SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1994 Commission file #0-16111
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(Exact name of registrant as specified in its charter)
Illinois 36-3314827
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . .
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . . . . .
PART II OTHER INFORMATION
Item 3. Defaults on Senior Securities . . . . . . . . . . . . . .
Item 5. Other Information . . . . . . . . . . . . . . . . . . . .
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 2,115,235 5,020,087
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,469,466 10,167,294
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,090,620 1,092,658
Current portion of notes receivable (net of allowance for doubtful accounts of $1,466,051 in 1994
and 1993) (note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,767 34,073
Escrow deposits and restricted securities (notes 1 and 4(a)) . . . . . . . . . . . . . . . . . . . . 6,339,430 6,151,429
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,043,518 22,465,541
------------ ------------
Investment properties, at cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,782,066 37,109,099
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359,940,870 376,030,478
------------ ------------
392,722,936 413,139,577
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(106,022,525) (107,997,321)
------------ ------------
Total investment properties, net of accumulated depreciation . . . . . . . . . . . . . . . . . 286,700,411 305,142,256
------------ ------------
Investment in unconsolidated ventures, at equity (notes 3 and 11). . . . . . . . . . . . . . . . . . . 27,592,520 28,554,815
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,044,803 4,305,261
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,402,819 6,719,239
Venture partners' deficits in ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,223,172 4,699,065
------------ ------------
$357,007,243 371,886,177
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
1994 1993
------------ -----------
Current liabilities:
Current portion of long-term debt (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 89,685,484 103,244,992
Current portion of notes payable (note 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,701 70,701
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,233,510 2,256,478
Amounts due to affiliates (note 10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,517,734 6,410,710
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,345,262 6,130,382
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,496,158 728,334
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,348,849 118,841,597
Notes payable (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361,135 361,135
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713,057 863,192
Investment in unconsolidated ventures, at equity (notes 3 and 11). . . . . . . . . . . . . . . . . . . 34,899,619 28,318,569
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,000 360,000
Long-term debt, less current portion (note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237,467,851 237,811,558
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381,150,511 386,556,051
Venture partners' subordinated equity in ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . 9,315,506 9,901,367
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,153,864) (15,779,416)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (600,866) (600,866)
------------ ------------
(16,734,730) (16,360,282)
------------ ------------
Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 384,978,681 384,978,681
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (377,504,275) (368,991,190)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,198,450) (24,198,450)
------------ ------------
(16,724,044) (8,210,959)
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . . . . . . . . . . . . . . . . . (33,458,774) (24,571,241)
------------ ------------
Commitments and contingencies (notes 1, 2, 3, 4, 7, 8 and 9)
$357,007,243 371,886,177
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$13,150,219 13,102,952
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,156 158,780
----------- ----------
13,302,375 13,261,732
----------- ----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,675,734 8,652,691
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,999,419 3,086,451
Property operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,952,353 5,486,147
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256,193 269,461
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,501 301,126
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,987 152,385
----------- -----------
18,339,187 17,948,261
----------- -----------
Operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,036,812 4,686,529
Partnership's share of loss from operations of unconsolidated ventures . . . . . . . . . . . . . . . . 5,073,502 5,355,990
Venture partners' share of ventures' operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . (591,215) (845,042)
----------- -----------
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,519,099 9,197,477
Gain on sale of interests in unconsolidated ventures (note 9(c)) . . . . . . . . . . . . . . . . . . . -- (229,140)
Gain on sale of investment property, net of venture partner's share of gain of $48,077 (note 9(a)) . . (631,566) --
----------- -----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 8,887,533 8,968,337
=========== ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1994 1993
----------- ----------
Net loss per limited partnership interest (note 1):
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 20.60 19.90
Net gain on sale of investment property (note 9(a)). . . . . . . . . . . . . . . . . . . (1.41) --
Net gain on sale of interest in unconsolidated ventures
(note 9(c)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (.51)
----------- -----------
$ 19.19 19.39
=========== ===========
Cash distributions per limited partnership interest. . . . . . . . . . . . . . . . . . . .$ -- --
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
1994 1993
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ (8,887,533) (8,968,337)
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,999,419 3,086,451
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,501 301,126
Long-term debt - deferred accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . (191,872) 514,126
Partnership's share of loss from operations of unconsolidated ventures . . . . . . . . . . . . . . 5,073,502 5,355,990
Venture partners' share of ventures' operations and gain on sale of investment property. . . . . . (543,138) (845,042)
Total gain on sale of investment property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (679,643) --
Gain on sale of interests in unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . . -- (229,140)
Changes in:
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,038 309,566
Current portion of notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,306 4,767
Escrow deposits and restricted securities (note 4(a)). . . . . . . . . . . . . . . . . . . . . . . (188,001) (109,283)
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316,420 268,803
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 977,032 84,125
Amounts due affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,024 374,758
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,880 840,129
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767,824 823,482
Deposits and advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (430,000)
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (150,135) 9,843
------------ -----------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . 107,624 1,391,364
------------ -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1994 1993
------------ -----------
Cash flows from investing activities:
Net purchases of short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,302,172) (72,214)
Additions to investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (306,336) (446,107)
Cash proceeds from sale of investment property (note 9(a)) . . . . . . . . . . . . . . . . . . . . . 2,810,896 --
Cash proceeds from sale of interest in unconsolidated venture (note 9(c)). . . . . . . . . . . . . . -- 229,140
Partnership's distributions from unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . 2,689,000 685,737
Partnership's contributions to unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . . (325,120) (16,000)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,043) (106,458)
------------ -----------
Net cash provided by (used in) investing activities. . . . . . . . . . . . . . . . . . . . . (2,457,775) 274,098
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (254,239) (282,258)
Distributions to venture partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (300,462) (67,028)
------------ -----------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . (554,701) (349,286)
------------ -----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . .$ (2,904,852) 1,316,176
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 8,652,725 7,298,436
============ ===========
Non-cash investing and financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ -- --
============ ===========
Sale of investment property (note 9(a)):
Total sale proceeds, net of selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 16,268,000 --
Principal balance due on mortgage payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,457,104 --
------------ -----------
Cash proceeds from sale of investment property, net of selling expenses. . . . . . . . . . .$ 2,810,896 --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994 AND 1993
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1993,
which are included in the Partnership's 1993 Annual Report on Form 10-K (file
no. 0-16111 filed on March 28, 1994 (the "Annual Report")), as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the accounts
of the Partnership and its consolidated ventures, Eastridge Development
Company ("Eastridge"); Daytona Park Associates ("Park"); JMB/160 Spear Street
Associates ("160 Spear"); Villa Solana Associates ("Villa Solana"); 260
Franklin Street Associates ("260 Franklin"); C-C California Plaza Partnership
("Cal Plaza"); Villages Northeast Associates ("Villages Northeast") and VNE
Partners, Ltd. ("VNE Partners"). The effect of all transactions between the
Partnership and the consolidated ventures has been eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's interests
in JMB/Piper Jaffray Tower Associates ("JMB/Piper") and JMB/Piper Jaffray
Tower Associates II ("JMB/Piper II"); 900 Third Avenue Associates ("JMB/900");
Maguire/Thomas Partners-South Tower ("South Tower"); JMB/Owings Mills
Associates ("JMB/Owings") (sold June 30, 1993, see note 9(b)); Carlyle - XV
Associates, L.P., which owns an interest in JMB/125 Broad Building Associates,
L.P. ("JMB/125"), and JMB/NewPark Associates ("JMB/NewPark").
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to present the Partnership's
accounts in accordance with generally accepted accounting principles ("GAAP")
and to consolidate the accounts of certain ventures as described above. Such
adjustments are not recorded on the records of the Partnership. The effect of
these items is summarized as follows for the three months ended March 31, 1994
and 1993:
<TABLE>
<CAPTION>
1994 1993
------------------------- -------------------------
GAAP Basis Tax Basis GAAP Basis Tax Basis
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net loss . . . . . . $8,887,533 4,136,917 8,968,337 7,200,116
Net loss per
limited partner-
ship interest . . . $ 19.19 8.67 19.39 15.58
========== ========== ========== =========
</TABLE>
The net loss per limited partnership interest ("Interest") is based upon
the interests outstanding at the end of each period. Deficit capital accounts
will result, through the duration of the Partnership, in the recognition of
net gain for financial reporting and income tax purposes.
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. Partnership
distributions from unconsolidated ventures are considered cash flow from
operating activities only to the extent of the Partnership's cumulative share
of net earnings. In addition, the Partnership records amounts held in U.S.
Government obligations and other securities at cost which approximates market.
For the purposes of these statements, the Partnership's policy is to consider
all such amounts held with original maturities of three months or less (none
at March 31, 1994 and December 31, 1993) as cash equivalents with any
remaining amounts (generally with original maturities of one year or less)
reflected as short-term investments being held to maturity.
Escrow deposits and restricted securities primarily represent cash and
investments restricted as to their use by the Partnership.
Due to the uncertainty of the Partnership's ability to recover the net
carrying value of the California Plaza, Wells Fargo Center - IBM Tower, Villa
Solana Apartments and Springbrook Shopping Center investment properties, the
Partnership, or ventures, as the case may be, made, as a matter of prudent
accounting practice, provisions for value impairment. A provision for value
impairment was recorded at June 30, 1993, of $2,166,799 for California Plaza,
which included $1,558,492 relating to the venture partner's deficit investment
balance at that date, at August 31, 1993, of $67,479,871 (of which, the
Partnership's share is $20,035,181) for Wells Fargo Center - IBM Tower, at
September 30, 1993, of $916,309 for Villa Solana Apartments, and at December
31, 1993 of $7,534,763 for Springbrook Shopping Center. Such provisions
generally reduced the net carrying values of the investment properties to the
then outstanding balance of the related non-recourse mortgage notes.
(2) INVESTMENT PROPERTIES
(a) General
The Partnership has acquired, either directly or through joint ventures,
interests in four apartment complexes, twelve office buildings, four shopping
centers and one parking facility. The Partnership's aggregate cash
investment, excluding certain related acquisition costs, is $299,637,926.
During 1989, the Partnership disposed of its interest in the investment
property owned by CBC Investment Company ("Boatmen's"). During 1991, the
Partnership sold 62% of its interest in Harbor and in 1993 sold its remaining
38% interest in Harbor (note 9(c)). In September 1992, the Partnership sold
the Erie-McClurg Parking Facility. In June 1993, the Partnership sold its
interest in Owings Mills Shopping Center (note 9(b)). In March 1994 the
Partnership, through Villa Solana Associates, sold Villa Solana Apartments
(note 9(a)). All of the properties owned at March 31, 1994 were completed and
operating.
All investment properties are pledged as security for the long-term debt,
for which there is no recourse to the Partnership.
(b) Woodland Hills Apartments
Effective February 1, 1991, the seller/manager agreed to guarantee a
level of cash flow from the property equal to the underlying debt service in
return for a subordinated level of cash flow (payable as an incentive
management fee) from operations and sale or refinancing of the property. The
underlying debt (which consists of first and second mortgage notes secured by
the property) is scheduled to mature in June 1994. The Partnership plans to
refinance the notes when they mature, although there is no assurance the
Partnership will be able to obtain such financing (see note 4(b)).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(3) VENTURE AGREEMENTS
(a) Introduction
The Partnership (or Carlyle-XV Associates, L.P., in which the Partnership
holds a limited partnership interest) has entered into eight joint venture
agreements (JMB/Piper, JMB/Piper II, JMB/900, JMB/Owings, JMB/125, 260
Franklin, Villages Northeast and JMB/NewPark) with Carlyle Real Estate Limited
Partnership-XIV ("Carlyle-XIV") or Carlyle Real Estate Limited Partnership-XVI
(or Carlyle-XVI Associates, L.P., in which Carlyle Real Estate Limited
Partnership-XVI holds a limited partnership interest) ("Carlyle-XVI"),
partnerships sponsored by the Corporate General Partner, and eight joint
venture agreements with unaffiliated venture partners. Pursuant to such
agreements, the Partnership made initial capital contributions of
approximately $247,300,000 (before legal and other acquisition costs and its
share of operating deficits as discussed below). The terms of these
affiliated partnerships provide, in general, that the benefits of ownership,
including tax effects, net cash receipts and sale and refinancing proceeds,
are allocated between or distributed to, as the case may be, the Partnership
and the affiliated partner in proportion to their respective capital
contributions to the affiliated venture.
There are certain risks associated with the Partnership's investments
made through joint ventures, including the possibility that the Partnership's
joint venture partner(s) in an investment might become unable or unwilling to
fulfill its (their) financial or other obligations, or that such joint venture
partner(s) may have economic or business interests or goals that are
inconsistent with those of the Partnership. Under certain circumstances,
either pursuant to the venture agreements or due to the Partnership's
obligations as a general partner, the Partnership may be required to
contribute additional amounts to the venture.
During 1989, the Partnership disposed of its interest in the Boatmen's
venture (note 3(c)). During 1991, the Partnership sold a portion of its
interest in the Harbor venture. In January 1993, the Partnership sold the
remaining portion of its interest in the Harbor venture (note 9(c)). In June
1993, the Partnership sold its interest in the JMB/Owings Mills Associates
joint venture (note 9(b)). In March 1994, the Partnership, through Villa
Solana Associates, sold the Villa Solana Apartments to an independent third
party (note 9(a)).
(b) JMB/900
As a result of certain defaults by one of the unaffiliated joint venture
partners, an affiliate of the General Partner assumed management
responsibility for the property as of August 1987 for a fee computed as a
percentage of certain revenues.
Through December 31, 1991, it was necessary for JMB/900 to contribute
approximately $4,364,000 ($2,909,000 of which was contributed by the
Partnership) to pay past due property real estate taxes and to pay certain
costs, which were the responsibility of one of the unaffiliated joint venture
partners under the terms of the joint venture agreement to the extent such
funds were not available from the investment property.
In July 1989, JMB/900 filed a lawsuit in federal court against the former
manager and one of the unaffiliated venture partners to recover the amounts
contributed and to recover for certain other joint venture obligations on
which the unaffiliated partner has defaulted. This lawsuit was dismissed on
jurisdictional grounds. Subsequently, however, the Federal Deposit Insurance
Corporation ("FDIC") filed a complaint, since amended, in a lawsuit against
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
the joint venture partner, the Partnership and affiliated partner and the
joint venture, which has enabled the Partnership and affiliated partner to
refile its previously asserted claims against the joint venture partner as
part of that lawsuit in Federal Court. There is no assurance that JMB/900
will recover the amounts of its claims as a result of the litigation. Due to
the uncertainty, no amounts in addition to the amounts advanced to date, noted
above, have been recorded in the financial statements. Settlement discussions
with one of the venture partners and the FDIC continue. In addition, it
appears that the unaffiliated venture partners may not have the financial
capabilities to repay amounts advanced on their behalf. Consequently, a final
settlement will likely involve redirecting amounts otherwise payable to the
unaffiliated venture partners in accordance with the venture agreement to
JMB/900. There are no assurances that a settlement will be finalized and that
the Partnership and affiliated partner will be able to recover any amounts
from the unaffiliated venture partners.
(c) Boatmen's
During 1989 the joint venture defaulted on the mortgage loan secured by
the property, and the lender obtained title to the property. As a result, the
Partnership has no further ownership interest in the property.
On May 31, 1990, the Partnership entered into an agreement with the joint
venture partners to settle certain claims against the joint venture partners.
The settlement provided that the Partnership would receive payments totalling
$2,325,000. The remaining notes do not bear interest and were scheduled to be
due May 31, 1993. As of March 31, 1994, the Partnership has received cash
payments totalling $1,910,937. Two of the venture partners were delinquent
under the scheduled payments in the amount of $414,063 as of March 31, 1994.
These joint venture partners had requested extensions of the promissory notes
and the Partnership is currently considering their requests. To preserve its
legal rights, the Partnership served the delinquent partners with notices of
default. The Partnership has recognized revenue on the settlement only to the
extent of the cash collected. There is no assurance that the remaining
delinquent payments will be collected.
(d) JMB/NewPark
In December 1986, the Partnership, through the JMB/NewPark joint venture
partnership, acquired an interest in an existing joint venture partnership
("NewPark Associates") with the developer which owns an interest in an
existing enclosed regional shopping center in Newark, California known as
NewPark Mall.
JMB/NewPark acquired its 50% interest in NewPark Associates for a
purchase price of $32,500,000 paid in cash at closing, subject to an existing
first mortgage loan of approximately $23,556,000 and certain loans from the
joint venture partner of approximately $6,300,000.
On December 31, 1992, NewPark Associates refinanced the shopping center
with an institutional lender. The new mortgage note payable in the principal
amount of $50,620,219 is due on November 1, 1995. Monthly payments of
interest only of $369,106 are due through November 30, 1993. Commencing on
December 1, 1993 through October 30, 1995, principal and interest are due in
monthly payments of $416,351 with a final balloon payment due November 1,
1995. Interest on the note payable accrues at 8.75% per annum. The joint
venture has an option to extend the term of the mortgage note payable to
November 1, 2000 upon payment of a $250,000 option fee and satisfaction of
certain conditions as specified in the mortgage note. A portion of the
proceeds from the note payable were used to pay the outstanding balance,
including accrued interest, under the previous mortgage note payable and the
notes payable to the unaffiliated joint venture partner. NewPark Associates
commenced a renovation of NewPark Mall in early 1993 and such renovation was
substantially completed as of September 30, 1993.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(e) Cal Plaza
In August 1990, the joint venture partner filed a lawsuit against the
Partnership, the General Partners of the Partnership and certain of their
affiliates, alleging, among other things, breaches of the joint venture
agreement and fraud. The Partnership filed a counterclaim against the joint
venture partner for breaches of the joint venture agreement and property
management agreement. In November 1991, the Partnership and the joint venture
partner reached a settlement resolving certain claims between the two parties.
Under the terms of the settlement agreement, the obligation of the venture
partner to indemnify Cal Plaza for payment on promissory notes issued to a
tenant was revised (see note 8) and previously escrowed amounts were made
available for 1991 cash flow requirements.
In December 1993, the venture reached an agreement with the lender to
modify the mortgage note, effective February 1993. The accrual rate of the
note remains at 10.375% per annum, but the interest only monthly payments are
based on an interest rate of 8% per annum. The maturity date of the note has
been extended from January 1, 1997 to January 1, 2000, and property cash flows
are required to be escrowed as more fully described in note 4(a)(vi).
(f) JMB/125
In December 1985, the Partnership, through the JMB/125 joint venture
partnership, acquired an interest in an existing joint venture partnership
("125 Broad") which owns a 40-story office building, together with a leasehold
interest in the underlying land, located at 125 Broad Street in New York, New
York. In addition to JMB/125, the other partners (the "O&Y partners") of 125
Broad include O&Y 25 Realty Company L.P., Olympia & York Broad Street Holding
Company L.P. (USA) and certain other affiliates of Olympia & York Development,
Ltd. ("O&Y").
JMB/125 is a joint venture between Carlyle-XV Associates, L.P. (in which
the Partnership holds an approximate 99% limited partnership interest),
Carlyle-XVI Associates, L.P. and Carlyle Advisors, Inc. The terms of the
JMB/125 venture agreement generally provide that JMB/125's share of 125
Broad's annual cash flow and sale or refinancing proceeds will be distributed
or allocated to the Partnership in proportion to its (indirect) 60% share of
capital contributions to JMB/125. In April 1993 JMB/125, originally a general
partnership, was converted to a limited partnership, and the Partnership's
interest in JMB/125, which previously had been held directly, was converted to
a limited partnership interest and was contributed to Carlyle-XV Associates,
L.P. in exchange for a limited partnership interest in Carlyle-XV Associates,
L.P. As a result of these transactions, the Partnership currently holds,
indirectly through Carlyle-XV Associates, L.P., an approximate 60% limited
partnership interest in JMB/125. The general partner in each of JMB/125 and
Carlyle-XV Associates, L.P. is an affiliate of the Partnership. For financial
reporting purposes, profits and losses of JMB/125 are generally allocated 60%
to the Partnership.
JMB/125 acquired an approximately 48.25% interest in 125 Broad for a
purchase price of $16,000,000, subject to a first mortgage loan of
$260,000,000 and a note payable to an affiliate of the joint venture partners
in the amount of $17,410,516 originally due September 30, 1989. In June 1987,
the note payable was consolidated with the first mortgage loan forming a
single consolidated note in the principal amount of $277,410,516. The
consolidated note bears interest at a rate of 10-1/8% per annum payable in
semi-annual interest only payments and matures on December 27, 1995. JMB/125
has also contributed $14,055,500 to 125 Broad to be used for working capital
purposes and to pay an affiliate of O&Y for its assumption of JMB/125's share
of the obligations incurred by 125 Broad under the "takeover space" agreement
described below. In addition, JMB/125 contributed $24,222,042, plus interest
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
thereon of approximately $1,089,992 on June 30, 1986 for working capital
purposes. Thus, JMB/125's original cash investment (exclusive of acquisition
costs) was $55,367,534, of which the Partnership's share was approximately
$33,220,000.
The land underlying the office building is subject to a ground lease
which has a term through June 2067 and provides for annual rental payments of
$1,075,000. The terms of the ground lease grant 125 Broad a right of first
refusal to acquire the fee interest in the land in the event of any proposed
sale of the land during the term of the lease and an option to purchase the
fee interest in the land for $15,000,000 at 10-year intervals (the next option
date occurring in 1994).
The partnership agreement of 125 Broad, as amended, provides that the O&Y
partners are obligated to make advances to pay operating deficits incurred by
125 Broad from the earlier of 1991 or the achievement of a 95% occupancy rate
of the office building through 1995. In addition, from closing through 1995,
the O&Y partners are required to make capital contributions to 125 Broad for
the cost of tenant improvements and leasing expenses up to certain specified
amounts and to make advances to 125 Broad to the extent such costs exceed such
specified amounts and such costs are not paid for by the working capital
provided by JMB/125 or the cash flow of 125 Broad. The amount of all costs
for such tenant improvements and leasing expenses over the specified amounts
and the advances for operating deficits from the earlier of the achievement of
a 95% occupancy rate of the office building or 1991 will be treated by 125
Broad as non-recourse loans bearing interest, payable monthly, at the floating
prime rate of an institutional lender. The interest rate in effect at March
31, 1994 was 6.25% per annum. The amount of such outstanding O&Y partner non-
recourse loans was approximately $16,234,000 at March 31, 1994. Due to a
major tenant vacating in 1991, the property operated at a deficit in 1993 and
is expected to operate at a deficit in 1994 and for the next several years.
Such deficits through 1995 are required to be funded by additional loans from
the O&Y partners, although as discussed below the O&Y partners have been in
default of such funding obligation since June 1992. The outstanding principal
balance and any accrued and unpaid interest of such loans will be payable from
125 Broad's annual cash flow or net sale or refinancing proceeds, as described
below. Any unpaid principal of such loans and any accrued and unpaid interest
thereon will be due and payable on December 31, 2000. JMB/125 and the O&Y
partners are obligated to make capital contributions, in proportion to their
respective interests in 125 Broad, in amounts sufficient to enable 125 Broad
to pay any excess expenditures not required to be covered by the capital
contributions or advances of the O&Y partners described above.
The 125 Broad partnership agreement also provides that beginning in 1991,
annual cash flow, if any, is distributable first to JMB/125 and to the O&Y
partners in certain proportions up to certain specified amounts. Next, the
O&Y partners are entitled to repayment of principal and any accrued but unpaid
interest on the loans for certain tenant improvements, leasing expenses and
operating deficits described above, and remaining annual cash flow, if any, is
distributable approximately 48.25% to JMB/125 and approximately 51.75% to the
O&Y partners. In general, operating profits or losses are allocable
approximately 48.25% to JMB/125 and approximately 51.75% to the O&Y partners,
except for certain specified items of profits or losses which are allocable to
JMB/125 or the O&Y partners.
The 125 Broad partnership agreement further provides that, in general,
upon sale or refinancing of the property, net sale or refinancing proceeds
(after repayment of the outstanding principal balance and any accrued and
unpaid interest on any loans from the O&Y partners described above) are
distributable approximately 48.25% to JMB/125 and approximately 51.75% to the
O&Y partners.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In the event of a dissolution and liquidation of 125 Broad, the terms of
the 125 Broad joint venture agreement provide that if there is a deficit
balance in the tax basis capital account of JMB/125, after the allocation of
profits or losses and the distribution of all liquidation proceeds, then
JMB/125 generally would be required to contribute cash to 125 Broad in the
amount of its deficit capital account balance. Taxable gain arising from the
sale or other disposition of 125 Broad property generally would be allocated
to the joint venture partner or partners then having a deficit balance in its
or their respective capital accounts in accordance with the terms of 125 Broad
joint venture agreement. However, if such taxable gain is insufficient to
eliminate the deficit balance in its account in connection with a liquidation
of 125 Broad, JMB/125 would be required to contribute funds to 125 Broad
(regardless of whether any proceeds were received by JMB/125 from the
disposition of 125 Broad's property) to eliminate any remaining deficit
capital account balance.
The Partnership's liability for such contribution, if any, would be its
share, if any, of the liability of JMB/125 and would depend upon, among other
things, the amounts of JMB/125's and the O&Y partners' respective capital
accounts at the time of a sale or other disposition of 125 Broad's property,
the amount of JMB/125's share of the taxable gain attributable to such sale or
other disposition of 125 Broad's property and the timing of the dissolution
and liquidation of 125 Broad. In such event, the Partnership could be
required to sell or dispose of other assets in order to satisfy an obligation
to make such contribution. Although the amount of such liability could be
material, the Limited Partners of the Partnership would not be required to
make additional contributions of capital to satisfy such obligation, if any,
of the Partnership.
As described above, the terms of the 125 Broad joint venture agreement
provide that the O&Y partners are obligated to advance to 125 Broad, in the
form of interest-bearing loans, amounts required to pay operating deficits and
capital improvement costs incurred during 1991 through 1995. O&Y and certain
of its affiliates have been involved in bankruptcy proceedings in the United
States and Canada and similar proceedings in England. During 1993, O&Y
emerged from bankruptcy protection in Canada. In addition, a reorganization
of the management of the company's United States operations has been
completed, and certain O & Y affiliates are in the process of renegotiating or
restructuring various loans affecting properties in the United States in which
they have an interest. In view of the present financial condition of O&Y and
its affiliates and the anticipated deficits for the property, as well as the
existing defaults of the O&Y Partners, it appears unlikely that the O&Y
partners will meet their financial and other obligations to JMB/125 and 125
Broad.
In October 1993, 125 Broad entered into an agreement with Salomon
Brothers, Inc. to terminate its lease covering approximately 231,000 square
feet (17% of the building) at the property on December 31, 1993 rather than
its scheduled termination in January 1997. In consideration for the early
termination of the lease, Salomon Brothers, Inc. paid 125 Broad approximately
$26,500,000, plus interest thereon of approximately $200,000, which 125 Broad
in turn paid to its lender to reduce amounts outstanding under the mortgage
loan. In addition, Salomon Brothers, Inc. paid JMB/125 $1,000,000 in
consideration of JMB/125's consent to the lease termination.
Due to the O&Y partners' failure to advance necessary funds to 125 Broad
as required under the 125 Broad joint venture agreement, 125 Broad defaulted
on its mortgage loan in June 1992 by failing to pay approximately $4,722,000
of the semi-annual interest payment due on the loan. As a result of this
default, the loan agreement provides for a default interest rate of 13-1/8%
per annum on the unpaid principal amount. In addition, during 1992 affiliates
of O&Y defaulted on a "takeover space" agreement with Johnson & Higgins, Inc.
("J&H"), one of the major tenants at the 125 Broad Street Building, whereby
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
such affiliates of O&Y agreed to assume certain lease obligations of J&H at
another office building in consideration of J&H's leasing space in the 125
Broad Street Building. As a result of this default, J&H has offset rent
payable to 125 Broad for its lease at the 125 Broad Street Building in the
amount of approximately $33,200,000 through March 31, 1994, and it is expected
that J&H will continue to offset amounts due under its lease corresponding to
amounts by which the affiliates of O&Y are in default under the "takeover
space" agreement. Due to the O&Y affiliates' default under the "takeover
space" agreement and the continuing defaults of the O&Y partners to advance
funds to cover operating deficits, as of March 31, 1994, the arrearage under
the mortgage loan had increased to approximately $48,180,000. As discussed
above, approximately $26,700,000 was remitted to the lender in October 1993 in
connection with the early termination of the Salomon Brothers lease, and was
applied towards mortgage principal for financial reporting purposes. Due to
their obligations relating to the "takeover space" agreement, the affiliates
of O&Y are obligated for the payment of the rent receivable associated with
the J&H lease at the 125 Broad Street Building. Based on the continuing
defaults of the O&Y partners, 125 Broad has reserved the entire $33,200,000 of
rent offset by J&H and has also reserved approximately $32,600,000 of accrued
rents receivable relating to such J&H lease, since the ultimate collectibility
of such amounts depends upon the O&Y partners' and the O&Y affiliates'
performance of their obligations. The Partnership's share of such losses,
approximately $1,332,000 and $1,737,000 for the three months ended March 31,
1994 and 1993, respectively, is included in the Partnership's share of loss
from operations of unconsolidated ventures. The O&Y partners have attempted
to negotiate a restructuring of the mortgage loan with the lender in order to
reduce operating deficits of the property. In view of, among other things,
the significant operating deficits which the property is expected to incur
during 1994 and for the next several years, it is unlikely that a
restructuring of the mortgage will be obtained. The loan restructuring is
part of a larger restructuring with the lender involving a number of loans
secured by various properties in which O & Y affiliates have an interest.
JMB/125 has notified the O&Y partners that their failure to advance funds to
cover the operating deficits constitutes a default under the 125 Broad joint
venture agreement.
Accordingly, it appears unlikely the O&Y partners will fulfill their
obligations to 125 Broad and JMB/125. As discussed above, it appears unlikely
that 125 Broad will be able to restructure the mortgage loan. Also, JMB/125
is not likely to commit any significant additional amounts to the property.
This is expected to result in the Partnership no longer having an ownership
interest in the property. If this event were to occur, the Partnership would
recognize a net gain for financial reporting and Federal income tax purposes
without any corresponding distributable proceeds. In addition, under certain
circumstances as discussed above, JMB/125 may be required to make an
additional capital contribution to 125 Broad in order to make up a deficit
balance in its capital account, and the Partnership may, under certain
circumstances, be requested to bear a share of such additional capital
contribution obligation.
Vacancy rates in the downtown Manhattan office market have increased over
the last few years. As a result, competition for tenants has increased, which
has resulted in lower effective rents. The increased vacancy in the downtown
Manhattan office market has resulted primarily from layoffs, cutbacks and
consolidations by many financial service companies which, along with related
businesses, dominate the submarket. This resulted in uncertainty as to 125
Broad's ability to recover the net carrying value of the investment property
through future operations and sale. As a matter of prudent accounting
practice, a provision for value impairment of such investment property of
$14,844,420 was recorded as of December 31, 1991. The Partnership's share of
such provision was $4,841,800 and was included in the Partnership's share of
loss from operations of unconsolidated ventures. Such provision was recorded
to reduce the net book value of the investment property to the then
outstanding balance of the related non-recourse financing and O&Y partner
loans.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The office building is being managed pursuant to a long-term agreement
with an affiliate of the O&Y partners. Under the terms of the management
agreement, the manager is obligated to manage the office building, collect all
receipts from operations and to the extent available from such receipts pay
all expenses of the office building. The manager is entitled to receive a
management fee equal to 1% of gross receipts of the property.
(g) JMB/Piper
During the fourth quarter of 1993, the joint venture finalized a lease
amendment with Popham, Haik, Schnobrich & Kaufman, Ltd. (104,843 square feet).
The amendment provides for the extension of the lease term from February 1,
1997 to January 31, 2003 in exchange for a rent reduction effective February
1, 1994. In addition, the tenant will lease an additional 10,670 square feet
effective August 1, 1995. The rental rate on the expansion space approximates
market, which is significantly lower than the reduced rental rate on the
tenant's current occupied space.
(4) LONG-TERM DEBT
(a) Debt Modifications
(i) Park
In March 1988, the mortgage note secured by Park at Countryside
Apartments located in Daytona Beach, Florida was modified to reduce the
monthly installments payable and in November 1991, the mortgage note was
further modified effective January 1, 1990 through December 31, 1995. The new
agreement provides for minimum monthly interest payments of $18,033 (7.0% per
annum) through 1991, $19,375 (7.5% per annum) for 1992, $20,667 (8.0% per
annum) for 1993, $21,958 (8.5% per annum) for 1994 and $23,250 (9.0% per
annum) for 1995. The contract rate on the loan remains at 11.25% per annum.
The deferrals, along with interest thereon, and the outstanding principal
balance were to become due and payable at maturity on January 1, 1996.
In October 1993, the joint venture ceased making the required debt
service payments, and commenced discussions with the lender regarding an
additional modification of the loan. However, the venture was unable to
secure an additional modification of the loan. Therefore, as of the date of
this report, the loan is in default and the lender has initiated procedures to
obtain title to the property. The loan has been classified at March 31, 1994
and December 31, 1993 as a current liability in the accompanying consolidated
financial statements. As of March 31, 1994, the venture continues to make
partial debt service payments based on the monthly cash flow of the property,
and the amount of interest in arrears since October 1993 is approximately
$36,000.
(ii) 260 Franklin
The affiliated joint venture reached an agreement with the lender to
modify the terms of the long-term mortgage note secured by the 260 Franklin
Street Building in December 1991. Beginning May 1991, the modified mortgage
note provides for monthly payments of interest only based upon the then
outstanding balance at a rate of 6% per annum through January 1992 and 8% per
annum thereafter. Upon the scheduled or accelerated maturity, or prepayment
of the mortgage loan, the affiliated joint venture shall be obligated to pay
an amount sufficient to provide the lender with an 11% per annum yield on the
mortgage note from January 1, 1991 through the date of maturity or prepayment.
In addition, upon maturity or prepayment, the affiliated joint venture is
obligated to pay to the lender a residual interest amount equal to 60% of the
highest amount, if any, of (i) net sales proceeds, (ii) net refinancing
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
proceeds, or (iii) net appraisal value, as defined. The affiliated joint
venture is required to (i) escrow excess cash flow from operations (computed
without a deduction for property management fees and leasing commissions to an
affiliate), beginning in 1991, to cover future cash flow deficits (ii) make an
initial contribution to the escrow account of $250,000, of which the
Partnership's share was $175,000, and (iii) make annual escrow contributions
through January 1995, of $150,000, of which the Partnership's share is
$105,000. The escrow account is to be used to cover the costs of capital and
tenant improvement and lease inducements ($726,983 used as of March 31, 1994),
as defined, with the balance, if any, of such escrowed funds available at the
scheduled or accelerated maturity to be used for the payment of principal and
interest due to the lender as described above.
(iii) 160 Spear Street Building
The Partnership reached an agreement, effective February 10, 1992, with
the first mortgage lender to modify the mortgage note secured by the 160 Spear
Street investment property, which was scheduled to mature on December 10,
1992. Under the terms of the agreement, the modified first mortgage note of
approximately $33,750,000 and the second mortgage note of $5,435,000 require
monthly debt service (reduced to interest only payments) of approximately
$262,000 (9.3% per annum) and $57,000 (12.55% per annum), respectively,
through February 10, 1995. Beginning March 10, 1995, monthly payments of
principal and interest of approximately $337,000 (for combined first and
second mortgage note) are required through maturity of the loan, which is
extended to February 10, 1999. Additionally, the Partnership is required to
escrow net cash flow (as defined) thirty days following each quarter end which
can be withdrawn for expenditures approved by the lender, by the lender upon
default of the note or by the Partnership on February 10, 1997 when the escrow
agreement terminates. As of March 31, 1994, approximately $62,000 has been
placed in, and withdrawn for expenditures approved by the lender, from the
escrow account.
(iv) RiverEdge Place Building
The Partnership ceased making its monthly debt service payments effective
July 1, 1992. The Partnership is currently negotiating with the lender to
restructure the mortgage note (with a balance of $18,166,294 at March 31,
1994) in order to reduce operating deficits anticipated as a result of the
over-lease buy-out. If the Partnership's negotiations for mortgage note
restructuring are not successful, the Partnership would likely decide, based
upon current market conditions and other considerations relating to the
property and the Partnership's portfolio, not to commit significant additional
amounts to the property. This would result in the Partnership no longer
having an ownership interest in the property and would result in the
recognition of a gain for financial statement and Federal income tax purposes
without any corresponding distributable proceeds. As of March 31, 1994, the
amount of such principal and interest payments in arrears is approximately
$6,359,000. Therefore, the loan has been classified at March 31, 1994 and
December 31, 1993 as a current liability in the accompanying consolidated
financial statements.
(v) Villages Northeast
The Villages Northeast joint venture, through a joint venture with an
affiliate of the developer, refinanced the first mortgage loan secured by the
Dunwoody Crossing (Phase II) Apartments (formerly known as Post Crest) located
in Atlanta Georgia. Effective October 6, 1992, the joint venture obtained a
$9,800,000 replacement loan from an institutional lender to retire in full
satisfaction the original first mortgage loan.
The new first mortgage loan, which is collateralized by the property,
requires monthly payments of principal and interest (7.64% per annum) of
$73,316 beginning November 1, 1992 and continuing through November 1, 1997,
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
when the remaining balance is payable. The new lender required the
establishment of an escrow account for real estate taxes to be deposited on a
monthly basis.
The first mortgage loan secured by the Dunwoody Crossing Phase I and III
Apartments is scheduled to mature in October 1994, and has been classified at
March 31, 1994 and December 31, 1993 as a current liability in the accompany-
ing consolidated financial Statements. The joint venture plans to refinance
this note when it matures, although there can be no assurance the joint
venture will be able to obtain such financing.
An affiliate of the joint venture partner entered into an agreement to
manage the complexes through December 31, 2002 (subject to earlier termination
by either party upon 60 days' prior written notice) for a fee equal to 5% of
the gross revenues of the complexes. In August 1993, an affiliate of the
General Partners assumed management of the property for a fee equal to 5% of
the gross revenues of the complexes.
(vi) California Plaza
Effective March 1, 1993, the joint venture ceased making the scheduled
debt service payments on the mortgage loan secured by the property which was
scheduled to mature on January 1, 1997. Subsequently, the Partnership made
partial debt service payments based on net cash flow of the property through
December 1993 when an agreement was reached with the lender to modify the
loan. The accrual rate of the modified loan remains at 10.375% per annum
while the pay rate is reduced to 8% per annum. The loan modification reduced
the monthly payments to $384,505, effective with the March 1, 1993 payment.
The maturity date is extended, as a result of this modification, to January 1,
2000 when the unpaid balance of principal and interest is due (including the
difference between the accrual interest and pay rate interest). Additionally,
the joint venture entered into a cash management agreement which requires
monthly net cash flow to be escrowed (as defined). The excess (of
approximately $426,000) of the monthly cash flow paid from March 1993 to
December 1993 above the 8% interest pay rate was put into escrow for the
future payment of insurance premiums, real estate taxes, and to fund a reserve
account to be used to cover future costs, including tenant improvements, lease
commissions, and capital improvements, approved by the lender (none used as of
March 31, 1994). The joint venture also was required to fund $500,000 into
the reserve account, upon the execution of the modification.
(b) Cancellation of Wrap Note
In February 1991, the Partnership entered into an agreement with the
seller of Woodland Hills Apartments. Under the terms of this agreement, the
seller cancelled its wrap-around mortgage note receivable from the Partnership
and assumed management of the property (see notes 2(b) and 6). The
obligations to make payments on the two underlying mortgage loans have been
assumed by the Partnership. The mortgage note receivable wrapped around and
was subordinate to first and second mortgage loans in the principal amounts of
$6,800,000 and $1,256,667, respectively. The first mortgage loan bears
interest at the rate of 12.8% per annum and requires monthly payments of
interest only in arrears through June 1, 1994 when the entire principal
balance and any accrued interest will be due and payable. The second mortgage
loan bears interest at 11.7% per annum and requires monthly payments of
interest only in arrears until June 1, 1994 when the entire principal balance
and any accrued interest will be due and payable. The Partnership plans to
refinance these notes when they mature, although there is no assurance the
Partnership will be able to obtain such financing. The mortgage loans have
been classified at March 31, 1994 and December 31, 1993 as current liabilities
in the accompanying consolidated financial statements as they mature June 1,
1994 (see note 2(b)).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) PARTNERSHIP AGREEMENT
The Partnership Agreement provides that subject to certain conditions,
the General Partners shall receive as a distribution from the sale of a real
property by the Partnership up to 3% of the selling price, and that the
remaining proceeds (net after expenses and retained working capital) be
distributed 85% to the Limited Partners and 15% to the General Partners.
However, prior to such distribution being made, the Limited Partners are
entitled to receive 99% and the General Partners l% of net sale or refinancing
proceeds until the Limited Partners (i) have received cash distributions of
"sale proceeds" or "refinancing proceeds" in an amount equal to the Limited
Partners' aggregate initial capital investment in the Partnership and (ii)
have received cumulative cash distributions from the Partnership's operations
which, when combined with "sale proceeds" or "refinancing proceeds" previously
distributed, equal a 6% annual return on the Limited Partners' average
adjusted capital investment for each year (their initial capital investment as
reduced by "sale proceeds" or "refinancing proceeds" previously distributed)
commencing with the fourth fiscal quarter of 1986. Accordingly, up to
$561,000 of sale proceeds from Erie-McClurg Parking Facility for the General
Partners has been deferred.
(6) MANAGEMENT AGREEMENTS
At acquisition, management of the 9701 Wilshire Building and the
Springbrook Shopping Center was assumed by affiliates of the Corporate General
Partner.
For a fee computed as a percentage of rental income, an affiliate of the
Corporate General Partner assumed management of the 21900 Burbank Boulevard
Building, the 260 Franklin Street Building, the Woodland Hills Apartments, the
Villa Solana Apartments, RiverEdge Place Building and Village Northeast
Apartments in January 1988, May 1988, September 1989, December 1989, September
1992, and August 1993, respectively.
In February 1991, management of the Woodland Hills Apartments was
reassumed by the seller of this property (see note 2(b)).
(7) NOTES RECEIVABLE
In 1987 and 1988, the Partnership advanced funds to pay for certain
deficits at the 21900 Burbank Boulevard Building which were the obligation of
an affiliate of the seller. Such advances, including unpaid interest, were
approximately $2,043,000 as of March 31, 1994. The Partnership received
demand notes from the seller which are personally guaranteed by certain of its
principals. The seller had been paying interest on the note at a rate equal
to 3% over the prime rate. In February 1991, the seller ceased paying monthly
interest required under terms of the note. The Partnership has put the seller
in default and effective October 31, 1991, the note began accruing interest at
the default rate. The Partnership is pursuing its legal remedies against the
seller and certain of its principals. The collectibility of the amounts
discussed above is uncertain. For financial reporting purposes, the
Partnership ceased accruing interest on the note receivable as of February
1991. As a matter of prudent accounting policy, a reserve for
uncollectibility for the entire amount recorded for financial reporting
purposes ($1,466,051) has been reflected in the accompanying consolidated
financial statements.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(8) NOTES PAYABLE
Pursuant to the terms of a tenant lease at Cal Plaza, promissory notes
(for certain sub-leasing costs) aggregating $707,009 have been issued by the
Cal Plaza joint venture to a tenant of the investment property. Commencing on
July 1, 1990 and on each July 1st thereafter until the notes are paid in full,
one-tenth of the original principal balance together with 12% annual interest
on the outstanding balance of the notes shall be payable. As the result of a
settlement agreement between the Partnership and its joint venture partner,
the joint venture partner is obligated to pay 40% and the Cal Plaza venture is
obligated to pay 60% of the amounts owed under the promissory notes (to the
extent cash flow of the property is insufficient to pay such amounts) (see
note 3(e)). During July 1992, principal of $70,701 and interest of $68,788
were paid to the tenant from cash flow generated from operations of the
property. During July, 1993, principal of $70,701 and interest of $60,304
were paid to the tenant from cash flow generated from operations of the
property. As of March 31, 1994, the outstanding balance of the notes was
$431,836.
(9) SALES OF INVESTMENT PROPERTY
(a) Villa Solana Apartments
On March 23, 1994 the Partnership, through Villa Solana Associates, sold
the Villa Solana Apartments located in Laguna Hills, California. The sale
price was $16,600,000 (before selling costs and prorations). The venture
received net sale proceeds after selling costs and the retirement of the debt
secured by the property, of $2,810,896, of which the Partnership's share is
$2,557,915.
For financial reporting purposes, the venture recognized, on the date of
sale, gain of $679,643 of which the Partnership's share is $631,566. The
venture's gain for Federal income taxes is approximately $4,682,000, of which
the Partnership's share is approximately $4,129,000.
(b) Owings Mills
On June 30, 1993, JMB/Owings sold its partnership interest in Owings
Mills Limited Partnership ("OMLP"), which owns an allocated portion of the
land, building and related improvements of the Owings Mills Mall located in
Owings Mills, Maryland. The purchaser, O.M. Investment II Limited
Partnership, is an affiliate of the JMB/Owing's joint venture partner in OMLP.
The sale price of the interest in OMLP was $9,416,000, all of which was
received in the form of a promissory note. In addition, the Partnership and
Carlyle-XVI were relieved of their allocated portion of the debt secured by
the property. The promissory note (which is secured by a guaranty from an
affiliate of the purchaser and of JMB/Owing's joint venture partner in OMLP)
bears interest at a rate of 7% per annum unless a certain specified event
occurs, in which event the rate would increase to 8% per annum for the
remainder of the term of the note. The promissory note requires principal and
interest payments of approximately $109,000 per month with the remaining
principal balance of approximately $5,500,000 due and payable on June 30,
1998. The monthly installment of principal and interest would be adjusted for
the increase in the interest rate if applicable. Early prepayment of the
promissory note may be required under certain circumstances (as defined),
including the sale or further encumbrance of Owings Mills Mall.
The net cash proceeds and gain from sale of the interest in OMLP was
allocated 50% to the Partnership and 50% to Carlyle-XVI in accordance to the
JMB/Owings partnership agreement.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For financial reporting purposes, JMB/Owings recognized, on the date of
sale, gain of $5,254,855, of which the Partnership's share is $2,627,427,
attributable to JMB/Owings being relieved of its obligations under the OMLP
partnership agreement pursuant to the terms of the sale agreement. The
Partnership has adopted the cost recovery method until such time as the
purchaser's initial investment is sufficient in order to recognize gain under
Statement of Financial Accounting Standards No. 66. At March 31, 1994, the
total deferred gain of JMB/Owings including principal and interest payments of
$757,956 received through March 31, 1994 is $9,898,759, of which the
Partnership's share is $4,949,380.
(c) Harbor
During 1991, the Partnership sold 62% of its general partnership interest
in Harbor, to an affiliate of the Harbor unaffiliated joint venture partners.
The Partnership owned an 80% interest in Harbor prior to sale. Harbor owned a
55% general partnership interest in a joint venture which owned the leasehold
interest on the land and owned the building and related improvements of the
300 East Lombard office building located in Baltimore, Maryland. The sale
price for 62% of the Partnership's general partnership interest was $383,244,
all of which was received in cash at closing. As of the date of the initial
sale, the Partnership had a deficit capital account balance in the Harbor
venture resulting from losses and distributions from the joint venture in an
amount in excess of its original cash investment in the joint venture. As a
result of the Partnership's initial sale of 62% of its interest and its
simultaneous conversion to a limited partner, the Partnership eliminated its
remaining deficit capital balance and recognized a total gain of $9,041,533 in
1991 for financial reporting purposes. In conjunction with the sale, the
Partnership established a put-call option with the buyer on the Partnership's
remaining interest in Harbor. On January 19, 1993, the Partnership sold the
remaining 38% of its limited partnership interest in Harbor based on the
buyer's exercise of the put-call option. The sale price for the Partnership's
remaining interest was $229,140, plus $24,294 of interest accrued at 10% from
September 30, 1991 through the closing date, all of which was received in cash
at closing. For financial reporting purposes in 1993, the Partnership
recognized a gain on sale of the remaining interest of $229,140, which is
included in gain on sale of interests in unconsolidated ventures in the
accompanying financial statements.
(10) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partner-
ship (or its consolidated ventures) to the General Partners and their
affiliates as of March 31, 1994 and for the three months ended March 31, 1994
and 1993 are as follows:
<TABLE>
<CAPTION>
Unpaid at
1994 1993 March 31, 1994
--------- -------- ---------------
<S> <C> <C> <C>
Property management and
leasing fees . . . . . . . . $228,145 233,913 2,081,025
Insurance commissions. . . . . 160 312 --
Management fee to corporate
general partner. . . . . . . -- -- 724,121
Reimbursement (at cost)
for out-of-pocket
expenses . . . . . . . . . . 47,019 41,571 88
-------- ------- ---------
$275,324 275,796 2,805,234
======== ======= =========
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Corporate General Partner and its affiliates relating to the administra-
tion of the Partnership and the operation of the Partnership's properties.
Such costs were $47,604 for the three months ended March 31, 1994, $166,148
for the year ended December 31, 1993 and $864,110 in the aggregate for the
years ended December 31, 1992, 1991, 1990, 1989 and 1988, of which $845,855
was unpaid as of March 31, 1994.
The General Partners and its affiliates have deferred payment of certain
partnership management fees and property management and leasing fees as set
forth in the above table. Effective October 1, 1993, the Partnership began
paying property management and leasing fees on a current basis. In addition,
an affiliate of the General Partner has deferred (through reimbursements made
directly to the Partnership) $2,866,734 for the Partnership's proportionate
share of property management and leasing fees paid by affiliated joint venture
partnerships or their underlying ventures, as the case may be (these
reimbursements are not reflected in the above table). These reimbursements
include the proportionate share of property management fees of two
unconsolidated entities, which are not included in the consolidated financial
statements. Distributions to the General Partners of net cash flow of the
Partnership aggregating $249,571 also have been deferred. The cumulative
deferred amounts (including reimbursement for salaries and direct expenses and
the proportionate reimbursements described above, and the deferral of property
management fees by one of the Partnership's unconsolidated entities that
stopped deferring property management fees by means of reimbursement not
included above) aggregated $6,933,848 at March 31, 1994. These amounts
(approximately $16 per Interest) do not bear interest and are expected to be
paid in future periods. In addition, up to approximately $561,000 of sale
proceeds from the sale of the Erie-McClurg Parking Facility for the General
Partners is subordinated to the satisfaction of certain conditions (see note
5).
Effective January 1, 1994, certain officers and directors of the
Corporate General Partner acquired interests in a company which, among other
things, has provided and continues to provide certain property management
services to certain of the properties owned by the Partnership. Such
acquisition had no effect on the fees payable by the Partnership under any
existing agreements with such Company. The fees earned by such company from
the Partnership for the three months ended March 31, 1994 were approximately
$6,000.
(11) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for JMB/Piper, JMB/Piper II,
JMB/900, South Tower, JMB/Owings and JMB/125, for the three months ended March
31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Total income of properties. . . . . . . . . . $32,515,073 37,456,038
=========== ===========
Operating loss of ventures. . . . . . . . . . $14,758,391 13,362,580
=========== ===========
Partnership's share of loss . . . . . . . . . $ 4,779,719 5,144,693
=========== ===========
</TABLE>
(12) ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of March 31, 1994
and for the three months ended March 31, 1994 and 1993.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
At March 31, 1994, the Partnership and its consolidated ventures had cash
and cash equivalents of approximately $2,115,000. Such funds and short-term
investments of approximately $17,469,000 are available for the Partnership's
share of leasing costs and capital improvements at 9701 Wilshire Building, 160
Spear Street Building, Springbrook Shopping Center, Eastridge Mall and 260
Franklin Street, and the Partnership's share of operating deficits currently
being incurred at 260 Franklin Street Building (to the extent not funded from
escrowed reserves for 260 Franklin as discussed below), 900 Third Avenue and
9701 Wilshire Building as well as distributions to partners and working
capital requirements, including the Partnership's share of potential future
deficits and financing costs at these and certain other of the Partnership's
investment properties. The Partnership currently has adequate cash and cash
equivalents to maintain the operations of the Partnership. However, the
Partnership has taken steps to preserve its working capital by deciding to
suspend distributions (except for certain withholding requirements) to the
Limited and General Partners effective as of the first quarter of 1992. In
addition, the General Partners and their affiliates have deferred cash
distributions, management and leasing fees and reimbursements payable to them
in an aggregate amount of approximately $6,933,848 (approximately $16 per
interest) through March 31, 1994. These amounts, which do not bear interest,
are expected to be paid in future periods. Effective October 1, 1993, the
Partnership and its consolidated ventures began paying property management and
leasing fees on a current basis. Reference is made to Note 10 relating to
this deferral of distributions, fees and reimbursements.
The Partnership and its consolidated ventures have currently budgeted in
1994 approximately $2,412,000 for leasing costs and other capital
expenditures. The Partnership's share of such items and its share of such
similar items for its unconsolidated ventures in 1994 is currently budgeted to
be approximately $4,571,000. Actual amounts expended in 1994 may vary
depending on a number of factors including actual leasing activity, results of
property operations, liquidity considerations and other market conditions over
the course of the year. The source of capital for such items and for both
short-term and long-term future liquidity requirements and distributions is
expected to be primarily through net cash generated by the Partnership's
investment properties, through an existing obligation of a seller (or its
affiliate) to fund deficits at one property, and through the sale or
refinancing of such investments, as well as cash and short-term investments
currently held.
A number of mortgage loans secured by the Partnership's investment
properties will mature in 1994 and will need to be extended or refinanced,
including the mortgage loans related to the Wells Fargo Center, 900 Third
Avenue, 9701 Wilshire Building, Woodland Hills Apartments and the Dunwoody
Apartments (Phase I and III). In addition, certain other mortgage loans
secured by the Partnership's investment properties are the subject of
discussions with lenders for debt modifications or restructurings, including
the mortgage loans related to 125 Broad and RiverEdge Place. The current
status of the attempts to extend, refinance, modify or restructure these
loans, as well as other possible mortgage loan modifications, are discussed
below.
The mortgage note secured by the Villa Solana Apartments matured on
November 1, 1993. The venture had obtained extensions of this note from the
existing lender until August 1, 1994. The venture paid the lender $125,000 in
extension fees in connection with these extensions. The monthly principal and
interest payment, and the interest rate remained the same on the loan as prior
to the original maturity date. The unpaid principal and accrued interest were
to mature on August 1, 1994, however, the venture sold the investment property
on March 23, 1994 for $16,600,000, before closing costs, as described in Note
9.
The mortgage notes secured by the Woodland Hills Apartments in the
aggregate principal amount of $8,056,667 are scheduled to mature on June 1,
1994. The Partnership plans to refinance these notes when they mature,
although there is no assurance the Partnership will be able to obtain such
financing. The loans have been classified at March 31, 1994 and December 31,
1993 as current liabilities in the accompanying consolidated financial
statements. Reference is made to Note 4(b).
In October 1993, the joint venture ceased making the required debt
service payments on the mortgage note secured by Park at Countryside
Apartments, and commenced discussions with the lender regarding an additional
modification of the loan. However, the venture was unable to secure an
additional modification of the loan. Therefore, as of the date of this
report, the loan is in default and the lender has initiated procedures to
obtain title to the property. The loan in the principal amount of $3,100,000,
has been classified at March 31, 1994 and December 31, 1993 as a current
liability in the accompanying consolidated financial statements. Based on
current and anticipated market conditions, the Partnership and the joint
venture partners are unwilling to commit any additional amounts to the
property since the likelihood of recovering any such amounts is remote. This
is expected to result in the Partnership no longer having an ownership
interest in the property and result in a gain to the Partnership for financial
reporting and Federal income tax purposes with no corresponding distributable
proceeds. Reference is made to Note 4(a)(i).
The first mortgage loan secured by the Dunwoody Crossing Phase I and III
Apartments is scheduled to mature in October 1994, and has been classified as
a current liability at March 31, 1994 and December 31, 1993 in the
accompanying consolidated financial statements. The joint venture plans to
refinance this note when it matures, although there can be no assurance the
joint venture will be able to obtain such financing.
In June 1993, JMB/Owings sold its interest in the Owings Mills Shopping
Center for $9,416,000 represented by a purchase price note. Reference is made
to Note 9(b).
The borrowings of the Partnership and its ventures consist of separate
non-recourse mortgage loans secured by the investment properties and
individually are not obligations of the entire investment portfolio. However,
for any particular investment property incurring deficits, the Partnership or
its ventures, if deemed appropriate, may seek a modification or refinancing of
existing indebtedness and, in the absence of a satisfactory debt modification
or refinancing, may decide, in light of then existing and expected future
market conditions for such investment property, not to commit additional funds
to such investment property. This would result in the Partnership no longer
having an ownership interest in such property and would generally result in a
gain to the Partnership for financial reporting and Federal income tax
purposes with no corresponding distributable proceeds.
Certain of the Partnership's investments have been made through joint
ventures. There are certain risks associated with the Partnership's
investments including the possibility that the Partnership's joint venture
partner(s) in an investment might become unable or unwilling to fulfill its
(their) financial or other obligations, or that such joint venture partner(s)
may have economic or business interests or goals that are inconsistent with
those of the Partnership.
Though the economy has recently shown signs of improvement and financing
is generally becoming more available for certain types of higher-quality
properties in healthy markets, real estate lenders are typically requiring a
lower loan-to-value ratio for mortgage financing than in the past. This has
made it difficult for owners to refinance real estate assets at their current
debt levels unless the value of the underlying property has appreciated
significantly. As a consequence, and due to the weakness of some of the local
real estate markets in which the Partnership's properties operate, the
Partnership is taking steps to preserve its working capital. Therefore, the
Partnership is carefully scrutinizing the appropriateness of any possible
discretionary expenditures, particularly in relation to the amount of working
capital it has available to it and its ventures. By conserving working
capital, the Partnership will be in a better position to meet future needs of
its properties without having to rely on external financing sources.
Piper Jaffray Tower
The Minneapolis office market remains competitive due to the significant
amount of new office building developments, which has caused effective rental
rates achieved at Piper Jaffray Tower to be below expectations. During the
fourth quarter of 1993, the joint venture finalized a lease amendment with
Popham, Haik, Schnobrich & Kaufman, Ltd. (104,843 square feet). The amendment
provides for the extension of the lease term from February 1, 1997 to January
31, 2003 in exchange for a rent reduction effective February 1, 1994. In
addition, the tenant will lease an additional 10,670 square feet effective
August 1, 1995. The rental rate on the expansion space approximates market,
which is significantly lower than the reduced rental rate on the tenant's
current occupied space.
Pursuant to the modification of the mortgage loan made in August, 1992,
to the extent the investment property generates cash flow after leasing and
capital costs, and 25% of the ground rent, such amount will be paid to the
lender as a reduction of the principal balance of the mortgage loan. The
excess cash flow generated by the property in 1992 totalled $923,362 was
remitted to the lender during the third quarter of 1993. During 1993, the
excess cash flow generated under this agreement was $1,390,910 and was
remitted to the lender in May 1994. The mortgage note provides for the lender
to earn a minimum internal rate of return which increases over the term of the
note. Accordingly, for financial reporting purposes, interest expense has
been accrued at a rate of 13.59% per annum which is the estimated minimum
internal rate of return per annum assuming the note is held to maturity. On a
monthly basis, the venture deposits the property management fee into an escrow
account to be used for future leasing costs to the extent cash flow is not
sufficient to cover such items. The manager of the property (which is an
affiliate of the Corporate General Partner) has agreed to defer receipt of its
management fee until a later date. As of March 31, 1994, the manager has
deferred approximately $1,919,000 of management fees. In order for the
Partnership to share in future net sale or refinancing proceeds, there must be
a significant improvement in current market and property operating conditions
resulting in a significant increase in value of the property. Reference is
made to Note 3(g) for further discussion of this investment property.
160 Spear Street Building
Due to the rental concessions granted to facilitate leasing, the property
operated at an approximate break-even level in 1993, and is expected to
operate an approximate break-even level in 1994. As more fully discussed in
Note 4(a)(iii), effective February 1992, the Partnership reached an agreement
with the lender to reduce the current debt service payments and to extend the
loan, which was scheduled to mature on December 10, 1992, to February 10,
1999. Additionally, tenant leases comprising approximately 69% of the
building are scheduled to expire in 1995. It is anticipated that there will
be significant costs related to releasing this space. The venture expects to
approach the lender regarding an additional modification to the loan due to
the increased deficits anticipated in connection with the re-leasing costs.
Should the venture not be successful in obtaining an additional loan
modification or alternative financing, or, should the Partnership decide not
to commit any significant additional funds for the anticipated re-leasing
costs, this may result in the Partnership no longer having an ownership
interest in the property. This would likely result in the Partnership
recognizing a gain for financial reporting and Federal income tax purposes
with no corresponding distributable proceeds.
125 Broad Street Building
Vacancy rates in the downtown Manhattan office market have increased over
the last few years. As vacancy rates rise, competition for tenants increases,
which results in lower effective rental rates. The increased vacancy rate in
the downtown Manhattan office market has resulted primarily from layoffs,
cutbacks and consolidations by many of the financial service companies which,
along with related businesses, dominate this submarket. The Partnership
believes that these adverse market conditions and the negative impact on
effective rental rates may continue over the next few years. The current
competitive market in downtown Manhattan has significantly affected the 125
Broad Street Building, as the occupancy has decreased to 54% at March 31, 1994
partially as a result of a major tenant vacating 395,000 square feet (30% of
the building) at the expiration of its lease during 1991. Additionally, in
October 1993, 125 Broad entered into an agreement with Salomon Brothers Inc.
to terminate its lease covering approximately 231,000 square feet (17% of the
building) at the property on December 31, 1993 rather than its scheduled
termination in January 1997. In consideration for the early termination of
the lease, Salomon Brothers Inc. paid 125 Broad approximately $26,500,000,
plus interest thereon of approximately $200,000 which 125 Broad in turn paid
to its lender to reduce amounts outstanding under the mortgage loan. In
addition, Salomon Brothers Inc. paid JMB/125 $1,000,000 in consideration of
JMB/125's consent to the lease termination. The property will be adversely
affected by low effective rental rates to be achieved upon releasing of the
space. The low effective rental rates coupled with the lower occupancy during
the releasing period are expected to result in the property operating at a
significant deficit in 1994 and for the next several years. The unaffiliated
venture partners (the "O&Y partners"), who are affiliates of Olympia & York
Developments, Ltd. ("O&Y"), are obligated to fund (in the form of interest-
bearing loans) operating deficits and costs of lease-up and capital
improvements through the end of 1995. However, as discussed below, the O&Y
partners are in default in respect to certain of their funding obligations and
it appears unlikely that the O&Y Partners will fulfill their obligations to
125 Broad and JMB/125. Releasing of the building's vacant space will depend
upon, among other things, the O&Y partners advancing the costs associated with
such releasing since JMB/125 does not intend to contribute funds to 125 Broad
to pay such costs. The O&Y partners have made outstanding loans to 125 Broad
of approximately $16,234,000 as of March 31, 1994. Such loans, which are non-
recourse to JMB/125, are payable out of cash flow from property operations or
sale or refinancing proceeds. Based on the facts discussed above and as
described more fully in Note 3(f), 125 Broad recorded a provision for value
impairment as of December 31, 1991 to reduce the net book value of the 125
Broad Street Building to the then outstanding balance of the related non-
recourse financing and O&Y partner loans due to the uncertainty of 125 Broad's
ability to recover the net carrying value of the investment property through
future operations or sale.
O&Y and certain of its affiliates have been involved in bankruptcy
proceedings in the United States and Canada and similar proceedings in
England. Subsequent to December 31, 1992, O&Y emerged from bankruptcy
protection in Canada. In addition, a reorganization of the management of the
company's United States operations has been completed and certain O & Y
affiliates are in the process of renegotiating or restructuring various loan
affecting properties in the United States in which they have an interest. In
view of the present financial condition of O&Y and its affiliates and the
anticipated deficits for the property as well as the existing defaults of the
O&Y partners discussed below, it appears unlikely that the O&Y partners will
meet their financial and other obligations to JMB/125 and 125 Broad.
The O&Y partners have failed to advance necessary funds to 125 Broad as
required under the 125 Broad joint venture agreement, and as a result, 125
Broad defaulted on its mortgage loan, which has an outstanding principal
balance of $277,000,000 in June 1992 by failing to pay approximately
$4,722,000 of the semi-annual interest payment due on the loan. In addition,
during 1992 affiliates of O&Y defaulted on a "takeover space" agreement with
Johnson & Higgins, Inc. ("J&H"), one of the major tenants at the 125 Broad
Street Building, whereby such affiliates of O&Y agreed to assume certain lease
obligations of J&H at another office building in consideration of J&H's
leasing space in the 125 Broad Street Building. As a result of this default,
J&H has offset rent payable to the joint venture for its lease at the 125
Broad Street Building in the amount of approximately $33,200,000 through March
31, 1994, and it is expected that J&H will continue to offset amounts due
under its lease corresponding to amounts by which the affiliates of O&Y are in
default under the "takeover space" agreement. Due to the O&Y affiliates'
default under the "takeover space" agreement and the continuing defaults of
the O&Y partners to advance funds to cover operating deficits, as of March 31,
1994, the arrearage of principal and interest under the mortgage loan had
increased to approximately $48,180,000. As discussed above, approximately
$26,700,000 was remitted to the lender in October 1993 in connection with the
early termination of the Salomon Brothers lease, and was applied towards the
mortgage principal for financial reporting purposes. Due to their obligations
relating to the "takeover space" agreement, the affiliates of O&Y are
obligated for the payment of the rent receivable associated with the J&H lease
at the 125 Broad Street Building. Based on the continuing defaults of the O&Y
partners, JMB/125 has reserved the entire $33,200,000 of rent offset by J&H
and has also reserved approximately $32,600,000 of accrued rents receivable
relating to such J&H lease, since the ultimate collectibility of such amounts
depends upon the O&Y partners' and the O&Y affiliates' performance of their
obligations. The Partnership's share of such losses was approximately
$1,332,000 and $1,737,000 for the three months ended March 31, 1994 and 1993,
respectively, and is included in the Partnership's share of loss from
operations of unconsolidated ventures. The O&Y partners have attempted to
negotiate a restructuring of the mortgage loan with the lender in order to
reduce operating deficits of the property. In view of, among other things,
the significant operating deficits which the property is expected to incur
during 1994 and for the next several years, it is unlikely that a
restructuring of the loan will be obtained. The loan restructuring is part of
a larger restructuring with the lender involving a number of loans secured by
various properties in which O & Y affiliates have an interest. JMB/125 has
notified the O&Y partners that their failure to advance funds to cover the
operating deficits constitutes a default under the 125 Broad joint venture
agreement.
Accordingly, it appears unlikely the O&Y partners will fulfill their
obligations to 125 Broad and JMB/125. As discussed above, it also appears
unlikely that 125 Broad will be able to restructure the mortgage loan. As a
result, JMB/125 is not likely to commit any significant additional amounts to
the property. This would result in the Partnership no longer having an
ownership interest in the property. If this event were to occur, the
Partnership would recognize a net gain for financial reporting and Federal
income tax purposes without any corresponding distributable proceeds. In
addition, under certain circumstances, JMB/125 may be required to make an
additional capital contribution to 125 Broad in order to make up a deficit
balance in its capital account, and the Partnership may, under certain
circumstances, be required to bear a share of additional capital contribution
obligation. Reference is made to Note 3(f).
260 Franklin Street Building
The office market in the Financial District of Boston remains competitive
due to new office building developments and layoffs, cutbacks and
consolidations by financial service companies. The effective rental rates
achieved upon releasing have been substantially below the rates which were
received under the previous leases for the same space. In December 1991, the
affiliated joint venture reached an agreement with the lender to modify the
long-term mortgage note secured by 260 Franklin Street Building. The property
is currently expected to operate at a deficit for 1994 and for several years
thereafter. The loan modification required that the affiliated joint venture
establish an escrow account for excess cash flow from the property's
operations (computed without a deduction for property management fees and
lease commissions to an affiliate) to be used to cover the cost of capital and
tenant improvements and lease inducements, as defined, which are the primary
components of the anticipated operating deficits noted above with the balance,
if any, of such escrowed funds available at the scheduled or accelerated
maturity to be used for the payment of principal and interest due to the
lender. Beginning January 1, 1992, 260 Franklin began escrowing the payment
of property management fees and lease commissions owed to an affiliate of the
Corporate General Partner pursuant to the terms of the debt modification. The
Partnership's share of such fees and lease commissions is approximately
$495,000 at March 31, 1994. In 1995, the leases of tenants occupying
approximately 107,000 square feet (approximately 31% of the property) at the
260 Franklin Street Building expire. It is anticipated that there would be
significant costs related to releasing this space. In addition, the long-term
mortgage loan matures January 1, 1996. If the affiliated joint venture is
unable to refinance or extend the mortgage loan, the Partnership may decide
not to commit any significant additional funds to the property. This may
result in the Partnership no longer having an ownership interest in the
property. This would likely result in the Partnership recognizing a gain for
financial reporting purposes.
900 Third Avenue Building
During the quarter, occupancy of this building decreased to 94%, down
from 95% at the end of 1993. The midtown Manhattan market remains depressed.
16% of the leases at the property expire during 1994 through 1996. Although,
the joint venture is in discussions with the existing lender for a possible
refinancing and extension of its mortgage loan in the principal amount of
$90,411,000 which matures in December 1994, there can be no assurance that the
Partnership will be successful in such discussions. The property is expected
to operate at a deficit in 1994 due to certain leasing costs expected to be
incurred. Such deficit would be paid by cash reserves currently held by the
joint venture.
300 East Lombard Building
Effective September 30, 1991, the Partnership sold, to an affiliate of
the joint venture partners, 62% of its interest in a joint venture that owns a
55% interest in the 300 East Lombard investment property. In conjunction with
the sale, the Partnership and buyer established a put-call option on the
Partnership's remaining interest in the joint venture. In January 1993, the
Partnership sold its remaining interest in accordance with the terms of the
option. Reference is made to Note 9.
Wells Fargo Center
The Wells Fargo Center operates in the Downtown Los Angeles office
market, which has become extremely competitive over the last several years
with the addition of several new buildings that has resulted in a high vacancy
rate of approximately 25% in the marketplace. In 1992, two major law firm
tenants occupying approximately 11% of the building's space approached the
joint venture indicating that they were experiencing financial difficulties
and desired to give back a portion of their leased space in lieu of ceasing
business altogether. The joint venture reached agreements which resulted in a
reduction of the space leased by each of these tenants. The Partnership is
also aware that a major tenant, IBM, leasing approximately 58% of the tenant
space in the Wells Fargo Building, is sub-leasing or attempting to sub-lease
approximately one-half of its space which is scheduled to expire in December
1998. The Partnership expects that the competitive market conditions will
have an adverse affect on the building through lower effective rental rates
achieved on releasing of existing space which expires or is given back over
the next several years. The Partnership's share of distributions from the
joint venture for 1992 and 1993 were insufficient to cover the debt service on
the promissory note secured by the Partnership's interest in the joint
venture. Such shortfall was due to rental concessions granted to facilitate
leasing of space taken back from the two tenants noted above and the expansion
of one of the other major tenants in the building. The property is expected
to produce cash flow in 1994. The mortgage note secured by the property, as
well as the promissory note secured by the Partnership's interest in the joint
venture are scheduled to mature in December 1994. The promissory note secured
by the Partnership's interest in the joint venture has been classified at
March 31, 1994 and December 31, 1993 as a current liability in the
accompanying consolidated financial statements. In view of, among other
things, current and anticipated market and leasing conditions affecting the
property, including uncertainty regarding the amount of space, if any, which
IBM will renew when its lease expires in December 1998, the South Tower
Venture, as a matter of prudent accounting practice, recorded a provision for
value impairment of $67,479,871 (of which $20,035,181 has been allocated to
the Partnership and was reflected in the Partnership's share of operations of
unconsolidated ventures). Such provision, made as of August 31, 1993, was
recorded to reduce the net carrying value of the Wells Fargo Center to the
then outstanding balance of the related non-recourse debt. Further, there is
no assurance that the joint venture or the Partnership will be able to
refinance these notes when they mature in December of 1994. In the absence of
an extension or refinancing of the notes, the Partnership may decide not to
commit any significant additional amounts to the property. This would likely
result in the Partnership no longer having an ownership interest in the
property, and would result in a gain for financial reporting and for Federal
income tax purposes with no corresponding distributable proceeds. The
property did not sustain any significant damage as a result of the January
1994 earthquake in southern California. Reference is made to Note 1.
RiverEdge Place Building
The RiverEdge Place Building was 100% leased to an affiliate of the major
tenant, First American Bank, under a long-term over-lease executed in
connection with the purchase of the property. The Bank and its affiliate
approached the Partnership indicating that they were experiencing financial
difficulties. On June 23, 1992, the Partnership reached an agreement with the
Bank and received cash and U.S. Government securities valued at $9,325,000 for
the buy-out of the Bank's over-lease obligations. The Partnership took this
course of action due to the First American Bank's deteriorating financial
condition and the Federal Deposit Insurance Corporation's ability to assume
control of the Bank and to terminate the over-lease obligation. The
$9,325,000 buy-out was concurrently remitted to the lender to reduce the
mortgage loan secured by the RiverEdge Place Building and the Partnership
continues to negotiate with the lender to restructure the mortgage note with a
current outstanding balance of $18,166,294 in order to reduce operating
deficits anticipated as a result of the over-lease buy-out. In connection
with the Partnership's negotiations with the lender, the Partnership ceased
making debt service payments effective July 1, 1992. If the Partnership's
negotiations for mortgage note restructuring are not successful, the
Partnership would likely decide, based upon current market conditions and
other considerations relating to the property and the Partnership's portfolio,
not to commit significant additional amounts to the property. This would
result in the Partnership no longer having an ownership interest in the
property and would result in a gain for financial reporting and Federal income
tax purposes without any corresponding distributable proceeds. The mortgage
note has been classified as a current liability in the accompanying
consolidated financial statements. Additionally, the tenant lease with First
American Bank for approximately 120,000 square feet has been assigned to and
assumed by SouthTrust Bank of Georgia in connection with that bank's
acquisition of most of the remaining assets of First American Bank. Effective
August 1, 1992, the Partnership restructured the lease with SouthTrust Bank of
Georgia reducing the tenant's space to approximately 92,000 square feet, as
well as, reducing the effective rent on the retained space in exchange for an
extension of the lease term from April, 1994 to July, 2002. The restructuring
of SouthTrust Bank's lease reduced the occupied space of the RiverEdge Place
Building from 96% to 85% at that time. The Partnership is actively pursuing
replacement tenants for the building's vacant space including the space taken
back from the SouthTrust lease restructuring.
21900 Burbank Building
The 21900 Burbank Building sustained some damage as a result of the
earthquakes that occurred in January 1994 in southern California. Preliminary
estimates of the damage range from $200,000 to $500,000. Much of this damage
occurred within tenant premises in the building. The Partnership does not
believe it has any significant obligations to reimburse tenants for such
repairs. While the Partnership carried earthquake insurance on this property,
it is anticipated that the total damages will not exceed the policy's
deductible amount. Although the property produced cash flow to the
Partnership in 1993, there is uncertainty as to the Partnership's ability to
recover the net carrying value of the investment property through future
operations and sale as a result of the substantial amount of tenant space
(approximately 83% of the building) under leases that are scheduled to expire
during 1995 and 1996.
NewPark Associates
NewPark Associates commenced a renovation of NewPark Mall in early 1993
and such renovation was substantially completed as of September 30, 1993.
NewPark Mall may be subject to increased competition from a new mall that is
scheduled to open in the vicinity in late 1994.
California Plaza
The property operated at a deficit in 1993 due to the costs incurred in
connection with the leasing of space which was vacant or under leases that
expired in 1993. The property is expected to produce cash flow in 1994,
however, as discussed below, net cash flow is to be escrowed. Effective March
1, 1993, the joint venture ceased making the scheduled debt service payments
on the mortgage loan secured by the property which was scheduled to mature on
January 1, 1997. Subsequently, the Partnership made partial debt service
payments based on cash flow of the property through December, 1993 when an
agreement was reached with the lender to modify the loan on December 22, 1993.
As more fully discussed in Note 4(a)(vi), the loan modification reduced the
pay rate of monthly interest only payments to 8% per annum, effective February
1993, extended the loan maturity date to January 1, 2000, and requires the net
cash flow of the property to be escrowed (as defined). The venture also
funded $500,000 into a reserve account as required by the modification
agreement. This reserve account is to be used to fund future costs, including
tenant improvements, leasing commissions and capital improvements, approved by
the lender (none used as of March 31, 1994). Additionally, due to the
uncertainty of the Partnership's ability to recover the net carrying value of
the California investment property, the Partnership made, as a matter of
prudent accounting practice, a provision for value impairment of California
Plaza at June 30, 1993 of $2,166,799 (which included $1,558,492 relating to
the venture partner's deficit investment balance at that date). Such
provision reduced the net carrying value of the investment property to the
June 30, 1993 outstanding balance of the related non-recourse mortgage note.
Reference is made to Notes 1 and 4(b)(vi).
Erie-McClurg Parking Facility
On September 25, 1992, the Partnership, through Erie-McClurg Associates,
sold the Erie-McClurg Parking Facility located in Chicago, Illinois.
Concurrently, with the sale of the Erie-McClurg Parking Facility, the
Partnership entered into an agreement with the unaffiliated manager of the
parking facility to induce the manager to re-write the existing long-term
management agreement at less favorable terms. This agreement guarantees the
manager 100% of the compensation which would have been earned under the
agreement prior to the sale in years one through five and 50% of any potential
difference between the management fee under the agreement prior to the sale
and the renegotiated agreement with the purchaser (as defined) in years six
through eighteen.
In connection with this agreement, at closing the Partnership paid the
unaffiliated manager a partial settlement of $400,000 and has estimated the
remaining contingent liability to be $360,000. This contingent liability is
recorded as a long-term liability in the accompanying consolidated financial
statements.
Springbrook Shopping Center
In October 1993, a tenant occupying 20% of the space at the Springbrook
Shopping Center vacated upon expiration of its lease. The Partnership is
actively pursuing replacement tenants for the vacant space, but there is no
assurance that any leases will be consummated. Due to the uncertainty of re-
leasing this space, and due to the property being expected to operate at a
deficit in 1994, there is uncertainty as to the Partnership's ability to
recover the net carrying value of the investment property through future
operations or sale. Thus, as a matter of prudent accounting practice, the
Partnership made a provision for value impairment of such investment property
of $7,534,763 at December 31, 1993. Such provision is recorded to reduce the
net carrying value of the investment property to the December 31, 1993
outstanding balance of the related non-recourse financing. Reference is made
to Note 1.
Other
The mortgage note secured by Eastridge Mall is scheduled to mature on
October 1, 1995. There is no assurance that the venture will be able to
refinance or obtain alternative financing when the note matures. The property
is expected to operate at a deficit in 1994.
The 9701 Wilshire Building operated at a slight deficit in 1993 due to
the costs incurred in connection with the re-leasing of the vacant space in
the building, and is expected to operate at a deficit in 1994. The mortgage
note secured by the property matured on January 1, 1994. The Partnership
obtained extensions of this note from the existing lender until August 1,
1994. The Partnership paid the lender $110,000 in extension fees in
connection with these extensions. The monthly principal and interest payment,
and the interest rate remain the same on the loan as prior to the original
maturity date. The unpaid principal and interest matures on August 1, 1994,
and thus, the loan has been classified at March 31, 1994 and December 31, 1993
as a current liability in the accompanying consolidated financial statements.
The Partnership is pursuing a sale or alternative financing of the property,
however, there is no assurance that the Partnership will be successful in
either refinancing or selling the property. The property did not sustain any
significant damage as a result of the January 1994 earthquake in southern
California.
Due to the factors discussed above, it is likely that the Partnership
will hold certain of its investment properties longer than originally
anticipated in order to maximize the return to the Limited Partners. Although
the Partnership expects to distribute sales proceeds from the disposition of
the Partnership's remaining assets, without a dramatic improvement in market
conditions Limited Partners will receive significantly less than their
original investment. In addition, in connection with sales or other
dispositions (including transfers to lenders) of properties (or interests
therein) owned by the Partnership or its joint ventures, the Limited Partners
may be allocated substantial gain for Federal income tax purposes.
RESULTS OF OPERATIONS
The increase in short-term investments at March 31, 1994 as compared to
December 31, 1993 is primarily due to the receipt of approximately $2,560,000
of net sale proceeds (after payment of prorations) related to the sale of
Villa Solana Apartments on March 23, 1994 (see Note 9(a)), and the receipt of
a $1,664,000 distribution from the Wells Fargo Center investment property
related to 1993 and first quarter 1994 operations.
The decrease in land, building and improvements,accumulated depreciation,
current portion of long-term debt, and tenant security deposits is primarily
due to the sale of Villa Solana Apartments on March 23, 1994. Reference is
made to Note 9(a).
The increase in the balance of accounts payable at March 31, 1994 as
compared to December 31, 1993 is primarily due to a distribution payable at
March 31, 1994 to a venture partner related to the sale of Villa Solana
Apartments on March 23, 1994 (see Note 9), an increase in prepaid rents at the
260 Franklin and 160 Spear Street investment properties, and the timing of
payment of certain expenses at the 260 Franklin investment property.
The increase in the balance of accrued real estate taxes at March 31,
1994 as compared to December 31, 1993 is primarily due to the timing of real
estate tax payments at certain of the Partnership's investment properties.
The increase in property operating expenses for the three months ended
March 31, 1994 as compared to the same period in 1993 is primarily due to the
loan extension fees of approximately $210,000 incurred at the Villa Solana
Apartments and the 9701 Wilshire building, and increases in certain operating
expenses at certain of the Partnership's other investment properties.
The decrease in the Partnership's share of loss from operations of
unconsolidated ventures for the three months ended March 31, 1994 as compared
to the same period in 1993 is primarily due to the Partnership's share of
losses of JMB/Owings in 1993. JMB/Owings sold its Partnership interest in
Owings Mills Limited Partnership on June 30, 1993, and thus there are no
losses from JMB/Owings in 1994 for financial reporting purposes.
The decrease in venture partners' share of ventures' operations for the
three months ended March 31, 1994 as compared to the same period in 1993 is
primarily due to the venture partner at the California Plaza investment
property not being allocated any losses in 1994, as a result of the impairment
recorded at California Plaza at June 30, 1993 which resulted in the write-off
of the venture partner's deficit investment balance at June 30, 1993.
Reference is made to Note 1.
The $631,566 gain on sale of investment property for the three months
ended March 31, 1994 relates to the sale of the Villa Solana Apartments in
March 1994. Reference is made to Note 9(a).
The $229,140 gain on sale of interests in unconsolidated ventures for the
three months ended March 31, 1993 relates to the Partnership's sale of the
remaining interest in Harbor Overlook Limited Partnership in January 1993.
Reference is made to Note 9(c).
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS ON SENIOR SECURITIES
The mortgage loan secured by the 125 Broad Street property is in default
at March 31, 1994 due to the partial payment of scheduled debt service since
June 1992. The mortgage loan secured by the Park at Countryside Apartments is
in default due to the venture ceasing the required debt service payments in
October 1993. In addition, in July, 1992, the Partnership ceased making debt
service payments on the mortgage loan secured by the RiverEdge Place Building.
Reference is made to Notes 3(f), Notes 4(a)(i) and 4(a)(iv) of Notes to
Consolidated Financial Statements filed with this quarterly report and the
discussion of those investment properties in Liquidity and Capital Resources
contained in the Management's Discussions and Analysis of Financial Condition
section of this quarterly report for discussions of such loan defaults, which
are hereby incorporated herein by reference.
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment properties.
<CAPTION>
1993 1994
------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. 900 Third Avenue Building
New York, New York. . . . . . . . . . . . . . . . . . . 91% 94% 94% 95% 94%
2. Piper Jaffray Tower
Minneapolis, Minnesota 97% 98% 98% 98% 99%
3. RiverEdge Place (a)
Fulton County (Atlanta), Georgia. . . . . . . . . . . . 85% 83% 84% 89% 87%
4. Wells Fargo Center - IBM Tower
Los Angeles, California . . . . . . . . . . . . . . . . 98% 98% 98% 98% 97%
5. Villa Solana Apartments
Laguna Hills, California. . . . . . . . . . . . . . . . 94% 91% 91% 91% N/A
6. Eastridge Mall
Casper, Wyoming . . . . . . . . . . . . . . . . . . . . 90% 90% 90% 91% 91%
7. Woodland Hills Apartments
DeKalb County (Atlanta), Georgia. . . . . . . . . . . . 96% 87% 98% 92% 89%
8. Park at Countryside Apartments
Port Orange (Daytona Beach), Florida. . . . . . . . . . 97% 95% 97% 99% 98%
9. 160 Spear Street Building
San Francisco, California . . . . . . . . . . . . . . . 93% 95% 94% 91% 91%
10. 21900 Burbank Boulevard Building
Los Angeles (Woodland Hills), California. . . . . . . . 98% 98% 100% 99% 99%
11. 125 Broad Street Building
New York, New York. . . . . . . . . . . . . . . . . . . 72% 72% 72% 54% 54%
12. Owings Mills Shopping Center
Owings Mills (Baltimore County), Maryland . . . . . . . 93% N/A N/A N/A N/A
13. 260 Franklin Street Building
Boston, Massachusetts . . . . . . . . . . . . . . . . . 97% 98% 97% 99% 99%
14. 9701 Wilshire Building
Beverly Hills, California . . . . . . . . . . . . . . . 92% 96% 93% 93% 89%
15. California Plaza
Walnut Creek, California. . . . . . . . . . . . . . . . 94% 96% 97% 95% 95%
16. Dunwoody Crossing (Phase I, II and III) Apartments
DeKalb County (Atlanta), Georgia (b). . . . . . . . . . 94% 96% 93% 90% 91%
17. NewPark Mall
Newark (Alameda County), California . . . . . . . . . . 71% 73% 80% 81% 80%
18. Springbrook Shopping Center
Bloomingdale, Illinois. . . . . . . . . . . . . . . . . 95% 95% 95% 74% 74%
<PAGE>
<FN>
- - --------------------
An N/A indicates that the property, or the Partnership's interest in the
property was sold and was not owned by the Partnership at the end of the
period.
(a) This investment property, formerly the First American Bank Building,
had been 100% leased pursuant to an over-lease since the date the Partnership
acquired the property until June 1992. However, reference is made to
Management's Discussion and Analysis of Financial Condition and Results of
Operations regarding the over-lease buy-out in June, 1992.
(b) Formerly known as Post Crossing, Post Crest and Post Terrace
Apartments, respectively.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4-A. Assignment Agreement set forth as Exhibit B to the
Prospectus is hereby incorporated herein by reference to Exhibit 4-A to the
Partnership's report for December 31, 1992 on Form 10-K (File No. 0-16111)
dated March 19, 1993.
4-B. Documents relating to the modification of the mortgage
loan secured by 260 Franklin Street Building are hereby incorporated herein by
reference to the Partnership's report for December 31, 1992 on Form 10-K (File
No. 0-16111) dated March 19, 1993.
4-C. Documents relating to the modification of the mortgage
loans secured by the 160 Spear Street Building are hereby incorporated herein
by reference to Exhibit 4-C to the Partnership's report for December 31, 1992
on Form 10-K (File No. 0-16111) dated March 19, 1993.
4-D. Documents relating to the refinancing of the mortgage
note secured by the Post Crest Apartments are hereby incorporated herein by
reference to Exhibit 4-D to the Partnership's report for December 31, 1992 on
Form 10-K (File No. 0-16111) dated March 19, 1993.
10-A. Escrow Deposit Agreement is hereby incorporated herein by
reference to the Partnership Registration Statement on Form S-11 (File No.
2-95382) dated January 18, 1985.
10-B. Acquisition documents relating to the purchase by the
Partnership of an interest in the 900 Third Avenue Building in New York, New
York, are hereby incorporated herein by reference to the Partnership's
Registration Statement on Form S-11 (File No. 2-95382) dated January 18, 1985.
10-C. Acquisition documents relating to the purchase by the
Partnership of an interest in the Piper Jaffray Tower in Minneapolis,
Minnesota, are hereby incorporated herein by reference to the Partnership's
Registration Statement on Form S-11 (File No. 2-95382) dated January 18, 1985.
10-D. Acquisition documents relating to the purchase by the
Partnership of the NBG Building in Fulton County, Georgia, are hereby
incorporated herein by reference to the Partnership's Registration Statement
on Amendment No. 2 to Form S-11 (File No. 2-95382) dated July 5, 1985.
10-E. Acquisition documents relating to the purchase by the
Partnership of an interest in the Crocker Center South Tower in Los Angeles,
California, are hereby incorporated herein by reference to the Partnership's
Registration Statement on Amendment No. 2 to Form S-11 (File No. 2-95382)
dated July 5, 1985.
10-F. Acquisition documents relating to the purchase by the
Partnership of an interest in the Villa Solana Apartments in Laguna Hills,
California, are hereby incorporated herein by reference to the Partnership's
Registration Statement on Post-Effective Amendment No. 1 to Form S-11 (File
No. 2-95382) dated September 13, 1985.
10-G. Acquisition documents relating to the purchase by the
Partnership of an interest in the Eastridge Mall in Casper, Wyoming, are
hereby incorporated herein by reference to the Partnership's Registration
Statement on Post Effective Amendment No. 1 to Form S-11 (File No. 2-95382)
dated September 13, 1985.
10-H. Acquisition documents relating to the purchase by the
Partnership of the Summit Hills Apartments in DeKalb County, Georgia, are
hereby incorporated herein by reference to the Partnership's Registration
Statement on Post Effective Amendment No. 2 to Form S-11 (File No. 2-95382)
dated December 13, 1985.
10-I. Acquisition documents relating to the purchase by the
Partnership of an interest in the 160 Spear Street Building in San Francisco,
California, are hereby incorporated herein by reference to the Partnership's
Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File
No. 2-95382) dated March 13, 1986.
10-J. Acquisition documents relating to the purchase by the
Partnership of an interest in the Baltimore Federal Financial Building in
Baltimore, Maryland, are hereby incorporated herein by reference to the
Partnership's Registration Statement on Post-Effective Amendment No. 3 to Form
S-11 (File No. 2-95382) dated March 13, 1986.
10-K. Acquisition documents relating to the purchase by the
Partnership of the Arthur D. Little Building in Woodland Hills, California,
are hereby incorporated herein by reference to the Partnership's Registration
Statement on Post-Effective Amendment No. 3 to Form S-11 (File No. 2-95382)
dated March 13, 1986.
10-L. Acquisition documents relating to the purchase by the
Partnership of an interest in the Park at Countryside Apartments in Port
Orange, Florida, are hereby incorporated herein by reference to the Partner-
ship's Registration Statement on Post-Effective Amendment No. 3 to Form S-11
(File No. 2-95382) dated March 13, 1986.
10-M. Acquisition documents relating to the purchase by the
Partnership of an interest in the Owings Mills Shopping Center in Owings
Mills, Maryland, are hereby incorporated herein by reference to the Partner-
ship's Registration Statement on Post-Effective Amendment No. 3 to Form S-11
(File No. 2-95382) dated March 13, 1986.
10-N. Acquisition documents relating to the purchase by the
Partnership of an interest in the 125 Broad Street Building, New York, New
York, are hereby incorporated herein by reference to the Partnership's
Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File
No. 2-95382) dated March 13, 1986.
10-O. Acquisition documents relating to the purchase by the
Partnership of an interest in the Boatmen's Center in Kansas City, Missouri,
are hereby incorporated herein by reference to the Partnership's Registration
Statement on Post-Effective Amendment No. 3 to Form S-11 (File No. 2-95382)
dated March 13, 1986.
10-P. Acquisition documents relating to the purchase by the
Partnership of an interest in the 260 Franklin Street Building in Boston,
Massachusetts, are hereby incorporated herein by reference to the Partner-
ship's Registration Statement on Post-Effective Amendment No. 4 to Form S-11
(File No. 2-95382) dated April 30, 1986.
10-Q. Acquisition documents relating to the purchase by the
Partnership of an interest in the Mitsui Manufacturers Bank Building in
Beverly Hills, California, are hereby incorporated herein by reference to the
Partnership's Registration Statement on Post-Effective Amendment No. 5 to Form
S-11 (File No. 2-95382) dated July 31, 1986.
10-R. Acquisition documents relating to the purchase by the
Partnership of an interest in the California Plaza office building in Walnut
Creek, California are hereby incorporated herein by reference to the
Partnership's Registration Statement on Post-Effective Amendment No. 5 to Form
S-11 (File No. 2-95382) dated July 31, 1986.
10-S. Acquisition documents relating to the purchase by the
Partnership of the Springbrook Shopping Center in Bloomingdale, Illinois, are
hereby incorporated herein by reference.
10-T. Acquisition documents relating to the purchase by the
Partnership of the Erie-McClurg Parking Facility in Chicago, Illinois are
hereby incorporated herein by reference.
10-U.* Real Estate Purchase Agreement dated June 30, 1992,
between Erie-McClurg Associates ("Beneficiary") and The Streeterville
Corporation ("Purchaser") for the sale of Erie-McClurg Parking Facility, is
hereby incorporated herein by reference.
10-V.* First Amendment to Real Estate Purchase Agreement dated
August 26, 1992, between Erie-McClurg Associates ("Beneficiary") and The
Streeterville Corporation ("Purchaser") for the sale of Erie-McClurg Parking
Facility, is hereby incorporated herein by reference.
10-W.* Second Amendment to Real Estate Purchase Agreement dated
September 3, 1992, between Erie-McClurg Associates ("Beneficiary") and The
Streeterville Corporation ("Purchaser") for the sale of Erie-McClurg Parking
Facility, is hereby incorporated herein by reference.
10-X. Amended and Restated Articles of Partnership of JMB/125
Broad Building Associates, dated April 21, 1993 between Carlyle Advisors, Inc.
and Carlyle-XV Associates, L.P. relating to the 125 Broad Street Building, is
hereby incorporated herein by reference to the Partnership's report for
December 31, 1993 on Form 10-K (File No. 0-16111) dated March 28, 1994.
10-Y. Documents relating to the modification of the mortgage
loan secured by California Plaza are hereby incorporated herein by reference
to the Partnership's report for December 31, 1993 on Form 10-K (File No. 0-
16111) dated March 28, 1994.
10-Z. Agreement for Purchase and Sale of Real Estate and
Related Property related to the sale of Villa Solana Apartments dated February
7, 1994 between Villa Solana Associates ("Seller") and EQR-Villa Solana
Vistas, Inc. ("Purchasers") is filed herewith.
10-AA. Amendment to the Agreement for Purchase and Sale of Real
Estate and Related Property related to the sale of Villa Solana Apartments
dated February 25, 1994 between Villa Solana Associates ("Seller") and EQR-
Villa Solana Vistas, Inc. ("Purchasers") is filed herewith.
10-BB. Second Amendment to Agreement for Purchase and Sale of
Real Estate and Related Property related to the sale of Villa Solana
Apartments dated March 4, 1994 between Villa Solana Associates ("Seller") and
EQR-Villa Solana Vistas, Inc. ("Purchaser") is filed herewith.
10-CC. Takeover agreement relating to Johnson & Higgins space at
the 125 Broad Building is filed herewith.
---------------
* Previously filed as exhibits 10-U, 10-V and 10-W,
respectively, to the Partnership's report for December 31, 1992 on Form 10-K
of the Securities Exchange Act of 1934 (File No. 0-16111) dated March 19, 1993
and hereby incorporated herein by reference.
(b) The following report on Form 8-K has been filed for the
quarter covered by this report:
(i) None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 11, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person in the capacity and on
the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: May 11, 1994
TAKEOVER AGREEMENT
------------------
AGREEMENT, dated this 11th day of August 1983, between 0LYMPIA & YORK 125
BROAD STREET COMPANY, a New York partnership with its office at 245 Park Avenue,
New York, New York 10017 (hereinafter called "Owner") and JOHNSON & HIGGINS, a
New Jersey corporation with its office at 95 Wall Street, New York, New York
10005 (hereinafter called "J&H").
WITNESSETH
----------
WHEREAS:
A. Owner is the landlord of the building known as 125 Broad Street, New
York, New York (hereinafter called the "Building");
B. J&H is leasing from Owner a portion of the Building on terms and
conditions set forth in a lease (hereinafter called the "Broad Street Lease")
between Owner and J&H being executed simultaneously herewith;
C. J&H has heretofore executed a lease for office space comprising the
second through twelfth floors (hereinafter called the "Hanover Space") within
the building known as 7 Hanover Square, New York, New York, pursuant to a
certain lease dated September 28th, 1981 between Seven Hanover Associates as
landlord and J&H as tenant as amended by Agreement dated August 5, 1983
(hereinafter called the "Hanover Lease");
D. J&H has executed a lease for the entire building (excluding certain
ground floor space) known as 46-48 Water Street (hereinafter called the "Water
Street Space") pursuant to a certain lease dated March 7, 1983 between 46 Water
Associates, as landlord and J&H as tenant (hereinafter called the "Water Street
Lease");
E. J&H and the Landlords (as hereinafter defined) have executed an
agreement dated March 7, 1983 with respect to the creation of openings between
the Water Street Space and the Hanover Space (hereinafter called the "Joinder of
Space Agreement"); and
F. Owner has agreed to become responsible to J&H for its obligations as
tenant under the Hanover Lease and the Water Street Lease and the Joinder of
Space Agreement (such two leases and such agreement being hereinafter
collectively called the "Takeover Leases") pursuant to the terms and provisions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein the parties hereto covenant and agree as follows:
1. J&H represents and warrants to Owner that: (i) true and complete
copies of the Takeover Leases are annexed hereto as Exhibit A and that the same,
together with certain other documents annexed hereto as Exhibit A, in the
aggregate constitute the entire agreements binding and affecting J&H in
connection with the space demised thereunder (hereinafter in the aggregate
called the "Takeover Space"); (ii) as of the date hereof the Takeover Space
is free of all subtenancies and/or other claims of possession (except for the
existing
tenants of the Water Street Space) created by or known to J&H; (iii) J&H has
to date received no bills or statements from the respective landlords under
the Takeover Leases (hereinafter sometimes collectively called "Landlords" or
referred to individually as "Landlord") for rent or additional rent or for
tenant improvements or any other charges other than as are annexed hereto as
Exhibit B; (iv) J&H has delivered to Owner true and correct copies of all
plans which J&H has delivered to the Landlord under the Hanover Lease, a list
of which is annexed hereto as Exhibit F (hereinafter called "Tenant's Plans");
(v) annexed hereto as Exhibit C is a schedule setting forth the dates on
which Tenant's Plans were to be delivered in accordance with the terms of the
Hanover Lease and the dates on which plans complying therewith were delivered;
(vi) annexed hereto as Exhibit D are true and correct copies of all agreements,
orders, estimates and other pertinent data in the possession of J&H relating
to the costs of improvements, work, services and materials being assumed by
Owner (hereinafter called "Leasehold Improvements") which costs in no event
exceed in the aggregate $8,000,000; and (vii) J&H has received no notices of
default from the Landlords under the Takeover Leases and has no knowledge of
any defaults thereunder which would, after notice or with the passage of time
or otherwise, entitle either Landlord to terminate either of the Takeover
Leases.
2. Owner shall have the right (in the name of J&H or otherwise, as Owner
shall determine) to direct or cause J&H to exercise its rights under the
Takeover Leases with respect to assignments thereof and subletting of all or
portions of the Takeover Space or any other disposition of the Takeover Space
or any part thereof before and during the respective terms of the Takeover
Leases. J&H covenants and agrees that it will fully cooperate with Owner in
the assignment of the Takeover Leases and the subletting or other disposition
of the Takeover Space or any part thereof and shall use its best efforts in
obtaining the consent, if and when needed, of the Landlords to any such
disposition of and in all matters pertaining to the Takeover Leases and/or
the Takeover Space.
3. J&H covenants and agrees (wherever a party is said herein to
"covenant" as to any matter, it shall be deemed to have "covenanted and agreed")
that it shall at all times hereafter promptly deliver to Owner all bills,
notices, invoices, statements and other communications which J&H receives from
the Landlords. J&H covenants that it will, upon request of Owner, from time to
time, promptly execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, to Owner or to anyone Owner shall designate, such
papers and instruments (including, but not limited to, any assignment, sublease
or other similar or dissimilar instrument) pertaining, directly or indirectly,
to the Takeover Leases or any interest therein and/or the Takeover Space or any
part thereof as Owner shall deem necessary or desirable. J&H covenants that it
will, when requested by Owner, give or cause to be given, to the Landlords such
notice or notices or other communications as Owner shall specify including any
notices required for the valid exercise of any options contained in the Takeover
Leases and J&H shall in no event transmit any such notice or any other notice
whatsoever except upon the prior written request of Owner. Notwithstanding the
foregoing, in no event shall any option to extend the term of any Takeover Lease
be exercised unless J&H is protected against any resulting liability in a manner
fully satisfactory to J&H in its absolute discretion. Any notice or other
communication shall be transmitted by J&H to the Landlords promptly (and in any
event no later than as required by the circumstances dictating the giving of
such notice) after any such written request by Owner, and J&H hereby
constitutes and appoints Owner its attorney-in-fact to execute and deliver
such instruments for and on behalf of J&H. Such appointment and any similar
appointment in this Agreement, or wherever in or pursuant to this Agreement
Owner is authorized to act for or on behalf of J&H, the same shall be deemed
a power coupled with an interest and irrevocable by J&H. Owner shall be
entitled to make any agreement and/or arrangement with the Landlords which
would result in a reduction or discharge of J&H's obligations under the
Takeover Leases or with respect to the Takeover Space, on such terms as Owner,
in its reasonable discretion, may decide (but shall not make any agreement
with the Landlords which would increase the obligations of J&H under the
Takeover Leases without the consent of J&H, which shall not be unreasonably
withheld). All rents, charges and any other sums, however designated, that
are derived from any assignment of the Takeover Leases or subletting or other
disposition of the Takeover Space or any part thereof including any sums
payable by the Landlords in the event that they exercise any right or option
to recapture contained in the Takeover Leases shall belong to and be the
property of Owner and shall be collected by Owner, unless Owner advises
J&H that Owner elects not to collect such moneys or any part of such moneys in
which event J&H shall at Owner's request make such collections on behalf of
Owner and remit the same promptly to Owner. At Owner's request, J&H shall
immediately confirm in writing to any subtenant of the Takeover Space that
Owner is authorized by J&H to collect rentals, charges or any other monies
as set forth in this Paragraph 3.
4. Owner shall indemnify and hold harmless J&H with respect to J&H's
obligations as sublessor under any sublease or as assignor of any assignment or
with respect to any other disposition of the Takeover Leases and/or the Takeover
Space which Owner requests J&H to execute and any claims arising thereunder, and
Owner is authorized, at Owner's expense, to perform on behalf of J&H, J&H's
obligations as sublessor of the Takeover Space.
5. Owner shall indemnify and hold J&H harmless for all of its
obligations as the tenant under the Takeover Leases from and after the date
hereof and all costs, expenses, claims and liability incurred in connection with
or arising under the Takeover Leases, including without limitation occupancy
taxes and any and all rent, additional rent, utility charges or other expenses.
Owner shall perform, or cause to be performed on behalf of J&H, any and all
obligations of J&H as tenant, of whatever kind or nature arising hereafter under
or in connection with the Takeover Leases. Owner is authorized by J&H to pay any
of J&H's bills relating to the Takeover Space directly to the entity issuing
such bill. J&H shall cooperate with Owner to minimize and mitigate Owner's
obligation hereunder. If Owner shall fail to perform or cause to be
performed on behalf of J&H any of the obligations of J&H under the Takeover
Leases which it has agreed to perform hereunder, then whether or not the
Landlord(s) thereunder shall give notice of default to J&H, J&H shall not
without the consent of Owner take any action to perform such obligation or to
cure such default or take any other action with respect thereto unless (i) the
Landlord(s) under such Takeover Lease(s) give notice of default thereunder,
and (ii) Owner shall fail within two days prior to the expiration of any
grace period afforded by such Takeover Lease(s) after such notice either (y)
to cure the same or (z) to obtain and maintain in effect a restraining order
or injunction or other equitable relief to stay the running of such grace
period. Notwithstanding any other provision of this Agreement, Owner shall
not indemnify J&H with respect to any obligation to make any payment which
shall be allocable under or with respect to the Takeover Leases to a date
prior to July 15, 1983 (including without limitation on account of liability
for any defaults of J&H) except that Owner shall promptly pay on behalf of
J&H in accordance with the terms of the Hanover Lease or reimburse J&H for
the payment of all costs incurred by J&H thereunder with respect to Leasehold
Improvements (including but not limited to flooring, wall covering and
vertical conveyor) in the Hanover Space in excess of the allowances
granted J&H therefor under the Hanover Lease in aggregate amount up to but not
in excess of $8,000,000.
6. J&H will not, after the date hereof, make any modifications of or
amendments to the Takeover Leases, assign the Takeover Leases (except as
permitted under Paragraph 20 hereof) or sublease all or any part of the Takeover
Space or enter into any agreement with respect to the surrender or discharge of
or take any other action with respect to the Takeover Leases or the Takeover
Space without the prior written consent or except pursuant to the written
instructions of Owner. In addition, after the date hereof J&H will not make any
modifications of Tenant's Plans without first obtaining the written consent of
Owner, and at Owner's discretion, will submit to Landlords modifications of
Tenant's Plans or issue instructions to the Landlords not to complete all or
portions of work shown on Tenant's Plans. J&H shall with respect to any and all
contracts or commitments for Leasehold Improvements or other work, materials or
installation at or in the Takeover Space, act in accordance with Owner's written
instructions, whether the same shall involve termination or modification of
planned or ongoing work or otherwise. Unless the Broad Street Lease and this
Agreement have been terminated J&H will not at any time occupy the Takeover
Space or any part thereof.
7. (a) J&H covenants and agrees to indemnify and hold Owner harmless
against any loss, liability, claims, damages, or expenses (including attorney's
fees) arising out of or resulting from any of the representations and warranties
contained herein being false or misleading and from any breach or default by J&H
of its obligations pursuant to this Agreement.
(b) If (i) J&H is adjucated a bankrupt or (ii) as a consequence of
the failure of J&H to pay Fixed Minimum Rent (which for the purposes of this
Agreement shall not be deemed to include any portion thereof attributable to
electric service) under the Broad Street Lease, the same shall have been duly
and
validly terminated and J&H shall not have contested such termination by judicial
proceedings or (iii) such a termination of the Broad Street Lease is contested,
and there shall have occurred a final determination not subject to appeal by a
court of competent jurisdiction that the Broad Street Lease has been duly and
properly terminated, then this Agreement shall at the option of the Owner (to be
exercised by written notice from Owner to J&H) terminate effective as of the
date
of such notice, and Owner shall have no further liability hereunder.
(c) If (i) a default notice for non-payment of all or a portion of
the Fixed Minimum Rent (exclusive of any charge for electric service, as
aforesaid) is given by Owner to J&H pursuant to the provisions of the Broad
Street Lease, and J&H obtains an injunction staying the running of the default
period commenced by the giving of such notice or (ii) the termination of the
Broad Street Lease is being contested before a court of competent jurisdiction,
then during the period such injunction is in effect or pendency of such contest
including any appeal therefrom (as the case may be) J&H shall not have recourse
to nor draw upon any insurance or trust fund obtained or created pursuant to the
provisions of this Agreement.
8. J&H agrees that it will promptly notify Owner of any action or
proceeding which may be brought or asserted against J&H and of any notice which
may be given to J&H arising out or by reason of and/or involving the Takeover
Leases and/or the Takeover Space and/or any part thereof, and J&H will cooperate
fully with Owner with respect to any such action, proceeding or notice and will
execute, or cause to be executed, such instrument(s) and/or document(s) and/or
take such action, or cause such action to be taken, as Owner may reasonably
request in the situation. Owner may, at its option and expense and utilizing
counsel of Owner's choice (who shall be reasonably acceptable to J&H provided
that insurance company counsel shall be deemed to be satisfactory), cause to be
resisted or defended in the name of J&H, any claim or liability under the
Takeover Leases asserted by the Landlords, or if Owner shall so elect, J&H shall
in accordance with Owner's instructions and at Owner's expense resist or defend
such claim or liability. J&H shall not settle or compromise any such claim
without Owner's consent and shall immediately notify Owner of any communication
it may have with the claimant with respect to such claim. If all or any portion
of the Takeover Space is sublet or if either of the Takeover Leases is assigned
and the sublessee or assignee with respect thereto shall commit a default with
respect to any of its obligations under its sublease or assignment, as the case
may be, Owner may in name of and on behalf of J&H (including without limitation
asserting any rights of J&H under the appropriate documents), commence and
prosecute any and all actions or proceedings against such subtenant or assignee,
and J&H shall cooperate with Owner in the prosecution of such action or
proceeding (including without limitation the execution of any and all documents
required in connection therewith).
9. Owner, O&Y Equity Corp. (hereinafter called "O&Y") and J&H agree that
it would be difficult at any time to determine the value of a contingent claim
against Owner or O&Y or both based upon its obligations with respect to the
Hanover Lease pursuant to this Agreement. This valuation is particularly
difficult if there are persons in occupancy of the Hanover Space as assignees of
the Hanover Lease or as subtenants of the Hanover Space and there is no default
under the Hanover Lease, but is also difficult if the Hanover Space is vacant
and
a default under the Hanover has occurred or would have occurred but for action
on the part of J&H. Therefore, Owner and O&Y and J&H agree that if at any time
the last sentence of Paragraph 10 of this Agreement or the law shall require the
valuation or estimation of a contingent claim against Owner or O&Y or both based
upon their obligations with respect to the Hanover Lease under this Agreement,
whether or not there is then due and unpaid any amount under this Agreement or
under the Hanover Lease, then such contingent claim shall be valued or estimated
as follows (provided however that prior to proceeding to value or estimate such
contingent claim the party initiating such valuation or estimation shall insure
that the other has notice that such valuation or estimation has been initiated):
(a) at an amount equal to the amount which the Landlord under the
Hanover Lease is then willing to accept in order to grant a release satisfying
the requirements of Paragraph 12 hereof and to obtain the same from any other
party required pursuant to Paragraph 12 hereof in each case within 60 days after
it is determined that valuation or estimation of a contingent claim is
necessary; or
(b) if the release referred to in subparagraph 9(a) above cannot
be obtained, then at an amount equal to the amount for which the insurance
referred to in Paragraph 11 (but with coverage of $131,400,000 declining after
the year 1999 in accordance with Exhibit E hereof) is then offered to J&H by an
insurance company satisfying the requirements of Paragraph 11 within 90 days
after it is determined that valuation or estimation of a contingent claim is
necessary; or
(c) if the release referred to subparagraph 9(a) above or the
insurance referred to in subparagraph 9(b) above cannot be obtained before the
expiration of 90 days after it is determined that valuation or estimation of a
contingent claim is necessary, then at an amount equal to the amount set forth
in Exhibit E annexed hereto for the date set forth in Exhibit E next preceding
the date as of which it is determined that a valuation or estimation of
contingent claim is necessary.
If at the time of any determination or estimate of the value of a
contingent claim there is any amount then already due and unpaid with respect to
the Hanover Lease under this Agreement or under the Hanover Lease, then such
amount plus the amount determined pursuant to subparagraphs (a), (b), or (c)
above, as the case may be, shall be the value of the contingent claim.
10. (a) J&H agrees to deliver to Owner an amendment to the Broad Street
Lease in the form annexed hereto as Exhibit G deleting the provisions of the
First Supplemental Agreement to the Broad Street Lease and terminating the right
of offset thereunder promptly after Owner delivers Acceptable Securities (as
such
term is hereinafter defined) having a Value (as such therm is hereinafter
defined) having a Value (as such term is hereinafter defined) of not less than
$100,000,000 (subject to reduction pursuant to Paragraph 14 hereof) to a trustee
reasonably acceptable to J&H acting under a trust agreement (hereinafter called
"Trust Agreement") reasonably acceptable to J&H, provided that all amounts then
due to J&H with respect to the Hanover Lease and arising under this Agreement
have been paid. Owner covenants that so long as J&H does not have the right of
setoff provided in the First Supplemental Agreement to the Broad Street Lease by
reason on this Paragraph 10, it will at all times maintain with the trustee
Acceptable Securities having a Value of not less than $100,000,000 (except as
provided in Paragraphs 11 and 14 hereof or unless the obligations and
liabilities of J&H under the Hanover Lease have been terminated).
(b) The term "Acceptable Securities" means:
(i) cash;
(ii) general obligations of the United States of America and
obligations the payment of which as to both principal and interest is guaranteed
by the United States of America;
(iii)certificates of deposit maturing in one year or less
issued by any bank organized under the laws of the United States or any state
thereof and a member of the Federal Reserve System having a capital and surplus,
as most recently reported to the Board of Governors of the Federal Reserve
System, in excess of $500,000,000, provided that not more than $10,000,000 shall
be from any one bank;
(iv) commercial paper maturing within 90 days which has been
rated by either Standard & Poors Corporation or Moody's Investors Service, Inc.
in the highest rating category for commercial paper (provided that if both such
services rate such paper, then both services shall rate such paper in such
category), provided that not more than $10,000,000 shall be from any one issuer
or group of affiliated issuers;
(v) irrevocable letters of credit naming the trustee as
beneficiary having an expiration date of not more than five years from the date
of issuance and conditioned only upon delivery of a sight draft by the trustee
and otherwise in form and substance reasonably satisfactory to J&H issued by
banks (i) which are members of the New York Clearing House Association, (ii)
having a capital and surplus as reported most recently to the Board of Governors
of the Federal Reserve System in excess of $500,000,000 and (iii) the long term
debt of which is rated by Moody's and Standard & Poors (or either one if not
rated by both) at least AA, provided no more than $50,000,000 shall be from any
one bank; and
(vi) any other items J&H shall approve in writing (such
approval not to be unreasonably withheld);
(c) the term "Value" means:
(i) as to Acceptable Securities listed in clause (b)(ii)
above having a maturity of less than 45 days or listed in clauses (b)(i) or
(b)(v), 100% of the face value thereof plus accrued interest at maturity, if
any;
(ii) as to Acceptable Securities listed in clause (b)(ii)
above having a maturity of 45 days or more but less than 6 months or in clauses
(b)(iii) or (b)(iv) above having a maturity of less than 45 days, 95% of the
face value thereof plus accrued interest at maturity, if any;
(iii)as to Acceptable Securities listed in clause (b)(ii)
having a maturity of 6 months or more in clauses (b)(iii) or (b)(iv) having a
maturity of 45 days or more, 95% of the fair market value, as determined by the
trustee, thereof at the time of valuation (but in no event greater than face
value at maturity); and
(iv) as to all other Acceptable Securities as specified in the
writing approving such, it being understood that liquid debt securities will
generally be discounted at least 15% from fair market value and that liquid
equity securities will generally be discounted at least 25% from fair market
value.
(d) The Trust Agreement shall provide, among other things, that the
trustee shall on submission of a written statement from an officer of J&H
certifying that Owner is in default of its obligations under this Agreement with
respect to the Hanover Lease in an amount in excess of $1,000,000 or that Owner
has failed to maintain the Value of Acceptable Securities under this Agreement,
and in either event that such default or failure has continued for 30 days after
notice (hereinafter called a "Trust Default Notice") to Owner and O&Y of such
failure, deliver to J&H the full corpus and income of the trust. The Trust
Default Notice shall specifically state that the failure to cure such default
shall result in all the Acceptable Securities being turned over to J&H.
Notwithstanding anything contained in this Paragraph 10 with respect to
the
Trust Agreement and J&H's rights thereunder, in no event shall J&H exercise its
rights to obtain delivery of the corpus and income of the trust unless and until
Owner has defaulted in its obligations under this Agreement and such default
shall have continued for a period of 30 days after notice from J&H.
Furthermore, regardless of whether J&H obtains delivery of the corpus and
income of the trust J&H shall not retain and shall promptly remit to Owner so
much thereof as exceeds the value (determined as provided in Paragraph 9 except
that the date that such corpus and income are delivered to J&H shall be deemed
the date that it is determined that the valuation of a contingent claim is
necessary) of J&H's contingent claim hereunder.
11. If (a) Owner provides J&H with either (i) an insurance
agreement reasonably acceptable to J&H providing that if J&H delivers to the
insurer a certificate stating that Fixed Minimum Rent (as defined in the Hanover
Lease) or additional rent payable pursuant to Articles 19 or 20 of the Hanover
Lease has not at any time during the term of the Hanover Lease been paid to J&H
when stated to be due in accordance with the terms of this Agreement and the
Hanover Lease and that such rent has not been paid to the Landlord under the
Hanover Lease, then the insurer shall have an unconditional obligation to pay to
J&H the amount claimed due up to a policy limit of $100,000,000 (subject to
reduction pursuant to Paragraph 14 hereof), provided that such amounts have not
been actually received in respect of such rent by J&H or by the Landlord under
the Hanover Lease, and provided further that the policy may contain such
covenants on the part of the insured as are normally contained in an insurance
policy of this nature or a policy analogous thereto, and provided further that
J&H has complied with such customary notice requirements as such insurer may
require or (ii) a surety bond reasonably acceptable to J&H which provides for a
bond penalty in the aggregate of not less than $100,000,000 (subject to
reduction
pursuant to Paragraph 14 hereof) for all occurrences against any liability for
actual damage or loss (i.e., without coverage for the value of any contingent
claim of J&H) arising out of or related to the Hanover Lease, and (b) no amounts
are then due to J&H under this Agreement with respect to the Hanover Space, then
J&H shall promptly deliver to Owner an amendment to the Broad Street Lease
deleting the First Supplemental Agreement therefrom and terminating the right of
offset thereunder in the form annexed hereto as Exhibit G, and upon such
delivery
the trust under Paragraph 10, if established, shall terminate and the corpus and
income of the trust shall be paid over to Owner. Any such insurance agreement
(whether or not in the form of a surety bond) shall be issued by an insurance
carrier rated by Bests in its highest rating category as to size (or the rating
category which is the substantive equivalent to the current highest rating
category) and in a rating category not less than A (or its equivalent in any
substitute system) as to quality of credit.
12. If (a) Owner provides J&H with a release, reasonably
satisfactory to J&H, from liabilities under each of the Takeover Leases from the
Landlord thereunder and from (to the extent that J&H or Owner has received
notice
thereof) all other entities, if any, (i) to which either Landlord's interest
thereunder has been pledged as security or collateral or otherwise assigned or
(ii) (if their consent is required for such release to be binding upon it) which
holds a mortgage on the building in which the Takeover Space is located or (iii)
which is the lessor under any lease by which the estate of the Landlord in the
Takeover Space derives, directly or indirectly, and (b) no amounts are then
due and unpaid to J&H under this Agreement, or if any amount is
owing but in dispute, security for such amount in dispute shall be
held by the trustee, then J&H shall, if requested to do so by
Owner, promptly deliver to Owner an agreement in form satisfactory
to Owner terminating all further rights of J&H and obligations of
Owner under this Agreement, and upon such delivery with respect to
the Hanover Lease (whether or not the same has been obtained with
respect to the Water Street Lease), the trust under Paragraph 10,
if established, shall terminate, and the corpus and income of the
trust shall be paid over to Owner, and the First Supplemental
Agreement to the Broad Street Lease and the right of offset
contained therein shall be deleted therefrom by execution of an
agreement in the form annexed hereto as Exhibit G.
13. If Owner shall establish a trust pursuant to Paragraph
10, then J&H agrees to reimburse Landlord its out-of-pocket costs
in connection with the trust within 15 days of receipt of paid
bills therefor, but not to exceed $250,000 for any 12 month period.
14. Prior to the Commencement Date (as defined in the Broad
Street Lease) and at all times thereafter during which J&H shall
have liability as tenant under the Hanover Lease, (i.e., until J&H
is released therefrom as provided in Paragraph 12 hereof, or until
the term of the Hanover Lease expires or such lease or J&H's
liability thereunder earlier terminates), Owner covenants and
agrees that either:
(i) J&H shall have the right of setoff provided in
the First Supplemental Agreement, which right shall be subordinate
to no mortgage of Owner's interest in the Building or if
subordinate, the mortgagee thereunder shall have offered to enter
into a non-disturbance agreement with J&H with respect to the Broad
Street Lease, including the right of setoff contained in the First
Supplemental Agreement thereof, or
(ii) Owner shall maintain the insurance contract(s)
referred to in Paragraph 11 hereof, or
(iii)Owner shall maintain the trust referred to in
Paragraph 10 hereof.
The foregoing obligation shall not be affected by the
existence of subtenants occupying the Hanover Space and paying rent
with respect thereto; however, in no event shall the trust or
surety contract be required to be maintained or funded in an amount
greater than the amount at the time in question for such date
pursuant to Exhibit E hereto (as the same may thereafter be reduced
pursuant to Exhibit E).
15. Except as hereinafter provided in this Paragraph 15, all
notices hereunder by either party to the other shall be sent by
registered or certified mail, return receipt requested, addressed
J&H as follows:
(a) Prior to Commencement Date under the Broad
Street Lease:
Johnson & Higgins
95 Wall Street
New York, New York 10005
Attention: James Delaney
(b) After the Commencement Date under the Broad
Street Lease:
Johnson & Higgins
125 Broad Street
New York, New York 10004
Attention: James Delaney
with a copy in each instance to J&H at such address;
Attention: Corporate Secretary
and to the Owner at:
Olympia & York 125 Broad Street Company
245 Park Avenue
New York, New York 10167
Attention: General Counsel
with a copy to:
O&Y Equity Corp
245 Park Avenue
New York, New York 10167
Attention: William Hay
Notices given in the foregoing manner shall be deemed served
on the date of registration with the postal authorities if sent by
registered mail, and on the date of mailing if set by certified
mail. Notices on behalf of the respective parties may be given by
their attorneys and such notices shall have the same effect as if
in fact subscribed by the party on whose behalf it is given.
Either party hereto may change the address to which notice may be
given or provide an additional address to which notice must be
given by notice to the other given in the manner provided herein.
In addition to the foregoing, Owner shall have the right to
designate from time to time individuals located in New York City
and to require J&H to Likewise designate individuals located in New
York City to whom written communications concerning this Agreement
and notices hereunder may be personally delivered. In any such
instance, without regard to the right of either party to give
notice by mail as hereinabove provided, notices shall also be
deemed delivered if delivered personally to any of such persons.
Owner and J&H shall each make a reasonable effort to comply with
any request from the other that specified notices and/or
communications be transmitted by personal delivery rather than by
registered or certified mail, as hereinabove provided, but delivery
by certified mail shall nevertheless constitute good and effective
notice whether or not there has been compliance with any such
request.
16. Wherever in this Agreement Owner is entitled to expect
the cooperation of J&H, Owner shall, to the extent that J&H incurs
any substantial out of pocket expenses (excluding attorney's fees
except as specifically provided in Paragraph 8) in connection
therewith, promptly after being furnished with a statement
therefor, reimburse J&H for any such expenses.
17. It is understood and agreed that all understandings and
agreements heretofore had between the parties hereto with respect
to the Takeover Space are hereby merged in this Agreement which
alone fully and completely expresses their agreement, and that the
same is entered into after full investigation, neither party
relying upon any statement or representation made by the other not
embodied in this Agreement.
18. This Agreement may not be changed or terminated orally.
The stipulations and agreements aforesaid are to apply to and bind
the heirs, executors, administrators, successors and assigns of the
respective parties hereto.
19. O&Y joins in the execution of this Agreement for the
purpose of guarantying the performance by Owner of its obligations
and responsibilities hereunder and agreeing to the provisions of
Paragraph 9 hereof. O&Y unconditionally guarantees, without offset
or deduction, (i) the prompt payment when due of all amounts
payable by Owner pursuant to this Agreement, the guaranty hereunder
constituting a guaranty of payment and not of collection, and (ii)
that Owner will perform punctually and faithfully all its
obligations under and in accordance with the terms of this
Agreement. O&Y agrees that in the event that Owner does not or is
unable to pay or perform in accordance with the terms of this
Agreement for any reason (including without limitations the
liquidation, dissolution, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of, or other similar
proceeding affecting the status, existence, assets or obligations
of Owner, or the disaffirmance of this Agreement or any part
thereof in any such proceeding), O&Y will pay the amounts provided
for herein to be paid by Owner and otherwise perform or cause to be
performed the obligations of Owner under this Agreement. O&Y
agrees that it shall not be necessary or required that J&H file
suite or proceed to obtain or assert a claim for personal judgment
against Owner for the obligations of Owner hereunder or make any
effort at collection of such obligations from Owner or foreclose
against or seek to realize upon any security now or hereafter
existing for any such obligations or file suite or proceed to
obtain or assert a claim for personal judgment against any other
party liable for such obligations or make any effort at collection
of such obligation from such other party, before or as a condition
of enforcing the liability of O&Y under this guaranty or requiring
the payment of such obligations by O&Y hereunder. O&Y waives
notice of the acceptance of this guaranty and of the performance or
non-performance of any of the obligations of Owner hereunder;
demand of payment; and notice of non-payment or failure to perform
on the part of Owner. The obligations of O&Y shall not IPSO FACTO
be released or discharged (but shall be modified, decreased or
terminated to the same extent as the obligation of Owner) by the
happening from time to time of any of the following with respect to
this Agreement, although without notice to and further consent of
O&Y: (i) the waiver of J&H or its successors or assigns of the
performance by Owner of any obligation, term or condition contained
in this Agreement or any default thereunder, (ii) the extension of
the time or performance by Owner of such obligations, or (iii) any
failure, omission or delay of J&H in this Agreement or any
instrument contemplated herein or any action on the part of J&H to
enforce, assert or exercise any right, power or remedy conferred on
J&H in this Agreement or any instrument contemplated herein or any
action on the part of J&H granting extension or indulgence in any
form. O&Y will note consolidate with or merge into another
corporation, or sell or otherwise dispose of all or the major
portion of its properties and assets in a single transaction or
series of related transactions to any other single corporation or
entity or to other corporations or entities which are commonly
controlled by a single corporation or entity, unless such
corporation or entity will assume the observance and performance of
the covenants, agreements and conditions of this guaranty and
shall, unless the same are assumed by operation of law, execute and
deliver to J&H an agreement whereby such corporation or entity
expressly assumes the observances and performance of such
covenants, agreements and conditions. O&Y shall not exercise any
rights which it may have acquired by subrogation under this
guaranty, by any payment made hereunder or otherwise (except to the
extent required to preserve any rights it may have under any
applicable statute of limitations), unless and until all of the
obligations of Owner hereunder shall have been paid in full, and if
any such payment shall be made to O&Y on account of such
subrogation rights at any time when all of the obligations of Owner
hereunder shall not have been paid in full, each and every amount
so paid will forthwith be paid to J&H to be credited and applied
upon any of the obligations of Owner hereunder.
20. J&H agrees to look solely to the assets and property of
Owner for the satisfaction of any right or remedy of J&H for the
collection of a judgment or other judicial process requiring the
payment of money by Owner in the event of any liability of Owner,
and the partners or members therein (by reason of their being
partners or members) shall have no personal liability in connection
therewith or be subject to levy, execution, attachment or other
enforcement procedure for the satisfaction of J&H's remedies under
or with respect to this Agreement, or the relationship of the
parties hereunder.
21. Notwithstanding any other provisions of this Agreement,
J&H shall not be obligated to execute, acknowledge or deliver any
papers or instruments, take any action or give any notice (except
that J&H shall if so requested exercise any option in the Takeover
Leases for additional space) nor will Owner on its behalf, if the
effect thereof shall be to increase substantially any obligation or
decrease any right of J&H or otherwise materially adversely affect
J&H without the consent of J&H (which shall not be unreasonably
withheld), provided, however, J&H agrees that the execution and
delivery by a wholly owned subsidiary of J&H of a sublease or
assignment or other instruments relating thereto or any other
papers or instruments or notices or the taking by such subsidiary
of any other action shall not be deemed to increase any obligation
or decrease any right of J&H or otherwise adversely affect J&H.
J&H shall have the right at any time to assign, and upon 15 days
prior written notice from Owner shall assign, the Takeover Leases
to a wholly owned subsidiary of J&H or waive any right it (as
distinguished from such subsidiary) would have to decline to
execute and deliver such sublease, assignment or other instrument.
No such assignment shall, however, be effected or be effective, and
if executed at the request of Owner such request shall not be
deemed to have been complied with, unless the assignee thereof
shall simultaneously with its acceptance of the assignment of the
Takeover Leases and the assumption of the obligations of the tenant
thereunder, also assume all of the obligations of J&H under this
Agreement. Nothing, however, contained herein, shall be deemed to
release J&H from any obligations that it may have under this
Agreement, notwithstanding such assignment and assumption by such
subsidiary. Any sale or transfer of the capital stock of any
subsidiary to which the Takeover Leases have been assigned shall be
deemed an assignment of the Takeover Leases for purposes of this
Agreement.
22. If one or more of the provisions of this Agreement shall
be invalid or illegal, the validity and legality of the remaining
provisions shall not be affected or impaired thereby.
23. This Agreement shall be governed by the laws of the State
of New York.
IN WITNESS WHEREOF, the parties hereto have executed these
presents as of the day and year first above written.
OLYMPIA & YORK 125 BROAD
STREET COMPANY
BY: S/TOM ARNOTT
WITNESS: Sr. Vice President
S/MARTIN R. LEVINE
WITNESS: JOHNSON & HIGGINS
By:
WITNESS: O&Y EQUITY CORP.
S/MARTIN R. LEVINE
By: S/TOM ARNOTT
Sr. Vice President
EQR - JMB
AGREEMENT FOR PURCHASE AND SALE
OF
REAL ESTATE AND RELATED PROPERTY
THIS AGREEMENT FOR PURCHASE AND SALE (this "Agreement") is
made and entered into as of the 7th day of February, 1994, by and
between VILLA SOLANA ASSOCIATES ("Seller"), an Illinois general
partnership having office c/o JMB Realty Corporation, 19th Floor,
900 North Michigan Avenue, Chicago, Illinois 60611, and EQR-VILLA
SOLANA VISTAS, INC. ("Purchaser"), an Illinois corporation having
offices at Suite 600, Two North Riverside Plaza, Chicago, Illinois
60606.
RECITALS
A. Seller is the owner of fee simple title to the Land,
Improvements and other Property (as each such term is hereinafter
defined).
B. Seller desires to sell the Property to Purchaser, and
Purchaser desires to purchase the Property from Seller, each upon
and subject to the terms and conditions of this Agreement.
THEREFORE, in consideration of and in reliance upon the above
Recitals, the terms, covenants and conditions contained in this
Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Seller and
Purchaser agree as follows:
1. PURCHASE AND SALE OF PROPERTY. Subject to the terms and
conditions of this Agreement, Seller shall sell and convey and
Purchaser shall purchase the following described property (all of
which is hereinafter collectively referred to as the "Property"):
A. that certain tract of real estate which is legally
described in Exhibit A attached to this Agreement, together
with all and singular easements, covenants, agreements,
rights, privileges, tenements, hereditaments and appurtenances
thereunto now or hereafter belonging or appertaining thereto
(collectively, the "Land"); and
B. all right, title and interest of Seller (whether now
or hereafter existing) in and to any land lying in the bed of
any street, alley, road or avenue (whether open, closed or
proposed) within, in front of, behind or otherwise adjoining
the Land or any of it, and all right, title and interest of
Seller (whether now or hereafter existing) in and to any award
made or to be made as a result or in lieu of condemnation, and
in and to any award for damage to the Land or any part thereof
by reason of casualty (all of which shall be included within
the term "Land"); and
C. that certain 272-unit apartment complex located on
the Land and commonly known as Villa Solana Apartments,
located at 26033 Moulton Parkway in Laguna Hills, California,
and all right, title and interest of Seller in and to any and
all of the other buildings, structures, fixtures, facilities,
installations and other improvements of every kind and
description now or hereafter in, on, over and under the Land,
including, without limitation, any and all plumbing, air
conditioning, heating, ventilating, mechanical, electrical and
other utility systems, parking lots and facilities,
landscaping, roadways, sidewalks, swimming pools and other
recreational facilities, security devices, signs and light
fixtures (collectively, but exclusive of the Land, the
"Improvements") (the Land and the Improvements being
collectively referred to as the "Premises"); and
D. all right, title and interest of Seller in and to
any and all furniture, furnishings, fixtures, equipment,
machinery, maintenance vehicles and equipment, tools, parts,
recreational equipment, carpeting, window treatments,
stationery and other office supplies and other tangible
personal property of every kind and description situated in,
on, over and under the Premises or used in connection
therewith, together with all replacements and substitutions
therefor (together with the intangible personal property
hereinafter identified, collectively, the "Personal
Property"), a substantially complete and accurate itemization
of which will be submitted to Purchaser pursuant to Section
8(B) below and attached to this Agreement as Exhibit B; and
E. all of Seller's right, title and interest in and to
all existing surveys, blue prints, drawings, plans and
specifications (including, without limitation, structural,
HVAC, mechanical and plumbing plans and specifications) and
other similar documentation for or with respect to the
Property or any part thereof, all marketing artwork,
construction drawings, soil tests, environmental reports,
appraisals and police reports, all tenant lists and data,
correspondence with past, present and prospective tenants,
vendors, suppliers, utility companies and other third parties,
booklets, manuals and promotional and advertising materials
concerning the Property or any part thereof, and such other
books, records and documents (including, without limitation,
those relating to ad valorem taxes and leases) used in
connection with the operation of the Property or any part
thereof (but excluding other books, records and documents not
located at the Improvements which are prepared or maintained
only for the internal use of Seller in connection with its
ownership [as opposed to operation] of the Property); and
F. all right, title and interest of Seller in and to
the Leases and Service Contracts (as each such term is
hereinafter defined) and the other intangible personal
property used in connection with or arising from the business
now or hereafter conducted on or from the Property or any part
thereof, including, without limitation, claims, choses in
action, lease and other contract rights, names, and, if
available, telephone exchange numbers, to the extent
applicable to the period from and after Closing unless
otherwise provided for in this Agreement. A summary of all
current leases affecting the Premises or any part thereof (the
"Leases", with such summary being referred to in this
Agreement as the "Rent Roll"), including each tenant's name,
a description of the space leased, the amount of rent due, the
amount of any security deposit paid, the term of each Lease,
will be prepared by Seller, submitted to Purchaser pursuant to
Section 8(D) below and attached to this Agreement as Exhibit
C. A list of all service and maintenance agreements,
equipment leases and any other agreements, contracts, licenses
and permits affecting or pertaining in any way to the Property
or any part thereof which will be in effect as of Closing (the
"Service Contracts") will be prepared by Seller, submitted to
Purchaser pursuant to Section 8(A) below and attached to this
Agreement as Exhibit D.
The Property shall not, however, include any property owned by
tenants under the Leases which, as to fixtures (as opposed to
unattached personalty) is specifically identified in the Leases.
In addition, the liability of Seller with respect to the accuracy
of Exhibits C and D shall be only as otherwise set forth in this
Agreement or in the documents executed and delivered in connection
herewith.
2. PURCHASE PRICE. The total consideration to be paid by
Purchaser to Seller for the Property is Sixteen Million Two Hundred
Sixty-Eight Thousand Dollars ($16,268,000.00) (the "Purchase
Price"), which shall be paid as follows:
A. Earnest Money.
(i) Upon the execution of this Agreement by Seller
and Purchaser, Purchaser shall deliver to Ticor Title
Insurance Company - Chicago office ("Escrowee") a check
payable to Escrowee in the sum of One Hundred Fifty Thousand
Dollars ($150,000.00) (the "Initial Earnest Money"). If
Purchaser does not terminate this Agreement as provided for in
Section 9(A)(i) below, then, within two (2) business days
after the expiration of the Inspection Period, Purchaser shall
deposit with the Escrowee additional earnest money (the
"Additional Earnest Money") of Three Hundred Fifty Thousand
Dollars ($350,000.00). The Initial Earnest Money and, if
deposited with the Escrowee, the Additional Earnest Money,
together with any interest earned thereon, is referred to in
this Agreement as the "Earnest Money".
(ii) As Seller and Purchaser jointly direct, the
Escrowee shall invest the Earnest Money in an interest-bearing
savings account or short term U.S. Treasury Bills or similar
cash equivalent securities. Any and all interest earned on
the Earnest Money shall be reported to Purchaser's federal tax
identification number.
(iii) If the transaction contemplated by this
Agreement closes in accordance with the terms and conditions
of this Agreement, at Closing (as such term is hereinafter
defined), the Earnest Money shall be delivered by the Escrowee
to Seller as payment toward the Purchase Price. If the
transaction fails to close due to a default on the part of
Seller or if a contingency set forth in this Agreement for the
benefit of Purchaser is not satisfied or removed, the Earnest
Money shall be delivered by the Escrowee to Purchaser as the
sole remedy of Purchaser, except as provided for in Section
11(A) below. If the transaction fails to close due to a
default on the part of Purchaser, the Earnest Money shall be
delivered by the Escrowee to Seller as Seller's sole and
exclusive remedy, as more particularly provided for in Section
11(B) below.
B. Cash at Closing. At Closing, in addition to the
Earnest Money, Purchaser shall pay to Seller the sum of Fifteen
Million Seven Hundred Sixty-Eight Thousand Dollars
($15,768,000.00), minus any interest included with the Earnest
Money, such sum to be paid by current federal funds wire
transferred to an account designated by Seller in writing by notice
received by Purchaser not less than three (3) business days prior
to the Closing Date (as such term is hereinafter defined), subject,
however, to such adjustments as are required by this Agreement
(such amount, as adjusted, being referred to as the "Cash
Balance").
3. OPERATION OF PROPERTY THROUGH CLOSING. Through the
Closing Date:
A. Except as otherwise provided in this Section 3,
Seller shall manage and operate the Property in accordance with
sound and prudent business practices as heretofore exercised and
maintained, but Seller shall not be required to make extraordinary
capital expenditures. Seller will not make any material change in
its normal and customary billing practices, but shall not apply any
security deposits against rent delinquencies of one month or less
or other Lease defaults without notice to and the consent of
Purchaser. As of Closing, all unoccupied rental units in the
Property that were vacated more than seven (7) days prior to
Closing shall be in rent-ready condition.
B. Seller shall not sell, mortgage, pledge, hypothecate
or otherwise transfer or dispose of all or any part of the Property
or any interest therein, nor, except as required by law, shall
Seller initiate, consent to, approve or otherwise take any action
with respect to zoning or any other governmental rules or
regulations presently applicable to all or any part of the Property
or any adjoining property.
C. Without the prior written consent of Purchaser,
Seller shall not terminate, modify, extend, amend or renew any
Lease or Service Contract or enter into any new Lease or Service
Contract without the prior written consent of Purchaser (which
consent shall not be unreasonably withheld during the Inspection
Period provided for in Section 9(A)(i) below, and which consent
shall be deemed to have been given if Purchaser does not respond to
a request therefore within five (5) business days after receipt of
the request from Seller), except that (i) the consent of Purchaser
shall not be necessary for a new Service Contract which will not be
in effect as of Closing or which is entered into in the ordinary
course of business at market rates and terms and is cancellable
upon not more than thirty (30) days notice without premium or
penalty, (ii) Purchaser's consent shall not be necessary for new
Leases or Lease renewals providing for a market rent, concessions
consistent with Seller's prior practices, and for not more than
twelve (12) months, and (iii) as of Closing, Seller shall terminate
any management contracts affecting the Property. Any new Lease or
Service Contract entered into with Purchaser's consent shall be
subject to the covenants set forth in this Agreement with respect
to Leases and Service Contracts and included in the updated
representations and warranties to be given by Seller at Closing
pursuant to Section 7(B) below.
D. Seller shall maintain in full force and effect its
existing insurance coverages as disclosed to Purchaser pursuant to
Section 8(C) below, or coverages substantially equivalent thereto.
E. Seller shall in good faith endeavor promptly to give
written notice to the Purchaser of the occurrence of any event
which materially affects the truth or accuracy of any
representations or warranties made or to be made by Seller under or
pursuant to this Agreement.
F. Upon reasonable prior notice and at reasonable
times, Purchaser shall have access to the Property to inspect same
to assure that Seller is complying with the requirements of this
Section 3 or for such other purposes as Purchaser in good faith
requests. Seller shall have the right to have a representative
present during such inspections, and such inspections shall be
subject to the provisions of the last two sentences of Section
9(A)(i) below.
4. STATUS OF TITLE TO PROPERTY
A. State of Title. It shall be a condition precedent
to the obligation of Purchaser to consummate the Closing that, at
Closing, the entire fee simple estate in and to the Premises be
conveyed by Seller to Purchaser or Purchaser's designee by the deed
required by Section 5(B)(i)(a) below, and that the title
transferred to Purchaser for all of the other Property be, in each
case, subject only to: (i) those covenants, conditions and
restrictions of record which are reviewed and approved by Purchaser
pursuant to Section 4(C) below, and (ii) the lien of general real
estate taxes and assessments for the then current tax fiscal year
and subsequent years which are not yet due or payable and
assessments which are payable in installments to the extent not
then delinquent (the above enumerated exceptions collectively
referred to as the "Permitted Exceptions"). Seller shall pay and
cause to be released at Closing any mortgage financing affecting
all or any part of the Property.
B. Preliminary Evidence of Title. Purchaser shall be
furnished with the following documents to evidence the condition of
Seller's title to the Property:
(i) Seller shall, within ten (10) days after the date of
this Agreement, obtain and deliver to Purchaser a preliminary title
report for the Premises (the "Title Commitment") issued by Ticor
Title Insurance Company (the "Title Insurer") as of a date not
earlier than the date of this Agreement, together with copies of
all documents or instruments referred to therein.
(ii) Seller has ordered and upon receipt shall furnish to
Purchaser written results of searches (the "UCC Searches"),
together with legible copies of all documents disclosed thereby,
conducted by Parasec, Inc. of the records of the Orange County
Recorder and Secretary of State of the State of the State of
California for Uniform Commercial Code Financing Statements, tax
liens and the like in the name of Seller and any other name or
location reasonably requested by Purchaser.
(iii) Seller has ordered and upon receipt shall furnish to
Purchaser a current plat of survey (the "Survey") of the Premises
dated after the date of this Agreement, certified to Purchaser and
the Title Insurer (and such other persons or entities as Purchaser
may designate) by Church Engineering, Inc. prepared in accordance
with the Minimum Standard Detail Requirements for Property Title
Surveys (as jointly established and adopted in 1992 by the American
Title Association and American Congress on Surveying and Mapping)
for an Urban ALTA/ACSM Land Title Survey (as defined therein) with
Optional Survey Responsibilities and Specifications (Table A) Items
1 through 4, 6 (record only), 7(a), and 8 through 11. The Survey
shall contain the surveyor's certification that the Premises is not
located in any area designated by any governmental agency or
authority as being a flood-prone or flood-risk area, whether
pursuant to the Flood Disaster Act of 1973, as amended, or
otherwise, and that the requirements of the National Flood
Insurance Program are not applicable to the Premises.
C. Title Defects. Purchaser shall have through and
including the end of the Inspection Period provided for in Section
9(A)(i) below to review the Title Commitment, UCC Searches and
Survey to determine if any discloses either exceptions to title
which are not acceptable to Purchaser or any other matter which
does not conform to the requirements of this Agreement (any such
exception or matter being an "unpermitted exception"). Purchaser
shall notify Seller of any unpermitted exceptions prior to the
expiration of the Inspection Period, and Seller shall have until
Closing to have each such unpermitted exception (and any
unpermitted exception arising after the Inspection Period, or
disclosed by any updated version of the Title Commitment, UCC
Searches or Survey of which Purchaser notifies Seller prior to
Closing) removed or corrected to the satisfaction of Purchaser (but
Seller shall in any event have the right to obtain title insurance
over mechanic's liens), but Seller shall not be obligated to do so
unless the unpermitted exception is a mechanic's, tax or judgment
lien or deed of trust encumbrance created or caused by Seller. If
within the time specified, Seller fails to have each such
unpermitted exception removed or corrected as aforesaid, Purchaser
may, at its option, either (i) terminate this Agreement and
immediately receive from the Escrowee the Earnest Money, in which
event this Agreement, without further action of the parties, shall
become null and void and, except as provided for in Section 12(K)
below, neither party shall have any further rights or obligations
under this Agreement, or (ii) elect to accept title to the Property
as it then is with the right, as to unpermitted exceptions which
Seller was obligated to remove or correct, to deduct from the
Purchase Price a sum equal to the amount required to discharge the
lien(s) and encumbrance(s). If Purchaser fails to make either such
election, Purchaser shall be deemed to have elected option (i). If
prior to the expiration of the Inspection Period, Purchaser shall
fail to deliver to Seller written notice of any such unpermitted
exceptions, Purchaser shall be deemed to have approved of the
matters disclosed by the Title Commitment, the UCC Searches and the
Survey.
5. CLOSING
A. Closing Date. The "Closing" of the transaction
contemplated by this Agreement (that is, the payment of the
Purchase Price, the transfer of title to the Property, and the
satisfaction of all other terms and conditions of this Agreement)
shall occur at 10:00 a.m. on the fifteenth (15th) day after the
expiration of the Inspection Period provided for in Section 9(A)(i)
below, at the Chicago office of Purchaser, or at such other time
and place as Seller and Purchaser shall agree in writing; provided,
however, that Purchaser, at its option, may, subject to Seller's
reasonable consent, accelerate the Closing Date upon not less than
fourteen (14) days prior written notice to Seller. The "Closing
Date" shall be the date of Closing. If the date of Closing above
provided for falls on a Saturday, Sunday or legal holiday, the
Closing Date shall be the next business day. To facilitate the
Closing, Seller and Purchaser shall if necessary enter into a
letter escrow agreement for the simultaneous deposit on the Closing
Date of the deed provided for in Section 5(B)(i)(a) below and the
Cash Balance.
B. Closing Documents.
(i) Seller. At Closing, Seller shall deliver to
Purchaser each of the following (in form and substance reasonably
acceptable to Purchaser if not attached as an Exhibit to this
Agreement):
(a) a deed in the form attached to this
Agreement as Exhibit E, subject only to matters of
record;
(b) a bill of sale in the form attached to
this Agreement as Exhibit F;
(c) a letter advising tenants under the Leases
of the change in management of the Premises and directing
them to pay rent to Purchaser or as Purchaser may direct;
(d) an ALTA statement in form reasonably
acceptable to the Title Insurer and Seller to enable it
to issue the Owner's Title Insurance Policy in the form
and condition required by this Agreement;
(e) an assignment of the Leases and those
Service Contracts which, by written notice given by
Purchaser to Seller prior to the expiration of the
Inspection Period, Purchaser elects to take an assignment
of in the form attached to this Agreement as Exhibit G,
together with an updated Rent Roll certified by Seller as
being true, accurate and complete as of Closing;
(f) an assignment of general intangibles in
the form of Exhibit H attached to this Agreement;
(g) all of the original Leases and written
Service Contracts, and any and all building plans,
surveys, site plans, engineering plans and studies,
utility plans, landscaping plans, development plans,
specifications, drawings, and other documentation
concerning all or any part of the Property, to the extent
the foregoing are in the possession or control of Seller
(all such documents either being delivered at Closing or
appropriate arrangements made to leave such documents at
the Property);
(h) for Seller, a certified copy of the
partnership agreements of Seller and its general partner,
and as to the general partner of the general partner of
Seller, a corporate resolution authorizing its
performance under this Agreement, a certified copy of the
articles of incorporation and by-laws, and a certificate
of incumbency certifying the titles and signatures of the
corporate officers authorized to perform hereunder on
behalf of Seller, and such other evidence of Seller's
power and authority as Purchaser reasonably requests;
(i) any bonds, warranties or guaranties which
are in any way applicable to the Property or any part
thereof, to the extent in the possession or control of
Seller (all such documents either being delivered at
Closing or appropriate arrangements made to leave such
documents at the Property);
(j) to the extent in the possession or control
of Seller, all keys for the Property, with identification
of the lock to which each such key relates (all such keys
either being delivered at Closing or appropriate
arrangements made to leave such keys at the Property);
and
(k) all other documents reasonably required by
Purchaser in order to perfect the conveyance, transfer
and assignment of the Property to Purchaser or
Purchaser's designee (including without limitation, the
currently effective certificate of occupancy for the
Property); provided, however, such other documents do not
materially increase the liability of, or costs to, Seller
from that contemplated in this Agreement.
(iii) Purchaser. Purchaser shall deliver or cause to
be delivered to Seller at Closing the Cash Balance as required
pursuant to Section 2(B) above. In addition, at Closing Purchaser
shall execute and deliver: (xx) to the Title Insurer such
certificates and agreements as may reasonably be required by the
Title Insurer to enable it to issue the Owner's Title Policy
(hereinafter defined) in the form and condition provided for in
this Agreement; provided, however, the same do not materially
increase the liability of, or costs to, Purchaser from that
contemplated in this Agreement, and (yy) to Seller a corporate
resolution authorizing Purchaser's performance under this
Agreement, a certified copy of articles of incorporation and by-
laws, and a certificate of incumbency certifying the titles and
signatures of the corporate officers authorized to perform
hereunder on behalf of Purchaser, and such other evidence of
Purchaser's power and authority as Seller reasonably requests.
C. Closing Prorations and Adjustments.
(i) A statement of prorations and other adjustments
shall be prepared by Seller in conformity with the provisions of
this Agreement and submitted to Purchaser for review and approval
not less than five (5) days prior to the Closing Date. For
purposes of prorations, Purchaser shall be deemed the owner of the
Property on the Closing Date. In addition to prorations and other
adjustments that may otherwise be provided for in this Agreement,
the following items are to be prorated or adjusted, as the case may
require, as of the Closing Date:
(a) real estate and personal property taxes
and assessments (initially prorated on the basis of 102% of
the most recent ascertainable bill, if the bill for the
current tax year has not yet been issued, but subject to
reproration within thirty (30) days after issuance of the
actual bill therefor to effectuate the actual proration);
(b) any rent and other charges payable by
tenants under the Leases; provided, however, that rent and all
other sums which are due and payable to Seller by any tenant
but uncollected as of the Closing shall not be adjusted, but
Purchaser shall cause the rent and other sums for the period
prior to Closing to be remitted to Seller if, as and when
collected. At Closing, Seller shall deliver to Purchaser a
schedule of all such past due but uncollected rent and other
sums owed by tenants and Purchaser shall endeavor to collect
same in the same manner used for its own rent receivables.
Purchaser shall promptly remit to Seller any such rent or
other sums paid by scheduled tenants, but only if a deficiency
in the then current rent for the applicable tenant is not
thereby created. For amounts due Seller not collected within
three (3) months after Closing, Seller shall have the right to
sue to collect same (and Purchaser shall, at no cost, expense
or liability to Purchaser, reasonably cooperate with Seller in
connection with such collection efforts), but in no event may
Seller seek to evict any tenant or terminate any Lease;
(c) the full amount of unapplied (subject to
Section 3(A) above) security deposits paid under the Leases,
together with interest thereon if required by law or the
applicable Lease;
(d) water, electric, telephone and all other
utility and fuel charges, fuel on hand (at cost plus sales tax
and minus a reasonable sludge factor, if appropriate), and any
assignable deposits with utility companies (to the extent
possible, utility prorations will be handled by meter readings
on the Closing Date);
(e) amounts due and prepayments under the
Service Contracts;
(f) assignable license and permit fees (if
any);
(g) premiums for insurance carried by Seller
with respect to the Property which is assignable and which
Purchaser takes and accepts an assignment of; and
(h) other expenses of operation and similar
items.
Except with respect to any general real estate and personal
property taxes (which shall be reprorated as set forth above, if
necessary), any proration which must be estimated at Closing shall
be reprorated and finally adjusted as soon as practicable after the
Closing Date; otherwise all prorations shall be final.
(ii) Notwithstanding anything to the contrary
contained in this Agreement, Seller shall be responsible for (and
shall indemnify Purchaser in connection with) all amounts due
through Closing for employees' salaries, vacation pay, withholding
and payroll taxes, and other benefits, and any management fee
affecting the Property. Seller shall indemnify and hold Purchaser
harmless from any and all obligations and other matters relative to
employees of Seller and its management agent at the Property
applicable to the period through Closing, including reasonable
attorneys' fees incurred by Purchaser in connection therewith and
Purchaser shall have no liability for any such employees after
Closing unless employed by Purchaser.
D. Transaction Costs. With respect to the transaction
provided for in this Agreement: (i) Seller and Purchaser shall be
responsible for (a) the fees of their respective attorneys, (b)
one-half of any investment costs incurred with respect to the
Earnest Money, and (c) one-half of any escrow fees charged by the
Escrowee or the Title Insurer, (ii) upon Closing, Seller shall pay
for (a) the transfer tax on the deed, and (b) that portion of the
premium for the Owner's Title Insurance Policy attributable to
standard CLTA coverage, and (iii) Purchaser shall pay (a) upon
Closing, for one-half the cost paid or incurred by Seller for the
Survey, (b) upon Closing, the balance of the premium for the
Owner's Title Insurance Policy (including the cost of all
endorsements), and (c) all costs and expenses incurred by Purchaser
in conducting its "due diligence" reviews, examinations and
inspections.
E. Possession. It shall be a condition precedent to
the obligation of Purchaser to consummate the Closing that
Purchaser shall, at Closing, be in full and complete possession of
the Property, subject only to Permitted Exceptions. As of Closing,
Seller shall relinquish to Purchaser its possession of the
Property.
6. CASUALTY LOSS AND CONDEMNATION.
If prior to Closing, the Property or any part thereof,
shall be condemned, or destroyed or materially damaged (that is,
damage or destruction which is in excess of $250,000.00, or which
materially impedes access), Purchaser shall have the option either
to terminate this Agreement or to consummate the transaction
contemplated by this Agreement notwithstanding such condemnation,
destruction or material damage. If Purchaser elects to consummate
the transaction contemplated by this Agreement, Purchaser shall be
entitled to receive the condemnation proceeds or to settle the loss
under all policies of insurance applicable to the destruction or
damage and receive the proceeds of insurance applicable thereto,
and Seller shall, at Closing and thereafter, cooperate with
Purchaser to execute and deliver to Purchaser all required proofs
of loss, assignments of claims and other similar items. If
Purchaser elects to terminate this Agreement, the Earnest Money
shall be returned to Purchaser by the Escrowee, in which event this
Agreement shall, without further action of the parties, become null
and void and, except as set forth in Section 12(K), below, neither
party shall have any further rights or obligations under this
Agreement. If there is any other damage or destruction (that is,
damage or destruction which is $250,000.00 or less and which does
not materially impede access) to the Property or any part thereof,
then Seller shall assign to Purchaser all insurance claims
pertaining to such damage or destruction by executing and
delivering to Purchaser at Closing and thereafter cooperate with
Purchaser to deliver all required proofs of loss, assignments of
claims and other similar items. If Purchaser takes and assignment
of all insurance claims as provided for in this Section 6,
Purchaser shall receive at Closing a credit against the Cash
Balance in an amount equal to any deductible amounts applicable
thereto.
7. REPRESENTATIONS AND WARRANTIES.
A. Seller represents and warrants to Purchaser that the
following are true, complete and correct as of the date of this
Agreement:
(i) Seller is the sole owner of fee simple title to
the Premises, subject to all matters of record. Seller has not
entered into any agreement to lease, sell, mortgage or otherwise
encumber or dispose of its interest in the Property or any part
thereof, except for the Leases, this Agreement and any matters of
record.
(ii) Seller has not received written notice that it
has not obtained or paid for any permits or certificates (including
without limitation, permits and certificates for plumbing,
electricity, heating, ventilation, air conditioning and occupancy)
required under any Federal, State or local law, ordinance, rule or
regulation or by any governmental or quasi-governmental agency, or
that any such permit or certificate is not in good standing.
Seller has not received written notice that the Property does not
have adequate drainage or does not contain at least the minimum
number of parking spaces required under applicable law. Seller has
received no written notice and has no actual knowledge of any
"latent structural defect" in the Property (which, as used herein,
means a material defect to the structural integrity of the
Improvements which could not be discovered by a prudent buyer
conducting a diligent inspection and review of the Property,
including, without limitation, engaging reputable structural
engineers to inspect the Improvements).
(iii) The schedule of insurance policies furnished by
Seller to Purchaser pursuant to Section 8(C) below contains a true
and complete list of all insurance policies owned by or on behalf
of Seller with respect to the Property or any part thereof. Such
policies are in full force and effect. Seller is current on all
premium payments thereunder and has satisfied all policy conditions
precedent thereto. No written notice has been received by Seller
from any insurer with respect to any defect or inadequacies of all
or any part of the Property or the use or operation thereof which
notice is still outstanding.
(iv) Seller has no knowledge of and has received no
written notice that there is any action, proceeding or
investigation pending or threatened against Seller or the Property
or any part thereof before any court or governmental department,
commission, board, agency or instrumentality.
(v) Seller has not received from any governmental
authority written notice of any violation of any zoning, building,
fire or health code or any other statute, ordinance rule of
regulation applicable (or alleged to be applicable) to the Property
or any part thereof.
(vi) The Service Contracts comprise every contract
or agreement, oral or written, which will be in effect as of
Closing, other than the Leases and other matters of record, which
affects the Property, to which Seller is a party, or by which, to
Seller's actual knowledge, it is bound. Neither Seller nor, to
Seller's actual knowledge, any other party is in default under the
terms of any Service Contract. Except as otherwise noted on
Exhibit D, each Service Contract is cancellable without payment of
any premium or penalty upon not more than thirty (30) days notice.
(vii) Seller has no trademarks or tradenames
which are used by Seller with respect to the Property, and Seller
has received no written notice that there is any claim pending or
threatened against Seller with respect to any alleged infringement
of any trademark or tradename owned by another
(viii) Seller is duly organized, validly existing and
qualified and empowered to conduct its business, and has full power
and authority to enter into and fully perform and comply with the
terms of this Agreement. Neither the execution and delivery of
this Agreement nor its performance by Seller will conflict with or
result in the breach of any contract, agreement, law, rule or
regulation to which Seller is a party or, to the actual knowledge
of Seller, by which Seller is bound.
(ix) Seller has not received written notice:
(a) that the existing use or occupation of the
Premises violates any applicable zoning laws; or
(b) that there is any existing, proposed or
contemplated plan to widen, modify or realign any street or
highway or any existing, proposed or contemplated eminent
domain proceedings that would affect the Premises in any
material way; or
(c) that any laws, ordinances, rules and
regulations of any government, or any agency, body or
subdivision thereof, bearing on the maintenance, repair or
operation of the Premises have not been complied with by
Seller.
(x) Seller has no actual knowledge of and has
received no written notice that there is any default in respect of
any of its material obligations or liabilities pertaining to the
Property or any part thereof.
(xi) Exhibit C describes all existing Leases. Each
tenant under the Leases is in possession or has a right to
possession of the premises demised thereunder. Each of the Leases
is in effect and, to Seller's actual knowledge, except as disclosed
on Exhibit C, has not been assigned, modified, amended or
rescinded, and the rights of each lessee thereunder are as tenants
only. Except as disclosed on Exhibit C, Seller has not consented
to any sublease with respect to any of the Leases. No tenant under
any Lease has any ownership interest in the Property or any part
thereof, and none has any right or option to renew or extend the
Lease term, to lease additional space within the Property, or to
terminate its Lease, except as provided in its Lease or as
described in Exhibit C. No commissions to any broker or leasing
agent are due or will become due on account of any of the Leases or
upon extension or renewal of the original term thereof, or upon the
leasing of additional space in the Property, whether or not
pursuant to an option or other rights contained in such Lease.
Except as disclosed on attached Exhibit C, all obligations of the
lessor or landlord under the Leases which are to be performed on or
before the date of this Agreement (or, for the certificate to be
delivered pursuant to Section 7(B) below, the Closing Date) and all
tenant improvement work required with respect to the Leases to be
completed by Seller have been performed and substantially completed
at no cost or expense to Purchaser. To Seller's actual knowledge,
no default exists or is claimed to exist on the part of the tenant
under any of the Leases and no event or condition exists which,
with the giving of notice, passage of time or both could constitute
such a default. To Seller's actual knowledge, no right or claim of
set-off against rent exists or has been asserted by any tenant
under the Leases. Exhibit C discloses all security and other
deposits made by each of the tenants under the Leases, and no
tenant is entitled to any rebate or concession applicable to the
period after Closing which is not disclosed on Exhibit C. Seller
has not received any advance payment of rent (other than for the
current month) on account of any of the Leases except as shown in
Exhibit C. There are no written or oral leases or tenancies
affecting the Property which are binding upon the owner of the
Property other than those listed in Exhibit C. To Seller's actual
knowledge, no guarantor(s) of any Lease have been released or
discharged from any obligation under or in connection with any
Lease. All of the Leases are assignable by Seller as contemplated
by this Agreement without the consent of any other party.
(xii) To the actual knowledge of Seller, there are no
unpaid taxes, fees or assessments of any kind or nature whatsoever
that are presently due and payable with respect to the Property or
any part thereof.
(xiii) This Agreement is valid and enforceable against
Seller in accordance with its terms and each instrument to be
executed by Seller pursuant to this Agreement or in connection
herewith will, when executed and delivered, be valid and
enforceable against Seller in accordance with its terms.
(xiv) The financial information about the Property
which is attached to this Agreement as Exhibit I or identified
therein has been prepared in good faith by or on behalf of Seller.
(xv) Except as set forth in Exhibit J attached to
this Agreement, Seller has no actual knowledge of and has received
no written notice that: (a) there is any gasoline, petroleum
products, explosives, radioactive materials, hazardous materials,
hazardous wastes, hazardous or toxic substances, polychlorinated
biphenyls or related or similar materials, asbestos or any material
containing asbestos, or any other substance or material as may be
defined as a hazardous or toxic waste or substance by any
environmental law, ordinance, rule, or regulations of any
governmental authority, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C.
Section 1801, et seq.), the Resource Conservation and Recovery Act,
as amended (42 U.S.C. Sections 6901 et seq.), the Toxic Substance
Control Act of 1976, as amended (15 U.S.C. Sections 2601 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.), the
Safe Drinking Water Act (42 U.S.C. Sections 300f - 300 j-11 et
seq.), the Emergency Planning and Community Right-to-Know Act (42
U.S.C. Sections 11001 et seq.), and in the regulations adopted and
publications promulgated pursuant thereto (collectively, "Hazardous
Materials") on the Property, or (b) the Property has ever been used
to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce, process or in any manner deal with
Hazardous Materials.
(xvi) Seller has received no written notice that
there exists any fact or condition which would result in the
termination or discontinuation of any utilities (including, without
limitation, gas, electricity, telephone, water and sanitary and
storm sewers) currently serving the Property or any part thereof,
or that any connection, hook-up and tap fees have not been paid.
(xvii) Seller owns and holds title to the Personal
Property identified on Exhibit B attached to this Agreement free
and clear of liens or encumbrances.
B. At Closing, Seller shall execute and deliver to
Purchaser a certificate pursuant to which Seller remakes and
restates the representations and warranties provided for in Section
7(A) above as of the Closing, noting any changes thereto. Such
certificate may disclose exceptions to such representations and
warranties but such disclosure shall not relieve Seller for any
liability under this Agreement by reason thereof. If, in the
reasonable opinion of Purchaser, any such disclosure constitutes or
could constitute a material adverse effect on the Property or the
use thereof intended by Purchaser, then Purchaser shall have the
right to terminate this Agreement, in which event the Earnest Money
shall be returned to Purchaser and, except as set forth in Section
12(K) below, neither party shall have any further rights or
obligations under this Agreement. If this Agreement is not
terminated as aforesaid, then Purchaser may proceed with the
Closing without affecting its rights and remedies against Seller
after Closing. As used in this Agreement, the "actual knowledge of
Seller" means only the knowledge of each of the following
individuals: Keith Harris, Chris Huber and Bo Parsons.
C. Purchaser represents and warrants to and covenants
with Purchaser that the following are true, complete and correct as
of the date of this Agreement and shall be as of Closing:
(i) Purchaser is duly organized, validly existing,
in good standing and qualified and empowered to conduct its
business, and has full power and authority to enter into and fully
perform and comply with the terms of this Agreement. Neither the
execution and delivery of this Agreement nor its performance by
Purchaser will conflict with or result in the breach of any
contract, agreement, law, rule or regulation to which Purchaser is
a party or by which Purchaser is bound.
(ii) This Agreement is valid and enforceable against
Purchaser in accordance with its terms and each instrument to be
executed by Purchaser pursuant to this Agreement or in connection
herewith will, when executed and delivered, be valid and
enforceable against Purchaser in accordance with its terms.
D. At Closing, Purchaser shall execute and deliver to
Seller a certificate pursuant to which Purchaser remakes and
restates the representations and warranties provided for in Section
7(C) above as of the Closing.
E. The representations and warranties set forth in
Sections 7(A)(i), (ix-a) and (xii) or in the above Recitals shall
not survive the Closing, but all of the other warranties and
representations of Seller set forth in this Section 7 shall survive
the execution and delivery of this Agreement, the Closing and
delivery of all documents and any and all performances in
accordance with this Agreement for a period of one (1) year (except
that there shall be no time limitation on the representations and
warranties of Seller set forth in Sections 7(A)(viii) and (xiii)
above). The representations and warranties of Purchaser in Section
7(C) above shall also survive the Closing. The foregoing
warranties and representations of Seller shall not be affected by
any investigation or verification made by or on behalf of Purchaser
prior to Closing; provided, however, that if Purchaser
intentionally fails to disclose to Seller at or prior to Closing a
matter within the actual knowledge of Purchaser which expressly
constitutes a breach by Seller of a representation or warranty set
forth in Section 7(A) above and Purchaser proceeds to consummate
the Closing, then Purchaser shall have no recourse against Seller
with respect to such breach after Closing. The "actual knowledge
of Purchaser" means only the knowledge of David Schwartz and Jean
Ubaudi.
F. [INTENTIONALLY OMITTED]
G. Except as set forth in this Agreement: the sale of
the Property to Purchaser pursuant hereto is and will be made on an
"as is" basis, without representations and warranties of any kind
or nature, including, but not limited to, any representation or
warranty concerning the title to the Property, the physical
condition of the Property (including, without limitation, the
condition of the soil at the Property, the environmental condition
of the Property (including, without limitation, the presence or
absence of hazardous materials on or respecting the Property), the
compliance of the Property with respect to applicable laws and
regulations (including, without limitation, zoning and building
codes or the status of development rights or potential respecting
the Property) or any other representation or warranty respecting
any income, expenses, charges, liens or encumbrances, rights or
claims on, affecting or pertaining to the Property or any part
thereof. Purchaser acknowledges that, except as otherwise set
forth in this Agreement, Purchaser will make its determinations
respecting the Property and the transactions contemplated herein
solely on the basis of its own physical, environmental and
financial examinations. Notwithstanding the foregoing or any other
provision of this Agreement, Purchaser does not waive, and
specifically hereby expressly retains, all rights and causes of
action it may have against Seller under any laws or regulations, or
at common law, relating to protection of the environment.
8. SCHEDULES
Within ten (10) days after the date of this Agreement,
Seller shall furnish to Purchaser:
A. The list of Service Contracts provided for in
Section 1(F) above, together with true, correct and complete copies
of each written Service Contract and a true, correct and complete
summary of each oral Service Contract; and
B. The itemization of the tangible Personal Property
provided for in Section 1(D) above; and
C. A schedule of all insurance policies owned by or on
behalf of Seller with respect to the Property or any part thereof;
and
D. The schedule of all Leases provided for in Section
1(F) above, together with a true, correct and complete copy of each
written Lease and a true, correct and complete summary of each oral
Lease; and
E. Copies of the most recent survey of and title policy
or commitment for the Premises in the possession or control of
Seller; and
F. Copies of all environmental reports, soil tests,
appraisals and police reports (within a 3 year period) in Seller's
procession.
9. CONDITIONS PRECEDENT
A. Purchaser. At the option of Purchaser, the
obligations of Purchaser under this Agreement are contingent and
conditional upon any one or more of the following, the failure of
any of which shall, at the request of Purchaser and after the
return to Purchaser of the Earnest Money, render this Agreement
null and void, except as set forth in Section 12 (K) below:
(i) Purchaser shall have through and including
February 25, 1994 (the "Inspection Period") within which to inspect
the Property. If for any reason whatsoever Purchaser determines in
its sole and absolute discretion, that the Property is unsuitable
for its purposes and notifies Seller of such decision during the
Inspection Period, the Earnest Money shall be returned to
Purchaser, at which time this Agreement shall be null and void and,
except as set forth in Section 12(K) below, neither party shall
have any further rights or obligations under this Agreement.
Purchaser's failure to object during the Inspection Period shall be
deemed a waiver by Purchaser of the condition contained in this
Section 9(A)(i). In addition, from the date of this Agreement
through the end of the Inspection Period, Purchaser and its agents,
engineers, surveyors, appraisers, auditors and other
representatives shall have the right to enter upon the Property to
inspect, examine, survey, obtain engineering inspections, appraise,
and otherwise do that which, in the opinion of Purchaser, is
necessary to determine the boundaries, acreage and condition of the
Property and to determine the suitability of the Property for the
uses intended by Purchaser (including, without limitation, inspect,
review and copy and all documents in the possession or control of
Seller, its agents, contractors or employees, and which pertain to
the construction, use, occupancy or operation of the Property or
any part thereof). Also during such time period, Seller shall make
all of Seller's books, files and records which constitute or,
except for purely internal documents of Seller, relate to, the
Property available for examination by Purchaser and Purchaser's
agents and representatives, who shall have the right to make copies
of such books, files and records and to extract therefrom such
information as they may desire and who shall have the right to
audit and have certified, thoroughly and completely, all income and
expenses, profits and losses, and operational results of the
Property for the three (3) calendar years prior to the date of
Closing and for the current calendar year to date. All inspections
undertaken by Purchaser pursuant to this Section 9(A)(i) shall be
upon reasonable prior notice and at reasonable times, and Seller
shall have the right to have a representative present during such
inspections. Purchaser shall conduct, and shall cause all persons
or entities acting on its behalf to conduct, its or their
inspections, reviews or examinations in a manner so as not to
unreasonably disturb the operations of, or any tenant at, the
Improvements. Any examinations, reviews or inspections shall be
subject to reasonable requirements of Seller with respect thereto
(and in no event will Purchaser or any person or entity acting on
its behalf contact any tenant at the Improvements without
reasonable advance notice to Seller and allowing Seller an
opportunity to have a representative participate in the contact,
and Purchaser shall use reasonable discretion in any contacts with
tenants and not unreasonably interfere with any tenants).
(ii) Each and every representation and warranty of
Seller is true, correct and complete as of Closing in all material
respects.
(iii) As of Closing, Seller shall have performed and
satisfied (a) its obligations under Sections 1 and 5(B) (i) above,
and (b) each and every other obligation, term and condition to be
performed and satisfied by Seller under this Agreement in all
material respects.
(iv) During the Inspection Period (as such term is
defined in Section 9(A)(i) above), Purchaser may, upon reasonable
prior notice and at reasonable times, conduct such environmental
studies of the Property as deemed necessary or appropriate by
Purchaser, and, with the prior consent of Seller (such consent not
to be unreasonably withheld), such studies may include a so-called
Phase II environmental survey. Seller shall have the right to have
a representative present during such studies. If for any reason
whatsoever Purchaser determines, in its sole and absolute
discretion, that the Property is unsuitable by reason of existing
or potential environmental matters and notifies Seller of such
decision during the Inspection Period, the Earnest Money shall be
returned to Purchaser, at which time this Agreement shall be null
and void and, except as set forth in Section 12(K) below, neither
party shall have any further rights or obligations under this
Agreement. Purchaser shall conduct, and shall cause all persons or
entities acting on its behalf to conduct, its or their inspections,
reviews or examinations in a manner so as not to unreasonably
disturb the operations of, or any tenant at, the Improvements.
Any examinations, reviews or inspections shall be subject to
reasonable requirements of Seller with respect thereto (and in no
event will Purchaser or any person or entity acting on its behalf
contact any tenant at the Improvements without reasonable advance
notice to Seller and allowing Seller an opportunity to have a
representative participate in the contact, and Purchaser shall use
reasonable discretion in any contacts with tenants and not
unreasonably interfere with any tenants). Copies of any
environmental reports will be delivered to Seller who shall keep
same confidential.
(v) The conditions precedent provided for in
Sections 4(A) and 5(E) above shall have been satisfied by Seller.
In addition, the Title Insurer shall issue at Closing an Owner's
Title Insurance Policy (or marked-up commitment therefore) insuring
fee simple title to the Property in Purchaser (or Purchaser's
designee, if applicable) in the amount of the Purchase Price
subject only to Permitted Exceptions, and otherwise in form and
condition required by this Agreement, and such Policy (the "Owner
Title Policy") shall include an extended coverage endorsement over
the so-called general or standard exceptions which are a part of
the printed form of the policy, and such other endorsements as the
Title Insurer agrees to give during the Inspection Period.
B. Seller. At the option of Seller, the obligations
of Seller under this Agreement are contingent and conditional upon
any one or more of the following, the failure of which shall, at
the request of Seller and after the return to Purchaser of the
Earnest Money, render this Agreement null and void, except as
provided for in Section 12(K) below:
(i) Each and every representation and warranty of
Purchaser is true, correct and complete as of Closing in all
material respects.
(ii) As of Closing, Purchaser shall have performed
and satisfied (a) its obligations under Section 5 (B) (ii) above,
and (b) each and every other obligation, term and condition to be
performed and satisfied by Purchaser under this Agreement in all
material respects.
10. BROKERAGE
Seller and Purchaser each represents and warrants to the
other that, except for Seller's having retained Continental Bank,
it has not employed, engaged or otherwise dealt with a broker,
finder or the like in connection with the sale and purchase of the
Property. At Closing, Purchaser shall pay to Continental Bank a
commission of $332,000.00. Seller and Purchaser shall each
indemnify and hold the other harmless from and against any and all
claims of all brokers and finders claiming by, through or under the
indemnifying party and in any way related to the sale and purchase
of the Property pursuant to this Agreement, including, without
limitation, attorneys fees incurred by the indemnified party in
connection with such claims.
11. DEFAULTS AND REMEDIES
A. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
IN THIS AGREEMENT, IF SELLER FAILS TO PERFORM IN ACCORDANCE WITH
THE TERMS OF THIS AGREEMENT PRIOR TO CLOSING AND PURCHASER DESIRES
TO SEEK A REMEDY WITH RESPECT THERETO PRIOR TO CLOSING, THEN, AT
PURCHASER'S OPTION, EITHER THE EARNEST MONEY SHALL BE RETURNED TO
PURCHASER (AT WHICH TIME THIS AGREEMENT SHALL BE NULL AND VOID AND,
EXCEPT AS SET FORTH IN SECTION 12(K) BELOW, NEITHER PARTY SHALL
HAVE ANY FURTHER RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT), OR
PURCHASER MAY SUE FOR SPECIFIC PERFORMANCE OF THIS AGREEMENT;
PROVIDED, HOWEVER, THAT PURCHASER MAY ALSO SUE FOR DAMAGES UP TO
THE AMOUNT OF THE EARNEST MONEY IF THE FAILURE TO PERFORM CAUSES
THE CLOSING NOT TO OCCUR AND IS A MATERIAL AND INTENTIONAL FAILURE
BY SELLER WHICH IS CAPABLE OF BEING CURED PRIOR TO THE CLOSING (OR
WITHIN SEVEN (7) DAYS AFTER THE SCHEDULED DATE FOR CLOSING) AND
WHICH SELLER EITHER REFUSES TO CURE OR DOES NOT CURE TIMELY AS
AFORESAID, AND IF THE NATURE OF THE DEFAULT IS SUCH THAT, EVEN IF
SPECIFIC PERFORMANCE IS OBTAINABLE, PURCHASER WILL NOT HAVE
REALIZED THE BENEFIT OF ITS BARGAIN IN ALL MATERIAL RESPECTS.
B. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
IN THIS AGREEMENT, IF PURCHASER FAILS TO CONSUMMATE THE CLOSING AS
REQUIRED BY THIS AGREEMENT OR OTHERWISE FAILS TO PERFORM IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT IN ANY MATERIAL RESPECT
PRIOR TO CLOSING AND SELLER DESIRES TO SEEK A REMEDY WITH RESPECT
THERETO PRIOR TO CLOSING, THEN THE EARNEST MONEY SHALL BE FORFEITED
TO SELLER AS LIQUIDATED DAMAGES (WHICH SHALL BE AT SELLER'S SOLE
AND EXCLUSIVE REMEDY AGAINST PURCHASER), AT WHICH TIME THIS
AGREEMENT SHALL BE NULL AND VOID AND, EXCEPT AS SET FORTH IN
SECTION 12(K) BELOW, NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR
OBLIGATIONS UNDER THIS AGREEMENT. SELLER AND PURCHASER EACH
ACKNOWLEDGES AND AGREES, AND BY ITS INITIALS AT THE END OF THIS
SECTION 11(B) CONFIRMS, THAT (1) THE EARNEST MONEY IS A REASONABLE
ESTIMATE OF AND BEARS A REASONABLE RELATIONSHIP TO THE DAMAGES THAT
WOULD BE SUFFERED AND COSTS INCURRED BY SELLER AS A RESULT OF
HAVING WITHDRAWN THE PROPERTY FROM SALE AND THE FAILURE OF CLOSING
TO OCCUR DUE TO A DEFAULT OF PURCHASER UNDER THIS AGREEMENT; (2)
THE ACTUAL DAMAGES SUFFERED AND COSTS INCURRED BY SELLER AS A
RESULT OF SUCH WITHDRAWAL AND FAILURE TO CLOSE DUE TO A DEFAULT OF
PURCHASER UNDER THIS AGREEMENT WOULD BE EXTREMELY DIFFICULT AND
IMPRACTICAL TO DETERMINE; (3) PURCHASER SEEKS TO LIMIT ITS
LIABILITY UNDER THIS AGREEMENT TO THE AMOUNT OF THE EARNEST MONEY
IN THE EVENT THIS AGREEMENT IS TERMINATED AND THE TRANSACTION
CONTEMPLATED BY THIS AGREEMENT DOES NOT CLOSE DUE TO A DEFAULT OF
PURCHASER UNDER THIS AGREEMENT; AND (4) THE EARNEST MONEY SHALL BE
AND CONSTITUTE VALID LIQUIDATED DAMAGES TO BE PAID TO SELLER IN
LIEU OF ALL CLAIMS FOR DAMAGES AND CLAIMS TO SPECIFIC PERFORMANCE
THAT SELLER MAY HAVE AGAINST PURCHASER.
SELLER: PURCHASER:
C. If at any time either Seller or Purchaser fails to
perform in accordance with the terms of this Agreement, and the
other party desires to seek a remedy with respect thereto after
Closing, then the other party shall have such rights and remedies
as are available to it at law or in equity, subject, however, to
the limitations expressly set forth in this Agreement.
D. If, as of Closing, Seller or Purchaser is in breach
of a representation or warranty or has failed to satisfy a covenant
or agreement in this Agreement contained, then the other party may
nonetheless proceed with the Closing without affecting its rights
and remedies with respect thereto after Closing, subject, however,
to the limitations expressly set forth in this Agreement.
12. MISCELLANEOUS
A. No present or future partner in either Seller or
Purchaser (or in any partner of any partner of either) shall have
personal liability, directly or indirectly, under or in connection
with this Agreement or any agreement made or entered into under or
in connection with the provisions of this Agreement, or any
amendment or amendments to any of the foregoing made at any time or
times, heretofore or hereafter, and Seller and Purchaser, and their
respective successors and assigns, and without limitation, all
other persons and entities, shall look solely to assets of Seller
or Purchaser, as the case may be, for the payment of any claim or
for any performance hereunder or with respect hereto.
Notwithstanding anything to the contrary contained herein, in no
event shall any individual person (as opposed to a corporate or
partnership entity) which is a partner in either Purchaser or
Seller or in any partnership which is, in turn, a partner in either
Purchaser or Seller, have any personal liability, directly or
indirectly, hereunder or in connection herewith.
B. Neither this Agreement nor any interest hereunder
shall be assigned or transferred by Seller. Purchaser may not
assign or otherwise transfer all or any part of its interest under
this Agreement, whether before or after Closing, except to an
entity controlling, controlled by or under common control with
Purchaser. As used in this Agreement, the term "Purchaser" shall
be deemed to include any permitted assignee or other transferee of
the initial Purchaser. Upon any such permitted transfer by a
Purchaser, such Purchaser shall be relieved of any subsequently
accruing liability under this Agreement. Subject to the foregoing,
this Agreement shall inure to the benefit of and shall be binding
upon Seller and Purchaser and their respective successors and
assigns.
C. This Agreement constitutes the entire agreement
between Seller and Purchaser with respect to the Property and shall
not be modified or amended except in a written document signed by
Seller and Purchaser. Any prior agreement or understanding between
Seller and Purchaser concerning the Property is hereby rendered
null and void.
D. With respect to any inspection, examination, review
or study of the Property or any part thereof made by Purchaser as
provided for in Sections 3(F), 9(A)(i) or 9(A)(iv) above, Purchaser
shall indemnify, defend and hold Seller harmless from and against
any and all loss, cost, expense, claims and liabilities asserted
against or incurred by Seller for physical loss or damage to person
or property which arises from Purchaser's activities as aforesaid.
E. Time is of the essence of this Agreement. In the
computation of any period of time provided for in this Agreement or
by law, the day of the act or event from which the period of time
runs shall be excluded, and the last day of such period shall be
included, unless it is a Saturday, Sunday, or legal holiday, in
which case the period shall be deemed to run until the end of the
next day which is not a Saturday, Sunday, or legal holiday.
F. All notices, requests, demands or other
communications required or permitted under this Agreement shall be
in writing and delivered personally or by certified mail, return
receipt requested, postage prepaid, by telecopy or other facsimile
transmission (to be promptly followed by delivery by another method
permitted by this Section 12(F)), or by overnight courier (such as
Federal Express), addressed as follows:
1. If to Seller:
c/o JMB Realty Corporation
19th Floor
900 North Michigan Avenue
Chicago, Illinois 60611
Attention: Keith Harris
With a copy to:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: Gary M. Laughlin
2. If to Purchaser:
Suite 600
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: David Schwartz
With a copy to:
Rosenberg & Liebentritt, P.C.
Suite 1600
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: Donald J. Liebentritt
All notices given in accordance with the terms hereof shall be
deemed received forty-eight (48) hours after posting, or when
delivered personally. Either party hereto may change the address
for receiving notices, requests, demands or other communication by
notice sent in accordance with the terms of this Section 12(F).
G. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Illinois.
H. At Closing, Seller shall deliver to Purchaser its
affidavit stating, under penalty of perjury, Seller's U.S. taxpayer
identification number and that Seller is not a foreign person
within the meaning of Section 1445 of the Internal Revenue Code.
The purpose of this affidavit is to assure Purchaser that the
withholding of taxes by Purchaser is not required by Section 1445
upon Seller's disposition of the Property, and such certification
shall be in form prescribed by said Section or regulations
promulgated pursuant thereto.
I. Unless otherwise consented to in writing by Seller,
and if the Closing does not occur, written information and
documents received by Purchaser from Seller pursuant to this
Agreement shall be held in confidence and not disclosed to third
parties other than to consultants, agents and the like assisting
Purchaser with the transaction contemplated by this Agreement and
as required by law (who shall be required, in turn, to keep all
such information confidential as herein provided.)
J. This Agreement may be executed in any number of
identical counterparts, any or all of which may contain the
signatures of fewer than all of the parties but all of which shall
be taken together as a single instrument. Neither this Agreement
nor any memorandum or short form hereof shall be recorded.
K. Sections 10 and 12(D) above shall survive the
termination of this Agreement, but the provisions of this Agreement
shall continue to be applicable to events and circumstances
occurring and liability accruing prior to the date of the
termination in accordance with its terms.
L. As used in this Agreement, "matters or record" means
matters disclosed by those public records maintained by the Orange
County Recorder and the Secretary of State of the State of
California which are generally available to the public and are
customarily searched by title companies to determine the status of
title to real and personal property.
M. As used in this Agreement, "security deposits" shall
mean all refundable security deposits under the Leases as of the
last day of the Inspection Period, plus all security deposits
(whether or not refundable) thereafter collected by Seller and held
by Seller as of Closing.
SELLER
VILLA SOLANA ASSOCIATES,
an Illinois general partnership
By: Carlyle Real Estate Limited
Partnership-XV,
an Illinois limited partnership,
General Partner
By: JMB Realty Corporation,
an Illinois corporation,
General Partner
By:
Title:
Date: February , 1994
PURCHASER
EQR-VILLA SOLANA VISTAS, INC., an
Illinois corporation
By:
Title:
Date: February , 1994
EXHIBITS
A - Legal Description
B - Tangible Personal Property
C - Leases
D - Service Contracts
E - California Grant Deed
F - Bill of Sale
G - Assignment and Assumption of Leases
and Service Contracts
H - Assignment of General Intangibles
I - Financial Information
J - Environmental Disclosure
VILLA SOLANA
LAGUNA HILLS, CA
SECOND AMENDMENT TO
AGREEMENT FOR PURCHASE AND SALE
OF REAL ESTATE AND RELATED PROPERTY
THIS SECOND AMENDMENT (this "Amendment") is made as of the
4th day of March, 1994, by and between VILLA SOLANA ASSOCIATES
("Seller"), an Illinois general partnership having an office c/o
JMB Realty Corporation, 19th Floor, 900 North Michigan Avenue,
Chicago, Illinois 60611, and EQR-VILLA SOLANA VISTAS, INC.
("Purchaser"), an Illinois corporation having an office at Two
North Riverside Plaza, Suite 600, Chicago, Illinois 60606.
RECITALS
A. Seller and Purchaser are parties to that certain
Agreement for Purchase and Sale of Real Estate and Related
Property dated February 7, 1994, as amended by letter agreement
dated February 25, 1994 (the "Contract") with respect to Villa
Solana Apartments, located at 26033 Moulton Parkway, Laguna
Hills, California. Each capitalized term used but not defined in
this Amendment shall have the meaning ascribed to it in the
Contract.
B. Seller and Purchaser desire to amend the Contract as
provided for in this Amendment.
THEREFORE, in consideration of the above Recitals, the
terms, covenants and conditions of the Contract and this
Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller
and Purchaser agree as follows:
1. Inspection Period. Purchaser acknowledges that the
Inspection Period has expired and that Purchaser has not
terminated the Contract as provided for in Sections 9(A)(i) and
9(A)(iv) thereof.
2. Permitted Exceptions. Purchaser hereby objects to the
following exceptions to coverage noted in the Title Commitment:
7, 18, 19, 20 and 21. Purchaser reserves its right to object to
exception 8 on the Title Commitment until Purchaser has
determined and approved the location of the easements noted
thereinm, but Purchaser shall accept exception 8 as a Permitted
Exception if it is determined that it is the same easement as is
noted at exception 9.
3. Owner Title Policy. The Owner Title Policy shall be an
ALTA Form B (1970) Extended Coverage Policy containing the
following endorsements: an extended coverage endorsement over the
so-called general or standard exceptions which are a part of the
printed form of the policy, a comprehensive 3.1 zoning
endorsement with parking and loading coverage (and specifically
including coverage as to the "First Comprehensive Revisions"
noted at item 10 in the Title Commitment), coverage insuring
access to Alicia and Moulton Parkways, ingress and egress (known
as a location endorsement), the equivalent of a Comprehensive
Endorsement No. 1, contiguity and "one parcel" endorsements as to
Parcels A, B and C as noted in the Title Commitment, an
encroachment endorsement for any encroachments shown by the
Survey, and a "surface rights" endorsement.
4. Personal Property. The appliances identified on
Exhibit A attached to this Amendment shall be deemed a part of
Exhibit B to the Contract and title to same shall be transferred
to Purchaser at Closing free and clear of any encumbrances.
5. Ratification. As hereby amended, the Contract
continues in full force and effect in accordance with its terms
and conditions.
IN WITNESS WHEREOF, Seller and Purchaser have executed and
delivered this Amendment as of the date first written above.
SELLER
VILLA SOLANA ASSOCIATES, an Illinois
general partnership
By: Carlyle Real Estate Limited
Partnership-XV, an Illinois limited
partnership, General Partner
By: JMB Realty Corporation, an
Illinois corporation, General
Partner
By:
Title:
PURCHASER
EQR-VILLA SOLANA VISTAS, INC., an
Illinois corporation
By:
Title:
EXHIBIT A
February 25, 1994
Mr. David Schwartz
EQR-VILLA SOLANA VISTAS, INC.
Suite 600
Two North Riverside Plaza
Chicago, Illinois 60606
RE: Villa Solana Apartments
Laguna Hills, California
Dear David:
Reference is made to that certain Agreement for Purchase and
Sale of Real Estate and Related Property ("Purchase Agreement") dated as of
February 7, 1994, between Villa Solana Assocuates ("Seller") and EQR-Villa
Solana Vistas, Inc. ("Purchaser"), providing for the purchase and sale of
that certain apartment complex known as "Villa Solana Apartments" in Laguna
Hills, California. Except as otherwise set forth herein, all capitalized
terms used herein shall have the meanings set forth for such terms in the
Agreement.
Seller has recently delivered to Purchaser the items required
pursuant to Section 8 of the Purchase Agreement, as well as the Title Commitment
contemplated in Section 4B (i) thereof. The Survey is expected to be delivered
shortly.
While Purchaser acknowledges that, subject to the foregoing,
it has completed and approved its physical and financial reviews and inspections
of the Property (other than as to environmental matters), Purchaser needs
appropriate time to review and approve the Title Commitment, Survey and the
other Section 8 deliveries as aforesaid. In that connection, the parties
hereby agree to extend the Inspection Period through and including March 4,
1994.
Mr. David Schwartz
February 25, 1994
Page 2
Attached hereto are Exhibits B, C, D, I and J to the Purchase
Agreement. As hereby amended, the Purchase Agreement is unmodified and is in
full force and effect.
Please indicate your consent to the foregoing by signing
where indicated below.
Very truly yours,
SELLER
VILLA SOLANA ASSOCIATES,
an Illinois general partnership
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-IV,
an Illinois limited
partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: ___________________
Name: Keith A. Harris
Title: Vice President
AGREED TO AS OF THIS
25TH DAY OF FEBRUARY, 1994
PURCHASER
EQR-VILLA SOLANA VISTAS, INC.,
an Illinois corporation
By: ________________________
NAME: DONALD J. LIERENTRISS
TITLE: VICE PRESIDENT
