SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year
ended December 31, 1995 Commission file no. 0-16108
JMB INCOME PROPERTIES, LTD. - XII
(Exact name of registrant as specified in its charter)
Illinois 36-3337796
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a
Vote of Security Holders. . . . . . . . . . . . 6
PART II
Item 5. Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters . 6
Item 6. Selected Financial Data . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . 13
Item 8. Financial Statements and Supplementary Data . . 20
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . 50
PART III
Item 10. Directors and Executive Officers
of the Partnership. . . . . . . . . . . . . . . 50
Item 11. Executive Compensation. . . . . . . . . . . . . 53
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . 54
Item 13. Certain Relationships and Related Transactions. 55
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . 55
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 57
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
The registrant, JMB Income Properties, Ltd. - XII (the "Partnership"),
is a limited partnership formed in 1984 and currently governed under the
Revised Uniform Limited Partnership Act of the State of Illinois to invest
in improved income-producing commercial and residential real property. On
August 23, 1985, the Partnership commenced an offering to the public of
$100,000,000 (subject to increase by up to $150,000,000) in Limited
Partnership Interests (the "Interests") pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933 (Registration No.
2-96716). A total of 189,679 Interests were sold to the public at $1,000
per Interest and were issued to Investors in fiscal 1986. The offering
closed on January 17, 1986. No Investor has made any additional capital
contribution after such date. The Investors in the Partnership share in
their portion of the benefits of ownership of the Partnership's real
property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title and/or through joint venture
partnership interests. The Partnership's real estate investments are
located throughout the nation and it has no real estate investments located
outside of the United States. A presentation of information about industry
segments, geographic regions, raw materials, or seasonality is not
applicable and would not be material to an understanding of the
Partnership's business taken as a whole. Pursuant to the Partnership
agreement, the Partnership is required to terminate no later than October
31, 2035. The Partnership is self-liquidating in nature. Upon sale of a
particular property, the net proceeds, if any, are generally distributed or
reinvested in existing properties rather than invested in acquiring
additional properties. As discussed further in Item 7, the marketplaces in
which the portfolio operates and real estate markets in general are in a
recovery mode. The Partnership currently expects to conduct an orderly
liquidation of its remaining investment portfolio as quickly as practicable
and to wind up its affairs not later than December 31, 1999, barring any
unforeseen economic developments. (Reference is also made to Note 1.)
The Partnership has made the real property investments set forth in
the following table:
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1995,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (D) SIZE PURCHASE CAPITAL PERCENTAGE (A) TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. Park Center
Financial Plaza
office buildings
San Jose,
California. . . . . 432,000 06/20/85 27% fee ownership of land and
sq.ft. improvements (through
n.r.a. joint venture partnership)
(c)
2. Topanga Plaza
shopping center
Los Angeles,
California. . . . . 360,000 12/31/85 20% fee ownership of land and
sq.ft. improvements (through
g.l.a. joint venture partnership)
(b)(c)(e)
3. 40 Broad Street
office building
New York, New York. 247,800 12/31/85 29% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership) (c)
4. Plaza Hermosa
Shopping Center
Hermosa Beach,
California. . . . . 94,900 09/03/86 8% fee ownership of land and
sq.ft. improvements (b)
n.r.a.
5. Mid Rivers Mall
shopping center
St. Peters
(St. Louis),
Missouri. . . . . . 323,100 12/12/86 1/30/92 fee ownership of land and
sq.ft. improvements (through
g.l.a. joint venture partnership)
6. First Financial
Plaza
office building
Encino,
California. . . . . 216,000 05/20/87 9% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
(b)(c)(e)
<FN>
- ---------------
(a) The computation of this percentage for properties held at
December 31, 1995 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.
(b) Reference is made to Note 4 and to Schedule III filed with this
annual report for the current outstanding principal balances and a
description of the long-term mortgage indebtedness secured by the
Partnership's real property investments.
(c) Reference is made to Note 3 for a description of the joint
venture partnership through which the Partnership has made this real
property investment.
(d) Reference is made to Item 8 - Schedule III filed with this
annual report for further information concerning real estate taxes and
depreciation.
(e) Reference is made to Item 6 - Selected Financial Data for
additional operating and lease expiration data concerning this investment
property.
</TABLE>
The Partnership's real property investments are subject to competition
from similar types of properties (including in certain areas properties
owned or advised by affiliates of the General Partners) in the respective
vicinities in which they are located. Such competition is generally for
the retention of existing tenants. Additionally, the Partnership is in
competition for new tenants in markets where significant vacancies are
present. Reference is made to Item 7 below for a discussion of competitive
conditions and future renovation and capital improvement plans of the
Partnership and certain of its significant investment properties.
Approximate occupancy levels for the properties are set forth in the table
in Item 2 below to which reference is hereby made. The Partnership
maintains the suitability and competitiveness of its properties in its
markets primarily on the basis of effective rents, tenant allowances and
service provided to tenants. In the opinion of the Managing General
Partner of the Partnership, all of the investment properties held at
December 31, 1995 are adequately insured. Although there is earthquake
insurance coverage for a portion of the value of the Partnership's
investment properties, the Managing General Partner does not believe that
such coverage for the entire replacement cost of the investment properties
is available on economic terms.
In January 1994, an earthquake occurred in Los Angeles, California.
Though significant portions of the mall suffered casualty damage, the
approximate 360,000 square feet of mall shops owned by the Topanga
Partnership did not suffer major structural damage. The costs at Topanga
for which the joint venture was responsible was approximately $11.9
million. The majority of this cost was recovered under the final
settlement, reached in the third quarter of 1995, with the joint venture's
earthquake insurance provider. Additional business interruption insurance
proceeds were also received. Reference is made to Item 7 and Note 3(c) for
further description of such event.
Reference is made to Note 6 for a schedule of minimum lease payments
to be received in each of the next five years, and in the aggregate
thereafter, under leases in effect at the Partnership's properties as of
December 31, 1995.
The Partnership has no employees other than personnel performing on-
site duties at certain of the Partnership's properties, none of whom are
officers or directors of the Managing General Partner of the Partnership.
The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.
ITEM 2. PROPERTIES
The Partnership owns directly or through joint venture partnerships
the properties or interests in the properties referred to under Item 1
above to which reference is hereby made for a description of said
properties.
The following is a listing of principal businesses or occupations and
approximate occupancy levels by quarter during fiscal years 1995 and 1994
for the Partnership's investment properties owned during 1995:
<TABLE>
<CAPTION>
1994 1995
------------------------- -------------------------
At At At At At At At At
Principal Business 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> <C>
1. Park Center
Financial Plaza
San Jose, California . . Accounting/
Legal 83% 83% 83% 84% 74% 77% 76% 77%
2. Topanga Plaza
Los Angeles,
California . . . . . . . Retail 90% 92% 92% 95% 95% 96% 96% 98%
3. 40 Broad Street
New York, New York . . . Insurance/
Financial
Services 82% 82% 82% 80% 76% 77% 77% 77%
4. Plaza Hermosa
Shopping Center
Hermosa Beach, (2)
California . . . . . . . Retail 81% 91% 92% 95% 93% 93% 95% 93%
5. First Financial Plaza
Encino (Los Angeles),
California (1) . . . . . University/
Bank/Housing
Developer 84% 91% 89% 89% 89% 86% 88% 89%
- ----------
<FN>
Reference is made to Item 6, Item 7, and Note 6 for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.
(1) The percentage represents physical occupancy. Mitsubishi (8,109 square feet) vacated its space in
July 1993 prior to its lease expiration of January 1997 and continues to pay rent pursuant to its lease
obligation.
(2) The percentage represents physical occupancy. Approximately 14,000 square feet is occupied by tenants
whose leases expired during 1995 but continue to occupy their spaces pursuant to their original lease terms.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of holders of Interests
during 1994 and 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1995, there were 15,647 record holders of Interests
of the Partnership. There is no public market for Interests and it is not
anticipated that a public market for Interests will develop. Upon request,
the Managing General Partner may provide information relating to a
prospective transfer of Interests to an investor desiring to transfer his
Interests. The price to be paid for the Interests, as well as any economic
aspects of the transaction, will be subject to negotiation by the investor.
There are certain conditions and restrictions on the transfer of Interests,
including, among other things, the requirements that the substitution of a
transferee of Interests as a Limited Partner of the Partnership be subject
to the written consent of the Managing General Partner. The rights of a
transferee of Interests who does not become a substituted Limited Partner
will be limited to the rights to receive his share of profits or losses and
cash distributions from the Partnership, and such transferee will not be
entitled to vote such Interests. No transfer will be effective until the
first day of the next succeeding calendar quarter after the requisite
transfer form satisfactory to the Managing General Partner has been
received by the Managing General Partner. The transferee consequently will
not be entitled to receive any cash distributions or any allocable share of
profits or losses for tax purposes until such succeeding calendar quarter.
Profits or losses from operations of the Partnership for a calendar year in
which a transfer occurs will be allocated between the transferor and the
transferee based upon the number of quarterly periods in which was
recognized as the holder of Interests, without regard to the results of
Partnership's operations during particular quarterly periods and without
regard to whether cash distributions were made to the transferor or
transferee. Profits or losses arising from the sale or other disposition
of Partnership properties will be allocated to the recognized holder of the
Interests as of the last day of the quarter in which the Partnership
recognized such profits or losses. Cash distributions to a holder of
Interests arising from the sale or other disposition of Partnership
properties will be distributed to the recognized holder of the Interests as
of the last day of the quarterly period with respect to which distribution
is made.
Reference is made to Item 6 below for a discussion of cash distribu-
tions to Investors.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992 AND 1991
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1995 1994 1993 1992 1991
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . . $ 33,940,506 31,152,216 30,055,775 31,061,115 32,094,290
============ ============ =========== =========== ===========
Operating loss. . . . . . . $ (776,107) (5,376,818) (213,393) (18,250,294) (23,790,221)
Partnership's share of
earnings (loss) from
operations of uncon-
solidated ventures . . . . 709,164 441,700 (6,610,269) (3,123,534) (10,516,323)
Venture partners' share
of consolidated ventures'
operations before
extraordinary item . . . . (1,568,232) 2,699,777 785,684 6,090,075 7,580,977
------------ ------------ ----------- ----------- -----------
Net operating loss
before extra-
ordinary item. . . . . . . (1,635,175) (2,235,341) (6,037,978) (15,283,753) (26,725,567)
Partnership's share of
gain on sale of interest
in investment property . . -- -- -- 5,655,876 --
Extraordinary item
(net of venture
partners' share) . . . . . -- (2,300,838) -- -- --
------------ ------------ ----------- ----------- -----------
Net loss. . . . . . . . . . $ (1,635,175) (4,536,179) (6,037,978) (9,627,877) (26,725,567)
============ ============ =========== =========== ===========
1995 1994 1993 1992 1991
------------- ------------- ----------- ------------ ------------
Net loss per Interest (b):
Net operating loss. . . . $ (9.15) (12.41) (31.79) (80.48) (140.06)
Partnership's share of
gain on sale of
interest in invest-
ment property . . . . . -- -- -- 29.52 --
Extraordinary item. . . . -- (11.65) -- -- --
------------ ------------ ----------- ----------- -----------
Net loss per
Interest (b). . . . . . $ (9.15) (24.06) (31.79) (50.96) (140.06)
============ ============ =========== =========== ===========
Total assets. . . . . . . . $178,508,742 189,322,387 195,051,570 201,746,282 193,509,107
Long-term debt. . . . . . . $ 88,670,160 64,470,886 87,612,869 69,869,294 51,085,549
Cash distributions
per Interest (c). . . . . $ 15.00 10.00 12.50 50.00 35.00
============ ============ =========== =========== ===========
<FN>
- -------------
(a) The above selected financial data should be read in conjunction with the consolidated financial
statements and the related notes appearing elsewhere in this annual report.
(b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of
each period (189,684).
(c) Cash distributions from the Partnership are generally not equal to Partnership's income (loss) for
financial reporting or Federal income tax purposes. Each Partner's taxable income (or loss) from the Partnership
in each year is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to
the cash generated or distributed by the Partnership. Accordingly, cash distributions to the Limited Partners
since the inception of the Partnership have not resulted in taxable income to such Limited Partners and have
therefore represented a return of capital.
</TABLE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1995
<CAPTION>
Property
- --------
Topanga Plaza
Shopping Center a) The gross leasable area ("GLA") occupancy rate and average base rent per square foot as
of December 31 for each of the last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1991. . . . . . 96% $22.53
1992. . . . . . 87% 25.11
1993. . . . . . 94% 21.13
1994. . . . . . 95% 24.84
1995. . . . . . 98% 24.93
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
None - no single tenant
represents more than 10%
of the total gross leasable
area at the property.
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the
expiration of leases for the next ten years at the Topanga Plaza Shopping Center:
Annualized Percent of
Number of Approx. Total Base Rent Total 1995
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 7 13,900 $ 327,700 3.7%
1997 3 12,100 271,600 3.1%
1998 7 19,700 458,200 5.2%
1999 7 13,200 381,600 4.3%
2000 12 24,300 760,400 8.6%
2001 10 13,500 649,400 7.4%
2002 11 22,200 871,400 9.9%
2003 11 32,900 848,800 9.7%
2004 16 44,000 1,734,500 19.7%
2005 21 52,600 1,921,600 21.8%
<FN>
(1) Excludes leases that expire in 1996 for which renewal leases or leases with
replacement tenants have been executed as of March 25, 1996.
</TABLE>
<TABLE>
<CAPTION>
Property
- --------
First Financial
Plaza Office
Building a) The net rentable area ("NRA") occupancy rate and average base rent per square foot as
of December 31 for each of the last five years were as follows:
NRA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1991. . . . . . 92% $29.49
1992. . . . . . 85% 30.06
1993. . . . . . 85% 30.90
1994. . . . . . 89% 24.93
1995. . . . . . 89% 25.61
<FN>
(1) Average base rent per square foot is based on NRA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Pepperdine University 32,000 $928,000 12/1996 4/5 year
(University)
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the
expiration of leases for the next ten years at the First Financial Plaza Building:
Annualized Percent of
Number of Approx. Total Base Rent Total 1995
Year Ending Expiring NRA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 13 64,400 $1,763,300 34.2%
1997 15 47,500 1,485,400 28.8%
1998 13 33,700 832,500 16.2%
1999 11 23,400 519,000 10.1%
2000 6 20,600 467,500 9.1%
2001 5 18,600 461,000 8.9%
2002 3 17,700 422,500 8.2%
2003 2 34,500 877,000 17.0%
2004 2 11,800 302,800 5.9%
2005 -- -- -- --
<FN>
(1) Excludes leases that expire in 1996 for which renewal leases or leases with
replacement tenants have been executed as of March 25, 1996.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On August 23, 1985, the Partnership commenced an offering to the
public of $100,000,000, subject to increase by up to $150,000,000, pursuant
to a Registration Statement on Form S-11 under the Securities Act of 1933.
On January 17, 1986, the initial and final closing of the offering was
consummated with the dealer manager of the public offering (an affiliate of
which is a limited partner of one of the Associate General Partners of the
Partnership), and 189,679 Interests were issued by the Partnership, from
which the Partnership received gross proceeds of $189,679,000.
After deducting selling expenses and other offering costs, the
Partnership had approximately $171,306,000 with which to make investments
in income-producing commercial real property, to pay legal fees and other
costs (including acquisition fees) related to such investments and for
working capital reserves. A portion of such proceeds was utilized to
acquire the properties described in Item 1 above.
At December 31, 1995, the Partnership had cash and cash equivalents of
approximately $21,457,000. Such funds are available for working capital
requirements including the Partnership's share of operating deficits at
First Financial, re-leasing costs and the funding of the Partnership's
share of re-leasing costs and capital improvements and repairs at the Park
Center Financial Plaza as discussed below. The Partnership and its
consolidated ventures have currently budgeted in 1996 approximately
$2,304,000 for tenant improvements and other capital expenditures. The
Partnership's share of such items and its share of similar items for its
unconsolidated ventures in 1996 is currently budgeted to be approximately
$3,476,000. Actual amounts expended in 1996 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. Additionally, as more fully described in Notes 5 and
7, distributions to the General Partners have been deferred in accordance
with the subordination requirements of the partnership agreement. The
source of capital for such items and for both short-term and long-term
future liquidity and distributions is expected to be through cash generated
by the Partnership's investment properties and through the sale of such
investments. In such regard, reference is made to the Partnership's
property specific discussions below and also to the Partnership's
disclosure of certain property lease expirations in Item 6 above. To the
extent that a property does not produce adequate amounts of cash to meet
its needs, the Partnership may withdraw funds from the working capital
reserve which it maintains. The Partnership's and its ventures' mortgage
obligations are separate non-recourse loans secured individually by the
investment properties and are not obligations of the entire investment
portfolio. The Partnership and its ventures are not personally liable for
the payment of the mortgage indebtedness.
Occupancy at the 40 Broad Street property has remained at
approximately 77% during 1995. Tenant leases representing 14% of the
property expire in 1996, not all of whom are expected to renew. The
Partnership will continue its aggressive leasing program; however, the
downtown New York City market remains extremely competitive due to the
significant amount of space available primarily resulting from the layoffs,
cutbacks and consolidations by financial service companies and related
businesses which dominated this market. In addition to competition for
tenants in the downtown market from other buildings in the area, there is
increasing competition from less expensive alternatives to downtown.
Rental rates in the downtown market are currently at depressed levels and
this can be expected to continue for the foreseeable future while the
current vacant space is gradually absorbed. Little, if any, new
construction is planned for downtown over the next few years. It is
expected that the building will continue to be adversely affected by the
lower effective rental rates achieved upon re-leasing of existing leases
which expire over the next few years. In addition, new leases will likely
require expenditures for lease commissions and tenant improvements prior to
tenant occupancy. This decline in rental rates and the increase in re-
leasing time is expected to result in continued depressed cash flow from
operations over the near term with most of the cash flow produced being
required to fund the anticipated re-leasing costs for vacant space.
Reference is made to Note 3(d) for a further discussion of the current
status of this investment property.
During August 1994, San Jose received notification from the
Redevelopment Agency of the City of San Jose of its offer to purchase one
of the parking garage structures in the office building complex for an
approved Agency project for $4,090,000. The price offered was deemed by
the Agency to be just compensation in compliance with applicable State and
Federal laws. During 1995, the Agency filed a condemnation action in court
to secure their position in obtaining the garage pursuant to the laws of
eminent domain. In late 1995, San Jose and the Agency reached a mutually
acceptable agreement on the transfer of the garage. In March 1996, the
sale was consummated. Under the transfer agreement, San Jose will receive
replacement parking spaces for its tenants in a near-by city-owned parking
structure for a term of fifty-five years in addition to the aforementioned
purchase price of $4,090,000. San Jose will recognize a gain of
approximately $2,000,000 and $1,800,000, respectively, for financial
reporting and Federal income tax purposes in 1996, of which approximately
$1,000,000 and $900,000, respectively, will be allocable to the
Partnership. Any distribution of such sale proceeds will be based upon the
working capital needs of the Partnership.
In October 1995, San Jose elected to repay its mortgage obligations
(originally scheduled to mature in September 2000) securing the portion of
the complex on which the 100-130 Buildings are located as well as a portion
of the garage. The outstanding principal balances, at the time of
repayment, were $2,418,722 of which the Partnership's share was $1,209,361.
Reference is made to Note 3(b). After reviewing and analyzing San Jose's
potential options with regard to its investment in the 100-130 Park Center
Plaza portion of the complex, San Jose determined that it was in the best
interest of the venture to repay the mortgage obligations secured by this
portion of the complex. Tenants occupying approximately 49,000 square feet
(approximately 11% of the buildings) of the Park Center Plaza investment
property have leases that expire in 1996, for which there can be no
assurance of renewals. In addition, new leases will likely require
expenditures for lease commissions and tenant improvements prior to tenant
occupancy. These anticipated costs upon re-leasing will result in a
decrease in cash flow from operations over the near term. San Jose
notified the tenants in and invitees to the complex that some of the
buildings, particularly the 100-130 Park Center Plaza Buildings and the
garage below them, could pose a life safety hazard under certain unusually
intense earthquake conditions. While the buildings and the garage were
designed to comply with the applicable codes for the period in which they
were constructed, and there is no legal requirement to upgrade the
buildings for seismic purposes, San Jose has worked with consultants to
analyze ways in which such a potential life safety hazard could be reduced.
In order to reduce any potential life safety hazard that may occur during
unusually intense earthquake conditions, San Jose is undergoing a voluntary
upgrade to the 130 Park Center Plaza building and the parking garage below
the 100-130 buildings for seismic purposes. San Jose estimates the cost of
the structural upgrade to be $1,200,000 of which the Partnership's share is
$600,000 (included in the budgeted amounts above). Such work began in
December 1995 and should be completed by mid 1996.
San Jose made provisions for value impairment on the 100-130 Park
Center Plaza buildings, certain parking areas and the 170 Almaden building
of $944,335 in the aggregate. Such provisions at September 30, 1994 were
recorded to reduce the net carrying values of these buildings to the then
outstanding balances of the related non-recourse financing.
During December 1995, San Jose entered into a non-binding letter of
intent for the sale of the 190 San Fernando Building to an independent
third party. In March 1996, the sale was consummated. The sale price of
the building was $1,753,000, paid in cash at closing. San Jose will
recognize a gain of approximately $772,000 for financial reporting purposes
in 1996, of which approximately $386,000 will be allocable to the
Partnership. San Jose will recognize a loss of approximately $12,000 for
Federal income tax purposes in 1996 of which approximately $6,000 will be
allocable to the Partnership. Any distribution of such sale proceeds will
be based upon the working capital needs of the Partnership.
On January 17, 1994, an earthquake occurred in Los Angeles,
California. The epicenter was located in the town of Northridge, which is
approximately six miles from Topanga Plaza Shopping Center. Consequently,
significant portions of the mall, including the four major department
stores who own their own buildings, suffered some casualty damage.
However, the approximate 360,000 square feet of mall shops owned by the
Topanga Partnership did not suffer major structural damage. The estimated
costs at Topanga for which the joint venture was responsible was
approximately $11.9 million (which does not include costs associated with
the space taken back by Robinson-May as discussed below), of which
approximately $7.7 million was construction related. The remaining amounts
represent lost revenues and various operating and administrative costs
incurred as a result of the earthquake. The majority of these costs were
subject to recovery under the joint venture's earthquake insurance policy.
The deductible on the earthquake casualty and business interruption
coverages was approximately $2.1 million which was funded by Topanga from
operations in 1995 and/or offset by other insurance recoveries as discussed
below. As of the date of this report, Topanga has incurred substantially
all of the estimated $7.7 million of costs to repair the mall.
Approximately $10.3 million of the $11.9 million of total costs has been
reimbursed through insurance proceeds. Approximately $3.2 million of
additional insurance proceeds were collected as a final settlement during
the third quarter of 1995. Such amount represents recoveries under the
joint venture's business interruption policy and is reflected as rental
income in the accompanying consolidated financial statements. All of the
mall's 114 shops and the four major department stores are open. Subsequent
to the earthquake, sales at the mall shops increased due to the greater
extent of damage at a nearby competing mall. However, in August 1995, the
competing mall was re-opened. The re-opening of this mall is expected to
have an adverse effect on Topanga's sales. One department store at
Topanga, Robinson-May, had a portion of their store condemned by city
inspectors. One consequence of this partial condemnation is that Robinson-
May took back the approximately 25,000 square feet of that store which had
been leased to the joint venture in 1990. Pursuant to the terms of the
lease agreement with the joint venture, Robinson-May was allowed to
terminate the lease in the event there was substantial damage to its
existing store (as defined). This is expected to represent the loss of
approximately $150,000 in annual net income from subleases of the eight
tenants which had subleased this space. Topanga was insured in case of
such event and received, in July 1994, insurance proceeds in the amount of
$2,500,000 (net of the related deductible) for the cost of the unamortized
tenant improvements and the loss of rents related to this space. As a
result of the termination of the leasehold for this space from Robinson-
May, Topanga wrote off, in 1994, approximately $1.2 million of unamortized
leasehold improvements discussed above. Topanga recorded, in 1994, an
extraordinary loss of $2,889,000 (of which the Partnership's share was
approximately $1,676,000) which included Topanga's share of repair cost of
approximately $2.1 million, and approximately $789,000 of other costs. The
earthquake did result in some adverse effect on the operations of the
center in early 1994.
The joint venture partner had agreed to advance the joint venture
funds for expenses incurred for certain redevelopment costs related to a
potential future expansion of Topanga Plaza which is still being studied by
the joint venture. The balance of these advances was $435,000 at December
31, 1994. Such advances were repaid to the joint venture partner in early
1995 from available cash at the venture.
The Plaza Hermosa Shopping Center was developed with proceeds raised
through a municipal bond financing. This financing was secured by a letter
of credit facility which was ultimately secured by a deed of trust on the
property. In December 1994, upon expiration of the letter of credit
facility, the Partnership obtained a long-term replacement letter of credit
with a new lender and simultaneously retired the original bond financing
and issued new bonds to the existing bondholders in their original
aggregate amount of $6,400,000 (see Note 4). The new letter of credit
expires in December 1997. The new bond financing is due and payable upon
the expiration of the letter of credit.
Occupancy at Plaza Hermosa at December 31, 1995 was approximately 93%.
However, included in the occupancy are tenants whose leases had expired in
1995 (approximately 14,000 square feet or 15% of the property) but remain
in the center and pay rent pursuant to their original lease terms.
Relocation, renewal and/or replacement of such tenants has been deferred
pending the finalization of negotiations with a significant new tenant.
However, finalization of negotiations regarding such new tenant or
renewals, relocation or replacement of such existing tenants cannot be
assured. In addition, new leases will likely require expenditures for
lease commissions and tenant improvements prior to tenant occupancy. These
anticipated costs upon re-leasing will result in a decrease in cash flow
from operations over the near term. As a result of reduced projected cash
flow, the upcoming maturity of the letter of credit facility in 1997 and
the expected holding period of the property, there is uncertainty as to the
Partnership's ability to recover the net carrying value of the Plaza
Hermosa investment property through future operations or sale over its
revised expected holding period. Therefore, the Partnership made a
provision for value impairment at September 30, 1995 of $5,500,000. Such
provision reduced the net carrying value of the investment property to its
estimated fair value. Reference is made to Note 2.
At December 31, 1995, the First Financial Plaza office building is
approximately 89% occupied. In July 1993, Mitsubishi vacated its
approximate 8,100 square feet prior to its lease expiration of January 1997
and continues to pay rent pursuant to its lease obligation. Including the
Mitsubishi lease, the building is 93% leased as of the date of this report.
The Los Angeles office market in general and the Encino submarket in
particular continue to show signs of strengthening as vacancy rates
decrease and rental rates stabilize.
The first mortgage loan on the property matured November 1, 1995.
Effective November 1, 1995, Encino and the existing lender amended and
restated the existing mortgage loan. The new principal balance of the
amended note at November 1, 1995 was $24,970,148. This amount was
comprised of the then outstanding principal portion of $28,970,148 on the
original $30,000,000 note less a required $4,000,000 principal paydown by
Encino, all of which was advanced by First Financial at closing. The
Partnership's share of such paydown was $2,500,000. The amended loan has
an interest rate of 8.67% and a term of two years resulting in a maturity
date of November 1, 1997. The new monthly installments of principal and
interest, based on a 23-year amortization, are $209,077.
The First Financial office building appeared to have experienced only
minor cosmetic damage as a result of the January 17, 1994 Northridge
earthquake in southern California. On February 22, 1995, the city council
of the city of Los Angeles passed an ordinance requiring certain buildings
(identified by building type and location) to perform testing on the welded
steel moment connections to determine if the earthquake had weakened such
joint weldings and to repair such joint weldings if weakness is detected.
This property qualified for the testing under the ordinance, and therefore,
Encino retained a structural engineer to perform the testing. Results of
the testing by the structural engineer indicated that some of the
building's joint weldings suffered damage which, in accordance with the
ordinance, were required to be repaired. Encino's structural engineer
informed Encino that the damage detected did not pose a life safety risk
for the building's tenants. All testing and repairs necessary to comply
with such ordinance were completed as of October 1995. The total cost of
such testing and repairs was approximately $826,000 (of which the
Partnership's share was approximately $516,250).
Due to the uncertainty of Encino's ability to recover the net carrying
value of the First Financial office building investment property through
future operations and sale during the estimated holding period, Encino
recorded a provision for value impairment of such investment of
approximately $6,475,000, all of which was allocated to First Financial.
The Partnership's share of such provision to First Financial was
approximately $4,047,000. Such provision was recorded at December 31, 1994
to reduce the net carrying value of the investment property to its
estimated fair value.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. In an effort to reduce partnership operating expenses, the
Partnership expects to make semi-annual rather than quarterly distributions
of available operating cash flow commencing with the 1996 distributions.
The Partnership has also sought or is seeking additional loan modifications
where appropriate. By conserving working capital, the Partnership will be
in a better position to meet the future needs of its properties since the
availability of satisfactory outside sources of capital may be limited
given the portfolio's current debt levels. Due to these factors, the
Partnership has held its remaining investment properties longer than
originally anticipated in an effort to maximize the return to the Limited
Partners. However, after reviewing the remaining properties and the
marketplaces in which they operate, the General Partners of the Partnership
expect to be able to conduct an orderly liquidation of its remaining
investment portfolio as quickly as practicable. Therefore, the affairs of
the Partnership are expected to be wound up no later than December 31, 1999
(sooner if the properties are sold in the near term), barring unforeseen
economic developments.
RESULTS OF OPERATIONS
The increase in cash and cash equivalents and the decrease in short-
term investments is primarily due to all of the Partnership's U.S.
Government obligations being classified as cash and cash equivalents at
December 31, 1995, whereas approximately $4,529,000 of such U.S. Government
obligations were classified as cash equivalents at December 31, 1994.
Reference is made to Note 1.
The increase in rents and other receivables at December 31, 1995 as
compared to December 31, 1994 is primarily due to the timing of payment of
certain tenant receivables at First Financial.
The increase in escrow deposits at December 31, 1995 as compared to
December 31, 1994 is primarily due to escrowing additional funds pursuant
to the terms of the letter of credit refinancing in December 1994 at Plaza
Hermosa, Note 2(b).
The casualty insurance receivable balance at December 31, 1994
represents a portion of repair costs reimbursed through insurance proceeds
in 1995 at Topanga Plaza. See Note 3(c).
The decreases in land, buildings and improvements, and deferred
expenses at December 31, 1995 as compared to December 31, 1994 are
primarily due to the provision for value impairment of $5,500,000 recorded
at the Plaza Hermosa investment property at September 30, 1995 due to the
uncertainty of the Partnership's ability to recover the net carrying value
of the investment property through future operations or sale. Reference is
made to Note 2(b).
The increase in investment in unconsolidated ventures at December 31,
1995 as compared to December 31, 1994 is primarily due to the Partnership's
contribution of approximately $1,200,000 to San Jose for the retirement of
the loan secured by the 100-130 buildings. See Note 3(b).
The decrease in current portion of long-term debt and the increase in
long-term debt, less current portion at December 31, 1995 as compared to
December 31, 1994 is primarily due to the 1995 reclassification (due to
refinancing) of the loan securing First Financial Plaza from current
portion of long-term debt to long-term debt, less current portion.
The decrease in accounts payable at December 31, 1995 as compared to
December 31, 1994 is primarily due to the payment in 1995 of certain
earthquake repair costs at Topanga Plaza and First Financial Plaza.
The decrease in construction costs payable at December 31, 1995 as
compared to December 31, 1994 is due to the timing of payment of
construction costs incurred at Topanga Plaza.
The increase in accrued interest at December 31, 1995 as compared to
December 31, 1994 is primarily due to the mortgage payments being made one
month in arrears (in conformity to the loan schedule) at Topanga Plaza in
1995.
The decrease in advances from venture partner as of December 31, 1995
as compared to December 31, 1994 is due to the repayment of such advances
to the venture partner at Topanga Plaza. References is made to Note 3(c).
The increase in rental income for the year ended December 31, 1995 as
compared to the year ended December 31, 1994 is primarily due to the
receipt of insurance proceeds of approximately $3,200,000, in the third
quarter of 1995, relating to business interruption at Topanga Mall
following the earthquake in early 1994. Reference is made to Note 3(c).
The increase in rental income for the year ended December 31, 1994 as
compared to the year ended December 31, 1993 is primarily due to
approximately $1,326,000 of insurance proceeds related to the lost rental
income due to the space taken back by Robinson-May at Topanga Plaza. This
increase is partially offset by 40 Broad Street achieving lower effective
rental rates upon renewals or upon re-leasing of space previously occupied
by tenants paying higher rental rates.
The increases in interest income for the year ended December 31, 1995
as compared to the year ended December 31, 1994 and for the year ended
December 31, 1994 as compared to the year ended December 31, 1993 are
primarily due to higher effective yields earned on U.S. Government
obligations in 1995 and 1994.
The decrease in property operating expenses for the year ended
December 31, 1995 as compared to the year ended December 31, 1994 is
primarily due to a decrease in provision for doubtful accounts of
approximately $238,000 as a result of the resolution of tenant rent
disputes in 1994 associated with the earthquake damage in addition to the
decrease in various operating expenses in 1995 as compared to 1994 due to
the earthquake at Topanga Plaza and a real estate tax refund of
approximately $128,000 received in 1995 at Plaza Hermosa.
The increase in amortization of deferred expenses for the year ended
December 31, 1995 as compared to the year ended December 31, 1994 is
primarily due to the capitalization of certain expenses including
refinancing costs at First Financial Plaza and Plaza Hermosa. The increase
for the year ended December 31, 1994 as compared to the year ended December
31, 1993 is primarily due to the capitalization of certain expenses at
Topanga Plaza.
The increases in general and administrative expenses for 1995 as
compared to 1994 and 1993 are primarily attributable to an increase in
reimbursable costs to affiliates of the General Partners in 1995 and the
recognition of certain additional prior year reimbursable costs to such
affiliates. Reference is made to Note 7.
The provision for value impairment for the year ended December 31,
1995 is due to the Partnership recording a provision for value impairment
of $5,500,000 at Plaza Hermosa at September 30, 1995. (See Note 2.) The
provision for value impairment for the year ended December 31, 1994 is due
to the Partnership recording a provision for value impairment of $6,475,138
at First Financial Plaza at December 31, 1994. (See Note 3(e)).
The increase in Partnership's share of operations of unconsolidated
ventures for the year ended December 31, 1995 as compared to the year ended
December 31, 1994 is primarily due to a provision for value impairment
recorded at the San Jose investment property at September 30, 1994 of which
the Partnership's share was approximately $472,000. The increase in
Partnership's share of operations of unconsolidated ventures for the year
ended December 31, 1994 as compared to the year ended December 31, 1993 is
primarily due to a provision for value impairment recorded at the San Jose
investment property at September 30, 1993 of which the Partnership's share
was approximately $7,775,000, partially offset by the provision for value
impairment recorded at the San Jose investment property at September 30,
1994 of which the Partnership's share was approximately $472,000. See Note
3(b).
Venture partners' share of consolidated ventures' operations before
extraordinary item decreased for the year ended December 31, 1995 as
compared to December 31, 1994 primarily due to the value impairment
recorded at First Financial Plaza in 1994 in addition to the receipt of
insurance proceeds of approximately $3,200,000 in 1995 relating to business
interruption at Topanga Plaza partially offset by the receipt of insurance
proceeds in 1994 related to space taken back by Robinson-May at Topanga
Plaza. Venture partners' share of consolidated ventures' operations before
extraordinary item increased for the year ended December 31, 1994 as
compared to the year ended December 31, 1993 primarily due to the value
impairment recorded at First Financial Plaza partially offset by the
venture partners' share of insurance proceeds related to space taken back
by Robinson-May at Topanga Plaza. See Note 3(c).
The extraordinary item for the year ended December 31, 1994 is due to
the earthquake damage at Topanga Plaza and First Financial Plaza. See Note
3(c) and 3(e) respectively.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
Inflation is not expected to significantly impact future operations
due to the expected liquidation of the Partnership by 1999. However, to
the extent that inflation in future periods would have an adverse impact on
property operating expenses, the effect would generally be offset by
amounts recovered from tenants as many of the long-term leases at the
Partnership's commercial properties have escalation clauses covering
increases in the cost of operating and maintaining the properties as well
as real estate taxes. Therefore, there should be little effect on
operating earnings if the properties remain substantially occupied. In
addition, substantially all of the leases at the Partnership's shopping
center investments contain provisions which entitle the Partnership to
participate in gross receipts of tenants above fixed minimum amounts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1995 and 1994
Consolidated Statements of Operations, years ended December 31, 1995,
1994 and 1993
Consolidated Statements of Partners' Capital Accounts, years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows, years ended December 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements
Schedule
--------
Consolidated Real Estate and Accumulated Depreciation III
Schedules not filed:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the consolidated financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
JMB INCOME PROPERTIES, LTD. - XII:
We have audited the consolidated financial statements of JMB Income
Properties, Ltd. - XII (a limited partnership) and consolidated ventures as
listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
JMB Income Properties, Ltd. - XII and consolidated ventures at December 31,
1995 and 1994, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1996
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1). . . . . . . . . . . . . . . . . . $ 21,456,552 8,222,359
Short-term investments (note 1) . . . . . . . . . . . . . . . . . . . -- 14,176,812
Rents and other receivables, net of allowance for
doubtful accounts of $784,652 in 1995 and
$925,820 in 1994. . . . . . . . . . . . . . . . . . . . . . . . . . 2,542,548 2,162,206
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 260,164 226,598
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 900,561 708,332
Casualty insurance receivable (note 3(c)) . . . . . . . . . . . . . . -- 853,000
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . 25,159,825 26,349,307
------------ -----------
Investment properties, at cost (notes 2, 3 and 4) - Schedule III:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,494,992 22,425,036
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . 168,635,413 170,873,378
------------ -----------
189,130,405 193,298,414
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . 52,390,756 46,792,110
------------ -----------
Total investment properties,
net of accumulated depreciation . . . . . . . . . . . . . . 136,739,649 146,506,304
Investment in unconsolidated ventures, at equity (notes 1, 3 and 8) . . 6,412,066 5,719,465
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,639,146 8,340,547
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 2,558,056 2,406,764
------------ -----------
$178,508,742 189,322,387
============ ===========
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
1995 1994
------------ -----------
Current liabilities:
Current portion of long-term debt (note 4). . . . . . . . . . . . . . $ 746,306 29,539,123
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,038,017 3,840,636
Construction costs payable. . . . . . . . . . . . . . . . . . . . . . -- 342,324
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 510,622 22,496
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,320 64,806
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . 3,318,265 33,809,385
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 492,214 509,493
Long-term debt, less current portion (note 4) . . . . . . . . . . . . . 88,670,160 64,470,886
Advances from venture partner (note 3(c)) . . . . . . . . . . . . . . . -- 435,000
------------ -----------
Commitments and contingencies (notes 3 and 7)
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 92,480,639 99,224,764
Venture partners' subordinated equity in ventures (note 3). . . . . . . 22,041,429 21,616,287
Partners' capital accounts (notes 1 and 5):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 11,123 11,123
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . 769,195 669,602
------------ -----------
780,318 680,725
------------ -----------
Limited partners (189,684 interests):
Capital contributions, net of offering costs. . . . . . . . . . . 171,306,452 171,306,452
Cumulative net loss . . . . . . . . . . . . . . . . . . . . . . . (30,082,749) (28,347,981)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (78,017,347) (75,157,860)
------------ -----------
63,206,356 67,800,611
------------ -----------
Total partners' capital accounts. . . . . . . . . . . . . . . 63,986,674 68,481,336
------------ -----------
$178,508,742 189,322,387
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . $32,608,714 30,166,883 29,224,716
Interest income . . . . . . . . . . . . . . . . . . 1,331,792 985,333 831,059
----------- ----------- -----------
33,940,506 31,152,216 30,055,775
----------- ----------- -----------
Expenses:
Mortgage and other interest . . . . . . . . . . . . 8,991,027 9,075,692 9,137,379
Depreciation. . . . . . . . . . . . . . . . . . . . 5,598,646 5,640,425 5,739,255
Property operating expenses . . . . . . . . . . . . 12,602,194 13,695,140 14,074,577
Professional services . . . . . . . . . . . . . . . 333,970 244,951 307,769
Amortization of deferred expenses . . . . . . . . . 1,263,041 1,117,672 787,304
General and administrative. . . . . . . . . . . . . 427,735 280,016 222,884
Provision for value impairment (note 2) . . . . . . 5,500,000 6,475,138 --
----------- ----------- -----------
34,716,613 36,529,034 30,269,168
----------- ----------- -----------
Operating loss. . . . . . . . . . . . . . . (776,107) (5,376,818) (213,393)
Partnership's share of earnings (loss) from
operations of unconsolidated ventures
(notes 1, 3 and 8). . . . . . . . . . . . . . . . . 709,164 441,700 (6,610,269)
Venture partners' share of consolidated ventures'
operations before extraordinary item
(notes 1 and 3) . . . . . . . . . . . . . . . . . . (1,568,232) 2,699,777 785,684
----------- ----------- -----------
Net operating loss before
extraordinary item. . . . . . . . . . . . (1,635,175) (2,235,341) (6,037,978)
Extraordinary item (net of venture partners'
share of $1,588,537) (note 3(c)). . . . . . . . . . -- (2,300,838) --
----------- ----------- -----------
Net loss. . . . . . . . . . . . . . . . . . $(1,635,175) (4,536,179) (6,037,978)
=========== =========== ===========
Net loss per limited partnership interest
(note 1):
Net operating loss . . . . . . . . . . . . . . . . $ (9.15) (12.41) (31.79)
Extraordinary item . . . . . . . . . . . . . . . . -- (11.65) --
----------- ----------- -----------
Net loss per limited partnership
interest (note 1) . . . . . . . . . . . . $ (9.15) (24.06) (31.79)
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (189,684 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1992 . . . . . $11,123 650,900 -- 662,023 171,306,452 (17,755,122) (70,868,630) 82,682,700
Cash distri-
butions
($12.50 per
limited
partnership
interest). . . -- -- -- -- -- -- (2,382,905) (2,382,905)
Net loss
(note 5) . . . -- (8,270) -- (8,270) -- (6,029,708) -- (6,029,708)
------- --------- ------- -------- ----------- ----------- ----------- -----------
Balance at
December 31,
1993 . . . . . 11,123 642,630 -- 653,753 171,306,452 (23,784,830) (73,251,535) 74,270,087
Cash distri-
butions
($10 per
limited
partnership
interest). . . -- -- -- -- -- -- (1,906,325) (1,906,325)
Net earnings
(loss)
(note 5) . . . -- 26,972 -- 26,972 -- (4,563,151) -- (4,563,151)
------- ------- ------- ------- ----------- ----------- ----------- ----------
Balance at
December 31,
1994 . . . . . 11,123 669,602 -- 680,725 171,306,452 (28,347,981) (75,157,860) 67,800,611
Cash distri-
butions
($15 per
limited
partnership
interest). . . -- -- -- -- -- -- (2,859,487) (2,859,487)
Net loss
(note 5) . . . -- 99,593 -- 99,593 -- (1,734,768) -- (1,734,768)
------- ------- ------- ------- ----------- ----------- ----------- ----------
Balance at
December 31,
1995 . . . . . $11,123 769,195 -- 780,318 171,306,452 (30,082,749) (78,017,347) 63,206,356
======= ======= ======= ======= =========== =========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . $(1,635,175) (4,536,179) (6,037,978)
Items not requiring (providing) cash or
cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . 5,598,646 5,640,425 5,739,255
Amortization of deferred expenses . . . . . . . . 1,263,041 1,117,672 787,304
Partnership's share of operations of
unconsolidated venture. . . . . . . . . . . . . (709,164) (441,700) 6,610,269
Venture partners' share of
ventures' operations and
extraordinary item. . . . . . . . . . . . . . . 1,568,232 (4,288,314) (785,684)
Provision for value impairment (notes 2(b)
and 3(e)) . . . . . . . . . . . . . . . . . . . 5,500,000 6,475,138 --
Write-off of assets . . . . . . . . . . . . . . . -- 1,174,125 --
Extraordinary item, net of insurance
recoveries of $1,174,125. . . . . . . . . . . . -- 3,889,375 --
Changes in:
Rents and other receivables . . . . . . . . . . . (380,342) (836,355) (445,506)
Prepaid expenses. . . . . . . . . . . . . . . . . (33,566) 41,120 (44,925)
Escrow deposits . . . . . . . . . . . . . . . . . (192,229) 685,195 (368,796)
Casualty insurance receivable . . . . . . . . . . 853,000 (853,000) --
Accrued rents receivable. . . . . . . . . . . . . (151,292) (757,729) (98,080)
Accounts payable. . . . . . . . . . . . . . . . . (1,802,619) (318,280) 39,427
Accrued interest . . . . . . . . . . . . . . . . 488,126 22,496 (160,105)
Unearned rents. . . . . . . . . . . . . . . . . . (41,486) 47,003 (16,198)
Tenant security deposits. . . . . . . . . . . . . (17,279) 99,261 33,372
----------- ----------- -----------
Net cash provided by
operating activities. . . . . . . . . . . 10,307,893 7,160,253 5,252,355
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments . . . . . . . . . . . . 14,176,812 7,789,504 (2,308,024)
Additions to investment properties,
net of related payables and, in 1994,
net of insurance recoveries of $6,647,000 . . . . (1,658,644) (2,908,722) (10,071,938)
Partnership's distributions from
unconsolidated ventures . . . . . . . . . . . . . 1,250,000 -- 1,000,000
Partnership's contributions to
unconsolidated ventures . . . . . . . . . . . . . (1,233,437) (1,557,469) --
Payment of deferred expenses. . . . . . . . . . . . (577,311) (1,480,284) (1,428,355)
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . 11,957,420 1,843,029 (12,808,317)
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . (4,593,543) (575,431) (421,223)
Decrease in other long-term
liabilities . . . . . . . . . . . . . . . . . . . -- -- (9,650,000)
Proceeds from refinancings of debt (note 4(b)). . . -- -- 18,400,000
Advances from venture partners. . . . . . . . . . . (435,000) (300,000) 735,000
Venture partners' contributions to venture. . . . . 1,580,310 604,973 150,126
Distributions to venture partners . . . . . . . . . (2,723,400) (75,000) (135,000)
Distributions to limited partners . . . . . . . . . (2,859,487) (1,906,325) (2,382,905)
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . . (9,031,120) (2,251,783) 6,695,998
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . . 13,234,193 6,751,499 (859,964)
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . 8,222,359 1,470,860 2,330,824
----------- ----------- -----------
Cash and cash equivalents, end of year. . . $21,456,552 8,222,359 1,470,860
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . $ 8,502,901 9,053,196 9,297,484
=========== =========== ===========
Non-cash investing and financing activities:
Change in accounts payable . . . . . . . . . . . . $ -- 3,189,483 --
Change in accounts receivable. . . . . . . . . . . -- 699,892 --
----------- ----------- -----------
Total extraordinary item-earthquake damage at
Topanga Mall and First Financial Plaza
(note 3(c) and 3(e), respectively) . . . . . . $ -- 3,889,375 --
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) OPERATIONS AND BASIS OF ACCOUNTING
The Partnership holds (either directly or through joint ventures) an
equity investment portfolio of United States real estate. Business
activities consist of rentals to a wide variety of commercial and retail
companies, and the ultimate sale or disposition of such real estate. The
Partnership currently expects to conduct an orderly liquidation of its
remaining investment portfolio and wind up its affairs not later than
December 31, 1999.
The accompanying consolidated financial statements include the
accounts of the Partnership and its ventures, Topanga Plaza Partnership
("Topanga"), JMB-40 Broad Street Associates ("Broad Street"), JMB First
Financial Associates ("First Financial") and First Financial's venture, JMB
Encino Partnership, ("Encino") (see note 3). The effect of all
transactions between the Partnership and its ventures have been eliminated
in the consolidated financial statements. The equity method of accounting
has been applied in the accompanying consolidated financial statements with
respect to the Partnership's venture interest in JMB/San Jose Associates
("San Jose"). Accordingly, the accompanying consolidated financial
statements do not include the accounts of San Jose.
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 the ventures as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items for the years
ended December 31, 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------------
TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . . $178,508,742 119,118,630 189,322,387 123,709,895
Partners' capital accounts
(deficits) (note 5):
General partners. . . . . . . . . 780,318 (1,143,498) 680,725 (1,073,088)
Limited partners. . . . . . . . . 63,206,356 113,755,473 67,800,611 118,304,795
Net earnings (loss) (note 5):
General partners. . . . . . . . . 99,593 (70,410) 26,972 (145,025)
Limited partners. . . . . . . . . (1,734,768) (1,689,836) (4,563,151) (3,480,611)
Net loss per limited
partnership interest. . . . . . . . $ (9.15) (8.91) (24.06) (18.35)
=========== =========== =========== ===========
</TABLE>
The net loss per limited partnership interest is based upon the number
of limited partnership interests outstanding at the end of each period
(189,684).
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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 its unconsolidated ventures are considered
cash flow from operating activities to the extent of the Partnership's
cumulative share of net earnings. In addition, the Partnership records
amounts held in U.S. Government obligations at cost, which approximates
market. For the purposes of these financial statements, the Partnership's
policy is to consider all such amounts held with original maturities of
three months or less ($18,402,684 and $4,529,080 at December 31, 1995 and
1994, respectively) 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.
Deferred expenses consist primarily of commitment fees and loan
related costs which are amortized over the term of the related mortgage
loans, and lease commissions which are amortized over the term of the
related leases, using the straight-line method.
Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due and/or increases in the
minimum lease payments over the term of the lease, rental income is accrued
for the full period of occupancy on a straight-line basis.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires all
entities to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined in
the Statement as the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes the carrying amount of its
financial instruments classified as current assets and liabilities
(excluding current portion of long-term debt) approximates SFAS 107 value
due to the relatively short maturity of these instruments. There is no
quoted market value available for any of the Partnership's other
instruments. The debt, with a carrying balance of $89,416,466, has been
calculated to have an SFAS 107 value of $96,884,656 by discounting the
scheduled loan payments to maturity. Due to restrictions on
transferability and prepayment and the inability to obtain comparable
financing due to current levels of debt, previously modified debt terms or
other property specific competitive conditions, the Partnership would be
unable to refinance these properties to obtain such calculated debt amounts
reported. (See note 4.) The Partnership has no other significant
financial instruments.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain circumstances, the Partnership has been
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners.
(2) INVESTMENT PROPERTIES
(a) General
The Partnership has acquired, either directly or through joint
ventures (see note 3), three shopping centers, two office buildings and an
office complex. The Partnership sold its interest in the Mid Rivers Mall
in St. Louis, Missouri in January 1992. All of the remaining properties
were in operation at December 31, 1995. The cost of the investment
properties represents the total cost to the Partnership or its consolidated
ventures plus miscellaneous acquisition costs.
Depreciation on the properties has been provided over the estimated
useful lives of the various components as follows:
YEARS
-----
Building and improvements -- straight-line . . 30
Personal property -- straight-line . . . . . . 5
==
Maintenance and repairs are generally charged to operations as
incurred. Significant betterments and improvements are capitalized and
depreciated over their estimated useful lives.
During March 1995, Statement of Financial Accounting Standards No. 121
("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" was issued. SFAS 121, when effective,
will require that the Partnership record an impairment loss on its long-
lived assets to be held and used whenever their carrying value cannot be
fully recovered through estimated undiscounted future cash flows from
operations and sale. The amount of the impairment loss to be recognized
would be the difference between the long-lived asset's carrying value and
the asset's estimated fair value. Any long-lived assets identified as "to
be disposed of" would no longer be depreciated. Adjustments for impairment
loss would be made in each period as necessary to report these assets at
the lower of carrying value and fair value less costs to sell. In certain
situations, such estimated fair value could be less than the existing non-
recourse debt which is secured by the property. There would be no
assurance that any estimated fair value of these assets would ultimately be
obtained by the Partnership in any future sale or disposition transaction.
Under the current impairment policy, provisions for value impairment
are recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale are less
than the property's net carrying value. The amount of any such impairment
loss recognized by the Partnership is limited to the excess, if any, of the
property's carrying value over the outstanding balance of the property's
non-recourse indebtedness. An impairment loss under SFAS 121 would be
determined without regard to the nature or the balance of such non-recourse
indebtedness. Upon the disposition of a property with the related
extinguishment of the long-term debt for which an impairment loss has been
recognized under SFAS 121, the Partnership would recognize, at a minimum, a
net gain (comprised of gain on extinguishment of debt and gain or loss on
sale or disposition of property) for financial reporting purposes to the
extent of any excess of the then outstanding balance of the property's non-
recourse indebtedness over the then carrying value of the property,
including the effect of any reduction for impairment loss under SFAS 121.
The Partnership will adopt SFAS 121 as required in the first quarter
of 1996. Based upon the Partnership's current assessment of the full
impact of adopting SFAS 121, it is not anticipated that any significant
additional provisions for value impairment would be required for the
properties owned by the Partnership or by the Partnership's unconsolidated
venture in the first period of implementation of SFAS 121. In addition,
upon the disposition of an impaired property, the Partnership would
generally recognize more net gain for financial reporting purposes under
SFAS 121 than it would have under the Partnership's current impairment
policy, without regard to the amount, if any, of cash proceeds received by
the Partnership in connection with the disposition. Although
implementation of this new accounting statement could significantly impact
the Partnership's reported earnings, there would be no impact on cash
flows. Further, any such impairment loss would not be recognized for
Federal income tax purposes.
Certain investment properties are pledged as security for the long-
term debt, for which there is no recourse to the Partnership, as described
in note 4.
(b) Plaza Hermosa Shopping Center
During September 1986, the Partnership acquired a multi-building
neighborhood shopping center in Hermosa Beach, California. The
Partnership's purchase price for the shopping center was $18,290,000, of
which $11,890,000 was paid in cash at closing. The balance of the purchase
price was represented by bond financing in the amount of $6,400,000 (see
note 4(c).
Occupancy at Plaza Hermosa at December 31, 1995 was approximately 93%.
However, included in the occupancy are tenants whose leases had expired in
1995 (approximately 14,000 square feet or 15% of the property) but remain
in the center and pay rent pursuant to their original lease terms.
Although the Partnership has received indications that some of these
tenants will renew, there can be no assurance that such renewals will take
place. In addition, new leases will likely require expenditures for lease
commissions and tenant improvements prior to tenant occupancy. These
anticipated costs upon re-leasing will result in a decrease in cash flow
from operations over the near-term. As a result of reduced projected cash
flows, the upcoming maturity of the letter of credit facility in 1997 (note
4(c)) and the expected holding period of the property, there is uncertainty
as to the Partnership's ability to recover the net carrying value of the
Plaza Hermosa investment property through future operations or sale over
its revised expected holding period. Therefore, the Partnership made a
provision for value impairment at September 30, 1995 of $5,500,000. Such
provision reduced the net carrying value of the investment property to its
estimated fair value.
The property is managed by an affiliate of the General Partners of the
Partnership for a fee calculated as 4% of gross receipts of the property.
(3) VENTURE AGREEMENTS
(a) General
The Partnership at December 31, 1995 is a party to four operating
venture agreements and has made capital contributions to the respective
ventures as discussed below. 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 make additional cash
contributions to the ventures.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
(b) San Jose
The Partnership has acquired, through San Jose, an interest in an
existing office building complex in San Jose, California (Park Center
Financial Plaza) consisting of ten office buildings, a parking and retail
building (185 Park Avenue) and two parking garage structures.
In September 1986, San Jose obtained a mortgage loan in the amount of
$25,000,000 secured by the 150 Almaden and 185 Park Avenue buildings and
certain parking areas. Due to the scheduled maturity of the loan, San
Jose, during the fourth quarter of 1994, finalized a loan extension and
modification with the mortgage lender. The refinancing resulted in the
1994 partial paydown of the outstanding principal balance in the amount of
$2.5 million.
The property was managed by an affiliate of the General Partners of
the Partnership for a fee calculated as 3% of gross receipts until December
1994 when the affiliated property manager sold substantially all of its
assets and assigned its interests in its management contracts to an
unaffiliated third party.
The partners of San Jose are the Partnership and JMB Income
Properties, Ltd.-XI, another partnership sponsored by the Managing General
Partner of the Partnership ("JMB-XI"). The terms of San Jose's partnership
agreement generally provide that contributions, distributions, cash flow,
sale or refinancing proceeds and profits and losses will be distributed or
allocated to the Partnership in their respective 50% ownership percentages.
During August 1994, San Jose received notification from the
Redevelopment Agency of the City of San Jose of its offer to purchase one
of the parking garage structures in the office building complex, for an
approved Agency project, for $4,090,000. The price offered was deemed by
the Agency to be just compensation in compliance with applicable State and
Federal laws. During 1995, the Agency filed a condemnation action in court
to secure their position in obtaining the garage pursuant to the laws of
eminent domain. In late 1995, San Jose and the Agency reached a mutually
acceptable agreement on the transfer of the garage. In March 1996, the
sale was consummated. Under the transfer agreement, San Jose will receive
replacement parking spaces for its tenants in a near-by city-owned parking
structure for a term of fifty-five years in addition to the aforementioned
purchase price of $4,090,000. San Jose will recognize a gain of
approximately $2,000,000 and $1,800,000, respectively, for financial
reporting and Federal income tax purposes in 1996, of which $1,000,000 and
$900,000, respectively, will be allocable to the Partnership.
In October 1995, San Jose elected to repay the mortgage obligations
(originally scheduled to mature in September 2000) securing the portion of
the complex on which the 100-130 Buildings are located as well as a portion
of the garage. The outstanding principal balances, at the time of
repayment, were $2,418,722 of which the Partnership's share was $1,209,361.
After reviewing and analyzing San Jose's potential options with regard to
its investment in the 100-130 Park Center Plaza portion of the complex, San
Jose determined that it was in the best interest of the venture to repay
the mortgage obligations secured by this portion of the complex. Tenants
occupying approximately 49,000 square feet (approximately 11% of the
buildings) of the Park Center Plaza investment property have leases that
expire in 1996, for which there can be no assurance of renewals. New
leases will likely require expenditures for lease commissions and tenant
improvements prior to tenant occupancy which would result in a decrease in
cash flow from operations over the near-term. San Jose notified the
tenants in and invitees to the Park Center Plaza complex that some of the
buildings, particularly the 100-130 Park Center Plaza Buildings and the
garage below them, could pose a life safety hazard under certain unusually
intense earthquake conditions. While the buildings and the garage were
designed to comply with the applicable codes for the period in which they
were constructed, and there is no legal requirement to upgrade the
buildings for seismic purposes, San Jose has worked with consultants to
analyze ways in which such a potential life safety hazard could be reduced.
In order to reduce any potential life safety hazard that may occur during
unusually intense earthquake conditions, San Jose is undergoing a voluntary
upgrade to the 130 Park Center Plaza building and the parking garage below
the 100-130 buildings for seismic purposes. San Jose estimates the cost of
the structural upgrade to be $1,200,000 of which the Partnership's share is
$600,000. Such work began in December 1995 and should be completed by mid
1996.
San Jose made provisions for value impairment on the 100-130 Park
Center Plaza buildings and certain parking areas and the 170 Almaden
building of $944,335 in the aggregate. Such provisions at September 30,
1994 were recorded to reduce the net carrying values of these buildings to
the then outstanding balances of the related non-recourse financing.
Additionally, at September 30, 1993, San Jose recorded a provision for
value impairment on the 150 Almaden and 185 Park Avenue buildings and
certain parking areas of $15,549,935 to reduce the net carrying value of
these buildings to the then outstanding balance of related non-recourse
financing.
During December 1995, San Jose entered into a non-binding letter of
intent for the sale of the 190 San Fernando Building to an independent
third party. In March 1996, the sale was consummated. The sale price of
the building was $1,753,000, paid in cash at closing. San Jose will
recognize a gain of approximately $772,000 for financial reporting purposes
in 1996, of which approximately $386,000 will be allocable to the
Partnership. San Jose will recognize a loss of approximately $12,000 for
Federal income tax purposes in 1996 of which approximately $6,000 will be
allocable to the Partnership.
(c) Topanga
In December 1985, the Partnership acquired a 58% interest in Topanga
Plaza in the Woodland Hills area of Los Angeles, California. The aggregate
purchase price for the Partnership's interest in the venture was
approximately $25,263,000, which was paid in cash at closing. Under the
terms of the joint venture agreement, the Partnership generally will be
allocated or distributed 58% of profits and losses, cash flow from
operations and sale or refinancing proceeds.
On January 17, 1994, an earthquake occurred in Los Angeles,
California. The epicenter was located in the town of Northridge, which is
approximately six miles from Topanga Plaza Shopping Center. Consequently,
significant portions of the mall, including the four major department
stores who own their own buildings, suffered some casualty damage.
However, the approximate 360,000 square feet of mall shops owned by the
Topanga Partnership did not suffer major structural damage. The estimated
costs at Topanga for which the joint venture was responsible was
approximately $11.9 million (which does not include costs associated with
the space taken back by Robinson-May as discussed below), of which
approximately $7.7 million was construction related. The remaining amounts
represent lost revenues and various operating and administrative costs
incurred as a result of the earthquake. The majority of these costs were
subject to recovery under the joint venture's earthquake insurance policy.
The deductible on the earthquake casualty and business interruption
coverages was approximately $2.1 million which was funded by Topanga from
operations in 1995 and/or offset by other insurance recoveries as
discussed below. As of the date of this report, Topanga has incurred
substantially all of the estimated $7.7 million of costs to repair the
mall. Approximately, $10.3 million of the $11.9 million of total costs has
been reimbursed through insurance proceeds. Approximately $3.2 million of
additional insurance proceeds were collected as a final settlement during
the third quarter of 1995. Such amount represents recoveries under the
joint venture's business interruption policy and is reflected as rental
income in the accompanying consolidated financial statements. All of the
mall's 114 shops and the four major department stores are open. Subsequent
to the earthquake, sales at the mall shops increased due to the greater
extent of damage at a nearby competing mall. However, in August 1995, the
competing mall was re-opened. The re-opening of this mall is expected to
have an adverse effect on Topanga's sales. One department store at
Topanga, Robinson-May, had a portion of their store condemned by city
inspectors in 1994. One consequence of this partial condemnation is that
Robinson-May took back in 1994 the approximately 25,000 square feet of that
store which had been leased to the joint venture in 1990. Pursuant to the
terms of the lease agreement with the joint venture, Robinson-May was
allowed to terminate the lease in the event there was substantial damage to
its existing store (as defined). This is expected to represent the loss of
approximately $150,000 in annual net income from subleases of the eight
tenants which had subleased this space. Topanga was insured in case of
such event and received, in July 1994, insurance proceeds in the amount of
$2,500,000 (net of the related deductible) for the cost of the unamortized
tenant improvements and the loss of rents related to this space. As a
result of the termination of the leasehold for this space from Robinson-
May, Topanga wrote off, in 1994, approximately $1.2 million of unamortized
leasehold improvements discussed above. Topanga recorded in 1994, an
extraordinary loss of $2,889,000 (of which the Partnership's share was
approximately $1,676,000) which included Topanga's share of repair cost of
approximately $2.1 million, and approximately $789,000 of other costs. The
earthquake did result in some adverse effect on the operations of the
center in early 1994.
The joint venture partner had agreed to advance the joint venture
funds for expenses incurred for certain redevelopment costs related to a
potential future expansion of Topanga Plaza which is still being studied by
the joint venture. The balance of these advances was $435,000 at December
31, 1994. Such advances were repaid to the joint venture partner in early
1995 from available cash at the venture.
The shopping center is subject to fire, life and safety code and
ordinance requirements, which have changed since the property's original
construction. Accordingly, the Partnership intends to comply with such
revised regulations and fund certain retrofit costs. In conjunction with
the renovation, a substantial portion of certain retrofit costs have been
completed. The Partnership currently expects to fund any remaining costs
from operations over the next several years, as tenant leases expire, until
the entire building conforms to such requirements.
The shopping center was subject to a long-term management agreement
with an affiliate of the joint venture partner. Under the terms of the
management agreement, the manager was entitled to receive a management fee
based on a formula which relates to direct and general overhead costs and
expenses incurred in the operation of the property. During 1994, the
manager of the Topanga Plaza, an affiliate of the joint venture partner,
was sold to an unaffiliated third party, who assumed management at the
property on the same terms as existed prior to the sale.
(d) Broad Street
During December 1985, the Partnership acquired, through Broad Street,
a joint venture with JMB Income Properties, Ltd.-X, a partnership sponsored
by an affiliate of the Managing General Partner, a 68.56% interest in the
40 Broad Street office building in New York, New York. Broad Street's
purchase price for the building, which was paid in cash at closing, was
approximately $65,100,000 of which the Partnership provided approximately
$44,630,000.
The Partnership will be allocated or distributed profits and losses,
cash flow from operations and sale or refinancing proceeds in the ratio of
its capital contributions to Broad Street which is 68.56%.
Until December 1994, the property was managed by an affiliate of the
General Partners of the Partnership for a fee calculated as 2% of gross
receipts of the property (see note 7).
(e) First Financial
In 1987, the Partnership, through First Financial, a joint venture
with JMB Income Properties, Ltd.-XIII (a partnership sponsored by an
affiliate of the Managing General Partner "JMB-XIII"), acquired an interest
in a general partnership ("Encino") with an affiliate of the developer
("Venture Partner") which owns an office building in Encino (Los Angeles),
California. First Financial is obligated to make an initial investment in
the aggregate amount of $49,850,000 of which approximately $49,812,000 of
such contributions have been made to Encino. First Financial does not
anticipate further increasing its initial cash investment in Encino.
The Encino partnership agreement generally provides that First
Financial is entitled to receive (after any participating amounts due to
Pepperdine University pursuant to its tenant lease) from cash flow from
operations (as defined) an annual cumulative preferred return equal to
9.05% through April 30, 1995 (and 8.9% thereafter) of its capital contri-
butions. Any remaining cash flow is to be split equally between First
Financial and the Venture Partner. Pepperdine University, under its tenant
lease, is entitled to an amount based on 6.6% of the Venture Partner's
share of the office building's net operating profit and net sale profit (as
defined).
All of Encino's operating profits and losses before depreciation have
been allocated to First Financial in 1994 and 1993.
The Encino partnership agreement also generally provides that net sale
proceeds and net refinancing proceeds (as defined), after any amounts due
to Pepperdine University pursuant to its tenant lease, are to be
distributed: first, to First Financial in an amount equal to its
deficiency, if any, in its cumulative preferred return as described above;
next, to First Financial in the amount of its capital contributions; next,
to the Venture Partner in an amount equal to $600,000; any remaining
proceeds are to be split equally between First Financial and the Venture
Partner.
The terms of the First Financial partnership agreement provide that
annual cash flow, net sale or refinancing proceeds, and tax items will be
distributed or allocated, as the case may be, to the Partnership in
proportion to its 62.5% share of capital contributions.
In November 1987, First Financial caused Encino to obtain a third
party first mortgage loan in the amount of $30,000,000. The proceeds of
such loan were distributed to First Financial to reduce its contribution
and to the Venture Partner who subsequently repaid a $15,500,000 loan from
First Financial. Thus, the total cash investment of First Financial for
its interest in the office building, after consideration of the funding of
the $30,000,000 permanent financing, is approximately $20,000,000, of which
the Partnership's share is approximately $12,500,000.
The first mortgage loan on the property matured November 1, 1995.
Effective November 1, 1995, Encino and the existing lender amended and
restated the existing mortgage loan. The new principal balance of the
amended note at November 1, 1995 was $24,970,148. This amount was
comprised of the then outstanding principal portion of $28,970,148 on the
original $30,000,000 note less a required $4,000,000 principal paydown by
Encino, all of which was advanced by First Financial at closing of which
the Partnership's share of such paydown was $2,500,000. The amended loan
has an interest rate of 8.67% and a term of two years resulting in a
maturity date of November 1, 1997. The new monthly installments of
principal and interest, based on a 23-year amortization, are $209,077.
In order to finalize the loan extension described above, the
Partnership and its affiliated partner advanced approximately $4.1 million
(approximately $2.5 million by the Partnership) to the joint venture to
fund the required principal paydown and related loan fees. A capital call
has been made on the unaffiliated joint venture partner for its share of
the total required amount; however, the unaffiliated joint venture partner
has indicated that it does not intend to fund its required share. The
Partnership and its affiliated partner are in discussions with the
unaffiliated partner and have reached an agreement in principle to settle
this dispute through a modification of the joint venture agreement. There
can be no assurance that a modification of the joint venture agreement will
be reached. Should a modification of the joint venture agreement not be
reached, the Partnership and its affiliated partner will pursue all rights
and remedies available under the joint venture agreement.
Due to the uncertainty of Encino's ability to recover the net carrying
value of the First Financial office building investment property through
future operations and sale during the estimated holding period, Encino
recorded, as a matter of prudent accounting practice, a provision for value
impairment of such investment of approximately $6,475,000, all of which was
allocated to First Financial. The Partnership's share of such provision to
First Financial was approximately $4,047,000. Such provision was recorded
at December 31, 1994 to reduce the net carrying value of the investment
property to its estimated fair value.
As previously reported, the First Financial office building appeared
to have experienced only minor cosmetic damage as a result of the January
17, 1994 Northridge earthquake in southern California. On February 22,
1995, the city council of the city of Los Angeles passed an ordinance
requiring certain buildings (identified by building type and location) to
perform testing on the welded steel moment connections to determine if the
earthquake had weakened such joint weldings and to repair such joint
weldings if weakness is detected. This property qualified for the testing
under the ordinance, and therefore, Encino retained a structural engineer
to perform the testing. Results of the testing by the structural engineer
indicated that some of the building's joint weldings suffered damage which,
in accordance with the ordinance, were required to be repaired. Encino's
structural engineer informed Encino that the damage detected did not pose a
life safety risk for the building's tenants. All testing and repairs
necessary to comply with such ordinance were completed as of October 1995.
The total cost of such testing and repairs was approximately $826,000 (of
which the Partnership's share was approximately $516,250).
The office building is managed by an affiliate of the Venture Partner
for a fee based upon a percentage of rental receipts (as defined) of the
property.
(4) LONG-TERM DEBT
(a) Long-term debt consists of the following at December 31, 1995 and
1994:
1995 1994
----------- -----------
10-1/8% mortgage note secured by
the Topanga Plaza shopping center
in Los Angeles, California; payable
in monthly installments of principal
and interest of $523,225 through
January 2002 when the remaining
balance is due and payable,
see note 4(b). . . . . . . . . . . $58,103,860 58,448,865
Floating rate bond financing
(certificates), secured by the
Plaza Hermosa Shopping Center
in Hermosa Beach, California;
the certificates bear interest
based on a floating rate which is
adjustable weekly (as defined),
with a maximum interest rate of
12%, interest only is payable
monthly through December 2023
when the entire outstanding
balance is due and payable,
note 4(c). . . . . . . . . . . . . 6,400,000 6,400,000
8.67% mortgage note, secured
by the First Financial Plaza
Office Building; payable in
monthly installments of
principal and interest of
$209,077 through November
1997 when the remaining
balance is due and payable . . . . 24,912,606 29,161,144
----------- -----------
Total debt. . . . . . . . 89,416,466 94,010,009
Less current portion
of long-term debt . . . 746,306 29,539,123
----------- -----------
Total long-term debt. . . $88,670,160 64,470,886
=========== ===========
(b) Topanga
In January 1992, the Partnership and its joint venture partner
finalized the refinancing of the existing mortgage notes at Topanga Plaza
with replacement financing from the existing mortgage holder. The
aggregate loan amount of $59,000,000 was funded $26,600,000 in 1992 and
$32,400,000 in 1993 to repay advances by an affiliate of the venture
partner, to return to the Partnership prior contributions used to fund
previous costs incurred relating to fire, life and safety regulations and
certain releasing costs, to paydown interim lines of credit used for
certain renovation costs and operational capital expenditures, to fund
additional renovation costs and to refinance the remaining portion of the
existing mortgage upon its maturity in June 1993. The Topanga joint
venture had funded certain renovation costs through a line of credit
bearing interest at 10.125% with various maturity dates. The line of
credit had a balance of $9,650,000 at December 31, 1992 and was paid in
1993 by the additional loan funding discussed above.
(c) Plaza Hermosa Shopping Center
A portion of the initial purchase price of the property was
represented by bond financing of $6,400,000. This financing was secured by
a letter of credit facility which was ultimately secured by a deed of trust
on the property. In December 1994, upon expiration of the letter of
credit, the Partnership obtained a long-term replacement letter of credit
with a new lender and simultaneously retired the original bond financing
and issued new bonds to the existing bondholders in their aggregate amount
of $6,400,000. The new letter of credit expires in December 1997. The new
bond financing is due and payable upon the new expiration date of the
letter of credit.
(d) Five year maturities of long-term debt are summarized as follows:
1996 . . . . . . . . . . $ 746,306
1997 . . . . . . . . . . 25,039,433
1998 . . . . . . . . . . 507,202
1999 . . . . . . . . . . 561,008
2000 . . . . . . . . . . 620,521
===========
(5) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale or
refinancing of investment properties will be allocated to the General
Partners: (i) in an amount equal to the greater of 1% of such profits or
the amount of cash distributable to the General Partners from any such sale
or refinancing (as described below); and (ii) in order to reduce deficits,
if any, in the General Partners' capital accounts to a level consistent
with the gain anticipated to be realized from the sale of properties.
Losses from the sale or refinancing of investment properties will be
allocated 1% to the General Partners. The remaining sale or refinancing
profits and losses will be allocated to the Limited Partners.
The General Partners are not required to make any capital contri-
butions except under certain limited circumstances upon termination of the
Partnership. In general, distributions of cash from operations will be
made 90% to the Limited Partners and 10% to the General Partners. However,
a portion of such distributions to the General Partners is subordinated to
the Limited Partners' receipt of a stipulated return on capital.
The Partnership Agreement provides that the General Partners shall
receive as a distribution from the sale of a real property by the
Partnership amounts equal to the cumulative deferrals of any portion of
their 10% cash distribution and 2-1/2% 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, the Limited Partners shall receive 100% of such net sale proceeds
until the Limited Partners (i) have received cash distributions of sale or
refinancing proceeds in an amount equal to the Limited Partners' aggregate
initial capital investment in the Partnership, (ii) have received
cumulative cash distributions from the Partnership's operations which, when
combined with sale or refinancing proceeds previously distributed, equal a
6% annual return on the Limited Partners' average capital investment for
each year (their initial capital investment as reduced by sale or
refinancing proceeds previously distributed) commencing with the second
fiscal quarter of 1986 and (iii) have received cash distributions of sale
and refinancing proceeds and of the Partnership's operations, in an amount
equal to the Limited Partners' initial capital investment in the
Partnership plus a 10% annual return on the Limited Partners' average
capital investment. Accordingly, approximately $773,000 of sale proceeds
from the sale of the Partnership's interest in Mid Rivers Mall has been
deferred by the General Partners.
(6) LEASES
At December 31, 1995, the Partnership and its consolidated ventures'
principal assets are two shopping centers and two office buildings. The
Partnership has determined that all leases relating to these properties are
properly classified as operating leases; therefore, rental income is
reported when earned and the cost of the properties, excluding the cost of
the land, is depreciated over the estimated useful lives. Leases with
tenants range in term from month-to-month to twenty-five years and provide
for fixed minimum rent and partial reimbursement of operating costs. In
addition, leases with shopping center tenants provide for additional rent
based upon percentages of tenants' sales volumes. With respect to the
Partnership's shopping center investments, a substantial portion of the
ability of retail tenants to honor their leases is dependent on the retail
economic sector.
Cost and accumulated depreciation of the leased assets are summarized
as follows at December 31, 1995:
Office Buildings:
Cost. . . . . . . . . . . . . . . . . . $ 68,084,657
Accumulated depreciation. . . . . . . . 25,098,404
------------
42,986,253
------------
Shopping Centers:
Cost. . . . . . . . . . . . . . . . . . 121,045,748
Accumulated depreciation. . . . . . . . 27,292,352
------------
93,753,396
------------
$136,739,649
============
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit, to be received
in the future under the operating leases are as follows:
1996. . . . . . . . . . . . . . . . . . . $ 20,669,237
1997. . . . . . . . . . . . . . . . . . . 19,423,331
1998. . . . . . . . . . . . . . . . . . . 18,494,161
1999. . . . . . . . . . . . . . . . . . . 17,445,959
2000. . . . . . . . . . . . . . . . . . . 15,607,560
Thereafter. . . . . . . . . . . . . . . . 61,663,368
------------
Total . . . . . . . . . . . . . . . . $153,303,616
============
Contingent rent (based on sales by property tenants) included in
rental income was as follows:
1993. . . . . . . . . . . . . . . . . . . $427,809
1994. . . . . . . . . . . . . . . . . . . 662,271
1995. . . . . . . . . . . . . . . . . . . 438,733
========
(7) TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Managing General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1995 1994 1993 1995
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Property management and
leasing fees. . . . . . . . . . . . . $ 67,422 184,881 221,843 --
Insurance commissions . . . . . . . . . 75,330 74,228 84,976 --
Reimbursement (at cost) for
accounting services . . . . . . . . . 90,577 70,947 70,349 --
Reimbursement (at cost) for
portfolio management
services. . . . . . . . . . . . . . . 38,217 31,466 -- --
Reimbursement (at cost) for
legal services. . . . . . . . . . . . 4,222 11,445 2,212 --
Reimbursement (at cost) for
administrative charges and
other out-of-pocket expenses. . . . . 170,348 6,516 19,682 60,381
-------- -------- -------- ------
$446,116 379,483 399,062 60,381
======== ======== ======== ======
<FN>
The above table reflects that during 1995, the Partnership recognized and paid certain 1994 administrative
charges of approximately $93,972 that had not previously been reimbursed.
</TABLE>
Certain of the Partnership's properties are managed by affiliates of
the General Partners or their assignees for fees computed as a percentage
of certain rents received by the properties. In December 1994, one of the
affiliated property managers sold substantially all of its assets and
assigned its interest in its management contracts to an unaffiliated third
party. In addition, certain of the management personnel of the property
manager became management personnel of the purchaser and its affiliates.
The successor to the affiliated property manager's assets is the property
manager of the 40 Broad Street property after the sale on the same terms
that existed prior to the sale.
In accordance with the subordination requirements of the Partnership
Agreement, the General Partners have deferred receipt of their distri-
butions (see note 5) of net cash flow from the Partnership. The cumulative
amount of such deferred distributions aggregated $7,784,297 at December 31,
1995. These amounts or amounts currently payable do not bear interest and
may be paid in future periods.
Effective October 1, 1995, the Managing General Partner of the
Partnership engaged independent third parties to perform certain
administrative services for the Partnership which were previously performed
by, and partially reimbursed to, affiliates of the General Partners. Use
of such third parties is not expected to have a material effect on the
operations of the Partnership.
The Topanga venture has incurred approximately $61,000 and $131,000 of
interest costs relating to affiliated venture partner advances (note 3(c))
in 1994 and 1993, respectively, all of which was paid to an affiliate of
the former venture partner as of December 31, 1995.
(8) INVESTMENT IN UNCONSOLIDATED VENTURE
Summary of financial information for San Jose as of and for the years
ended December 31, 1995 and 1994 is as follows:
1995 1994
------------ ------------
Current assets. . . . . . . . . . . $ 5,155,489 5,966,024
Current liabilities . . . . . . . . (323,044) (996,677)
------------ ------------
Working capital . . . . . . . 4,832,445 4,969,347
Investment property, net. . . . . . 30,955,893 31,913,782
Other assets, net . . . . . . . . . 874,007 866,256
Long-term debt. . . . . . . . . . . (23,431,863) (25,880,881)
Other liabilities . . . . . . . . . (48,870) (72,093)
Venture partners' equity. . . . . . (6,769,546) (6,076,946)
------------ ------------
Partnership's capital . . . . $ 6,412,066 5,719,465
============ ============
Represented by:
Invested capital. . . . . . . . . $ 48,767,680 47,534,243
Cumulative distributions. . . . . (21,902,500) (20,652,500)
Cumulative loss . . . . . . . . . (20,453,114) (21,162,278)
------------ ------------
$ 6,412,066 5,719,465
============ ============
Total income. . . . . . . . . . . . $ 9,182,446 9,270,819
============ ============
Expenses applicable to operating
income. . . . . . . . . . . . . . $ 7,764,118 8,387,418
============ ============
Net earnings. . . . . . . . . . . . $ 1,418,328 883,401
============ ============
Reference is made to note 3(b) regarding the provision for value
impairment of $944,335 which was recorded in 1994 by the San Jose joint
venture.
Total income, expenses related to operating earnings, and net loss for
the above-mentioned venture for the year ended December 31, 1993 were
$10,369,335, $23,589,873 and $13,220,538, respectively.
(9) SUBSEQUENT EVENT
(a) Distributions
In February 1996, the Partnership paid a distribution of $476,581
($2.50 per Interest) to the Limited Partners.
(b) San Jose
During December 1995, San Jose entered into a non-binding letter of
intent for the sale of the 190 San Fernando Building to an independent
third party. In March 1996, the sale was consummated. The sale price of
the building was $1,753,000, paid in cash at closing. San Jose will
recognize a gain of approximately $772,000 for financial reporting purposes
in 1996, of which approximately $386,000 will be allocable to the
Partnership. San Jose will recognize a loss of approximately $12,000 for
Federal income tax purposes in 1996 of which approximately $6,000 will be
allocable to the Partnership.
In March 1996, the Redevelopment Agency of the City of San Jose,
pursuant to the laws of eminent domain, purchased one of the parking garage
structures in the San Jose office complex for $4,090,000. San Jose will
recognize a gain of approximately $2,000,000 and $1,800,000, respectively,
for financial reporting and Federal income tax purposes in 1996, of which
approximately $1,000,000 and $900,000, respectively, will be allocable to
the Partnership. (See Note 3(b)).
<TABLE>
SCHEDULE III
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
------------------------- -------------- ------------------------------------
BUILDINGS BUILDINGS BUILDINGS
AND AND AND
ENCUMBRANCE LAND IMPROVEMENTS IMPROVEMENTS(D) LAND IMPROVEMENTS TOTAL (E)
----------- ----------- ------------ -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING
CENTERS:
Los Angeles,
California
(C). . . . . $58,103,860 8,506,014 54,714,281 44,751,810 8,506,014 99,466,091 107,972,105
Hermosa
Beach,
California . 6,400,000 5,106,570 13,131,181 (3,234,064) 3,176,526 9,897,117 13,073,643
OFFICE
BUILDINGS:
New York,
New York
(C). . . . . -- 13,201,780 55,095,008 (32,985,379) 1,765,194 22,109,629 23,874,823
Encino,
California
(C). . . . . 24,912,606 7,696,474 38,089,122 (926,546) 7,047,258 37,162,576 44,209,834
----------- ---------- ----------- ----------- ---------- ----------- -----------
Total . . $89,416,466 34,510,838 161,029,592 7,605,821 20,494,992 168,635,413 189,130,405
=========== ========== =========== =========== ========== =========== ===========
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1995
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTERS:
Los Angeles,
California (C). . . . . . . . . . . $23,234,564 1964 12/31/85 5-30 years 704,690
Hermosa Beach,
California . . . . . . . . . . . . 4,057,788 1985 09/03/86 5-30 years 104,246
OFFICE BUILDINGS:
New York,
New York (C). . . . . . . . . . . . 14,168,538 1983 12/31/85 5-30 years 1,774,192
Encino,
California (C). . . . . . . . . . . 10,929,866 1986 05/20/87 5-30 years 493,718
----------- ----------
Total . . . . . . . . . . . . . . $52,390,756 3,076,846
=========== ==========
<FN>
- ------------------
Notes:
(A) The initial cost to the Partnership represents the original purchase price of the properties, including
amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1995 for Federal income tax purposes was
$217,926,535.
(C) Properties owned and operated by joint venture; see Note 3.
(D) In 1994, the affiliated joint venture recorded provisions for value impairment totaling $6,475,138
(which included a reduction in deferred costs of $37,299) at First Financial Plaza; see Note 3(e). In 1995, the
Partnership recorded a provision for value impairment totaling $5,500,000 (which included a reduction in deferred
costs of $15,671) at Plaza Hermosa; see Note 2(b).
</TABLE>
<TABLE> SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(E) Reconciliation of real estate owned:
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period. . . . . . . . . . $193,298,414 199,493,970 196,088,700
Additions during period . . . . . . . . . . . . . 1,316,320 2,401,281 3,608,394
Sale or disposal during period. . . . . . . . . . -- (4,401,376) (203,124)
Provision for value impairment. . . . . . . . . . (5,484,329) (4,195,461) --
------------ ----------- -----------
Balance at end of period. . . . . . . . . . . . . $189,130,405 193,298,414 199,493,970
============ =========== ===========
(F) Reconciliation of accumulated depreciation:
Balance at beginning of period. . . . . . . . . . $ 46,792,110 41,724,753 36,188,622
Depreciation expense. . . . . . . . . . . . . . . 5,598,646 5,640,425 5,739,255
Sale or disposal during period. . . . . . . . . . -- (313,240) (203,124)
Provision for value impairment. . . . . . . . . . -- (259,828) --
------------ ----------- -----------
Balance at end of period. . . . . . . . . . . . . $ 52,390,756 46,792,110 41,724,753
============ =========== ===========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during 1994
and 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Managing General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation, substantially all of the
outstanding stock of which is owned directly or indirectly, by certain of
its officers and directors and members of their families. JMB has
responsibility for all aspects of the Partnership's operations, subject to
the requirement that sales of real property must be approved by the
Associate General Partner of the Partnership, ABPP Associates, L.P.
Effective December 31, 1995, ABPP Associates, L.P. acquired the general
partnership interest in the Partnership of the Associate General Partner,
Income Associates-XII, L.P., (which constituted substantially all of the
assets of Income Associates-XII, L.P.). ABPP Associates, L.P., an Illinois
limited partnership, with JMB as its sole general partner, continues as the
Associate General Partner. The Associate General Partner shall be directed
by a majority in interest of its limited partners (who are generally
officers, directors and affiliates of JMB or its affiliates) as to whether
to provide its approval of any sale of real property (or any interest
therein) of the Partnership.
The Partnership is subject to certain conflicts of interest arising out
of its relationships with the General Partners and their affiliates as well
as the fact that the General Partners and their affiliates are engaged in a
range of real estate activities. Certain services have been and may in the
future be provided to the Partnership or its investment properties by
affiliates of the General Partners, including property management services
and insurance brokerage services. In general, such services are to be
provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants for properties and/or for the
sale of properties. Because the timing and amount of cash distributions
and profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell or refinance a property, the
establishment and maintenance of reasonable reserves, the timing of
expenditures and the allocation of certain tax items under the Partnership
Agreement, the General Partners may have a conflict of interest with
respect to such determinations.
The names, positions held and length of service therein of each
director and the executive and certain other officers of the Managing
General Partner of the Partnership are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 8/01/93
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Managing General Partner to be held on
June 5, 1996. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Managing General Partner to be held on June 5,
1996. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"),
Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real
Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited
Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited
Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV
("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-
XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB
Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners,
Ltd.-II ("Mortgage Partners-II") and JMB Mortgage Partners, Ltd.-III
("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage
Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and
Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II"), and the managing
general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB
Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI
("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB
Income Properties, Ltd.-IX ("JMB Income-IX"), JMB Income Properties, Ltd.-X
("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI") and JMB
Income Properties, Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole
general partner of the associate general partner of most of the foregoing
partnerships. Most of the foregoing directors and officers are also
officer and/or directors of various affiliated companies of Arvida/JMB
Managers, Inc. (the general partner Arvida/JMB Partners, L.P. ("Arvida")),
Arvida/JMB Managers-II, Inc. (the general partner Arvida/JMB Partners,
L.P.-II ("Arvida-II")) and Income Growth Managers, Inc. (the corporate
general partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most
of such directors and officers are also partners of certain partnerships
which are associate general partners in the following real estate limited
partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI, Carlyle-XII,
Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB
Income-VI, JMB Income-VII, JMB Income-IX, JMB Income-X, JMB Income-XI, JMB
Income-XIII, Mortgage Partners, Mortgage Partners-II, Mortgage
Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income
Plus-II and IDS/BIG.
The business experience during the past five years of each such
director and officer of the Managing General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 58) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc.,
an affiliate of JMB that is a real estate investment trust in the business
of owning, managing and developing shopping centers. He is a Certified
Public Accountant.
Neil G. Bluhm (age 58) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August, 1970. Mr. Bluhm is a director of Urban Shopping Centers, Inc., an
affiliate of JMB that is a real estate investment trust in the business of
owning, managing and developing shopping centers. He is a member of the
Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 57) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 54) has been associated with JMB since July,
1972. Mr. Nathan is also a director of Sportmart Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 62) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 49) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is President of Schreiber Investments, Inc.,
a company which is engaged in the real estate investing business. He is
also a senior advisor and partner of Blackstone Real Estate Partners, an
affiliate of the Blackstone Group, L.P. Since 1994, Mr. Schreiber has also
served as a trustee of Amli Residential Property Trust, a publicly-traded
real estate investment trust that invests in multi-family properties. Mr.
Schreiber is also a director of Urban Shopping Centers, Inc., an affiliate
of JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. He is also a director of a
number of investment companies advised or managed by T. Rowe Price
Associates and its affiliates. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 46) has been associated with JMB since March,
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 48) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters Degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 43) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 47) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.
Howard Kogen (age 60) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The General Partners of
the Partnership are entitled to receive a share of cash distributions, when
and as cash distributions are made to the Investors, and a share of profits
or losses. Reference is also made to Notes 5 and 7 for a description of
such transactions, distributions and allocations. No such cash
distributions were paid to the General Partners in 1995, 1994 and 1993.
An affiliate of the Managing General Partner provided property
management services to the Partnership for 1995 for the Plaza Hermosa
Shopping Center in Hermosa Beach, California at a fee calculated at 4% of
the gross receipts of the property and to the 40 Broad Street office
building in New York, New York until December 1994 (see Note 7) at a fee
calculated at 2% of the gross receipts of the property. In 1995, such
affiliate earned property management and leasing fees amounting to $67,422
all of which were paid at December 31, 1995. As set forth in the
Prospectus of the Partnership, the Managing General Partner must negotiate
such agreements on terms no less favorable to the Partnership than those
customarily charged for similar services in the relevant geographical area
and such agreements must be terminable by either party thereto, without
penalty, upon 60 days' notice.
The General Partners of the Partnership may be reimbursed for their
salary-related and direct expenses relating to the administration of the
Partnership and the operation of the Partnership's real property
investments. In 1995, the Managing General Partner received reimbursement
for such expenses and salaries in the amount of $303,364 of which $60,381
was unpaid at December 31, 1995. The Managing General Partner received no
disbursement agent and data processing fees in 1995.
JMB Insurance Agency, Inc., an affiliate of the Managing General
Partner of the Partnership, earned and received insurance brokerage
commissions in 1995 aggregating $75,330 in connection with the providing of
insurance coverage for the real property investments of the Partnership.
Such commissions are at rates set by insurance companies for the classes of
coverage involved.
The Partnership is permitted to engage in various transactions
involving affiliates of the Managing General Partner of the Partnership.
The relationship of the Managing General Partner (and its directors and
officers) to its affiliates is set forth above in Item 10 above and Exhibit
21 hereto.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Managing General Partner, its officers and directors and the Associate General Partners own the
following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty Corporation 5 Interests (1) Less than 1%
indirectly
Limited Partnership
Interests Managing General Partner, 5 Interests (1) Less than 1%
its officers and indirectly
directors and the
Associate General
Partners as a group
<FN>
(1) Includes 5 interests owned by the Initial Limited Partner of the Partnership for which JMB Realty
Corporation, as its indirect majority shareholder, is deemed to have sole voting and investment power.
No officer or director of the Managing General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Managing General Partner, affiliates or their management other than
those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements (See Index to Financial Statements
filed with this annual report).
2. Exhibits.
3-A. The Prospectus of the Partnership dated August
23, 1985 as supplemented December 9, 1985 and January 10, pursuant to Rules
424 (b) and 424 (c), as filed with the Commission is hereby incorporated
herein by reference. Copies of pages 8-12, 61-64 and A-8 to A-12 are
hereby incorporated herein by reference to Exhibit 3-A to the Partnership's
Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March
19, 1993.
3-B. Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the Prospectus, which agreement is
hereby incorporated herein by reference to Exhibit 3-B to the Partnership's
Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March
19, 1993.
4-A. Mortgage loan agreement between Topanga and
Connecticut General Life Insurance Company dated January 31, 1992 relating
to Topanga Plaza in Los Angeles, California is hereby incorporated herein
by reference to Exhibit 4-A to the Partnership's Report on Form 10-K for
December 31, 1992 (File No. 0-16108) dated March 19, 1993.
4-B. Amended and restated mortgage loan agreement
between First Financial and The Prudential Insurance Company of America
dated November 21, 1995 relating to First Financial Plaza in Encino,
California is filed herewith.
4-C. Mortgage loan modification agreement between
Topanga and Connecticut General Life Insurance dated January 31, 1993
relating to Topanga Plaza in Los Angeles, California is hereby incorporated
herein by reference to Exhibit 4 of the Partnership's Report on Form 10-Q
(File No. 0-16108) dated November 11, 1993.
4-D. Letter of credit agreement between JMB Income
Properties, Ltd-XII and Dresdner Bank AG dated November 15, 1994 relating
to the letter of credit extension at Plaza Hermosa is hereby incorporated
herein by reference to Exhibit 4-D of the Partnership's Report on Form 10-K
for December 31, 1994 (File No. 0-16108) dated March 27, 1995.
4-E. Mortgage loan agreement, Amended and Restated
Deed of Trust, Security Agreement with assignment of Rents and Fixture
Filing and Real Estate tax escrow and Security Agreement between San Jose
and Connecticut General Life Insurance Co. dated November 30, 1994 is
hereby incorporated herein by reference to Exhibit 4-E to the Partnership's
Report on Form 10-K for December 31, 1994 (File No. 0-16108) dated March
27, 1995.
10-A. Acquisition documents including the venture
agreement relating to the purchase by the Partnership of Topanga Plaza in
Los Angeles, California, are hereby incorporated by reference to the
Partnership's Report on Form 8-K (File No. 0-16108) dated December 31,
1985.
10-B. Acquisition documents including the venture
agreement relating to the purchase by the Partnership of First Financial
Plaza in Encino, California are hereby incorporated by reference to the
Partnership's Report on Form 8-K (File No. 0-16108) dated June 3, 1987.
10-C. Acquisition documents including the venture
agreement relating to the purchase by the Partnership of 40 Broad Street in
New York, New York, are hereby incorporated by reference to the
Partnership's Report on Form 8-K (File No. 0-16108) dated December 31,
1985.
21. List of Subsidiaries
24. Powers of Attorney
27. Financial Data Schedule
- ----------------
Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such agreements
to the Securities and Exchange Commissions upon request.
(b) No Reports on Form 8-K were required or filed since the
beginning of the last quarter of the period covered by this report.
No annual report or proxy material for 1995 has been sent to the
Partners of the Partnership. An annual report will be sent to the Partners
subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - XII
By: JMB Realty Corporation
Managing General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Managing General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 25, 1996
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1996
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1996
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 25, 1996
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1996
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1996
By: STUART C. NATHAN*
Stuart C. Nathan, Executive Vice President
and Director
Date: March 25, 1996
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 25, 1996
JMB INCOME PROPERTIES, LTD. - XII
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------- ----
3-A. Pages 8-12, 61-64 and A-8 to A-12 of
the Prospectus of the Partnership
dated August 23, 1985, as supple-
mented on December 9, 1985 and
January 10, 1986 Yes
3-B. Amended and Restated Agreement of
Limited Partnership Yes
4-A. Mortgage loan agreement related to
Topanga Plaza Yes
4-B. Mortgage loan agreement related to
First Financial Plaza No
4-C. Mortgage loan modification agreement
related to Topanga Plaza Yes
4-D. Letter of credit agreement related to
Plaza Hermosa Yes
4-E. Mortgage loan agreement related to
Park Center Plaza Yes
10-A. Acquisition documents related to
Topanga Plaza Yes
10-B. Acquisition documents related to
First Financial Plaza Yes
10-C. Acquisition documents related to
40 Broad Street Yes
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
JMB INCOME PROPERTIES, LTD. - XII
EXHIBIT - 4B
------------------------------------
AMENDED AND RESTATED
PROMISSORY NOTE
$24,970,148.38 Los Angeles, California
LOAN NO.: 7 501 241 October 30, 1995
FOR VALUE RECEIVED, the undersigned, JMB ENCINO PARTNERSHIP, a
California general partnership ("Maker"), having an address at 900 Michigan
Avenue, Chicago, Illinois, PROMISES TO PAY TO THE ORDER OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA ("Prudential"), a New Jersey corporation
authorized to do business in the State of California (Prudential and it
successors and assigns who become holders of this Promissory Note (the
"Note") are hereinafter collectively referred to as ("Holder"), to
Prudential at Morgan Guaranty Trust Company, 23 Wall Street, New York, New
York 10019, Account No. 050-54-493, referencing Loan No. 7 501 241, or at
such other place as Holder, may from time to time designate, the principal
sum of Twenty Four Million Nine Hundred Seventy Thousand One Hundred Forty
Eight and 38/100ths Dollars ($24,970,148.38), together with interest
thereon from the date funds are first disbursed hereunder until paid at a
rate per annum equal to the Interest Rate (as hereinafter defined). For
the first payment due under the loan, interest shall be calculated on the
basis of 365-day year and the actual number of days in each month.
Thereafter, interest shall be calculated on the basis of a 360-day year and
30-day month; except with respect to partial months in which case interest
shall be calculated on the basis of the actual number of days in the year
and the actual number of days elapsed in the period during which it
accrues, in accordance with the terms and conditions set forth below.
This Note amends and restates that certain Fixed Monthly Payment
Note, Including Interest, Secured by Deed of Trust (the "Original Note") in
the face principal amount of $30,000,000.00, dated November 2, 1987,
executed by Maker and payable to Lender. The stated principal amount of
this Note equals the principal balance of the Original Note less the prior
payments of principal by Maker, including a $4,000,000.00 payment made
pursuant to this certain First Extension and Amendment to Loan Documents
(the "Modification") dated of even date and executed by Maker and
Prudential, made as a condition of the effectiveness of this Note. All
references in the Loan Documents (as defined below) to the Note shall, from
and after the Effective Date (as defined below) mean and refer to this
Note.
-1-
1. DEFINITIONS. For the purpose of this Note, the following terms
shall have the meanings set forth below; certain other terms are defined
where they appear in this Note:
(a) "DEED OF TRUST" means that certain Deed of Trust, Security
Agreement, and Assignment of Leases and Fixture Filing, dated November 2,
1995, executed by Maker as "Trustor" to the benefit of Prudential as
"Beneficiary" and recorded in the Official Records of Los Angeles County,
California, on November 2, 1987, as Instrument No. 87-1755004, as amended
by that certain First Amendment to Deed of Trust of even date executed by
Maker and Prudential.
(b) "DISCOUNT RATE" means the interest rate, which when
compounded monthly, is equivalent to the Treasury Rate, when compounded
semi-annually.
(c) "EFFECTIVE DATE" means November 1, 1995.
(d) "INTEREST RATE" means a rate of interest per annum of
Eight and Sixty Seven One Hundredths percent (8.67%).
(e) "LOAN DOCUMENTS" means this Note, the Deed of Trust, and
all other documents, with the exception of that certain Hazardous
Substances Remediation and Indemnification Agreement of even date herewith
(the "Remediation and Indemnification Agreement") executed by Maker in
favor of Holder, now or hereafter governing, securing or evidencing the
indebtedness evidenced by this Note or any portion of such indebtedness.
(f) "LOAN" means the loan evidenced by this Note.
(g) "MATURITY DATE" means that date which is the first (1st)
day of November, 1997.
(h) "PREPAYMENT AMOUNT" means the amount of the Principal
Balance prepaid on a Prepayment Date.
(i) "PREPAYMENT DATE" means any date, prior to the Maturity
Date, upon which all or any portion of the Principal Balance is prepaid.
(j) "PREPAYMENT PREMIUM" shall have the meaning set forth in
Paragraph 6(a) hereof.
(k) "PRESENT VALUE OF THE LOAN" means the present value,
discounting from a Prepayment Date at the Discount Rate, of all payments of
principal and interest which would have been payable on the Prepayment
Amount from the Prepayment Date through and including the Maturity Date.
-2-
(l) "PRINCIPAL BALANCE" means the outstanding principal
balance of this Note from time to time outstanding.
(m) "SECONDARY INTEREST RATE" means a rate of interest equal
to twelve percent (12%) per annum.
(n) "TREASURY RATE" means the interest rate, conclusively
determined by Holder on the Prepayment Date equal to the semi-annual yield
on the Treasury Constant Maturity Series with maturity equal to the
remaining weighted average life of the Loan for the week prior to the
Prepayment Date, as reported in Federal Reserve Statistical Release H.15 -
Selected Interest Rates ("Release H.15"). The rate will be determined by
linear interpolation between the yields reported in Release H.15, if
necessary. In the event Release H.15 is no longer published, Holder shall
select a comparable publication to determine the Treasury Rate.
2. PAYMENTS. Maker shall make payments of principal and interest
due under the Original Note through and including October 1, 1995, in
accordance with the terms of the Original Note. No later than the
Effective Date, Maker shall make a payment of $4,000,000.00 (the "Paydown")
to be applied to payment of principal under the Original Note.
Subject to the provisions of the first paragraph of the Note
with respect to the calculation of the first payment hereunder, on November
15, 1995, a payment of interest only shall be due and payable equal to the
sum of (a) interest at the interest rate specified in the Original Note on
the outstanding principal balance of the Original Note from and including
October 1, 1995, through and including the date upon which Holder receives
the Paydown plus (b) interest at the Interest Rate on the outstanding
Principal Balance from and including the day after the day upon which
Holder receives the Paydown through and including November 14, 1995.
Commencing on December 15, 1995 and continuing on the fifteenth day of each
calendar month thereafter through and including the fifteenth day of
October 1997, monthly installments of principal and interest in the amount
of $209,077.05 shall be due and payable with the entire unpaid Principal
Balance plus accrued interest and other amounts payable under the Loan
Documents being due and payable on the Maturity Date.
3. TREATMENT OF PAYMENTS. All payments due under this Note or the
Loan Documents shall be paid by Maker in lawful money of the United States
of America on the date such payment is due. All such payments shall be
made without deduction for any present or future taxes, levies, imposts,
deductions, charges or withholdings (including U.S., state or local income
taxes) imposed on Maker, which amounts shall be paid by Maker.
-3-
Payments from Maker to Holder under this Note shall be applied first to the
payment of any expense reimbursements under the Loan Documents, any Per
Diem Late Charges or Late Charges (each as hereinafter defined) and any
Prepayment Premium due thereon, in such order as Holder shall determine,
then to accrued and unpaid interest, with the remainder to be applied to
the Principal Balance.
4. PER DIEM LATE CHARGES, LATE CHARGES AND SECONDARY INTEREST.
(a) If Maker fails timely to pay any sum due and payable under
this Note on or before the date due, a late charge equal to One Hundred
Dollars ($100) per day (the "Per Diem Late Charge") shall be assessed for
each day that such payment is not paid from and including the first day
following the date such payment was due to and including the date upon
which such payment is made; provided, however, that notwithstanding the
foregoing, if such payment, together with all accrued Per Diem Late
Charges, is not make on or before the fifteenth (15th) day following the
date due, a late charge equal to four cents ($.04) for each dollar ($1.00)
of each such late payment (the "Late Charge") shall be immediately due and
payable. The Late Charge shall be in lieu of the Per Diem Late Charges
that shall have accrued during the immediately preceding fifteen (15) day
period. Maker acknowledges and agrees that its failure to make timely
payments will result in Holder incurring additional expense in servicing
the Loan, and that it is extremely difficult and impractical to ascertain
the extent of such damages and that the Per Diem Late Charges or, if
applicable, the Late Charge represent fair and reasonable estimates,
considering all of the circumstances existing on the date of the execution
of this Note, of the costs that Holder will incur by reason of such late
payment. Holder agrees to comply with Section 2954.5 of the California
Civil Code with respect to the giving of notice prior to imposing a Per
Diem Late Charge or Late Charge, as such Section or a successor Section may
now or hereafter be in effect. Acceptance of any Per Diem Late Charge or
Late Charge shall not constitute a waiver of the default with respect to
the late payment, and shall not prevent Holder from exercising any of the
other rights or remedies available hereunder or at law or in equity.
(b) Maker further acknowledges and agrees that during the time that
any payment of principal, interest or other amount due under this Note
shall be delinquent, Holder will incur additional costs and expenses
attributable to it loss of use of money due to and to the adverse impact on
Holder's ability to meet its other obligations and avail itself of other
opportunities. Maker agrees that it is extremely difficult and impractical
to ascertain the extent of such expenses, and Maker therefore agrees that,
if Holder elects,
-4-
interest at the Secondary Interest Rate shall accrue on any delinquent
payments of principal, interest or other amounts due under this Note or any
Loan Document from the date such payments were due and for so long as non-
payment continues, regardless of whether or not there has been an
acceleration of the maturity of the indebtedness evidenced by this Note;
and in the event of such election by Holder, Holder shall waive any Late
Charge or Per Diem Late Charge and to the extent the same were paid by
Maker shall be credited against the payment due at the Secondary Interest
Rate.
5. EVENT OF DEFAULT AND SECONDARY INTEREST.
(a) The occurrence of an "Event of Default" under any Loan
Document shall constitute an Event of Default under this Note. Upon the
occurrence of an Event of default (including without limitation the failure
of the Maker to observe the provisions of paragraph 27 of the Deed of
Trust, Holder, at its option may cause the Principal Balance together with
all unpaid accrued interest, any Prepayment Premium (as hereinafter
defined) and any other sums evidenced or secured by this Note or any Loan
Document, to be immediately due and payable, without further presentment,
demand, protest or notice of any kind, by so notifying Maker in writing
("Acceleration Notice"); and in the event of such election by Holder,
Holder shall waive any late charge or per diem late charge.
(b) Maker agrees that from and after the delivery of an
Acceleration Notice pursuant to Paragraph 5(a) hereof, interest at the
Secondary Interest Rate shall accrue on the Principal Balance and all
unpaid accrued interest and other sums evidenced or secured by this Note or
any Loan Documents.
6. PREPAYMENT.
(a) If for any reason (other than the application by Holder of
insurance or condemnation proceeds to paydown the Loan) the Principal
Balance or any portion thereof is prepaid (whether by operation of law,
acceleration or otherwise) on a date prior to July 1, 1997, Maker shall pay
to Holder as liquidated damages, immediately upon demand, together with the
related principal prepayment and any unpaid accrued interest, a prepayment
charge (the "Prepayment Premium") equal to the greater of:
(1) the product of (x) one percent (1%) of the
Principal Balance being prepaid multiplied by (y) a fraction, the numerator
of which is the number of full months remaining until the Maturity Date as
of the Prepayment Date and the denominator of
-5-
which is the number of full months comprising the
term of the Loan; or
(2) the Present Value of the Loan less the sum of (x)
the portion of the Principal Balance being prepaid, and (y) unpaid accrued
interest, if any.
(b) Notwithstanding anything to the contrary contained herein,
if for any reason the Principal Balance or any portion thereof is prepaid
voluntarily by Maker on or after July 1, 1997 there shall be not prepayment
penalty, charge or fee due whatsoever with respect to such prepayment.
(c) Maker shall have the right voluntarily to prepay all or any
portion of the Principal Balance, together with accrued interest thereon,
provided that Maker gives Holder not less than thirty (30) days prior
written notice of its intention to prepay, and delivers to Holder, on or
before the Prepayment Date, the Prepayment Premium, if any, as calculated
above, together with the Prepayment Amount and all accrued interest and
other sums due under the Loan Documents.
(d) Maker agrees that such Prepayment Premium represents the
reasonable estimate of Holder and Maker of a fair average compensation for
the loss that may be sustained by Holder due to the payment of any of the
Principal Balance prior to the Maturity Date; and by initialing this
provision in the space provided below, Maker hereby declares that Holder's
agreement to enter into this transaction on the terms set forth in this
Note and in the other Loan Documents constitutes adequate and valuable
consideration, given individual weight by Maker for this agreement. Such
Prepayment Premium shall be paid without prejudice to the right of Holder
to collect any other amount provided to be paid hereunder. Holder shall
not be obligated to actually reinvest the Prepayment Amount in any Treasury
obligations as a condition to receiving the Prepayment Premium.
INITIALS OF MAKER:
7. SECURITY. This Note is secured, among other security, by the
Deed of Trust and the other Loan Documents, which contain provisions for
the acceleration of the maturity of this Note upon the occurrence of
certain described events.
8. HOLDER'S RIGHTS; NO WAIVER BY HOLDER. The rights, powers and
remedies of Holder under this Note shall be in addition to all rights,
powers and remedies given to Holder under the Loan Documents and any other
agreement or document securing or evidencing the indebtedness evidenced
hereby or by virtue of any statute or rule of law, including, but not
limited to, the
-6-
California Uniform Commercial Code. All such rights, powers and remedies
shall be cumulative and may be exercised successively or concurrently in
Holder's sole discretion without impairing Holder's security interest,
rights or available remedies. Any forbearance, failure or delay by Holder
in exercising any right, power or remedy shall not preclude further
exercise thereof, and every right, power or remedy of Holder shall continue
in full force and effect until such right, power or remedy is specifically
waived in a writing executed by Holder. Maker waives any right to require
the Beneficiary (as defined in the Deed of Trust) to proceed against any
person or to pursue any remedy in Holder's power.
9. MAKER'S WAIVERS.
(a) Maker hereby waives diligence, demand, presentment for
payment, notice of non-payment, protest and notice of protest, and
specifically consent to and waive notice of any renewals or extensions of
this Note, whether made to or in favor of Maker or any person or persons.
Maker expressly waives all right to the benefit of any statute of
limitations and any moratorium, reinstatement, marshalling, forbearance,
extension, redemption, or appraisement now or hereafter provided by the
Constitution or the laws of the United States or of any state thereof, as a
defense to any demand against Maker or any such endorsers, to the fullest
extent permitted by law.
(b) Maker hereby waives any right to trial by jury with respect
to any action or proceeding brought by Maker, Holder or any other person
relating to (i) the indebtedness evidenced by this Note, or (ii) the Loan
Documents. Maker hereby agrees that this Note constitutes a written
consent to waiver of trial by jury pursuant to the provisions of California
Code of Civil Procedure Section 631 and Maker does hereby constitute and
appoint Holder its true and lawful attorney-in-fact, which appointment is
coupled with an interest, and Maker does hereby authorize and empower
Holder, in the name, place and stead of Maker, to file this Note with the
clerk or judge of any court of competent jurisdiction as statutory written
consent to waiver of trial by jury. In no event, however, shall Holder
(nor any successor or assignee of Holder) execute any document, agreement
or instrument which purports to create, or take any action with the
specific intent to create, any personal liability of Maker to third parties
pursuant to the foregoing. Any document, agreement or instrument executed
by Holder with or for the benefit of a third party pursuant to this
Paragraph shall be deemed to include the limitations on the personal
liability of Maker set forth in Paragraph 32 of the Deed of Trust.
-7-
(c) Maker hereby expressly waives any right it may have under
California Civil Code 2954.10 to prepay this Note, in whole or in part,
without prepayment charge, upon acceleration of the Maturity Date of this
Note, and agrees that if for any reason, a prepayment of any or all of this
Note is made, whether voluntarily or upon or following any acceleration of
the Maturity Date of this Note by the Holder, then Maker shall pay,
concurrently therewith, the Prepayment Premium if any, due pursuant to
Paragraph 6 hereof. By initialling this provision in the space provided
below, Maker hereby declares that Holder's agreement to make the Loan at
the Interest Rate and for the term set forth in this Note constitutes
adequate consideration, given individual weight by Maker, for this waiver
and agreement.
INITIALS OF MAKER:
10. TRANSFERS BY HOLDER. This Note or any interest in this Note and
the Loan Documents may be hypothecated, transferred or assigned by Holder
without the prior consent of Maker.
11. AMENDMENT. This Note may be amended or modified only by an
instrument in writing which by its express terms refers to this Note and
which is duly executed by the party sought to be bound thereby.
12. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and
permitted assigns.
13. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of California.
14. AUTHORITY. Each partnership, corporation or other entity
executing this Note states that it is duly authorized to execute and
deliver this Note on behalf of said entity, in accordance with duly and
regularly adopted existing authority and, if necessary, resolution of the
governing body of such organization, and that this Note is binding upon
said entity in accordance with its terms.
15. TIME. Time is of the essence with respect to each and every
term and provision of this Note.
16. USURY. Notwithstanding any provision herein, the total
liability for payments in the nature of interest shall not exceed the
applicable limits imposed by any applicable state or federal interest rate
laws. If any payments in the nature of interest, additional interest, and
other charges made
-8-
hereunder are held to be in excess of the applicable limits imposed by any
applicable state or federal laws, it is agreed that any such amount held to
be in excess shall be considered payment of principal and the indebtedness
evidenced thereby shall be reduced by such amount in the inverse order of
maturity so that the total liability for payments in the nature of
interest, additional interest and other charges shall not exceed the
applicable limits imposed by any applicable state or federal interest rate
laws in compliance with the desires of Holder and Maker.
17. NOTICES. All notices, consents and other communications
required or permitted by this Note shall be in writing and shall be given
in the manner set forth in the Deed of Trust.
18. ATTORNEYS' FEES. The undersigned agrees to pay all costs,
including reasonable attorneys' fees and expenses, incurred by Holder in
enforcing payment or collection of this Note, whether or not suit is filed.
19. LIMITATION ON PERSONAL LIABILITIES.
(a) Except as expressly set forth in paragraph 19(b) below, the
recourse of Holder with respect to the obligations evidenced by this Note
or set forth in any Loan Document shall be solely to the Property (as
defined in the Deed of Trust) and, accordingly, except as expressly set
forth in Paragraph 9(b) below, the obligations evidenced by the Note or set
forth in the Loan Documents are non-recourse to anything other that the
Property.
(b) Notwithstanding anything to the contrary contained in this
Note or in any Loan Document, nothing shall be deemed in any way to impair,
limit or prejudice the rights of Holder:
(i) in foreclosure proceedings or in any ancillary
proceedings brought to facilitate Holder's foreclosure on the Property or
any portion thereof;
(ii) to recover from Maker damages or costs (including
without limitation reasonable attorneys' fees) incurred by Holder as a
result of intentional waste of the Property by Maker;
(iii)to recover from Maker any condemnation or insurance
proceeds attributable to the Property received by Maker which were not paid
to Holder or used to
-9-
restore the Property in accordance with the terms
of the Deed of Trust;
(iv) to recover from Maker any rents, profits, security
deposits, advances, rebates, prepaid rents or other similar sums
attributable to the Property collected by or for Maker following an Event
of Default and not properly applied to the reasonable fixed and operating
expenses and other proper expenses of ownership of the Property, including
payments of the Loan;
(v) to recover from Maker any loss or damage suffered
by Holder by reason of the Property being transferred in violation of
Section 38.9 of the Deed of Trust and such transfer results in the Loan
being a non-exempt prohibited transaction under ERISA; and in such case,
Maker fails to unwind or reverse the sale, conveyance, assignment,
disposition or transfer within thirty (30) days following written notice
from Holder;
(vi) to exercise any other specific rights or remedies
afforded Holder under any provisions of the Loan Documents or at law or in
equity provided that this clause (vi) shall not permit Holder to pursue any
action for a deficiency after a foreclosure or seek any other recovery
based on personal liability except to the extent that Maker may have
personal liability under a provision of this Section 19(b) other than this
clause 19(b)(vi);
(vii)to recover under that certain Guaranty of Payment
dated October 29, 1987, executed by Encino Plaza in favor of Prudential;
(viii) to pursue any personal liability of Maker
under the Remediation and Indemnification Agreement;
(ix) to recover from Maker damages or costs incurred by
Holder as a result of any
-10-
breach or violation of paragraph 27 of the Deed of
Trust (provided that in a case where Maker demonstrates to the sole
satisfaction of Lender that such sale, conveyance, assignment or transfer
shall have been unintentional, Maker shall have thirty (30) days following
written notice from Lender to unwind or reverse the sale, conveyance,
assignment or transfer); and
(x) to recover from Maker damages or costs incurred by
Holder as a result of any actionable fraud or intentional misrepresentation
by Maker in connection with the Property, the Loan Documents or the Loan.
(c) The agreement contained in this Paragraph 19 to limit the
personal liability of Maker shall become null and void and of no further
force or effect in the event that the Property or any part thereof or any
interest therein shall be further encumbered by a voluntary lien securing
any obligation upon which Maker shall be personally liable for repayment
but only to the extent of the dollar amount that Maker is personally liable
with respect to the additional encumbrance (provided, however, a letter of
credit given to such subordinate mortgagee as additional collateral shall
not cause the obligation secured thereby to be deemed recourse and provided
further that this clause (c) shall not apply to liability which is recourse
only under one or more conditions substantially similar to Section 19(b)
and (c) of the Note unless recourse liability actually occurs under said
voluntary lien);
(d) Notwithstanding anything to the contrary contained herein,
Holder's recourse shall be limited to the assets owned by Encino Plaza, JMB
Income Properties, Ltd. - XII, an Illinois limited partnership, and/or JMB
Income Properties, Ltd. - XIII, an Illinois limited partnership. Without
limitation on the preceding sentence, in no event shall any of JMB Realty
Corporation, a Delaware corporation ("JMB Corp.") Income Partners - XII,
and Illinois limited partnership, Income Associates - XII an Illinois
limited partnership, Income Associates - XIII, an Illinois general
partnership, JMB Properties - XIII, Inc., an Illinois corporation, or any
other person or entity which is now or hereafter a partner in JMB Income
Properties, Ltd. - XII or JMB Income Properties, Ltd. - XIII, or any
officer, employee or director of any of them, have any personal liability,
directly or indirectly, under or in connection with this Note or any other
document or instru-
-11-
ment evidencing, securing or executed in connection with the Loan.
For purposes of the Note and the Loan Documents, neither the negative
capital account of any constituent partner and Maker, nor any obligation of
any constituent partner and Maker, to restore a negative capital account or
to contribute capital to Maker, or to other constituent partners and Maker,
shall be deemed at any time to be the property or an asset of Maker, or any
such other constituent partner (and neither Holder nor any of its
successors and assigns shall have any right to collect, enforce or proceed
against or with respect to any such negative capital account or partner's
obligation to restore or contribute). As used herein, a constituent
partner in Maker means a partner in Maker or in any partnership that has a
direct or indirect interest (through one or more partnerships) in Maker.
IN WITNESS WHEREOF, Maker has caused this Promissory Note to be
executed and delivered effective as of the date first written above.
MAKER:
JMB ENCINO PARTNERSHIP
a California general partnership
By: JMB FIRST FINANCIAL ASSOCIATES
Its general partner
By: JMB INCOME PROPERTIES
LTD. - XII
Its general partner, and
By: JMB REALTY CORPORATION
Its general partner
By: K. Jay Weaver
(PRINTED NAME AND TITLE)
Accepted and Approved:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA,
a New Jersey corporation
By: Carol Weiss
Its Vice President
-12-
FIRST EXTENSION AND AMENDMENT TO
LOAN DOCUMENTS
(LOAN NO. 7 501 241)
This FIRST EXTENSION AND AMENDMENT TO LOAN DOCUMENTS ("Amendment") is
made and entered into as of October 30, 1995, by and between JMB ENCINO
PARTNERSHIP, a California general partnership ("Borrower"), and THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a corporation organized and
existing under the laws of the State of New Jersey ("Lender").
RECITALS AND CERTAIN DEFINITIONS
A. Lender has previously made a loan (the "Loan") to
Borrower in the principal amount of $30,000,000.00.
B. The Loan is evidenced by that certain Fixed Monthly
Payment Note, Including Interest Secured by Deed of Trust dated November 2,
1987, in the original principal amount of $30,000,000.00 (the "Note").
C. The Note is secured by, among other things, that certain
Deed of Trust, Security Agreement, Assignment of Leases and Fixture Filing
(the "Deed of Trust") dated as of November 2, 1987, executed by Borrower as
"Trustor," and naming Chicago Title Insurance, as "Trustee," and Lender as
"Beneficiary," and recorded on November 2, 1987, as Instrument No. 87-
1755004 in the Official Records of Los Angeles County, California (the
"Official Records") which is a first lien on certain property (the
"Property") described therein.
D. In connection with the Loan, Borrower also executed in
favor of Lender (a) an Assignment of Lease dated November 2, 1987, (the
"Assignment of Leases"), and recorded on November 2, 1987, as Instrument
No. 87-1755005 in the Official Records, pursuant to which Borrower assigned
the leases and rents and (b) a Security Agreement (the "Security
Agreement") dated November 2, 1987.
E. The entire unpaid principal balance of the Loan, together
with all accrued and unpaid interest thereon, is due and payable on
November 1, 1995.
F. In connection with the Loan, ENCINO PLAZA, a California
general partnership ("Guarantor") executed a Guaranty of Payment (the
"Guaranty") in favor of Lender.
-1-
G. Borrower and Lender desire to amend the Note, the Deed of
Trust, the Assignment of Leases, the Security Agreement and the other
documents evidencing, securing and relating to the Loan (the "Loan
Documents"), among other things, to extend the maturity date of the Loan,
all on the terms and conditions set forth in this Amendment.
NOW, THEREFORE, Borrower and Lender agree as follows:
1. AMENDMENT OF LOAN DOCUMENTS. Subject to the
satisfaction, or express written waiver by Lender, of the conditions
precedent set forth in Section 2, below, on or prior to November 1, 1995,
the Loan Documents are hereby supplemented, amended and modified to
incorporate the following, which shall supersede and prevail over any
conflicting provisions of the Loan Documents.
1.1. AMENDMENTS TO NOTE. The Note is amended and restated in
its entirety as provided in Exhibit "A" hereto (the "Amended Note").
Concurrently with Lender's receipt of the duly executed Amended Note and
satisfaction of the conditions in Section 2, below, Lender shall deliver
the Note to Borrower marked "superseded."
1.2. AMENDMENTS TO ASSIGNMENT OF LEASES. The Assignment
of Leases is amended and restated in its entirety as provided in Exhibit
"B" hereto (the "Amended Assignment").
1.3. AMENDMENTS TO SECURITY AGREEMENT. The Security Agreement
is amended to add to the definition of the "Collateral" all of the personal
property described in the UCC-1 Financing Statement executed by Borrower of
even date herewith which is hereby incorporated herein by this reference.
Borrower hereby grants to Lender a security interest in the Collateral (as
defined in the Security Agreement, as amended by this Section 1.3) on the
terms and conditions contained in the Security Agreement.
1.4. SECURITY DOCUMENTS. The Deed of Trust and the
other documents given to secure the Note (the "Security Documents") shall
secure, in addition to any other obligations now or hereafter secured
thereby, Borrower's obligations to Lender under: (i) the Note and all
other Loan Documents, as amended or otherwise supplemented pursuant to this
Amendment and (ii) this Amendment, as amended or otherwise modified from
time to time in writing by Borrower and Lender. The Security Documents,
however, do NOT secure the Environmental Indemnity (as defined below).
1.5. LOAN DOCUMENTS. The term "Loan Documents" as used in
this Amendment and all other Loan Documents, means, collectively, the Note,
the Deed of Trust, the Modification
-2-
Documents (defined in Section 2.1, below) (including this Amendment), and
all other agreements, contracts and other instruments and documents now or
hereafter executed by Borrower with or in favor of Lender and required by
Lender to further evidence or secure the Loan, other than the Environmental
Indemnity.
2. CONDITIONS PRECEDENT. The effectiveness of this
Amendment is subject to the satisfaction, or waiver by Lender, of the
following conditions precedent:
2.1. Receipt and approval by Lender of the following documents
(the "Modification Documents") each in form and substance satisfactory to
Lender and each fully executed:
(a) two originals of this Amendment;
(b) one original of the Amended Note;
(c) one original of a recordable First Amendment to Deed
of Trust in form and substance satisfactory to Lender and Borrower (the
"First Amendment to Deed of Trust");
(d) one original of a recordable Amended Assignment;
(e) one original of a Hazardous Substances Remediation
and Indemnification Agreement in form and substance satisfactory to Lender
and Borrower (the "Environmental Indemnity");
(f) one original of an affirmation of the Guaranty in
form and substance satisfactory to Lender and Guarantor;
(g) two UCC-1 Financing Statements (the "Financing
Statements") in form for filing in California and Illinois and a UCC
Fixture Filing (the "Fixture Filing");
(h) documents pursuant to which the execution and
performance of the Modification Documents are authorized by entities other
than Lender; and
(i) any and all documents and agreements which are
required pursuant to this Amendment.
2.2. The issuance by Chicago Title Insurance Company (the
"Title Company"), and Lender's receipt, for attachment to the Title
Company's Policy of Title Insurance No. 8759665-73 (the "Title Policy"), of
CLTA Indorsement 110.5,
-3-
insuring the priority and validity of the Deed of Trust as modified by the
First Amendment to Deed of Trust as a first and valid lien upon the
Property, subject only to such exceptions as have been approved by Lender
in writing and a CLTA Indorsement No. 103.5.
2.3. Payment by Borrower of all fees and charges and expenses
incurred in connection with this Amendment and the transactions
contemplated hereby, including without limitation title insurance costs,
recording fees, reasonable attorneys' fees, engineers' and inspection fees,
and documentation costs and charges, excluding costs for services furnished
by Lender's employees and the cost of any appraisal.
2.4. The First Amendment to Deed of Trust, the Amended
Assignment and the Fixture Filing shall have been recorded in the Official
Records.
2.5. The representations and warranties contained in this
Amendment shall be true and correct in all material respects.
2.6. No default under the Note or any other Loan Document
("Event of Default") shall remain uncured and no event shall have occurred,
which, with the giving of notice or the
passage of time or both, could constitute an Event of Default.
2.7. Delivery of current searches of all Uniform Commercial
Code Financing Statements which may have been filed in any applicable
governmental offices in California and Illinois against Borrower, as
debtor, showing no Uniform Commercial Code filings or Financing Statements
affecting Borrower, except for statements or filings showing Lender as the
secured party.
2.8. Borrower shall have paid to Lender $4,000,000.00 to be
applied to the reduction of the outstanding principal balance of the Note.
2.9. Borrower shall have delivered to Lender, and Lender shall
have approved, a certified rent roll for the Property and a copy of each
lease affecting the Property not previously delivered to Lender, certified
by Borrower as being a true, complete and correct copy of such lease.
2.10. The Financing Statements shall have been filed in the
appropriate places in California and Illinois.
2.11. Delivery of a customary opinion of Borrower's counsel as
to the due authorization, execution, delivery and enforceability of the
Modification Documents and
-4-
the compliance of the Loan with the laws governing usury, in form and
substance satisfactory to Lender.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby
represents, warrants and agrees to and with Lender as follows:
3.1. Neither the execution, delivery or performance by
Borrower of this Amendment or the Modification Documents, nor compliance by
Borrower with the terms and provisions of this Amendment or any
Modification Documents (i) will contravene any provision of any law,
statute, rule or regulation or any order, writ, injunction or decree or any
court or governmental instrumentality affecting or applicable to Borrower
or the premises, or (ii) will conflict or be inconsistent with or result in
any breach of any of the terms, covenants, conditions or provisions of, of
constitute a default under, or result in the creation or imposition of (or
the obligation to create or impose) any lien upon any of the property or
assets of Borrower pursuant to the terms of any indenture, mortgage, deed
of trust, credit agreement, loan agreement of any other agreement, contract
or instrument to which Borrower is a party or by which it may be subject;
or (iii) will violate or conflict with the organizational documents of
Borrower.
3.2. Borrower is not legally obligated to obtain any order,
consent, approval, license, authorization or validation of any governmental
or public body or authority, or any subdivision thereof, to authorize (i)
the execution, delivery and performance of this Amendment or any other
Modification Documents, or (ii) the legality, validity, binding effect or
enforceability of this Amendment or any other Modification Documents,
except to the extent any Modification Documents need to be filed or
recorded to evidence the restructured security interest of Lender in the
Property.
3.3. There are no actions, suits or proceedings pending
or, to the actual knowledge of Borrower, threatened against the Property or
Borrower which may materially and adversely affect (i) the enforceability
or priority of the Loan Documents; (ii) the ability of Borrower to perform
its obligations under this Amendment or the Loan Documents; or (iii) the
business, operations, property, assets, condition (financially or
otherwise) or prospects of Borrower with respect to the Property. As used
in this Amendment, "actual knowledge of Borrower" means the present actual
knowledge of Mr. K. Jay Weaver and Andrea Backman, without investigation or
inquiry, and Borrower represents and warrants to Lender that (a) the
foregoing persons are the officers or employees of Borrower who are likely
to have, in Borrower's good faith belief, any material knowledge of the
Property, and (b) Andrea Backman is the portfolio manager for the Property
and is one
-5-
person who is primarily responsible for administering Borrower's interest
in the Property.
3.4. To Borrower's actual knowledge, all factual information
contemporaneously furnished by Borrower in writing to Lender (including,
without limitation, all information contained herein) for purposes of or in
connection with the Loan, the Property, this Amendment or the Modification
Documents is, and all other such factual information hereafter furnished by
or on behalf of Borrower in writing to Lender which is certified by
Borrower will be, true and accurate in all material respects on the date as
of which such information is dated or certified and will not omit to state
any fact necessary to make such information not materially misleading at
such time in light of the circumstances under which such information was
provided.
3.5. Except as disclosed to Lender in writing prior to the
date hereof, to Borrower's actual knowledge, Borrower's operation of the
Premises is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and
the ownership of its property, including but not limited to the (a)
Americans with Disabilities Act (and including applicable statutes,
regulations, orders and restrictions relating to environmental standards
and controls) and (b) Los Angeles Municipal Code Section 91.8908, except
such noncompliance as would not, in the aggregate, have a material adverse
effect on the business operations, property, assets, condition (financial
or otherwise) or prospects of Borrower.
3.6. Except as disclosed to Lender in writing prior to the
date hereof, Borrower has not received any written notice from any
insurance company of any defects or inadequacies in the Property which
would materially and adversely affect the insurability of the Property or
which would materially increase the cost of insuring the Property beyond
that which is currently charged for the Property.
3.7. To Borrower's actual knowledge, there has not been a
commencement of any action involving the (a) condemnation of any portion of
the Property, (b) condemnation or relocation of any material roadways
abutting the Property, or (c) denial of access to the Property from any
point of access to the Property; and to Borrower's actual knowledge, no
governmental authority is contemplating any condemnation proceedings which
could have an adverse effect on the use, occupancy or enjoyment of the
Property.
3.8. The financial statements (if any) delivered to Lender in
connection with this Amendment
-6-
accurately and fairly present the financial condition of Borrower as of the
date prepared. No material adverse change has occurred in the financial
condition of Borrower since the date thereof.
3.9. Borrower has filed all required federal and local tax
returns and paid all taxes due pursuant to said returns or any assessments
against Borrower or the Property, including without limitation real
property taxes and assessments. To Borrower's actual knowledge, no special
assessments have been imposed and are outstanding against the Property, and
to Borrower's actual knowledge, no such special assessments are
contemplated by any governmental authority or other person or entity having
jurisdiction over the Property.
3.10. Borrower has not cause, permitted or suffered any
material claims, liens or interests of any nature in, on or against the
Property, in favor of any person or entity whatsoever, whether any such
claim, lien or interest is prior to the lien and interest of Lender in the
Property, except as otherwise set further in the Title Policy or as
otherwise agreed to in writing by Lender.
3.11. No brokerage fees or commissions are payable by or to any
person claiming through Borrower or Borrower's activities in connection
with this Amendment or the Modification Documents.
3.12. Borrower is a duly formed and validly existing California
general partnership with full power and authority to execute, deliver and
perform its obligations under the Loan Documents and the Environmental
Indemnity and conduct its business in California.
3.13. The execution, delivery and performance of this Amendment
and the other Modification Documents have been duly authorized by proper
corporate actions or proceedings, and the Loan Documents and the
Environmental Indemnity constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms (but as to
enforceability, subject to laws relating to bankruptcy and enforcement of
creditors' rights generally).
3.14. To Borrower's actual knowledge, the Property has adequate
water, gas and electrical supply, storm and sanitary sewerage facilities,
and means of access between the Premises and public streets for pedestrian
and motor vehicles as required by applicable governmental regulations.
3.15. To Borrower's actual knowledge, no building or other
improvement on the Property encroaches upon any adjacent property, building
line, setback line, side yard
-7-
line, or any recorded or visible easement (or other easement of which
Borrower is aware or has reason to believe may exist) with respect to the
Property.
3.16 To the actual knowledge of Borrower there are no defaults
under any of the existing leases for occupancy of the Property that would
have a material adverse impact on the operations of the Property.
3.17. That neither Borrower, nor any partner of Borrower, nor
any partner of such partner, has filed, nor has there been filed against
any such party, a petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the bankruptcy laws of the United States or under any
applicable federal state or other law, nor has a receiver, trustee or
liquidator been appointed with respect to all or any substantial part of
any such party's property.
3.18 To Borrower's actual knowledge, (a) except in accordance
with prudent business practices, and as reasonably necessary for the
operation of the Property as it is currently being operated, (i) no
Hazardous Materials (as defined in the Environmental Indemnity) exist on,
under or about the Property in material violation of any Hazardous
Materials Laws (as defined in the Environmental Indemnity), and (ii) no
Hazardous Materials have at any time been transported to or from the
Property or used, generated, manufactured, stored, released or disposed of
on, under or about the Property in material violation of any Hazardous
Materials Laws; (b) there are no current or threatened Hazardous Materials
Claims (as defined in the Environmental Indemnity); and (c) there are not
now located on or under and no storage tanks have ever been located on or
under the Property in material violation of any Hazardous Materials Laws.
In addition, Borrower and Lender agree that: (i) this Section is intended
as Lender's written request for information (and Borrower's response)
concerning the environmental condition of the real property security under
the terms of California Code of Civil Procedure 726.5; and (ii) each
representation and/or covenant in this Amendment, the Environmental
Indemnity or any other Loan Document (together with any indemnity
applicable to a breach of any such representation and/or covenant) with
respect to the environmental condition of the Property is intended by
Lender and Borrower to be an "environmental provision" for purposes of
California Code of Civil Procedure 736.
3.19. No lease for occupancy of the Property contains (a) any
option to purchase or right of first refusal with respect to the Property,
or (b) any indemnification by the landlord of the tenant for Hazardous
Materials.
-8-
All representations and warranties provided herein will survive the
execution of this Amendment.
4. ESTOPPEL. Borrower hereby represents and warrants to
Lender that (i) this Amendment, the Loan Documents, the Environmental
Indemnity and the indebtedness and obligations they evidence or secure, are
valid, binding and enforceable on and against Borrower in accordance with
their respective terms, are in full force and effect, and are free from all
defenses; and (ii) there are not set-offs against Lender with regard to
this Amendment, the Modification Documents, the Environmental Indemnity or
the Loan Documents nor any claims or counter-claims against Lender with
respect to this Amendment, the Modification Documents, the Environmental
Indemnity or the Loan Documents. Without limiting the generality of the
foregoing, Borrower hereby acknowledges and agrees that there are no oral
agreements or understandings between or among any of the parties hereto
with respect to this Amendment, the Environmental Indemnity or the Loan
Documents.
5. WAIVER OF JURY TRIAL. LENDER AND BORROW HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS AMENDMENT, THE NOTE, THE ENVIRONMENTAL
INDEMNITY OR ANY OTHER LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE LENDER
OR BORROWER. THIS PROVISION IS MUTUALLY AGREED TO IN RECOGNITION OF THE
COMPLEXITY OF THE LOAN AND THE MUTUAL DESIRE OF LENDER AND BORROWER TO
AVOID DELAYS IN THE RESOLUTION OF DISPUTES INVOLVING THIS AMENDMENT.
BORROWER ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER TO ENTER INTO THIS AMENDMENT.
6. NO AGREEMENT TO EXTEND OR MAKE FURTHER ADDITIONAL ADVANCES.
Nothing in this Amendment, or in any prior course of conduct, shall be
construed to obligate Lender to make any future additional advances under
the Loan or to otherwise increase the amount of the Loan or to extend the
maturity of the Loan, and Borrower acknowledges that Lender has made no
such agreement.
7. FULL FORCE AND EFFECT. As amended by the Modification
Documents, the Loan Documents and the Environmental Indemnity remain in
full force and effect.
8. LIMITATION ON PERSONAL LIABILITIES.
(a) Except as expressly set forth in paragraph 8(b) below,
the recourse of Lender with the respect to the obligations evidenced by the
Note or set forth in any Loan Document shall be solely to any and all
security therefor (the
-9-
"Collateral") and, accordingly, except as expressly set forth in Paragraph
8(b) below, the obligations evidenced by the Note or set forth in the Loan
Documents are non-recourse to anything other than the Collateral.
(b) Notwithstanding anything to the contrary contained in
this Amendment or in any Loan Document, nothing shall be deemed in any way
to impair, limit or prejudice the rights of Lender:
(i) in foreclosure proceedings or in any ancillary
proceedings brought to facilitate Lender's foreclosure on the Collateral or
any portion thereof;
(ii) to recover from Borrower damages or costs
(including without limitation reasonable attorneys' fees) incurred by
Lender a result of intentional waste of the Collateral by Borrower;
(iii)to recover from Borrower any condemnation or
insurance proceeds attributable to the Collateral received by Borrower
which were not paid to Lender or used to restore the Collateral in
accordance with the terms of the Deed of Trust;
(iv) to recover from Borrower any rents, profits,
security deposits, advances, rebates, prepaid rents or other similar sums
attributable to the Collateral collected by or for Borrower following an
Event of Default and not properly applied to the reasonable fixed and
operating expenses and other proper expenses of ownership of the
Collateral, including payments of the Loan;
(v) to recover from Borrower any loss or damage
suffered by Lender by reason of the Collateral being transferred in
violation of Section 38.9 of the Deed of Trust and such transfer results in
the Loan being a non-exempt prohibited transaction under ERISA; and in such
case, Borrower fails to unwind or reverse the sale, conveyance, assignment,
disposition or transfer
-10-
within thirty (30) days following written notice
from the Lender;
(vi) to exercise any other specific rights or remedies
afforded Lender under any provisions of the Loan Documents or at law or in
equity provided that this clause (vi) shall not permit Lender to pursue any
action for a deficiency after a foreclosure or to seek any other recovery
based on personal liability except to the extent that Borrower may have
personal liability under a provision of this Section 8(b) other than this
clause 8(b) (vi);
(vii)to recover under that certain Guaranty of Payment
dated October 29, 1987, executed by Encino Plaza in favor of Lender;
(viii) to pursue any personal liability of Borrower
under the Environmental Indemnity;
(ix) to recover from Borrower damages or costs incurred
by Lender as a result of any breach or violation of paragraph 27 of the
Deed of Trust (provided that in a case where Borrower demonstrates to the
sole satisfaction of Lender that such sale, conveyance, assignment or
transfer shall have been unintentional, Borrower shall have thirty (30)
days following written notice from Lender to unwind or reverse the sale,
conveyance, assignment or transfer); and
(x) to recover from maker damages or costs incurred by
Lender as a result of any actionable fraud or intentional misrepresentation
by Borrower in connection with the Collateral, the Loan Documents or the
Loan.
(c) The agreement contained in this Paragraph 8 to
limit the personal liability of Borrower shall become null and void and of
no further force or effect in the event that the Collateral or any part
thereof or any interest therein shall be further encumbered by a voluntary
lien securing any
-11-
obligation upon which Borrower shall be personally liable for repayment but
only to the extent of the dollar amount that Borrower is personally liable
with respect to the additional encumbrance (provided, however, a letter of
credit given to such subordinate mortgagee as additional collateral shall
not cause the obligation secured thereby to be deemed recourse and provided
further that this clause (c) shall not apply to liability which is recourse
only under one or more conditions substantially similar to Section 8(b) and
(c) of this Amendment unless recourse liability actually occurs under said
voluntary lien);
(d) Notwithstanding anything to the contrary contained
herein, Lender's recourse shall be limited to the assets owned by Encino
Plaza, JMB Income Properties, Ltd. - XII, an Illinois limited partnership,
and/or JMB Income Properties, Ltd. - XIII, an Illinois limited partnership.
Without limitation on the preceding sentence, in no event shall any of JMB
Realty Corporation, a Delaware corporation ("JMB Corp."), Income Partners-
XII, an Illinois limited partnership, Income Associates-XII, an Illinois
limited partnership, Income Associates-XIII, an Illinois general
partnership, JMB Properties-XIII, Inc., an Illinois corporation, or any
other person or entity which is now or hereafter a partner in JMB Income
Properties, Ltd.-XII or JMB Income Properties, Ltd.-XIII, or any officer,
employee or director of any of them, have any personal liability, directly
or indirectly, under or in connection with this Amendment or any other
document or instrument evidencing, securing or executed in connection with
the Loan.
For purposes of the Amendment and the Loan Documents, neither
the negative capital account of any constituent partner and Borrower, nor
any obligation of any constituent partner and Borrower, to restore a
negative capital account or to contribute capital to Borrower, or to other
constituent partners and Borrower, shall be deemed at any time to be the
Property or an asset of Borrower, or any such other constituent partner
(and neither Lender nor any of its successors and assigns shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account or partner's obligation to restore or contribute).
As used herein, a constituent partner in Borrower means a partner in
Borrower or in any partnership that has a direct or indirect interest
(through one or more partnerships) in Borrower.
-12-
9. ESTOPPELS. Borrower shall use its reasonable efforts in a
commercially reasonable manner to secure from tenants of the Property
designated by Lender estoppel and subordination, nondisturbance and
attornment agreements in form reasonably satisfactory to Lender.
10. COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which shall be deemed to be an original and all
of which taken together shall be deemed to be one and the same document.
IN WITNESS WHEREOF, Borrower and Lender have caused this
Amendment to be duly executed as of the date first written above.
"Borrower": JMB ENCINO PARTNERSHIP,
a California general partnership
By: JMB FIRST FINANCIAL ASSOCIATES
Its general partner
By: JMB INCOME PROPERTIES,
LTD.-XII
Its general partner, and
By: JMB REALTY CORPORATION
Its general partner
By: K. Jay Weaver
K. Jay Weaver
[PRINTED NAME AND TITLE]
"Lender": THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,a
New Jersey corporation
By Carol Weiss
Its Vice President
-13-
EXHIBIT "A"
AMENDED NOTE
EXHIBIT "A"
AMENDED AND RESTATED
PROMISSORY NOTE
$24,970,148.38 Los Angeles, California
LOAN NO.: 7 501 241 October 30, 1995
FOR VALUE RECEIVED, the undersigned, JMB ENCINO PARTNERSHIP, a
California general partnership ("Maker"), having an address at 900 Michigan
Avenue, Chicago, Illinois, PROMISES TO PAY TO THE ORDER OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA ("Prudential"), a New Jersey corporation
authorized to do business in the State of California (Prudential and its
successors and assigns who become holders of this Promissory Note (the
"Note") are hereinafter collectively referred to as "Holder"), to
Prudential at Morgan Guaranty Trust Company, 23 Wall Street, New York, New
York 10019, Account No. 050-54-493, referencing Loan No. 7 501 241, or at
such other place as Holder, may from time to time designate, the principal
sum of Twenty Four Million Nine Hundred Seventy Thousand One Hundred Forty
Eight and 38/100ths Dollars ($24,970,148.38), together with interest
thereon from the date funds are first disbursed hereunder until paid at a
rate per annum equal to the Interest Rate (as hereinafter defined). For
the first payment due under the loan, interest shall be calculated on the
basis of a 365-day year and the actual number of days in each month.
Thereafter, interest shall be calculated on the basis of a 360-day year and
30-day month; except with respect to partial months in which case interest
shall be calculated on the basis of the actual number of days in the year
and the actual number of days elapsed in the period during which it
accrues, in accordance with the terms and conditions set forth below.
This Note amends and restates that certain Fixed Monthly Payment
Note, Including Interest, Secured by Deed of Trust (the "Original Note") in
the face principal amount of $30,000,000.00, dated November 2, 1987,
executed by Maker and payable to Lender. The stated principal amount of
this Note equals the principal balance of the Original Note less the prior
payments of principal by Maker, including a $4,000,000.00 payment made
pursuant to that certain First Extension and Amendment to Loan Documents
(the "Modification") dated of even date and executed by Maker and
Prudential, made as a condition of the effectiveness of this Note. All
references in the Loan Documents (as defined below) to the Note shall, from
and after the Effective Date (as defined below) mean and refer to this
Note.
-1-
1. DEFINITIONS. For the purpose of this Note, the following terms
shall have the meanings set forth below; certain other terms are defined
where they appear in this Note:
(a) "DEED OF TRUST" means that certain Deed of Trust,
Security Agreement, and Assignment of Leases and Fixture Filing, dated
November 2, 1995, executed by Maker as "Trustor" to the benefit of
Prudential as "Beneficiary" and recorded in the Official Records of Los
Angeles County, California, on November 2, 1987, as Instrument No. 87-
1755004, as amended by that certain First Amendment to Deed of Trust of
even date executed by Maker and Prudential.
(b) "DISCOUNT RATE" means the interest rate, which when
compounded monthly, is equivalent to the Treasury Rate, when compounded
semi-annually.
(c) "EFFECTIVE DATE" means November 1, 1995.
(d) "INTEREST RATE" means a rate of interest per annum of
Eight and Sixty Seven One Hundredths percent (8.67%).
(e) "LOAN DOCUMENTS" means this Note, the Deed of Trust, and
all other documents, with the exception of that certain Hazardous
Substances Remediation and Indemnification Agreement of even date herewith
(the "Remediation and Indemnification Agreement") executed by Maker in
favor of Holder, now or hereafter governing, securing or evidencing the
indebtedness evidenced by this Note or any portion of such indebtedness.
(f) "LOAN" means the loan evidenced by this Note.
(g) "MATURITY DATE" means that date which is the first (1st)
day of November, 1997.
(h) "PREPAYMENT AMOUNT" means the amount of the Principal
Balance prepaid on a Prepayment Date.
(i) "PREPAYMENT DATE" mean any date, prior to the Maturity
Date, upon which all or any portion of the Principal Balance is prepaid.
(j) "PREPAYMENT PREMIUM" shall have the meaning set forth in
Paragraph 6(a) hereof.
(k) "PRESENT VALUE OF THE LOAN" means the present value,
discounting from a Prepayment Date at the Discount Rate, of all payments of
principal and interest which would have been payable on the Prepayment
Amount from the Prepayment Date through and including the Maturity Date.
-2-
(l) "PRINCIPAL BALANCE" means the outstanding principal
balance of this Note from time to time outstanding.
(m) "SECONDARY INTEREST RATE" means a rate of interest equal
to twelve percent (12%) per annum.
(n) "TREASURY RATE" means the interest rate, conclusively
determined by Holder on the Prepayment Date equal to the semi-annual yield
on the Treasury Constant Maturity Series with maturity equal to the
remaining weighted average life of the Loan for the week prior to the
Prepayment Date, as reported in Federal Reserve Statistical Release H.15 -
Selected Interest Rates ("Release H.15"). The rate will be determined by
linear interpolation between the yields reported in Release H.15, if
necessary. In the event Release H.15 is no longer published, Holder shall
select a comparable publication to determine the Treasury Rate.
2. PAYMENTS. Maker shall make payments of principal and interest
due under the Original Note through and including October 1, 1995, in
accordance with the terms of the Original Note. No later that the
Effective Date, Maker shall make a payment of $4,000,000.00 (the "Paydown")
to be applied to payment of principal under the Original Note.
Subject to the provisions of the first paragraph of this Note
with the respect to the calculation of the first payment hereunder, on
November 15, 1995, a payment of interest only shall be due and payable
equal to the sum of (a) interest at the interest rate specified in the
Original Note on the outstanding principal balance of the Original Note
from and including October 1, 1995, through and including the date upon
which Holder receives the Paydown plus (b) interest at the Interest Rate on
the outstanding Principal Balance from and including the day after the day
upon which Holder receives the Paydown through and including November 14,
1995. Commencing on December 15, 1995 and continuing on the fifteenth day
of each calendar month thereafter through and including the fifteenth day
of October 1997, monthly installments of principal and interest in the
amount of $209,077.05 shall be due and payable with the entire unpaid
Principal Balance plus accrued interest and other amounts payable under the
Loan Documents being due and payable on the Maturity Date.
3. TREATMENT OF PAYMENTS. All payments due under this Note or the
Loan Documents shall be paid by Maker in lawful money of the United States
of America on the Date such payment is due. All such payments shall be
made without deduction for any present or future taxes, levies, imposts,
deductions, charges or withholdings (including U.S., state or local income
taxes) imposed on Maker, which amounts shall be paid by Maker.
-3-
Payments from Maker to Holder under this Note shall be applied first to the
payment of any expense reimbursements under the Loan Documents, any Per
Diem Late Charges or Late Charges (each as hereinafter defined) and any
Prepayment Premium due thereon, in such order as Holder shall determine,
then to accrued and unpaid interest, with the remainder to be applied to
the Principal Balance.
4. PER DIEM LATE CHARGES, LATE CHARGES AND SECONDARYINTEREST.
(a) If Maker fails timely to pay any sum due and payable
under this Note on or before the data due, a late charge equal to One
Hundred Dollars ($100) per day (the "Per Diem Late Charge") shall be
assessed for each day that such payment is not paid from and including the
first day following the date such payment was due to and including the date
upon which such payment is made; provided, however, that notwithstanding
the foregoing, if such payment, together with all accrued Per Diem Late
Charges, is not made on or before the fifteenth (15th) day following the
date due, a late charge equal to four cents ($.04) for each dollar ($1.00)
of each such late payment (the "Late Charge") shall be immediately due and
payable. The Late Charge shall be in lieu of the Per Diem Late Charges
that shall have accrued during the immediately preceding fifteen (15) day
period. Maker acknowledges and agrees that its failure to make timely
payments will result in Holder incurring additional expense in servicing
the Loan, and that it is extremely difficult and impractical to ascertain
the extent of such damages and that the Per Diem Late Charges or, if
applicable, the Late Charge represent fair and reasonable estimates,
considering all of the circumstance existing on the date of the execution
of this Note, of the costs that Holder will incur by reason of such late
payment. Holder agrees to comply with Section 2954.5 of the California
Civil Code with respect to the giving of notice prior to imposing a Per
Diem Late Charge or Late Charge, as such Section or any successor Section
may now or hereafter be in effect. Acceptance of any Per Diem Late Charge
or Late Charge shall not constitute a waiver of the default with respect to
the late payment, and shall not prevent Holder from exercising any of the
other rights or remedies available hereunder or at law or in equity.
(b) Maker further acknowledges and agrees that during the time
that any payment of principal, interest or other amount due under this Note
shall be delinquent, Holder will incur additional costs and expenses
attributable to its loss of use of money due to and to the adverse impact
on Holder's ability to meet its other obligations and avail itself of other
opportunities. Maker agrees that it is extremely difficult and impractical
to ascertain the extent of such expenses, and Maker therefore agrees that,
if Holder elects,
-4-
interest at the Secondary Interest Rate shall accrue on any delinquent
payments of principal, interest or other amounts due under this Note or any
Loan Document from the date such payments were due and for so long as non-
payment continues, regardless of whether or not there has been an
acceleration of the maturity of the indebtedness evidenced by this Note;
and in the event of such election by Holder, Holder shall waive any Late
Charge or Per Diem Late Charge and to the extent the same were paid by
Maker shall by credited against the payment due at the Secondary Interest
Rate.
5. EVENT OF DEFAULT AND SECONDARY INTEREST.
(a) The occurrence of an "Event of Default" under any Loan
Document shall constitute on Event of Default under this note. Upon the
occurrence of an Event of Default (including without limitation the failure
of the Maker to observe the provisions of paragraph 27 of the Deed of
Trust, Holder, at its option may cause the Principal Balance together with
all unpaid accrued interest, any Prepayment Premium (as hereinafter
defined) and any other sums evidenced or secured by this Note or any Loan
Document, to be immediately due and payable, without further presentment,
demand, protest or notice of any kind, by so notifying Maker in writing
("Acceleration Notice"); and in the event of such election by Holder,
Holder shall waive any late charge or per diem late charge.
(b) Maker agrees that from and after the delivery of an
Acceleration Notice pursuant to Paragraph 5(a) hereof, interest at the
Secondary Interest Rate shall accrue on the Principal Balance and all
unpaid accrued interest and other sums evidenced or secured by this Note or
any Loan Documents.
6. PREPAYMENT.
(a) If for any reason (other than the application by Holder
of insurance or condemnation proceeds to paydown the Loan) the Principal
Balance or any portion thereof is prepaid (whether by operation of law,
acceleration or otherwise) on a date prior to July 1, 1997, Maker shall pay
to Holder as liquidated damages, immediately upon demand, together with the
related principal prepayment and any unpaid accrued interest, a prepayment
charge (the "Prepayment Premium") equal to the greater of:
(1) the product of (x) one percent (1%) of the
Principal Balance being prepaid multiplied by (y) a fraction, the numerator
of which is the number of full months remaining until the maturity Date as
of the Prepayment Date and the denominator of
-5-
which is the number of full months comprising the
term of the Loan; or
(2) the Present Value of the Loan less the sum of (x)
the portion of the Principal Balance being prepaid, and (y) unpaid accrued
interest, if any.
(b) Notwithstanding anything to the contrary contained herein,
if for any reason the Principal Balance or any portion thereof is prepaid
voluntarily by Maker on or after July 1, 1997, there shall be no prepayment
penalty, charge or fee due whatsoever with respect to such prepayment.
(c) Maker shall have the right voluntarily to prepay all or
any portion of the Principal Balance, together with accrued interest
thereon, provided that Maker gives Holder not less than thirty (30) days
prior written notice of its intention to prepay, and delivers to Holder, on
or before the Prepayment Date, the Prepayment Premium, if any, as
calculated above, together with the Prepayment Amount and all accrued
interest and other sums due under the Loan documents.
(d) Maker agrees that such Prepayment Premium represents the
reasonable estimate of Holder and Maker of a fair average compensation for
the loss that may be sustained by Holder due to the payment of any of the
Principal Balance prior to the Maturity Date; and by initialing this
provision in the space provided below, Maker hereby declares that Holder's
agreement to enter into this transaction on the terms set forth in this
Note and in the other Loan Documents constitutes adequate and valuable
consideration, given individual weight by Maker for this agreement. Such
Prepayment Premium shall be paid without prejudice to the right of Holder
to collect any other amount provided to be paid hereunder. Holder shall
not by obligated to actually reinvest the Prepayment Amount in any Treasury
obligations as a condition to receiving the Prepayment Premium.
INITIALS OF MAKER:
7. SECURITY. This Note is secured, among other security, by Deed
of Trust and the other Loan Documents, which contain provisions for the
acceleration of the maturity of this Note upon the occurrence of certain
described events.
8. HOLDER'S RIGHTS; NO WAIVER BY HOLDER. The rights, powers and
remedies of Holder under this Note shall be in addition to all rights,
powers and remedies given to Holder under the Loan Documents and any other
agreement or document securing or evidencing the indebtedness evidenced
hereby or by virtue of any statute or rule of law, including, but not
limited to, the
-6-
California Uniform Commercial Code. All such rights, powers and remedies
shall be cumulative and may be exercised successively or concurrently in
Holder's sole discretion without impairing Holder's security interest,
rights or available remedies. Any forbearance, failure or delay by Holder
in exercising any right, power or remedy shall not preclude further
exercise thereof, and every right, power or remedy of Holder shall continue
in full force and effect until such right, power or remedy is specifically
waived in a writing executed by Holder. Maker waives any right to require
the Beneficiary (as defined in the Deed of Trust) to proceed against any
person or to pursue any remedy in Holder's power.
9. MAKER'S WAIVERS.
(a) Maker hereby waives diligence, demand, presentment for
payment, notice of non-payment, protest and notice of protest, and
specifically consent to and waive notice of any renewals or extensions of
this Note, whether made to or in favor of Maker or any person or persons.
Maker expressly waives all right to the benefit of any statute of
limitations and any moratorium, reinstatement, marshalling, forbearance,
extension, redemption, or appraisement now or hereafter provided by the
Constitution or the laws of the United States or of any state thereof, as a
defense to any demand against Maker or any such endorsers, to the fullest
extent permitted by law.
(b) Maker hereby waives any right to trial by jury with
respect to any action or proceeding brought by Maker, Holder or any other
person relating to (i) the indebtedness evidenced by this Note, or (ii) the
Loan Documents. Maker hereby agrees that this Note constitutes a written
consent to waiver of trial by jury pursuant to the provisions of California
code of Civil Procedure Section 631 and Maker does hereby constitute and
appoint Holder its true and lawful attorney-in-fact, which appointment is
coupled with an interest, and Maker does hereby authorize and empower
Holder, in the name, place and stead of Maker, to file this Note with the
clerk or judge of any court of competent jurisdiction as statutory written
consent to waiver of trial by jury. In no event, however, shall Holder
(nor any successor or assignee of Holder) execute any document, agreement
or instrument which purports to create, or take any action with the
specific intent to create, any personal liability of Maker to third parties
pursuant to the foregoing. Any document, agreement or instrument executed
by Holder with or for the benefit of a third party pursuant to this
Paragraph shall be deemed to include the limitations on the personal
liability of Maker set forth in Paragraph 32 of the Deed of Trust.
-7-
(c) Maker hereby expressly waives any right it may have under
California Civil Code 2954.10 to prepay this Note, in whole or in part,
without prepayment charge, upon acceleration of the Maturity Date of this
Note, and agrees that if for any reason, a prepayment of any or all of this
Note is made, whether voluntarily or upon or following any acceleration of
the Maturity Date of this Note by the Holder, then Maker shall pay,
concurrently therewith, the Prepayment Premium if any, due pursuant to
Paragraph 6 hereof. By initialling this provision Holder's agreement to
make the Loan at the Interest Rate and for the term set forth in this Note
constitutes adequate consideration, given individual weight by Maker, for
this waiver and agreement.
INITIALS OF MAKER:
10. TRANSFERS BY HOLDER. This Note or any interest in this Note
and the Loan Documents may be hypothecated, transferred or assigned by
Holder without the prior consent of Maker.
11. AMENDMENT. This Note may be amended or modified only by an
instrument in writing which by its express terms refers to this Note and
which is duly executed by the party sought to be bound thereby.
12. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and
permitted assigns.
13. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of California.
14. AUTHORITY. Each partnership, corporation or other entity
executing this Note states that it is duly authorized to execute and
deliver this Note on behalf of said entity, in accordance with duly and
regularly adopted existing authority and, if necessary, resolution of the
governing body of such organization, and that this Note is binding upon
said entity in accordance with its terms.
15. TIME. Time is of the essence with respect to each and every
term and provision of this Note.
16. USURY. Notwithstanding any provision herein, the total
liability for payments in the nature of interest shall not exceed the
applicable limits imposed by any applicable state or federal interest rate
laws. If any payments in the nature of interest, additional interest, and
other charges made
-8-
hereunder are held to be in excess of the applicable limits imposed by any
applicable state or federal laws, it is agreed that any such amount held to
be in excess shall be considered payment of principal and the indebtedness
evidenced thereby shall be reduced by such amount in the inverse order of
maturity so that the total liability for payments in the nature of
interest, additional interest and other charges shall not exceed the
applicable limits imposed by any applicable state or federal interest rate
laws in compliance with the desires of Holder and Maker.
17. NOTICES. All notices, consents and other communications
required or permitted by this Note shall be in writing and shall be given
in the manner set forth in the Deed of Trust.
18. ATTORNEYS' FEES. The undersigned agrees to pay all costs,
including reasonable attorneys' fees and expenses, incurred by Holder in
enforcing payment or collection of this Note, whether or not suit is filed.
19. LIMITATION ON PERSONAL LIABILITIES.
(a) Except as expressly set forth in paragraph 19(b) below,
the recourse of Holder with respect to the obligations evidenced by this
Note or set forth in any Loan Document shall be solely to the Property (as
defined in the Deed of Trust) and , accordingly, except as expressly set
forth in Paragraph 9(b) below, the obligations evidenced by the Note or set
forth in the Loan Documents are non-recourse to anything other than the
Property.
(b) Notwithstanding anything to the contrary contained in this
Note or in any Loan Document, nothing shall be deemed in any way to impair,
limit or prejudice the rights of Holder:
(i) in foreclosure proceedings or in any ancillary
proceedings brought to facilitate Holder's foreclosure on the Property or
any portion thereof;
(ii) to recover from Maker damages or costs (including
without limitation reasonable attorneys' fees) incurred by Holder as a
result of intentional waste of the Property by Maker;
(iii)to recover from Maker any condemnation or insurance
proceeds attributable to the Property received by Maker which were not paid
to Holder or used to
-9-
restore the Property in accordance with the terms
of the Deed of Trust;
(iv) to recover from Maker any rents, profits, security
deposits, advances, rebates, prepaid rents or other similar sums
attributable to the Property collected by or for Maker following an Event
of Default and not properly applied to the reasonable fixed and operating
expenses and other proper expenses of ownership of the Property, including
payments of the Loan;
(v) to recover from Maker any loss or damage suffered
by Holder by reason of the Property being transferred in violation of
Section 38.9 of the Deed of Trust and such transfer results in the Loan
being a non-exempt prohibited transaction under ERISA; and in such case,
Maker fails to unwind or reverse the sale, conveyance, assignment,
disposition or transfer within thirty (30) days following written notice
from Holder;
(vi) to exercise any other specific rights or remedies
afforded Holder under any provisions of the Loan Documents or at law or in
equity provided that this clause (vi) shall not permit Holder to pursue any
action for a deficiency after a foreclosure or seek any other recovery
based on personal liability except to the extent that Maker may have
personal liability under a provision of this Section 19(b) other than this
clause 19(b)(vi);
(vii)to recover under that certain Guaranty of Payment
dated October 29, 1987, executed by Encino Plaza in favor of Prudential;
(viii) to pursue any personal liability of Maker
under the Remediation and Indemnification Agreement;
(ix) to recover from Maker damages or costs incurred by
Holder as a result of any
-10-
breach or violation of paragraph 27 of the Deed of
Trust (provided that in a case where Maker demonstrates to the sole
satisfaction of Lender that such sale, conveyance, assignment or transfer
shall have been unintentional, Maker shall have thirty (30) days following
written notice from Lender to unwind or reverse the sale, conveyance,
assignment or transfer); and
(x) to recover from maker damages or costs incurred by
Holder as a result of any actionable fraud or intentional misrepresentation
by Maker in connection with the Property, the Loan Documents or the Loan.
(c) The agreement contained in this Paragraph 19 to limit the
personal liability of Maker shall become null and void and of no further
force or effect in the event that the Property or any part thereof or any
interest therein shall be further encumbered by a voluntary lien securing
any obligation upon which Maker shall be personally liable for repayment
but only to the extent of the dollar amount that Maker is personally liable
with respect to the additional encumbrance (provided, however, a letter of
credit given to such subordinate mortgagee as additional collateral shall
not cause the obligation secured thereby to be deemed recourse and provided
further that this clause (c) shall not apply to liability which is recourse
only under one or more conditions substantially similar to Section 19(b)
and (c) of this Note unless recourse liability actually occurs under said
voluntary lien);
(d) Notwithstanding anything to the contrary contained herein,
Holder's recourse shall be limited to the assets owned by Encino Plaza, JMB
Income Properties, Ltd. - XII, an Illinois limited partnership, and/or JMB
Income Properties, Ltd. - XIII, an Illinois limited partnership. Without
limitation on the preceding sentence, in no event shall any of JMB Realty
Corporation, a Delaware corporation ("JMB Corp."), Income Partners-XII, an
Illinois limited partnership, Income Associates-XII, an Illinois limited
Partnership, Income Associates-XIII, an Illinois general partnership, JMB
Properties-XIII, Inc., an Illinois corporation, or any other person or
entity which is now or hereafter a partner in JMB Income Properties, Ltd.-
XII or JMB Income Properties, Ltd.-XIII, or any officer, employee or
director of any of them, have any personal liability, directly or
indirectly, under or in connection with this Note or any other document or
instru-
-11-
ment evidencing, securing or executed in connection with the Loan.
For purposes of the Note and the Loan Documents, neither the negative
capital account of any constituent partner and Maker, to restore a negative
capital account or to contribute capital to Maker, or to other constituent
partners and Maker, nor any obligation of any constituent partners and
Maker, shall be deemed at any time to be the property or an asset of Maker,
or any such other constituent partner (and neither Holder nor any of its
successors and assigns shall have any right to collect, enforce or proceed
against or with respect to any such negative capital account or partner's
obligation to restore or contribute). As used herein, a constituent
partner in Maker means a partner in Maker or in any partnership that has a
direct or indirect interest (through one or more partnerships) in Maker.
IN WITNESS WHEREOF, Maker has caused this Promissory Note to be
executed and delivered effective as of the date first written above.
MAKER:
JMB ENCINO PARTNERSHIP,
a California general partnership
By: JMB FIRST FINANCIAL ASSOCIATES
Its general partner
By: JMB INCOME PROPERTIES, LTD.-XII
Its general partner, and
By: JMB REALTY CORPORATION
Its general partner
By:
[PRINTED NAME AND TITLE]
Accepted and Approved:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA,
a New Jersey corporation
By:
Its Vice President
-12-
EXHIBIT "B"
AMENDED ASSIGNMENT
EXHIBIT "B"
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Sheppard, Mullin, Richter & Hampton
333 South Hope Street, 48th Floor
Los Angeles, California 90071-1448
Attn: James A. Lonergan, Esq.
LOAN NO.: 7 501 241
ASSIGNMENT OF LESSOR'S INTEREST
IN LEASES
THIS ASSIGNMENT OF LESSOR'S INTEREST IN LEASES (this "Assignment") is
made as of October 30, 1995, by JMB ENCINO PARTNERSHIP, a California
partnership having offices at 900 N. Michigan Avenue, Chicago, Illinois
("Assignor"), in favor of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a
New Jersey corporation having offices at 2029 Century Park East, Suite
3700, Los Angeles, California 90067 ("Assignee"), for the benefit and
protection of Assignee as beneficiary under that certain Deed of Trust,
Security Agreement, Assignment of Leases and Fixture Filing dated as of
November 2, 1987, executed by Assignor in favor of Assignee, which is being
amended by a First Amendment to Deed of Trust of even date herewith (as so
amended, the "Deed of Trust") encumbering that certain real property,
together with any improvements now or at any time located thereon, located
in the City of Los Angeles, County of Los Angeles, State of California (the
"Property"), and more particularly described in EXHIBIT A attached hereto
and incorporated herein by this reference and for the benefit and
protection of Assignee as payee and holder of that certain Fixed Monthly
Payment Note, Including Interest, Secured by Deed of Trust, dated November
2, 1987, executed by Assignor, as maker, to and for the benefit of
Assignee, as holder, in the original principal amount of Thirty Million
Dollars ($30,000,000.00), which is being amended and restated pursuant to
an Amended and Restated Promissory Note of even date herewith executed by
Assignor and Assignee in the reduced principal amount of $24, 970, 148.38
to reflect a principal paydown by Assignor, and all modifications, renewals
or extensions thereof (the "Note").
W I T N E S S E T H:
FOR VALUE RECEIVED, Assignor does hereby irrevocably and absolutely
SELL, ASSIGN, TRANSFER, SET OVER AND DELIVER unto Assignee any and all
leasehold interests, including Subleases and tenancies following
attornment, now or hereafter affecting
-1-
or covering any part of the Property, including, without limitation, those
leases described in EXHIBIT B attached hereto (collectively, the "Leases").
TOGETHER, with the immediate and continuing right to collect and
receive all of the rents, income, receipts, revenues, issues and profits
now due or which may become due or to which Assignor may now or shall
hereafter (including the period of redemption, if any) become entitled or
may demand or claim, arising or issuing from or out of the Leases or from
deficiency rents and liquidated damages following default, including,
without limitation, all security and other deposits now or hereafter held
by Assignor, and all proceeds payable under any policy of insurance
covering loss of rents or other income from the Property, together with any
and all rights and claims of any kind that Assignor may have against
lessees under the Leases or any subtenants or occupants of the Property, or
any part thereof (all such moneys, rights and claims described in this
paragraph being hereinafter called the "Receipts").
SUBJECT, however, to a license hereby granted by Assignee to
Assignor, but limited as hereinafter provided, to collect and receive the
Receipts.
ASSIGNOR REPRESENTS, WARRANTS, COVENANTS AND AGREES AS FOLLOWS:
1. REPRESENTATIONS AND WARRANTIES. Assignor represents and warrants
that, except as otherwise set forth in a rent roll delivered to Assignee
within 30 days prior to the recording of this Assignment: (i) Assignor is
the owner of the Property, and has good title to the Leases and Receipts
and full and complete right to assign the same; (ii) no other Person (as
hereinafter defined) has any right, title or interest in the Leases or
Receipts; (iii) Assignor has duly and punctually performed all and singular
the material obligations, terms, covenants, conditions and warranties of
the Major Leases (as defined below) on Assignor's part to be kept, observed
and performed; (iv) Assignor has not previously sold, assigned,
transferred, mortgaged or pledged the Leases or the Receipts, whether now
due or hereafter to become due; (v) no Receipts for any period of more than
thirty (30) days subsequent to the date hereof have been collected, nor has
payment of any of same been otherwise discharged or compromised; (vi) the
lessees under the Leases ("Lessees") are not in material default of any of
the terms thereof and, to Assignor's actual knowledge, do not have any
defense, set-off or counter claim against Assignor thereunder; (vii) the
Leases are in full force and effect, are valid and enforced in accordance
with their terms, and have not been modified, amended or altered, whether
in writing or orally, except as otherwise disclosed to Assignee in writing;
(viii) there are no unextinguished material rent concessions, abatements or
other inducements relating to the
-2-
Leases, and no Lessee has any option or right to acquire any interest in
the Property; and (ix) the rent roll delivered to Assignee in connection
with the funding of the Loan discloses all currently existing Leases and is
complete, accurate and true in all material respects. As used herein, the
term "Person" shall mean and refer to any natural person, corporation,
firm, association, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity. As used
herein, the term "Major Lease" shall mean and refer to any single Lease
covering more than 5000 square feet of rentable area. As used herein, the
term "actual knowledge of Assignor" means the present actual knowledge of
Mr. K. Jay Weaver and Andrea Backman, without investigation or inquiry, and
Assignor represents and warrants to Assignee that (a) the foregoing persons
are the officers or employees of Assignor who are likely to have, in
Assignor's good faith belief, any material knowledge of the Property, and
(b) Andrea Backman is the portfolio manager for the Property and is one
person who is primarily responsible for administering Assignor's interest
in the Property.
2. AFFIRMATIVE COVENANTS. Assignor shall: (i) observe, perform and
discharge, duly and punctually, all and singular the obligations, terms,
covenants, conditions and warranties of the Major Leases, on the part of
Assignor to be kept, observed and performed, and give prompt notice to
Assignee of any failure on the part of Assignor to observe, perform and
discharge the same; (ii) direct the Lessees to deliver all rents and other
payments due under the Leases to Assignee upon written request of Assignee
which states that an Event of Default has occurred and without further
action of Assignor; (iii) upon request of Assignee, notify Lessees in
writing of this Assignment and that any security deposit, or other deposits
heretofore delivered to Assignor have been retained by Assignor or assigned
and delivered to Assignee, as the case may be; (iv) use reasonable efforts
to enforce or secure in the name of Assignee the performance of each and
every obligation, term, covenant, condition and agreement of the major
Leases to be performed by Lessees; (v) to the extent reasonable under the
circumstances, appear in and defend any action or proceeding arising under,
occurring out of, or in any manner connected with the Leases or the
obligations, duties, or liabilities of Assignor and Lessees thereunder; and
(vi) upon request by Assignee subsequent to an Event of Default, to do so
in the name and on behalf of Assignee but at the expense of Assignor, and
to pay all costs and expenses of Assignee, including, without limitation,
reasonable attorneys' fees.
3. NEGATIVE COVENANTS. Assignor shall not, without the prior
written consent of Assignee: (i) lease any part of the Property or renew
or extend any of the Leases; (ii) terminate, amend, modify or alter in any
material manner any of the Leases, or waive, excuse, condone, discount, set
off, compromise, or in any material manner release or discharge
(collectively, "Waiver
-3-
or Discharge") Lessees from any material obligations, covenants, conditions
or agreements by such Lessees to be kept, or accept or consent to any
surrender of Leases; (iii) receive or collect any receipts for a period of
more than one month in advance (whether in costs or by promissory note or
otherwise); (iv) further assign the Leases or pledge, transfer, mortgage or
otherwise encumber or assign future payments of Receipts; (v) commence an
action of ejectment or summary proceedings for dispossession of the Lessees
under any of the leases; (vi) consent to any material modification of the
express purposes for which the Property has been leased; or (vii) consent
to any subletting of the Property or any part thereof, or to any assignment
of the Leases by lessees thereunder or to any assignment or further
subletting by any sublessees. Notwithstanding the foregoing, Assignor may
do the following with respect to the Lease, including without limitation
any new leases affecting the Property, without obtaining Assignee's prior
written consent:
(a) Terminate or otherwise enforce the provisions of any Lease
so long as the Lessee under such Lease leases not more than 5000 rentable
square feet of the Property, and provided that such Lessee is in default
under such Lease;
(b) Enter into any amendment, modification or alteration of
any Lease, or consent to the assignment or subletting of any Lease, or
cause or permit any Waiver or Discharge, so long as the Lessee under such
Lease leases not more than 5000 rentable square feet of the Property,
provided that such amendment, modification, alteration, assignment,
subletting Waiver or Discharge does not (i) substantially increase the
obligations of the landlord by providing non-market inducements to the
Lessee, (ii) decrease or accelerate the rent under such Lease, or (iii)
decrease the term of such Lease; and
(c) Enter into new bona fide arms-length leases (or renew
existing Leases) with third-party tenants for premises of 5000 rentable
square feet or less, provided such leases (i) are on Assignor's standard
form lease approved by Assignee, with no modifications that substantially
increase the obligations of the landlord, (ii) have minimum terms of not
less than 12 months, (iii) provide for the tenant to pay gross rent in
monthly payments, (iv) require the tenant to pay gross rent in monthly
payments, (iv) require the tenant to pay for all non-structural repairs to
the leased premises as well as the tenant's pro rata share of all operating
expenses, utilities, taxes, insurance costs and common area maintenance
costs in excess of the amount of all such costs for the base year; provided
that nothing in this clause (iv) shall prohibit Assignor from agreeing to
provide tenant improvements at the commencement of the term consistent with
the terms of comparable leases in the area, and (iv) have
-4-
minimum base rents of not less than $1.75 per rentable square
foot per month.
In any case in which Assignee's consent is required pursuant to this
Section 3, such consent shall not be unreasonably withheld or delayed and
shall be deemed given unless objections in reasonable detail are given to
Assignor within ten (10) business days following Assignee's receipt of (i)
written request for such consent, and (ii) all pertinent information
relating to the Lease or proposed lease in question, including, without
limitation, copies of the proposed amendment or new lease, if applicable.
4. DEFAULT AND REMEDIES. In the event any representation or
warranty herein of Assignor shall be found to be untrue when made or in the
event Assignor shall default in the payment of any Indebtedness (as
hereinafter defined) or in the observance or performance of any other
Obligation (as hereinafter defined), after the expiration of all applicable
grace or cure periods, if any, set forth in the Deed of Trust, then, in
each such instance, the same shall constitute an "Event of Default"
hereunder and under the Loan Documents (as defined in the Deed of Trust),
thereby entitling Assignee to declare all Indebtedness immediately due and
payable and to exercise any and all of the rights and remedies provided
thereunder and hereunder as well as by law or in equity. Specifically, but
without limiting the generality of the foregoing, upon or at any time after
the occurrence of an Event of Default, Assignee, at its option, shall have
the complete right, power and authority to exercise and enforce any or all
of the following rights and remedies:
(i) to terminate and revoke the license granted to Assignor
hereunder and collect the Receipts, and without taking possession of the
Property, in Assignee's own name, to demand, collect, receive, sue for,
attach and levy the Receipts, to give proper receipts, releases and
acquittance therefor, and after deducting all reasonably necessary and
proper costs and expenses of operation and collection, as determined in
Assignee's sole judgment, and including reasonable attorneys' fees, to
apply the net proceeds thereof, together with any funds of Assignor
deposited with Assignee, upon the Indebtedness and in such order as
Assignee may determine in its sole discretion; and
(ii) without regard to the adequacy of the security, with or without
any action or proceeding, through any person or by agent, by the Trustee
under the Deed of Trust, or by a receiver appointed by a court of competent
jurisdiction, and irrespective of Assignor's possession, to enter upon,
take possession of, manage and operate the Property, or any part thereof or
interest therein, make, modify, enforce, cancel or accept
-5-
surrender of, any of the Leases, remove and evict any Lessee,
increase or decrease rents under any of the Leases, clean and repair any
premises under any of the Leases, and otherwise do any act or incur any
costs or expenses as Assignee deems necessary or proper to protect the
rights of Assignee therein, as fully and to the same extent as Assignor
could do if in possession, and in such event to apply the Receipts so
collected to the operation and management of the Property, in such order as
the Assignee shall deem proper in its sole discretion, including payment of
reasonable management, brokerage and attorneys' fees, payment of the
Indebtedness and maintenance, without interest (unless interest is actually
earned on those reserves, and then only to the extent of interest earned),
of reserves for replacements. In no event, however, shall Assignee (nor
any successor or assignee of Assignee) execute any document, agreement or
instrument which purports to create, or take any action with the specific
intent to create, any personal liability of Assignor to third parties
pursuant to the foregoing. Any document, agreement or instrument executed
by Assignee with or for the benefit of a third party pursuant to this
Paragraph shall be deemed to include the limitations on the personal
liability of Assignor set forth in Paragraph 32 of the Deed of Trust.
Collection of Receipts hereunder, and application thereof as specified
above, and/or the entry upon and taking possession of the Property, or any
part thereof or interest therein, shall not cure or waive any default or
waive, modify or affect any notice of default under any Loan Documents, or
invalidate any act done pursuant to such notice, and the enforcement of
such right or remedy by Assignee, once exercised, shall continue for so
long as Assignee shall elect. If Assignee shall thereafter elect to
discontinue the exercise of any such right or remedy, the same or any other
right or remedy hereunder may be reasserted at any time and from time to
time following any subsequent Event of Default. A demand upon any Lessee
made by Assignee for payment of Receipts by reason of any Event of Default
claimed by Assignee hereunder or under any other Loan Documents shall be
sufficient to warrant to said Lessee to make future payments of all
Receipts to Assignee without the necessity for further consent by Assignor.
As used herein, the term "Indebtedness" shall mean and refer to the
principal of and all other amounts, payments and premiums due under the
Note and any extensions or renewals thereof (including extensions or
renewals at a different rate of interest, whether or not evidenced by a new
or additional promissory note or notes), and additional advances under,
evidenced by
-6-
and/or secured by the Loan Documents, plus interest on all such amounts
incurred pursuant to the terms of the Loan Documents. As used herein, the
term "Obligations" shall mean and refer to any and all of the covenants,
promises and other obligations (including the Indebtedness) made or owing
by Assignor to or due Assignee under and/or as set forth in the Loan
Documents.
5. GRANT OF LICENSE TO ASSIGNOR. So long as there shall exist no
Event of Default which remains uncured, Assignor shall have the right under
a license granted hereby (but limited as provided in this paragraph) to
collect, but not more than 30-days in advance, all Receipts. Assignor
shall receive such Receipts and shall apply the same to the payment of
taxes and assessments upon the Property before penalty or interest are due
thereon (or the establishment of reserves for the payment thereof), to the
cost of such insurance and of such maintenance and repairs as is required
by the terms of the Deed of Trust, to the satisfaction of all obligations
under the Leases, and to the payment of the Indebtedness before using any
part of the Receipts for any other purpose.
6. POWER OF ATTORNEY. Effective automatically upon the occurrence
of an Event of Default and continuously thereafter, and without the
necessity of the execution of any further documents or instruments,
Assignor hereby constitutes and appoints Assignee as Assignor's true and
lawful attorney, coupled with an interest, in the name, place and stead of
Assignor (i) to collect, demand, sue for, attach, levy, recover and receive
all Receipts due and payable by Lessees pursuant to the Leases and to give
proper notices, receipts, releases and acquittance therefor and after
deducting expenses of collection, to apply the net proceeds as a credit
upon any portion, as selected by Assignee, of the Indebtedness,
notwithstanding that the amount owing thereunder may not then be due and
payable or that the Indebtedness is adequately secured, and Assignor does
hereby authorize and direct such Lessees to deliver such payment to
Assignee in accordance with the foregoing; and (ii) to subject and
subordinate at any time and from time to time, the Leases, to the lien of
the Deed of Trust or any other Loan Documents or any other mortgage or deed
of trust on or to any ground lease of the Property or to request or require
such subordination, where such reservation, option or authority was
reserved under the Leases to the Assignor, or in any case, where the
Assignor otherwise would have the right, power or privilege so to do.
Assignor hereby ramifies and confirms all acts that Assignee shall do or
cause to be done by virtue of the powers granted hereby and warrants that
the Assignor has not, on or at any time prior to the date hereof, exercised
any such right of subordination under clause (ii) above and covenants not
to exercise any such right except as may be required by Assignee. The
power of attorney hereunder granted is irrevocable and continuing, shall
survive the insolvency or dissolution of Assignor, and such rights,
-7-
powers and privileges shall be exclusive in Assignee, its successors and
assigns so long as any part of the Indebtedness shall remain unpaid. In no
event, however, shall Assignee (nor any successor or assignee of Assignee)
execute any document, agreement or instrument which purports to create, or
take any action with the specific intent to create, any personal liability
of Assignor to third parties pursuant to the foregoing power of attorney.
7. INDEMNITY. Except for those matters which are finally
adjudicated by a court of competent jurisdiction to have arisen from the
gross negligence or willful misconduct of Assignee or any of Assignee's
agents, Assignor shall indemnify, defend, protect and hold Assignee
harmless from and against any and all liability, loss, cost, damage or
expense (including, without limitation, reasonable attorneys' fees) that
Assignee incurs under or by reason of this Assignment, for any action taken
by Assignee hereunder in accordance with the terms hereof, or the
enforcement of this Assignment, or by reason or in defense of any and all
claims and demands whatsoever that may be asserted against Assignee arising
out of the Leases, including any claim by any Lessees of credit from rental
paid to and received by Assignor. If Assignee incurs any such liability,
loss, cost, damage or expense, the amount thereof with interest thereon at
the Secondary Interest Rate (as defined in the Note), shall be payable by
Assignor immediately upon demand, shall be secured by the Deed of Trust,
and shall be part of the Indebtedness; provided that if such amounts are
paid within five business days after such demand, such amounts shall
instead bear interest at the Interest Rate (as defined in the Note) in lieu
of the Secondary Interest Rate.
8. NO WAIVER. The failure of Assignee to avail itself of any of the
terms, covenants and conditions of this Assignment for any period of time,
or at any time or times, shall not be construed or deemed to be a waiver of
any such right, and nothing herein contained, nor anything done or omitted
to be done by Assignee pursuant hereto, shall be deemed a waiver by
Assignee of any of its rights and remedies under the Loan Documents, or
under any applicable laws. The rights of Assignee to collect the
Indebtedness and to enforce any security therefor may be exercised by
Assignee, either prior to, simultaneously with, or subsequent to, any
action taken hereunder.
9. NO MERGER. So long as any of the Indebtedness shall remain
unpaid, unless Assignee shall otherwise consent in writing, the leasehold
estates and the subleasehold estates on the Property, if any, shall not
merge, but shall always be kept separate and distinct, notwithstanding the
union of said estates either in Assignor or in any Lessees or in a third
party, by purchase or otherwise.
-8-
10. NO MORTGAGEE IN POSSESSION; NO OTHER LIABILITY. The acceptance
by Assignee of this Assignment, with all of the rights, power, privileges
and authority so created, shall not, prior to entry upon and taking of
possession of the Property by Assignee, be deemed or construed to (i)
constitute Assignee a mortgagee in possession nor thereafter or at any time
or in any event obligate Assignee to appear in or defend any action or
proceeding relating to the Leases or to the Property, (ii) require Assignee
to take any action hereunder, or to expend any money or incur any expenses
or perform or discharge any obligation, duty or liability under the Leases,
or (iii) require Assignee to assume any obligation or responsibility for
any security deposits or other deposits delivered to Assignor by Lessees
and not assigned and delivered to Assignee. Assignee shall not be liable
in any way for any injury or damage to person or property sustained by any
Person in or about the Property.
11. PAYMENT OF INDEBTEDNESS. Upon payment in full of all of the
Indebtedness, this Assignment shall become and be void and of no effect,
but the affidavit, certificate, letter or statement of any officer of
Assignee showing any part of said Indebtedness to remain unpaid shall be
and constitute conclusive evidence of the validity, effectiveness and
continuing force of this Assignment, and any Person may and is hereby
authorized to rely thereon.
12. NOTICES. All notices, demands or documents of any kind that
Assignee or Assignor may be required or may desire to serve shall be served
in the manner provided in the Deed of Trust.
13. SUCCESSORS AND ASSIGNS; GENDER. The terms, covenants,
conditions and warranties contained herein and the powers granted hereby
shall run with the land, shall inure to the benefit of and bind all parties
hereto and their respective heirs, executors, administrators, successors
and assigns, and all subsequent owners of the Property, and all subsequent
holders of the Note and the Deed of Trust, subject in all events to the
provisions of the Deed of Trust regarding transfers of the Property by
Assignor. In this Assignment, whenever the context so requires, the
masculine gender shall include the feminine and/or neuter and the singular
number shall include the plural and conversely in each case. If there is
more than one party constituting Assignor, all obligations of each Assignor
hereunder shall be joint and several.
14. SEVERABILITY. If any term, provision, covenant or condition
hereof or any application thereof should be held unenforceable, in whole or
in part, all terms, provisions, covenants and conditions hereof and all
applications thereof not held invalid, void or unenforceable shall continue
in full force and effect and shall in no way be affected, impaired or
invalidated thereby.
15. GOVERNING LAW. This Assignment shall be governed by and
construed in accordance with the laws of the State of California.
16. EXPENSES. Assignor shall pay on demand all reasonable costs and
expenses incurred by Assignee in connection with the review of Leases prior
to the date of this Assignment or the preparation and negotiation of any
subordination, nondisturbance and attornment agreements requested by
tenants, including the reasonable fees and disbursements of Assignee's
outside counsel.
17. ABSOLUTE ASSIGNMENT. Notwithstanding anything contained herein
to the contrary, this Assignment is intended by Assignor and Assignee to
create and shall be construed to create an absolute assignment by Assignor
to Assignee of all of Assignor's right, title and interest in the Leases
and Receipts and shall not be deemed to create a security interest therein.
Assignor and Assignee further agree that, during the term of this
Assignment, the Leases and Receipts shall not constitute property of
Assignor (or of any estate of Assignor) within the meaning of 11 U.S.C.
Section 541, as amended from time to time.
18. LIMITATION ON PERSONAL LIABILITY.
(a) Except as expressly set forth in paragraph 18(b) below, the
recourse of Assignee with respect to the obligations evidenced by the Note
or set forth in any Loan Document shall be solely to any and all security
therefor (the "Collateral") and, accordingly, except as expressly set forth
in Paragraph 18(b) below, the obligations evidenced by the Note or set
forth in the Loan Documents are non-recourse to anything other than the
Collateral.
(b) Notwithstanding anything to the contrary contained in this
Assignment or in any Loan Document, nothing shall be deemed in any way to
impair, limit or prejudice the rights of Assignee:
(i) in foreclosure proceedings or in any ancillary
proceedings brought to facilitate Assignee's foreclosure on the Collateral
or any portion thereof;
(ii) to recover from Assignor damages or costs (including
without limitation reasonable attorneys' fees) incurred by Assignee as a
result of intentional waste of the Collateral by Assignor;
(iii) to recover from Assignor any condemnation or insurance
proceeds
-10-
attributable to the Collateral received by Assignor which
were not paid to Assignee or used to restore the Collateral in accordance
with the terms of the Deed of Trust;
(iv) to recover from Assignor any rents, profits, security
deposits, advances, rebates, prepaid rents or other similar sums
attributable to the Collateral collected by or for Assignor following an
Event of Default and not properly applied to the reasonable fixed and
operating expenses and other proper expenses of ownership of the
Collateral, including payments of the Loan;
(v) to recover from Assignor any loss or damage suffered by
Assignee by reason of the Collateral being transferred in violation of
Section 38.9 of the Deed of Trust and such transfer results in the Loan
being a non-exempt prohibited transaction under ERISA; and in such case,
Assignor fails to unwind or reverse the sale, conveyance, assignment,
disposition or transfer within thirty (30) days following written notice
from Assignee;
(vi) to exercise any other specific rights or remedies
afforded Assignee under any provisions of the Loan Documents or at law or
in equity provided that this clause (vi) shall not permit Assignee to
pursue any action for a deficiency after a foreclosure or seek any other
recovery based on personal liability except to the extent that Assignor may
have personal liability under a provision of this Section 18(b) other than
this clause 18(b) (vi);
(vii) to recover under that certain Guaranty of Payment dated
October 29, 1987, executed by Encino Plaza in favor of Assignee;
(viii) to pursue any personal liability of Assignor under
the Remediation and Indemnification Agreement (as defined in the Deed of
Trust);
-11-
(ix) to recover from Assignor damages or costs incurred by
Assignee as a result of any breach or violation of paragraph 27 of the Deed
of Trust (provided that in a case where Assignor demonstrates to the sole
satisfaction of Assignee that such sale, conveyance, assignment or transfer
shall have been unintentional, Assignor shall have thirty (30) days
following written notice from Assignee to unwind or reverse the sale,
conveyance, assignment or transfer); and
(x) to recover from maker damages or costs incurred by
Assignee as a result of any actionable fraud or intentional
misrepresentation by Assignor in connection with the Collateral, the Loan
Documents or the Loan.
(c) The agreement contained in this Paragraph 18 to limit the
personal liability of Assignor shall become null and void and of no further
force or effect in the event that the Collateral or any part thereof or any
interest therein shall be further encumbered by a voluntary lien securing
any obligation upon which Assignor shall be personally liable for repayment
but only to the extent of the dollar amount that Assignor is personally
liable with respect to the additional encumbrance (provided, however, a
letter of credit given to such subordinate mortgagee as additional
collateral shall not cause the obligation secured thereby to be deemed
recourse and provided further that this clause (c) shall not apply to
liability which is recourse only under one or more conditions substantially
similar to Section 18 (b) and (c) of this Assignment unless recourse
liability actually occurs under said voluntary lien);
(d) Notwithstanding anything to the contrary contained herein,
Assignee's recourse shall be limited to the assets owned by Encino Plaza,
JMB Income Properties, Ltd. - XII, an Illinois limited partnership, and/or
JMB Income Properties, Ltd. - XIII, an Illinois limited partnership.
Without limitation on the preceding sentence, in no event shall any of JMB
Realty Corporation, a Delaware corporation ("JMB Corp."), Income Partners-
XII, an Illinois limited partnership, Income Associates-XII, an Illinois
limited partnership, Income Associates-XIII, an Illinois general
partnership, JMB Properties-XIII, Inc., an Illinois corporation, or any
other person or entity which is now or hereafter a partner in JMB Income
Properties, Ltd.-XII or JMB Income Properties, Ltd.-XIII, or any officer,
employee or director of any of them, have any
-12-
personal liability, directly or in connection with this Assignment or any
other document or instrument evidencing, securing or executed in connection
with the Loan.
For purposes of the Assignment and the Loan Documents, neither the
negative capital account of any constituent partner and Assignor, nor any
obligation of any constituent partner and Assignor, to restore a negative
capital account or to contribute capital to Assignor,or to other
constituent partners and Assignor, shall be deemed at any time to be the
property or an asset of Assignor, or any such other constituent partner
(and neither Assignee nor any of its successors and assigns shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account or partner's obligation to restore or contribute).
As used herein, a constituent partner in Assignor means a partner in
Assignor or in any partnership that has a direct or indirect interest
(through one or more partnerships) in Assignor.
19. PRIORITY OF LEASES. NOTICE OF THE FOLLOWING IS HEREBY GIVEN TO
ALL TENANTS EXECUTING A LEASE AFFECTING THE PROPERTY, EACH OF WHICH SHALL
BE ON NOTICE OF, BOUND BY AND SUBJECT TO THE TERMS OF THIS PARAGRAPH 19:
19.1 Anything to the contrary in any Lease notwithstanding,
Assignee shall have the right, but not the obligation, to change the
priority of that Lease and the lien of the Deed of Trust from time to time
by one or more unilateral notices to the tenant that (a) the lien of the
Deed of Trust shall be subordinate to such Lease, or (b) the Lease shall be
subordinate to the Deed of Trust.
19.2 Upon written request of Assignee, every tenant under a
Lease receiving such request shall execute and deliver to Assignee within
the time period specified in that written request (but no sooner than 10
business days after such request) a written agreement in a form reasonably
acceptable to Assignee and such tenant which provides the following: (a)
upon the foreclosure of the Deed of Trust such tenant shall attorn to the
purchaser of the Property at the foreclosure sale, and (b) the foreclosure
of the Deed of Trust shall not disturb or result in the cancellation or
termination of that tenant's Lease; provided, however, that Tenant shall
not be bound to any such agreement unless or until Assignee executes and
delivers the same to such Tenant. Assignor shall not be in default under
this Assignment for a tenant's failure to deliver such agreement, provided
Assignor has used reasonable efforts to obtain such agreement from such
tenant. Assignee has no obligation to deliver such a request to any
tenant.
-13-
19.3 Assignee shall have the right to elect to be a third
party beneficiary of any attornment provisions contained in any Lease.
Anything to the contrary in any Lease notwithstanding, no election by
Assignor under any Lease or otherwise to alter the relative priority of
that Lease and the Deed of Trust shall be effective unless Assignee shall
have consented thereto in writing.
IN WITNESS WHEREOF, this Assignment of Lessor's Interest in Leases
has been duly executed by Assignor the day and year first above written.
ASSIGNOR:
JMB ENCINO PARTNERSHIP,
a California general partnership
By: JMB FIRST FINANCIAL ASSOCIATES
Its general partner
By: JMB INCOME PROPERTIES, LTD. - XII
Its general partner, and
By: JMB REALTY CORPORATION
Its general partner
By:
K. Jay Weaver
(PRINTED NAME AND TITLE)
-14-
DESCRIPTION OF REAL PROPERTY
All that certain real property located in the County of Los Angeles,
State of California, described as follows:
PARCEL 1:
THAT PORTION OF LOT 6, BLOCK 9 OF TRACT NO. 2955, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 31 PAGES 62 THROUGH 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID LOT; THENCE SOUTH 0 DEGREES 3
MINUTES 30 SECONDS EAST ALONG THE EASTERLY LINE OF SAID LOT 180.98 FEET,
MORE OR LESS, TO A POINT DISTANT NORTH 0 DEGREES 03 MINUTES 30 SECONDS WEST
68 FEET FROM THE NORTHEAST CORNER OF THE LAND DESCRIBED IN DEED TO CHARLES
LEONARD MURDOCK, RECORDED IN BOOK 19353 PAGE 263, OFFICIAL RECORDS; THENCE
PARALLEL WITH THE NORTHEASTERLY LINE OF SAID LAND OF MURDOCK SOUTH 75
DEGREES 29 MINUTES 30 SECONDS WEST 196.55 FEET TO A LINE BEARING SOUTH 14
DEGREES 30 MINUTES 30 SECONDS WEST FROM A POINT THAT IS NORTH 52 DEGREES 13
MINUTES 30 SECONDS EAST 412 FEET; MEASURED ALONG THE NORTHWEST LINE OF SAID
LOT FROM THE MOST WESTERLY CORNER OF SAID LOT; THENCE NORTH 14 DEGREES 30
MINUTES 30 SECONDS EAST TO SAID NORTHWESTERLY LINE; THENCE ALONG THE
BOUNDARY OF SAID LOT, NORTHEASTERLY, EASTERLY AND SOUTHEASTERLY TO THE
POINT OF BEGINNING.
PARCEL 2:
THAT PORTION OF LOT 6, BLOCK 9 OF TRACT NO. 2955, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 31 PAGES 62 THROUGH 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE NORTHWESTERLY LINE OF SAID LOT THAT IS DISTANT
NORTH 52 DEGREES 13 MINUTES 30 SECONDS EAST 412 FEET FROM THE MOST WESTERLY
CORNER OF SAID LOT 6; THENCE ALONG SAID NORTHWESTERLY LINE SOUTH 52 DEGREES
13 MINUTES 30 SECONDS WEST 242 FEET TO THE MOST NORTHERLY CORNER OF THE
LAND DESCRIBED IN THE DEED TO CHARLES LEONARD MURDOCK, RECORDED IN BOOK
19353 PAGE 263 OFFICIAL RECORDS OF SAID COUNTY; THENCE ALONG THE
NORTHEASTERLY LINE OF SAID LAND OF MURDOCK SOUTH
EXHIBIT A
PAGE 1 OF 3
75 DEGREES 29 MINUTES 30 SECONDS EAST 361.69 FEET TO THE EAST LINE OF SAID
LOT 6; THENCE ALONG SAID EAST LINE NORTH 0 DEGREES 03 MINUTES 30 SECONDS
WEST 68.00 FEET; THENCE PARALLEL WITH THE NORTHEASTERLY LINE OF SAID LAND
OF MURDOCK, NORTH 75 DEGREES 29 MINUTES 30 SECONDS WEST 196.55 FEET TO A
LINE BEGINNING SOUTH 14 DESCRIBED 30 MINUTES 30 SECONDS WEST FROM THE POINT
OF BEGINNING; THENCE ALONG SAID LINE NORTH 14 DEGREES 30 MINUTES 30 SECONDS
EAST 125.62 FEET TO THE POINT OF BEGINNING.
PARCEL 3:
THAT PORTION OF LOT 6, BLOCK 9 OF TRACT NO. 2955, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 31 PAGES 62 THROUGH 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT DISTANT ALONG SAID
LINE SOUTH 74 DEGREES 16 MINUTES 30 SECONDS EAST 276.85 FEET FROM THE MOST
WESTERLY CORNER OF SAID LOT; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS
EAST 85.72 FEET; THENCE NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST 39.54
FEET; THENCE NORTH 77 DEGREES 14 MINUTES 10 SECONDS WEST 181.04 FEET TO THE
NORTHWESTERLY LINE OF SAID LOT; THENCE ALONG SAID NORTHWESTERLY LINE NORTH
52 DEGREES 13 MINUTES 30 SECONDS EAST 75 FEET TO A POINT DISTANT
NORTHEASTERLY ALONG SAID NORTHWESTERLY LINE 170 FEET FROM THE MOST WESTERLY
CORNER OF SAID LOT; THENCE SOUTH 75 DEGREES 29 MINUTES 30 SECONDS EAST
361.69 FEET TO A POINT IN THE EASTERLY LINE OF SAID LOT DISTANT NORTHERLY
ALONG SAID EASTERLY LINE 150 FEET FROM THE SOUTHEASTERLY CORNER OF SAID
LOT; THENCE ALONG SAID EASTERLY LINE SOUTH 0 DEGREES 03 MINUTES 30 SECONDS
EAST 150 FEET TO SAID SOUTHEASTERLY CORNER; THENCE ALONG THE SOUTHERLY LINE
OF SAID LOT NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST 226.68 FEET TO THE
POINT OF BEGINNING.
PARCEL 4:
THOSE PORTIONS OF LOT 1 AND 4, OF TRACT NO. 34766, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 920 PAGES 31 THROUGH 34 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, TOGETHER WITH THOSE PORTIONS OF LOT 5 IN BLOCK 9
OF TRACT NO. 2955, IN SAID CITY, COUNTY AND STATE, AS PER MAP RECORDED IN
BOOK 31 PAGES 62 THROUGH 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS A WHOLE AS FOLLOWS:
EXHIBIT A
PAGE 2 OF 3
BEGINNING AT THE MOST WESTERLY TERMINUS OF THAT CERTAIN NORTHERLY LINE OF
SAID LOT 4 SHOWN ON THE MAP OF SAID TRACT NO. 34766 AS HAVING A BEARING AND
LENGTH OF NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST 250.00 FEET; THENCE
SOUTH 0 DEGREES 03 MINUTES 30 SECONDS EAST ALONG THE WESTERLY LINE OF SAID
LOT 4 A DISTANCE OF 99.93 FEET; THENCE SOUTH 74 DEGREES 17 MINUTES 53
SECONDS EAST 4.98 FEET; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS EAST
75.30 FEET TO A LINE THAT IS PARALLEL WITH AND DISTANT 20.28 FEET SOUTHERLY
MEASURED AT RIGHT ANGLES FROM THE ABOVE MENTIONED NORTHERLY LINE OF SAID
LOT 4; THENCE SOUTH 74 DEGREES 16 MINUTES 30 SECONDS EAST ALONG SAID
PARALLEL LINE 18.00 FEET; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS
EAST 20.28 FEET TO SAID NORTHERLY LINE OF LOT 4; THENCE SOUTH 74 DEGREES 16
MINUTES 30 SECONDS EAST ALONG SAID NORTHERLY LINE 110.0 FEET; THENCE SOUTH
15 DEGREES 43 MINUTES 30 SECONDS WEST 20.28 FEET TO SAID LAST MENTIONED
PARALLEL LINE; THENCE SOUTH 74 DEGREES 16 MINUTES 30 SECONDS EAST ALONG
SAID PARALLEL LINE 95.73 FEET TO THE SOUTHERLY PROLONGATION OF THE WESTERLY
LINE OF SAID LOT 4 OF TRACT NO. 34766, THENCE ALONG SAID PROLONGATION NORTH
0 DEGREES 03 MINUTES 30 SECONDS WEST 160.29 FEET TO THE SOUTHWEST CORNER OF
SAID LOT 1 OF TRACT NO. 34766; THENCE ALONG THE PROLONGATION OF THE
SOUTHERLY LINE OF LOT 1 OF SAID TRACT NO. 34766 NORTH 74 DEGREES 16 MINUTES
30 SECONDS WEST 27.31 FEET; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS
EAST 63.33 FEET; THENCE SOUTH 74 DEGREES 16 MINUTES 30 SECONDS EAST 7.24
FEET; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS EAST 71.39 FEET TO THE
NORTHERLY LINE OF LOT 1 OF SAID TRACT NO. 34766; THENCE ALONG SAID LAST
MENTIONED NORTHERLY LINE NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST TO THE
NORTHWEST CORNER OF LOT 1 OF SAID TRACT NO. 34766; THENCE ALONG THE
PROLONGATION OF THE WESTERLY LINE OF LOT 1 OF SAID TRACT NO. 34766 NORTH 0
DEGREES 03 MINUTES 30 SECONDS WEST TO THE NORTHERLY LINE OF LOT 5 IN BLOCK
9 OF SAID TRACT NO. 2955; THENCE ALONG SAID LAST MENTIONED NORTHERLY LINE
NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST TO THE NORTHWEST CORNER OF SAID
LOT 5 IN BLOCK 9 OF TRACT NO. 2955; THENCE ALONG THE WESTERLY LINE OF LOT 5
IN BLOCK 9 OF TRACT NO. 2955; SOUTH 0 DEGREES 03 MINUTES 30 SECONDS WEST TO
THE POINT OF BEGINNING.
EXHIBIT A
PAGE 3 OF 3
LIST OF LEASES
EXHIBIT B
State of: Illinois
County of: Cook
On October 30, 1995 before me, Karen M. Narcissi, Notary Public, personally
appeared K. Jay Weaver, personally known to me or proved to me on the basis
of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity (ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Karen M. Narcissi
RECORDING REQUESTED BY, AND
WHEN RECORDED RETURN TO:
The Prudential Insurance
Company of America
2029 Century Park East
Suite 3600
Los Angeles, California 90067
Attention: Regional Counsel
Re: Loan No. 7 501 241
FIRST AMENDMENT TO DEED OF TRUST
This First Amendment to Deed of Trust, dated as of October 30, 1995
(the "Modification"), by and between JMB ENCINO PARTNERSHIP, a California
general partnership ("Trustor"), and THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Beneficiary"), is a first amendment to
that certain Deed of Trust, Security Agreement, Assignment of Leases and
Fixture Filing (the "Deed of Trust') dated November 2, 1987, executed by
Trustor, for the benefit of Beneficiary and recorded on November 2, 1987,
as Instrument No. 87-1755004 in the Official Records of Los Angeles County,
California (the "Official Records"). This Modification is entered into in
conjunction with a First Extension and Amendment to Loan Documents of even
date herewith between Trustor and Beneficiary ("the Amendment") which
modifies certain obligations that are presently secured by the Deed of
Trust, including without limitation certain obligations of Trustor under
that certain Fixed Monthly Payment Note, Including Interest, Secured by
Deed of Trust in the face principal amount of $30,000,000.00 dated November
3, 1987 (the "Note"), executed by Trustor in favor of Beneficiary. Such
modifications include without limitation an extension of the maturity date
of the Note and the reduction of the stated principal balance of the Note
from $30,000,000 to $24,970,148.38 to reflect principal payments by Trustor
(subject to the satisfaction of certain conditions).
In consideration of the foregoing, and for other valuable
consideration, the receipt of sufficiency of which are hereby acknowledged,
Trustor and Beneficiary hereby agree as follows:
-1-
1. MODIFICATIONS OF DEED OF TRUST.
1.1 The Deed of Trust is hereby modified to provide that it
secures, in addition to any and all other obligations now or hereafter
secured under the Deed of Trust, Trustor's obligations to Beneficiary under
the Note (as amended pursuant to that certain Amended and Restated
Promissory Note of even date executed by Borrower) and under the Amendment,
each as modified from time to time hereafter.
1.2 Paragraph 31 of the Deed of Trust is amended in its
entirety to read as follows: "All Leases entered into after November 1,
1995 shall be subject to Beneficiary's approval, except as otherwise
provided in the Assignment of Lessor's Interest in Leases executed
concurrently with the First Amendment to this Deed of Trust."
1.3 Paragraph 32 of the Deed of Trust is amended in its
entirety to read as follows:
(a) Except as expressly set forth in paragraph 32(b) below,
the recourse of Beneficiary with respect to the obligations evidenced by
the Note or set forth in any Loan Document shall be solely to the Property
and, accordingly, except as expressly set forth in Paragraph 32(b) below,
the obligations evidenced by the Note or set forth in the Loan Documents
are non-recourse to anything other than the Property.
(b) Notwithstanding anything to the contrary contained in
this Deed of Trust or in any Loan Document, nothing shall be deeded in any
way to impair, limit or prejudice the rights of Beneficiary:
(i) in foreclosure proceedings or in any
ancillary proceedings brought to facilitate Beneficiary's foreclosure on
the Property or any portion thereof;
(ii) to recover from Trustor damages or costs
(including without limitation reasonable attorneys' fees) incurred by
Beneficiary as a result of intentional waste of the Property by Trustor;
(iii) to recover from Trustor any condemnation or
insurance proceeds attributable to the Property received by Trustor which
were not paid to Beneficiary or used to restore the
-2-
Property in accordance with the terms of the
Deed of Trust;
(iv) to recover from Trustor any rents, profits,
security deposits, advances, rebates, prepaid rents or other similar sums
attributable to the Property collected by or for Trustor following an Event
of Default and not properly applied to the reasonable fixed and operating
expenses and other proper expenses of ownership of the Property, including
payments of the Loan;
(v) to recover from Trustor any loss or damage
suffered by Beneficiary by reason of the Property being transferred in
violation of Section 38.9 of the Deed of Trust and such transfer results in
the Loan being a non-exempt prohibited transaction under ERISA; and in such
case, Trustor fails to unwind or reverse the sale, conveyance, assignment,
disposition or transfer within thirty (30) days following written notice
from Beneficiary;
(vi) to exercise any other specific rights or
remedies afforded Beneficiary under any provisions of the Loan Documents or
at law or in equity provided that this clause (vi) shall not permit
Beneficiary to pursue any action for a deficiency after a foreclosure or
seek any other recovery based on personal liability except to the extent
that Trustor may have personal liability under a provision of this Section
32(b) other than this clause 32(b) (vi);
(vii) to recover under that certain Guaranty of
Payment dated October 29, 1987, executed by Encino Plaza in favor of
Beneficiary;
(viii) to pursue any personal liability of Trustor
under the Remediation and Indemnification Agreement;
-3-
(ix) to recover from Trustor damages or costs
incurred by Beneficiary as a result of any breach or violation of paragraph
27 of the Deed of Trust (provided that in a case where Trustor demonstrates
to the sole satisfaction of Beneficiary that such sale, conveyance,
assignment or transfer shall have been unintentional, Trustor shall have
thirty (30) days following written notice from Beneficiary to unwind or
reverse the sale, conveyance, assignment or transfer); and
(x) to recover from maker damages or costs
incurred by Beneficiary as a result of any actionable fraud or intentional
misrepresentation by Trustor in connection with the Property, the Loan
Documents or the Loan.
(c) The agreement contained in this Paragraph 32 to limit the
personal liability of Trustor shall become null and void and of no further
force or effect in the event that the Property or any part thereof or any
interest therein shall be further encumbered by a voluntary lien securing
any obligation upon which Trustor shall be personally liable for repayment
but only to the extent of the dollar amount that Trustor is personally
liable with respect to the additional encumbrance (provided, however, a
letter of credit given to such subordinate mortgagee as additional
collateral shall not cause the obligation secured thereby to be deemed
recourse and provided further that this clause (c) shall not apply to
liability which is recourse only under one or more conditions substantially
similar to Section 32(b) and (c) of this Deed of Trust unless recourse
liability actually occurs under said voluntary lien);
(d) Notwithstanding anything to the contrary contained herein,
Beneficiary's recourse shall be limited to the assets owned by Encino
Plaza, JMB Income Properties, Ltd.-XII, and Illinois limited partnership,
and/or JMB Income Properties, Ltd.-XIII, an Illinois limited partnership.
Without limitation on the preceding sentence, in no event shall any of the
JMB Realty Corporation, a Delaware corporation ("JMB Corp."), Income
Partners-XII, an Illinois limited partnership, Income Associates-XII, an
Illinois limited partnership, Income Associates-XIII, an Illinois general
partnership, JMB Properties-XIII, Inc., an Illinois corporation, or any
other person or entity which is now or hereafter a partner in JMB Income
Properties, Ltd.-XII or JMB Income Properties, Ltd.-XIII, or any officer,
employee or director of any of them, have any personal liability, directly
or indirectly, under or
-4-
in connection with this Deed of Trust or any other document or instrument
evidencing, securing or executed in connections with the Loan.
For purposes of the Deed of Trust and the Loan Documents, neither the
negative capital account of any constituent partner and Trustor, nor any
obligation of any constituent partner and Trustor, to restore a negative
capital account or to contribute capital to Trustor, or to other
constituent partners and Trustor, shall be deemed at any time to be the
property or an asset of Trustor, or any such other constituent partner (and
neither Beneficiary not any of its successors and assigns shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account or partner's obligation to restore or contribute).
As used herein, a constituent partner in Trustor means a partner in Trustor
on in any partnership that has a direct or indirect interest (through one
or more partnerships) in Trustor."
1.4 Paragraph 33 of the Deed of Trust is amended by deleting
all of Paragraph 33 appearing on page 17 thereof and the portion of
Paragraph 33 starting at the top of page 18 thereof and ending with the
line of "prepayment privilege fee required under the prepayment privilege"
on page 18 thereof.
1.5 Beneficiary agrees that the conversion of Trustor from a
general partnership to a limited partnership shall be permitted under the
Deed of Trust and shall not be an Event of Default; provided that (a) there
is no change in control of Trustor, (b) the limited partnership expressly
assumes (subject to the limitations on liability set forth in the Loan
Documents) all of Trustor's obligations under the Loan Documents and the
Remediation and Indemnification Agreement and (c) Beneficiary receives
within 30 days after that conversion California and Illinois UCC-1
Financing Statements executed by the limited partnership in substantially
the same for as those filed in connection with the Amendment, and Trustor
pays all reasonable costs and fees in connection with the preparation and
filing thereof.
1.6 The following new paragraph 34-38 are hereby added to the
Deed of Trust:
34. CERTAIN DEFINED TERMS: As used in this Deed of Trust the
following in terms shall have the following meanings; other terms are
defined where they appear in this Deed of Trust"
EVENT OF DEFAULT: As defined in Paragraph 36.1 hereof.
-5-
FIXTURES: All fixtures located upon or within the Improvements
or now or hereafter installed in, or used in connection with any of the
Improvements, including boilers, furnaces, pipes, plumbing, elevator,
cleaning and sprinkler systems, fire extinguishing apparatus and equipment,
water tanks, heating, ventilation, air conditioning and air cooling
equipment, whether or not permanently affixed to the Land or the
Improvements.
IMPOUND ACCOUNT: The account that Trustor may be required to
maintain pursuant to a Paragraph 26 hereof for the deposit of amounts
required to pay real estate taxes and assessments and insurance premiums.
IMPROVEMENTS: All buildings and other improvements and
appurtenances located on the Land, including surface improvements, such as
parking areas and landscaping structures and all improvements, additions
and replacements thereof, and other buildings and improvements, at any time
hereafter constructed or placed upon the Land.
INDEBTEDNESS: The principal of and all other amounts, payments
and premiums due under the Note and any extensions or renewals thereof
(including extension or renewals at a different rate of interest, whether
or not evidenced by a new or additional promissory note or notes), and
additional advances under, evidenced by and/or secured by the Loan
Documents, plus interest on all such amounts.
INVENTORY: The personal property Inventory certified by
Trustor by Owner's Affidavit of even date herewith.
LEASES: Any and all leasehold interests, including subleases
and tenancies following attornment, now or hereafter affecting or covering
any part of the Property.
LOAN: The loan from Beneficiary to Trustor evidenced by the
Note.
LOAN DOCUMENTS: The Note, the Assignment of Agreements, the
Assignment of Lessor's Interest in Leases and all other documents executed
by Borrower, with the exception of the Remediation and Indemnification
Agreement, evidencing or securing the Loan, the payment of the Indebtedness
or the performance of the Obligations.
NOTE: The Amended and Restated Promissory Note of even date
with the First Amendment to this Deed of Trust executed by Trustor in the
original principal amount of Twenty Four Million Nine Hundred Seventy
Thousand One Hundred Forty Eight and 38/100ths Dollars ($24,970,148.38),
payable to
-6-
Beneficiary or its order, and all modifications, renewals or extensions
thereof.
OBLIGATIONS: Any and all of the covenants, promises and other
obligations (including, without limitation, the Indebtedness) made or owing
by Trustor to or due to Beneficiary under and/or as set forth in the Loan
Documents.
PERSON: Any natural person, corporation, firm, association,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
PERSONALITY: Trustor's right, title and interest in the
following: all personal property (other than Fixtures) now or hereafter
located in, upon or about or collected or used in connection with the
Property, together with all present and future attachments, accessions,
replacements, substitutions and additions thereto or therefor, and the cash
and noncash proceeds thereof, including all property listed in the
Inventory, the Impound Account, all goods, documents, instruments and
chattel paper, all drawings, plans and specifications, all causes of action
and recoveries now or hereafter existing for any loss or diminution in
value of the Property, all licenses, governmental authorizations or permits
pertaining to the Property or the development, ownership, management or
operation thereof, all trademarks, service marks, designs, logos, names or
similar identifications pertaining to the Property, and all accounts,
contract rights and general intangibles (including, without limitation, any
insurance proceeds and condemnation awards or compensation) arising out of
or incident to the ownership, development or operation of the Property
including, without limitation, all personal property described in the UCC-1
Financing Statement executed by Trustor of even date with the First
Amendment to this Deed of Trust, which is incorporated herein by this
reference, and all furniture, furnishings, equipment, machinery,
construction materials and supplies, leasehold interests in personal
property and the Leases.
PROPERTY: As defined in the above granting paragraph of this
Deed of Trust together with the Personality.
RECEIVER: Any trustee, receiver, custodian, fiscal agent,
liquidator or similar officer.
REMEDIATION AND INDEMNIFICATION AGREEMENT: The Hazardous
Substances Remediation and Indemnification Agreement of even date with the
First Amendment to this Deed of Trust executed by Trustor in favor or
Beneficiary.
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35. AFFIRMATIVE COVENANTS. Trustor hereby covenants and
agrees as follows:
35.1 INSURANCE.
A. Trustor, at its sole cost and expense, will keep and
maintain for the mutual benefit of Trustor and Beneficiary, the following
policies of insurance:
(1) Insurance against loss or damage to the Property by
fire and other risks covered by insurance commonly known as the broad form
of extended coverage, including losses sustained by reason of riot and
civil commotion, vandalism, malicious mischief, burglary, theft and
mysterious disappearance, flood (if the Property is located in a HUD
designated special flood hazard area), and against such other risks or
hazards as Beneficiary from time to time reasonably may designate, in an
amount equal to one hundred percent (100%) of the then "full replacement
cost" of the Improvements, the Fixtures and the Personalty, without
deduction for physical depreciation.
(2) Rental income insurance against loss of income in an
amount not less than twelve (12) months rental and taxes and other
operating expense reimbursements or payments at then-current income levels.
(3) Comprehensive General Liability insurance including
broad form property damage, contractual liability and personal injury or
death coverage, with a combined single limit of at least $5,000,000.
(4) "Builders Risk" insurance, during any material
construction, repair, replacement, renovation or alteration of the
Improvements, in such amounts as are reasonably approved by Beneficiary.
(5) If applicable, boiler and machinery insurance
covering boilers and other pressure vessels, the air conditioning system,
high pressure piping and other machinery and equipment required for the
operation of the Property.
(6) Such other insurance, and in such amounts, as may
from time to time be reasonably required by Beneficiary.
B. Upon Beneficiary's written request, Trustor shall provide
Beneficiary with satisfactory evidence of compliance with applicable
requirements for Worker's Compensation insurance and of employee automobile
coverage.
C. All policies of insurance required by this Deed of Trust
(i) shall be satisfactory in form and substance to
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Beneficiary and written with companies having an A.M. Best rating of at
least B+ XII and reasonably satisfactory to Beneficiary, (ii) shall name
Beneficiary as an additional insured as it interests may appear, (iii)
shall contain a Standard Lender's Loss Payable endorsement and other non-
contributory standard mortgagee protection clauses acceptable to
Beneficiary, and at Beneficiary's option, a waiver of subrogation rights by
the insurer, (iv) shall contain an agreement by the insurer that such
policy shall not be amended or cancelled without at least thirty (30) days'
prior written notice to Beneficiary, (v) shall be in the full replacement
cost of the Improvements, without deduction for physical depreciation and
(vi) shall contain such other provisions as Beneficiary deems reasonably
necessary or desirable to protect its interests. Any policies containing a
coinsurance clause shall include a replacement cost endorsement adequate to
ensure that the coinsurance clause is rendered inoperative.
D. In the event a blanket policy is submitted to satisfy
Trustor's responsibilities under this Paragraph 3.2, in addition to such
other requirements set forth herein, Trustor shall deliver to Beneficiary a
certificate from such insurer indicating that Beneficiary is an insured
under such policy and designating the amount of such insurance applicable
to the Property.
E. Trustor shall furnish evidence, satisfactory to
Beneficiary, that Trustor's insurance coverage is sufficient after payment
of any deductible (assuming the total destruction of the Property) to
permit Trustor to rebuild the Improvements (including basic tenant
improvements) and to replace the Fixtures and Personalty in such manner as
to enable the Property to be operable and rentable as it is currently
rented and operated.
F. Self-insurance (other than the applicable deductibles
approved by Beneficiary) shall not be employed to satisfy the requirements
of this Paragraph 3.2.
G. All of Trustor's right, title and interest in and to all
policies of property insurance and any unearned premiums paid thereon are
hereby assigned (to the fullest extent assignable) to Beneficiary who shall
have the right, but not the obligation, to assign the same to any purchaser
of the Property at any foreclosure sale.
H. Prior to the expiration dates of any policy previously
furnished pursuant to this Paragraph 3.2, Trustor shall provide Beneficiary
with a certificate with respect to the renewal policies together with
evidence reasonably satisfactory to Beneficiary of Trustor's payment of the
applicable premiums.
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35.2 INSPECTION OF PROPERTY. Trustor hereby grants to
Beneficiary, its agents, employees, consultants and contractors, the right
to enter upon the Property for the purpose of making any and all
inspections, reports, tests (including, without limitation, soils borings,
ground water testing, wells and/or soils analysis), inquiries and reviews
as Beneficiary (in its sole and absolute discretion) may deem necessary to
assess the then current condition of the Property. Beneficiary shall
provide Trustor with three (3) business day's notice of such entry;
provided, however, that Trustor's consent shall not be required for such
entry or for the performance of such tests. Beneficiary agrees that unless
an Event of Default has occurred and remains uncured it shall not perform
any invasive testing of the Property without Trustor's prior consent, which
Trustor may condition upon receipt of an agreement satisfactory to Trustor
and Beneficiary pursuant to which Beneficiary agrees to be responsible for
any increased liabilities caused by Beneficiary's requested invasive
testing.
35.3 TAX RECEIPTS. Trustor will deliver to Beneficiary,
within seven (7) days after the demand made therefor, bills showing the
payment to the extent then due of all taxes, assessments (including,
without limitation, those payable in periodic installments), and any
Imposition that may have become a lien upon the Property or any part
thereof.
35.4 PREPAYMENT. Trustor may prepay the Loan only on the
terms and conditions set forth in the Note and Trustor shall pay
Beneficiary prepayment charges, if any, in respect of any prepayment,
whether voluntary or involuntary, as required by and on the terms and
conditions set forth in the Note.
36. EVENTS OF DEFAULT AND REMEDIES OF BENEFICIARY
36.1 EVENTS OF DEFAULT.
A. If one or more of the following events shall have occurred
and be continuing:
(1) Trustor shall fail to pay when within five (5) days
of the date due any installment of interest or principal under the Note or
any other part of the Indebtedness that has a stated due date, or, in the
case of any other monetary payment, Trustor shall fail to make such payment
within five (5) days after Trustor's receipt of written notice that such
payment is due;
(2) Trustor shall fail to timely observe, perform or
discharge any Obligation contained in any of the Loan Documents, other than
as described in Paragraphs 36.1A(1), (3), (4), (5), (6), and (7), and any
such failure
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shall remain unremedied for thirty (30) days or such lesser period as may
be otherwise specified in the applicable Loan Document (the "Grace Period")
after notice to Trustor of the occurrence of such failure; provided,
however, that the Grace Period may be extended to ninety (90) days if: (a)
Beneficiary determines in good faith that (i) such default cannot be cured
within the Grace Period but can be cured within ninety (90) days, (ii) no
lien or security interest created by the Loan Documents shall be impaired
prior to the completion of such cure, and (iii) Beneficiary's immediate
exercise of any remedies provided hereunder or by law is not necessary for
the protection or preservation of the Property of Beneficiary's security
interest therein, and (b) Trustor shall immediately commence and diligently
pursue the cure of such default;
(3) Trustor, as lessor or sublessor, as the case may be,
shall assign the rents or income of the Property or any part thereof (other
than to Beneficiary) without first obtaining the written consent of
Beneficiary;
(4) [intentionally omitted]
(5) Any representation or warranty made by Trustor in,
under or pursuant to the Loan Documents was false or misleading in any
material respect as of the date on which such representation or warranty
was made or deemed remade;
(6) Except as otherwise permitted by the Loan Documents,
(i) Any claim or lien shall be filed against the Property or any part
thereof, whether or not such lien shall be prior to this Deed of Trust,
which shall be maintained for a period of forty-five (45) days without
discharge, satisfaction or adequate bonding in accordance with the terms of
this Deed of Trust; (ii) the existence of any interest in the Property
other than the Permitted Exceptions, those of Trustor, Trustee, Beneficiary
and any tenants in the Property; or (iii) the sale, hypothecation,
conveyance or other disposition of the Property without the prior written
consent of Beneficiary except as the result of the condemnation of a non-
material part of the Property; or
(7) Any of the Loan Documents, at any time after their
respective execution and delivery and for any reason, other than an act or
omission of Beneficiary, shall cease to be in full force and effect or be
delclared null and void, or cease to constitute valid and subsisting liens
and/or valid and perfected security interests in and to the Property and
Trustor shall have failed to execute and deliver such documents as
Beneficiary may reasonably request to cause such documents to be restored
to full force and effect or such liens to be restored and perfected, or
Trustor shall contest or
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deny in writing that it has any further liability or obligation under any
of the Loan Documents.
THEN and in any such event Beneficiary may, by written notice
delivered to Trustor, which notice specifically states the occurrence of an
Event of Default, declare Trustor to be in default. Upon the occurrence of
such event and the giving of such notice, the same shall constitute an
event of default (an :Event of Default").
B. It shall constitute an Event of Default hereunder
without the requirement of any notice if one or more of the following
events shall have occurred and be continuing:
(1) (i) The entry of an order for relief under Title 11
of the United States code as to Trustor, any general partner of Trustor
(other than Encino Plaza), any parent company of such partner, or any owner
of the Property or any interest therein or the adjudication of Trustor
(other than Encino Plaza), any general partner of Trustor, or any owner of
the Property as insolvent or bankrupt pursuant to the provisions of any
state insolvency or bankruptcy act; (ii) the commencement by Trustor (other
than Encino Plaza), and general partner of Trustor, any parent company of
such partner, or any owner of the Property or any interest therein of any
case, proceeding or other action seeking any reorganization, arrangement,
composition, adjustment, liquidation, dissolution or similar relief for
itself under any present or future statute, law or regulation relating to
bankruptcy, insolvency, reorganization or other relief for debtors; (iii)
consent to acquiescence in or attempt to secure the appointment of any
Receiver of all or any substantial part of its properties or of the
Property by Trustor, any general partner of Trustor (other than Encino
Plaza), any parent company of such partner, or any owner of the Property or
any interest therein; (iv) Trustor, any general partner of Trustor (other
than Encino Plaza), and parent company of such partner, or any owner of the
Property or any interest therein shall admit in writing its inability to
pay its debts or shall make a general assignment for the benefit of
creditors; or (v) Trustor, any general partner of Trustor (other than
Encino Plaza), any parent company of such partner, or any owner of the
Property or any interest therein shall take any action to authorize any of
the acts set forth above; or
(2) Any case, proceeding or other action against
Trustor, any general partner of Trustor (other than Encino Plaza), any
parent company of such partner, or any owner of Property or any interest
therein shall be commenced seeking to have an order for relief entered
against such party as a debtor or seeking any reorganization, arrangement,
composition, adjustment, liquidation, dissolution or similar relief for
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itself under any present or future statute, law or regulation relating to
bankruptcy, insolvency, reorganization or other relief for debtors, or
seeking the appointment of any Receiver for Trustor, any general partner
thereof (other than Encino Plaza), any parent company of such partner, or
any owner of the property or any interest therein or for all or any
substantial part of its property or the Property, and such case, proceeding
or other action remains undismissed for an aggregate of sixty (60) days
(whether or not consecutive) or Trustor or such owner or general partner or
parent company during the period of its ownership fails to proceed
diligently during such sixty (60) day period to have such proceeding or
other action dismissed.
C. Upon the occurrence of any Event of Default, Beneficiary
may at any time declare all of the Indebtedness to be due and payable and
the same shall thereupon become immediately due payable, together with any
prepayment fee due in accordance with the terms of the Note, without any
further presentment, demand, protest or notice of any kind. Beneficiary
may in its sole discretion, also do any of the following:
(1) in person, by agent, or by a Receiver, and without
regard to the adequacy of security, the solvency of Trustor or the
condition of the Property, enter upon and take possession of the Property,
or any part thereof, in its own name or in the name of Trustee and do any
acts which Beneficiary deems necessary to preserve the value, marketability
or rentability of the Property; sue for or otherwise collect the rents,
issues and profits therefrom, including those past due and unpaid, and
apply the same, less cost and expenses of operation and collection,
including, without limitation, reasonable attorneys' fees, against the
Indebtedness, all in such order as beneficiary may determine. The entering
upon and taking possession of said property, the collection of such rents,
issues and profits and the application thereof as aforesaid shall not cure
or waive any default or notice of default hereunder or invalidate any act
done pursuant to such notice. In no event, however, shall the Beneficiary
(nor any successor or assignee of Beneficiary) execute any document,
agreement or instrument which purports to create, or take any action with
the specific intent to create, any personal liability of Trustor to third
parties pursuant to the foregoing. Any document, agreement or instrument
executed by Beneficiary with or for the benefit of a third party pursuant
to this Paragraph shall be deemed to include the limitations on the
personal liability of Trustor set forth in Paragraph 32 of this Deed of
Trust;
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(2) commence an action to foreclose this Deed of Trust in
the manner provided under this Deed of Trust or by law;
(3) with respect to any Personalty, proceed as to both
the real and personal property in accordance with Beneficiary's rights and
remedies in respect of the Land, or proceed to sell said Personalty
separately and without regard to the Land in accordance with Beneficiary's
rights and remedies as to personal property;
(4) deliver to Trustee a written declaration of default
and demand for sale, and a written notice of default and election to cause
the Property to be sold, which notice Trustee or Beneficiary shall cause to
be duly filed for record.
36.2 PROTECTION OF SECURITY. If an Event of Default shall
have occurred and be continuing, then Beneficiary or Trustee, but without
obligation so to do and without notice to or demand upon Trustor and
without releasing Trustor from any obligations or defaults hereunder, may:
(i) perform any act in such manner and to such extent as either may deem
necessary to protect the security hereof, Beneficiary and Trustee being
authorized to enter upon the Property for such purpose; (ii) appear in and
defend any action or proceeding purporting to affect, in any manner
whatsoever, the obligations or the Indebtedness, the security hereof or the
rights or powers of Beneficiary or Trustee; (iii) pay, purchase or
compromise any encumbrance, charge or lien that in the judgement of
Beneficiary or Trustee is prior or superior hereto; and (iv) in exercising
any such powers, pay necessary expenses, employ counsel and pay reasonable
attorneys' fees. In no event, however, shall the Beneficiary (nor any
successor or assignee of Beneficiary) execute any document, agreement or
instrument which purports to create, or take any action with the specific
intent to create, any personal liability of Trustor to third parties
pursuant to the foregoing. Any document, agreement or instrument executed
by Beneficiary with or for the benefit of a third party pursuant to this
Paragraph shall be deemed to include the limitations on the personal
liability of Trustor set forth in Paragraph 32 of this Deed of Trust.
Trustor agrees that all sums expended by Trustee or Beneficiary pursuant to
this paragraph, together with interest at the Secondary Interest Rate from
the date of expenditure by Beneficiary, shall be added to the principal
amount of the Indebtedness secured by the Loan Documents and this Deed of
Trust and shall be payable by Trustor to beneficiary upon demand.
36.3 RECEIVER. If an Event of Default shall have occurred and
be continuing, Beneficiary, as a matter of strict right and without notice
to Trustor or anyone claiming under Trustor, except such minimal notice to
Trustor as may be
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required by the applicable court in connection with an ex parte
application, and without regard to the then value of the Property, shall
gave the right to apply ex parte to any court having jurisdiction to
appoint a Receiver to enter upon and take possession of the Property, and
Trustor hereby waives notice of any application therefor, except such
minimal notice to Trustor as may be required by the applicable court in
connection with an ex parte application, provided a hearing to confirm such
appointment with notice to Trustor is set within the time required by law.
Any such Receiver shall have all the powers and duties of Receivers in like
or similar cases and all the powers and duties of Beneficiary in case of
entry as provided in this Deed of Trust, and shall continue as such and
exercise all such powers until the date of confirmation of sale, unless
such receivership is sooner terminated.
36.4 REMEDIES CUMULATIVE. All remedies of Beneficiary
provided for herein are cumulative and shall be in addition to any and all
other rights and remedies provided in the other Loan Documents or by law.
The exercise of any right or remedy by Beneficiary hereunder shall not in
any way constitute a cure or waiver of default hereunder or under the Loan
Documents, or invalidate any act done pursuant to any notice of default, or
prejudice Beneficiary in the exercise of any of its rights hereunder or
under the Loan Documents.
36.5 CURING OF DEFAULTS. If Trustor shall at any time fail to
perform or comply with any of the terms, covenants and conditions required
on Trustor's part to be performed and complied with under this Deed of
Trust, any of the other Loan Documents or any other agreement that, under
the terms of this Deed of Trust, Trustor is required to perform, then
Beneficiary, and without waiving or releasing Trustor from any of the
Obligations, may, in its sole discretion:
(i) take out, pay for and maintain any of the insurance
policies provided for therein; and/or
(ii) after the expiration of any applicable grace period
or notice and cure period make any payments thereunder payable by Trustor
and subject to Trustor's rights to contest certain obligations specifically
granted hereby, perform any such other acts thereunder on the part of
Trustor to be performed and enter upon the Property for such purpose.
All sums so paid out of Beneficiary's own funds and all reasonable costs
and expenses incurred and paid by Beneficiary in connection with the
performance of any such act, together with interest on unpaid balances
thereof at the Secondary Interest Rate from the respective dates of
Beneficiary's making of each such payment, shall be added to the principal
of the Indebted-
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ness, shall be secured by the Loan Documents and by the lien of this Deed
of Trust, prior to any right, title or interest in or claim upon the
Property attaching or accruing subsequent to the lien of this Deed of
Trust, and shall be payable by Trustor to Beneficiary or demand.
37. SECURITY AGREEMENT AND FIXTURE FILING
37.1 GRANT OF SECURITY INTEREST. Trustor hereby grants to
Beneficiary a security interest in and to all Trustor's right, title and
interest now owned or hereafter acquired in and to the Personalty and the
Fixtures (collectively, the "Collateral").
37.2 REMEDIES. This Deed of Trust constitutes a security
agreement with respect to the Collateral in which Beneficiary is hereby
granted a security interest. In addition to the rights and remedies
provided under this Deed of Trust, Beneficiary shall have all of the rights
and remedies of a secured party under the California Uniform Commercial
Code as well as all other rights and remedies available at law or in
equity. Trustor hereby agrees to execute and deliver on demand and
irrevocably constitutes and appoints Beneficiary the attorney-in-fact of
Trustor to, at Trustor's expense, execute, deliver and, if appropriate, to
file with the appropriate filing officer or office such security
agreements, financing statements, continuation statements or other
instruments as Beneficiary may request or require in order to impose,
perfect or continue the perfection of the lien or security interest created
hereby. In no event, however, shall the Beneficiary (nor any successor or
assignee of Beneficiary) execute any document, agreement or instrument
which purports to create, or take any action with the specific intent to
create, any personal liability of Trustor to third parties pursuant to the
foregoing power of attorney. Any document, agreement or instrument
executed by Beneficiary with or for the benefit of a third party pursuant
to this Paragraph shall be deemed to include the limitations on the
personal liability of Trustor set forth in Paragraph 32 of this Deed of
Trust. Upon the occurrence of any event of Default, Beneficiary shall have
(i) the right to cause any of the Collateral which is personal property to
be sold at any one or more public or private sales as permitted by
applicable law and to apply the proceeds thereof to the Indebtedness or any
other monetary obligation of Trustor to Beneficiary, and (ii) the right to
apply to the Indebtedness or any other monetary obligation of Trustor to
Beneficiary, any Collateral which is cash, negotiable documents or chattel
paper. Any such disposition may be conducted by an employee or agent of
Beneficiary or Trustee. Any Person, including, without limitation, both
Trustor and Beneficiary, shall be eligible to purchase any part or all of
such Personalty at any such disposition.
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37.3 EXPENSES. Expenses o retaking, holding, preparing for
sale, selling or the like pertaining to the Collateral shall be borne by
Trustor and shall include Beneficiary's and Trustee's reasonable attorneys'
fees and legal expenses. Trustor, upon demand of Beneficiary shall
assemble the Collateral and make it available to Beneficiary at the
Property, a place which is hereby deemed to be reasonably convenient to
Beneficiary and Trustor. Beneficiary shall give Trustor at least ten (10)
days' prior written notice of the time and place of any public sale or
other disposition of the Collateral or of the time after which any private
sale or any other intended disposition is to be made. Any such notice sent
to Trustor in the manner provided for the mailing of notices herein is
hereby deemed to be reasonable notice to Trustor.
37.4 FIXTURE FILING. This Deed of Trust constitutes a
financial statement filed as a fixture filing in the Official Records of
the County Recorder of the county in which the Land is located with respect
to any and all Fixtures included within the term "Property" as used herein
and with respect to any goods, Personalty or other personal property that
may now be or hereafter become Fixtures.
37.5 WAIVERS. Trustor waives (a) any right to require
Beneficiary to (i) proceed against any Person, (ii) proceed against or
exhaust any Collateral or (iii) pursue any other remedy in its power; and
(b) any defense arising by reason of disability or other defense of Trustor
or any other Person, or by reason of the cessation from any cause
whatsoever of the liability of Trustor or any other Person. Until the
Indebtedness shall have been paid in full, Trustor shall not have any right
subrogation, and Trustor waives any right to enforce any remedy which
Beneficiary now has or may hereafter have against Trustor or against any
other Person and waives any benefit of and any right to participate in any
Collateral or security whatsoever now or hereafter held by Beneficiary.
38. MISCELLANEOUS
38.1 NO WAIVER. No waiver by Beneficiary of any default or
breach by Trustor hereunder shall be implied from any omission by
Beneficiary to take action on account of such default if such default
persists or is repeated, and no express waiver shall affect any default
other than the default expressly referenced in the waiver and such waiver
shall operative only for the time and to the extent therein stated.
Waivers of any covenant, term or condition contained herein shall not be
construed as a waiver of any subsequent breach of the same covenant, term
or condition. The consent or approval by Beneficiary to or of any act by
Trustor requiring further
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consent or approval shall not be deemed to waive or render unnecessary the
consent or approval to or of any subsequent similar act.
38.2 JOINDER OF FORECLOSURE. Should Beneficiary hold any
other or additional security for the payment of the Indebtedness or
performance of the Obligations, its sale or foreclosure, upon any default
in such payment or performance, in the sole discretion of Beneficiary, may
be prior to, subsequent to, or joined or otherwise contemporaneous with any
sale or foreclosure hereunder. In addition to the rights herein
specifically conferred, Beneficiary, at any time and from time to time, may
exercise any right or remedy now or hereafter given by law to beneficiaries
under deeds of trust generally, or to the holders of any obligations of the
kind hereby secured.
38.3 GOVERNING LAW. The parties expressly agree that this
Deed of Trust (including, without limitation, all questions regarding
permissible rates of interest) shall be governed by and construed in
accordance with the laws of the state in which the Land is located.
38.4 SUBORDINATION. At the option of Beneficiary, this Deed
of Trust shall become subject and subordinate in whole or in part (but not
with respect to priority of entitlement to any insurance proceeds, damages,
awards, or compensation resulting from damage to the Property or
condemnation or exercise of power of eminent domain), to any and all
contracts of sale and/or any and all Leases upon the execution by
Beneficiary and recording thereof in the Official Records of the County in
which the Land is located or unilateral declaration to that effect.
Beneficiary may require the issuance of such title insurance endorsements
to the Title Policy in connection with any such subordination as
Beneficiary, in its reasonable judgement, shall determine are appropriate,
and Trustor shall not be obligated to pay any cost or expense incurred in
connection with the issuance thereof.
38.5 WAIVER OF STATUTE OF LIMITATIONS AND RIGHTS TO TRIAL BY
JURY. The pleading of any statute of limitations as a defense to any and
all obligations secured by this Deed of Trust and the right to a jury trial
in any action under or relating to the Loan Documents is hereby waived, to
the fullest extent allowed by law.
38.6 PERSONALTY SECURITY INSTRUMENTS. Trustor covenants and
agrees that if Beneficiary at any time holds additional security for any
obligations secured hereby, it may enforce the terms thereof or otherwise
realize upon the same, at its option, either before or concurrently
herewith or after a sale is made hereunder, and may apply the proceeds upon
the
-18-
Indebtedness secured hereby without affecting the status or of waiving any
right to exhaust all or any other security, including the security
hereunder, and without waiving any breach or default or any right or power
where exercised hereunder, and without waiving any breach or default or any
right or power whether exercised hereunder or contained herein or in any
such other security.
38.7 USURY. In the event that Beneficiary determines that any
charge, fee or interest paid or agreed to be paid in connection with the
Loan may, under the applicable usury laws, cause the interest rate on the
Loan to exceed the maximum permitted by law, then such charges, fees or
interest shall be reduced and any amounts actually paid in excess of the
maximum interest permitted by such laws shall be applied by Beneficiary to
reduce the outstanding principal balance of the Loan. The parties intend
that Trustor shall not be required to pay, and Beneficiary shall not be
entitled to collect, interest in excess of the maximum legal rate permitted
under the applicable usury law.
38.8 INFORMATION REPORTING UNDER IRC SECTION 6045(e). Any
information returns or certifications that must be filed with the Internal
Revenue Service and/or provided to other parties, pursuant to Internal
Revenue Code Section 6045(e) shall be prepared, filed by and sent to the
appropriate parties by Trustor. To the extent permitted by law,
Beneficiary shall have no responsibility to perform such services; provided
however, upon demand Trustor shall reimburse Beneficiary for any costs
incurred by Beneficiary in doing so and shall also pay such fee as
Beneficiary may reasonably and lawfully request. Beneficiary shall, where
requested by Trustor, promptly supply Trustor with all information
pertaining to Beneficiary reasonably required by Trustor to prepare and
file any such return or certification. Trustor shall indemnify Beneficiary
and defend, protect and hold Beneficiary harmless from and against all
loss, cost, damage and expense (including, without limitation, attorneys'
fees and costs incurred in the investigation, defense and settlement of
claims) that Beneficiary may incur, directly or indirectly, as a result of
or in connection with assertion against Beneficiary of any claim relating
to the failure of Trustor to comply with its obligations under this
Paragraph.
38.9 ERISA.
A. Beneficiary represents and warrants to Trustor that, as of
the date of the recording of this Deed of Trust, the source of funds from
which Beneficiary extends the Loan is its general account, which is subject
to the claims of its general creditor under state law and not from any
account holding "plan assets" within the meaning of 29 C.F.R. 2510.3-
-19-
101 or assets of any "governmental plan" within the meaning of Section
3(32) of the Employee Retirement Income Security Act of 1974, as amended
(ERISA"). For so long as the Prudential Insurance Company of America is
the Beneficiary hereunder, it shall not allocate all or any portion of the
Loan to any separate account other than its general account.
B. Trustor represents and warrants to Beneficiary that, as of
the date of this Deed of Trust and so long as JMB Encino Partnership is
Trustor hereunder (i) Trustor is not an "employee benefit plan" as defined
in Section 3 (3) ERISA, which is subject to Title I of ERISA, and (ii) the
assets of Trustor do no constitute "plan assets" or one or more such pans
within the meaning of 29 C.F.R. Section 2510.3-101.
C. Trustor represents and warrants to Beneficiary that, as of
the date of this Deed of Trust, Trustor is not a "governmental plan" within
the meaning of Section 3 (32) of ERISA.
D. Trustor covenants and agrees to deliver to Beneficiary
prior to recordation of this Instrument and, subject to the provisions of
Section 38.9.G, as reasonably requested by Beneficiary from time to time
throughout the term of the Loan, a certification that the assets of Trustor
do not constitute "plan assets" of any employee benefit plan or
governmental plan within the meaning of 29 C.F.R. 2510.3-101, because one
or more of the following is true:
(1) Equity interests in Trustor are publicly offered
securities, within the meaning of 29 C.F.R. Section 2510.3-101(b) (2);
(2) Less than twenty-five percent (25%) of all equity
interests in Trustor are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f) (2); or
(3) Trustor qualifies as an "operating company" or a
"real estate operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e).
E. Any of the following shall constitute an Event of Default
entitling Beneficiary to exercise any and all remedies to which it may be
entitled under the Loan Documents: (i) the failure of any representation
or warranty made by Trustor under this Paragraph 38.9 to be true and
correct in all respects, (ii) the failure of Trustor to provide Beneficiary
with the written certifications referred to in 38.9.D above, or (iii)
failure of the Trustor to indemnify and defend and hold the Beneficiary
harmless in accordance with any provisions of
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this Section 38.9 or (iv) failure of Trustor to comply with any of the
terms, conditions or requirements of this Section 38.9.
F. Trustor shall indemnify, protect and defend and hold
Beneficiary harmless from and against all loss, cost, damage and expense
(incurring, without limitation, attorneys' fees and costs incurred in the
investigation, defense and settlement of claims and losses incurred in
correcting any prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in Beneficiary's
sole discretion) that beneficiary may incur directly or indirectly, as a
result of a default under Paragraph 38.9.E hereof. This indemnity shall
survive any termination, satisfaction or foreclosure of the Deed of Trust.
G. (1) Subject to the following provisions of this Section
38.9.G, not less than thirty-five (35) days before consummation of a direct
or indirect transfer of title to, or a ground lease interest in, the
Property or any portion thereof or any interest therein, or a placement of
a subordinate lien on the Property or any portion thereof (each of which is
referred to below as a "Transfer") to an "employee benefit plan" or a
"governmental plan" or an entity holding "plan assets," Trustor shall
provide notice to Beneficiary of the proposed Transfer, that the proposed
buyer, assignee, lienholder or transferee is an employee benefit plan or
governmental plan. Upon consummation of a Transfer permitted hereunder and
under Article 27 hereof, Trustor shall obtain from the proposed buyer,
assignee, lienholder or transferee a representation to Beneficiary in form
and substance satisfactory to Beneficiary that the representations in
Section 38.9.B, C and D, will be true after the Transfer, and the agreement
of any proposed lienholder or ground lessor that any direct or indirect
transfer of its lien or leasehold interest or any interest therein will be
governed by this Section 38.9.G and that it shall obtain from its
transferee the representations described in Section 38.9; provided,
however, that:
(a) the representations and agreements otherwise
required by this sentence shall not be applicable with respect to transfer
of the entire Property to "employee benefit plan," "governmental plan" or
entity which holds "plan assets" which is permitted under Section
38.9.G(2); and
(b) the representations otherwise required by this
sentence shall not be applicable (but the agreements required of the
lienholder or ground lessor shall be applicable) with respect to the
placement of subordinated lien on the entire Property if the lienholder is
an "employee benefit plan," "governmental plan" or entity which holds "plan
assets" and the lienholder represents
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that (x) if the lienholder is an "employee benefit plan," at the time the
subordinated lien transaction occurred, the lienholder was represented by a
qualified professional asset manager (as defined in Prohibited Transaction
Exemption 84-14) and, for the duration of this Deed of Trust any action or
transaction with respect to the lien will be taken on its behalf by the
qualified professional asset manager or (y) that any transaction during the
term of this Deed of Trust between the lienholder and the Beneficiary shall
be exempt from the prohibited transaction rules of ERISA and any comparable
rules governing governmental plans by reason of any other applicable
exemption.
Notwithstanding the first two sentences of this Section 38.9.G(1), no
certification to Beneficiary at the time of the Transfer, consent from
Beneficiary or notification to Beneficiary shall be required for transfers
of interests from time to time (i) in JMB Realty Corporation, (ii) in JMB
Institutional Realty Corporation (iii) in enties controlled by or under
common control with JMB Realty Corporation or JMB Institutional Realty
Corporation (provided that as a result of the transfer no "employee benefit
plan" or "governmental plan" will acquire an interest in such entities),
(iv) within Trustor, so long as such transfer will not result in a
violation of Trustor's representations and warranties set forth in Section
38.9.
(2) Trustor shall not consummate a proposed transfer of
the Property or any portion thereof to an "employee benefit plan,"
"governmental plan" or entity which holds "plan assets" if Beneficiary
after receiving timely notice of the proposed Transfer, provides notice to
Trustor not more than ten (10) days after notice is received from Trustor
of the Transfer, that such Transfer might reasonably be viewed as causing
the loan transaction (or any exercise of Beneficiary's rights under the
Loan Documents) to be a violation of ERISA or any applicable state statute
regulating a governmental plan at the time of Transfer, Beneficiary's
notice shall state the facts and reasons upon which Beneficiary relied in
deciding that the proposed Transfer might reasonably be viewed as causing
the Loan or the exercise of Beneficiary's rights under the Loan Documents
to violate ERISA or any applicable state statute at the time of the
Transfer. Notwithstanding the foregoing, Trustor may consummate the
proposed Transfer if Trustor in its sole discretion believes that based
upon the facts set forth in Beneficeary's notice, the proposed Transfer
does not cause the Loan or the exercise of Beneficiary's rights under the
Loan Documents to violate ERISA or any applicable state statute, at the
time of the Transfer, provided, however, that Trustor shall indemnify
Beneficiary and defend and hold Beneficiary harmless from and against all
loss, liability,
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claim, judgement, cost, damage and expense that beneficiary shall incur,
directly or indirectly, as a result of a violation of ERISA or any
applicable state stature regulating fiduciary obligations relating to the
investment of governmental plans that results from a Transfer under this
Section 38.9 (including but not limited attorney's fees and costs incurred
in the investigation, defense and settlement of claims and losses incurred
in correcting any prohibited transaction, or in obtaining any individual
prohibited transaction exemption that may reasonably be required in
Beneficiary's sole discretion); and further provided, however that Trustor
shall have no liability to Beneficiary under the foregoing indemnity for
any loss resulting from a Transfer based upon any misrepresentation,
incorrect statement of fact, or omission of fact by Beneficiary in said
notice. The foregoing indemnity shall survive repayment of the Loan and
release, satisfaction or assignment of this Deed of Trust. The foregoing
indemnity notwithstanding, however, Trustor shall have no liability to
Beneficiary under the foregoing indemnity for a loss resulting from (i) the
misrepresentation to Beneficiary or Trustor by a buyer, assignee or
transferee (referred to as a "transferee" with respect to such transferee's
ERISA status or identity as, or relationship to a government plan, or (ii)
any action taken by the transferee in violation of the restrictions on
transfer set forth in this Section 38.9. To the extent that the transferre
shall assume the obligations under the Loan Documents, including the
provisions of this Section 38.9, arising subsequent to the date of
transfer, and further shall be personally liable to Trustor of Beneficiary
with respect to such transferee's ERISA status or identity as, or
relationship to, a governmental plan, and upon such assumption by the
transferee of any obligations under the Loan Documents, the Trustor shall
be released from such liability as is assumed by the transferee hereunder
arising subsequent to the date of transfer.
H. Anything in this Deed of Trust to the contrary
notwithstanding:
(1) Not less than thirty-five (35) days before
consummation of any sale, assignment or transfer of any direct or indirect
interest in the Loan (a "Transfer") to an "employee benefit plan" or a
"governmental plan" or an entity holding "plan assets, "Beneficiary shall
provide notice to Trustor of the proposed Transfer and of the proposed
buyer, assignee or transferee and whether the buyer, assignee or transferee
is an employee benefit plan or governmental plan or an entity that holds
plan assets, and the name of any such employee benefit plan or governmental
plan.
(2) Beneficiary shall not consummate the proposed
Transfer if Trustor, after receiving timely notice of
-23-
the proposed Transfer, provides notice to Beneficiary but not more than ten
(10) days after notice is received from Beneficiary of the Transfer, that
such Transfer might reasonably be viewed as causing the loan transaction
(or any exercise of Trustor's rights (or satisfaction of Trustor's
obligations) under the Loan Documents) to be a violation of ERISA or any
applicable state statute regulating a governmental plan at the time of the
Transfer. Trustor's notice shall state the facts and reasons upon which
Trustor relied in deciding that the proposed Transfer might reasonably be
viewed as causing the Loan or the exercise of Trustor's rights (or
satisfaction of Trustor's obligations) under the Loan Documents to violate
ERISA or an applicable state statute at the time of the Transfer.
Notwithstanding the foregoing, Beneficiary may consummate the proposed
Transfer if Beneficiary in its sole discretion believes that based upon the
facts set forth in Trustor's notice, the proposed Transfer does not cause
the Loan or the exercise of Trustor's rights (or satisfaction of Trustor's
obligations) under the Loan Documents to violate ERISA or an applicable
state statute, at the time of the Transfer, subject, however, to the
indemnity provisions of Section 38.9.H(3).
(3) Beneficiary shall indemnify Trustor and hold Trustor
harmless from and against all loss, liability, claim, judgement, cost,
damage and expense that Trustor shall incur, directly or indirectly, as a
result of violation of ERISA or an applicable state statute regulating
fiduciary obligations relating to the investment of governmental plans that
results from the failure of any representation or warranty made by
Beneficiary under this Section 38.9 to be true and correct in all respects,
the failure of the beneficiary to provide Trustor with the written notices
required under Section 38.9.H(1) or a transfer under Section 38.9.H(2)
(including but not limited to attorney's fees and cost incurred in
correcting any prohibited transaction, or in obtaining any individual
prohibited transaction, or in obtaining any individual prohibited
transaction exemption that may reasonably be required in Trustor's sole
discretion); provided, however, that Beneficiary shall have no liability to
Trustor under the foregoing indemnity for any loss resulting from a
Transfer under Section 38.9.H(2) based upon any misrepresentation,
incorrect statement of fact, or omission of fact by Trustor in said notice.
The foregoing indemnity shall survive the termination, assignment,
satisfaction or foreclosure of this Deed of Trust. The foregoing indemnity
notwithstanding, however, Beneficiary shall have no liability to Trustor
under the foregoing indemnity for a loss resulting from (i) the
misrepresentation to Trustor or Beneficiary by a buyer, assignee or
transferee (referred to as a "transferee") with respect to such
transferee's ERISA status or identity as, or relationship to, a government
plan, or (ii) any action taken by the transferee, as Beneficiary in
violation of the restrictions on transfer set forth in this Section 38.9.
To the extent that
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the transferee, as Beneficiary shall assume all of Beneficiary's
obligations under the Loan Documents, including the provisions of this
Section 38.9, arising subsequent to the date of transfer, and further shall
be personally liable to Trustor or Beneficiary with respect to such
transferee's ERISA status or identity as, or relationship to, a
governmental plan, and upon such assumption by the transferee of the
Beneficiary's obligations under the Loan Documents, the beneficiary shall
be released form such liability as is assumed by the transferee hereunder
arising subsequent to the date of transfer.
(4) Trustor shall have no right of set-off or defense to
the payment or performance of any obligation under the Loan Documents as a
result of any violation of this Paragraph by Beneficiary.
38.10 CERTAIN OBLIGATIONS UNSECURED. Notwithstanding anything
to the contrary set forth herein or any of the Loan Documents, this Deed of
Trust shall not secure the following obligations (the "Unsecured
Obligations"): (i) any obligations evidenced by or arising under the
Remediation and Indemnification Agreement, and (ii) any other obligations
in this Deed of Trust or in any of the other Loan Documents to the extent
that such other obligations relate specifically to the presence on the
Property of Hazardous Materials (as defined in the Remediation and
Indemnification Agreement) and are the same or have the same effect as any
of the obligations evidenced by or arising under the Remediation and
Indemnification Agreement. Any breach or default with respect to the
Unsecured Obligations shall constitute an Event of Default hereunder,
notwithstanding the fact that such Unsecured Obligations are not secured by
this Deed of Trust. Nothing in this section shall, in itself, impair or
limit Beneficiary's right to obtain a judgement in accordance with
applicable law after foreclosure for any deficiency in recovery of all
obligations that are secured by this Deed of Trust following foreclosure."
-25-
2. NO OTHER MODIFICATION. Except as expressly modified
hereby, the Deed of Trust remains in full force and effect.
IN WITNESS WHEREOF, Trustor and Beneficiary have caused
this Modification to be duly executed as of the date first written above.
"Trustor":
JMB ENCINO PARTNERSHIP,
a California general partnership
By: JMB FIRST FINANCIAL ASSOCIATES
Its general partner
By: JMB INCOME PROPERTIES, LTD.-XII
Its general partner, and
By: JMB REALTY CORPORATION
Its general partner
By:
K. JAY WEAVER
[Printed Name and Title]
-26-
"Beneficiary":
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation
By CAROL WEISS, Vice President
[Printed Name and Title]
-27-
State of ILLINOIS)
)
County of COOK )
On OCTOBER 30, 1995 before me, KAREN M. NAVASSI, Notary Public, personally
appeared K. JAY WEAVER, personally known to me or proved to me on the basis
of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
KAREN M. NARCISSI
-28-
State of California )
)
County of LOS ANGELES)
On OCTOBER 31, 1995 before me, GEORGIA A. THEODOR, Notary Public,
personally appeared CAROL WEISS, personally known to me or to be the
person, whose name is subscribed to the within instrument and acknowledged
to me that she executed the same in her authorized capacity, and that by
her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal.
GEORGIA A. THEODOR
-29-
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Sheppard, Mullin, Richter & Hampton
333 South Hope Street, 48th Floor
Los Angeles, California 90071-1448
Attn: James A. Lonergan, Esq.
LOAN NO.: 7 501 241
ASSIGNMENT OF LESSOR'S INTEREST
IN LEASES
THIS ASSIGNMENT OF LESSOR'S INTEREST IN LEASES (this "Assignment") is
made as of October 30, 1995, by JMB ENCINO PARTNERSHIP, a California
partnership having offices at 900 N. Michigan Avenue, Chicago, Illinois
("Assignor"), in favor of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a
New Jersey corporation having offices at 2029 Century Park East, Suite
3700, Los Angeles, California 90067 ("Assignee"), for the benefit and
protection of Assignee as beneficiary under that certain Deed of Trust,
Security Agreement, Assignment of Leases and Fixture Filing dated as of
November 2, 1987, executed by Assignor in favor of Assignee, which is being
amended by a First Amendment to Deed of Trust of even date herewith (as so
amended, the "Deed of Trust") encumbering that certain real property,
together with any improvements now or at any time located thereon, located
in the City of Los Angeles, County of Los Angeles, State of California (the
"Property"), and more particularly described in EXHIBIT A attached hereto
and incorporated herein by this reference and for the benefit and
protection of Assignee as payee and holder of that certain Fixed Monthly
Payment Note, Including Interest, Secured by Deed of Trust, dated November
2, 1987, executed by Assignor, as maker, to and for the benefit of
Assignee, as holder, in the original principal amount of Thirty Million
Dollars ($30,000,000.00), which is being amended and restated pursuant to
an Amended and Restated Promissory Note of even date herewith executed by
Assignor and Assignee in the reduced principal amount of $24, 970, 148.38
to reflect a principal paydown by Assignor, and all modifications, renewals
or extensions thereof (the "Note").
W I T N E S S E T H:
FOR VALUE RECEIVED, Assignor does hereby irrevocably and absolutely
SELL, ASSIGN, TRANSFER, SET OVER AND DELIVER unto Assignee any and all
leasehold interests, including Subleases and tenancies following
attornment, now or hereafter affecting
-1-
or covering any part of the Property, including, without limitation, those
leases described in EXHIBIT B attached hereto (collectively, the "Leases").
TOGETHER, with the immediate and continuing right to collect and
receive all of the rents, income, receipts, revenues, issues and profits
now due or which may become due or to which Assignor may now or shall
hereafter (including the period of redemption, if any) become entitled or
may demand or claim, arising or issuing from or out of the Leases or from
deficiency rents and liquidated damages following default, including,
without limitation, all security and other deposits now or hereafter held
by Assignor, and all proceeds payable under any policy of insurance
covering loss of rents or other income from the Property, together with any
and all rights and claims of any kind that Assignor may have against
lessees under the Leases or any subtenants or occupants of the Property, or
any part thereof (all such moneys, rights and claims described in this
paragraph being hereinafter called the "Receipts").
SUBJECT, however, to a license hereby granted by Assignee to
Assignor, but limited as hereinafter provided, to collect and receive the
Receipts.
ASSIGNOR REPRESENTS, WARRANTS, COVENANTS AND AGREES AS FOLLOWS:
1. REPRESENTATIONS AND WARRANTIES. Assignor represents and warrants
that, except as otherwise set forth in a rent roll delivered to Assignee
within 30 days prior to the recording of this Assignment: (i) Assignor is
the owner of the Property, and has good title to the Leases and Receipts
and full and complete right to assign the same; (ii) no other Person (as
hereinafter defined) has any right, title or interest in the Leases or
Receipts; (iii) Assignor has duly and punctually performed all and singular
the material obligations, terms, covenants, conditions and warranties of
the Major Leases (as defined below) on Assignor's part to be kept, observed
and performed; (iv) Assignor has not previously sold, assigned,
transferred, mortgaged or pledged the Leases or the Receipts, whether now
due or hereafter to become due; (v) no Receipts for any period of more than
thirty (30) days subsequent to the date hereof have been collected, nor has
payment of any of same been otherwise discharged or compromised; (vi) the
lessees under the Leases ("Lessees") are not in material default of any of
the terms thereof and, to Assignor's actual knowledge, do not have any
defense, set-off or counter claim against Assignor thereunder; (vii) the
Leases are in full force and effect, are valid and enforced in accordance
with their terms, and have not been modified, amended or altered, whether
in writing or orally, except as otherwise disclosed to Assignee in writing;
(viii) there are no unextinguished material rent concessions, abatements or
other inducements relating to the
-2-
Leases, and no Lessee has any option or right to acquire any interest in
the Property; and (ix) the rent roll delivered to Assignee in connection
with the funding of the Loan discloses all currently existing Leases and is
complete, accurate and true in all material respects. As used herein, the
term "Person" shall mean and refer to any natural person, corporation,
firm, association, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity. As used
herein, the term "Major Lease" shall mean and refer to any single Lease
covering more than 5000 square feet of rentable area. As used herein, the
term "actual knowledge of Assignor" means the present actual knowledge of
Mr. K. Jay Weaver and Andrea Backman, without investigation or inquiry, and
Assignor represents and warrants to Assignee that (a) the foregoing persons
are the officers or employees of Assignor who are likely to have, in
Assignor's good faith belief, any material knowledge of the Property, and
(b) Andrea Backman is the portfolio manager for the Property and is one
person who is primarily responsible for administering Assignor's interest
in the Property.
2. AFFIRMATIVE COVENANTS. Assignor shall: (i) observe, perform and
discharge, duly and punctually, all and singular the obligations, terms,
covenants, conditions and warranties of the Major Leases, on the part of
Assignor to be kept, observed and performed, and give prompt notice to
Assignee of any failure on the part of Assignor to observe, perform and
discharge the same; (ii) direct the Lessees to deliver all rents and other
payments due under the Leases to Assignee upon written request of Assignee
which states that an Event of Default has occurred and without further
action of Assignor; (iii) upon request of Assignee, notify Lessees in
writing of this Assignment and that any security deposit, or other deposits
heretofore delivered to Assignor have been retained by Assignor or assigned
and delivered to Assignee, as the case may be; (iv) use reasonable efforts
to enforce or secure in the name of Assignee the performance of each and
every obligation, term, covenant, condition and agreement of the major
Leases to be performed by Lessees; (v) to the extent reasonable under the
circumstances, appear in and defend any action or proceeding arising under,
occurring out of, or in any manner connected with the Leases or the
obligations, duties, or liabilities of Assignor and Lessees thereunder; and
(vi) upon request by Assignee subsequent to an Event of Default, to do so
in the name and on behalf of Assignee but at the expense of Assignor, and
to pay all costs and expenses of Assignee, including, without limitation,
reasonable attorneys' fees.
3. NEGATIVE COVENANTS. Assignor shall not, without the prior
written consent of Assignee: (i) lease any part of the Property or renew
or extend any of the Leases; (ii) terminate, amend, modify or alter in any
material manner any of the Leases, or waive, excuse, condone, discount, set
off, compromise, or in any material manner release or discharge
(collectively, "Waiver
-3-
or Discharge") Lessees from any material obligations, covenants, conditions
or agreements by such Lessees to be kept, or accept or consent to any
surrender of Leases; (iii) receive or collect any receipts for a period of
more than one month in advance (whether in costs or by promissory note or
otherwise); (iv) further assign the Leases or pledge, transfer, mortgage or
otherwise encumber or assign future payments of Receipts; (v) commence an
action of ejectment or summary proceedings for dispossession of the Lessees
under any of the leases; (vi) consent to any material modification of the
express purposes for which the Property has been leased; or (vii) consent
to any subletting of the Property or any part thereof, or to any assignment
of the Leases by lessees thereunder or to any assignment or further
subletting by any sublessees. Notwithstanding the foregoing, Assignor may
do the following with respect to the Lease, including without limitation
any new leases affecting the Property, without obtaining Assignee's prior
written consent:
(a) Terminate or otherwise enforce the provisions of any Lease
so long as the Lessee under such Lease leases not more than 5000 rentable
square feet of the Property, and provided that such Lessee is in default
under such Lease;
(b) Enter into any amendment, modification or alteration of
any Lease, or consent to the assignment or subletting of any Lease, or
cause or permit any Waiver or Discharge, so long as the Lessee under such
Lease leases not more than 5000 rentable square feet of the Property,
provided that such amendment, modification, alteration, assignment,
subletting Waiver or Discharge does not (i) substantially increase the
obligations of the landlord by providing non-market inducements to the
Lessee, (ii) decrease or accelerate the rent under such Lease, or (iii)
decrease the term of such Lease; and
(c) Enter into new bona fide arms-length leases (or renew
existing Leases) with third-party tenants for premises of 5000 rentable
square feet or less, provided such leases (i) are on Assignor's standard
form lease approved by Assignee, with no modifications that substantially
increase the obligations of the landlord, (ii) have minimum terms of not
less than 12 months, (iii) provide for the tenant to pay gross rent in
monthly payments, (iv) require the tenant to pay gross rent in monthly
payments, (iv) require the tenant to pay for all non-structural repairs to
the leased premises as well as the tenant's pro rata share of all operating
expenses, utilities, taxes, insurance costs and common area maintenance
costs in excess of the amount of all such costs for the base year; provided
that nothing in this clause (iv) shall prohibit Assignor from agreeing to
provide tenant improvements at the commencement of the term consistent with
the terms of comparable leases in the area, and (iv) have
-4-
minimum base rents of not less than $1.75 per rentable square
foot per month.
In any case in which Assignee's consent is required pursuant to this
Section 3, such consent shall not be unreasonably withheld or delayed and
shall be deemed given unless objections in reasonable detail are given to
Assignor within ten (10) business days following Assignee's receipt of (i)
written request for such consent, and (ii) all pertinent information
relating to the Lease or proposed lease in question, including, without
limitation, copies of the proposed amendment or new lease, if applicable.
4. DEFAULT AND REMEDIES. In the event any representation or
warranty herein of Assignor shall be found to be untrue when made or in the
event Assignor shall default in the payment of any Indebtedness (as
hereinafter defined) or in the observance or performance of any other
Obligation (as hereinafter defined), after the expiration of all applicable
grace or cure periods, if any, set forth in the Deed of Trust, then, in
each such instance, the same shall constitute an "Event of Default"
hereunder and under the Loan Documents (as defined in the Deed of Trust),
thereby entitling Assignee to declare all Indebtedness immediately due and
payable and to exercise any and all of the rights and remedies provided
thereunder and hereunder as well as by law or in equity. Specifically, but
without limiting the generality of the foregoing, upon or at any time after
the occurrence of an Event of Default, Assignee, at its option, shall have
the complete right, power and authority to exercise and enforce any or all
of the following rights and remedies:
(i) to terminate and revoke the license granted to Assignor
hereunder and collect the Receipts, and without taking possession of the
Property, in Assignee's own name, to demand, collect, receive, sue for,
attach and levy the Receipts, to give proper receipts, releases and
acquittance therefor, and after deducting all reasonably necessary and
proper costs and expenses of operation and collection, as determined in
Assignee's sole judgment, and including reasonable attorneys' fees, to
apply the net proceeds thereof, together with any funds of Assignor
deposited with Assignee, upon the Indebtedness and in such order as
Assignee may determine in its sole discretion; and
(ii) without regard to the adequacy of the security, with or without
any action or proceeding, through any person or by agent, by the Trustee
under the Deed of Trust, or by a receiver appointed by a court of competent
jurisdiction, and irrespective of Assignor's possession, to enter upon,
take possession of, manage and operate the Property, or any part thereof or
interest therein, make, modify, enforce, cancel or accept
-5-
surrender of, any of the Leases, remove and evict any Lessee,
increase or decrease rents under any of the Leases, clean and repair any
premises under any of the Leases, and otherwise do any act or incur any
costs or expenses as Assignee deems necessary or proper to protect the
rights of Assignee therein, as fully and to the same extent as Assignor
could do if in possession, and in such event to apply the Receipts so
collected to the operation and management of the Property, in such order as
the Assignee shall deem proper in its sole discretion, including payment of
reasonable management, brokerage and attorneys' fees, payment of the
Indebtedness and maintenance, without interest (unless interest is actually
earned on those reserves, and then only to the extent of interest earned),
of reserves for replacements. In no event, however, shall Assignee (nor
any successor or assignee of Assignee) execute any document, agreement or
instrument which purports to create, or take any action with the specific
intent to create, any personal liability of Assignor to third parties
pursuant to the foregoing. Any document, agreement or instrument executed
by Assignee with or for the benefit of a third party pursuant to this
Paragraph shall be deemed to include the limitations on the personal
liability of Assignor set forth in Paragraph 32 of the Deed of Trust.
Collection of Receipts hereunder, and application thereof as specified
above, and/or the entry upon and taking possession of the Property, or any
part thereof or interest therein, shall not cure or waive any default or
waive, modify or affect any notice of default under any Loan Documents, or
invalidate any act done pursuant to such notice, and the enforcement of
such right or remedy by Assignee, once exercised, shall continue for so
long as Assignee shall elect. If Assignee shall thereafter elect to
discontinue the exercise of any such right or remedy, the same or any other
right or remedy hereunder may be reasserted at any time and from time to
time following any subsequent Event of Default. A demand upon any Lessee
made by Assignee for payment of Receipts by reason of any Event of Default
claimed by Assignee hereunder or under any other Loan Documents shall be
sufficient to warrant to said Lessee to make future payments of all
Receipts to Assignee without the necessity for further consent by Assignor.
As used herein, the term "Indebtedness" shall mean and refer to the
principal of and all other amounts, payments and premiums due under the
Note and any extensions or renewals thereof (including extensions or
renewals at a different rate of interest, whether or not evidenced by a new
or additional promissory note or notes), and additional advances under,
evidenced by
-6-
and/or secured by the Loan Documents, plus interest on all such amounts
incurred pursuant to the terms of the Loan Documents. As used herein, the
term "Obligations" shall mean and refer to any and all of the covenants,
promises and other obligations (including the Indebtedness) made or owing
by Assignor to or due Assignee under and/or as set forth in the Loan
Documents.
5. GRANT OF LICENSE TO ASSIGNOR. So long as there shall exist no
Event of Default which remains uncured, Assignor shall have the right under
a license granted hereby (but limited as provided in this paragraph) to
collect, but not more than 30-days in advance, all Receipts. Assignor
shall receive such Receipts and shall apply the same to the payment of
taxes and assessments upon the Property before penalty or interest are due
thereon (or the establishment of reserves for the payment thereof), to the
cost of such insurance and of such maintenance and repairs as is required
by the terms of the Deed of Trust, to the satisfaction of all obligations
under the Leases, and to the payment of the Indebtedness before using any
part of the Receipts for any other purpose.
6. POWER OF ATTORNEY. Effective automatically upon the occurrence
of an Event of Default and continuously thereafter, and without the
necessity of the execution of any further documents or instruments,
Assignor hereby constitutes and appoints Assignee as Assignor's true and
lawful attorney, coupled with an interest, in the name, place and stead of
Assignor (i) to collect, demand, sue for, attach, levy, recover and receive
all Receipts due and payable by Lessees pursuant to the Leases and to give
proper notices, receipts, releases and acquittance therefor and after
deducting expenses of collection, to apply the net proceeds as a credit
upon any portion, as selected by Assignee, of the Indebtedness,
notwithstanding that the amount owing thereunder may not then be due and
payable or that the Indebtedness is adequately secured, and Assignor does
hereby authorize and direct such Lessees to deliver such payment to
Assignee in accordance with the foregoing; and (ii) to subject and
subordinate at any time and from time to time, the Leases, to the lien of
the Deed of Trust or any other Loan Documents or any other mortgage or deed
of trust on or to any ground lease of the Property or to request or require
such subordination, where such reservation, option or authority was
reserved under the Leases to the Assignor, or in any case, where the
Assignor otherwise would have the right, power or privilege so to do.
Assignor hereby ramifies and confirms all acts that Assignee shall do or
cause to be done by virtue of the powers granted hereby and warrants that
the Assignor has not, on or at any time prior to the date hereof, exercised
any such right of subordination under clause (ii) above and covenants not
to exercise any such right except as may be required by Assignee. The
power of attorney hereunder granted is irrevocable and continuing, shall
survive the insolvency or dissolution of Assignor, and such rights,
-7-
powers and privileges shall be exclusive in Assignee, its successors and
assigns so long as any part of the Indebtedness shall remain unpaid. In no
event, however, shall Assignee (nor any successor or assignee of Assignee)
execute any document, agreement or instrument which purports to create, or
take any action with the specific intent to create, any personal liability
of Assignor to third parties pursuant to the foregoing power of attorney.
7. INDEMNITY. Except for those matters which are finally
adjudicated by a court of competent jurisdiction to have arisen from the
gross negligence or willful misconduct of Assignee or any of Assignee's
agents, Assignor shall indemnify, defend, protect and hold Assignee
harmless from and against any and all liability, loss, cost, damage or
expense (including, without limitation, reasonable attorneys' fees) that
Assignee incurs under or by reason of this Assignment, for any action taken
by Assignee hereunder in accordance with the terms hereof, or the
enforcement of this Assignment, or by reason or in defense of any and all
claims and demands whatsoever that may be asserted against Assignee arising
out of the Leases, including any claim by any Lessees of credit from rental
paid to and received by Assignor. If Assignee incurs any such liability,
loss, cost, damage or expense, the amount thereof with interest thereon at
the Secondary Interest Rate (as defined in the Note), shall be payable by
Assignor immediately upon demand, shall be secured by the Deed of Trust,
and shall be part of the Indebtedness; provided that if such amounts are
paid within five business days after such demand, such amounts shall
instead bear interest at the Interest Rate (as defined in the Note) in lieu
of the Secondary Interest Rate.
8. NO WAIVER. The failure of Assignee to avail itself of any of the
terms, covenants and conditions of this Assignment for any period of time,
or at any time or times, shall not be construed or deemed to be a waiver of
any such right, and nothing herein contained, nor anything done or omitted
to be done by Assignee pursuant hereto, shall be deemed a waiver by
Assignee of any of its rights and remedies under the Loan Documents, or
under any applicable laws. The rights of Assignee to collect the
Indebtedness and to enforce any security therefor may be exercised by
Assignee, either prior to, simultaneously with, or subsequent to, any
action taken hereunder.
9. NO MERGER. So long as any of the Indebtedness shall remain
unpaid, unless Assignee shall otherwise consent in writing, the leasehold
estates and the subleasehold estates on the Property, if any, shall not
merge, but shall always be kept separate and distinct, notwithstanding the
union of said estates either in Assignor or in any Lessees or in a third
party, by purchase or otherwise.
-8-
10. NO MORTGAGEE IN POSSESSION; NO OTHER LIABILITY. The acceptance
by Assignee of this Assignment, with all of the rights, power, privileges
and authority so created, shall not, prior to entry upon and taking of
possession of the Property by Assignee, be deemed or construed to (i)
constitute Assignee a mortgagee in possession nor thereafter or at any time
or in any event obligate Assignee to appear in or defend any action or
proceeding relating to the Leases or to the Property, (ii) require Assignee
to take any action hereunder, or to expend any money or incur any expenses
or perform or discharge any obligation, duty or liability under the Leases,
or (iii) require Assignee to assume any obligation or responsibility for
any security deposits or other deposits delivered to Assignor by Lessees
and not assigned and delivered to Assignee. Assignee shall not be liable
in any way for any injury or damage to person or property sustained by any
Person in or about the Property.
11. PAYMENT OF INDEBTEDNESS. Upon payment in full of all of the
Indebtedness, this Assignment shall become and be void and of no effect,
but the affidavit, certificate, letter or statement of any officer of
Assignee showing any part of said Indebtedness to remain unpaid shall be
and constitute conclusive evidence of the validity, effectiveness and
continuing force of this Assignment, and any Person may and is hereby
authorized to rely thereon.
12. NOTICES. All notices, demands or documents of any kind that
Assignee or Assignor may be required or may desire to serve shall be served
in the manner provided in the Deed of Trust.
13. SUCCESSORS AND ASSIGNS; GENDER. The terms, covenants,
conditions and warranties contained herein and the powers granted hereby
shall run with the land, shall inure to the benefit of and bind all parties
hereto and their respective heirs, executors, administrators, successors
and assigns, and all subsequent owners of the Property, and all subsequent
holders of the Note and the Deed of Trust, subject in all events to the
provisions of the Deed of Trust regarding transfers of the Property by
Assignor. In this Assignment, whenever the context so requires, the
masculine gender shall include the feminine and/or neuter and the singular
number shall include the plural and conversely in each case. If there is
more than one party constituting Assignor, all obligations of each Assignor
hereunder shall be joint and several.
14. SEVERABILITY. If any term, provision, covenant or condition
hereof or any application thereof should be held unenforceable, in whole or
in part, all terms, provisions, covenants and conditions hereof and all
applications thereof not held invalid, void or unenforceable shall continue
in full force and effect and shall in no way be affected, impaired or
invalidated thereby.
15. GOVERNING LAW. This Assignment shall be governed by and
construed in accordance with the laws of the State of California.
16. EXPENSES. Assignor shall pay on demand all reasonable costs and
expenses incurred by Assignee in connection with the review of Leases prior
to the date of this Assignment or the preparation and negotiation of any
subordination, nondisturbance and attornment agreements requested by
tenants, including the reasonable fees and disbursements of Assignee's
outside counsel.
17. ABSOLUTE ASSIGNMENT. Notwithstanding anything contained herein
to the contrary, this Assignment is intended by Assignor and Assignee to
create and shall be construed to create an absolute assignment by Assignor
to Assignee of all of Assignor's right, title and interest in the Leases
and Receipts and shall not be deemed to create a security interest therein.
Assignor and Assignee further agree that, during the term of this
Assignment, the Leases and Receipts shall not constitute property of
Assignor (or of any estate of Assignor) within the meaning of 11 U.S.C.
Section 541, as amended from time to time.
18. LIMITATION ON PERSONAL LIABILITY.
(a) Except as expressly set forth in paragraph 18(b) below, the
recourse of Assignee with respect to the obligations evidenced by the Note
or set forth in any Loan Document shall be solely to any and all security
therefor (the "Collateral") and, accordingly, except as expressly set forth
in Paragraph 18(b) below, the obligations evidenced by the Note or set
forth in the Loan Documents are non-recourse to anything other than the
Collateral.
(b) Notwithstanding anything to the contrary contained in this
Assignment or in any Loan Document, nothing shall be deemed in any way to
impair, limit or prejudice the rights of Assignee:
(i) in foreclosure proceedings or in any ancillary
proceedings brought to facilitate Assignee's foreclosure on the Collateral
or any portion thereof;
(ii) to recover from Assignor damages or costs (including
without limitation reasonable attorneys' fees) incurred by Assignee as a
result of intentional waste of the Collateral by Assignor;
(iii) to recover from Assignor any condemnation or insurance
proceeds
-10-
attributable to the Collateral received by Assignor which
were not paid to Assignee or used to restore the Collateral in accordance
with the terms of the Deed of Trust;
(iv) to recover from Assignor any rents, profits, security
deposits, advances, rebates, prepaid rents or other similar sums
attributable to the Collateral collected by or for Assignor following an
Event of Default and not properly applied to the reasonable fixed and
operating expenses and other proper expenses of ownership of the
Collateral, including payments of the Loan;
(v) to recover from Assignor any loss or damage suffered by
Assignee by reason of the Collateral being transferred in violation of
Section 38.9 of the Deed of Trust and such transfer results in the Loan
being a non-exempt prohibited transaction under ERISA; and in such case,
Assignor fails to unwind or reverse the sale, conveyance, assignment,
disposition or transfer within thirty (30) days following written notice
from Assignee;
(vi) to exercise any other specific rights or remedies
afforded Assignee under any provisions of the Loan Documents or at law or
in equity provided that this clause (vi) shall not permit Assignee to
pursue any action for a deficiency after a foreclosure or seek any other
recovery based on personal liability except to the extent that Assignor may
have personal liability under a provision of this Section 18(b) other than
this clause 18(b) (vi);
(vii) to recover under that certain Guaranty of Payment dated
October 29, 1987, executed by Encino Plaza in favor of Assignee;
(viii) to pursue any personal liability of Assignor under
the Remediation and Indemnification Agreement (as defined in the Deed of
Trust);
-11-
(ix) to recover from Assignor damages or costs incurred by
Assignee as a result of any breach or violation of paragraph 27 of the Deed
of Trust (provided that in a case where Assignor demonstrates to the sole
satisfaction of Assignee that such sale, conveyance, assignment or transfer
shall have been unintentional, Assignor shall have thirty (30) days
following written notice from Assignee to unwind or reverse the sale,
conveyance, assignment or transfer); and
(x) to recover from maker damages or costs incurred by
Assignee as a result of any actionable fraud or intentional
misrepresentation by Assignor in connection with the Collateral, the Loan
Documents or the Loan.
(c) The agreement contained in this Paragraph 18 to limit the
personal liability of Assignor shall become null and void and of no further
force or effect in the event that the Collateral or any part thereof or any
interest therein shall be further encumbered by a voluntary lien securing
any obligation upon which Assignor shall be personally liable for repayment
but only to the extent of the dollar amount that Assignor is personally
liable with respect to the additional encumbrance (provided, however, a
letter of credit given to such subordinate mortgagee as additional
collateral shall not cause the obligation secured thereby to be deemed
recourse and provided further that this clause (c) shall not apply to
liability which is recourse only under one or more conditions substantially
similar to Section 18 (b) and (c) of this Assignment unless recourse
liability actually occurs under said voluntary lien);
(d) Notwithstanding anything to the contrary contained herein,
Assignee's recourse shall be limited to the assets owned by Encino Plaza,
JMB Income Properties, Ltd. - XII, an Illinois limited partnership, and/or
JMB Income Properties, Ltd. - XIII, an Illinois limited partnership.
Without limitation on the preceding sentence, in no event shall any of JMB
Realty Corporation, a Delaware corporation ("JMB Corp."), Income Partners-
XII, an Illinois limited partnership, Income Associates-XII, an Illinois
limited partnership, Income Associates-XIII, an Illinois general
partnership, JMB Properties-XIII, Inc., an Illinois corporation, or any
other person or entity which is now or hereafter a partner in JMB Income
Properties, Ltd.-XII or JMB Income Properties, Ltd.-XIII, or any officer,
employee or director of any of them, have any
-12-
personal liability, directly or in connection with this Assignment or any
other document or instrument evidencing, securing or executed in connection
with the Loan.
For purposes of the Assignment and the Loan Documents, neither the
negative capital account of any constituent partner and Assignor, nor any
obligation of any constituent partner and Assignor, to restore a negative
capital account or to contribute capital to Assignor,or to other
constituent partners and Assignor, shall be deemed at any time to be the
property or an asset of Assignor, or any such other constituent partner
(and neither Assignee nor any of its successors and assigns shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account or partner's obligation to restore or contribute).
As used herein, a constituent partner in Assignor means a partner in
Assignor or in any partnership that has a direct or indirect interest
(through one or more partnerships) in Assignor.
19. PRIORITY OF LEASES. NOTICE OF THE FOLLOWING IS HEREBY GIVEN TO
ALL TENANTS EXECUTING A LEASE AFFECTING THE PROPERTY, EACH OF WHICH SHALL
BE ON NOTICE OF, BOUND BY AND SUBJECT TO THE TERMS OF THIS PARAGRAPH 19:
19.1 Anything to the contrary in any Lease notwithstanding,
Assignee shall have the right, but not the obligation, to change the
priority of that Lease and the lien of the Deed of Trust from time to time
by one or more unilateral notices to the tenant that (a) the lien of the
Deed of Trust shall be subordinate to such Lease, or (b) the Lease shall be
subordinate to the Deed of Trust.
19.2 Upon written request of Assignee, every tenant under a
Lease receiving such request shall execute and deliver to Assignee within
the time period specified in that written request (but no sooner than 10
business days after such request) a written agreement in a form reasonably
acceptable to Assignee and such tenant which provides the following: (a)
upon the foreclosure of the Deed of Trust such tenant shall attorn to the
purchaser of the Property at the foreclosure sale, and (b) the foreclosure
of the Deed of Trust shall not disturb or result in the cancellation or
termination of that tenant's Lease; provided, however, that Tenant shall
not be bound to any such agreement unless or until Assignee executes and
delivers the same to such Tenant. Assignor shall not be in default under
this Assignment for a tenant's failure to deliver such agreement, provided
Assignor has used reasonable efforts to obtain such agreement from such
tenant. Assignee has no obligation to deliver such a request to any
tenant.
-13-
19.3 Assignee shall have the right to elect to be a third
party beneficiary of any attornment provisions contained in any Lease.
Anything to the contrary in any Lease notwithstanding, no election by
Assignor under any Lease or otherwise to alter the relative priority of
that Lease and the Deed of Trust shall be effective unless Assignee shall
have consented thereto in writing.
IN WITNESS WHEREOF, this Assignment of Lessor's Interest in Leases
has been duly executed by Assignor the day and year first above written.
ASSIGNOR:
JMB ENCINO PARTNERSHIP,
a California general partnership
By: JMB FIRST FINANCIAL ASSOCIATES
Its general partner
By: JMB INCOME PROPERTIES, LTD. - XII
Its general partner, and
By: JMB REALTY CORPORATION
Its general partner
By:
K. Jay Weaver
(PRINTED NAME AND TITLE)
-14-
DESCRIPTION OF REAL PROPERTY
All that certain real property located in the County of Los Angeles,
State of California, described as follows:
PARCEL 1:
THAT PORTION OF LOT 6, BLOCK 9 OF TRACT NO. 2955, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 31 PAGES 62 THROUGH 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID LOT; THENCE SOUTH 0 DEGREES 3
MINUTES 30 SECONDS EAST ALONG THE EASTERLY LINE OF SAID LOT 180.98 FEET,
MORE OR LESS, TO A POINT DISTANT NORTH 0 DEGREES 03 MINUTES 30 SECONDS WEST
68 FEET FROM THE NORTHEAST CORNER OF THE LAND DESCRIBED IN DEED TO CHARLES
LEONARD MURDOCK, RECORDED IN BOOK 19353 PAGE 263, OFFICIAL RECORDS; THENCE
PARALLEL WITH THE NORTHEASTERLY LINE OF SAID LAND OF MURDOCK SOUTH 75
DEGREES 29 MINUTES 30 SECONDS WEST 196.55 FEET TO A LINE BEARING SOUTH 14
DEGREES 30 MINUTES 30 SECONDS WEST FROM A POINT THAT IS NORTH 52 DEGREES 13
MINUTES 30 SECONDS EAST 412 FEET; MEASURED ALONG THE NORTHWEST LINE OF SAID
LOT FROM THE MOST WESTERLY CORNER OF SAID LOT; THENCE NORTH 14 DEGREES 30
MINUTES 30 SECONDS EAST TO SAID NORTHWESTERLY LINE; THENCE ALONG THE
BOUNDARY OF SAID LOT, NORTHEASTERLY, EASTERLY AND SOUTHEASTERLY TO THE
POINT OF BEGINNING.
PARCEL 2:
THAT PORTION OF LOT 6, BLOCK 9 OF TRACT NO. 2955, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 31 PAGES 62 THROUGH 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE NORTHWESTERLY LINE OF SAID LOT THAT IS DISTANT
NORTH 52 DEGREES 13 MINUTES 30 SECONDS EAST 412 FEET FROM THE MOST WESTERLY
CORNER OF SAID LOT 6; THENCE ALONG SAID NORTHWESTERLY LINE SOUTH 52 DEGREES
13 MINUTES 30 SECONDS WEST 242 FEET TO THE MOST NORTHERLY CORNER OF THE
LAND DESCRIBED IN THE DEED TO CHARLES LEONARD MURDOCK, RECORDED IN BOOK
19353 PAGE 263 OFFICIAL RECORDS OF SAID COUNTY; THENCE ALONG THE
NORTHEASTERLY LINE OF SAID LAND OF MURDOCK SOUTH
EXHIBIT A
PAGE 1 OF 3
75 DEGREES 29 MINUTES 30 SECONDS EAST 361.69 FEET TO THE EAST LINE OF SAID
LOT 6; THENCE ALONG SAID EAST LINE NORTH 0 DEGREES 03 MINUTES 30 SECONDS
WEST 68.00 FEET; THENCE PARALLEL WITH THE NORTHEASTERLY LINE OF SAID LAND
OF MURDOCK, NORTH 75 DEGREES 29 MINUTES 30 SECONDS WEST 196.55 FEET TO A
LINE BEGINNING SOUTH 14 DESCRIBED 30 MINUTES 30 SECONDS WEST FROM THE POINT
OF BEGINNING; THENCE ALONG SAID LINE NORTH 14 DEGREES 30 MINUTES 30 SECONDS
EAST 125.62 FEET TO THE POINT OF BEGINNING.
PARCEL 3:
THAT PORTION OF LOT 6, BLOCK 9 OF TRACT NO. 2955, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 31 PAGES 62 THROUGH 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT DISTANT ALONG SAID
LINE SOUTH 74 DEGREES 16 MINUTES 30 SECONDS EAST 276.85 FEET FROM THE MOST
WESTERLY CORNER OF SAID LOT; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS
EAST 85.72 FEET; THENCE NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST 39.54
FEET; THENCE NORTH 77 DEGREES 14 MINUTES 10 SECONDS WEST 181.04 FEET TO THE
NORTHWESTERLY LINE OF SAID LOT; THENCE ALONG SAID NORTHWESTERLY LINE NORTH
52 DEGREES 13 MINUTES 30 SECONDS EAST 75 FEET TO A POINT DISTANT
NORTHEASTERLY ALONG SAID NORTHWESTERLY LINE 170 FEET FROM THE MOST WESTERLY
CORNER OF SAID LOT; THENCE SOUTH 75 DEGREES 29 MINUTES 30 SECONDS EAST
361.69 FEET TO A POINT IN THE EASTERLY LINE OF SAID LOT DISTANT NORTHERLY
ALONG SAID EASTERLY LINE 150 FEET FROM THE SOUTHEASTERLY CORNER OF SAID
LOT; THENCE ALONG SAID EASTERLY LINE SOUTH 0 DEGREES 03 MINUTES 30 SECONDS
EAST 150 FEET TO SAID SOUTHEASTERLY CORNER; THENCE ALONG THE SOUTHERLY LINE
OF SAID LOT NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST 226.68 FEET TO THE
POINT OF BEGINNING.
PARCEL 4:
THOSE PORTIONS OF LOT 1 AND 4, OF TRACT NO. 34766, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 920 PAGES 31 THROUGH 34 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, TOGETHER WITH THOSE PORTIONS OF LOT 5 IN BLOCK 9
OF TRACT NO. 2955, IN SAID CITY, COUNTY AND STATE, AS PER MAP RECORDED IN
BOOK 31 PAGES 62 THROUGH 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS A WHOLE AS FOLLOWS:
EXHIBIT A
PAGE 2 OF 3
BEGINNING AT THE MOST WESTERLY TERMINUS OF THAT CERTAIN NORTHERLY LINE OF
SAID LOT 4 SHOWN ON THE MAP OF SAID TRACT NO. 34766 AS HAVING A BEARING AND
LENGTH OF NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST 250.00 FEET; THENCE
SOUTH 0 DEGREES 03 MINUTES 30 SECONDS EAST ALONG THE WESTERLY LINE OF SAID
LOT 4 A DISTANCE OF 99.93 FEET; THENCE SOUTH 74 DEGREES 17 MINUTES 53
SECONDS EAST 4.98 FEET; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS EAST
75.30 FEET TO A LINE THAT IS PARALLEL WITH AND DISTANT 20.28 FEET SOUTHERLY
MEASURED AT RIGHT ANGLES FROM THE ABOVE MENTIONED NORTHERLY LINE OF SAID
LOT 4; THENCE SOUTH 74 DEGREES 16 MINUTES 30 SECONDS EAST ALONG SAID
PARALLEL LINE 18.00 FEET; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS
EAST 20.28 FEET TO SAID NORTHERLY LINE OF LOT 4; THENCE SOUTH 74 DEGREES 16
MINUTES 30 SECONDS EAST ALONG SAID NORTHERLY LINE 110.0 FEET; THENCE SOUTH
15 DEGREES 43 MINUTES 30 SECONDS WEST 20.28 FEET TO SAID LAST MENTIONED
PARALLEL LINE; THENCE SOUTH 74 DEGREES 16 MINUTES 30 SECONDS EAST ALONG
SAID PARALLEL LINE 95.73 FEET TO THE SOUTHERLY PROLONGATION OF THE WESTERLY
LINE OF SAID LOT 4 OF TRACT NO. 34766, THENCE ALONG SAID PROLONGATION NORTH
0 DEGREES 03 MINUTES 30 SECONDS WEST 160.29 FEET TO THE SOUTHWEST CORNER OF
SAID LOT 1 OF TRACT NO. 34766; THENCE ALONG THE PROLONGATION OF THE
SOUTHERLY LINE OF LOT 1 OF SAID TRACT NO. 34766 NORTH 74 DEGREES 16 MINUTES
30 SECONDS WEST 27.31 FEET; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS
EAST 63.33 FEET; THENCE SOUTH 74 DEGREES 16 MINUTES 30 SECONDS EAST 7.24
FEET; THENCE NORTH 15 DEGREES 43 MINUTES 30 SECONDS EAST 71.39 FEET TO THE
NORTHERLY LINE OF LOT 1 OF SAID TRACT NO. 34766; THENCE ALONG SAID LAST
MENTIONED NORTHERLY LINE NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST TO THE
NORTHWEST CORNER OF LOT 1 OF SAID TRACT NO. 34766; THENCE ALONG THE
PROLONGATION OF THE WESTERLY LINE OF LOT 1 OF SAID TRACT NO. 34766 NORTH 0
DEGREES 03 MINUTES 30 SECONDS WEST TO THE NORTHERLY LINE OF LOT 5 IN BLOCK
9 OF SAID TRACT NO. 2955; THENCE ALONG SAID LAST MENTIONED NORTHERLY LINE
NORTH 74 DEGREES 16 MINUTES 30 SECONDS WEST TO THE NORTHWEST CORNER OF SAID
LOT 5 IN BLOCK 9 OF TRACT NO. 2955; THENCE ALONG THE WESTERLY LINE OF LOT 5
IN BLOCK 9 OF TRACT NO. 2955; SOUTH 0 DEGREES 03 MINUTES 30 SECONDS WEST TO
THE POINT OF BEGINNING.
EXHIBIT A
PAGE 3 OF 3
EXHIBIT B
JMB ENCINO PARTNERSHIP
200 PEPPERDINE UNIVERSITY 12/27/86 12/27/96
202 NATIONAL FILM SERVICE 1/1/94 12/31/89
206 JACK CHEGWIDDEN 2/7/94 2/6/97
210 VACANT
211 GUSTIN & RAIKOW 6/1/93 6/31/96
224 BEXY COMMUNICATIONS 2/18/94 2/22/96
230 WORD & BROWN 9/18/89 9/18/96
236 BROTMAN FOUNDATION 6/7/94 6/6/96
244 PVG EQUITY 12/1/96 11/31/00
246 GEORGE MAGIT 6/1/92 6/30/96
248 ROBERT SHAW 10/22/94 9/30/04
260 AAMES HOME LOAN 2/6/93 6/15/96
266 MARK FRIEDMAN,D.D.S. 11/16/83 3/31/93
268 HADASSAH 6/10/91 6/9/96
300 ELKINS & ELKINS 2/1/89 2/12/01
310 VENTURE PACIFIC 4/20/96 4/19/00
315 MAXICLAIM 4/19/84 6/22/96
321 VACANT
322 TMC ESCROW 8/16/91 8/16/96
323 BERG & WEXELMAN 11/6/92 11/6/98
326 ZIPPERSTEIN & KANTOR 10/1/86 9/30/96
330 ROBERT & HOLLER 2/15/95 2/14/96
336 HARLAN & ROTHBERG 4/16/87 4/16/97
340 OFFICE OF THE BUILDING
342 VACANT
345 SILVERMAN, DAVID 10/2/87 9/30/97
346 PRINCETON CORP. 3/14/87 3/13/97
360 SHADUR, WEINBERG 2/1/87 1/31/97
361 FREEMAN & GOLDEN 8/1/87 7/31/00
362 HEARTHSTONE ADVISORS 1/1/94 12/31/96
364 HEARTHSTONE ADVISORS 9/1/94 12/31/96
400 FISHMAN, BLOCK 8/22/87 8/31/97
401 VACANT
410 BERK INVESTMENT 6/1/88 2/28/96
411 EZRA & ANTEN 11/1/88 4/30/96
412 COBEN & YOUNG 7/1/93 7/31/96
415 MISCHEL, IOSUE & AKPOVI 2/26/91 12/14/97
500 BENSON,MINKOW,SHAPIRO 7/16/96 7/14/01
501 HABER CORPORATION 10/26/91 10/26/96
506 CLINTON HODGES 4/16/83 4/14/88
507 J. SCHOENBERGER 7/26/96 Mo.to Mo.
510 OSTROM REAL ESTATE 3/15/83 3/14/96
511 BLOCK, KLEIN & COMPANY 1/16/83 1/14/96
515 AMERICAN GRAMAPHONE 2/1/91 1/31/97
600 FIRST FINANCIAL GROUP 9/1/86 8/31/96
605 ECHO ENTERTAINMENT 8/1/83 7/31/96
606 VACANT
610 CHASE 6/6/92 6/6/97
620 COMM. COLLECTIONS 7/14/91 7/13/97
"A" BANK OF CALIFORNIA 1/16/87 1/16/97
"B" ALAN HERZLICH 4/1/92 Mo. to Mo.
"G" PLAZA CAFE 6/15/88 6/14/98
"I" FIRST AMERICAN TITLE 3/1/87 2/28/97
"J" IMPERIAL THRIFT & LOAN 4/1/94 3/31/99
"N" COAST SAVINGS BANK 1/1/87 12/31/96
"P" GREAT EXPECTATIONS 8/1/88 8/1/98
"R" FRED SANDS REALTY 6/1/88 6/31/90
"S" THE SEELY COMPANY 1/1/94 12/31/96
"M" VACANT
"X" VACANT
State of: Illinois
County of: Cook
On October 30, 1995 before me, Karen M. Narcissi, Notary Public, personally
appeared K. Jay Weaver, personally known to me or proved to me on the basis
of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity (ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Karen M. Narcissi
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a general partner in JMB/San Jose Associates, an
Illinois general partnership which holds title to Park Center Financial
Plaza. The Partnership is a general partner in Topanga Plaza Partnership,
a California general partnership which holds title to Topanga Plaza. The
Partnership is a general partner in JMB-40 Broad Street Associates, an
Illinois general partnership which holds title to the 40 Broad Street
Building. The Partnership is a general partner in JMB First Financial
Associates, an Illinois general partnership. JMB First Financial
Associates is a general partner in JMB Encino Partnership, a California
general partnership, which holds title to the First Financial Plaza.
Reference is made to Note 3 for a summary description of the terms of such
partnership agreements. The Partnership's interest in the foregoing joint
venture partnerships, and the results of their operations are included in
the consolidated financial statements of the Partnership filed with this
annual report.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the managing general partner of JMB INCOME PROPERTIES,
LTD. - XII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1995, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 5th day of February, 1996.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1995,
and any and all amendments thereto, the 5th day of February, 1996.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the managing general partner of JMB INCOME PROPERTIES,
LTD. - XII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1995, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 5th day of February, 1996.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1995,
and any and all amendments thereto, the 5th day of February, 1996.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 21,456,552
<SECURITIES> 0
<RECEIVABLES> 3,703,273
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,159,825
<PP&E> 189,130,405
<DEPRECIATION> 52,390,756
<TOTAL-ASSETS> 178,508,742
<CURRENT-LIABILITIES> 3,318,265
<BONDS> 88,670,160
<COMMON> 0
0
0
<OTHER-SE> 63,986,674
<TOTAL-LIABILITY-AND-EQUITY> 178,508,742
<SALES> 32,608,714
<TOTAL-REVENUES> 33,940,506
<CGS> 0
<TOTAL-COSTS> 19,463,881
<OTHER-EXPENSES> 6,261,705
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,991,027
<INCOME-PRETAX> (776,107)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,635,175)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,635,175)
<EPS-PRIMARY> (9.15)
<EPS-DILUTED> (9.15)
</TABLE>
