Seller are complete,
accurate, true and correct and reflect all transactions affecting or relating to
the Property, are kept and maintained at the office of Seller at Seller's
address set forth in the Notice section hereof, and no financial records
affecting or relating to the Property have been knowingly withheld from
Purchaser.
u. Personal Property and Improvements. To the best of Seller's actual
knowledge, the Personal Property is in good condition and repair and all
Improvements at the Property,
<PAGE>
including, tenant improvements installed by or at the direction of Seller,
are in good condition and repair.
v. Property Condition. To the best of Seller's actual knowledge and except
as may have been previously disclosed by Seller to Purchaser or his agents, the
Property, and all components thereof, including, but no limited to, parking
lots, electrical systems, roofs, air conditioning systems, heating systems and
elevators are and, at the Closing shall be, in good condition and working order,
and shall perform the work or function for which intended. To the best of
Seller's actual knowledge, the Improvements, and all component parts thereof,
were constructed in substantial conformance with the Plans and Specifications,
as well as documents approved by the appropriate city, county, state and other
officials, and are free of material construction, design and structural defects.
w. Rent Roll and Tenants. All information set forth in the Rent Roll dated
May 31, 1993 is true and correct and, to the best of Seller's actual knowledge,
there are no material defaults under any of the leases. Except with respect to
the Leases described in the Rent Roll, there are no Leases or other agreements
that grant, and there is no person other than the Tenants pursuant to the Leases
so listed and the subtenants and assignees thereof which has or has asserted,
any right of use or possession to the Property or any part thereof.
Additionally, no rent concessions have been given to or asserted by any Tenant
except as shown in the Rent Roll and Leases, no rent has been paid in advance by
any Tenant except as shown in the Rent Roll and Leases, Seller has no actual
knowledge that any Tenant has or has asserted any claim against Seller for any
security deposit or other deposits except as shown in the Rent Roll and Leases,
and no Tenant has or has asserted any defense or off-set to (i) rent accruing
after the Closing Date or (ii) any other obligations under its Lease. Seller is
not aware of any fact or circumstance with respect to any Tenant that would
indicate that any Tenant who is occupying space in the Property is unwilling to
perform any of its obligations under its Lease, or due under its Lease or is
otherwise insolvent. Seller has made no commitment, undertaking, or
representation to any Tenant, or given any renewal rights to any Tenant, other
than as indicated on the Rent Roll or in the Leases.
x. Service Contracts. Except for the Service Contracts and Seller's
agreement with its management agent, Seller has no actual knowledge of any
contracts or other oral or written agreements for services, supplies or
materials, affecting the use, operation or management of the Property.
y. Storm Water. To the best of Seller's actual knowledge, all storm water
flowing from the Property drains either into a public system or onto a permitted
location and through recorded easements for the benefit of the Property.
z. Title to Personal Property. Seller has good and marketable title to the
Personal Property set forth in the schedule
<PAGE>
of the Personal Property listed or to be listed prior to the Closing in the Bill
of Sale, free and clear of all liens and security interests and other interests.
aa. Title to Real Property. At the Closing, fee simple title to the Land
and Improvements shall be conveyed to Purchaser in a good and marketable
condition, free and clear of all liens, encumbrances, agreements, encroachments,
leases, tenancies, mechanics' liens, materialmen's liens, and other interests
affecting all or any portion of the Property or any interest therein other than
(i) current non-delinquent real property taxes (but not assessments), (ii)
written Leases, and (iii) the Permitted Title Exceptions.
bb. Utilities Available. To the best of Seller's actual knowledge, all
utilities necessary for the operation of the Property in accordance with its
present use are available to the Land.
cc. Zoning and Other Governmental Information. Seller has no actual
knowledge of any pending or threatened request, application or proceeding to
alter or restrict the zoning or other use restrictions applicable to the
Property, except for the matters described in the letter dated June 6, 1991, to
Mr. Edward Noble from Fulton County (and related documents), a copy of which has
been heretofore delivered to Purchaser; or any plan, study or effort by any
governmental authority or agency or any private party or entity that in any way
affects or would affect the authorization of the current use and operation of
the Property. Seller has no actual knowledge of any pending or threatened action
or governmental proceeding in eminent domain, zoning change, rent control or
otherwise that would directly or indirectly affect the Property, nor does Seller
know of any fact that might give
rise to such a proceeding; to the best of Seller's actual knowledge, all
governmental and regulatory licenses, franchises, certificates and permits
respecting the Property that are necessary for the operation of the Property by
Seller in accordance with its intended use, if any, are possessed by Seller and
will be transferred to Purchaser, if legally transferable, at the Closing.
dd. ERISA Representation. Seller is not a pension plan subject to ERISA or
a governmental pension plan or an entity which is deemed to hold plan assets of
any ERISA or governmental plan, and Seller is not a 'party in interest' (as
defined in Section 3(14) of ERISA) to any ERISA plan which is a limited partner
in any affiliate of Purchaser.
ee. Governmental Violations. Seller has received no written notice of, nor
does Seller have actual knowledge of, any violations under CERCLA, RCRA or any
other federal, state or other governmental legislation or ordinance. Seller has
received no written notice that any municipality or any governmental or quasi-
governmental authority has determined that there are any violations of zoning,
health, environmental or other statutes, ordinances or
<PAGE>
regulations affecting the Property, and Seller has no actual knowledge of any
such violations.
ff. Seller's Additional Covenants. In addition to all other agreements
contained herein, Seller covenants to Purchaser as follows:
1. Leasing Activities. At all times during the time between the
Effective Date of the Contract and the Closing (hereinafter referred to as
the 'Contract Period') Seller agrees that (i) it shall continue to perform
all of its obligations as landlord under the Lease and (ii) it shall not
enter into any new Leases, amend, terminate, or accept the surrender of any
Lease, or approve the assignment of any Lease, without the prior written
consent of Purchaser. Purchaser's failure to respond to Seller in writing
within five (5) business days after its receipt of a written request from
Seller seeking Purchaser's consent shall be deemed to constitute
Purchaser's consent to the proposed transaction. Any such request by Seller
shall contain the proposed terms of the new Lease and all financial
information regarding the proposed Tenant necessary for Purchaser to
determine the creditworthiness of the Tenant or the economic feasibility of
the proposed lease.
2. New Contracts. At all times during the Contract Period, Seller
agrees that it shall not enter into any new Service Contract or any other
contract relating or pertaining to the Property, or amend or modify any
such contract, in any manner that would preclude Purchaser from terminating
the same, without cost or expense to Purchaser, on not more than thirty
(30) days written notice, given at any time after the Closing, unless
Seller has obtained Purchaser's prior written consent.
3. Payment of Obligations. At all times during the Contract Period,
Seller shall timely pay and perform its material obligations under the
Leases and Services Contracts and shall timely pay all taxes, assessments
and utility charges affecting the Property.
4. Insurance. At all times during the Contract Period, Seller shall
maintain in full force and effect and pay all premiums for all fire and
extended (or all risk) coverage and liability insurance policies currently
covering the Property.
5. Compliance with Laws. At all times during the Contract Period,
Seller shall not permit to exist, and Seller shall initiate action to cause
removal of, any notices of violations of any federal, state or municipal or
other health, building, zoning, safety, environmental protection or other
applicable code, law, ordinance, rule or regulation now or hereafter
existing and relating or applying to the Property.
6. Encumbrances. At all times during the Contract Period, Seller shall
not encumber, or permit or suffer to be
<PAGE>
encumbered with any encumbrance, lien or other claim or right, the
Property, the Leases or any other right, appurtenance or property, real or
personal, to be conveyed pursuant to this Agreement, which encumbrance(s)
cannot otherwise be removed as of the date of Closing at no cost to
Purchaser.
7. Remove Liens. At or prior to the Closing, Seller agrees to fully
pay, satisfy or otherwise remove or bond, at its sole cost and expense, (i)
all deeds to secure debt, mortgages or other monetary liens against the
Property, and (ii) all mechanic's or materialmen's liens or any similar
claim or lien claimed against the Property, or any part thereof, arising
from work performed or commenced or materials supplied, prior to the
Closing, such that there are and will be no mechanic's or materialman's
liens existing or that may arise by reason of the construction of the
Improvements.
8. Operating Reports. Within Fifteen (15) days after the end of each
calendar month during the Contract Period, Seller shall deliver to
Purchaser an operating report with respect to the Property's operations for
such month, which report shall indicate gross rental income, gross income
from other (identified) sources, expenses of each kind and amount, rent
delinquencies and vacancies.
9. Changes. At all times during the Contract Period, if Seller learns
of any material fact or circumstance that causes or has a reasonable
likelihood of causing any document or other information delivered to
Purchaser by Seller or any agent of Purchaser or Seller's representation or
warranty to be untrue or misleading, Seller shall notify Purchaser as soon
as is reasonably possible, but in any event, within three (3) business days
after Seller learns thereof.
10. Confidentiality. Seller, and each of its trustees, employees and
agents shall not, during the Contract Period or after the Closing, make any
public disclosure, except as provided below, including any publication,
radio or television announcements or other similar form of disclosures, and
shall exercise its best efforts not to make any other disclosure other than
as required by law to any third party, except with the prior written
consent of the Purchaser, of any information concerning the Purchase Price
for the Property and/or any of the financial terms and considerations of
the underlying transaction, including any information concerning Purchaser
or any Tenant occupying space in the Property. Furthermore, Seller shall
exercise its best efforts to require that its employees comply with the
foregoing. Purchaser acknowledges Seller's obligation to issue a press
release announcing the signing of this agreement, and Seller shall make a
reasonable effort to issue such press release with language agreeable to
Purchaser.
11. Maintenance. During the Contract Period, Seller shall maintain the
Property, including all landscaping, in its present condition, ordinary
wear and tear excepted, in
<PAGE>
accordance with all applicable federal, state and local laws, ordinances
and requirements; Seller shall not otherwise deviate from its ordinary and
customary operation, maintenance or management of the Property. Seller
shall, within three (3) business days of its occurrence, provide Purchaser
with written notice of any material change in the condition of the
Property which is other than as a result of ordinary wear and tear; the
notice shall indicate the extent of the damage, the anticipated cost of
repair and the time necessary to make such repairs.
12. Permits and Licenses. If Seller does not have any license, permit
or certificate that is required for the operation or maintenance of the
Property by any authority having jurisdiction over the Property, Seller
shall obtain same prior to the Closing.
To the extent that any of Seller's Representations or Warranties given
herein with respect to the existence or absence of facts is qualified by the
knowledge of Seller, it is intended to mean that no information has come to the
attention of Seller that would give Seller actual knowledge of such facts. The
term 'actual knowledge' in this Agreement shall mean only express information of
fact of circumstance on which any representation or warranty is given. The
Seller's Representations and Warranties are solely for the benefit of Purchaser
and permitted successors and assigns and may not be relied upon in any manner or
be enforced against Seller by any other person or entity.
Seller hereby agrees to execute a certificate at Closing for the purpose of
restating and affirming Seller's Representations and Warranties. If any of
Seller's Representations or Warranties is proven to be false in any material
respect, Purchaser shall have, in addition to any other remedies Purchaser may
have pursuant to the terms hereof, the right to terminate and rescind this
Agreement, in which event the Earnest Money, to the extent paid, shall be
promptly refunded to Purchaser and except for the indemnity provisions of this
Agreement, this Agreement shall be void and of no further force or effect. All
right and remedies of Purchaser for a breach of any of Seller's Representations
and Warranties shall terminate one (1) year from Closing.
15.
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER
As an inducement to Seller to enter this Agreement and to sell the
Property, Purchaser covenants with and represents and warrants to the Seller, as
follows:
a. Purchaser has the right, power and authority to enter into this
Agreement and to purchase the Property in accordance with the terms and
conditions of this Agreement.
b. Purchaser has not (i) made any assignment for the benefit of creditors,
(ii) filed any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by his creditors, (iii) suffered the appointment of a
receiver to take possession of any of his assets, (iv) suffered the attachment
or other judicial seizure of any of his assets, (v) admitted in writing his
inability to pay his debts as they come due, or (vi) made an offer of
settlement, extension or composition to his creditors generally.
16.
ESTOPPEL LETTERS
a. At least ten (10) business days prior to the Closing, Purchaser shall
have received a Tenant Estoppel from each Tenant under the Leases in form and
substance satisfactory to Seller and Purchaser, dated as of a date not more than
forty-five (45) days prior to the Closing Date, properly executed by each such
Tenant. If any Tenant Estoppel does not contain all of the representations
required by Purchaser, or discloses exceptions to such statements, Seller shall
have the right to cure such matters, provided such cure occurs prior to the date
of the Closing; and provided further, however, that in the event a Tenant
asserts any claim against Seller, and Seller does not satisfy such Tenant's
claim to the reasonable satisfaction of Purchaser prior to the Closing,
Purchaser may (i), if the value of the claim is less than or equal to Fifty
Thousand and 00/100ths Dollars ($50,000.00), require the escrow with Escrow
Agent of the amount in dispute from the cash proceeds payable to Seller at the
Closing, or (ii), if the value of the claim is greater than Fifty Thousand and
00/100ths Dollars ($50,000.00), either terminate this Agreement or, in the
alternative, require the escrow with Escrow Agent of such the amount in dispute
from the cash proceeds payable to Seller at the Closing; provided that in the
event of an amount in dispute in excess of $50,000.00 and further provided that
Seller had no prior actual knowledge of such dispute, Seller shall likewise have
the option to terminate this Agreement rather than escrow the amount in
question, unless Purchaser is willing to waive this requirement. Any amount
placed in escrow pursuant to this provision shall be held by Escrow Agent
pending a final resolution of the claim as between Seller and such Tenant, and
shall be disbursed to Seller and/or Tenant, as the case may be, depending on the
outcome of such claim; Seller shall be solely liable for the cost and/or expense
of such escrow.
b. In the event Seller is unable to provide a Tenant Estoppel from any
Tenant occupying less than 3,000 square feet of rentable space at the Property,
after reasonable efforts to obtain such Tenant Estoppel, Seller may in lieu
thereof provide to Purchaser an indemnity against any loss or claim made against
Purchaser by any of such Tenants arising from a default of Seller under the
relevant lease prior to Closing or the unenforceability of the relevant lease
against any such Tenant due to conditions existing or actions occurring prior to
Closing. Seller shall also in such event
<PAGE>
warrant and represent to Purchaser that Seller has no actual knowledge of any
default by Seller or of any claims by such Tenant against Seller or which may
represent offsets for Tenant against amounts due under the relevant Lease.
17.
TIME OF ESSENCE
Time is of the essence of this Agreement.
18.
ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties and may not
be amended except by written instrument executed by all the parties hereto.
19.
HEADINGS
The paragraph headings are inserted for convenience only and are in no way
intended to describe, interpret, define, or limit the scope or content of this
Agreement or any provision hereof.
20.
SEVERABILITY
The provisions of this Agreement are intended to be independent, and in the
event any provision hereof should be declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such illegality
or invalidity shall not effect the remainder of this Agreement.
21.
POSSESSION
Seller shall deliver possession of the Property at Closing, subject to the
rights of Tenants under the Leases.
22.
SURVIVING CLAUSES
The indemnity provisions hereof and the provisions of paragraphs 5, 8, 9,
14, 15, 18, 22 and 29 hereof shall all survive Closing and shall not be merged
into the Closing documents. All other provisions of this Agreement shall be
merged into the Closing
<PAGE>
documents and shall not survive Closing unless otherwise expressly provided.
23.
APPLICABLE LAW
This agreement shall be construed and interpreted in accordance with the
laws of the State of Georgia.
24.
ASSIGNABILITY
Purchaser may not assign Purchaser's rights under this Agreement without
the prior written consent of Seller, such consent not to be unreasonably
withheld; provided, however, Purchaser may assign this Agreement without
Seller's prior written consent to an entity which Purchaser may form as his
chosen vehicle for ownership and operation of the Property, and, provided that
all obligations of Purchaser hereunder are assigned to and assumed by such
substitute entity and that notice of such assignment (including information
regarding the substituted entity, its composition and ownership) shall be
promptly provided to Seller, upon the execution of proper documentation
effecting such assignment, Purchaser shall thereafter be released from its
obligations to perform the obligations of Purchaser hereunder. Purchaser shall
also have the right to effect his purchase of the Property as part of a
like-kind exchange and Seller agrees to cooperate in such exchange, provided
that any additional costs incurred by Seller by reason thereof shall be borne by
Purchaser. In no event shall Purchaser have the right to assign his interest
hereunder to an entity which is an 'affiliate' of Seller, as defined by Seller's
Declaration of Trust and governing regulations.
In connection with such a permitted assignment by Purchaser, Seller
consents to Purchaser's disclosure of the terms hereof and any and all
information available to Purchaser or said assignee regarding the Property to
such investors, prospective investors, their brokers and representatives,
underwriters, counsel to any of the foregoing, and state and federal
governmental securities-regulating authorities. Seller shall maintain in a safe
place all financial and other records with respect to the operation management
and maintenance of the Property for the three (3) year period immediately
preceding the Closing Date, which records are not delivered by or on behalf of
Seller to Purchaser pursuant to the terms of this Agreement, and Purchaser, or
persons or entities designated by Purchaser, shall have the right to review and
audit such records during the two (2) year period next following the Closing
Date; Seller shall make the records available to Purchaser, or to persons or
entities designated by Purchaser, within ten (10) days following receipt by
Seller of a written notice from Purchaser indicating Purchaser's desire to have
the records reviewed and/or audited.
<PAGE>
25.
SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of Seller,
Purchaser and Broker, and their respective successors and assigns.
26.
DATES
If any date of significance hereunder falls upon a Saturday, Sunday or
legal holiday, such date shall be deemed moved to the next succeeding day which
is not a Saturday, Sunday or legal holiday.
27.
LEGAL FEES
In the event of the bringing of any action or suit by a party hereto
against another party hereunder by reason of any breach of any of the covenants,
agreements, representations or warranties on the part of the other party arising
out of this Agreement, then, in that event, notwithstanding anything in this
Agreement to the contrary, the prevailing party in such action or dispute,
whether by judgment or out of court settlement, shall be entitled to have and
recover of and from the other party all costs and expenses of suit, including
actual attorney's fees (but not to include fees of in-house counsel).
28.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same agreement, and any of the
parties to this Agreement may execute this Agreement by signing any one of the
counterparts.
29.
LIABILITY OF SELLER
The individuals who have executed this Agreement on behalf of Seller have
done so in their capacity as Trustees and/or officers under that certain
Declaration of Trust of EQK Realty Investors I, dated October 8, 1984, as it has
been amended from time to time (hereinafter called the 'Declaration'). The
Declaration provides, in part, and Purchaser hereby agrees that, no shareholder,
trustee, officer, director, employee, partner or agent of Seller, or any
subsidiary or disclosed principal of any of them, shall have any personal
liability for any debt, claim, demand, judgment, decree,
<PAGE>
liability or obligation hereunder, nor shall the property or any such person or
entity be subject to attachment, levy, execution or other judicial process and,
except for the reimbursement obligation set forth in paragraph 16., Purchaser
hereby agrees to look solely to the interests of Seller in its real estate
assets (including the rents, issues and profits therefrom) for the payment of
any sum or the performance of any obligation, and any judgment against Seller
shall be limited to the interest of Seller in its real property assets
(including the rents, issues and profits therefrom), and shall not attach to
any other property or asset of Seller.
30.
PARKING
Seller has indicated to Purchaser that the Property is currently zoned as
one parcel together with the real property occupied by Buildings A, B, C, D and
G of the complex known as Peachtree Dunwoody Pavilion and that the Property's
compliance with Fulton County zoning requirements with regard to parking are
currently determined in accordance with such zoning. Seller has delivered to
Purchaser for his review all information in the possession of Seller with regard
to the compliance of the Property with Fulton County parking ratio requirements,
including the easement agreement executed between the Building G parcel and the
Property, a copy of the relevant Fulton County zoning resolutions, a copy of the
current zoning of the Property, a survey of the Property showing all current
parking spaces and counts, Seller's analysis of parking requirements for the
Peachtree Dunwoody Pavilion complex (pre-dating any sales thereof), and a letter
from Fulton County verifying the availability and applicability of a reduction
in parking required by the zoning resolution due to the planned adjacent
presence of a MARTA rapid rail station. Seller agrees to cooperate with
Purchaser in its understanding of the parking requirements and Purchaser shall
be free to request and obtain such third party verifications and information as
Purchaser may require; provided that absent definitive, conclusive written
evidence from a qualified third party that the Property does not presently
comply with the relevant Fulton County zoning
resolution as to parking ratio requirements, the failure of Purchase additional
information or verification of such compliance shall not entitle Purchaser to
delay or avoid its obligations hereunder.
31.
OFFER AND ACCEPTANCE; BINDING EFFECT
a. This Agreement, as executed by Purchaser, shall constitute an offer to
Seller. Seller shall accept the same, if at all, by delivering to Purchaser two
(2) executed originals of this Agreement on or before 5:00 P.M. on July ____,
1993. This offer, if not timely accepted as aforesaid, shall expire and be of no
further force and effect at the time and date set forth in this paragraph.
<PAGE>
b. This Agreement shall not be binding upon any party signatory hereto
until Purchaser, Seller and Broker have each agreed to all provisions hereof and
any and all changes thereto and have each executed this Agreement.
IN WITNESS WHEREOF, Seller, Purchaser, and Broker have caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
SELLER:
EQK REALTY INVESTORS I
By: __________________________________
Title: Executive Vice President
Seller's Tax ID No. 23-2320360
PURCHASER:
/s/ LAWRENCE E. COOPER, M.D. (SEAL)
LAWRENCE E. COOPER, M.D.
Purchaser's Tax ID No. ###-##-####
BROKER: THE EDWARDS GROUP
By: __________________________________
Title: President
<PAGE>
TABLE OF EXHIBITS
A -- Survey Depicting Land
B -- List of Permitted Title Exceptions
C -- Current Rent Roll
D -- Leasing Fees
<PAGE>
EXHIBIT 'A'
SURVEY OF THE LAND PREPARED BY
WATTS & BROWNING ENGINEERS AS JOB NO. 910529
LAST UPDATED DECEMBER 16, 1992
ATTACHED TO ORIGINAL COUNTERPARTS
BUT NOT INCLUDED IN THIS COPY
<PAGE>
EXHIBIT 'B'
LIST OF PERMITTED TITLE EXCEPTIONS
Seller and Purchaser shall agree on a
List of Permitted Title Exceptions within ten
days of the Effective Date and incorporate said
List into or subsequently initial and attach
said List to this agreement.
<PAGE>
EXHIBIT 'C'
PEACHTREE DUNWOODY PAVILION
RENT ROLL
AS OF MAY 31, 1993
BUILDING E
<TABLE>
<CAPTION>
LEASE LEASE RENT CURRENT CURRENT CURRENT
LOCATION/ RENTABLE START EXPIRATION START RENT/ RENT/ RENT/ ESCALATION
SUITE TENANT SQUARE FEET DATE DATE DATE MONTH YEAR RSF CLAUSE
- --------- ---------------------- ----------- --------- ----------- --------- --------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
E-120 Toni Curry & 1,100 01-Nov-91 31-Oct-92 01-Nov-91 $ 1,279.00 $ 15,348 $ 13.95 None
Associates*
E-150 Union Tank Car Company 1,181 01-Jan-91 31-Dec-93 01-Jan-91 $ 1,292.67 $ 15,512 $ 13.13 Fixed--3%
E-160 Standard Register 793 01-Feb-92 31-May-96 01-Feb-92 $ 808.83 $ 9,706 $ 12.24 CPI
E-200 Crown Suites 21,441 17-Nov-86 31-Dec-94 17-Nov-86 Cash Flow
E-300 Executive travel 11,713 01-Jan-91 31-Dec-95 01-Feb-92 $17,033.15 $ 204,398 $ 17.45 CPI(2-6%)
E-350 Standard Register 7,080 01-Jun-91 31-May-96 01-Jun-91 $ 7,434.00 $ 89,208 $ 12.60 None
E-355 Standard Register 1,364 01-Apr-93 31-May-96 01-Apr-93 $ 1,717.50 $ 20,610 $ 15.11 None
E-360 Just Delicious 1,768 01-May-93 30-Apr-98 01-May-93 $ 1,768.00 $ 21,216 $ 12.00 CPI & DOE
E-400 EQ Services 23,935 15-Aug-92 14-Aug-97 01-Aug-92 $21,740.96 $ 260,892 $ 10.90 CPI (5-8%)
E-500 EREIM Expansion 2,390 01-May-90 31-May-94 01-May-90 $ 4,280.00 $ 51,360 $ 21.49 CPI (5-8%)
E-500 EREIM 19,343 01-Jun-89 31-May-94 01-Jun-89 $34,639.08 $ 415,669 $ 21.49 CPI (5-8%)
E-600 EQ Services 23,935 15-Aug-92 14-Aug-97 01-Aug-92 $21,740.96 $ 260,892 $ 10.90 CPI (5-8%)
E-110 Vacant 4,480
E-130 Vacant 1,171
TOTAL OFFICE 121,694 $1,364,810 $ 11.76
E-170 EQ Services 6,915 15-Aug-92 14-Aug-97 15-Aug-92 $3,457.50 $ 41,490 $ 6.00 CPI (5-8%)
E-STOR Standard Register 366 01-Feb-92 31-May-96 01-Feb-92 $ 259.25 $ 3,111 $ 8.50 CPI
Total Vacant - Storage 2,139 $ 0 $ 0.00
TOTAL STORAGE 9,420 $ 44,601 $ 6.13
TOTAL BUILDING 131,114 $1,409,411 $ 11.43
</TABLE>
<TABLE>
<CAPTION>
STEP-UP STEP-UP
LOCATION/ RENT RENT/ RENT/
SUITE STEP-UPS YEAR RSF
- --------- --------- --------- -----------
<S> <C> <C> <C>
E-120 Year 1 $ 15,348 $ 13.95
E-150 Year 1 $ 15,060 $ 12.75
E-160 Year 1 $ 9,706 $ 12.24
E-200
E-300 Year 1 $ 199,121 $ 17.00
E-350 Year 1 $ 70,800 $ 10.00
Year 2 $ 74,340 $ 10.50
Year 3 $ 89,208 $ 12.60
Year 4 $ 104,076 $ 14.70
Year 5 $ 118,944 $ 16.80
E-355 Year 1 $ 20,610 $ 15.11
E-360 Year 1 $ 21,216 $ 12.00
E-400 Year 1 $ 260,892 $ 10.90
E-500 Year 1 $ 42,660 $ 17.85
E-500 Year 1 $ 345,273 $ 17.85
E-600 Year 1 $ 260,892 $ 10.90
E-110
E-130
E-170 Year 1 $ 41,490 $ 6.00
E-STOR Year 1 $ 3,111 $ 8.50
</TABLE>
* Tenant is currently Month-to-Month
<PAGE>
EXHIBIT C
PEACHTREE DUNWOODY PAVILION
RENT ROLL
AS OF MAY 31, 1993
BUILDING F
<TABLE>
<CAPTION>
LEASE LEASE RENT CURRENT CURRENT CURRENT
LOCATION/ RENTABLE START EXPIRATION START RENT/ RENT/ RENT/ ESCALATION
SUITE TENANT SQUARE FEET DATE DATE DATE MONTH YEAR RSF CLAUSE
- --------- ---------------------- ----------- --------- ----------- --------- --------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
F-100 AT&T Paradyne 12,696 17-Apr-91 30-Apr-99 17-Apr-91 $13,817.48 $ 165,810 $ 13.06 None
F-150 Tandy Corporation 4,197 15-Apr-92 14-Apr-97 15-Apr-92 $ 4,809.08 $ 57,709 $ 13.75 DOE
F-160 Mac 'N' Train 2,895 13-Apr-92 12-Apr-97 13-Apr-92 $ 3,136.25 $ 37,635 $ 13.00 CPI cap 5%
F-200 GeoSyntec Consultants 14,821 16-Oct-92 15-Oct-00 16-Oct-92 $13,894.69 $ 166,736 $ 11.25 DOE cap @5%
CPI cap 5%
F-220 National Mortgage Co. 2,807 01-Feb-93 31-Jan-96 01-Feb-93 $ 3,445.59 $ 41,347 $ 14.73 CPI
F-300 EQ Services 22,249 01-Apr-93 M-T-M 01-Apr-93 $20,209.51 $ 242,514 $ 10.90 None
F-250 Vacant 4,373
F-400 Vacant 22,249
F-500 Vacant 22,249
TOTAL BUILDING 108,536 $ 711,751 $ 11.93
GRAND TOTAL OFFICE 230,230 $2,076,561 $ 9.02
GRAND TOTAL BUILDING 239,650 $2,121,162 $ 8.85
GRAND TOTAL VACANT 56,661 24.61%
</TABLE>
<TABLE>
<CAPTION>
STEP-UP STEP-UP
LOCATION/ RENT RENT/ RENT/
SUITE STEP-UPS YEAR RSF
- --------- --------- --------- -----------
<S> <C> <C> <C>
F-100 Year 1 $ 126,960 $ 10.00
Year 2 $ 133,308 $ 10.50
Year 3 $ 165,810 $ 13.06
Year 4 $ 173,173 $ 13.64
Year 5 $ 203,898 $ 16.06
Year 6 $ 212,277 $ 16.72
Year 7 $ 246,810 $ 19.44
Year 8 $ 256,205 $ 20.18
F-150 Year 1 $ 57,709 $ 13.75
F-150 Year 1 $ 30,135 $ 10.41
Year 2 $ 37,635 $ 13.00
F-200 Year 1 $ 166,736 $ 11.25
Year 2 $ 170,442 $ 11.50
Year 3 $ 185,263 $ 12.50
Year 4 $ 200,084 $ 13.50
Year 5 $ 214,905 $ 14.50
Year 6 $ 232,690 $ 15.70
Year 7&8 $ 251,957 $ 17.00
F-220 Year 1 $ 41,347 $ 14.73
F-300 Year 1 $ 242,514 $ 10.90
F-250
F-400
F-500
</TABLE>
<PAGE>
PEACHTREE DUNWOODY PAVILION
EXHIBIT 'D'
LEASING FEES
A. COMMISSIONS DUE FOR EXISTING TENANTS UPON RENEWAL, EXPANSION, EXTENSION, NEW
LEASE
<TABLE>
<CAPTION>
TENANT CONDITIONS PERCENTAGE
- ---------------------- ------------------------------------------------------------------------- -----------------
<S> <C> <C>
AT&T Paradyne extension, renewal, expand, new lease 2.00%
Agent must be involved.
No liability after 10 years from original commencement.
Executive Travel extension, renewal, expand, new lease 2.00%
No other outside broker involved.
No liability after lO years from original commencement.
GeoSyntec extension, renewal, expand, new lease 2.00%
Agent must be involved.
No other outside broker involved.
No liability after 10 years from original commencement.
Mac 'N' Train extension, renewal, expand, new lease 2.00%
Agent must be involved.
No other outside broker involved.
No liability after 10 years from original commencement.
National Mortgage extension, renewal, expand, new lease 2.00%
Agent must be involved.
No other outside broker involved.
No liability after 10 years from original commencement.
Anxiety, Inc. extension, renewal, expand, new lease 2.00%
No other outside broker involved.
No liability after 10 years from original commencement.
</TABLE>
B. COMMISSIONS PAYABLE FOR CURRENT LEASES
<TABLE>
<CAPTION>
TENANT DESCRIPTION
- ---------------------- __________________________________________________________________________________________
<S> <C>
Standard Register $185.83 per month through 5/94, increasing to $216.83 on 6/94, and $247.80 on 6/95 through
expiration of 5/96.
Union Tank Car $62.75 per month until expiration of 12/93.
</TABLE>
October 1, 1993
EQK Realty Investors I
5775 Peachtree Dunwoody Road, Suite 200-D
Atlanta, GA 30342
Attn: Gregory Greenfield
Executive Vice President
First Union National Bank of Georgia
999 Peachtree Street, N.E., 12th Floor
Atlanta, GA 30309
Attn: Mr. Neil Morgan
Trust Administrator
RE: Cash Management and Security Agreement by and among EQK
Realty Investors I, The Prudential Insurance Company of
America and First Union National Bank of Georgia dated
as of December 15. 1992 (the 'Cash Management Agreement')
Gentlemen:
EQK has requested that we modify certain procedures set forth in the Cash
Management Agreement. Prudential desires to enter into this letter agreement to
confirm that it will agree to the changes in procedure set forth below until
Prudential decides, in its sole discretion, to void the changes set forth below
and to instruct you to act in accordance with the original provisions under the
Cash Management Agreement.
Accordingly, until you are notified by Prudential to the contrary, please
refer to this letter with regard to the specified items:
1. Elimination of Mid-Year Review and Revision of Capital Budget. EQK shall
not be required to perform the mid-year revision of the Capital Budget or the
simultaneous revisions to the Operating Budget, Leasing Plan or Cash Flow
Summaries required by Section 3.2 of the Cash Management Agreement.
2. Restoration of Operating Reserve. Notwithstanding anything to the
contrary set forth in Section 4.8(d) of the Cash Management Agreement, EQK shall
not be required to obtain Prudential's consent to the transfer for restoration
of the Operating Reserve to $1,000,000 each month. EQK shall have the right to
submit a certification in the form of Exhibit 'F-2'
<PAGE>
attached hereto and made a part hereof in lieu of Exhibit 'F' required pursuant
to Section 4.3(d) of the Cash Management Agreement, and Escrow Agent shall
accept such certificate in lieu of Exhibit 'F' required pursuant to the Cash
Management Agreement.
3. Advances for Approved Capital Expenditures Other Than Major Construction
or Major Tenant Work. Notwithstanding anything to the contrary contained in
Section 5.3(a) or 7.1(b) of the Cash Management Agreement, disbursements from
the Capital Reserve Account for Approved Capital Expenditures for capital
improvements and tenant improvements which do not constitute Major Construction
or Major Tenant Work, shall rot require the approval of Prudential. Advances for
such improvements shall be made by Escrow Agent upon receipt of a certificate in
the form of Exhibit 'H-1' from EQK attached hereto and made a part hereof. EQK
shall simultaneously send to Prudential a copy of any such certificate sent to
Escrow Agent.
4. Effect of this Letter Agreement; Procedures May Be Reinstated by
Prudential. The parties hereto acknowledge and agree that, at Prudential's sole
option, Prudential shall have the right to render any or all of the procedures
set forth above null and void and to return to the procedures outlined in the
Cash Management Agreement. Except as modified hereby, all procedures set forth
in the Cash Management Agreement shall remain in full force and effect. All
capitalized terms used but
<PAGE>
not defined in this letter shall have the meanings ascribed to such terms in
the Cash Management Agreement.
If you agree with the foregoing and intend to be legally bound, please
execute the enclosed copy of this letter agreement.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation
By: __________________________________
Accepted and Agreed:
EQK REALTY INVESTORS, I,
a Massachusetts business trust
By: ____________________________________________________________________________
The undersigned Escrow Agent acknowledges the change in instructions as set
forth above and agrees to comply therewith.
FIRST UNION NATIONAL BANK OF
GEORGIA, a national banking
association
By: ____________________________________________________________________________
<PAGE>
EXHIBIT 'F-2'
FORM OF NOTICE REQUESTING RELEASES FROM
CASH COLLATERAL ACCOUNT (FOR OPERATING RESERVE)
Dated: _______________________________
First Union National Bank of Georgia
999 Peachtree Street, N.E., 12th Floor
Atlanta, GA 30309
Attn: Mr. Neil Morgan
Trust Administrator
Re: Cash Collateral Account -- Escrow Account No. ______
FBO: The Prudential Insurance Company of America
under Cash Management and Security Agreement dated
as of December 15, 1992
Dear Sirs:
This request is made pursuant to the Cash Management and Security Agreement
(the 'Cash Management Agreement') dated as of December 15, 1992 by and between
EQK Realty Investors I ('EQK'), The Prudential Insurance Company of America
('Prudential') and First Union National Bank of Georgia (the 'Escrow Agent').
Capitalized terms used herein shall have their respective meanings as set forth
in the Cash Management Agreement.
EQK hereby certifies to Prudential as follows:
1. No Event of Default (or event which, with notice or the passage of time
or both, shall constitute an Event of Default) has occurred and is continuing
under the Loan Documents;
2. The balance in the Operating Reserve as of __________ is $__________;
3. Pursuant to the Cash Management Agreement, EQK is entitled to the
disbursement of the sum requested hereby, and such disbursement will not result
in an insufficiency in the balance of the Cash Collateral Account for the
purposes set forth in sections 4.3(a) through 4.3(c) of the Cash Management
Agreement.
Accordingly, EQK hereby requests Escrow Agent to disburse the sum of
$__________ (a maximum of $1,000,000 minus the amount set forth in Section 2
above) from the Cash Collateral Account to EQK to be deposited in the Operating
Reserve.
<PAGE>
EQK further requests that sums released from the Cash Collateral Account
be transferred to or for the benefit of EQK in accordance with the wiring
instructions set forth below.
Wiring Instructions:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Very truly yours,
EQK REALTY INVESTORS I
By: __________________________________
Name:
Title:
cc: The Prudential Insurance Company of America
<PAGE>
Exhibit 'H-1'
Form of Notice Authorizing Releases from
the Capital Reserve Account (for Capital Expenditures)
Dated:__________ , 199_
First Union National Bank of Georgia
as Escrow Agent
999 Peachtree Street, N.E., 12th Floor
Atlanta, GA 30309
Attn: Mr. Neil Morgan
Trust Administrator
Re: Capital Reserve Account -- Escrow Account No. ______
FBO: The Prudential Insurance Company of America
under Cash Management and Security Agreement dated
as of December 15, 1992
Dear Sirs:
This Certificate and Application is made pursuant to the Cash Management
and Security Agreement (the 'Cash Management Agreement') dated as of December
15, 1992 by and between EQK Realty Investors I ('EQK'), The Prudential
Insurance Company of America ('Prudential') and First Union National Bank of
Georgia (the 'Escrow Agent'). Capitalized terms used herein shall have their
respective meanings as set forth in the Cash Management Agreement.
EQK hereby certifies as follows:
1. No Event of Default (or event which, with notice or the passage of time
or both, shall constitute an Event of Default) has occurred and is continuing
under the Loan Documents;
2. The work covered by this request does not constitute Major Construction
or Major Tenant Work;
3. The work and materials for which payment is requested have been
physically incorporated into the Property (or stored in a secure manner on the
Property) and the services for which payment is requested have been fully
performed;
4. The value of each item of the work and services is at least as great as
the amount set forth below (individually and collectively);
<PAGE>
5. That generally the work and materials conformed and all services
performed have conformed with all applicable rules and regulations of the public
authorities having jurisdiction;
6. Pursuant to the Cash Management Agreement, EQK is entitled to the
disbursement of the sum requested hereby; and
7. Payment for the items described below has been made or will be made with
the proceeds of the funds requested hereby.
EQK hereby requests the release of $__________ from the Capital Reserve
Account for the following Capital Expenditures in the amounts, with respect to
the vendors and payees at the Property and for the work or services described
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
VENDORS/ DESCRIPTION OF
AMOUNT PAYEES PROPERTY WORK OR SERVICES
- --------------------------- --------------------------- --------------------------- ---------------------------
</TABLE>
EQK hereby requests that the aggregate sum set forth above be transferred from
the Capital Reserve Account to or for the benefit of EQK in accordance with the
wiring instructions set forth below.
Wiring Instructions:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Very truly yours,
EQK REALTY INVESTORS I
By: __________________________________
Name:
Title:
cc: The Prudential Insurance Company of America
December 3, 1993
EQK Realty Investors I
c/o Compass Retail, Inc.
5775 Peachtree Dunwoody Road
Suite 200-D
Atlanta, GA 30342
Re: Prudential Loan No. 7-501-488 -- $75,688,720 Second Amended
and Restated Note dated as of December 16, 1992;
$3,525,000 Amended and Restated Note dated December 16, 1992
in favor of PNC Bank, National Association, as successor
to Provident National Bank
Ladies and Gentlemen:
You have advised us that you are about to close on the sale of Buildings E
and F of the Peachtree Property, as defined under that certain Cash Management
and Security Agreement (the 'Cash Management Agreement') dated as of December
15, 1992, by and among you, The Prudential Insurance Company of America
('Prudential') and First Union National Bank of Georgia ('Escrow Agent'). You
have advised us further that the Net Sales Proceeds from such sale are expected
to be in excess of the Minimum Net Sales Proceeds set forth in Section 8.2 of
the Cash Management Agreement. You have requested that Prudential and PNC Bank,
National Association, a national banking association ('PNC') permit you to apply
such Net Sales Proceeds to prepay in full the Senior Secured Debt. You have
further requested that such Net Sales Proceeds be held in the Capital Reserve
Account, as defined in the Cash Management Agreement, under and subject to the
terms thereof, until such Net Sales Proceeds are used to prepay the Senior
Secured Debt on the first permitted prepayment dates under the respective notes
constituting the Senior Secured Debt (the 'Prepayment Dates'), with the
remainder of such Net Sales Proceeds to remain the Capital Reserve Account.
The undersigned, by execution of this letter, hereby agree as follows:
1. All terms used but not defined herein shall have the meanings ascribed
to them in the Cash Management Agreement.
2. All Net Sales Proceeds from the sale of Peachtree Property Buildings
E and F shall be deposited in the Capital Reserve Account immediately upon
closing, except that EQK shall cause the title company disbursing settlement
proceeds shall disburse $50,000.00 to Prudential and $10,000.00 to PNC for
service fees with regard to this transaction. PNC and Prudential shall each
receive a copy of the Settlement Statement contemporaneously with closing.
<PAGE>
3. All Net Sales Proceeds from the sale shall remain in the Capital Reserve
Account and held and disbursed in accordance with the provisions of the Cash
Management Agreement; provided, however, that so long as such Net Sales Proceeds
are equal to or exceed the amount necessary to prepay the Senior Secured Debt in
full, and not in part, on the respective Prepayment Dates, Escrow Agent shall
disburse, upon delivery by EQK of a written request and payoff statement to
Escrow Agent, with a copy to each of Prudential and PNC, such portion of the Net
Sales Proceeds as are necessary to prepay such Senior Secured Debt in full on
the Prepayment Dates. No funds necessary to prepay the Senior Secured Debt in
full on the Prepayment Date shall be used for any other purpose without the
consent of Prudential and PNC.
If you agree with the foregoing and intend to be legally bound by it,
kindly execute the enclosed copy of this letter agreement, whereupon all parties
shall be legally bound.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: __________________________________
<PAGE>
PNC BANK, National Association
By: __________________________________
Assistant Vice President
ACCEPTED AND AGREED:
EQK REALTY INVESTORS I
By: __________________________________
Escrow Agent hereby acknowledges
receipt of a copy of this letter
agreement and agrees to be bound
by the terms hereof:
FIRST UNION NATIONAL BANK
OF GEORGIA
By: __________________________________
