SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the
Securities Exchange Act of
1934
BALCOR/COLONIAL STORAGE INCOME FUND-85
(Name of Subject Company)
BALCOR/COLONIAL STORAGE INCOME FUND-85
(Name of Person(s) Filing Statement)
Limited Partnership Interests
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
Thomas E. Meador James R. Pruett
Chairman President
The Balcor Company Colonial Storage 85, Inc.
Bannockburn Lake Office Plaza 4381 Green Oaks Blvd. West,
2355 Waukegan Road, Suite A200 Suite 100
Bannockburn, Illinois 60015 Arlington, Texas 76016
(708) 267-1600 (817) 561-0100
(Name, Address and (Name, Address and
Telephone Number of Telephone Number of
Person Authorized to Person Authorized to
Receive Notice and Receive Notice and
Communications on Behalf Communications on Behalf
of the Person(s) Filing of the Person(s) Filing
Statement) Statement)
Copy To:
Michael P. Morrison, Esq.
Hopkins & Sutter
Three First National Plaza, Suite 4100
Chicago, Illinois 60602
(312) 558-6600
<PAGE>
Item 1. Security and Subject Company
The name of the subject partnership is Balcor/Colonial Storage Income
Fund-85, an Illinois limited partnership (the "Partnership"). The address of
the Partnership's principal executive offices is 2355 Waukegan Road, Suite
A200, Bannockburn, Illinois 60015. The Partnership's general partners are
Balcor Storage Partners-85, an Illinois partnership (the "Balcor General
Partner") and Colonial Storage 85, Inc., a Texas corporation (the "Colonial
General Partner," and together with the Balcor General Partner the "General
Partners"). The title of the class of equity securities to which this
statement relates is the Partnership's limited partnership interests (the
"Units"). (The holder of any Unit is hereinafter referred to as a "Limited
Partner".)
Item 2. Tender Offer of the Bidder
This statement relates to the unsolicited tender offer by Public Storage,
Inc., a California corporation ("Public Storage), to purchase up to 25% (but
not more than 25%) of the Units at a purchase price of $210 per Unit, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated January 25, 1996 (the
"Offer to Purchase"), and the related letter of transmittal (which together
constitute the "Offer"). The Offer is disclosed in a Tender Offer Statement on
Schedule 14D-1 dated January 25, 1996 as filed with the Securities and Exchange
Commission (the "Commission"). The Offer to Purchase states that the address
of the principal executive office of Public Storage is 600 North Brand
Boulevard, Glendale, California 91203-1241.
Item 3. Identity and Background
(a) The name and business address of the Partnership, which is the person
filing this statement, are set forth in Item 1 above.
(b)(1) The Partnership and its affiliates have the following material
contracts, agreements, arrangements and understandings and actual or potential
conflicts of interest with the Partnership, the General Partners and their
affiliates:
The General Partners each own a nominal interest in the Partnership and,
subject to certain preferential rights of the Limited Partners, the General
Partners are entitled to a certain percentage of the annual cash flows of the
Partnership resulting from the operations of the Partnership's properties. In
addition, also subject to certain preferential rights of the Limited Partners,
the General Partners are entitled to a certain percentage of the net cash
proceeds realized by the Partnership from the sale or refinancing of the
Partnership's properties and may be entitled to commissions arising from any
property sales. These preferential rights of the Limited Partners subordinate
the General Partners' rights to receive such distributions to the receipt by
the Limited Partners of an agreed upon rate of return. The General Partners
currently anticipate that the Limited Partners will receive distributions from
Partnership operations for the twelve-month period ending March 31, 1996
sufficient to satisfy the rate of return requirement applicable to operating
cash flow. Accordingly, the General Partners may be entitled to receive a
distribution from operating revenues.
<PAGE>
The General Partners are reimbursed by the Partnership for certain
administrative expenses incurred by the General Partners in connection with
their management of the Partnership's business. The Colonial General Partner
and an affiliate of the Balcor General Partner, The Balcor Company (the
"Company"), each fund certain other administrative expenses of the General
Partners that are not reimbursed by the Partnership.
An affiliate of the Colonial General Partner ("Colonial Affiliate") has
entered into a property management and leasing agreement with respect to the
properties owned by the Partnership (the "Property Management Agreement", a
copy of which is attached hereto as Exhibit (c)(1)). The Property Management
Agreement provides for monthly fees to be paid to the Colonial Affiliate in an
amount generally equal to 6% of gross revenues, provided that half of such fee
is to be subordinated to certain distributions to the Limited Partners. The
Property Management Agreement is terminable (i) at the option of the
Partnership upon 60 days' prior written notice to the Colonial Affiliate, (ii)
at the option of the Colonial Affiliate upon 270 days' prior written notice to
the Partnership and (iii) automatically upon the withdrawal of the Colonial
General Partner as a general or limited partner of the Partnership.
(b)(2) The Partnership and its affiliates have the following material
contracts, agreements, arrangements and understandings and actual or potential
conflicts of interest with Public Storage, or its affiliates:
The ownership of a substantial number of Units by any person presents a
potential conflict of interest between such person on the one hand and the
General Partners and any non-tendering Limited Partners on the other hand. If
the transactions contemplated in the Offer were to be consummated, Public
Storage could own a substantial number of Units. The ownership of a large
block of Units by Public Storage would enable Public Storage to significantly
influence decisions of the Partnership with respect to certain Partnership
matters. Holders of a majority of the outstanding Units are entitled to vote
to take any of the following actions: (i) remove the General Partners; (ii)
elect or approve of a successor to any removed or withdrawn General Partners;
(iii) dissolve the Partnership; and (iv) amend the Partnership's partnership
agreement. In order to amend certain provisions of the Partnership's
partnership agreement approval by the General Partners as well as an
affirmative vote by the holders of a majority of the outstanding Units is
required. Similarly, the consent of the General Partners and an affirmative
vote by the holders of a majority of the outstanding Units is required to sell
all or substantially all of the assets of the Partnership in a single
transaction or a series of related transactions. Limited Partners holding more
than 10% of the Units are entitled to call a meeting at which these matters may
be submitted to a vote of the Limited Partners. Therefore, such ownership by
Public Storage may increase the likelihood that any one or more of these
actions may or may not be taken by the Partnership. Such actions may conflict
with the General Partners' intentions and/or any non-tendering Limited
Partner's desires with respect to these Partnership matters.
Since the principal business of Public Storage is the ownership of
self-storage properties which compete with the Partnership's properties in
certain markets, the potential conflict of interest described in the paragraph
above may be magnified.
If either of the General Partners are removed as General Partner by the
Limited Partners at some future date, such removal may adversely impact the
employment needs of the Colonial General Partner and/or the Company.
<PAGE>
Except as set forth in (b)(1) and (b)(2) above, there are no material
contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest between the Partnership or any of its
affiliates and: (i) the General Partners, their respective executive officers,
directors, or affiliates; or (ii) Public Storage, or its executive officers,
directors or affiliates.
Item 4. The Solicitation and Recommendation
(a) The General Partners are expressing no opinion and are remaining
neutral with respect to the Offer.
(b) The General Partners believe that the decision of whether or not a
Limited Partner should accept the Offer depends on a number of factors,
including the following, which should be considered in connection with such
Limited Partner's individual circumstances:
(i) The General Partners' current strategy is to continue to operate
the Partnership's properties in a manner to maximize cash flow and to
provide the Limited Partners with regular quarterly cash distributions.
The Partnership recently distributed a quarterly distribution of $6.10 per
Unit, representing an annualized return of 9.76% of adjusted original
capital. Due to consistent improvement in the operating performance of
the properties, the Partnership has increased its quarterly distribution
by $1.47 per Unit (31.7%) since January 1994. The General Partners expect
to at least maintain the current level of quarterly distributions during
1996.
(ii) A further objective of the General Partners is to maximize the
price at which the properties may ultimately be sold. Occasionally, the
General Partners receive unsolicited inquiries to purchase Partnership
properties, and currently there has been strong interest from
institutional purchasers of mini-warehouse facilities. The General
Partners will continue to evaluate all offers and explore other
alternatives in order to achieve Partnership objectives and maximize
returns to Limited Partners.
(iii) Valuation Counselors Group and Darby & Associates, Joint
Venture ("Darby") has made a preliminary estimate that as of December 31,
1995 the value of a Unit was $292, based upon an estimate of the present
value of the Partnership's future cash flows and the sale of the
Partnership's assets at year-end 2000, adjusted for (A) the current assets
and current liabilities of the Partnership, (B) the present value of the
Partnership's administrative costs, including management fees, and (C) the
anticipated costs of dissolution and termination of the Partnership. This
calculation does not represent the amount a Limited Partner would receive
if the Partnership were to sell its remaining assets in the near future.
This is a preliminary estimate only and is therefore subject to
adjustment, although Darby has informed the General Partners that any such
possible adjustment will not be material. Darby's finalized December 31,
1995 valuation will be included in the Partnership's 1995 annual report.
<PAGE>
The above calculation was based on forecasted individual cash flows
prepared by the General Partners for each property, assuming a year-end
2000 liquidation. The cash flows were discounted at an annual rate of
10.0% to a net present value. Sales proceeds were calculated on the basis
of a 10.0% capitalization rate, adjusted for a 3.0% costs of sale, and
discounted at an annual rate of 10.0% to a net present value. This
valuation reflects a minor change in the methodology used in Darby's
previous calculations. Such change was made in order to reflect the
General Partners' current strategy for termination of the Partnership.
(iv) Public Storage's offering price of $210 is at the low end of the
range of prices at which Units have been sold in recent secondary market
trades. According to the most recent issue of Partnership Spectrum
(November/December 1995), trading prices for the Units ranged from $210 to
$250 during the 60 day period ended November 30, 1995. These prices do
not reflect any commissions payable by the sellers to third parties and,
therefore, the actual proceeds received by a seller will be reduced
accordingly. Due in part to the inefficiency of these secondary markets,
there can be no assurances that future secondary trades will occur or
result in similar prices.
(v) For Limited Partners who desire immediate cash, Public Storage's
offer provides an opportunity to liquidate their investment in the
Partnership.
Item 5. Persons Retained, Employed or to Be Compensated
The Partnership has retained Darby on an on-going basis to provide an
annual valuation of the Units. This year the Partnership will pay Darby a fee
of $17,500 plus any out of pocket expenses incurred in connection with these
services. None of the Partnership, the General Partners, or any person acting
on behalf of any of them has retained any other person to make solicitations or
recommendations to holders of Units in connection with the Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) To the best of the General Partners' knowledge, no transactions in
the Units have been effected during the past 60 days by the Partnership, the
General Partners or any partner, executive officer, director, affiliate or
subsidiary of either such entity.
(b) To the best of the General Partners' knowledge, none of the
Partnership, the General Partners, the Company or any partner, executive
officer, director, affiliate or subsidiary of each such entity presently
intends to tender any Units that are held of record or beneficially owned by
such persons pursuant to the Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) No negotiations are being undertaken or are underway by the
Partnership in response to the Offer which relate to or would result in: (1)
an extraordinary transaction such as a merger or reorganization involving the
Partnership or any affiliate controlled by the Partnership; (2) a purchase,
sale or transfer of a material amount of assets by the Partnership or any
affiliate controlled by the Partnership; (3) a tender offer for or other
acquisition of securities by or of the Partnership; or (4) any material change
in the present capitalization or distribution policy of the Partnership.
<PAGE>
On January 10, 1996, Everest Properties, Inc. ("Everest") commenced an
unsolicited tender offer to purchase up to 4.9% of the Units at a purchase
price of $175. The Everest tender offer expires on February 12, 1996. The
Everest offer is on a first-come, first-serve basis, and all acceptances
thereof are irrevocable.
(b) There are no transactions, General Partner resolutions, agreements in
principle or signed contracts in response to the Offer that relate to or would
result in one or more of the events referred to in Item 7(a).
Item 8. Additional Information to be Furnished
Taxable Limited Partners. Limited Partners that are not exempt from
Federal income tax ("Taxable Limited Partners") will recognize gain on a sale
of a Unit pursuant to the Offer to the extent that the amount realized exceeds
the Limited Partner's adjusted tax basis in such Unit. Notably, any gain
realized by a Taxable Limited Partner may possibly be offset by losses from
other "passive activities" under the passive loss rules of Section 469 of the
Internal Revenue Code of 1986, as amended (the "Code"). In the event a Taxable
Limited Partner realizes a loss on disposition, such loss may be deductible
only to the extent permitted under the passive loss rules and other applicable
limitations. If a Taxable Limited Partner sells all Units (and such Units have
not been aggregated for purposes of the passive loss rules with activities not
currently being sold), loss recognized on the sale should be deductible by such
Taxable Limited Partner against non-passive income, subject to any other
applicable limitations (including capital loss limitations).
A bill passed by the U.S. Congress in November 1995, but vetoed by the
President, would have reduced the tax rate on long-term capital gains and
changed the treatment of long-term capital losses. Currently, it is uncertain
whether any change in the taxation of capital gains and losses will ultimately
be enacted, and if so, what the changes and their effective dates will be.
Limited Partners should consider the possibility of such changes, as well as
other tax law changes, in evaluating the Offer.
In addition, other considerations could affect your tax liability,
including, but not limited to, alternative minimum taxes and state income
taxes.
Tax-exempt Limited Partners. Limited Partners that are generally exempt
from Federal income taxation (such as pension and retirement plans and
religious, charitable, scientific, literary and educational organizations (the
"Tax-exempt Limited Partners")) will generally not be taxable on a sale of
Units pursuant to the Offer. However, in order to avoid tax on the sale,
certain entities exempt under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20)
of the Code must set aside or reserve the income from the sale for purposes
related to their tax-exempt status, as described in Section 512(a)(3) of the
Code. In addition, to the extent the Units of a Tax-exempt Limited Partner are
considered debt-financed property as a result of borrowing by such Partner, all
or part of the gain from the sale of the Units may be taxable as unrelated
business taxable income (although certain "qualified organizations" may be
excepted from taxation under Section 514(c)(9) of the Code). Also, a
Tax-exempt Limited Partner would be taxable on a sale of Units in the unlikely
event the Units are considered includible in inventory of the Partner or held
primarily for sale to customers in the ordinary course of business.
<PAGE>
Item 9. Material to be Filed as Exhibits
(a)(1) Letter to Investors, dated January 29, 1996.
(a)(2) Letter to Investors, dated February 7, 1996.
(c)(1) Management Agreement.
Signature. After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: February 7, 1996 BALCOR/COLONIAL STORAGE INCOME FUND-85
By: Balcor Storage Partners-85, a general
partner
By: The Balcor Company, a partner
By: /s/Thomas E. Meador
--------------------------
Thomas E. Meador, Chairman
By: Colonial Storage 85, Inc., a general
partner
By: /s/James R. Pruett
--------------------------
James R. Pruett, President
<PAGE>
BALCOR/COLONIAL STORAGE INCOME FUND-85
P.O. BOX 7190
Deerfield, Illinois 60015-7190
January 29, 1996
Dear Investor,
By this time you may have received an offer from Public Storage, Inc. to
acquire 25 percent of the limited partnership units of Balcor/Colonial Storage
Income Fund-85.
Numerous items which appear in the offer call for a considered response
from Balcor Storage Partners-85, and Colonial Storage 85, Inc., the general
partners of Balcor/Colonial Storage Income Fund-85. Your general partners'
will mail you their response with respect to this offer no later than February
9, 1996.
In the meantime, we advise you to defer making a determination as to
whether to accept or reject such offer. In addition, please understand that
while your telephone inquiries are welcome, the securities laws strictly limit
what your general partners can tell you about this offer prior to their written
response to you on or before February 9, 1996.
Very truly yours,
BALCOR/COLONIAL STORAGE INCOME FUND-85
By: Balcor Storage Partners-85 By: Colonial Storage 85, Inc.
a General Partner a General Partner
By: The Balcor Company,
/s/Thomas E. Meador /s/James E. Pruett
-------------------------- --------------------------
Chairman President
<PAGE>
BALCOR/COLONIAL STORAGE INCOME FUND-85
P.O. Box 7190
Deerfield, Illinois 60015-7190
February 7, 1996
Dear Investor:
On January 25, 1996, Public Storage, Inc. ("PSI") announced an unsolicited
offer to purchase up to 69,230 (25%) of the outstanding limited partnership
interests ("Units") in Balcor/Colonial Storage Income Fund-85 (the
"Partnership") for a price of $210 per Unit. Your General Partners, Balcor
Storage Partners-85 and Colonial Storage 85, Inc., express no opinion and are
remaining neutral with respect to the offer by PSI. In evaluating PSI's offer
to purchase Units, each limited partner should consider the following:
1. The General Partners' current strategy is to continue to operate the
Partnership's properties in a manner to maximize cash flow and to provide the
limited partners with regular quarterly cash distributions. The Partnership
recently distributed a quarterly distribution of $6.10 per Unit, representing
an annualized return of 9.76% of adjusted original capital. Due to consistent
improvement in the operating performance of the properties, the Partnership has
increased its quarterly distribution by $1.47 per Unit (31.7%) since January
1994. The General Partners expect to at least maintain the current level of
quarterly distributions during 1996.
2. A further objective of the General Partners is to maximize the price
at which the properties may ultimately be sold. Occasionally, the General
Partners receive unsolicited inquiries to purchase Partnership properties, and
currently there has been strong interest from institutional purchasers of
mini-warehouse facilities. The General Partners will continue to evaluate all
offers and explore other alternatives in order to achieve Partnership
objectives and maximize returns to investors.
3. Valuation Counselors Group and Darby & Associates, Joint Venture
("Darby") has made a preliminary estimate that as of December 31, 1995 the
value of a Unit was $292. This amount represents the estimated present value
of projected distributions to an investor who holds the Unit until termination
of the Partnership and does not represent the amount a limited partner would
receive if the Partnership were to sell its remaining assets in the near
future. This is a preliminary estimate only and is therefore subject to
adjustment, although Darby has informed the General Partners that any such
possible adjustment will not be material. Darby's finalized December 31, 1995
valuation will be included in the Partnership's 1995 annual report. For a more
detailed discussion of Darby's preliminary valuation analysis, please see Item
4(b)(iii) of the attached Schedule 14D-9.
4. PSI's offering price of $210 is at the low end of the range of prices
at which Units have been sold in recent secondary market trades. According to
the most recent issue of Partnership Spectrum (November/December 1995), trading
prices for the Units ranged from $210 to $250 during the 60 day period ended
November 30, 1995. These prices do not reflect any commissions payable by the
sellers to third parties and, therefore, the actual proceeds received by a
seller may be reduced accordingly. Due in part to the inefficiency of these
secondary markets, there can be no assurances that future secondary trades will
occur or result in similar prices.
<PAGE>
5. For investors who desire immediate cash, PSI's offer provides an
opportunity to liquidate their investment in the Partnership.
Under the terms of PSI's offer, PSI cannot purchase any tendered Units
prior to March 12, 1996. You may withdraw Units tendered to PSI at any time
prior to 5:00 p.m., E.S.T., on March 12, 1996. You should consult your
personal financial, tax and legal advisors as to your personal situation prior
to making a decision regarding the offer. If you wish to retain your Units,
you need not take any action regarding PSI's offer. If you wish to tender your
Units, you need to comply with the terms of PSI's offer.
We strongly urge you to read carefully the attached Schedule 14D-9 for a
more thorough discussion of the Partnership's response to the PSI offer. The
Exhibits to Schedule 14D-9 have been omitted but may be obtained at the
Partnership's expense by calling 1-800-422-5267.
Your General Partners will continue to act in the manner they believe to
be in the best interest of the Partnership and its limited partners.
Very truly yours, Very truly yours,
/s/James R. Pruett /s/Thomas E. Meador
James R. Pruett Thomas E. Meador, Chairman
Colonial Storage 85, Inc. Balcor Storage
Partners-85
<PAGE>
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, dated as of the 1st day of October, 1985, is entered
into by and between Colonial Storage Management 85, Inc., a Texas corporation
("CSM") and Balcor/Colonial Storage Income Fund - 85, an Illinois limited
partnership (the "Partnership").
WHEREAS, the Partnership intends to acquire and operate certain existing
mini-warehouse facilities identified in Schedule I attached hereto and
incorporated herein by this reference (each such mini-warehouse facility being
referred to as a "Property" and, collectively, as the "Properties"); and
WHEREAS, it is the intention of the Partnership that the Properties be rented
on a rental unit by rental unit basis to corporations, partnerships,
individuals or other entities for use primarily as storage facilities for
personal and business use; and
WHEREAS, the Partnership desires to employ CSM to manage the Properties and CSM
desires to accept said employment, all in accordance with the terms and
conditions of this Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants, promises,
representations and warranties contained herein, the adequacy and accuracy of
which is hereby acknowledged, the parties hereto hereby agree as follows:
SECTION I
EMPLOYMENT
1.1. Employment and Term. The Partnership hereby employs CSM and CSM hereby
accepts such employment as manager of the Properties for a period of twenty
(20) years from the date hereof (or until such Properties are sold) upon the
terms and conditions hereinafter set forth.
1.2. Other Business. The Partnership acknowledges and expressly agrees that CSM
and its affiliates intend to engage in the business of managing mini-warehouse
and other facilities both for their own account and for others (whether or not
such other facilities may be in direct or indirect competition with the
Partnership). It is further expressly agreed that CSM and its affiliates may in
the future engage in other businesses which may compete directly or indirectly
with the activities of the Partnership.
1.3. Independent Contractor. In the performance of its duties under this
Agreement CSM shall occupy the position of an independent contractor with
respect to the Partnership. Nothing contained herein shall be construed as
making the parties hereto partners or joint venturers nor, except as expressly
otherwise provided for herein, construed as making CSM an agent or employee of
the Partnership.
SECTION II
DUTIES AND AUTHORITY OF CSM
2.1. General Duties and Authority. Subject only to the restrictions,
limitations and covenants provided in Paragraphs 2.2, 2.3 and 2.4 of this
Section II and the right of the Partnership to terminate this Agreement as
provided in Section VI hereof, CSM shall have the sole and exclusive authority
to fully and completely supervise the Properties and supervise and direct the
<PAGE>
business and affairs associated with or related to the daily operations thereof
and, to that end, to cause or direct the Partnership to execute such documents
or instruments and hire or discharge such employees as, in the reasonable
judgment of CSM, may be deemed necessary or advisable. Such duties and
authorities shall include, but not be limited to, the following:
(a) Renting of the Properties. CSM shall establish policies and procedures
for directing the marketing activities of Partnership employees. CSM shall
have the sole discretion, which discretion shall be exercised in good
faith and consistent with reasonable business practices in the locality
where each property is situated, to establish the terms and conditions of
occupancy by the lessees of rental units in Properties. CSM is hereby
authorized to direct and control Partnership employees in entering into
rental agreements on behalf of, in the name of and for the account of the
Partnership with such lessees and in collecting rent from such lessees.
CSM shall cause the Partnership to advertise in such media and to the
extent it deems necessary and appropriate.
(b) Repair, Maintenance and Improvements. CSM shall make and execute, or
supervise and have control over the making and executing of, all decisions
concerning the acquisition of furniture, fixtures and supplies for the
Properties, and the purchase, lease or other acquisition of the same on
behalf of, in the name of and for the account of the Partnership. CSM
shall make and execute, or supervise and have control over the making and
executing of, all decisions concerning the maintenance, repair and
landscaping of the Properties; provided, however, that nothing contained
herein shall preclude the Partnership from requiring maintenance and/or
repairs in addition to those recommended by CSM. All costs incurred in
connection therewith shall be on behalf of, in the name of and for the
account of the Partnership. With the prior written approval of the
Partnership, CSM or Partnership employees acting pursuant to CSM's
direction shall, on behalf of, in the name of and for the account of the
Partnership, negotiate and contract for, and supervise the installation
of, all capital improvements relating to the Properties.
(c) Personnel. CSM or Partnership employees acting pursuant to CSM's
direction shall select all vendors, suppliers, contractors, subcontractors
and employees with respect to the Properties and shall hire, discharge and
supervise all labor and employees required for the operation (including
billings and collections) and maintenance of the Properties, including
attorneys, accountants, consultants and clerical employees. All such acts
shall be on behalf of, in the name of and for the account of the
Partnership and any employee so hired shall be carried on the payroll of
the Partnership and shall not be deemed to be an employee of CSM.
Employees of the Partnership may include, but shall not be limited to,
regional managers, resident managers, assistant managers, relief managers
and administrative and clerical personnel. Where appropriate, CSM may
cause the Partnership to hire employees of CSM (other than CSM's executive
officers and directors) on a reasonable hourly rate basis (not to exceed
the rate otherwise payable to such employees by CSM) to perform the
necessary management, administrative and clerical services. In such event,
salaries of such personnel payable by CSM may be reduced correspondingly.
All personnel employed by the Partnership in connection with the foregoing
shall be supervised by CSM.
CSM and its employees shall be responsible for the disbursement of
Partnership funds in payment of all expenses incurred in connection with
<PAGE>
the operation of the Properties. CSM shall be separately reimbursed for
the direct cost of furnishing such services, but shall not be reimbursed
for the time of its executive officers and directors devoted to
Partnership affairs.
(d) Agreements. CSM and Partnership employees acting pursuant to CSM's
direction shall negotiate and execute on behalf of, in the name of and for
the account of the Partnership such agreements as CSM deems necessary or
advisable for the furnishing of utilities, services, concessions and
supplies and for the maintenance, repair and operation of the Properties
and such other agreements as may benefit the Properties or be incidental
to the matters for which CSM is responsible hereunder.
(e) Other Decisions. CSM shall have control over the daily operation of
the Properties.
(f) Regulations and Permits. CSM shall use its best efforts to cause all
things to be done on behalf of, in the name of and for the account of the
Partnership on the Properties necessary to comply with any statute,
ordinance, law, rule, regulation or order of any governmental or
regulatory body having jurisdiction over the Properties with respect to
the use of the Properties or the construction, maintenance, or operation
thereof, and with all orders and requirements of the local Board of Fire
Underwriters or any other body which may hereafter exercise similar
functions. CSM shall cause the Partnership to apply for and attempt to
obtain and maintain on behalf of, in the name of and for the account of
the Partnership all licenses and permits required or advisable (in CSM's
sole judgment) in connection with the management and operation of the
Properties.
(g) Accounting. CSM shall establish, supervise, direct and maintain the
operation of an accounting system and shall cause to be prepared and
delivered to the Partnership, at the Partnership's expense, financial
statements as follows:
(i) On or before thirty (30) days after the close of each calendar
month, a statement of operations showing the results of operation of
each of the Properties for such month and of the fiscal year to date
having annexed thereto a computation of the Property Management Fee,
as such fee is defined in Section IV of this Agreement, for such
month and for the fiscal year to date.
(ii) On or before sixty (60) days after the close of the fiscal year,
a balance sheet and related statement of operations showing the
result of the operations of the Properties during the fiscal year,
both audited and reported on by an independent certified public
accounting firm approved by and retained on behalf of, in the name of
and for the account of the Partnership by CSM and having annexed
thereto a computation of the Property Management Fee for such fiscal
year. Fees for the independent certified public accounting firm shall
be borne by the Partnership.
(h) Deposits and Disbursements. CSM shall cause the establishment of bank
accounts insured by the Federal-Deposit Insurance Corporation in the name
of the Partnership and shall deposit therein all receipts and monies
arising from the operation of the Properties or otherwise received for and
on behalf of the Partnership. CSM shall disburse Partnership funds from
<PAGE>
said accounts on behalf of, in the name of and for the account of the
Partnership in such amounts and at such time as disbursement of such
revenues for payment of payroll and other obligations of the Partnership
is required. CSM shall establish and be responsible for administering a
policy for specifying the identity of signatories to the Partnership's
bank accounts and establishing the number of signatures required for
checks of various amounts. Expenses for deposits and disbursements shall
be borne by the Partnership.
(i) Collections. CSM shall supervise and direct personnel in the
collection and billing of all accounts payable and due to the Partnership
with respect to the Properties and shall be responsible for establishing
policies and procedures to minimize the amount of bad debts. Expenses of
collections shall be borne by the Partnership.
(j) Legal Actions. CSM shall cause to be instituted on behalf of, in the
name of and for the account of the Partnership any and all legal actions
or proceedings CSM deems necessary or advisable to collect charges, rents
or other income due to the Partnership with respect to the Properties or
to oust or dispossess lessees or other persons unlawfully in possession
under any lease or otherwise, and to collect damages for breach thereof,
or default thereunder by such lessee or other occupant. The cost of all
such legal actions or proceedings shall be borne by the Partnership.
(k) Insurance. CSM shall use its best efforts to assure that there is
obtained and kept in force fire, comprehensive, liability and other
insurance policies in amounts and from carriers approved by the
Partnership and in amounts generally carried with respect to similar
facilities. CSM shall also obtain and maintain in force on behalf of the
Partnership such additional insurance with respect to the Properties as
the Partnership shall from time to time instruct. All insurance expenses
shall be borne by the Partnership.
(l) Taxes. CSM shall disburse from Partnership funds when due or in
installments (where allowed) all taxes, personal and real, and assessments
properly levied on the Partnership with respect to the Properties on
behalf of, in the name of and for the account of the Partnership. CSM
shall use its best efforts to assure that the Partnership maintains and
implements a procedure for review by Partnership employees of all amounts
assessed on the Properties. All expenses for the disbursement of taxes
shall be borne by the Partnership.
(m) Budget and Reports. CSM shall submit to the Partnership on or before
December 31 of each calendar year during the term hereof an annual budget
containing an estimate of the projected income (including rent increases
and when same, if any, are scheduled) and necessary expenditures during
the forthcoming calendar year in connection with the management and
operation of the Properties by CSM on behalf of the Partnership. CSM shall
also provide to the Partnership such periodic reports concerning the
management and operation of the Properties by CSM as the Partnership may
reasonably request.
2.2. Restrictions. Notwithstanding anything to the contrary set forth in this
Section II, CSM shall not be required to do, or cause to be done, anything for
the account of the Partnership (i) which may make CSM liable to third parties,
(ii) which may not be commenced, undertaken or pleaded because of insufficient
funds available on the accounts of the Partnership established pursuant to this
<PAGE>
Section II after reasonable request from CSM to the Partnership, (iii) which
may, under applicable law, constitute an impermissible delegation of duties and
responsibilities, including but not limited to the purchase or construction of
capital improvements, the sale or disposition of all or substantially all of
the Partnership's assets, and any action which may result in a change in the
Partnership's primary business, (iv) which cannot be done because of acts of
God, strikes, governmental regulations or laws, acts of war or other types of
events beyond CSM's control, whether similar or dissimilar to the foregoing, or
(v) which would violate the terms of the Agreement and Certificate of Limited
Partnership, any other agreement known to CSM by which the Partnership may be
bound, or that certain Registration Statement No. 95752 on Form S-11, as
amended from time to time, filed with the Securities and Exchange Commissions
and declared effective on June 11, 1985 (the "Registration Statement").
2.3. Limitations on CSM's Authority. Notwithstanding anything to the contrary
set forth in this Section II, CSM shall not, without obtaining the prior
written consent of the Partnership, (i) alter the buildings or other structures
on the Properties in any material manner, (ii) make any arrangements for a term
exceeding one (1) year which are not terminable on thirty (30) days notice at
the will of the Partnership, without penalty, payment or surcharge, or (iii)
incur any unbudgeted expenditure of Partnership funds in excess of Five
Thousand Dollars ($5,000) on any Property without the prior approval of the
Partnership.
2.4. Covenants. Notwithstanding anything to the contrary set forth in this
Section II, CSM hereby covenants to use its best efforts to assure that the
Partnership does not derive any revenues or income from or for (i) the sale of
locks and keys to lessees of rental units in the Properties; (ii) lease
application or credit check fees collected from prospective lessees of rental
units in the Properties; (iii) vending machine or concessionaire operations on
the Properties; (iv) maintenance charges assessed against lessees of rental
units in the Properties in addition to the basic rent paid by such lessees
(other than amounts received as payments for damages caused by a lessee, which
amounts shall be treated as additional rents); or (v) the provision of parking
facilities on the Properties, other than the rental of a parking space subject
to a month-to-month lease. CSM further covenants that it will operate the
Properties in a manner similar to that in which affiliates of CSM have
typically operated other mini-warehouse facilities and that the services to be
provided to lessees of rental units in the Properties will not exceed those
customarily rendered in connection with the rental of mini-warehouse
facilities.
SECTION III
DUTIES OF THE PARTNERSHIP
The Partnership hereby agrees to cooperate with CSM in the performance of its
duties under this Agreement and, to that end, upon the request of CSM, to
provide reasonable temporary office space for CSM's employees on the premises
of the Properties, to give CSM access to all files, books and records of the
Partnership relevant to the Properties and to execute all documents or
instruments and hire and discharge such employees as CSM in its good faith
judgment deems reasonably necessary or advisable to enable it to fulfill its
duties under this Agreement. Such employees shall include, but not be limited
to, regional managers, resident managers, assistant managers, relief managers
and administrative and clerical personnel. It is understood and acknowledged
that some or all of such employees may be employed part-time by the Partnership
<PAGE>
and part-time by CSM or its affiliates and/or by owners of other mini-warehouse
or other facilities managed by CSM, some of which may compete with the
Properties.
SECTION IV
COMPENSATION TO CSM
4.1. Property Management Fee. The Partnership shall pay CSM, as the full amount
due for the services herein provided which are actually rendered by CSM
pursuant to this Agreement, a Property Management Fee equal to six percent (6%)
of the "Gross Revenue" derived from or connected with the Properties so long as
the Partnership owns the Properties, but not exceeding that customary for
similar property management and leasing services in the relevant geographical
area. In the event the Partnership consents to a net lease for a term of ten
(10) or more years on any Property, the compensation otherwise payable to CSM
shall be reduced to one percent (1%) of the "Gross Revenue" derived from or
connected with such Property, except for a one time initial leasing fee of
three percent (3%) of the "Gross Revenue" on such lease payable over the first
five (5) full years of the original term of the lease. The term "Gross Revenue"
shall mean all receipts (excluding security deposits, unless and until the
Partnership recognizes such security deposits as income, and amounts received
as payments for damages by lessees) of the Partnership (whether or not received
by CSM on behalf of, in the name of or for the account of the Partnership)
arising from the operation of the Properties in the ordinary course of business
including, but not limited to, rental payments of lessees of rental units of
the Properties and all other funds, whether or not otherwise described herein,
paid for the use of the Properties. Gross Revenue shall be determined on a cash
basis. The Management Fee for each month shall be paid on or before 30 days
after the close of such month and shall be calculated on the basis of Gross
Revenue for such month.
4.2. Subordination. Fifty percent (50%) of the Property Management Fee
otherwise payable to CSM pursuant to Paragraph 4.1 shall be subordinated to the
prior receipt by Limited Partners of the Partnership of a "Special
Distribution" of eight percent (8%) during the first twelve (12) month period
after termination of the public offering of limited partnership interests in
Balcor/Colonial Storage Income Fund - 85 pursuant to the Registration
Statement, nine percent (9%) during the second twelve (12) month period and ten
percent (10%) during each twelve (12) month period thereafter. If and to the
extent required to accomplish the subordination of its Property Management Fee
as required by this Paragraph 4.2, CSM hereby agrees that it shall annually
refund to the Partnership any payments theretofore received by CSM which are
required to be subordinated by the terms hereof. If the receipt of any portion
of CSM's Property Management Fee has been subordinated to the Limited Partners
"Special Distributions", such amount shall be deferred and paid to CSM, without
interest, from and only to the extent of the "Net Cash Proceeds" of the
Partnership remaining after distributions of such "Net Cash Proceeds" to the
Limited Partners in an amount equal to their "Original Capital" plus any
deficiency in their "Special Distributions" and a twelve percent (12%)
"Cumulative Distribution." The terms "Special Distribution," "Net Cash
Proceeds," "Original Capital" and "Cumulative Distribution" shall have the same
meaning in this Paragraph 4.2 as defined in the Registration Statement, as from
time to time supplemented or amended.
4.3. Employees Compensated by Partnership. It is understood and agreed that the
Property Management Fee payable to CSM will be in addition to, and shall not be
<PAGE>
reduced by, the cost to the Partnership of employing or engaging those
employees and independent contractors engaged by or for the Partnership,
including, but not limited to, the categories of personnel specifically
referred to in Paragraph 2.1(c).
SECTION V
USE OF TRADEMARKS, SERVICE MARKS
AND RELATED ITEMS
It is understood and agreed that the name, trademark and service mark,
"Colonial Self Storage" and related trademarks, service marks, slogans,
caricatures, designs and other trade or service items shall be utilized for the
non-exclusive benefit of the Partnership in the rental and operation of the
Properties, and in comparable operations elsewhere. It is further understood
and agreed that this name and all such trademarks, service marks, slogans,
caricatures, designs and other trade or service items shall remain and be at
all times the property of CSM or its affiliates, and that, except during the
term hereof, the Partnership shall have no right whatsoever therein. Upon
termination of this Agreement, at any time or for any reason, all such use by
and for the benefit of the Partnership of any such name, trademark, service
mark, slogan, caricature, design or other trade or service item in connection
with the Properties shall, in any event, be terminated and any signs bearing
any of the foregoing shall be removed from view and no longer used by the
Partnership. It is understood and agreed that CSM will use and shall be
unrestricted in its use of such name, trademark, service mark, slogan,
caricature, design or other trade or service item in the management and
operation of mini-warehouse and other facilities both during and after the
expiration of the term or the termination of this Agreement. CSM represents and
warrants that CSM has the right to the non-exclusive use of the name, trademark
and service mark "Colonial Self Storage" and hereby agrees to indemnify and
defend the Partnership and its general partners from any and all costs,
expenses, attorneys' fees, suits, liabilities, judgments, damages and claims
arising in connection with any claim that the use of the name, trademark and
service mark "Colonial Self Storage" infringes the name, trademark or service
mark of any other person.
SECTION VI
TERMINATION
Upon sixty (60) days written notice to CSM pursuant to Section XI hereof, the
Partnership may terminate this Agreement with or without cause. Upon two
hundred seventy (270) days written notice to the Partnership pursuant to
Section XI hereof, CSM may terminate this Agreement with or without cause. This
Agreement shall automatically terminate in the event Colonial Storage 85, Inc.,
an affiliate of CSM, shall voluntarily withdraw as a general or limited partner
of the Partnership.
<PAGE>
SECTION VII
INDEMNIFICATION
The Partnership hereby agrees to indemnify and hold CSM and its executive
officers, directors, employees and affiliates harmless from any and all costs,
expenses, attorneys' fees, suits, liabilities, judgments, damages and claims
arising from the Partnership's breach of this Agreement or in connection with
the management of the Properties (including the loss of the use thereof
following any damage, injury or destruction) arising from any cause except for
the willful misconduct, negligence or negligent omissions on the part of CSM or
its executive officers, directors, employees or affiliates. CSM and its
executive officers, directors, employees and affiliates also shall not be
liable for any error of judgment or for any mistake of fact or law, or for
anything which it may do or refrain from doing hereinafter, except in cases of
willful misconduct or negligence. CSM and its affiliates hereby agree to
indemnify and hold the Partnership and its general partners harmless from any
and all costs, expenses, attorneys' fees, suits, liabilities, judgments,
damages and claims arising from CSM's breach of this Agreement or in connection
with the management of the Properties arising from the willful misconduct or
negligence of CSM or its executive officers, directors, employees or
affiliates.
SECTION VIII
ASSIGNMENTS
Neither this Agreement nor any right hereunder shall be assignable by the
Partnership and any attempt to do so shall be void ab initio. CSM shall have
the right to assign this Agreement to an affiliate, provided, however, that any
such assignee must assume all obligations of CSM hereunder. The Partnership's
rights hereunder will be enforceable against any such assignee and CSM shall
not be released from its liabilities hereunder unless the Partnership shall
expressly agree thereto in writing.
SECTION IX
HEADINGS
The headings contained herein are for convenience of reference only and are not
intended to define, limit or describe the scope or intent of any provision of
this Agreement.
SECTION X
GOVERNING LAW
The validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties shall be governed by the
laws of the State of Texas. This Agreement shall be deemed performable and
venue for any action brought hereunder shall be in Tarrant County, Texas.
<PAGE>
SECTION XI
NOTICES
Any notice required or permitted herein to be given shall be given in writing
and shall be personally delivered or mailed, first class postage prepaid, to
the respective addresses of the parties set forth below their signatures on the
signature page hereof, or to such other address as any party may give to the
others in writing.
SECTION XII
SEVERABILITY
Should any term or provision hereof be deemed invalid, void or unenforceable
either in its entirety or in a particular application, the remainder of this
Agreement shall nonetheless remain in full force and effect and, if the
subject, term or provision is deemed to be invalid, void or unenforceable only
with respect to a particular application, such term or provision shall remain
in full force and effect with respect to all other applications. The parties
recognize that broad discretionary authority has been granted by the
Partnership to CSM in the management and direction of the Partnership's
business and financial affairs and it is their intent that such authority be
fully exercised by CSM within the limitations imposed by applicable law. If,
however, any court of competent jurisdiction should render a final judgment
that the authority granted to CSM herein exceeds the bounds of permissible
delegation under applicable law, the parties agree that this Agreement shall be
deemed amended, modified and reformed to the extent necessary to reduce the
scope of authority delegated by the Partnership to CSM as to limit such
authority to that permissible under applicable law as evidenced by the written
legal opinion of counsel to CSM. The parties agree that no determination that
the discretion and authority granted to CSM hereunder exceeds permissible
bounds shall result in this Agreement being declared or adjudged invalid, void
or unenforceable in its entirety; rather, the parties request that any court
examining such issue employ great latitude in reforming this Agreement so as to
make the same, as reformed, valid and enforceable.
SECTION XIII
AFFILIATES
"Affiliate", with respect to CSM shall mean (i) any person directly or
indirectly owning, controlling, or holding with power to vote, 10% or more of
the outstanding voting securities or interests of CSM; (ii) any person, 10% or
more of whose outstanding voting securities or interests are directly or
indirectly owned, controlled, or held with power to vote, by CSM; (iii) any
person directly or indirectly controlling, controlled by or under common
control with CSM; (iv) any officer, director or partner directly or indirectly
controlling, controlled by or under common control with CSM; (iv) any officer,
director or partner of CSM; and (v) any company for which CSM acts as an
officer, director or partner.
<PAGE>
SECTION XIV
SUCCESSORS
This Agreement shall be binding upon and inure to the benefit of the respective
parties hereto and their permitted assigns and successors in interest.
SECTION XV
ATTORNEYS' FEES
If it shall become necessary for either party hereto to engage attorneys to
institute legal action for the purpose of enforcing its rights hereunder or for
the purpose of defending legal action brought by the other party hereto, the
party or parties prevailing in such litigation shall be entitled to receive all
costs, expenses and fees (including reasonable attorneys' fees) incurred by it
in such litigation (including appeals).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
COLONIAL STORAGE MANAGEMENT 85, INC.
By: /s/James R. Pruett
----------------------
James R. Pruett,
Its President
1141 West Pioneer Parkway
Suite 200
Arlington, Texas 76013
BALCOR/COLONIAL STORAGE
INCOME FUND - 85
By: Balcor Storage
Partners - 85
By: Balcor Storage
Partners, Inc.
By: /s/Michael C. Schindler
--------------------------
--------------------------
Its
----------------------
4849 Golf Road
Skokie, Illinois 60077
AND By: Colonial Storage 85, Inc.
By: /s/James R. Pruett
---------------------------
James R. Pruett, Its
President
<PAGE>
SCHEDULE I
The Initial Facilities
1. 3233 East Highway 80
Odessa, Texas
2. 2306 N. Collins Blvd.
Arlington, Texas
3. 3107 South Lake Drive
Texarkana, Texas
4. 6715 Wolflin Road
Amarillo, Texas
5. 7800 North Broadway
Oklahoma City, Oklahoma
6. 1604 Camp Lane
Albany, Georgia
7. 1005 W. Cotton
Longview, Texas
8. 6046 Financial Drive
Norcross, Georgia
9. 1320 Norwood Drive
Bedford, Texas
10. 5311 Apex Highway
Durham, North Carolina
11. 218 Eisenhower Drive
Savannah, Georgia
12. 132 Slaton Highway
Lubbock, Texas
13. 2960 South Cobb Drive
Smyrna, Georgia
14. 3513 Highway 45 North
Meridian, Mississippi
15. 3194 S. Campbell Ave.
Springfield, Missouri
16. 5115 San Mateo N.E.
Albuquerque, New Mexico
17. 1440 North Hairston Road
Stone Mountain, Georgia
18. 3472 Hillsboro Road
Durham, North Carolina
19. 4615 West Beryl Road
Raleigh, North Carolina
20. 2826 S. Clack Street
Abilene, Texas
21. 1301 S. Stemmons
Lewisville, Texas
22. 2316 Highway 19 North
Meridian, Mississippi
23. 3016 South Cooper
Arlington, Texas
24. 2215 W. Southwest Loop 223
Tyler, Texas
25. 2000 Country Club Drive
Carrollton, Texas
26. 2331 S. Collins Blvd.
Arlington, Texas
<PAGE>
27. 2990 Pio Nono Avenue
Macon, Georgia
28. 5513 East Lancaster
Fort Worth, Texas
29. 5121 North Street
Nacogdoches, Texas
30. 4917 California Pkwy., SE
Fort Worth, Texas
31. 2636 Baylor Drive, SE
Albuquerque, New Mexico
32. 1881 Gordon Highway
Augusta, Georgia
33. 3208 E. Park Row
Arlington, Texas
34. 5502 Chapel Hill Blvd.
Chapel Hill, North Carolina
35. 3654 West Pioneer Pkwy.
Arlington, Texas
36. 1311 Northwest Loop 281
Longview, Texas
37. 3125 Cherry Street North
Winston-Salem, North Carolina
38. 1010 Holiday Hill Drive North
Midland, Texas
39. 1311 Clark Road
Santa Fe, New Mexico
40. 95 Green Street
Warner-Robins, Georgia
41. 2115 Silas Creek Pkwy.
Winston-Salem, North Carolina
42. 3120 Knickerbocker Rd.
San Angelo, Texas
43. 2302 Parkview Drive
San Angelo, Texas
44. 8457 Roswell Rd.
Dunwoody, Georgia
45. 5717 Will Ruth Ave.
El Paso, Texas
46. 1513 Denman Street
Lufkin, Texas
47. 9303 Abercorn Extension
Savannah, Georgia
48. 1850 N. Clack Street
Abilene, Texas
49. 7012 Glenwood
Raleigh, North Carolina
50. 3730 West Wendover Ave.
Greensboro, North Carolina
<PAGE>
The Additional Facilities
51. 2305 E. Lohman Avenue
Las Cruces, New Mexico
52. 661 W. San Mateo Road
Santa Fe, New Mexico
53. 4000 I-40 East
Amarillo, Texas
54. 4701 Osborne Drive
El Paso, Texas
55. 3229 Highway 80
Mesquite, Texas
56. 1510 West 7th Street
Clovis, New Mexico
57. 914 N.E. 8th Street
Grand Prairie, Texas
58. 7469 Tara Boulevard
Jonesboro, Georgia
59. 831 N. Forest
Amarillo, Texas
60. 5808 Highway 271 South
Fort Smith, Arkansas
61. 5604 Tinker Diagonal
Midwest City, Oklahoma
62. 3751 Longmire Way
Doraville, Georgia
63. 818 S. Clack Street
Abilene, Texas
64. 8400 Canyon Drive
Amarillo, Texas
65. 3121 Washington Road
Augusta, Georgia
66. 4011 Midland Blvd.
Fort Smith, Arkansas
67. 4141 Snapfinger Woods Drive
Decatur, Georgia
68. 1808 Hampton Road
Texarkana, Texas
69. 4155 Milgen Road
Columbus, Georgia
<PAGE>
FIRST AMENDMENT TO
MANAGEMENT AGREEMENT
THIS FIRST AMENDMENT TO MANAGEMENT AGREEMENT, dated as of the 30th day of
April, 1986, is entered into by and between Colonial Storage Management 85,
Inc., a Texas corporation ("CSM") and Balcor/Colonial Storage Income Fund - 85,
an Illinois limited partnership (the "Partnership").
W I T N E S S E T H:
WHEREAS, CSM and the Partnership have previously entered into a certain
Management Agreement dated as of the 1st day of October, 1985, a copy of which
is attached hereto as Exhibit A and incorporated herein by reference, pursuant
to which the Partnership retained CSM to manage the Properties (as defined
therein); and
WHEREAS, the Partnership intends to acquire and operate three (3) additional
existing mini-warehouse facilities, identified in Schedule I-A attached hereto
and incorporated herein by reference (each such mini-warehouse facility being
referred to as an "Additional Property" and, collectively, as the "Additional
Properties"; and
WHEREAS, it is the intention of the Partnership that the Additional Properties
be rented on a rental unit by rental unit basis to corporations, partnerships,
individuals or other entities for use primarily as storage facilities for
personal and business use; and
WHEREAS, the Partnership desires to employ CSM to manage the Additional
Properties and CSM desires to accept said employment, all in accordance with
the terms and conditions of the Management Agreement attached hereto;
NOW, THEREFORE, in consideration of the mutual covenants, promises,
representations and warranties contained herein, the adequacy of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Employment and Term. The Partnership hereby employs CSM and CSM hereby
accepts such employment as manager of the Additional Properties for a period of
twenty (20) years from October 1, 1985 (or until such Additional Properties are
sold) upon the terms and conditions set forth in the Management Agreement.
2. Definitions. From and after the date hereof, "Property" shall be deemed to
include an Additional Property and "Properties" shall be deemed to include the
Additional Properties for all purposes, as if originally set forth in Schedule
I to the Management Agreement.
3. Subordination. With respect to the Properties, including the Additional
Properties, the first sentence of 4.2 of the Management Agreement shall read as
follows:
"Fifty percent (50%) of the Property Management Fee otherwise payable to
CSM pursuant to Paragraph 4.1 shall be subordinated to the prior receipt
by Limited Partners of the Partnership of a "Special Distribution" of
eight percent (8%) during the first twelve (12) month period after April
1, 1986, nine percent (9%) during the second twelve (12) month period, and
ten percent (10%) during each twelve (12) month period thereafter
<PAGE>
4. Integration. Except as specifically set forth herein, the terms and
conditions of the Management Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to
Management Agreement as of the date first above written.
COLONIAL STORAGE MANAGEMENT 85, INC.
By:/s/James R. Pruett
---------------------------
James R. Pruett, President
Suite 200
1141 West Pioneer Parkway
Arlington, Texas 76013
BALCOR/COLONIAL STORAGE INCOME
FUND - 85
By: Balcor Storage Partners -
85
By: Balcor Storage Partners, Inc.
By: /s/Michael C. Schindler
---------------------------
Michael C. Schindler,
Its First Vice President
------------------------
4849 Golf Road
Skokie, Illinois 60077
AND By: Colonial Storage 85, Inc.
/s/James R. Pruett
------------------------
James R. Pruett,
President
<PAGE>
SCHEDULE I-A
70 426 South College Drive, Wilmington, North Carolina
71 2815 White House Road, Greenville, South Carolina
72 1412 Poinsett Highway, Greenville, South Carolina
<PAGE>
