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, 1997 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
AND ASSIGNEE INTERESTS THEREIN
(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
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings. . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . 7
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters. . . . . . . 7
Item 6. Selected Financial Data. . . . . . . . . . . 8
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 12
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . 17
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 18
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 58
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 58
Item 11. Executive Compensation . . . . . . . . . . . 61
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 62
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 63
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 63
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 66
i
<PAGE>
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report. Capitalized terms used herein, but
not defined, have the same meanings as used in the Notes.
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. 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 or have been 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 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.
The Partnership has made the real property investments set forth in
the following table:
<PAGE>
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1997,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. Park Center
Financial Plaza
office buildings
San Jose,
California. . . . . 408,000 06/20/85 27% fee ownership of land and
sq.ft. improvements (through
n.r.a. joint venture partnership)
(c)(g)(i)
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)(d)(e)
3. 40 Broad Street
office building
New York, New York. 247,800 12/31/85 12/30/97 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership) (c)(f)
4. Plaza Hermosa
Shopping Center
Hermosa Beach,
California. . . . . 94,900 09/03/86 8% fee ownership of land and
sq.ft. improvements (b)(d)(h)
g.l.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 9/11/96 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
(c)(f)
<PAGE>
<FN>
- ---------------
(a) The computation of this percentage for properties held at
December 31, 1997 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 the Notes 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 the Notes 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.
(f) The joint venture sold this property. Reference is made to the
Notes for a further description of such sale.
(g) In March 1996, the joint venture sold the 190 San Fernando
building, one of the buildings in the Park Center Financial Plaza office
complex comprising approximately 5% of the total occupied space, to an
independent third party, and transferred title to one of the parking
garages to the City of San Jose. The original capital percentage reflected
for this property in the table has not been adjusted for such transactions.
Reference is made to the Notes for a description of such transactions.
(h) The Partnership sold this property on January 13, 1998.
Reference is made to the Notes for a description of the sale.
(i) The joint venture sold the remaining buildings in the Park
Center Financial Plaza office complex on February 24, 1998. Reference is
made to the Notes for a description of the sale.
</TABLE>
<PAGE>
The Partnership's remaining real property investment is subject to
competition from similar types of properties (including in certain areas
properties owned by affiliates of the General Partners) in the vicinity in
which it is located. Such competition is generally for the retention of
existing tenants. Additionally, the Partnership is in competition for new
tenants. Reference is made to Item 7 below for a discussion of possible
future renovation and capital improvement plans of the Partnership and its
consolidated venture. Approximate occupancy levels for the properties
owned in 1997 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 property in its market primarily on the basis of
tenant mix, property aesthetics, effective rents, tenant allowances and
service provided to tenants. In the opinion of the Managing General
Partner of the Partnership, the remaining investment property is adequately
insured. Although there is earthquake insurance coverage for a portion of
the value of the Partnership's remaining investment property, the Managing
General Partner does not believe that such coverage for its entire
replacement cost is available on economic terms.
In January 1994, an earthquake occurred in Los Angeles, California.
The costs at Topanga for which the joint venture was responsible were
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 to
the Notes for further description of such event.
Reference is made to the Notes 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, 1997.
On December 30, 1997, the Partnership, through its joint venture, sold
the 40 Broad Street office building located in New York, New York.
Reference is made to the Notes for a further description of such
transaction.
On January 13, 1998, the Partnership sold the land and related
improvements of the Plaza Hermosa Shopping Center located in Hermosa Beach,
California. Reference is made to the Notes for a further description of
such transaction.
On February 24, 1998, the Partnership, through its joint venture, sold
the remaining assets in the Park Center Financial Plaza office complex
located in San Jose, California. Reference is made to the Notes for a
further description of such transaction.
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.
<PAGE>
ITEM 2. PROPERTIES
The Partnership owns or owned 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 1997 and 1996
for the Partnership's investment properties owned during 1997:
<PAGE>
<TABLE>
<CAPTION>
1996 1997
------------------------- -------------------------
Principal At At At At At At At At
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
(a). . . . . . . . . . . Accounting/
Telecommunications 85% 85% 87% 85% 86% 87% 87% 90%
2. Topanga Plaza
Shopping Center
Los Angeles,
California . . . . . . . Retail 98% 94% 98% 98% 97% 98% 98% 98%
3. 40 Broad Street
New York, New York . . . Insurance/
Financial
Services 75% 78% 81% 74% 82% 90% 88% N/A
4. Plaza Hermosa
Shopping Center
Hermosa Beach,
California (b) . . . . . Retail 95% 93% 92% 91% 91% 91% 91% 91%
- ----------
<FN>
Reference is made to Item 6, Item 7, and to the Notes for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.
An "N/A" indicates that the property was sold and not owned by the Partnership at the end of the quarter.
(a) Portions of this property were sold in March 1996. The percentages reflected in the table as of the
respective dates are compared on the basis of the remaining portion of the complex owned by the Partnership. In
addition, the remaining portion of the property was sold in February 1998. Reference is made to the Notes for a
more complete description of these transactions.
(b) This property was sold by the Partnership in January 1998 as more fully described in the Notes.
</TABLE>
<PAGE>
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 1996 and 1997.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1997, there were 14,562 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, which, may be
granted or withheld in its sole and absolute discretion. 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 or have other rights of a Limited Partner.
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.
Reference is made to Item 7 for a discussion of unsolicited tender
offers received from unaffiliated third parties.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
YEARS ENDED DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1997 1996 1995 1994 1993
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income, includ-
ing gain on sale or
disposition of
investment property
in 1997 and 1996 . . . . $ 48,208,830 32,521,866 33,940,506 31,152,216 30,055,775
============ ============ =========== =========== ===========
Earnings (loss)
before extra-
ordinary item. . . . . . $ 21,259,326 5,928,741 (1,635,175) (2,235,341) (6,037,978)
Extraordinary items
(net of venture
partners' share) . . . . 393,705 -- -- (2,300,838) --
------------ ------------ ----------- ----------- -----------
Net earnings (loss) . . . $ 21,653,031 5,928,741 (1,635,175) (4,536,179) (6,037,978)
============ ============ =========== =========== ===========
<PAGE>
1997 1996 1995 1994 1993
------------- ------------- ----------- ------------ ------------
Net earnings (loss)
per Interest (b):
Earnings (loss) before
gains on sales of
investment
properties and
extraordinary item. . $ 36.35 14.70 (9.15) (12.41) (31.79)
Net gain on sale
or disposition of
investment property . 73.47 15.78 -- -- --
Extraordinary items,
net . . . . . . . . . 1.99 -- -- (11.65) --
------------ ------------ ----------- ----------- -----------
Net earnings (loss)
per Interest (b). . . $ 111.81 30.48 (9.15) (24.06) (31.79)
============ ============ =========== =========== ===========
Total assets. . . . . . . $160,776,991 138,673,945 178,508,742 189,322,387 195,051,570
Long-term debt. . . . . . $ 63,123,525 63,630,727 88,670,160 64,470,886 87,612,869
Cash distributions
per Interest (c). . . . $ 30.00 79.50 15.00 10.00 12.50
============ ============ =========== =========== ===========
<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>
<PAGE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1997
<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>
1993 . . . . . 94% $21.13
1994 . . . . . 95% 24.84
1995 . . . . . 98% 24.93
1996 . . . . . 98% 28.03
1997 . . . . . 98% 33.41
<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>
<PAGE>
<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 1997
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 2 3,536 83,708 0.7%
1999 7 13,918 359,150 3.0%
2000 11 17,237 519,716 4.4%
2001 7 7,081 423,160 3.6%
2002 12 22,286 796,806 6.8%
2003 12 33,340 756,766 6.4%
2004 15 37,350 1,030,456 8.7%
2005 21 67,743 1,899,497 16.1%
2006 20 62,931 1,963,585 16.7%
2007 8 21,780 826,953 7.0%
<FN>
(1) Excludes leases that expire in 1998 for which renewal leases or leases with
replacement tenants have been executed as of January 28, 1998.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering as described in Item 1, the
Partnership had approximately $171,306,000, after deducting selling
expenses and other offering costs, 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.
During 1996, 1997 and early 1998, some of the Limited Partners in the
Partnership received from unaffiliated third parties unsolicited tender
offers to purchase up to 4.9% of the Interests in the Partnership at
between $150 and $475 per Interest. The Partnership recommended against
acceptance of these offers on the basis that, among other things, the offer
prices were inadequate. All of such offers have expired. As of the date
of this report, the Partnership is aware that 5.79% of the Interests have
been purchased by such unaffiliated third parties either pursuant to such
tender offers or through negotiated purchases. It is possible that other
offers for Interests may be made by unaffiliated third parties in the
future, although there is no assurance that any other third party will
commence an offer for Interests, the terms of any such offer or whether any
such offer, if made, will be consummated, amended or withdrawn. The board
of directors of JMB Realty Corporation ("JMB") the managing general partner
of the Partnership, has established a special committee (the "Special
Committee") consisting of certain directors of JMB to deal with all matters
relating to tender offers for Interests in the Partnership, including any
and all responses to such tender offers. The Special Committee has
retained independent counsel to advise it in connection with any potential
tender offers for Interests and has retained Lehman Brothers Inc. as
financial advisor to assist the Special Committee in evaluating and
responding to any additional potential tender offers for Interests.
At December 31, 1997, the Partnership had consolidated cash and cash
equivalents of approximately $54,581,000, of which approximately
$16,944,000 is held by the Partnership. The remaining $37,637,000 is held
by the Partnership's consolidated joint ventures, of which approximately
$25,505,000 represents the Partnership's share of undistributed sale
proceeds from the sale of the 40 Broad Street office building in December
1997, which were subsequently received by the Partnership in January 1998,
and cash flow from operations. These funds are available for distributions
to partners, potential obligations related to representations and
warranties given pursuant to the sale of the 40 Broad Street office
building, tenant and capital improvements, leasing commissions, and other
expenditures, including the Partnership's share of the costs associated
with a possible expansion and mall enhancement, including a possible
purchase of the Montgomery Ward parcel, at the Topanga Plaza Shopping
Center. The Partnership and its consolidated venture has currently
budgeted in 1998 approximately $1,088,000 for tenant improvements and other
capital expenditures, excluding the possible expansion and mall enhancement
at Topanga and purchase of the Ward store, of which the Partnership's share
is currently budgeted to be approximately $631,000. Actual amounts
expended in 1998 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 the Notes, 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 remaining 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. The Partnership's and its ventures' mortgage
<PAGE>
obligations are separate non-recourse loans secured individually by the
investment properties and are not obligations of other investments. The
Partnership and its ventures are not personally liable for the payment of
the mortgage indebtedness.
Commencing in 1996, the Partnership changed from a quarterly
distribution of cash flow from operations to a semi-annual distribution in
May and November of each year. In May 1997, the Partnership paid an
operating distribution of $953,162 ($5 per Interest) for the first and
second quarters of 1997 to the Limited Partners. In November 1997, the
Partnership paid a special operating distribution of $3,812,648 ($20 per
Interest) and an operating distribution of $953,162 ($5 per Interest)
representing cash flow from operations for the third and fourth quarters of
1997. In February 1998, the Partnership made a distribution of sale
proceeds primarily related to the sale of the 40 Broad Street office
building of $22,875,888 ($120 per Interest) to the Limited Partners.
40 BROAD STREET
JMB-40 Broad Street Associates ("Broad Street") had committed to a
plan to sell the property, and therefore, had classified the property as
held for sale as of July 1, 1997. The property was no longer subject to
continued depreciation beyond such date.
On December 30, 1997, the joint venture sold the 40 Broad Street
office building for $34,735,000 (before selling costs). The joint venture
received approximately $33,155,000 of sale proceeds at closing, of which
the Partnership's share was approximately $22,731,000 which was
subsequently received in January 1998. Reference is made to the Notes for
a further description of such sale.
SAN JOSE
During August 1994, JMB/San Jose Associates ("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 laws governing eminent domain. During 1995, the
Agency filed a condemnation action in court to proceed to obtain the garage
pursuant to such laws. 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. Reference is made to the Notes for a
description of such sale.
During March 1996, San Jose sold the 190 San Fernando Building and a
parking garage structure to an independent third party. The sale price of
the building was $1,753,000 (before selling costs), paid in cash at
closing. Reference is made to the Notes for a description of such sale.
The aggregate net sale proceeds to San Jose from both sales was
approximately $5,800,000 after selling costs and prorations, of which the
Partnership's share was approximately $2,900,000.
Due to the proposed sales, the San Jose venture had classified the
parking garage structures and the 190 San Fernando Building as held for
sale or disposition as of January 1, 1996. The remaining assets were
classified as held for sale as of December 31, 1996, and have, therefore,
not been subject to continued depreciation beyond such date.
As previously reported, in 1996 San Jose completed a voluntary seismic
upgrade to the 130 Park Center Financial Plaza building and the parking
garage below the 100-130 buildings. The cost of the structural upgrade was
approximately $860,000 (of which the Partnership's share was approximately
$430,000).
<PAGE>
On February 24, 1998, San Jose sold the remaining assets of the Park
Center Financial Plaza office complex to an independent third party for
$76,195,000 (before selling costs). San Jose received approximately
$49,400,000 of net sale proceeds at closing (after the repayment by San
Jose of the mortgage loans secured by the 170 Almaden, 150 Almaden and 185
Park Avenue buildings with a balance of approximately $23,300,000, loan
prepayment premiums of approximately $2,422,000 and closing costs), of
which the Partnership's share was approximately $24,700,000. Reference is
made to the Notes for a further description of such sale.
TOPANGA PLAZA SHOPPING CENTER
Occupancy at the Topanga Plaza Shopping Center at December 31, 1997
was approximately 98%. The Topanga venture had committed to a plan to sell
the property and therefore had classified the property as held for sale as
of December 31, 1996. The property has no longer been subject to continued
depreciation beyond such date. The Partnership is continuing its
discussion with its joint venture partner to sell its interest in the joint
venture to the joint venture partner. There can be no assurance that any
agreement will be reached in this regard.
PLAZA HERMOSA SHOPPING CENTER
The property was classified as held for sale or disposition as of
December 1, 1996 and therefore was not subject to continued depreciation.
On January 13, 1998, the Partnership sold the land and related improvements
of the Plaza Hermosa Shopping Center for $13,335,000. The Partnership
received approximately $6,400,000 of net sale proceeds at closing (after
the repayment by the Partnership of the letter of credit secured by the
property to support the underlying bond financing with a balance of
approximately $6,480,000 and closing costs). Reference is made to the
Notes for a further description of such transaction.
GENERAL
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.
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 elected to make semi-annual rather than quarterly
distributions of available operating cash flow commencing with the 1996
distributions. By conserving working capital, the Partnership will be in a
better position to meet the future needs of its remaining property since
the availability of satisfactory outside sources of capital may be limited
given the property's current debt levels. The Partnership has held its
remaining investment property longer than originally anticipated in an
effort to maximize the return to the Limited Partners. However, after
reviewing the remaining property and the marketplace in which it operates,
the General Partners of the Partnership expect to be able to conduct an
orderly liquidation of its remaining investment property as quickly as
practicable. In such regard, the Partnership's remaining investment
property has been classified as held for sale as discussed above.
Therefore, the affairs of the Partnership are expected to be wound up no
later than December 31, 1999, perhaps in the 1998 timeframe, barring
unforeseen economic developments.
<PAGE>
RESULTS OF OPERATIONS
Significant variances between periods reflected in the accompanying
consolidated financial statements not otherwise reported are primarily the
result of the sales of the First Financial Plaza office building and the 40
Broad Street office building in September 1996 and December 1997,
respectively.
The decrease in escrow deposits at December 31, 1997 as compared to
December 31, 1996 is primarily due to the release from escrow of
approximately $300,000 in December 1997 by the letter of credit holder at
the Plaza Hermosa investment property in anticipation of the sale of the
property.
The decrease in accounts payable at December 31, 1997 as compared to
December 31, 1996, and the related extraordinary gain for the year ended
December 31, 1997, is primarily due to the reversal of $678,801 (of which
the Partnership's share is $393,705) in accrued costs related to earthquake
damage in 1994 at the Topanga Plaza investment property, as more fully
discussed in the Notes. The decrease is also partially due to the sale of
the 40 Broad Street office building in December 1997.
The decrease in unearned rents at December 31, 1997 as compared to
December 31, 1996 is primarily due to the timing of rental receipts at the
Topanga Plaza investment property.
The decrease in rental income for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 and for the year ended
December 31, 1996 as compared to the year ended December 31, 1995 is
primarily due to the sale of the First Financial Plaza office building in
September 1996. The decrease for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 is partially offset by the
receipt of proceeds totaling approximately $312,000 during 1997 from The
Broadway and Nordstrom, relating to their share of prorata expenses and
costs for repairs and restorations at the Topanga Plaza Shopping Center
following the earthquake in early 1994. The decrease in rental income for
the year ended December 31, 1996 as compared to the year ended December 31,
1995 is also partially due to the receipt of insurance proceeds of
approximately $3,200,000, in the third quarter of 1995, relating to
business interruption at the Topanga Plaza Shopping Center following the
earthquake in early 1994. Furthermore, the decrease in rental income for
the year ended December 31, 1996 as compared to the year ended December 31,
1995 is partially offset by the receipt of proceeds totaling approximately
$513,000, in the second quarter of 1996, from Robinson-May and Montgomery
Ward, relating to their pro rata share of expenses and costs for repairs
and restorations at the Topanga Plaza Shopping Center following the
earthquake in early 1994.
The decrease in mortgage and other interest for the year ended
December 31, 1997 as compared to the years ended December 31, 1996 and 1995
is primarily due to the sale of the First Financial Plaza office building
in September 1996 and the $4,000,000 loan paydown at the First Financial
Plaza in 1995.
The decrease in depreciation expense for the year ended December 31,
1997 as compared to the years ended December 31, 1996 and 1995 is primarily
due to the First Financial Plaza office building being classified as held
for sale as of April 1, 1996, the Topanga Plaza and Plaza Hermosa
investment properties being identified as held for sale or disposition as
of December 31, 1996, and the 40 Broad Street investment property being
identified as held for sale or disposition as of July 1, 1997, and
therefore, no longer subject to depreciation beyond such dates.
<PAGE>
The increase in general and administrative expenses for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 is
primarily attributable to an increase in reimbursable costs to affiliates
of the General Partners in 1997. The decrease in general and
administrative expenses for the year ended December 31, 1996 as compared to
the year ended December 31, 1995 is primarily attributable to an increase
in reimbursable costs to affiliates of the General Partners in 1995
including the recognition of certain additional prior year reimbursable
costs to such affiliates.
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 the Plaza Hermosa investment property at September 30,
1995.
The increase in Partnership's share of operations of unconsolidated
ventures for the year ended December 31, 1997 as compared to the year ended
December 31, 1996 is primarily due to an increase in earnings of the San
Jose venture due to the San Jose properties being identified as held for
sale or disposition as of December 31, 1996, and therefore, no longer
subject to depreciation beyond such date. The decrease in Partnership's
share of operations of unconsolidated ventures for the year ended
December 31, 1996 as compared to the year ended December 31, 1995 is
primarily due to the sale of the 190 San Fernando building and one of the
parking structures at the San Jose investment property in 1996, partially
offset by the write-off of receivables in 1995 related to a certain tenant
at the San Jose investment property.
The Partnership's share of gain on sale of investment properties of
unconsolidated venture of $1,412,610 in 1996 relates to the sale of the 190
San Fernando building and one of the parking structures at the San Jose
investment property.
The increase in venture partners' share of consolidated ventures'
operations before extraordinary item for the year ended December 31, 1997
as compared to the year ended December 31, 1996 is primarily due to the
Topanga Plaza and 40 Broad Street investment properties being identified as
held for sale or disposition as of December 31, 1996 and July 1, 1997,
respectively, and therefore, no longer subject to depreciation beyond such
dates. In addition, the increase is also due to a reduction in assessed
real estate taxes for 1997 at the 40 Broad Street investment property.
However, this increase is partially offset by the sale of the First
Financial Plaza office building in September 1996. The decrease in venture
partners' share of consolidated ventures' operations before extraordinary
item for the year ended December 31, 1996 as compared to the year ended
December 31, 1995 is primarily due to the sale of the First Financial Plaza
office building in September 1996.
The venture partner's share of gain on sale of investment property of
$6,455,513 in 1997 is the gain on the sale of the 40 Broad Street
investment property in December 1997. The venture partner's share of gain
on sale of investment property of $1,270,596 in 1996 is the gain on the
sale of the First Financial Plaza investment property in September 1996.
<PAGE>
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 property have escalation clauses covering
increases in the cost of operating and maintaining the property as well as
real estate taxes. Therefore, there should be little effect from inflation
on operating earnings if the property remains substantially occupied. In
addition, substantially all of the leases at the Partnership's shopping
center investment contain provisions which entitle the Partnership to
participate in gross receipts of tenants above fixed minimum amounts.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
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, 1997 and 1996
Consolidated Statements of Operations, years ended December 31, 1997,
1996 and 1995
Consolidated Statements of Partners' Capital Accounts, years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, years ended December 31, 1997,
1996 and 1995
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 as the information is
presented in the consolidated financial statements or related notes.
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1997 and 1996
Statements of Operations, years ended December 31, 1997, 1996 and 1995
Statements of Partners' Capital Accounts, years ended December 31, 1997,
1996 and 1995
Statements of Cash Flows, years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements.
Schedule
--------
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.
<PAGE>
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,
1997 and 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1997, 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.
As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated ventures changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1998
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 54,580,706 22,821,808
Rents and other receivables, net of allowance for
doubtful accounts of $25,880 in 1997 and
$255,866 in 1996. . . . . . . . . . . . . . . . . . . . . . . . . 217,745 774,707
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 179,879 282,111
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 878,669 1,053,916
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 55,856,999 24,932,542
------------ -----------
Investment properties - Schedule III:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,765,194
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . -- 22,602,302
------------ -----------
-- 24,367,496
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . -- 14,873,703
------------ -----------
Total properties held for investment,
net of accumulated depreciation . . . . . . . . . . . . . -- 9,493,793
Properties held for sale or disposition . . . . . . . . . . . . . . 91,675,837 90,811,933
------------ -----------
Total investment properties . . . . . . . . . . . . . . . . 91,675,837 100,305,726
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 6,353,682 4,848,158
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,125 6,491,467
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 1,890,348 2,096,052
------------ -----------
$160,776,991 138,673,945
============ ===========
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
1997 1996
------------ -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 507,202 458,557
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 533,374 1,601,488
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 482,884 503,951
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . 272,481 595,723
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . 1,795,941 3,159,719
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 147,624 200,990
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 63,123,525 63,630,727
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 65,067,090 66,991,436
Venture partners' subordinated equity in ventures . . . . . . . . . . 25,015,702 16,922,369
Partners' capital accounts:
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . 11,123 11,123
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . 1,359,410 915,607
------------ -----------
1,370,533 926,730
------------ -----------
Limited partners (189,684 interests):
Capital contributions, net of offering costs. . . . . . . . . . 171,306,452 171,306,452
Cumulative net loss . . . . . . . . . . . . . . . . . . . . . . (3,091,192) (24,300,420)
Cumulative cash distributions . . . . . . . . . . . . . . . . . (98,891,594) (93,172,622)
------------ -----------
69,323,666 53,833,410
------------ -----------
Total partners' capital accounts. . . . . . . . . . . . . . 70,694,199 54,760,140
------------ -----------
$160,776,991 138,673,945
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $26,345,595 28,415,164 32,608,714
Interest income . . . . . . . . . . . . . . . . . 1,330,433 1,224,129 1,331,792
Gain on sale of investment property . . . . . . . 20,532,802 2,882,573 --
----------- ----------- -----------
48,208,830 32,521,866 33,940,506
----------- ----------- -----------
Expenses:
Mortgage and other interest . . . . . . . . . . . 6,108,328 7,665,413 8,991,027
Depreciation. . . . . . . . . . . . . . . . . . . 328,493 4,625,655 5,598,646
Property operating expenses . . . . . . . . . . . 10,106,333 12,174,612 12,602,194
Professional services . . . . . . . . . . . . . . 280,273 307,504 333,970
Amortization of deferred expenses . . . . . . . . 1,029,488 1,205,175 1,263,041
General and administrative. . . . . . . . . . . . 483,878 357,395 427,735
Provision for value impairment. . . . . . . . . . -- -- 5,500,000
----------- ----------- -----------
18,336,793 26,335,754 34,716,613
----------- ----------- -----------
29,872,037 6,186,112 (776,107)
Partnership's share of earnings (loss) from
operations of unconsolidated ventures . . . . . . 1,505,524 611,483 709,164
Partnership's share of gain on sale of investment
properties of unconsolidated venture. . . . . . . -- 1,412,610 --
Venture partners' share of consolidated ventures'
operations before extraordinary item. . . . . . . (3,662,722) (1,010,868) (1,568,232)
Venture partners' share of gain on sale of
investment property . . . . . . . . . . . . . . . (6,455,513) (1,270,596) --
----------- ----------- -----------
Earnings (loss) before
extraordinary item. . . . . . . . . . . 21,259,326 5,928,741 (1,635,175)
Extraordinary item (net of venture partner's
share of $285,096). . . . . . . . . . . . . . . . 393,705 -- --
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . . $21,653,031 5,928,741 (1,635,175)
=========== =========== ===========
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1997 1996 1995
------------ ------------ ------------
Net earnings (loss) per limited partnership
interest:
Earnings (loss) before gain on sale of
investment properties and extraordinary
item . . . . . . . . . . . . . . . . . . . . . $ 36.35 14.70 (9.15)
Gain on sale of investment properties. . . . . . 73.47 15.78 --
Extraordinary item, net. . . . . . . . . . . . . 1.99 -- --
----------- ----------- -----------
Net earnings (loss) per limited
partnership interest. . . . . . . . . . $ 111.81 30.48 (9.15)
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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,
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 earnings
(loss) . . . -- 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
Cash distri-
butions
($79.50 per
limited
partnership
interest). . -- -- -- -- -- -- (15,155,275)(15,155,275)
Net earnings
(loss) . . . -- 146,412 -- 146,412 -- 5,782,329 -- 5,782,329
------- ------- ------- ------- ----------- ----------- ----------- ----------
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS - CONTINUED
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
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
Balance at
December 31,
1996 . . . . 11,123 915,607 -- 926,730 171,306,452 (24,300,420) (93,172,622) 53,833,410
Cash distri-
butions
($30 per
limited
partnership
interest). . -- -- -- -- -- -- (5,718,972) (5,718,972)
Net earnings
(loss) . . . -- 443,803 -- 443,803 -- 21,209,228 -- 21,209,228
------- --------- ------- --------- ----------- ----------- ----------- ----------
Balance at
December 31,
1997 . . . . $11,123 1,359,410 -- 1,370,533 171,306,452 (3,091,192) (98,891,594) 69,323,666
======= ========= ======= ========= =========== =========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $21,653,031 5,928,741 (1,635,175)
Items not requiring (providing) cash or
cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . 328,493 4,625,655 5,598,646
Amortization of deferred expenses . . . . . . . 1,029,488 1,205,175 1,263,041
Partnership's share of operations of
unconsolidated venture. . . . . . . . . . . . (1,505,524) (611,483) (709,164)
Partnership's share of gain on sale of
investment properties of unconsolidated
venture . . . . . . . . . . . . . . . . . . . -- (1,412,610) --
Venture partners' share of
ventures' operations, gain on sale and
extraordinary item. . . . . . . . . . . . . . 10,403,333 2,281,464 1,568,232
Total gain on sale of investment property . . . (20,532,802) (2,882,574) --
Provision for value impairment. . . . . . . . . -- -- 5,500,000
Extraordinary item. . . . . . . . . . . . . . . (678,801) -- --
Changes in:
Rents and other receivables . . . . . . . . . . 556,962 1,670,049 (380,342)
Prepaid expenses. . . . . . . . . . . . . . . . 102,232 (21,947) (33,566)
Escrow deposits . . . . . . . . . . . . . . . . 175,247 (153,355) (192,229)
Casualty insurance receivable . . . . . . . . . -- -- 853,000
Accrued rents receivable. . . . . . . . . . . . (1,559,728) (289,426) (151,292)
Accounts payable. . . . . . . . . . . . . . . . (389,313) (436,529) (1,802,619)
Accrued interest . . . . . . . . . . . . . . . (21,067) (6,671) 488,126
Unearned rents. . . . . . . . . . . . . . . . . (323,242) 572,414 (41,486)
Tenant security deposits. . . . . . . . . . . . (53,366) (291,224) (17,279)
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . 9,184,943 10,177,679 10,307,893
----------- ----------- -----------
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments . . . . . . . . . . . -- -- 14,176,812
Cash proceeds on sale of investment property. . . 33,154,809 12,985,931 --
Additions to investment properties,
net of related payables . . . . . . . . . . . . (1,743,255) (1,583,556) (1,658,644)
Partnership's distributions from
unconsolidated ventures . . . . . . . . . . . . -- 3,588,000 1,250,000
Partnership's contributions to
unconsolidated ventures . . . . . . . . . . . . -- -- (1,233,437)
Payment of deferred expenses. . . . . . . . . . . (350,070) (624,372) (577,311)
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . 31,061,484 14,366,003 11,957,420
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . (458,557) (622,627) (4,593,543)
Advances from venture partners. . . . . . . . . . -- -- (435,000)
Venture partners' contributions to venture. . . . -- 161,356 1,580,310
Distributions to venture partners . . . . . . . . (2,310,000) (7,561,880) (2,723,400)
Distributions to limited partners . . . . . . . . (5,718,972) (15,155,275) (2,859,487)
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . (8,487,529) (23,178,426) (9,031,120)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . 31,758,898 1,365,256 13,234,193
Cash and cash equivalents,
beginning of year . . . . . . . . . . . 22,821,808 21,456,552 8,222,359
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . $54,580,706 22,821,808 21,456,552
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . $ 6,129,395 7,672,084 8,502,901
=========== =========== ===========
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Non-cash investing and financing activities:
Total sales proceeds from sale of investment
property, net of selling expenses . . . . . . . $33,154,809 37,690,486 --
Principal balance due on mortgage payable . . . . -- (24,704,555) --
----------- ----------- -----------
Cash proceeds from sale of investment
property, net of selling expenses . . . $33,154,809 12,985,931 --
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (either directly or through joint ventures)
investments in 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, barring any
unforeseen economic developments.
The accompanying consolidated financial statements include the
accounts of the Partnership and its majority-owned ventures, Topanga Plaza
Partnership ("Topanga"), JMB-40 Broad Street Associates ("Broad Street"),
JMB First Financial Associates ("First Financial", prior to its sale in
September 1996) and First Financial's venture (prior to its sale in
September 1996), JMB Encino Partnership, ("Encino"). The effect of all
transactions between the Partnership and its consolidated ventures have
been eliminated. 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, 1997 and 1996 is summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $160,776,991 89,829,763 138,673,945 103,781,808
Partners' capital accounts
(deficits):
General partners. . . . . . . . 1,370,533 (1,314,353) 926,730 (1,184,427)
Limited partners. . . . . . . . 69,323,666 84,497,148 53,833,410 98,323,758
Net earnings (loss):
General partners. . . . . . . . 443,803 (129,924) 146,412 (40,931)
Limited partners. . . . . . . . 21,209,228 (8,107,640) 5,782,329 (276,439)
Net earnings (loss)
per limited partnership
interest. . . . . . . . . . . . . 111.81 42.74 30.48 (1.46)
=========== =========== =========== ===========
</TABLE>
<PAGE>
The net earnings (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 ($53,859,686 and $21,768,622 at December 31, 1997 and
1996, respectively) as cash equivalents, which includes investments in an
institutional mutual fund which holds U.S. Government obligations, 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" (as amended),
requires certain large 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 $63,630,727, has
been calculated to have an SFAS 107 value of $69,174,577 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. 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.
<PAGE>
The Partnership has acquired, either directly or through joint
ventures 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. In March 1996, the San Jose venture sold
its interest in the 190 San Fernando Building and one of the parking
structures at the Park Center Financial Plaza investment property. The
Partnership sold its interest in the First Financial Plaza office building
in September 1996. The Venture sold the 40 Broad Street Office Building in
December 1997. All of the remaining properties were in operation at
December 31, 1997. Subsequent to the end of the year, the Partnership sold
the Plaza Hermosa Shopping Center and the remaining assets in the Park
Center Financial Plaza office complex. 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.
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 in March 1995. The Partnership
adopted SFAS 121 as required in the first quarter of 1996. SFAS 121
requires that the Partnership record an impairment loss on its properties
held for investment whenever their carrying value cannot be fully recovered
through estimated undiscounted future cash flows from their operations and
sale. The amount of the impairment loss to be recognized would be the
difference between the property's carrying value and the property's
estimated fair value. The Partnership's policy is to consider a property
to be held for sale or disposition when the Partnership has committed to a
plan to sell or dispose of such property and active marketing activity has
commenced or is expected to commence in the near term or the Partnership
has concluded that it may dispose of the property by no longer funding
operating deficits or debt service requirements of the property thus
allowing the lender to realize upon its security. In accordance with SFAS
121, any properties identified as "held for sale or disposition" are no
longer depreciated. Adjustments for impairment loss for such properties
(subsequent to the date of adoption of SFAS 121) are made in each period as
necessary to report these properties at the lower of carrying value or 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 can be no assurance that any estimated fair value of these
properties would ultimately be realized by the Partnership in any future
sale or disposition transaction.
Under the prior impairment policy, provisions for value impairment
were recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale were less
than the property's net carrying value. The amount of any such impairment
loss recognized by the Partnership was limited to the excess, if any, of
the property's carrying value over the outstanding balance of the
property's non-recourse indebtedness.
The results of operations, net of venture partners' share, for
consolidated properties classified as held for sale or disposition as of
December 31, 1997 or sold or disposed of during the past three years were
profits of $5,866,318 and $1,961,979 and losses of $2,633,237 for the years
ended December 31, 1997, 1996 and 1995, respectively. In addition, the
accompanying consolidated financial statements include $1,505,524, $611,483
<PAGE>
and $709,164 of the Partnership's share of total unconsolidated property
operations of $3,011,047, $1,222,965 and $1,418,328 of the properties owned
by the San Jose venture held for sale or disposition as of December 31,
1997 or sold or disposed of in the past three years, respectively.
Certain investment properties are pledged as security for the long-
term debt, for which there is no recourse to the Partnership.
During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued. These standards became
effective for reporting periods after December 15, 1997. As the
Partnership's capital structure only has general and limited partnership
interests, the Partnership will not experience any significant impact on
its consolidated financial statements.
Certain 1996 and 1995 amounts have been reclassed to conform to 1997
presentation.
INVESTMENT PROPERTIES
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.
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 the aggregate amount of $6,400,000. The replacement letter
of credit was scheduled to expire in December 1997, but was extended for a
two year period in 1997.
As a result of reduced projected cash flows, the upcoming maturity of
the letter of credit facility in 1999 and the expected holding period of
the property, there was 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 to reflect the then estimated fair value
of the property based upon an analysis of discounted estimated future cash
flows over the projected holding period.
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.
As the Partnership had committed to a plan to sell the property, the
property had been classified as held for sale as of December 1, 1996 and
therefore has not been subject to continued depreciation after such date.
On January 13, 1998, the Partnership sold the land, building and
related improvements of the Plaza Hermosa Shopping Center to an
unaffiliated third party for a sale price of $13,335,000 (before selling
costs and prorations). The sale will result in a gain in 1998 of
approximately $4,000,000 and $2,400,000 for financial reporting and Federal
income tax purposes, respectively. In addition, in connection with the
sale of the property, as is customary in such transactions, the Partnership
agreed to certain representations, warranties and covenants with a
stipulated survival period that expires September 15, 1998. Although it is
not expected, the Partnership may ultimately have some liability under such
representations, warranties and covenants, but such liability has been
limited in the sale agreement to actual damages in an amount not to exceed
$800,000 in the aggregate.
<PAGE>
VENTURE AGREEMENTS - GENERAL
The Partnership at December 31, 1997 is a party to two 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.
SAN JOSE
The Partnership 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
$2,500,000.
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 and
did so in October 1995. The outstanding principal balances, at the time of
repayment, were $2,418,722 of which the Partnership's share was $1,209,361.
The property is managed by an unaffiliated third party for a fee
calculated as 3% of gross receipts.
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 and JMB-XI 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 laws
concerning eminent domain. During 1995, the Agency filed a condemnation
action in court to proceed to obtain the garage pursuant to such laws. 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 received replacement parking spaces
for its tenants in a nearby city-owned parking structure for a term of
fifty-five years in addition to the aforementioned purchase price of
$4,090,000. San Jose recognized a gain of approximately $2,036,000 and
$1,857,000, respectively, for financial reporting and Federal income tax
purposes in 1996, of which approximately $1,018,000 and $928,500,
respectively, was allocated to the Partnership.
<PAGE>
In March 1996, San Jose sold the 190 San Fernando Building to an
independent third party. The sale price of the building was $1,753,000
(before selling costs), and was paid in cash at closing. San Jose
recognized a gain of approximately $789,000 and $21,000, respectively, for
financial reporting and Federal income tax purposes in 1996, of which
approximately $394,500 and $10,500, respectively, was allocated to the
Partnership.
As San Jose had committed to a plan to sell the properties, the 190
San Fernando Building and the parking structures were classified as held
for sale or disposition as of January 1, 1996 and therefore were not
subject to continued depreciation. The San Jose venture subsequently
committed to a plan to sell the balance of the complex, and classified the
remaining assets as held for sale as of December 31, 1996 and these assets
have, therefore, no longer been subject to continued depreciation beyond
such date.
On February 24, 1998, San Jose sold the land, buildings, related
improvements and personal property of the remaining assets of the Park
Center Financial Plaza office complex to an unaffiliated third party for a
sale price of $76,195,000 (before selling costs and prorations). The sale
will result in a gain in 1998 of approximately $41,000,000 and $23,000,000
for financial reporting and Federal income tax purposes, respectively, of
which approximately $20,500,000 and $11,500,000 of gain will be allocated
to the Partnership, respectively. In addition, in connection with the sale
of the property, as is customary in such transactions, San Jose agreed to
certain representations, warranties and covenants with a stipulated
survival period that expires November 15, 1998. Although it is not
expected, San Jose and the Partnership may ultimately have some liability
under such representations, warranties and covenants.
TOPANGA
In December 1985, the Partnership acquired a 58% interest in the
Topanga Plaza Shopping Center 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
with its epicenter in the town of Northridge, approximately six miles from
Topanga Plaza Shopping Center. The estimated costs at Topanga for which
the joint venture was responsible was approximately $11.9 million. 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. The $11.9 million of total costs was
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 represented recoveries under the
joint venture's business interruption policy and was reflected as rental
income in the accompanying consolidated financial statements.
In the second quarter of 1996, Topanga received, in the aggregate,
approximately $513,000 from Robinson-May and Montgomery Ward, relating to
their prorata share of expenses and costs for repairs and restorations to
the Topanga Plaza Shopping Center following the earthquake. During 1997,
Topanga received, in the aggregate, approximately $312,000 from The
Broadway and Nordstrom, relating to their prorata share of expenses and
costs for repairs and restorations to the Topanga Plaza Shopping Center
following the earthquake. As of the date of this report, Topanga is not
expecting to receive any significant additional reimbursements from tenants
related to the earthquake.
<PAGE>
The joint venture partner advanced funds to the joint venture for
expenses incurred for certain development costs related to a potential
future expansion of Topanga Plaza. The balance of these advances was
$435,000 at December 31, 1994. Although such an expansion of the Shopping
Center is still an option, such advances were repaid to the joint venture
partner in early 1995 from available cash at the venture.
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 Shopping Center, an affiliate of the joint
venture partner, was sold to an unaffiliated third party, who assumed
management at the property on the same terms which existed prior to the
sale.
Sears had agreed to acquire the Broadway store site at the Shopping
Center. Broadway closed in February 1996 and Sears completed its
remodeling of the store and opened in October 1996.
Montgomery Ward, a major department store which owns its own facility,
filed for bankruptcy protection pursuant to Chapter 11 of the Federal
bankruptcy code on July 7, 1997. The store continues to operate and
fulfill its obligations under its operating agreement. Topanga is
considering the possibility of purchasing the Ward store to protect the
value of the shopping center. However, there is no assurance that any such
transaction will occur.
During the third quarter of 1997, $678,801 of the approximate $770,000
of remaining previously accrued costs related to earthquake damage in 1994,
was reversed and recognized as an extraordinary gain. This liability was
established in 1994 for Topanga's share of the estimated repair costs due
to the earthquake damage. This reversal is attributable to repairs which
are no longer considered necessary as a result of previously overestimated
repair costs.
The Topanga venture committed to a plan to sell the property and
therefore classified the property as held for sale as of December 31, 1996.
The property has no longer been subject to continued depreciation beyond
such date.
The Partnership is currently in discussions with the joint venture
partner to explore the possibility of the joint venture partner buying the
Partnership's interest in Topanga. There can be no assurance that any
agreement will be reached in this regard.
Concurrent with the discussions described above, the Partnership is
currently preparing to cause the joint venture to market the property for
sale to third parties, as provided for under the Topanga venture agreement.
Under such agreement, the joint venture partner and the Partnership each
have a limited right of first refusal to purchase the other's interest if a
third party offer is tendered by the other partner, which could have the
effect of lengthening the time necessary to effect a sale or discouraging
offers for the property. There can be no assurance that any sale
transaction will occur.
40 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.
<PAGE>
The Partnership was 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%.
The property was managed by an unaffiliated third party for a fee
calculated as 2% of gross receipts.
As the Partnership had committed to a plan to sell the property as of
July 1, 1997, the property had been classified as held for sale as of that
date, and therefore, has not been subject to continued depreciation.
On December 30, 1997, the Partnership, through the Affiliated Joint
Venture, sold the land, building, related improvements and personal
property of the 40 Broad Street office building to an unaffiliated third
party for a sale price of $34,735,000 (before selling costs). The sale
resulted in a gain of $20,532,803 (predominantly due to provisions for
value impairment totaling approximately $52,000,000 recorded in 1990 and
1991, of which the Partnership's share was approximately $35,651,000), of
which the Partnership's share was $14,077,289 and a loss of $9,703,264, of
which the Partnership's share was $6,652,557 in 1997 for financial
reporting and Federal income tax purposes, respectively. In addition, in
connection with the sale of the property, as is customary in such
transactions, the Affiliated Joint Venture agreed to certain
representations, warranties and covenants with a stipulated survival period
that expires December 1, 1998. Although it is not expected, the Affiliated
Joint Venture and the Partnership may ultimately have some liability under
such representations, warranties and covenants, but such liability has been
limited in the sale agreement to actual damages in an amount not to exceed
$1,500,000 in the aggregate.
In February 1998, the Partnership made a distribution of sale proceeds
primarily related to the sale of the property of $22,875,888 ($120 per
Interest) to the Limited Partners.
FIRST FINANCIAL
On May 20, 1987, the Partnership, through First Financial, a joint
venture with JMB-XIII, acquired an interest in a general partnership
("Encino") with an affiliate of the developer ("Encino Venture Partner").
Encino owned an office building in Encino (Los Angeles), California. First
Financial made an initial investment in the aggregate amount of
approximately $49,812,000 to Encino.
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 Encino 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, was approximately
$20,000,000, of which the Partnership's share was 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
had an interest rate of 8.67% and a term of two years resulting in a
maturity date of November 1, 1997.
<PAGE>
In order to finalize the loan extension described above, the
Partnership and its affiliated partner advanced approximately $4.0 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
had been made on the unaffiliated joint venture partner for its share of
the total required amount; however, the unaffiliated joint venture partner
indicated that it did not intend to fund its required share. The
Partnership and its affiliated partner reached an agreement with the
unaffiliated partner to modify the joint venture agreement. In April 1996,
the unaffiliated partner became a limited partner as a result of this
modification.
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 First Financial office building was classified as held for sale as
of April 1, 1996 and therefore was not subject to continued depreciation
since such date.
On September 11, 1996, the joint venture sold the First Financial
office building to an unaffiliated third-party for a sale price of
$37,900,000 (before selling costs and prorations). The joint venture
received $13,095,445 of net sale proceeds at closing (which reflected the
assumption by the buyer of the mortgage loan with a current balance of
$24,704,555 and closing costs), substantially all of which were allocable
to First Financial pursuant to the Encino venture agreement. The sale
resulted in approximately $2,880,000 and $18,800,000 of gain for financial
reporting purposes and Federal income tax purposes in 1996, respectively,
of which approximately $1,612,000 and $2,000 of gain was allocated to the
Partnership, respectively. The Partnership made a cash distribution of $42
per Interest from the sales proceeds in November 1996.
The Encino partnership agreement generally provided that First
Financial was 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 was to be split equally between First
Financial and the Encino Venture Partner. Pepperdine University, under its
tenant lease, was 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 were allocated to First Financial in 1995 and 1996.
The Encino partnership agreement also generally provided that net sale
proceeds and net refinancing proceeds (as defined), after any amounts due
to Pepperdine University pursuant to its tenant lease, were to be
distributed: first, to First Financial in an amount equal to the
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 Encino Venture Partner in an amount equal to $600,000; any remaining
proceeds were to be split equally between First Financial and the Encino
Venture Partner.
<PAGE>
The terms of the First Financial partnership agreement provided that
annual cash flow, net sale or refinancing proceeds, and tax items were to
be distributed or allocated, as the case may be, to the Partnership in
proportion to its 62.5% share of capital contributions.
The office building was managed by an affiliate of the Encino Venture
Partner for a fee based upon a percentage of rental receipts (as defined)
of the property.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and
1996:
1997 1996
----------- -----------
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 . . . $57,230,727 57,689,284
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 13.5%, interest
only is payable monthly through
December 2023 when the entire
outstanding balance is due and
payable (repaid upon sale
in January 1998) . . . . . . . . 6,400,000 6,400,000
----------- -----------
Total debt. . . . . . . 63,630,727 64,089,284
Less current portion
of long-term debt . . 507,202 458,557
----------- -----------
Total long-term debt. . $63,123,525 63,630,727
=========== ===========
Five year scheduled maturities of long-term debt are summarized as
follows:
1998. . . . . . . . . . $ 507,202
1999. . . . . . . . . . 561,008
2000. . . . . . . . . . 620,521
2001. . . . . . . . . . 686,348
2002. . . . . . . . . . 54,855,647
===========
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
<PAGE>
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, notwithstanding such allocations, 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. As the above levels of
return are not expected to be achieved, the General Partners have waived
their right to receive any portion of the proceeds from the sales of
property by the Partnership.
LEASES
At December 31, 1997, the Partnership and its consolidated ventures'
principal assets are two shopping centers. 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, substantially all
of the leases provide for additional rent based upon percentages of
tenants' sales volumes. A substantial portion of the ability of retail
tenants to honor their leases is dependent on the retail economic sector.
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:
1998. . . . . . . . . . $ 10,469,801
1999. . . . . . . . . . 10,277,342
2000. . . . . . . . . . 9,901,830
2001. . . . . . . . . . 9,645,557
2002. . . . . . . . . . 9,023,985
Thereafter. . . . . . . 25,281,458
------------
Total . . . . . . . $ 74,599,973
============
<PAGE>
Contingent rent (based on sales by property tenants) included in
rental income was as follows:
1995. . . . . . . . . . $438,733
1996. . . . . . . . . . 301,919
1997. . . . . . . . . . 183,895
========
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, 1997 and for the years ended December
31, 1997, 1996 and 1995 are as follows:
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- -------- -------- ------------
Property management
and leasing fees . . . . $ 79,670 70,792 67,422 --
Insurance
commissions. . . . . . . 22,214 34,632 75,330 --
Reimbursement (at cost)
for accounting
services . . . . . . . . 24,372 9,642 90,577 12,474
Reimbursement (at cost)
for portfolio manage-
ment services. . . . . . 39,225 25,996 38,217 11,405
Reimbursement (at cost)
for legal services . . . 11,542 8,683 4,222 4,078
Reimbursement (at cost)
for administrative
charges and other
out-of-pocket expenses . 842 1,026 170,348 --
-------- -------- -------- ------
$177,865 150,771 446,116 27,957
======== ======== ======== ======
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.
During 1994, certain officers and directors of the Managing General
Partner acquired interests in a company which provides certain property
management services to a property owned by the Partnership. The fees
earned by such company from the Partnership for the years ended
December 31, 1997, 1996 and 1995 were approximately $32,500, $39,000 and
$30,000, respectively, all of which has been paid at December 31, 1997.
In accordance with the subordination requirements of the Partnership
Agreement, the General Partners have deferred receipt of their distri-
butions of net cash flow from the Partnership. The cumulative amount of
such deferred distributions aggregated $8,684,505 at December 31, 1997.
The amount is being deferred in accordance with the subordination
requirements of the Partnership Agreement as discussed above. The
Partnership does not expect that the subordination requirements of the
Partnership Agreement will be satisfied to permit payment of the majority
of these amounts. These amounts or amounts currently payable do not bear
interest.
<PAGE>
INVESTMENT IN UNCONSOLIDATED VENTURE
Summary of financial information for San Jose as of and for the years
ended December 31, 1997 and 1996 is as follows:
1997 1996
------------ ------------
Current assets. . . . . . . . . . $ 4,819,672 4,538,120
Current liabilities . . . . . . . (619,337) (456,506)
------------ ------------
Working capital . . . . . . 4,200,335 4,081,614
Investment property, net. . . . . 30,803,149 28,430,666
Other assets, net . . . . . . . . 1,204,478 959,991
Long-term debt. . . . . . . . . . (22,961,889) (23,338,875)
Other liabilities . . . . . . . . (181,229) (79,599)
Venture partners' equity. . . . . (6,711,162) (5,205,639)
------------ ------------
Partnership's capital . . . $ 6,353,682 4,848,158
============ ============
Represented by:
Invested capital. . . . . . . . $ 48,767,680 48,767,680
Cumulative distributions. . . . (25,490,500) (25,490,500)
Cumulative loss . . . . . . . . (16,923,498) (18,429,022)
------------ ------------
$ 6,353,682 4,848,158
============ ============
Total income. . . . . . . . . . . $ 9,404,683 9,238,168
============ ============
Expenses. . . . . . . . . . . . . $ 6,393,636 8,015,203
============ ============
Gain on disposition of
investment property . . . . . . $ -- 2,825,220
============ ============
Net earnings. . . . . . . . . . . $ 3,011,047 4,048,185
============ ============
Total income, expenses and net earnings for the above-mentioned venture
for the year ended December 31, 1995 were $6,412,066, $9,182,446 and
$1,418,328, respectively.
<PAGE>
<TABLE>
SCHEDULE III
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<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). . . . . $57,230,727 8,506,014 54,714,281 46,124,455 8,506,014 100,838,736 109,344,750
Hermosa
Beach,
California . 6,400,000 5,106,570 13,131,181 (3,073,895) 3,176,525 10,057,286 13,233,811
----------- ---------- ----------- ----------- ---------- ----------- -----------
Total . . $63,630,727 13,612,584 67,845,462 43,050,560 11,682,539 110,896,022 122,578,561
=========== ========== =========== =========== ========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 1997
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1997
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). . . . . . . . . . $26,570,333 1964 12/31/85 5-30 years 753,698
Hermosa Beach,
California . . . . . . . . . . . 4,332,391 1985 09/03/86 5-30 years 212,784
----------- ---------
Total . . . . . . . . . . . . . $30,902,724 966,482
=========== =========
<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, 1997 for Federal income tax purposes was
$112,612,934.
(C) Properties owned and operated by joint venture.
(D) 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 the Plaza Hermosa Shopping Center.
</TABLE>
<PAGE>
<TABLE> SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 1997
(E) Reconciliation of real estate owned:
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . $146,082,153 189,130,405 193,298,414
Additions during period. . . . . . . . . . . . . 1,743,255 1,583,556 1,316,320
Sale or disposal during period . . . . . . . . . (25,246,847) (44,631,808) --
Provision for value impairment . . . . . . . . . -- -- (5,484,329)
------------ ----------- -----------
Balance at end of period . . . . . . . . . . . . $122,578,561 146,082,153 189,130,405
============ =========== ===========
(F) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . $ 45,776,427 52,390,756 46,792,110
Depreciation expense . . . . . . . . . . . . . . 328,493 4,625,655 5,598,646
Sale or disposal during period . . . . . . . . . (15,202,196) (11,239,984) --
------------ ----------- -----------
Balance at end of period . . . . . . . . . . . . $ 30,902,724 45,776,427 52,390,756
============ =========== ===========
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
JMB/SAN JOSE ASSOCIATES:
We have audited the financial statements of JMB/San Jose Associates (a
general partnership) as listed in the accompanying index. In connection
with our audits of the financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
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 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 financial statements referred to above present
fairly, in all material respects, the financial position of JMB/San Jose
Associates at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
As discussed in the Notes to the financial statements, in 1996 the
Partnership changed its method of accounting for long-lived assets and
long-lived assets to be disposed of to conform with Statement of Financial
Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1998
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 2,783,007 2,260,010
Rents and other receivables, net of allowance for
doubtful accounts of $0 in 1997 and $1,648,319
in 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,849,882 2,111,845
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 89,913 92,041
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 96,870 74,223
----------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 4,819,672 4,538,119
----------- -----------
Property held for sale or disposition . . . . . . . . . . . . . . . . 30,803,149 28,430,666
----------- -----------
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,204,478 959,992
----------- -----------
$36,827,299 33,928,777
=========== ===========
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
1997 1996
----------- -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 376,986 92,988
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 79,396 199,955
Accrued interest payable. . . . . . . . . . . . . . . . . . . . . . 162,955 163,563
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . 619,337 456,506
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 181,229 79,599
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 22,961,889 23,338,875
----------- -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 23,762,455 23,874,980
Partners' capital accounts. . . . . . . . . . . . . . . . . . . . . . 13,064,844 10,053,797
----------- -----------
$36,827,299 33,928,777
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $ 9,249,115 9,125,251 9,071,667
Interest income . . . . . . . . . . . . . . . . . 155,568 112,917 110,779
Gain on sale of investment property . . . . . . . -- 2,825,220 --
----------- ----------- -----------
9,404,683 12,063,388 9,182,446
----------- ----------- -----------
Expenses:
Mortgage and other interest . . . . . . . . . . . 1,958,848 1,965,892 2,202,191
Depreciation. . . . . . . . . . . . . . . . . . . -- 1,044,296 1,114,143
Property operating expenses . . . . . . . . . . . 4,160,963 4,728,651 4,237,476
Amortization of deferred expenses . . . . . . . . 273,825 276,364 210,308
----------- ----------- -----------
6,393,636 8,015,203 7,764,118
----------- ----------- -----------
Net earnings. . . . . . . . . . . . . . . $ 3,011,047 4,048,185 1,418,328
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
AFFILIATED
PARTNER JMB - XII TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1994. . . . $ 6,076,945 5,719,465 11,796,410
Capital contributions . . . . . . . 1,233,436 1,233,437 2,466,873
Cash distributions. . . . . . . . . (1,250,000) (1,250,000) (2,500,000)
Net earnings. . . . . . . . . . . . 709,165 709,164 1,418,329
----------- ----------- -----------
Balance at December 31, 1995. . . . 6,769,546 6,412,066 13,181,612
Cash distributions. . . . . . . . . (3,588,000) (3,588,000) (7,176,000)
Net earnings. . . . . . . . . . . . 2,024,093 2,024,092 4,048,185
----------- ----------- -----------
Balance at December 31, 1996. . . . 5,205,639 4,848,158 10,053,797
Net earnings. . . . . . . . . . . . 1,505,523 1,505,524 3,011,047
----------- ----------- -----------
Balance at December 31, 1997. . . . $ 6,711,162 6,353,682 13,064,844
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . . . . $ 3,011,047 4,048,185 1,418,328
Items not requiring (providing) cash:
Depreciation. . . . . . . . . . . . . . . . . . -- 1,044,296 1,114,143
Amortization of deferred expenses . . . . . . . 273,825 276,364 210,308
Gain on sale of investment property . . . . . . -- (2,825,220) --
Changes in:
Rents and other receivables . . . . . . . . . . 261,963 398,749 (19,820)
Prepaid expenses. . . . . . . . . . . . . . . . 2,128 (20,632) --
Escrow deposits . . . . . . . . . . . . . . . . (22,647) 232,577 (268,535)
Accounts payable. . . . . . . . . . . . . . . . (120,559) 134,662 (323,557)
Accrued interest payable. . . . . . . . . . . . (608) (562) (32,398)
Tenant security deposits. . . . . . . . . . . . 101,630 30,729 (23,223)
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . 3,506,779 3,319,148 2,075,246
----------- ----------- -----------
Cash flows from investing activities:
Additions to investment property. . . . . . . . . (2,372,483) (1,485,395) (156,254)
Payment of deferred expenses. . . . . . . . . . . (518,311) (402,481) (218,059)
Proceeds from sale of investment property . . . . -- 5,824,041 --
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . (2,890,794) 3,936,165 (374,313)
----------- ----------- -----------
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . (92,988) (85,989) (374,973)
Paydowns on long-term debt. . . . . . . . . . . . -- -- (2,418,722)
Capital contributed to venture. . . . . . . . . . -- -- 2,466,873
Distributions to partners . . . . . . . . . . . . -- (7,176,000) (2,500,000)
----------- ----------- -----------
Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . (92,988) (7,261,989) (2,799,822)
----------- ----------- -----------
Net increase (decrease) increase
in cash and cash equivalents. . . . . . . 522,997 (6,676) (1,098,889)
----------- ----------- -----------
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . 2,260,010 2,266,686 3,365,575
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . . $ 2,783,007 2,260,010 2,266,686
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . $ 1,959,456 1,966,455 2,234,589
Non-cash investing and financing activities:
Cash sale proceeds, net of selling expenses . . $ -- 5,824,041 --
Reduction in investment property, net . . . . . -- (2,966,325) --
Reduction in other assets and liabilities . . . -- (32,496) --
----------- ----------- -----------
Gain recognized on sale of property . . . $ -- 2,825,220 --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
The accompanying financial statements have been prepared for the
purpose of complying with Rule 3.09 of Regulation S-X of the Securities and
Exchange Commission. They include the accounts of the unconsolidated joint
venture, JMB/San Jose Associates ("San Jose"), in which JMB Income
Properties, Ltd.-XII ("JMB Income-XII" or "Partnership") and JMB Income
Properties, Ltd.-XI ("JMB Income-XI" or "Affiliated Partner") are the
partners.
San Jose holds an equity investment in a commercial office complex in
San Jose, California. Business activities consist of rentals to a wide
variety of commercial companies and governmental entities, and the ultimate
sale or disposition of such real estate.
As San Jose has determined to sell the complex, all portions of the
office complex have been classified as held for sale or disposition as of
or during the period ended December 31, 1996. Therefore, the complex is
not subject to continued depreciation. Certain portions of the office
complex were sold during 1996. The results of operations of the complex
included in the accompanying financial statements were earnings of
$2,855,479, $1,110,048 and $1,307,549 for the years ended December 31,
1997, 1996 and 1995, respectively.
On February 24, 1998, San Jose sold the land and related improvements
of the remaining assets of the Park Center Financial Plaza office complex
for $76,195,000. San Jose received approximately $49,400,000 of net sale
proceeds at closing (after the repayment by San Jose of the mortgage loans
secured by the 170 Almaden, 150 Almaden and 185 Park Avenue buildings with
a balance of approximately $23,300,000, loan prepayment premiums of
approximately $2,422,000 and closing costs), of which the Partnership's
share was approximately $24,700,000. A description of the sale of the
property is contained in the Notes of the financial statements of JMB
Income - XII. Such notes are incorporated herein by reference.
The Partnership uses the allowance method of accounting for doubtful
accounts. Provisions for uncollectible tenant receivables in the amounts
of $0, $588,052 and $783,417 were recorded in 1997, 1996 and 1995,
respectively. Bad debt expense is included in Property Operating Expenses.
The preparation of financial statements in accordance with GAAP
requires San Jose 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 amounts could differ from those
estimates.
The accounting policies of San Jose are the same as those of the
Partnership. Accordingly, reference is made to the Notes to the
Partnership's consolidated financial statements filed with this annual
report. Such notes are incorporated herein by reference.
VENTURE AGREEMENT
A description of the venture agreement and the management agreement
is contained in the Notes to Consolidated Financial Statements of JMB
Income - XII. Such note is incorporated herein by reference.
<PAGE>
MANAGEMENT AGREEMENT
In December 1994, the property manager, an affiliate of the General
Partners of the Partnership, sold substantially all of its assets and
assigned its interest in the management contracts to an unaffiliated third
party who continues to manage the complex. In addition, certain of the
management personnel of the property manager became management personnel of
the purchaser and its affiliates.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and
1996:
1997 1996
---------- ----------
7.85% mortgage note; secured by
the 170 Almaden Building in
San Jose, California; principal
and interest payments of $13,537
are due monthly through
September 2003 when the remaining
principal of approximately
$169,000 is due. . . . . . . . . $ 838,875 931,863
8.4% mortgage note; secured by the
150 Almaden and 185 Park Avenue
buildings, and certain related
parking improvements in San Jose,
California; interest only payments
of $157,500 are due monthly through
December 1997; principal and
interests payments of $179,663 are
due monthly through November 2001
when the entire principal of approx-
imately $21,421,000 is due . . . 22,500,000 22,500,000
----------- ----------
Total debt. . . . . . . . 23,338,875 23,431,863
Less current portion
of long-term debt. . . . 376,986 92,988
----------- ----------
Total long-term debt. . . $22,961,889 23,338,875
=========== ==========
Five year scheduled maturities of long-term debt are as follows:
1998. . . . . . . . . . $ 376,986
1999. . . . . . . . . . 409,305
2000. . . . . . . . . . 444,398
2001. . . . . . . . . . 21,723,357
2002. . . . . . . . . . 137,509
===========
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by San Jose
to the General Partners and their affiliates as of December 31, 1997 and
for the years ended December 31, 1997, 1996 and 1995 were as follows:
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- -------- -------- ------------
Property management
and leasing fees. . $ 65,012 77,870 60,000 --
Insurance commissions 23,530 25,768 30,140 --
-------- ------- ------- ------
$ 88,542 103,638 90,140 --
======== ======= ======= ======
<PAGE>
<TABLE>
SCHEDULE III
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) COSTS AT CLOSE OF PERIOD (B)
------------------------------ CAPITALIZED ------------------------------------------
BUILDINGS SUBSEQUENT TO BUILDINGS
AND ACQUISITION AND
ENCUMBRANCE LAND IMPROVEMENTS (C) (D) LAND IMPROVEMENTS TOTAL (E)
----------- ----------- ------------ -------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BLDS:
San Jose,
California $23,338,875 21,078,745 62,309,815 (19,621,073) 5,867,750 42,688,742 48,556,492
=========== ========== ========== =========== ========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1997
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
San Jose, 6/20/85
California . . . . . . . $17,753,343 1970 and 5/2/86 5-30 years 528,193
=========== =======
<FN>
- --------------
Notes:
(A) The initial cost to San Jose represents the original purchase price of the property, 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, 1997 for Federal income tax purposes was $89,267,717.
(C) Through December 31, 1997, San Jose has recorded provisions for value impairment totaling $45,811,547.
(D) During 1996, San Jose sold the 190 San Fernando Building and one of the parking garage structures in
the complex in two separate transactions as described more fully in the Notes to Consolidated Financial Statements
of the Partnership.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(E) Reconciliation of real estate owned:
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . $46,184,009 49,530,107 49,373,853
Additions during period. . . . . . . . . . . . . 2,372,483 1,485,395 156,254
Sales of investment property. . . . . . . . . . -- (4,831,493) --
----------- ----------- -----------
Balance at end of period . . . . . . . . . . . . $48,556,492 46,184,009 49,530,107
=========== =========== ===========
(F) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . $17,753,343 18,574,214 17,460,071
Sales of investment property. . . . . . . . . . -- (1,865,167) --
Depreciation expense . . . . . . . . . . . . . . -- 1,044,296 1,114,143
----------- ----------- -----------
Balance at end of period . . . . . . . . . . . . $17,753,343 17,753,343 18,574,214
=========== =========== ===========
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during 1997
and 1996.
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, directors, members of their families and their affiliates.
JMB has responsibility for all aspects of the Partnership's operations.
ABPP Associates, L.P., is an Illinois limited partnership with JMB as its
sole general partner, is one of the Associate General Partners of the
Partnership and is also the sole general partner of Income Partners - XII,
an Illinois limited partnership that is the other Associate General Partner
of the Partnership. The limited partners of ABPP Associates, L.P. are
generally officers, directors and affiliates of JMB or its affiliates.
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 and/or for the sale of property.
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 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:
<PAGE>
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 3, 1998. 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 3,
1998. 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-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.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV
("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus")
and Carlyle Income Plus, L.P.-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.-VII ("JMB Income-VII"), 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"))
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, directly or indirectly, of certain partnerships
which are associate general partners in the following real estate limited
partnerships: the Partnership, Carlyle-VII, Carlyle-XI, Carlyle-XII,
Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB
Income-VI, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XIII,
Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle
Income Plus-II and IDS/BIG.
<PAGE>
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 60) 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 also a director of Urban Shopping Centers,
Inc. ("USC, 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 60) 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 also a principal of Walton Street Real Estate
Fund I, L.P. and a director of USC, Inc. He is a member of the Bar of the
State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 59) 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 56) has been associated with JMB since July,
1972. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 64) has been associated with JMB since December,
1972. He is also the President and a director of JMB Insurance Agency,
Inc.
John G. Schreiber (age 51) 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 Advisors, L.P.,
an affiliate of the Blackstone Group, L.P. Mr. Schreiber is also a
director of USC, Inc., a trustee of Amli Residential Property Trust and 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 48) 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 50) 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 45) 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 49) 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 62) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
<PAGE>
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 the Notes for a description of such
transactions, distributions and allocations. No such cash distributions
were paid to the General Partners in 1997, 1996 and 1995.
Affiliates of the Managing General Partner provided property
management services to the Partnership for 1997 for the Plaza Hermosa
Shopping Center in Hermosa Beach, California at a fee calculated at 4% of
the gross receipts of the property and for the 40 Broad Street office
building in New York, New York until December 1994 at a fee calculated at
2% of the gross receipts of the property. In 1997, the affiliates earned
property management and leasing fees amounting to $79,670, all of which
were paid at December 31, 1997. 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
salaries, salary-related and direct expenses relating to the administration
of the Partnership and the operation of the Partnership's real property
investments. In 1997, the Managing General Partner received reimbursement
for such expenses and salaries in the amount of $75,981 of which $27,957
was unpaid at December 31, 1997. The Managing General Partner received no
disbursement agent and data processing fees in 1997.
JMB Insurance Agency, Inc., an affiliate of the Managing General
Partner of the Partnership, earned and received insurance brokerage
commissions in 1997 aggregating $22,214 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.
<PAGE>
<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 and
Assignee Interests
Therein JMB Realty Corporation 5 Interests (1) Less than 1%
indirectly
Limited Partnership
Interests and
Assignee Interests
Therein 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.
Reference is made to Item 10 for information concerning ownership of the Managing General Partner.
(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>
<PAGE>
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.
3-C. Acknowledgement of rights and duties of the
General Partners of the Partnership between ABPP Associates, L.P. (a
successor Associated General Partner of the Partnership) and JMB Realty
Corporation as of December 31, 1995 is hereby incorporated herein by
reference to the Partnership's report for June 30, 1996 on Form 10-Q (File
No. 0-16108) dated August 9, 1996.
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 hereby incorporated herein by reference to the Partnership's
Report for December 31, 1995 on Form 10-K (File No. 0-16108) dated March
25, 1996.
<PAGE>
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.
10-D. Third Amendment to amended and restated
partnership agreement of JMB Encino Partnership L.P. dated April 24, 1996
between JMB First Financial Associates and JMB Encino Partnership are
hereby incorporated by reference to the Partnership's report on Form 10-Q
(File No. 0-16108) dated May 10, 1996.
10-E. Purchase Agreement and Amendments thereto dated
August 9, 1996 relating to the sale of First Financial Plaza by JMB Encino
Partnership, L.P. are hereby incorporated herein by reference to the
Partnership's report for September 11, 1996 on Form 8-K (File No. 0-16108)
dated September 26, 1996.
<PAGE>
10-F. Sale documents relating to the sale of the 40
Broad Street office building in New York, New York are hereby incorporated
by reference to the Partnership's report for December 30, 1997 on Form 8-K
(File No. 0-16108) dated January 14, 1998.
10-G. First Amendment to the Purchase-Sale Agreement
dated February 10, 1998 relating to the sale by San Jose of the Park Center
Financial Plaza office complex in San Jose, California between JMB/San Jose
Associates and Divco West Properties, LLC are filed herewith.
10-H. Purchase-Sale Agreement with exhibits dated
December 3, 1997 relating to the sale by San Jose of the Park Center
Financial Plaza office complex in San Jose, California between JMB/San Jose
Associates and Divco West Properties, LLC are filed herewith.
10-I. Purchase-Sale Agreement with amendments thereto
dated November 25, 1997 relating to the sale by the Partnership of the
Plaza Hermosa Shopping Center in Hermosa Beach, California between JMB
Income Properties, Ltd. - XII and Pacific Retail Trust are filed herewith.
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) The following report on Form 8-K was filed since the
beginning of the last quarter of the period covered by this report.
The Partnership's report on Form 8-K (File No. 0-16108) for
December 30, 1997 dated January 14, 1998 describing under Item 2 the sale
of the 40 Broad Street office building was filed.
No annual report or proxy material for 1997 has been sent to the
Partners of the Partnership. An annual report will be sent to the Partners
subsequent to this filing.
<PAGE>
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, 1998
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, 1998
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1998
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1998
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 25, 1998
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1998
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1998
By: STUART C. NATHAN*
Stuart C. Nathan, Executive Vice President
and Director
Date: March 25, 1998
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 25, 1998
<PAGE>
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
3-C. Acknowledgement of rights and duties
of the General Partners of the
Partnership dated August 9, 1996
between ABPP Associates, L.P. and
JMB Realty Corporation Yes
4-A. Mortgage loan agreement related to
Topanga Plaza Yes
4-B. Mortgage loan agreement related to
First Financial Plaza Yes
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
10-D. Third Amendment to amended and
restated partnership agreement of
JMB Encino Partnership L.P. dated
April 24, 1996 between JMB First
Financial Associates and JMB Encino
Partnership Yes
10-E. Purchase Agreement and Amendments
thereto dated August 9, 1996 relating
to the sale of First Financial Plaza
by JMB Encino Partnership, L.P. Yes
<PAGE>
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------- ----
10-F. Sale documents related to the
40 Broad Street office building Yes
10-G. First Amendment to the Purchase-
Sale Agreement related to the
Park Center Financial Plaza
office complex No
10-H. Purchase-Sale Agreement related
to the Park Center Financial Plaza
office complex No
10-I. Purchase-Sale Agreement with
amendments thereto related to
the Plaza Hermosa Shopping Center No
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 10-G
- ------------
(JMB-XII)
FIRST AMENDMENT TO PURCHASE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
(Park Center Plaza, San Jose, California)
THIS FIRST AMENDMENT TO PURCHASE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS (this "First Amendment"), is made as of February 10, 1998, by
and between JMB/SAN JOSE ASSOCIATES, an Illinois general partnership
("Seller"), and DIVCO WEST PROPERTIES, LLC, a Delaware limited liability
company ("Buyer"), with reference to the following facts:
Seller and Buyer entered into that certain Purchase Agreement and
Joint Escrow Instructions, dated as of December 3, 1997 (the "Purchase
Agreement"). Each capitalized term used in this First Amendment, but not
defined herein, shall have the meaning ascribed to it in the Purchase
Agreement.
Seller and Buyer desire to amend the Purchase Agreement as set forth
in the First Amendment.
NOW, THEREFORE, the parties agree as follows:
Purchase Price.
Price Reduction. Paragraph 2A of the Purchase Agreement is hereby
deleted in its entirety and the following Paragraph 2A is hereby inserted
in the place thereof: "The purchase price (the "Purchase Price") for the
Property shall be the sum of Seventy-Six Million One Hundred Ninety-Five
Thousand Dollars ($76,195,000.00)." Seller and Buyer hereby agree that the
reduction to the Purchase Price represented by the foregoing has been
agreed upon based on discussions by Seller and Buyer of Buyer's due
diligence examinations, reviews and inspections and Buyer acknowledges that
such adjustment appropriately and adequately takes such due diligence
matters into account (including, without limitation, all roof, plaza
basement pumping system and other physical matters, all environmental
matters and all financial matters relating to such due diligence reviews).
Environmental Matters. Without limitation on the foregoing matters, Buyer
acknowledges that a portion of the foregoing Purchase Price reduction
related to the alleged presence of Hazardous Material in groundwater at the
Property and the alleged non-compliance with permitting requirements
related to the discharge of pumped groundwater from the Property.
Notwithstanding any other provision of the Purchase Agreement to the
contrary, Buyer waives any and all rights it has or may have against Seller
(including, without limitation, contribution rights under CERCLA) with
respect to any Hazardous Material in groundwater at or from the Property,
or with respect to any non-compliance with permitting requirements related
to the discharge of pumped groundwater from the Property. At Closing,
Buyer shall obtain from Zurich American/Steadfast Insurance Company the
environmental liability insurance policy described in those certain letters
dated January 23, 1998, and February 10, 1998, attached hereto as Schedule
"I", such policy to have a liability limit of not less than $5,000,000, a
deductible not to exceed $250,000, a term of not less than 10 years and an
endorsement in favor of Seller. In the event that Buyer obtains such
policy, Seller shall provide Buyer with a proration credit at Closing in an
amount equal to the sum of Ten Thousand Dollars ($10,000). However, in the
event Buyer fails to obtain such policy within sixty (60) days after the
Closing, Buyer shall immediately refund to Seller the sum of Two Hundred
and Fifty-Five Thousand Dollars ($255,000).
<PAGE>
Additional Escrow Deposit. The parties hereto agree that Buyer shall
deliver the Additional Escrow Deposit to Escrow Holder within two (2)
business days following the complete execution and delivery of this First
Amendment. Notwithstanding anything to the contrary contained in the
Purchase Agreement, the Additional Escrow Deposit shall not be an uncashed
check of Buyer but shall be made by bank or cashier's check drawn on a
major national money center banking institution (or by other delivery of
good funds reasonably acceptable to Seller), the proceeds of which shall be
held by Escrow Holder as part of the Escrow Deposit under the Purchase
Agreement.
Satisfaction of Certain Conditions.
A. Due Diligence Period. Buyer hereby acknowledges that the Due
Diligence Period has expired and that condition precedent set forth in
Paragraph 4B of the Purchase Agreement has been satisfied or waived.
Without limitation thereon, Buyer hereby acknowledges that Buyer has
approved all title and survey matters and waives the provisions of
Paragraph 4A(1) of the Purchase Agreement.
B. Estoppel Certificates. Buyer hereby acknowledges that Buyer
has received, reviewed and approved all Tenant Estoppel Certificates
delivered to Buyer and that the condition set forth in Paragraph 4C of the
Purchase Agreement is deemed satisfied. Without limitation thereon, Buyer
acknowledges that the Stephenz Group estoppel contains certain claims
related to proposed amendments which Buyer elected not to approve and, as a
result, Seller has not executed (and Buyer agrees to acquire the Property
subject to such claims, and releases Seller from any liability or
obligation to Buyer or its successor and assigns in connection therewith).
Buyer further acknowledges that no Seller's Estoppel shall be required at
closing under the Purchase Agreement.
Closing Date and Procedure. Notwithstanding anything to the contrary
provided in the Purchase Agreement, including, without limitation, the
provisions of Paragraph 5 thereof, the "Closing Date" shall mean
February 24, 1998. Notwithstanding the Escrow closing provisions of the
Purchase Agreement, Buyer hereby acknowledges that Seller shall have the
right, upon not less than three (3) business days' prior written notice, to
require that the closing of the purchase and sale transactions occur at a
closing conference to be held on the Closing Date at the offices of Buyer's
counsel, Orrick, Herrington & Sutcliffe at 400 Sansome Street, San
Francisco, California 94111-3143.
Heritage Bank Lease. Buyer hereby acknowledges that Buyer has
approved the Heritage Bank of Commerce lease pursuant to that certain Lease
Agreement dated November 18, 1997. In that connection, Buyer shall pay all
third party leasing commissions (including those payable to Heitman) not to
exceed the sum of Forty-Two Thousand Five Hundred Dollars ($42,500.00) and
third party tenant improvements costs with respect to such extension
agreement. Buyer further agrees that the rent commencement date may be
extended for up to two (2) months after the original date specified in such
extension agreement.
Termination of Parking Lease. Seller covenants and agrees to
terminate effective as of the Closing that certain parking agreement dated
as of October 23, 1986 between Seller and Standard Parking Corporation, a
California corporation, as amended by those certain amendments dated as of
March 17, 1987, December 27, 1991, August 17, 1995 and April 3, 1996.
Miscellaneous. Seller hereby approves an assignment of the Purchase
Agreement (as amended hereby) to Park Center Plaza, LLC, a Delaware limited
liability company formed by Buyer (the "Buyer Entity"), provided (i) such
assignment shall be effective only at Closing, and (ii) Buyer Entity
assumes the obligations of Buyer under the Purchase Agreement (as amended
hereby). References in the Purchase Agreement to Seller being a "limited"
partnership are hereby amended to reflect that Seller is a "general"
partnership. The Exhibits attached hereto as Schedule "II" represent the
final Exhibits to be attached to the Purchase Agreement (provided, however,
Buyer acknowledges that such Exhibits are hereby supplemented by matters
disclosed in the Tenant Estoppel Certificates delivered to Buyer prior to
the date hereof).
<PAGE>
No Other Amendment; Conflict. Except as set forth in this First
Amendment, the provisions of the Purchase Agreement shall be, and remain,
in full force and effect (such Purchase Agreement being hereby ratified and
confirmed by the parties hereto notwithstanding any prior termination
thereof). If any provision of this First Amendment conflicts with any
provision of the Purchase Agreement, then the provisions of this First
Amendment shall prevail.
Counterparts. This First Amendment may be signed in multiple
counterparts (including facsimile counterparts) which, when signed by all
parties, shall constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first written above.
BUYER:
DIVCO WEST PROPERTIES, LLC,
a Delaware limited liability company
By: David A. Taran
Member
SELLER:
JMB/SAN JOSE ASSOCIATES,
an Illinois limited partnership
By: JMB Income Properties, Ltd.-XI,
an Illinois general partnership,
General Partner
By: JMB Realty Corporation,
a Delaware corporation,
General Partner
By:
Its:
By: JMB Income Properties, Ltd.-XII,
an Illinois general partnership,
General Partner
By: JMB Realty Corporation,
a Delaware corporation,
General Partner
By:
Its:
<PAGE>
Schedule "I"
to first amendment to purchase agreement
and joint escrow instructions"
See Attached
<PAGE>
Schedule "II"
to first amendment to purchase agreement
and joint escrow instructions"
See Attached
EXHIBIT 10-H
- ------------
(J-XII)
PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
(Park Center Plaza; San Jose, California)
THIS AGREEMENT is made and entered into as of December ___, 1997 (the
"Effective Date") by and between JMB/SAN JOSE ASSOCIATES, an Illinois
limited partnership (hereinafter called _xe "Seller":"Seller"), and DIVCO
WEST PROPERTIES LLC, a Delaware limited liability company (hereinafter
called _xe "\"Buyer\":"_"Buyer").
R E C I T A L S
A. Seller is the owner of that certain real property located in
the City of San Jose, County of Santa Clara, State of California,
consisting primarily of an office complex and related parking facilities
sometimes known as "Park Center Plaza".
B. Buyer desires to purchase such premises on the terms and
conditions hereinafter documented.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. Purchase and Sale. Seller shall sell to Buyer, and Buyer shall
purchase from Seller, the following:
A. That certain real property located in San Jose,
California and commonly known as the Park Center Plaza, and being more
particularly described on Exhibit "A" attached hereto (the "Real
Property");
B. All of Seller's right, title and interest in and to any
rights, privileges and easements appurtenant to the Real Property,
including, without limitation, all minerals, oil, gas and other hydrocarbon
substances on and under the Real Property, as well as all development
rights, air rights, water, water rights, riparian rights and water stock
relating to the Real Property and any rights-of-way or other appurtenances
used in connection with the beneficial use and enjoyment of the Real
Property, and all of Seller's right, title and interest in and to all roads
and alleys adjoining or servicing the Real Property (collectively, the
"Appurtenances");
C. All of Seller's right, title and interest in and to all
improvements and fixtures located on the Real Property, including, without
limitation, all buildings and structures presently located on the Real
Property, all apparatus, equipment and appliances used in connection with
the operation or occupancy of the Real Property, such as heating and air
conditioning systems and facilities used to provide any utility,
refrigeration, ventilation, garbage disposal, landscaping and cleaning
equipment, or other services on the Real Property, and along with all on-
site parking (collectively, the "Improvements");
D. All personal property owned by Seller located at the
Property and utilized in connection with the operation or maintenance of
the Property (the "Personal Property"); and
E. All right, title and interest of Seller in and to the
name "Park Center Plaza", any lease and occupancy rights (including,
without limitation, the lessor's interest in and to all tenant leases,
including all amendments, modifications and agreements and all material
correspondence and other documents affecting in any way any of the parties'
obligations under each such lease (the "Leases"), and Seller's interest in
all refundable security deposits and prepaid rent, if any, under the Leases
<PAGE>
and any and all guaranties, letters of credit or other credit enhancement
relating to the Leases), any and all licenses, permits, certificates of
occupancy, development rights, plans and specifications, utility contracts
and, to the extent approved by Buyer pursuant to this Agreement, all other
agreements relating to the ownership, use and operation of the Property, as
defined below (collectively, the "Intangible Property").
All of the items referred to in subparagraphs A, B, C, D and E
above are collectively referred to as the "Property".
2. Purchase Price.
A. The purchase price (the _xe "\"Purchase
Price\":"_"Purchase Price") for the Property shall be the sum of Seventy-
Eight Million Two Hundred Fifty Thousand and No/100 Dollars ($78,250,000).
3. Payment of Purchase Price. The Purchase Price shall be paid to
Seller by Buyer as follows:
A. Escrow Deposit. Within two (2) business days of the
Effective Date, Buyer shall deliver $250,000 (together with all interest
thereon, the _xe "\"Escrow Deposit\":"_"Initial Escrow Deposit") to Chicago
Title Insurance Company, 110 West Taylor Street, San Jose, California 95110
Attention: Linda Tugade (which company or such other national title
insurance company selected by Buyer within two (2) business days of the
Effective Date, and reasonably approved by Seller, in its capacity as
escrow holder hereunder, is called _xe "\"Escrow Holder\":"_"Escrow
Holder"). In addition, if Buyer shall deliver the "Approval Notice" prior
to the expiration of the "Due Diligence Period", as provided (and defined)
in paragraph 4B hereof, Buyer shall concurrently therewith deliver Buyer's
check in the amount of $500,000 (the "Additional Escrow Deposit") to Escrow
Holder. The Additional Escrow Deposit shall be in the form of Buyer's
check which shall be held uncashed by the Escrow Holder until such time as
the Closing occurs or, pursuant to the terms hereof, Seller notifies Escrow
Holder and Buyer that Seller believes in its good faith discretion that it
is entitled to the Escrow Deposit. The Initial Escrow Deposit to be made
hereunder shall be made by a bank or cashier's check drawn on a major
national money center banking institution (or by other delivery of good
funds reasonably acceptable to Seller), and the amounts so deposited shall
be held by Escrow Holder as a deposit against the Purchase Price in
accordance with the terms and provisions of this Agreement. The parties
hereto hereby acknowledge that the closing of the transactions hereunder
(the "Closing") will occur not later than December 30, 1997, and that the
parties will reasonably cooperate to most effectively and efficiently cause
the delivery of all sums hereunder so as to avoid multiple wires or
deliveries of funds hereunder. As used herein, the term "Escrow Deposit"
means the Initial Escrow Deposit and, from and after the delivery of good
funds, the Additional Escrow Deposit, together with all interest earned on
such deposits while the same are held in escrow hereunder. At all times in
which the Escrow Deposit is being held by the Escrow Holder, the Escrow
Deposit shall be invested by Escrow Holder in the following investments
(_xe "\"Approved Investments\":"_"Approved Investments"): (i) United
States Treasury obligations, (ii) United States Treasury-backed repurchase
agreements issued by a major national money center banking institution
reasonably acceptable to Seller, or (iii) such other manner as may be
reasonably agreed to by Seller and Buyer. The Escrow Deposit shall be
disposed of by Escrow Holder only as provided in this Agreement.
Notwithstanding anything to the contrary contained herein the Escrow Holder
shall not be obligated or entitled to cash the Buyer's check for the
Additional Escrow Deposit until such time as the Closing occurs or Seller
notifies Escrow Holder and Buyer that Seller believes in its good faith
discretion that it is entitled to received the Escrow Deposit pursuant to
the terms hereof. In the event that pursuant to the terms hereof Buyer is
entitled to the return of the Escrow Deposit, Buyer's check for the
Additional Escrow Deposit shall be returned to Buyer uncashed.
<PAGE>
B. Closing Payment. The balance of the Purchase Price
(i.e., the Purchase Price less the sum of the Escrow Deposit available as
of the date thereof in good funds, as such amounts shall be adjusted by the
prorations and credits specified herein) shall be paid by wire transfer
through "Escrow" as hereinafter provided of immediately available federal
funds on the Closing Date (the amount to be paid under this subparagraph B
being herein called the "Closing Payment").
4. Conditions Precedent.
A. Title Matters.
Title Report.
(a) Buyer has received a copy of a preliminary title report (_xe
"\"Preliminary Title Report\":"_"Preliminary Title Report") covering the
Property from Chicago Title Insurance Company (which company, or such other
national title insurance company selected by Buyer within two (2) business
days of the Effective Date and reasonably approved by Seller, in its
capacity as title insurer hereunder, is herein called the _xe "\"Title
Company\":"_"Title Company"). In addition, Seller has ordered (and will
use good faith efforts to cause the delivery to Buyer on or before December
15, 1997) an update of that certain survey of the Property prepared by
Mountain Pacific Surveys, which survey shall be certified in customary form
to Buyer and Title Company (_xe "\"Survey\":"_"Survey"). If Buyer shall
fail to deliver a "Title Objection Notice" (as hereinafter defined) setting
forth those title and survey matters to which Buyer objects in its sole and
absolute discretion on or before the date which is five (5) business days
prior to the end of the "Due Diligence Period", as hereinafter defined (the
"Title Review Period"), Buyer shall be deemed to have disapproved the
exceptions to title shown on the Preliminary Title Report and the matters
disclosed on any survey(s) obtained or delivered hereunder.
(b) Additional Title Matters. Approval by Buyer in its sole and
absolute discretion of any additional exceptions to title matters first
disclosed to or discovered by Buyer after the delivery of the Title
Objection Notice shall be a condition precedent to Buyer's obligation to
purchase the Property. Unless Buyer gives written notice that it approves
any such additional exceptions to title or survey matters, stating the
exceptions so approved, on or before the sooner to occur of three (3)
business days after receipt of written notice thereof and the Closing Date,
Buyer shall be deemed to have disapproved said additional title exception
matters.
(c) Title Objections. If Buyer shall not approve any title or
survey matters which Buyer is permitted to disapprove hereunder, Buyer
shall have the right to give written notice thereof ("Title Objection
Notice") to Seller within the time periods provided for in
Paragraphs 4A(1)(a) or (b), as applicable. Upon receipt by Seller of a
Title Objection Notice given in a timely manner (or a deemed title
disapproval under Paragraphs 4A(1)(a) or (b) above), then Seller shall have
until the sooner to occur of (1) three (3) business days from receipt of
such Title Objection Notice (or from the date of Buyer's deemed disapproval
as aforesaid) and (2) the Closing Date, within which to notify Buyer as to
each properly disapproved matter either that (i) Seller elects not to cause
such disapproved matter to be removed as of the Closing Date (or otherwise
take any action with respect thereto), or (ii) Seller intends to either (a)
use commercially reasonable efforts to cause such disapproved matter to be
removed on the Closing Date, or (b) obtain a title endorsement (if
available) reasonably acceptable to Buyer insuring over such disapproved
matter; provided, however, Seller shall have no liability if for any
reason, after electing under (ii) above, such additional disapproved
matters are not removed or insured over in a form reasonably acceptable to
<PAGE>
Buyer as of the Closing Date. Failure to deliver any written notification
by Seller of its election within such period shall be deemed to be an
election not to cause any such additional disapproved matters to be
removed. If Seller elects not to cause any or all such additional
disapproved matters to be removed or insured over as aforesaid, Buyer shall
have until the sooner to occur of (1) three (3) business days from receipt
of written notice thereof (or from the date of Seller's deemed election as
aforesaid) and (2) the Closing Date, within which to notify Seller in
writing either that (x) Buyer revokes its disapproval and will proceed with
the purchase of the Property without any reduction in the Purchase Price
and will take subject to such matters, or (y) Buyer terminates this
Agreement (and thereupon the Escrow Deposit shall be delivered to Buyer).
Failure to deliver any written notification by Buyer of its election within
such period shall be deemed to be an election to terminate this Agreement.
(d) Permitted Exceptions. All matters set forth on the Preliminary
Title Report which are approved by Buyer pursuant to the terms are herein
called the "Permitted Exceptions". The term "Permitted Exceptions" shall
additionally include (i) any title matters objected to by Buyer, which
objections are subsequently waived in writing by Buyer, and (ii) any title
matters objected to by Buyer, which objections are removed or which are
otherwise satisfactorily cured as determined by Buyer in its sole and
absolute discretion. Buyer shall have the option to waive the condition
precedent set forth in this paragraph 4A(1) by written notice to Seller.
In the event of such waiver, such condition shall be deemed satisfied.
(2) Exceptions to Title. Buyer shall be obligated to accept
title to the Property, subject to the following exceptions to title:
(a) Real estate taxes and assessments not yet due and
payable;
(b) The standard printed exceptions of the standard form ALTA
owner's policy of title insurance with so-called "extended coverage" issued
by Title Company in the State of California; and
(c) The Permitted Exceptions.
Conclusive evidence of the availability of such title shall be the
irrevocable commitment of Title Company to issue to Buyer on the Closing
Date a standard ALTA owner's policy of title insurance with so-called
"extended coverage" ("Owner's Policy"), in the face amount of the Purchase
Price, which policy shall (i) show title to the Property to be vested of
record in Buyer, (ii) show the Permitted Exceptions to be the only
exceptions to title, and (iii) contain such endorsements or additional
coverage as Buyer may have requested and Title Company shall have committed
to issue in writing during the Due Diligence Period to issue.
B. Due Diligence Reviews. Buyer shall have until 5:00 p.m.
(Pacific time) on December 26, 1997 (the _xe "\"Due Diligence
Period\":"_"Due Diligence Period"), within which to perform and complete
all of Buyer's due diligence examinations, reviews and inspections of all
matters pertaining to the purchase of the Property, including all leases,
service contracts, survey and title matters, and all physical,
environmental, structural, zoning, land use and compliance matters and
conditions respecting the Property and any other matters Buyer deems
relevant in its sole and absolute discretion. During the Due Diligence
Period, Seller shall provide Buyer with reasonable access to the Property
upon reasonable advance notice. Prior to the Effective Date, Seller shall
have delivered to Buyer or made available to Buyer at the office of the
Property in San Jose, California all leases, service contracts, third party
reports or studies, correspondence with tenants or service providers and
all other material documents respecting the Property (to the extent the
same are known to Seller and are in Seller's possession or reasonably
available to Seller). Buyer shall at all times conduct its due diligence
review, inspections and examinations in a manner so as to not cause
material damage, loss, cost or expense to Seller or the Property and so as
to not materially interfere with or disturb any tenant at the Property, and
<PAGE>
Buyer will indemnify, defend, and hold Seller and the Property harmless
from and against any such damage, loss, cost or expense (the foregoing
obligation surviving any termination of this Agreement); provided, however,
nothing contained in the foregoing shall impose any liability upon Buyer
for the mere discovery by Buyer of any pre-existing conditions. Without
limitation on the foregoing, in no event shall Buyer (a) make any intrusive
physical testing (environmental, structural or otherwise) at the Property
(such as soil borings, water samplings or the like) without Seller's
express written consent. Buyer will coordinate any tenant contact with
Seller and comply with any reasonable requirements of Seller in connection
therewith (including scheduling tenant contacts toward the end of the Due
Diligence Period). Seller shall have the right, at its option, to cause a
representative of Seller to be present at all inspections, reviews and
examinations conducted hereunder. Buyer shall promptly deliver to Seller
true, accurate and complete copies of any final written reports relating to
the Property prepared for or on behalf of Buyer by any third party (without
representation or warranty of any kind by Buyer with respect thereto) and
in the event of termination hereunder, shall return all documents and other
materials furnished by Seller hereunder. Buyer shall keep all information
or data received or discovered in connection with any of the inspections,
reviews or examinations strictly confidential. If, on or before the
expiration of the Due Diligence Period, based upon such review, examination
or inspection, Buyer shall determine in its sole and absolute discretion
that it intends to proceed with the acquisition of the Property, then Buyer
shall promptly notify Seller and Escrow Holder of such determination in
writing (such notice being herein called the "Approval Notice") and
concurrently therewith Buyer shall deliver the Additional Escrow Deposit to
Escrow Holder (and thereafter, Buyer shall have no further right to
terminate this Agreement pursuant to this paragraph 4B). If, however, on
or before the expiration of the Due Diligence Period, based upon such
review, examination or inspection, Buyer shall determine in its sole and
absolute discretion that it no longer intends to acquire the Property, then
Buyer shall promptly notify Seller of such determination in writing (such
notice being herein called the "Termination Notice"), whereupon the Escrow
Deposit shall be returned to Buyer and this Agreement, and the obligations
of the parties hereunder, shall terminate. In the event that, on or before
the expiration of the Due Diligence Period, Buyer shall fail to have
delivered the Approval Notice to Seller (and concurrently therewith deposit
the Additional Escrow Deposit with Escrow Holder as provided for in this
Agreement), Buyer shall be deemed to have elected not to proceed with the
acquisition of the Property whereupon the Escrow Deposit shall be returned
to Buyer and this Agreement, and the obligations of the parties hereunder,
shall terminate.
C. Estoppel Certificates. Receipt of estoppel certificates
("Tenant Estoppel Certificates"), from all tenants leasing more than 10,000
square feet of space, together with such additional tenants as may be
required so that Tenant Estoppel Certificates are received from tenants
leasing, in the aggregate, not less than 80% of the net rentable square
feet of space covered by leases in effect as of the date hereof, shall be a
condition precedent to Buyer's obligation to purchase the Property
hereunder. Each Tenant Estoppel Certificate shall either be substantially
in the form provided in Exhibit "C" attached hereto and made a part hereof
or in the form, if any, prescribed in the applicable tenant lease and shall
disclose no material defaults or other adverse information which is
materially inconsistent with the leases or the "Rent Roll" (as hereinafter
defined). Seller's sole obligation hereunder shall be to utilize
commercially reasonable efforts to obtain a Tenant Estoppel Certificate
from each tenant at the Property (such reasonable efforts obligations not
including any obligation to institute legal proceedings or to expend monies
therefor), but such obligation shall not affect the provision of such
Tenant Estoppel Certificates as a condition precedent to closing. Without
<PAGE>
limiting the condition that Buyer received the Estoppel Certificates
described above, Seller shall deliver at the Closing a Seller's estoppel
certificate ("Seller's Estoppel") for each tenant that does not deliver a
Tenant Estoppel Certificate. The Seller's Estoppel shall state that (i)
attached to such estoppel is a true, correct and complete copy of the
applicable tenant lease (including all amendments or modifications
thereto), (ii) there is no default under the applicable lease, (iii) the
rent and other charges payable under the applicable lease, (iv) the
commencement and termination date of the applicable lease, and (v) the
suite number and square footage covered by the applicable lease. The
Seller's Estoppel shall be subject to the limitations on survival contained
in paragraph 7C hereof and the limitations on liability contained in
paragraph 9B hereof.
5. Closing Procedure. The sale and purchase herein provided shall
be consummated on the Closing Date through escrow ("Escrow") with the Title
Company. As used herein, _xe "\"Closing Date\":"_"Closing Date" means
December 30, 1997, or such earlier date as may be agreed upon by Buyer and
Seller; provided, however, if any of the conditions to Closing set forth in
this Agreement is not satisfied on or before the Closing Date or if Buyer
shall claim that Seller in is default or has otherwise breached its
obligations under this Agreement, Seller shall have the right, at its sole
option, to extend the Closing Date for up to ten (10) days in order to
attempt to satisfy such conditions or cure such defaults or breaches.
A. Escrow. On or before the Closing Date, the parties shall
deliver to Title Company the documents described below. Such deliveries
shall be made pursuant to escrow instructions (_xe "\"Escrow
Instructions\":"_"Escrow Instructions") to be executed among Buyer, Seller
and Title Company in form reasonably acceptable to such parties in order to
effectuate the intent hereof.
B. Delivery by Parties.
(1) Seller Deliveries. Seller shall deliver to Escrow the
following:
(a) By Seller, a duly executed and acknowledged grant deed
(_xe "\"Deed\":"_"Deed") in the form of Exhibit "D" attached hereto and
made a part hereof,
(b) A duly executed and acknowledged bill of sale, assignment
and assumption agreement (_xe "\"Assignment and Assumption
Agreement\":"_"Assignment and Assumption Agreement") in the form of Exhibit
"E" attached hereto and made a part hereof;
(c) Duly executed and acknowledged certificates sufficient
for State and Federal law purposes) regarding the "non-foreign" status of
Seller;
(d) To the extent in Seller's possession or control,
originals (or copies certified as true and complete, if originals are
unavailable) of all tenant leases, Service Agreements, Parking Agreements
and Rooftop Agreements. In addition, Seller shall deliver copies of all
guaranties, warranties, licenses, permits, certificates of occupancy, plans
and specifications, keys and other applicable management material
respecting the Property (provided the foregoing items may be delivered by
Seller causing the same to be retained at the Property);
(e) Notices to tenants in form reasonably acceptable to
Seller and Buyer informing tenants of the sale of the Property to Buyer and
the transfer of security deposits ("Tenant Notices");
(f) A signed "Closing Statement" (as hereinafter defined);
(g) Evidence reasonably satisfactory to Buyer and Title
Company respecting the due organization of Seller and the due authorization
and execution of this Agreement and the documents required to be delivered
hereunder; and
<PAGE>
(h) Such additional documents as may be reasonably required
by Buyer and Title Company in order to consummate the transactions
hereunder (provided the same do not materially increase the costs to, or
liability or obligations of, Seller in a manner not otherwise provided for
herein).
(2) Buyer Deliveries. Buyer shall deliver to Escrow the
following:
(a) The Closing Payment in immediately available federal
funds;
(b) A duly executed and acknowledged Assignment and
Assumption Agreement;
(c) A signed Closing Statement;
(d) Evidence reasonably satisfactory to Seller and Title
Company respecting the due organization of Buyer and the due authorization
and execution of this Agreement and the documents required to be delivered
hereunder; and
(e) Such additional documents as may be reasonably required
by Seller and Title Company in or to consummate the transactions hereunder
(provided the same do not materially increase the costs to, or liability or
obligations of, Buyer in a manner not otherwise provided for herein).
(3) Delivery to Parties. Upon the satisfaction of the
conditions set forth in the Escrow Instructions, then (x) the Deed shall be
delivered to Buyer by Title Company's depositing the same for recordation,
(y) the Closing Payment (and the Escrow Deposit) shall be delivered by
Title Company to Seller and (z) the other deliveries appropriately
exchanged and delivered to the parties.
C. Closing Costs. Seller shall pay (i) the title insurance
premium for the Owner's Policy at a rate not in excess of standard issue
rates (but excluding any additional or extended coverage or endorsements
requested by Buyer), (ii) any documentary transfer tax imposed by the
County of Santa Clara and attributable to the Deed (the "County Tax"),
(iii) one-half of any local transfer taxes (other than the County Tax)
attributable to the Deed, (iv) the costs to update the Survey and (v) one-
half of any escrow or recording charges attributable to the Deed. Buyer
shall pay (i) the costs of any ALTA or so called "extended coverage" in
connection with, or endorsements to, the Owner's Policy, together with the
cost of any other title insurance coverage (such as lender's insurance
policies), (ii) one-half of any local transfer taxes (other than the County
Tax) attributable to the Deed, (iii) one-half of any escrow or recording
charges and (iv) all fees, costs or expenses incurred by Buyer in
connection with Buyer's due diligence reviews hereunder. Each of Seller
and Buyer shall pay its own attorneys' fees and its respective share of
prorations as hereinafter provided. Notwithstanding the foregoing, in the
event the sale contemplated hereby does not close on the Closing Date, then
each party shall pay all costs incurred by it.
D. Prorations.
(1) Items to be Prorated. The following shall be prorated
between Seller and Buyer such that items of income and expense through the
day prior to the Closing Date shall be allocated to Seller, and items of
income and expense for the Closing Date and thereafter shall be allocated
to Buyer:
<PAGE>
(a) All real estate taxes and assessments on the Property for
the current year on a per diem basis. In no event shall Seller be charged
with or be responsible for any increase in the taxes on the Property
resulting from the sale of the Property or from any improvements made or
leases entered into on or after the Closing Date. If any assessments on
the Property are payable in installments, then the installment for the
current period shall be prorated (with Buyer assuming the obligation to pay
any installments due after the Closing Date).
(b) All fixed and additional rentals under the leases,
security deposits and other tenant charges. Seller shall deliver or
provide a credit in an amount equal to all prepaid rentals for periods
after the Closing Date and all refundable security deposits (to the extent
the foregoing are held by Seller and are not applied or forfeited prior to
the Closing Date) to Buyer on the Closing Date. Rents which are delinquent
as of the Closing Date shall not be prorated on the Closing Date. Buyer
shall include such delinquencies in its normal billing and shall diligently
pursue the collection thereof in good faith after the Closing Date (but
Buyer shall not be required to litigate or declare a default in any lease).
To the extent Buyer receives rents on or after the Closing Date, such
payments shall be applied first toward then current rent owed to Buyer in
connection with the applicable lease for which such payments are received,
and any excess monies received shall be applied toward the payment of any
delinquent rents, with Seller's share thereof being promptly delivered to
Seller within fifteen (15) days after receipt of the same by Buyer. Buyer
may not waive any delinquent rents nor modify a lease so as to reduce or
otherwise affect amounts owed thereunder for any period in which Seller is
entitled to receive a share of charges or amounts without first obtaining
Seller's written consent. Seller hereby reserves the right to pursue any
damage remedy (but in no action for eviction or lease termination) against
any tenant owing delinquent rents and any other amounts to Seller. Buyer
shall reasonably cooperate with Seller in any collection efforts hereunder
(but shall not be required to litigate or declare a default in any lease).
With respect to delinquent rents and any other amounts or other rights of
any kind respecting tenants who are no longer tenants of the Property as of
the Closing Date, Seller shall retain all rights relating thereto.
Reimbursement amounts due Seller under any reciprocal easement agreements
affecting the Property shall be prorated in the same manner as rents
hereunder.
(c) All operating expenses, including those under any
reciprocal easement agreements affecting the Property.
(2) Calculation. The prorations and payments shall be made
on the basis of a written statement submitted to Buyer and Seller by Escrow
Holder prior to the Close of Escrow and approved by Buyer and Seller. In
the event any prorations or apportionments made under this subparagraph D
shall prove to be incorrect for any reason, then any party shall be
entitled to an adjustment to correct the same provided written notice of
such inaccuracy and request for correction is given within six months after
the date hereof. Any item which cannot be finally prorated because of the
unavailability of information shall be tentatively prorated on the basis of
the best data then available and reprorated when the information is
available. The obligations of Seller and Buyer under this paragraph 5D(2)
shall survive the closing until June 15, 1998 (and all reprorations shall
be finalized prior to such date).
<PAGE>
6. Risk of Loss. If any of the Property is damaged or destroyed
prior to the Closing Date, and such damage or destruction would cost less
than Two Hundred Fifty Thousand Dollars ($250,000) to repair or restore and
is covered by insurance (other than the deductible amount, if any), then
this Agreement shall remain in full force and effect and Buyer shall
acquire the Property upon the terms and conditions set forth herein. In
such event, Buyer shall receive a credit against the Purchase Price equal
to any deductible under Seller's property damage insurance policy and
Seller shall assign to Buyer all of Seller's right, title and interest in
and to all proceeds of insurance other than amounts expended to repair any
damage or destruction and loss of rent proceeds attributable to the period
prior to Closing on account of such damage or destruction. If any of the
Property is damaged or destroyed prior to the Closing, and the cost of
repair would exceed Two Hundred Fifty Thousand Dollars ($250,000), or if
such cost of repair would not exceed $250,000 but such casualty damage is
uninsured (and Seller shall elect not to credit Buyer with the amount
necessary to repair the same, Seller having the right but not the
obligation to so credit), or condemnation proceedings are commenced against
any of the Property, then, Buyer shall have the right, at its election,
either to terminate this Agreement or to not terminate this Agreement and
purchase the Property. Buyer shall have the sooner to occur of the Closing
Date or ten (10) business days after Seller notifies Buyer in writing that
an event described in the immediately preceding sentence has occurred to
make such election by delivery to Seller of an election notice (the
"Election Notice"). Buyer's failure to deliver the Election Notice within
such period shall be deemed an election to terminate this Agreement. If
this Agreement is terminated by delivery of notice of termination to
Seller, then Buyer and Seller shall each be released from all obligation
hereunder, except as otherwise expressly provided to the contrary herein.
If Buyer continues this Agreement, Buyer shall receive a credit against the
Purchase Price equal to any deductible under Seller's property damage
insurance policy and Seller shall assign to Buyer all of Seller's right,
title and interest in and to all insurance proceeds (other than amounts
expended to repair any damage or destruction and any loss of rent proceeds
attributable to the period prior to the Closing, which shall remain the
property of Seller) or condemnation awards on account of such damage,
destruction or taking, and Buyer shall accept the Property as damaged or
destroyed, on condemned, as the case may be, and the closing shall occur on
the terms and conditions contained in this Agreement. As used in this
paragraph 6, the cost to repair or restore shall include the cost of lost
rental revenue, including additional rent and base rent, occurring after
the Closing, if any.
7. Representations, Warranties and Covenants.
A. Representations, Warranties and Covenants of Seller.
(1) General Disclaimer. Except as specifically set
forth in Paragraph 7A(2) below, the sale of the Property hereunder is and
will be made on an "as is" basis, without representations and warranties of
any kind or nature, express, implied or otherwise, including, but not
limited to, any representation or warranty concerning title to the
Property, the physical condition of the Property (including, but not
limited to, the condition of the soil or the Improvements), the
environmental condition of the Property (including, but not limited to, the
presence or absence of hazardous substances on or respecting the Property),
the compliance of the Property with applicable laws and regulations
(including, but not limited to, zoning and building codes or the status of
development or use rights respecting the Property), the financial condition
of the Property or any other representation or warranty respecting any
income, expenses, charges, liens or encumbrances, rights or claims on,
affecting or pertaining to the Property or any part thereof. Buyer
acknowledges that, during the Due Diligence Period, Buyer will have had the
<PAGE>
opportunity to examine, review and inspect all matters which in Buyer in
its sole and absolute judgment bears upon the Property and its value and
suitability for Buyer's purposes. Except as to matters specifically set
forth in Paragraph 7A(2) below, Buyer will acquire the Property solely on
the basis of its own physical and financial examinations, reviews and
inspections and the title insurance protection afforded by the Owner's
Policy. Without limitation thereon, Buyer agrees that it will not pursue
any rights of contribution or other rights or remedies against Seller under
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or any other applicable environmental laws, rules or
regulations. The provisions of the preceding sentence shall not in any way
limit Buyer's right to seek contribution or other rights or remedies
against Seller under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") or any other applicable environmental laws,
rules or regulations in the event that any claim is made against Buyer
under the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") or any other applicable environmental laws, rules or
regulations by any governmental agency or any third party based on any
facts or circumstances arising prior to the Closing (such rights or
remedies in all events being subject to the limitations on liabilities set
forth in this Agreement, including those set forth in paragraph 9B hereof).
(2) Limited Representations and Warranties of Seller. Seller
hereby represents and warrants that, except as set forth in Exhibit "F"
attached hereto and made a part hereof, Seller has no knowledge that any of
the following statements is untrue (and, for this purpose, Seller's
knowledge shall mean only the present actual knowledge of Andrea Backman
without any duty to investigate (other than to make inquiry of Bob
Bronstein of Seller's third party property management company) and with any
imputed or constructive knowledge being excluded):
(a) Rent Roll. Attached as Exhibit "G" and made a part
hereof is a true, complete and accurate list, as of the date thereof, of
all tenant leases respecting the Property. Seller has made available, or
during the Due Diligence Period will make available, to Buyer true and
correct copies of the tenant leases. Seller has not received any written
notice of a material default under any of such tenant leases that remains
uncured. Notwithstanding anything to the contrary contained herein, if any
of the foregoing matters are confirmed as correct in any Tenant Estoppel
Certificate which may be delivered hereunder and thereafter the applicable
tenant takes an inconsistent position with respect to such matters, Buyer
shall look solely to such tenants for any liability or obligation in
connection with such matters.
(b) Litigation. There is no pending action, litigation,
condemnation or other proceeding against the Property or against Seller
with respect to the Property.
(c) Compliance. Seller has received no written notice from
any governmental authority having jurisdiction over the Property to the
effect that the Property is not in compliance with applicable laws and
ordinances.
(d) Agreements Affecting the Property. Other than the leases
or matters of record, Seller has not entered into any contracts or other
agreements (other than as set forth in this Agreement) relating to the
Property which will be in force on the Closing Date, except for the service
agreements described in Exhibit "H-1" (the "Service Agreements"), the
parking easements and agreements described in Exhibit "H-2" (the "Parking
Agreements") and the rooftop agreements described in Exhibit "H-3" (the
"Rooftop Agreements"). Seller has not received any written notice of any
default under any of the foregoing agreements that remains uncured.
<PAGE>
(e) Due Authority. This Agreement and all agreements,
instruments and documents herein provided to be executed or to be caused to
be executed by Seller are and on the Closing Date will be duly authorized,
executed and delivered by and are binding upon Seller. Seller is a
partnership, duly organized and validly existing under the laws of the
State of Illinois, and is duly authorized and qualified to do all things
required of it under this Agreement. Seller has the capacity and authority
to enter into this Agreement and consummate the transactions herein
provided.
(f) Environmental Matters. Except as set forth in the
reports described in Exhibit "I" attached hereto and made a part hereof
(the "Environmental Reports"), Seller has received no written notice of the
existence, deposit, storage, removal, burial or discharge of any material
known to Seller to be a "Hazardous Material" at, upon, under or within the
Property, in an amount which would, as of the date hereof, give rise to an
"Environmental Compliance Cost". The term "Hazardous Material" shall mean
(i) asbestos, petrochemicals or hydrocarbons and any chemicals, flammable
substances or explosives, any radioactive materials (including radon), any
hazardous wastes or substances which have, as of the date hereof, been
determined by any applicable Federal, State or local government law to be
hazardous or toxic by the U.S. Environmental Protection Agency, the U.S.
Department of Transportation, and/or any instrumentality now or hereafter
authorized to regulate materials and substances in the environment which
has jurisdiction over the Property ("Environmental Agency"), and (ii) any
oil, petroleum or petroleum derived substance, any drilling fluids,
produced waters and other wastes associated with the exploration,
development or production of crude oil, which materials listed under items
(i) and (ii) above cause the Property (or any part thereof) to be in
violation of any applicable environmental laws or the regulations of any
Environmental Agency; provided, however, that the term "Hazardous Material"
shall not include motor oil and gasoline contained in or discharged from
vehicles not used primarily for the transport of motor oil or gasoline or
any materials such as cleaning supplies, photocopy equipment supplies and
other similar materials in quantities commonly stored, found or maintained
for similar uses in properties similar to the Property. The term
"Environmental Compliance Cost" means any out-of-pocket cost, fee or
expense incurred directly to satisfy any requirement imposed by an
Environmental Agency to bring the Property into compliance with applicable
Federal, State and local laws and regulations directly relating to the
existence on the Property of any Hazardous Material. Buyer hereby
acknowledges that it is acquiring the Property subject to the matters
disclosed in the Environmental Reports, and Buyer shall at Closing, assume
the obligations for, and release Seller from any liability relating to
(whether under local, state or federal law), any matters disclosed in the
Environmental Reports; provided, however, nothing in the foregoing shall
constitute an indemnification by Buyer in favor of Seller for any third
party claims with respect to such matters and in the event that any claim
is made against Buyer by any governmental agency or any third party based
on any violation of environmental laws or any contamination of the Property
by Hazardous Materials prior to the Closing Buyer shall be entitled to seek
contribution or indemnification from Seller on account thereof in
accordance with any applicable laws, rules, regulations or statutes (such
rights or remedies in all events being subject to the limitations on
liabilities contained in this Agreement, including those set forth in
paragraph 9B hereof).
(g) Options. Seller has not given or granted (nor does
Seller have any knowledge of the existence of) any rights of first refusal,
rights of first offer or other options to acquire the Property in whole or
in part.
(h) Structural Condition. Except as otherwise disclosed to
Buyer, Seller has not received any written notice from any governmental
authorities or any third party structural reports or studies that indicate
that there are any material structural problems or deficiencies in the
Property or any part thereof.
<PAGE>
B. Representations and Warranties of Buyer. Buyer hereby
represents and warrants that this Agreement and all agreements, instruments
and documents herein provided to be executed or to be caused to be executed
by Buyer are and on the Closing Date will be duly authorized, executed and
delivered by and are binding upon Buyer; Buyer is a limited liability
company, duly organized and validly existing and in good standing under the
laws of the State of Delaware, and is duly authorized and qualified to do
all things required of it under this Agreement; and Buyer has the capacity
and authority to enter into this Agreement and consummate the transactions
herein provided.
C. Survival. Any cause of action of a party for a breach of
the foregoing representations and warranties shall survive until
November 15, 1998, at which time such representations and warranties (and
any cause of action resulting from a breach thereof not then in litigation)
shall terminate. Notwithstanding the foregoing, if Buyer shall have actual
knowledge as of the Closing Date that any of the representations or
warranties of Seller contained herein are false or inaccurate or that
Seller is in breach or default of any of its obligations under this
Agreement, and Buyer nonetheless closes the transactions hereunder and
acquires the Property, then Seller shall have no liability or obligation
respecting such false or inaccurate representations or warranties or other
breach or default (and any cause of action resulting therefrom shall
terminate upon such closing hereunder).
D. Interim Covenants of Seller. Until the Closing Date or
the sooner termination of this Agreement:
(1) Seller shall maintain the Property in the same manner as
prior hereto pursuant to its normal course of business (such maintenance
obligations not including extraordinary capital expenditures or
expenditures not incurred in such normal course of business), subject to
reasonable wear and tear and further subject to destruction by casualty or
other events beyond the control of Seller.
(2) Seller shall not enter into any additional service
contracts or other similar agreements without the prior consent of Buyer,
except those deemed reasonably necessary by Seller which are cancelable on
thirty (30) days' notice.
(3) Seller shall have the right to continue to offer the
Property for lease in the same manner as prior hereto pursuant to its
normal course of business and, upon request, shall keep Buyer reasonably
informed as to the status of leasing prior to the Closing Date. After the
Effective Date, Seller shall not enter into any new leases or material
modifications of existing leases thereafter without the consent of Buyer
(which consent, may be given or withheld in Buyer's sole and absolute
discretion). In connection therewith, Buyer shall respond to Seller's
request to enter into a new lease or a material modification within
five (5) business days after Buyer's receipt of such request. In the event
that Buyer fails to respond to such a request within such five (5) business
day period, Buyer shall be deemed to have approved the new lease or
material modification. In no event shall Seller have any obligation to
enter into any new lease or modify any existing lease unless Buyer shall
agree to pay or reimburse Seller on the Closing Date for all landlord
costs, legal costs, tenant improvement costs and leasing commissions
incurred by Seller under or in connection therewith.
<PAGE>
9. DISPOSITION OF DEPOSIT. IF THE TRANSACTION HEREIN PROVIDED
SHALL NOT BE CLOSED BY REASON OF SELLER'S DEFAULT UNDER THIS AGREEMENT OR
THE FAILURE OF SATISFACTION OF THE CONDITIONS DESCRIBED IN PARAGRAPH 4
HEREOF OR THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH PARAGRAPH 6
HEREOF, THEN THE ESCROW DEPOSIT SHALL BE RETURNED TO BUYER, AND NEITHER
PARTY SHALL HAVE ANY FURTHER OBLIGATION OR LIABILITY TO THE OTHER;
PROVIDED, HOWEVER, IF THE TRANSACTIONS HEREUNDER SHALL FAIL TO CLOSE BY
REASON OF SELLER'S DEFAULT, AND BUYER SHALL BE READY, WILLING AND ABLE TO
CLOSE, THEN BUYER SHALL BE ENTITLED TO SPECIFICALLY ENFORCE THIS AGREEMENT;
AND PROVIDED FURTHER THAT, IF FOLLOWING OR IN CONNECTION WITH A DEFAULT BY
SELLER, SELLER SHALL TAKE ACTIONS SO AS TO EITHER PREVENT THE AVAILABILITY
OF SPECIFIC PERFORMANCE TO BUYER OR WHICH MATERIALLY ADVERSELY IMPACT THE
VALUE OF THE PROPERTY SUCH THAT SPECIFIC PERFORMANCE WOULD NOT PROVIDE
BUYER SUBSTANTIALLY WITH THE BENEFITOF THE BARGAIN CONTEMPLATED IN THIS
AGREEMENT, AND THE OTHER CONDITIONS SET FORTH ABOVE SHALL BE SATISFIED,
BUYER SHALL BE ENTITLED TO A RETURN OF THE ESCROW DEPOSIT AND REIMBURSEMENT
OF ITS ACTUAL OUT-OF-POCKET COSTS PAID TO THIRD PARTIES IN CONNECTION WITH
THE TRANSACTIONS HEREUNDER (SUCH REIMBURSEMENT NOT TO EXCEED $150,000 IN
THE AGGREGATE). EXCEPT AS SET FORTH ABOVE, NO OTHER ACTIONS, FOR DAMAGES
OR OTHERWISE, SHALL BE PERMITTED IN CONNECTION WITH ANY DEFAULT BY SELLER
IN THE EVENT THE TRANSACTIONS HEREUNDER SHALL FAIL TO CLOSE. IN THE EVENT
THE TRANSACTION HEREIN PROVIDED SHALL NOT CLOSE FOR ANY REASON OTHER THAN
THE FAILURE OF SATISFACTION OF THE CONDITIONS DESCRIBED IN PARAGRAPH 4
HEREOF OR THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH PARAGRAPH 6
HEREOF OR THE DEFAULT OF SELLER, THEN THE ESCROW DEPOSIT SHALL BE DELIVERED
TO SELLER AS FULL COMPENSATION AND LIQUIDATED DAMAGES UNDER AND IN
CONNECTION WITH THIS AGREEMENT. IN THE EVENT THE TRANSACTION HEREIN
PROVIDED SHALL CLOSE, THE ESCROW DEPOSIT SHALL BE APPLIED AS A PARTIAL
PAYMENT OF THE PURCHASE PRICE. IN CONNECTION WITH THE FOREGOING, THE
PARTIES RECOGNIZE THAT SELLER WILL INCUR EXPENSE IN CONNECTION WITH THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND THAT THE PROPERTY WILL BE
REMOVED FROM THE MARKET; FURTHER, THAT IT IS EXTREMELY DIFFICULT AND
IMPRACTICABLE TO ASCERTAIN THE EXTENT OF DETRIMENT TO SELLER CAUSED BY THE
BREACH BY BUYER UNDER THIS AGREEMENT AND THE FAILURE OF THE CONSUMMATION OF
THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR THE AMOUNT OF
COMPENSATION SELLER SHOULD RECEIVE AS A RESULT OF BUYER'S BREACH OR
DEFAULT. IN THE EVENT THE SALE OF THE PROPERTY SHALL NOT BE CONSUMMATED ON
ACCOUNT OF BUYER'S DEFAULT, THEN THE RETENTION OF THE ESCROW DEPOSIT SHALL
BE SELLER'S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT BY REASON OF
SUCH DEFAULT, SUBJECT TO THE PROVISIONS OF PARAGRAPH 9I HEREOF.
Seller's Initials Buyer's Initials
9. Miscellaneous.
A. Brokers.
(1) Except as provided in subparagraphs (2) and (3) below,
Seller represents and warrants to Buyer, and Buyer represents and warrants
to Seller, that no broker or finder has been engaged by it, respectively,
in connection with any of the transactions contemplated by this Agreement
or to its knowledge is in any way connected with any of such transactions.
In the event of a claim for broker's or finder's fee or commissions in
connection herewith, then Seller shall indemnify and defend Buyer from the
same if it shall be based upon any statement or agreement alleged to have
been made by Seller, and Buyer shall indemnify and defend Seller from the
same if it shall be based upon any statement or agreement alleged to have
been made by Buyer. The indemnification obligations under this Paragraph
9A(1) shall survive the closing of the transactions hereunder or the
earlier termination of this Agreement.
(2) If and only if the sale contemplated herein closes,
Seller agrees to pay a brokerage commission to Richard Ellis, LLC and
Alexis A. Fafenrodt (collectively, the "Seller's Broker") pursuant to
separate written agreements between Seller's Broker and Seller. The
foregoing payments shall be the sole commissions, fees or payments payable
to Seller's Broker in connection with the transactions hereunder.
<PAGE>
(3) If and only if the sale contemplated herein closes, Buyer
agrees to pay a brokerage commission to B.T. Commercial (the "Buyer's
Broker") pursuant to separate written agreements between Buyer's Broker and
Buyer. The foregoing payments shall be the sole commissions, fees or
payments payable to Buyer's Broker in connection with the transactions
hereunder.
B. Limitation of Liability.
(1) Notwithstanding anything to the contrary contained
herein, if the closing of the transactions hereunder shall have occurred
(and Buyer shall not have waived, relinquished or released any applicable
rights in further limitation), the aggregate liability of Seller arising
pursuant to or in connection with the representations, warranties,
indemnifications, covenants, contribution or other obligations (whether
express or implied) of, or rights or remedies against Seller under this
Agreement (or any document executed or delivered in connection herewith) or
otherwise in connection with the Property shall not exceed $2,500,000.
(2) No constituent partner in or agent of Seller, nor
any advisor, trustee, director, officer, employee, beneficiary,
shareholder, participant, representative or agent of any corporation or
trust that is or becomes a constituent partner in Seller (including, but
not limited to, JMB Realty Corporation) shall have any personal liability,
directly or indirectly, under or in connection with this Agreement or any
agreement made or entered into under or pursuant to the provisions of this
Agreement, or any amendment or amendments to any of the foregoing made at
any time or times, heretofore or hereafter, and Buyer and its successors
and assigns and, without limitation, all other persons and entities, shall
look solely to Seller's assets for the payment of any claim or for any
performance, and Buyer, on behalf of itself and its successors and assigns,
hereby waives any and all such personal liability. Notwithstanding
anything to the contrary contained in this Agreement, neither the negative
capital account of any constituent partner in Seller (or in any other
constituent partner of Seller), nor any obligation of any constituent
partner in Seller (or in any other constituent partner of Seller) to
restore a negative capital account or to contribute capital to Seller (or
to any other constituent partner of Seller), shall at any time be deemed to
be the property or an asset of Seller or any such other constituent partner
(and neither Buyer nor any of its successors or assigns shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account of partner's obligation to restore or contribute).
C. Entire Agreement. This Agreement contains the entire
agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements between the parties hereto respecting such
matters. This Agreement may not be modified or amended except by written
agreement signed by both parties.
D. Time of the Essence. Time is of the essence of this
Agreement.
E. Interpretation. Paragraph headings shall not be used in
construing this Agreement. Each party acknowledges that such party and its
counsel, after negotiation and consultation, have reviewed and revised this
Agreement. As such, the terms of this Agreement shall be fairly construed
and the usual rule of construction, to the effect that any ambiguities
herein should be resolved against the drafting party, shall not be employed
in the interpretation of this Agreement or any amendments, modifications or
exhibits hereto or thereto.
F. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of California.
<PAGE>
G. Successors and Assigns. Buyer may not assign or transfer
its rights or obligations under this Agreement without the prior written
consent of Seller, (in which event such transferee shall assume in writing
all of the transferor's obligations hereunder, and transferor shall
thereupon be released from any obligations hereunder first arising
thereafter) provided, however, effective at, and conditioned upon, Closing
hereunder, Buyer may assign its interest in this Agreement to an entity
affiliated or associated with David Taran and/or Stuart Shiff. No consent
given by Seller to any transfer or assignment of Buyer's rights or
obligations hereunder shall be construed as a consent to any other transfer
or assignment of Buyer's rights or obligations hereunder. No transfer or
assignment in violation of the provisions hereof shall be valid or
enforceable. Subject to the foregoing, this Agreement and the terms and
provisions hereof shall inure to the benefit of and be binding upon the
successors and assigns of the parties.
H. Notices. Any notice, consent or approval required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given upon (i) hand delivery, (ii) delivery or refused
delivery if deposited with Federal Express or another reliable overnight
courier service, (iii) transmission if transmitted by facsimile telecopy
(as evidenced by a printed confirmation slip), or (iv) delivery or refused
delivery if deposited in the United States mail, registered or certified
mail, postage prepaid, return receipt required (as evidenced by the return
receipt), and addressed as follows:
To Buyer:
c/o Divco West Properties, LLC
111 W. St. John Street
Suite 1010
San Jose, California 95113
Attention: Mr. David A. Taran
Facsimile: (408) 293-9690
Telephone: (408) 293-9600
With Copy To:
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, California 94111
Attention: William G. Murray, Esq.
Facsimile: (415) 773-5759
Telephone: (415) 773-5802
To Seller:
c/o JMB Realty Corporation
900 North Michigan Avenue
12th Floor
Chicago, Illinois 60611
Attention: Ms. Andrea Backman
Facsimile: (312) 915-2502
Telephone: (312) 915-2367
With Copy To:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (GML)
Facsimile: (310) 201-8922
Telephone: (310) 201-8900
<PAGE>
I. Legal Costs. The parties hereto agree that they shall
pay directly any and all legal costs which they have incurred on their own
behalf in the preparation of this Agreement, all deeds and other agreements
pertaining to this transaction and that such legal costs shall not be part
of the closing costs. In addition, if either Buyer or Seller brings any
suit or other proceeding with respect to the subject matter or the
enforcement of this Agreement, the prevailing party (as determined by the
court, agency or other authority before which such suit or proceeding is
commenced), in addition to such other relief as may be awarded, shall be
entitled to recover reasonable attorneys' fees, expenses and costs of
investigation actually incurred. The foregoing includes, but is not
limited to, attorneys' fees, expenses and costs of investigation
(including, without limitation, those incurred in appellate proceedings),
costs incurred in establishing the right to indemnification, or in any
action or participation in, or in connection with, any case or proceeding
under Chapter 7, 11 or 13 of the Bankruptcy Code (11 United States Code
Sections 101 et seq.), or any successor statutes.
J. Counterparts; Facsimile Signatures. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same document.
Each party hereto (i) has agreed to permit the use, from time to time and
where appropriate, of telecopied signatures in order to expedite the
transaction contemplated by this Agreement, (ii) intends to be bound by its
respective telecopied signature, (ii) is aware that the other party will
rely on the telecopied signature, and (iv) acknowledges such reliance and
waives any defenses to the enforcement of documents and notices effecting
the transaction contemplated by this Agreement based on the fact that a
signature or notice was sent by telecopy.
K. Waiver of Jury Trial and Consent to Venue. To the
fullest extent permitted by law, Buyer and Seller hereby waive their
respective right to trial by jury in any action, proceeding and/or hearing
on any matter whatsoever arising out of, or in any way connected with this
Agreement or any matter arising hereunder. Neither party will seek to
consolidate any such action in which a jury has been waived, with any other
action in which a jury trial cannot or has not been waived. In addition,
each party consents to venue and jurisdiction in the Superior Court for the
County of Santa Clara or the federal District Court sitting in San Jose.
Each party acknowledges that it has received the advice of counsel with
respect to this waiver.
L. Exhibits. The parties acknowledge that Exhibits to be
attached hereto have not yet been finalized and agreed upon. In that
connection, the parties agree that they shall endeavor in good faith to
finalize and attach such Exhibits as they shall each approve within ten
(10) days of the Effective Date. Upon such agreement, the Exhibits shall
be a part of and shall be deemed incorporated herein as a part of this
Agreement. If the parties are unable to agree on such Exhibits within such
ten (10) day period, then this Agreement, and the obligations of the
parties to close hereunder, shall thereupon terminate (and the Deposit
shall be promptly returned to Buyer).
THE SUBMISSION OF THIS AGREEMENT FOR EXAMINATION IS NOT INTENDED TO
NOR SHALL CONSTITUTE AN OFFER TO SELL, OR A RESERVATION OF, OR OPTION OR
PROPOSAL OF ANY KIND FOR THE PURCHASE OF THE PROPERTY. IN NO EVENT SHALL
ANY DRAFT OF THIS AGREEMENT CREATE ANY OBLIGATION OR LIABILITY, IT BEING
UNDERSTOOD THAT THIS AGREEMENT SHALL BE EFFECTIVE AND BINDING ONLY WHEN A
COUNTERPART HEREOF HAS BEEN EXECUTED AND DELIVERED BY EACH PARTY HERETO TO
THE OTHER PARTY.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the Effective Date.
SELLER:
JMB/SAN JOSE ASSOCIATES,
An Illinois limited partnership
By: JMB INCOME PROPERTIES, LTD.-XI,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: _________________________
Name: _______________________
Title: ________________________
By: JMB INCOME PROPERTIES, LTD.-XII,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: _________________________
Name: _______________________
Title: ________________________
BUYER:
DIVCO WEST PROPERTIES, LLC,
a Delaware limited liability company
By:
Name: David A. Taran
Title: Member
<PAGE>
ESCROW HOLDER'S ACKNOWLEDGEMENT
The undersigned hereby executes this Agreement to evidence its
agreement to act as Escrow Holder in accordance with the terms of this
Agreement.
Effective Date: ________, 1997 CHICAGO TITLE INSURANCE COMPANY,
a corporation
By:__________________________________
Name: _______________________________
Title: ________________________________
"Escrow Holder"
<PAGE>
EXHIBIT LIST
"A" - Property Description
"B" - Intentionally Deleted
"C" - Form of Tenant Estoppel Certificate
"D" - Deed
"E" - Assignment and Assumption Agreement
"F" - Exceptions to Seller's Representations and Warranties
"G" - Rent Roll
"H-1" - Service Agreements
"H-2" - Parking Agreements
"H-3" - Rooftop Agreements
"I" - Environmental Reports
"J" - Exception List for Tenant Options
<PAGE>
EXHIBIT "A"
PROPERTY DESCRIPTION
All that certain Real Property in the City of San Jose, County of
Santa Clara, State of California, described as follows:
All of Parcels 2, 3 and 4, as shown upon that certain Map entitled,
Parcel Map of a portion of Parcel "A" as shown on record of Survey,
recorded in Book 237 of Maps, at Page 24, Santa Clara County Records, which
Map was filed for record in the Office of the Recorder of the County of
Santa Clara, State of California on November 28, 1983 in Book 520 of Maps,
at Pages 39, 40, 41 and 42.
<PAGE>
EXHIBIT "B"
INTENTIONALLY DELETED
<PAGE>
EXHIBIT "C"
FORM OF TENANT ESTOPPEL CERTIFICATE
<PAGE>
EXHIBIT "D"
DEED
<PAGE>
Recording Requested By and |
When Recorded Mail To: |
|
_____________________________ |
____________________________ |
____________________________ |
____________________________ |
Attention: ________________ |
|
|_____________________________________
APN No.: _________________
DOCUMENTARY TRANSFER TAX - SEE SEPARATE TRANSFER TAX STATEMENT
GRANT DEED
FOR VALUE RECEIVED, , a
("Grantor"), grants to
,
a ____________________________________ ("Grantee"), all that certain real
property (the "Property") situated in the City of , County
of , State of California, and more particularly described
in Exhibit A attached hereto and incorporated herein by reference.
MAIL TAX STATEMENTS TO:
_________________________________
_________________________________
_________________________________
Attention: ________________________
The Property is conveyed to Grantee subject to all matters of
record.
IN WITNESS WHEREOF, the undersigned has executed this Grant
Deed on _______________, 199__.
,
a __________________
By:
Name:
Title:
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
<PAGE>
EXHIBIT "E"
ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
BILL OF SALE, ASSIGNMENT AND ASSUMPTION
( , )
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
the undersigned, , a
("Seller"), hereby sells, transfers, assigns and conveys to ,
a ("Buyer"), the following:
1. Personal Property. All right, title and interest of Seller in
and to all personal property owned by Seller and used in connection with
the ownership, use, operation or maintenance of the Property described
below, including without limitation, those items of tangible personal
property described in Exhibit "A" attached hereto and made a part hereof
("Personal Property"), located upon, and used in the operation of, that
certain property commonly known as " ",
located in the City of , County of ,
State of (collectively, the "Property").
2. Leases. All right, title and interest of Seller in and to all
leases ("Leases") relating to the Property and described in Exhibit "B"
attached hereto.
3. Service Agreements. All right, title and interest of Seller in
and to all service agreements ("Service Agreements") relating to the
Property, or any part of the same and described in Exhibit "C" attached
hereto.
4. Intangible Property. All right, title and interest of Seller,
to the extent assignable, in and to the name "Park Center Plaza", Seller's
interest in all refundable security deposits and prepaid rent, if any,
under the Leases and any and all guaranties, letters of credit or other
credit enhancement relating to the Leases), any and all licenses, permits,
certificates of occupancy, development rights, plans and specifications,
utility contracts and, to the extent approved by Buyer pursuant to this
Agreement, all other agreements relating to the ownership, use and
operation of the Property (collectively the "Intangible Property").
This Bill of Sale, Assignment and Assumption is given pursuant to
that certain purchase agreement captioned "PURCHASE AGREEMENT" dated as of
, 199__ (as amended, the "Agreement"), between the Seller
and Buyer, providing for, among other things, the assignment of the
Personal Property, Leases, Service Agreements and Intangible Property. The
covenants, agreements, and limitations (including, but not limited to, the
limitations of liability provided in paragraph 9B of the Agreement)
provided in the Agreement with respect to the property conveyed hereunder
are hereby incorporated herein by this reference as if herein set out in
full and shall inure to the benefit of and shall be binding upon Seller and
Buyer, and their respective successors and assigns. Said property is
conveyed "as is" without warranty or representation, except as expressly
provided in (and subject to the limitations of) the Agreement.
<PAGE>
This Bill of Sale, Assignment and Assumption may be executed in one or more
counterparts, each of which shall constitute an original, and all of which,
when taken together, shall constitute one and the same instrument.
Buyer hereby accepts the foregoing assignment of Personal Property,
Leases, Service Agreements and Intangible Property assigned hereby and
agrees to assume and discharge, in accordance with the terms thereof, all
of the burdens and obligations of Seller thereunder, to the extent the same
arise from and after the date hereof. Seller shall continue to be
responsible for all burdens and obligations of Seller under the Personal
Property, Leases, Service Agreements and Intangible Property for the period
prior to the date hereof and Buyer shall have no liability therefor.
DATED: As of ________, 199__
SELLER:
a
By:
Name:
Title:
BUYER:
a
By:
Name:
Title:
<PAGE>
EXHIBIT "F"
EXCEPTIONS TO SELLER'S REPRESENTATIONS AND WARRANTIES
NONE.
<PAGE>
EXHIBIT "G"
RENT ROLL
Mitsui Manufacturers Bank
Lease Dated September 1983
First Amendment Dated February 13, 1985
Consent to Sublease Dated October 15, 1990
Sublease Dated October 9, 1990
Consent to Sublease Dated February 12, 1996
Sublease Dated February 12, 1996
Letter Agreement Dated February 12, 1996
First Amendment to Sublease Agreement Dated June 4, 1997
Second Amendment to Sublease Agreement Dated June 17, 1997
Consent to Modification of Sublease Agreement Dated June 17,
1997
Price Waterhouse LLP
Lease Dated July 31, 1984
Amendment Dated March 1, 1985 (unexecuted)
Amendment Dated March 12, 1986
Storage Agreement Dated October 1, 1988
Lease Extension Dated February 10, 1993
Subordination, Nondisturbance and Attornment Agreement Dated
April, 1993
Tenant Expansion Dated September 30, 1994
Tenant Expansion Dated July 20, 1995
Tenant Expansion Dated October 25, 1995
Tenant Expansion Dated February 19, 1997
The Stephenz Group
Lease Dated November 28, 1995
Subordination, Nondisturbance and Attornment Agreement Dated
November 28, 1995
Grant Thornton LLP f/k/a Alexander Grant and Company
Lease Dated November 9, 1984
First Amendment to Office Lease Dated February 10, 1986
Lease Extension Agreement Dated December 29, 1994
Subordination, Nondisturbance and Attornment Agreement Dated
February 22, 1995
Tenant Expansion Agreement Dated October 31, 1995
Neuronetics Corporation Inc. (Suites 750, 760 and 1380)
Lease Dated May 22, 1996
Tenant Expansion Agreement Dated September 11, 1997
Browning Ferris Industries of California, Inc.
Suites 800/900
Lease Dated December 16, 1988
Addendum to Office Lease Dated December 16, 1988
Amendment No. 1 to Office Lease Dated December 16, 1988
Subordination, Nondisturbance and Attornment Agreement Dated
December 31, 1988
Amendment No. 2 to Office Lease and Amendment No. 1 to Work
Agreement Dated April 3, 1989
Office Sublease Dated December 16, 1994
Consent to Sublease Dated December 20, 1994
Suites 850
Lease Dated December 16, 1988
Addendum to Office Lease Dated December 16, 1988
Amendment No. 1 to Office Lease Dated December 16, 1988
Subordination, Nondisturbance and Attornment Agreement Dated
December 31, 1988
Office Sublease Dated December 16, 1994
Consent to Sublease Dated December 20, 1994
TCSI Corporation
Lease Agreement Dated January 31, 1996
People.Com Consultants, Inc.
Lease Dated January 11, 1996
Expansion and Extension Agreement Dated December 6, 1996
PR Newswire Association, Inc.
Lease Dated November 11, 1988
Lease Extension Agreement Dated November 16, 1993
Lease Extension Agreement Dated March 14, 1997
ITJ America, Inc.
Lease Dated October 13, 1997
Michael P. Groom, Thomas R. Cave, Michael P. Groom as Trustee
and Linda P. Cave a/k/a Groom and Cave
Lease Dated May 10, 1988
Short Form Lease Dated May 27, 1988
Addendum to Office Lease Dated July 31, 1987
Relocation Agreement Dated February 16, 1995
The Golden 1 Credit Union
Lease Dated January 18, 1996
Lease Extension Agreement Dated November 26, 1996
Asahi Shimbun America, Inc.
Lease Dated November 22, 1996
Valley Credit Union
Lease Dated September 21, 1990
Lease Extension Agreement Dated January 22, 1996
Kaplan Educational Centers, Inc. f/k/a Stanley H. Kaplan
Educational Center, Ltd.
Lease Dated August 16, 1990
Term Commencement Agreement Dated March 13, 1991
Haworth, Inc.
Lease Dated June 1, 1989
Lease Extension Agreement Dated August 10, 1994
Lease Extension Agreement Dated August 9, 1996
Landmark Education Corporation
Lease Dated September 8, 1997
Ghassan and Suhair Joudy d/b/a O' Deli
Lease Dated May 15, 1989
Lease Amendment Dated April 1, 1993
Assignment of Lease Dated May 15, 1993
Pacific Bell Directory
Lease Dated June 17, 1991
Lease Extension and Amendment Dated January 19, 1996
Term Commencement Agreement Dated March 27, 1996
Frequency Technology, Inc.
Lease Dated December 23, 1996
C&H Travel and Tours, Inc.
Lease Dated February 7, 1997
Heritage Bank Of Commerce
Lease Dated October 9, 1996 (Suite 110)
Subordination, Nondisturbance and Attornment Agreement Dated
October 9, 1996 (Suite 110)
Lease Dated March 18, 1997 (Suite 430)
Lease Dated November 18, 1997 (Suite 300)
De Leuw, Cather & Company
Lease Dated March 16, 1989
Letter Agreement Dated May 16, 1989
Tenant Expansion Agreement Dated September 19, 1990
Assignment of Lease Dated July 18, 1995
Tenant Expansion Agreement Dated November 16, 1995
Lease Extension Agreement Dated July 29, 1996
Tenant Expansion Agreement Dated March 19, 1997
Extension and Space Reduction Agreement Dated June 12, 1995
Costantini, Dana & Immer, an accountancy corp. a/k/a Bondi &
Danna
Lease Dated January 20, 1989
Lease Expansion/Extension Dated January 11, 1993
Westin Engineering, Inc.
Lease Dated June 15, 1990
Term Commencement Agreement Dated November 29, 1990
Lease Extension Agreement Dated April 5, 1995
Letter Regarding Expansion Rights Dated September 11, 1995
Rollins Hudig Hall Of Northern California/Aon Risk Services,
Inc.
Lease Dated April 11, 1995
Lease Termination Notice Dated November 17, 1997
Steven R. Manchester Incorporated & John L. Williams
Incorporated
Lease Dated June 15, 1990
Lease Extension Agreement Dated April 19, 1995
Letter Agreement Regarding Base Rent Abatement (undated)
Ann B. Rundquist and J. Rudy Hale, individuals
Lease Dated July 27, 1992
Relocation Agreement Lease Dated February 7, 1994
Tenant Expansion Agreement Dated May 24, 1994
Lease Extension Agreement Dated February 19, 1997
Assignment of Lease Dated October 13, 1995
Advanced Systems Control, Inc.
Lease Dated October 8, 1996
Lease Extension Agreement Dated October 10, 1997
Caspr Library Systems Inc.
Lease Dated December 7, 1995
The County Of Santa Clara
Lease Dated November 13, 1989
Amendment Dated December 4, 1990
Expansion Agreement Dated March 8, 1994
Expansion Agreement Dated November 16, 1994
Amendment Dated May 23, 1995
City Year, Inc.
Lease Dated May 5, 1994
Lease Extension Dated August 22, 1994
Tar Chair, Maykir Yen, Ted S. Lam and Tiffany M. Lam as
assignee of PBRB Inc. d/b/a Caffe Dolce
Lease Dated December 18, 1995
Assignment of Lease Dated March 21, 1996
Federal Express Corporation
Lease Dated November 15, 1993
Amendment Dated March 14, 1995
TKW Enterprises Inc. d/b/a Yeung's Sung Yuan Restaurant
Lease Dated June 27, 1994
Tam Enterprises Inc. d/b/a Sir Speedy Printing Center
Lease Dated February 28, 1994
Team Ravioli's, Inc.
Lease Dated March 30, 1992
Lease Amendment Dated June 24, 1992
Manpower, Inc./California Peninsula
Lease Dated April 17, 1991
Lease Extension Agreement Dated March 5, 1996
Scott's San Jose d/b/a Scott's Seafood Restaurant
Lease Dated October 17, 1985
Amendment No. 1 Dated September 15, 1992
Imwalle Stegner
Lease Dated October 22, 1990
Lease Extension Agreement Dated February 8, 1996
Lease Extension Agreement Dated February 27, 1997
Biagini Properties, Inc.
Lease Dated January 8, 1992
Lease Extension Agreement Dated June 10, 1997
Sublease Dated July 10, 1997
Comms People, Inc.
Lease Dated May 28, 1997
Scott P. Feldman, O.D.
Lease Dated April 11, 1989
Letter Agreement Regarding Partial Base Rent Abatement Dated
May 11, 1989
Lease Extension Agreement Dated August 24, 1995
Oracle Corporation
Lease Dated September 12, 1997
<PAGE>
EXHIBIT "H(1)"
SERVICE AGREEMENTS
Diversified Fire Products_MTM
Browning Ferris Industries of California, Inc._MTM
Four Seasons Landscape and Maintenance, Inc._MTM
Johnson Controls, Inc._MTM
Montgomery KONE, Inc._06/30/00
Service By Medallion, Inc._06/30/98
Plantscaping_12/31/98
The Asset Assurance Co._MTM
Valley Building Maintenance_MTM
Xerox Corporation _06/30/02
Terminix Commercial_MTM
Pitney Bowes Fax_07/23/99
Protection Service Industries
(Fire monitoring, 185 Building)_03/19/98
Diversified Fire Products
(Fire Monitoring, 100 Park Center Plaza, 150 Almaden and 190 Park Center
Plaza)_MTM
Diversified Fire Products
(Fire Monitoring 130 Park Center Plaza)_12/17/98
<PAGE>
EXHIBIT "H(2)"
PARKING AGREEMENTS
Agreements Date of Agreements
- ---------- ------------------
Grant of Reciprocal Easement and
Agreement for Maintenance September 22, 1970
Grant of Easements September 29, 1970
Agreement for Apportionment of Parking
Revenue and Expense March 1, 1972
Parking Agreement November 22, 1972
Settlement Agreement February 14, 1973
Lease of Parking Spaces February 28, 1973
Lease of Parking Spaces Parcel C
Parking Garage February 28, 1973
Grant of Easement October 22, 1973
Joinder in Grant of Reciprocal
Easement and Agreement for
Maintenance October 22, 1973
Amendment of Lease of Parking Spaces December 15, 1973
Assignment Agreement December 15, 1973
Declaration of Covenants June 10, 1974
Grant of Avigation Easement November 12, 1985
Joinder in Grant of Reciprocal Easement
and Agreement for Maintenance August 6, 1976
Parcel Map with Certification
of the Real Property Owners October 17, 1983
Grant of Easement December 14, 1983
Agreement Among Partners of
Park Center Plaza Parcel C March 26, 1985
Parking Garage, Park Center Plaza-
The Bank of California Building,
Almaden-San Fernando Partnership Agreement
Among Partners of New Almaden Associates March 26, 1985
<PAGE>
EXHIBIT "H(2)"
PARKING AGREEMENTS
Parking Agreement between JMB/San Jose Associates, an Illinois general
partnership and New Almaden Associates, a California General Partnership
recorded June 20, 1985 in Book J377, page 1946, Official Records.
Supplemental Parking Agreement between JMB/San Jose Associates, an Illinois
general partnership, and New Almaden Associates.
Public Parking Covenant and Easement by JMB/San Jose Associates, an
Illinois general partnership, recorded October 23, 1985 in Book J494, page
1602, Official Records.
Parking Agreement between Seller and Principal Mutual Life Insurance
Company (undated).
Parking Agreement among Park Center Plaza, Wells Fargo Bank and Wolff-
Sesnon-Buttery dated August 26, 1985, as amended by First Amendment to
Lease between Wells Fargo Bank and Seller dated October 27, 1997.
Parking Sublease between Redevelopment Agency of the City of San Jose
("Redevelopment Agency") and Seller dated March 19, 1996, as amended by
First Amendment to Parking Sublease between Redevelopment Agency and Seller
dated October 27, 1997.
Parcel 2 Public Parking Covenant and Easement between New Almaden
Associates and Redevelopment Agency recorded October 23, 1985 as Instrument
No. 8566697, as amended by First Amendment to Parcel 2 Public Parking
Covenant and Agreement between Seller and Redevelopment Agency dated
October 27, 1997, recorded on October 31, 1997, as Instrument No. 13919902.
Parcel 1, 3 and 4 Public Parking Covenant and Easement between Seller and
Redevelopment Agency, recorded October 23, 1985, as Instrument No. 8566696,
as amended by First Amendment to Parcels 1, 3 and 4 Public Parking Covenant
and Easement recorded on October 31, 1997, as Instrument No. 13919903.
Lease of Parking Spaces between Seller and ALTA Broadcasting Company dated
March 19, 1996.
Parking Lease between West Park Center Plaza and United California Bank
dated January 15, 1972, as amended by agreement dated June 1, 1981.
Reciprocal Easement Agreement between Seller and ALTA intended to be
recorded immediately prior to closing.
<PAGE>
EXHIBIT "H(3)"
ROOFTOP AGREEMENTS
Asahi Shimbun America, Inc.
Roof License Agreement Dated August 13, 1997 (150 Almaden)
Destineer Corporation
Roof License Agreement Dated March 18, 1994
Addendum to Roof License (undated)
Lease Amendment Dated September 15, 1994
Lease Extension Agreement Dated September 11, 1997
GTE Mobilnet of California
Roof License Agreement Dated April 1, 1990
Roof License Amendment Dated March 25, 1992
License Extension Agreement Dated March 1, 1995
GWcom
Roof License Agreement Dated November 7, 1997
<PAGE>
EXHIBIT "I"
ENVIRONMENTAL REPORTS
Law Engineering Testing Company - August 13, 1987
Health Science Associates - June 1, 1989
Blasland, Bouck & Lee, Inc. - August 1994
Cygna Consulting Engineers (Building 100) - September 17, 1992
Cygna Consulting Engineers (Building 102-130) - September 17, 1992
Nabih Youssef & Associates - September 1992
Marx/Okubo & Associates - September 7, 1994
Nabih Youssef & Associates - February 1995
Nabih Youssef & Associates - January 12, 1998
EXHIBIT 10-I.
- -------------
(J-XII)
PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
(Plaza Hermosa Shopping Center; Hermosa Beach, California)
THIS AGREEMENT is made and entered into as of the _______ day of
November, 1997 (the "Effective Date"), by and between JMB INCOME
PROPERTIES, LTD.-XII, an Illinois limited partnership (hereinafter called
"Seller"), and PACIFIC RETAIL TRUST, a Maryland real estate investment
trust (hereinafter called "Buyer").
R E C I T A L S
A. Seller is the owner of that certain real property located in
the City of Hermosa Beach, County of Los Angeles, State of California,
consisting primarily of a shopping center sometimes known as "Plaza Hermosa
Shopping Center" (the "Premises").
B. Buyer desires to purchase, and Seller desires to sell, such
Premises on the terms and conditions hereinafter documented.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. PURCHASE AND SALE. Seller shall sell to Buyer, and Buyer shall
purchase from Seller, the land (the "Land") described in Exhibit "A"
attached hereto and made a part hereof, together with all right, title and
interest of Seller in and to all improvements, structures, supplies and
fixtures located upon the Land, all right, title and interest of Seller in
and to those items of personal property described in Exhibit "B" attached
hereto and made a part hereof, all right, title and interest of Seller in
and to the name "Plaza Hermosa Shopping Center", and, to the extent
assignable, all right, title and interest of Seller in and to all leases,
contract rights, agreements, tenant lists, advertising material and
telephone exchange numbers (hereinafter, collectively, the "Property"), all
upon the terms, covenants and conditions hereinafter set forth.
2. PURCHASE PRICE. The purchase price (the "Purchase Price") for
the Property shall be the sum of $13,600,000.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid to
Seller by Buyer as follows:
A. ESCROW DEPOSIT. Within three (3) business days after the
Effective Date, Buyer shall deliver $250,000 (which amount, together with
all interest earned thereon, is herein called the "Escrow Deposit") to
Chicago Title Insurance Company, at its offices at 700 South Flower Street,
Los Angeles, California, Attention: Fran Butler (which company, in its
capacity as escrow holder hereunder, is called "Escrow Holder"). The
Escrow Deposit shall be delivered to Escrow Holder by wire transfer of
immediately available federal funds or by bank or cashier's check
evidencing good funds and drawn on a national bank reasonably satisfactory
to Seller. The amounts deposited hereunder shall be held by Escrow Holder
as a deposit against the Purchase Price in accordance with the terms and
provisions of this Agreement. At all times that the Escrow Deposit is
being held by the Escrow Holder, the Escrow Deposit shall be invested by
Escrow Holder in the following investments, provided such funds are
immediately available ("Approved Investments"): (i) United States Treasury
obligations, (ii) United States Treasury-backed repurchase agreements
issued by a major money center banking institution reasonably acceptable to
Seller, or (iii) such other manner as may be reasonably agreed to by Seller
and Buyer. The Escrow Deposit shall be disposed of by Escrow Holder only
as provided in this Agreement.
B. CLOSING PAYMENT. The balance of the Purchase Price, as
adjusted by the application of the Escrow Deposit and by the prorations and
credits specified herein, shall be paid in cash on the Closing Date (the
amount to be paid under this subparagraph B being herein called the
"Closing Payment").
4. CONDITIONS PRECEDENT.
A. TITLE MATTERS.
(1) PRELIMINARY TITLE REPORT. Seller has ordered (and within ten
(10) days after the Effective Date will deliver) to Buyer and its counsel a
copy of a preliminary title report (the "Preliminary Title Report")
covering the Property from Chicago Title Insurance Company (which company,
in its capacity as title insurer hereunder, is herein called the "Title
Company"), together with copies of all exceptions to title referenced
thereto. In addition, Seller has ordered (and within ten (10) days after
the Effective Date will deliver) to Buyer and its counsel an update of that
certain survey of the Property dated July 9, 1997, prepared by Anacal
Engineering Co., which survey shall be certified to Buyer and Title Company
("Survey") in accordance with Exhibit "C" attached hereto and made a part
hereof. If Buyer shall fail to deliver written notice ("Title Objection
Notice") setting forth those title and survey matters to which Buyer
objects on or before the date which is ten (10) days after the date Buyer
has received both the Preliminary Title Report and the Survey (the "Title
Review Period"), Buyer shall be deemed to have approved the exceptions to
title shown on the Preliminary Title Report and the matters disclosed on
the Survey. Approval by Buyer of any additional exceptions to title or
survey matters disclosed after the end of the Title Review Period shall be
a condition precedent to Buyer's obligation to purchase the Property.
Unless Buyer gives written notice that it disapproves any such additional
exceptions to title or survey matters, stating the exceptions so
disapproved, on or before the sooner to occur of five (5) business days
after receipt of written notice thereof or the Closing Date, Buyer shall be
deemed to have approved said exceptions or survey matters. If for any
reason, on or before the Closing Date Seller does not cause such exceptions
to title or survey matters which Buyer disapproves (to the extent Buyer is
permitted hereunder to so disapprove) to be removed at no cost or expense
to Buyer (Seller having the right but not the obligation to do so), unless
Buyer elects to waive any such objections by delivering written notice of
such waiver to Seller on or before the Closing Date, the obligation of
Seller to sell, and Buyer to buy, the Property as herein provided shall
terminate (and Seller and Buyer shall have no further obligations in
connection herewith). Buyer shall have the option to waive the condition
precedent set forth in this paragraph 4A(1) by notice to Seller. In the
event of such waiver, such condition shall be deemed satisfied. All
matters set forth on the Preliminary Title Report which are not timely
objected to by Buyer, are herein called the "Permitted Exceptions". The
term "Permitted Exceptions" shall additionally include (i) any title
matters objected to by Buyer, which objections are subsequently waived in
writing by Buyer, and (ii) any title matters objected to by Buyer, which
objections are cured to Buyer's satisfaction. Notwithstanding the
foregoing to the contrary, Seller shall be obligated to eliminate at or
prior to "Closing" (as hereinafter defined) all liens in the nature of (x)
a mechanics' or materialmans' lien created as a result of a direct contract
entered into by Seller (or its agents), (y) a deed of trust or mortgage
created by Seller and (z) a tax or judgment lien against Seller. In the
event that Seller fails to eliminate a lien that Seller is obligated to
eliminate in accordance with the immediately preceding sentence, Buyer
shall receive at Closing a credit against the Purchase Price in an amount
equal to the amount of the lien that Seller has failed to so eliminate.
(2) EXCEPTIONS TO TITLE. Buyer shall be obligated to accept title
to the Property, subject to the following exceptions to title:
(a) Real estate taxes and assessments not yet due and payable; and
(b) The Permitted Exceptions.
As a condition to Buyer's obligation to close, the Escrow Agent shall
deliver to Buyer at Closing an ALTA Owner's Policy (Revised 10-17-70 and
10-17-84) (or other form if required by state law) of title insurance, with
extended coverage (i.e., with ALTA General Exceptions 1 through 5 deleted,
or with corresponding deletions if the Property is located in a non-ALTA
state), issued by the Title Company as of the date and time of the
recording of the "Deed" (as hereinafter defined), in the amount of the
Purchase Price, containing the Buyer's Endorsements, insuring Buyer as
owner of good, marketable and indefeasible fee simple title to the
Property, and subject only to the Permitted Exceptions (the "Owner's
Policy"). "Buyer's Endorsements" shall mean, to the extent such
endorsements are available under the laws of the state in which the
Property is located: (a) owner's comprehensive; (b) access; (c) survey
(accuracy of survey); (d) location (survey legal matches title legal); (e)
separate tax lot; (f) legal lot; (g) zoning 3.1, with parking and loading
docks; and (h) such other endorsements as Buyer may require during the Due
Diligence Period based on its review of the Preliminary Title Report and
Survey. Seller shall execute at Closing an ALTA Statement (Owner's
Affidavit) acceptable to Seller and such other documents or agreements
required by the Title Company and acceptable to Seller to issue the Title
Policy in accordance with the provisions of this Agreement.
B. DUE DILIGENCE REVIEWS. Buyer shall have until 5:00 p.m.
(Central time) on the date that is thirty (30) days after the Effective
Date (the "Due Diligence Period") within which to complete all of Buyer's
due diligence examinations, reviews and inspections of all matters
pertaining to the purchase of the Property (other than the title and survey
reviews contemplated in paragraph A above), including all leases, service
contracts, and all physical, environmental and compliance matters and
conditions respecting the Property. Seller has delivered (and Buyer hereby
acknowledges receipt of), the due diligence materials listed on Exhibit "D"
attached hereto and made a part hereof. During the Due Diligence Period,
Seller shall provide Buyer with reasonable access to the Property upon
reasonable advance notice. Buyer shall promptly commence, and shall
diligently and in good faith pursue, its due diligence review hereunder.
Buyer shall at all times conduct its due diligence review, inspections and
examinations in a manner so as to not cause damage, loss, cost or expense
to Seller or the Property and, to the extent reasonably practicable, so as
to not interfere with or disturb any tenant at the Property, and Buyer will
indemnify, defend, and hold Seller and the Property harmless from and
against any such damage, loss, cost or expense (the foregoing obligation
surviving any termination of this Agreement). In no event shall Buyer make
any intrusive physical testing (environmental, structural or otherwise) at
the Property (such as soil borings, water samplings or the like) without
Seller's prior written consent (and shall in all events promptly return the
Property to its prior condition and repair thereafter). Seller shall have
the right, at its option, to cause a representative of Seller to be present
at all inspections, reviews and examinations conducted hereunder (including
any tenant interviews). At the request of Seller, Buyer shall promptly
deliver to Seller true, accurate and complete copies of any written reports
relating to the Property prepared for or on behalf of Buyer by any third
party and in the event of termination hereunder, shall return all documents
and other materials furnished to or on behalf of Buyer by Seller hereunder.
Buyer shall keep all information or data received or discovered in
connection with any of the inspections, reviews or examinations strictly
confidential. Notwithstanding anything herein to the contrary, Buyer may
disclose any such information to its employees, consultants and agents on a
need to know basis for purposes evaluating the Property, and as may be
required in order to comply with any laws or regulations applicable to
Buyer (provided, however, that Buyer shall cause such employees,
consultants and agents to keep such information strictly confidential).
If, on or before the expiration of the Due Diligence Period, Buyer shall
determine that it does not intend to proceed with the acquisition of the
Property, then Buyer shall promptly notify Seller and Escrow Holder of such
determination in writing (such notice being herein called the "Disapproval
Notice"), and in which event this Agreement, and the obligations of the
parties, shall terminate and the Escrow Deposit will be returned to Buyer.
If Buyer fails to timely deliver the Disapproval Notice, Buyer shall have
no further right to terminate this Agreement pursuant to this paragraph 4B.
During the Due Diligence Period, Buyer shall notify Seller as to which
Service Agreements Buyer will assume and which Service Agreements will be
terminated by Seller at Closing. Buyer will assume the obligations arising
from and after the Closing Date under those Service Agreements that are not
in default as of the Closing Date and which Buyer has elected to assume.
Seller shall terminate at Closing all Service Agreements that are not so
assumed; provided, however, that Buyer shall be responsible for paying any
termination fees or costs associated therewith. Seller shall terminate at
Closing, and Buyer shall not assume, any property management agreement
affecting the Property.
C. ESTOPPEL CERTIFICATES. Receipt of estoppel certificates
consistent with the "Rent Roll" (as hereinafter defined) and Seller's
representations and warranties set forth in paragraph 7A(2)(a) hereof,
dated not more than thirty (30) days prior to the Closing Date from Vons,
Savon, Aaron Brothers, Blockbuster and 70% of the balance of the tenants at
the Property under leases at the Property in effect as of the date hereof,
is a condition precedent to Buyer's obligation to purchase the Property
hereunder. The estoppel certificates to be obtained from each tenant shall
be substantially in the form of Exhibit "E" attached hereto and made a part
hereof; provided, however, (i) with respect to the any major national
tenant, the applicable estoppel certificate may be in the standard form
otherwise required by such entity and (ii) if the applicable tenant lease
limits the information required to be certified by the tenant, then an
estoppel certificate setting forth only such required information shall be
deemed acceptable. If the required tenant estoppel are not delivered to
Buyer, or if any tenant estoppel either does not meet the foregoing
requirements or discloses any facts objectionable to Buyer in its
reasonable opinion, Buyer may elect to either: (x) terminate this Agreement
by delivering written notice to Seller on or before the expiration of the
Due Diligence Period (in which event the Escrow Deposit shall be promptly
returned to Buyer); or (y) waive the satisfaction of this condition (and
failure to provide such written notice of termination shall be deemed a
waiver) and proceed with transaction contemplated hereunder. Seller's sole
obligation hereunder shall be to utilize reasonable efforts to obtain such
estoppel certificates (such reasonable efforts obligation not including any
obligation to institute legal proceedings or to expend any monies therefor,
other than for minor administrative charges incurred by Seller).
D. PERFORMANCE BY SELLER. The performance and observance, in all
material respects, by Seller of all covenants and agreements of this
Agreement to be performed or observed by Seller prior to or on the Closing
Date shall be a condition precedent to Buyer's obligation to purchase the
Property. In addition, in the event that the "Seller Closing Certificate"
(as hereinafter defined) shall disclose any material adverse changes in the
representations and warranties of Seller contained in paragraph 7A below
which are not otherwise permitted or contemplated by this Agreement, then
Buyer shall have the right to terminate this Agreement. Buyer shall have
the right to terminate this Agreement if any condition precedent set forth
in this paragraph 4D is not satisfied, by delivering written notice to
Seller. In the event Buyer fails to deliver such notice of termination,
such conditions shall be deemed satisfied.
E. PERFORMANCE BY BUYER. The performance and observance, in all
material respects, by Buyer of all covenants and agreements of this
Agreement to be performed or observed by it prior to or on the Closing Date
shall be a condition precedent to Seller's obligation to sell the Property.
In addition, in the event that the "Buyer Closing Certificate" (as
hereinafter defined) shall disclose any material adverse changes in the
representations and warranties of Buyer contained in paragraph 7B below
which are not permitted or contemplated by this Agreement, then Seller
shall have the right to terminate this Agreement. Seller shall have the
right to terminate this Agreement if any condition precedent set forth in
this paragraph 4E is not satisfied, by delivering written notice to Buyer.
In the event Seller fails to deliver such notice of termination, such
conditions shall be deemed satisfied.
5. CLOSING PROCEDURE TRANSACTIONS. The closing (the "Closing") of
the sale and purchase herein provided shall be consummated at a closing
conference ("Closing Conference"), which shall be held on the Closing Date
either at the offices of the Seller at 900 North Michigan Avenue, Chicago,
or through mutually agreeable escrow arrangements. As used herein,
"Closing Date" means the date which is three (3) business days after the
expiration of the Due Diligence Period, or such other date as may be agreed
upon by Buyer and Seller in writing.
A. ESCROW. On or before the Closing Date, the parties shall
deliver to Title Company, at its office located at 700 South Flower Street,
Los Angeles, California, the following: (1) by Seller, a duly executed and
acknowledged original grant deed ("Deed") in favor of Buyer, in the form of
Exhibit "F" attached hereto and made a part hereof, and (2) by Buyer, the
Closing Payment in immediately available federal funds. Such deliveries
shall be made pursuant to escrow instructions ("Escrow Instructions") to be
executed among Buyer, Seller and Title Company in form reasonably
acceptable to such parties in order to effectuate the intent hereof. The
conditions to the closing of such escrow shall include the Title Company's
receipt of the Deed, the Closing Payment, the issuance by the Title Company
of the Owner's Policy in the form specified in paragraph 4A(2) hereof, and
an authorization notice from each of Buyer and Seller (and each of Buyer
and Seller shall be obligated to deliver such authorization notice at the
Closing Conference as soon as it is reasonably satisfied that the other
party is in a position to deliver the items to be delivered by such other
party under subparagraph B below).
B. DELIVERY TO PARTIES. Upon full satisfaction of the conditions
set forth in the Escrow Instructions, then on the Closing Date (1) the Deed
shall be delivered to Buyer by Title Company's depositing the same for
recordation, (2) the Closing Payment (and the Escrow Deposit) shall be
delivered to Seller and (3) at the Closing Conference, the following items
shall be delivered:
(1) SELLER DELIVERIES. Seller shall deliver to Buyer the
following:
(a) A duly executed and acknowledged bill of sale, assignment and
assumption agreement ("Assignment and Assumption Agreement") in the form of
Exhibit "G" attached hereto and made a part hereof;
(b) A certificate of Seller ("Seller Closing Certificate") updating
the representations and warranties contained in paragraph 7A hereof to the
Closing Date and noting any changes thereto;
(c) Duly executed and acknowledged certificates regarding the "non-
foreign" status of Seller satisfying both federal and state law
requirements;
(d) Evidence reasonably satisfactory to Escrow Holder respecting
the due organization of Seller and the due authorization and execution of
this Agreement and the documents required to be delivered hereunder; and
(e) Such additional documents as may be reasonably required by
Buyer and Title Company in order to consummate the transactions hereunder
(provided the same do not increase the costs to, or liability or
obligations of, Seller in a manner not otherwise provided for herein).
(2) BUYER DELIVERIES. Buyer shall deliver to Seller the following:
(a) A duly executed and acknowledged Assignment and Assumption
Agreement;
(b) A certificate of Buyer ("Buyer Closing Certificate") updating
the representations and warranties contained in paragraph 7B hereof to the
Closing Date and noting any changes thereto;
(c) Evidence reasonably satisfactory to Escrow Holder respecting
the due organization of Buyer and the due authorization and execution of
this Agreement and the documents required to be delivered hereunder; and
(d) Such additional documents as may be reasonably required by
Seller and Title Company in order to consummate the transactions hereunder
(provided the same do not increase the costs to, or liability or
obligations of, Buyer in a manner not otherwise provided for herein).
C. CLOSING COSTS. Seller shall pay the documentary or transfer
taxes attributable to the Deed, and the title insurance premiums (at a rate
not in excess of standard issue rates) attributable to standard coverage
respecting the CLTA portion of the Owner's Policy, and the cost of updating
the Survey. Buyer shall pay all title insurance premiums attributable to
the Owner's Policy in excess of standard coverage, as well as any costs
attributable to ALTA coverage in connection therewith or for other
so-called "extended coverage" or for any endorsements to the Owner's
Policy, to the extent any of the foregoing is requested by Buyer, all costs
and expenses related to Buyer's due diligence examinations, reviews and
inspections, all costs and expenses of any financing which Buyer may obtain
in connection with its acquisition and all recording fees for the Deed.
Seller and Buyer shall each pay one-half of any closing escrow charges.
Seller and Buyer shall each pay its own attorney's fees and expenses and
its own respective shares of prorations as hereinafter provided.
D. PRORATIONS.
(1) ITEMS TO BE PRORATED. The following shall be prorated between
Seller and Buyer as of the close of the day immediately preceding the
Closing Date (the "Adjustment Date"):
(a) TAXES. All real estate taxes and assessments on the Property
applicable to any period prior to the Adjustment Date. Buyer shall receive
a credit against the Purchase Price for any accrued but unpaid real estate
taxes and assessments on the Property applicable to any period prior to the
Adjustment Date. In no event shall Seller be charged with or be
responsible for any increase in the taxes on the Property resulting from
the sale of the Property or from any improvements made or leases entered
into on or after the Closing Date. In the event that any assessments on
the Property are payable in installments, then the installment for the
current period shall be prorated (with Buyer assuming the obligation to pay
any installments due after the Adjustment Date).
(b) RENTS. All fixed and additional rentals under the Leases, and
other tenant charges. Seller shall deliver or provide a credit in an
amount equal to all prepaid rentals for periods after the Adjustment Date
to Buyer on the Closing Date. Rents which are delinquent as of the
Adjustment Date shall not be prorated on the Closing Date. Buyer shall
include such delinquencies in its normal billing and shall use commercially
reasonable efforts to collect the same after the Closing Date (but Buyer
shall not be required to litigate or declare a default in any lease). To
the extent Buyer receives rents (other than "Additional Amounts", as
hereinafter defined) after the Adjustment Date, such payments shall be
applied first toward then current rent owed to Buyer in connection with the
applicable lease for which such payments are received, and finally any
excess monies received shall be applied toward the payment of any
delinquent rents in the inverse order in which they accrued, with Seller's
share thereof being promptly delivered to Seller. Buyer may not waive any
delinquent rents nor modify a lease so as to reduce or otherwise affect
amounts owed thereunder for any period in which Seller is entitled to
receive a share of charges or amounts without first obtaining Seller's
written consent. Common area charges, taxes, operating expense and other
similar expense reimbursement obligations of the tenants under the Leases,
as well as any percentage payable thereunder (collectively, "Additional
Amounts") shall be prorated as of the Adjustment Date. The parties will
finalize such Additional Amounts prorations on the Closing Date or as soon
as practicable thereafter (but in any event not later than September 15,
1998) In order for the parties to determine the credits and adjustments
herein provided for, no later than three (3) business days prior to the
Closing Date, Seller will deliver to Buyer (or otherwise make available to
Buyer) copies of all relevant portions of its books and records and all
back-up or supporting documentation corroborating the amount paid by Seller
and the amount received from the tenants in respect of Additional Amounts,
and at Closing, Seller shall deliver to Buyer at the Property copies of the
same information for each that has audit rights and the ability to
challenge any prior year's reconciliations. Seller agrees to cooperate in
good faith and with reasonable diligence in providing to Buyer as and when
needed copies of all relevant invoices, bills, evidence of payment and
other information required by Buyer to make any required post-Closing
reconciliations of Additional Amounts. Proration of expense items
contained in the calculation of the Additional Amounts shall be made on the
basis that Seller shall be entitled to reimbursement of the applicable
expenses incurred by Seller (annualized or otherwise appropriately
apportioned) on or prior to the Adjustment Date. To the extent that, based
on such determinations, Seller has received amounts in excess of the amount
due Seller, then Buyer shall receive a credit equal to such excess amount
on the Closing Date (or if determined thereafter, then Seller shall deliver
such amounts to Buyer within fifteen (15) days of such determination). To
the extent that Seller has received an amount less than the amount so due,
Buyer shall deliver such shortfall amount to Seller within fifteen (15)
days after such amounts are received from the respective tenants. The
amount of percentage rent to be allocated to Seller with respect to each
Tenant Lease for the lease year (the "Current Lease Year") in which the
Closing Date occurs shall be that amount equal to the amount of percentage
rent owed by such tenant for the lease year multiplied by a fraction, the
numerator of which is the number of days in such lease year prior to and
including the Adjustment Date, and the denominator of which is the total
number of days in such lease year. Buyer shall receive a credit at Closing
equal to the amount, if any, of percentage rent received by Seller as of
the Adjustment Date which is allocable to any period of time after the
Adjustment Date. Buyer shall not be obligated to pay or credit Seller any
sum on account of the proration of percentage rent as aforesaid unless and
until the percentage rent to be prorated as aforesaid shall be received by
Buyer. Buyer shall reasonably endeavor to collect delinquencies owed to
Seller hereunder (but shall not be require to litigate or declare a default
in any lease); provided, however, that Buyer shall not waive any claims for
delinquencies relating to Seller's period of ownership without Seller's
prior written consent. With respect to delinquent rents, Additional
Amounts and any other amounts or other rights of any kind respecting
tenants who are no longer tenants of the Property as of the Closing Date,
Seller shall retain all rights relating thereto.
(c) SECURITY DEPOSITS. Seller shall deliver or provide a
credit to Buyer in an amount equal to all refundable security deposits (to
the extent the foregoing are held by Seller and are not applied or
forfeited prior to the Adjustment Date)
(d) UTILITY AND OPERATING EXPENSES. All utility costs and other
normal and customary operating expenses in connection with the Property.
Seller shall cause the meters, if any, for utilities to be read on the
Adjustment Date and to pay the bills rendered on the basis of such
readings. If any such meter reading for any utility is not available, then
adjustment therefor shall be made on the basis of the most recently issued
bills therefor which are based on meter readings not earlier than thirty
(30) days before the Closing Date; and such adjustment shall be re-prorated
when the next utility bills are received. Seller or Buyer, as the case may
be, shall receive a credit for regular charges under Service Agreements
assumed by Buyer pursuant to this Agreement paid and applicable to Buyer's
period of ownership or payable and applicable to Seller's period of
ownership, respectively.
(e) TENANT IMPROVEMENTS AND ALLOWANCES. Tenant improvement expenses
(including all hard and soft construction costs, whether payable to the
contractor or the tenant), tenant allowances, rent abatement, moving
expenses and other out-of-pocket costs which are the obligation of the
landlord under Tenant Leases shall be allocated between the parties
according to whether such obligations arise in connection with (1) Leases
executed as of the date of this Agreement other than with respect to
renewal or expansion rights under such Tenant Leases properly exercised
after the date of this Agreement (collectively, "Existing TI Obligations");
or (2) Tenant Leases or amendments entered into during the pendency of this
Agreement and approved or deemed approved by Buyer pursuant to paragraph 8C
and renewals or expansion rights properly exercised after the date of this
Agreement ("New TI Obligations"):
(i) EXISTING TI OBLIGATIONS. If, by the Adjustment Date, Seller has
not completed and paid in full Existing TI Obligations, then such costs as
reasonably agreed by Buyer and Seller shall be credited against the
Purchase Price at Closing, and Buyer shall be responsible for completing
and paying such Existing TI Obligations.
(ii) NEW TI OBLIGATIONS. At Closing, Buyer shall reimburse Seller
for the cost for New TI Obligations properly performed and paid for by
Seller, and Buyer shall assume the obligation to perform and pay for such
New TI Obligations.
(iii) CHANGE ORDERS. Except as required by the respective terms of
the applicable Tenant Leases, Seller shall not agree to any change orders
or additions to tenant improvements or material changes in the scope of
work or specifications with respect to Existing TI Obligations or New TI
Obligations without Buyer's prior written approval (which shall not be
unreasonably withheld or delayed).
(iv) EVIDENCE OF PAYMENT. At Closing, Seller shall provide lien
waivers, payment affidavits, certificates of completion, and other evidence
reasonably necessary to confirm Seller's compliance with its obligations
pursuant to this paragraph 5D(1)(e).
(v) ASSIGNMENT OF CONSTRUCTION-RELATED CONTRACTS. If Buyer is
responsible for completing tenant improvements pursuant to the foregoing
provisions, at Closing Seller shall assign to Buyer all contracts
(including, without limitation, contracts with contractors, architects
and/or consultants) related to such construction other than any contracts
which by their terms are non-assignable and the other party thereto refuses
to consent to such assignment, pursuant to an assignment instrument in form
and substance reasonably acceptable to Buyer, and Seller further shall
cause to be delivered to Buyer at Closing written consents and
acknowledgments of such other parties to such contracts consenting to such
assignment and otherwise in form and substance reasonably acceptable to
Buyer.
(f) LEASING COMMISSIONS. On or before the Closing Date, Seller
shall pay in full all leasing commissions due to leasing or other agents
for the current remaining term of each Lease (determined without regard to
any unexercised termination or cancellation right); provided, however, that
at Seller's option, Buyer shall receive a credit against the Purchase Price
at Closing in an amount equal to the then unpaid leasing commissions and
Buyer shall assume, in writing, the obligation to pay any such leasing
commissions due thereunder after the Adjustment Date up to the amount of
such credit.
(2) CALCULATION. The prorations and payments shall be made on the
basis of a written statement submitted to Buyer and Seller by Escrow Holder
prior to the Close of Escrow and approved by Buyer and Seller. In the
event any prorations or apportionments made under this subparagraph D shall
prove to be incorrect for any reason, then any party shall be entitled to
an adjustment to correct the same. Any item which cannot be finally
prorated because of the unavailability of information shall be tentatively
prorated on the basis of the best data then available and reprorated when
the information is available. The obligations of Seller and Buyer under
this paragraph 5D(2) shall survive the closing until September 15, 1998
(and all reprorations hereunder shall be finalized prior to such date).
6. CONDEMNATION OR DESTRUCTION OF PROPERTY. In the event that,
after the date hereof but prior to the Closing Date, either any portion of
the Property is taken pursuant to eminent domain proceedings or any of the
improvements on the Property are damaged or destroyed by any casualty,
Seller shall have no obligation to repair or replace any such damage or
destruction. Seller shall, upon consummation of the transaction herein
provided, assign to Buyer all claims of Seller respecting any condemnation
or casualty insurance coverage, as applicable, and all condemnation
proceeds or proceeds from any such casualty insurance received by Seller on
account of any casualty (the damage from which shall not have been repaired
by Seller prior to the Closing Date), as applicable. In connection with
any assignment of insurance proceeds hereunder, Seller shall assign any
rent loss insurance applicable to the period from and after the Closing,
and Seller shall credit Buyer with an amount equal to the applicable
deductible amount under Seller's insurance; provided, however, if the
amount of such deductible amount shall exceed $100,000, then unless Buyer
elects to proceed with the transaction without receiving further credit for
the deductible in excess of $100,000, Seller shall have the right to
terminate this Agreement by notice to Buyer given on or before the Closing
Date (whereupon the Escrow Deposit shall be returned to Buyer). In the
event the condemnation award or the cost of repair of damage to the
Property on account of a casualty, as applicable, shall exceed $100,000 (or
if a casualty is uninsured, and Seller does not elect to credit Buyer with
an amount equal to the cost to repair such uninsured casualty, Seller
having the right, but not the obligation, to do so), Buyer may, at its
option, terminate this Agreement by notice to Seller, given on or before
the Closing Date and receive a refund of the Escrow Deposit.
7. REPRESENTATIONS AND WARRANTIES.
A. REPRESENTATIONS AND WARRANTIES OF SELLER.
(1) GENERAL DISCLAIMER. Except as specifically set forth in
paragraph 7A(2) below or in the documents delivered by Seller at closing
pursuant to paragraph 5B(1) hereof, the sale of the Property hereunder is
and will be made on an "as is" basis, without representations and
warranties of any kind or nature, express, implied or otherwise, including,
but not limited to, any representation or warranty concerning title to the
Property, the physical condition of the Property (including, but not
limited to, the condition of the soil or the Improvements), the
environmental condition of the Property (including, but not limited to, the
presence or absence of hazardous substances on or respecting the Property),
the compliance of the Property with applicable laws and regulations
(including, but not limited to, zoning and building codes or the status of
development or use rights respecting the Property), the financial condition
of the Property or any other representation or warranty respecting income,
expenses, charges, liens or encumbrances, rights or claims on, affecting or
pertaining to the Property or any part thereof. Buyer acknowledges that,
during the Due Diligence Period, Buyer will examine, review and inspect all
matters which in Buyer's judgment bear upon the Property and its value and
suitability for Buyer's purposes. Except as to matters specifically set
forth in paragraph 7A(2) below or in the documents delivered by Seller at
closing pursuant to paragraph 5B(1) hereof, Buyer will acquire the Property
solely on the basis of its own physical and financial examinations, reviews
and inspections and the title insurance protection afforded by the Owner's
Policy. Without limitation thereon, Buyer hereby waives any and all rights
of contribution or other rights or remedies against Seller under the
Comprehensive Environmental Response, Compensation and Liability Act or any
other applicable laws, rules or regulations as to all matters disclosed in
the "Environmental Reports" (as hereinafter defined) and/or Buyer's
environmental assessments of the Property.
(2) LIMITED REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
hereby represents and warrants to Buyer that, except as set forth in
Exhibit "H" attached hereto and made a part hereof, Seller has no knowledge
that any of the following statements is untrue (and, for this purpose,
Seller's knowledge shall mean only the present actual knowledge of (i)
Andrea Backman, Vice President of JMB Realty Corporation and portfolio
manager overseeing Seller's investment in the Property (after having made
inquiry of Seller's third party property manager with respect to the
representations and warranties contained in this Agreement, but otherwise
without any duty to investigate and with any imputed or constructive notice
being excluded), or (ii) Courtney Lackey, the on-site manager employed by
Seller's third party property manager):
(a) RENT ROLL. Attached as Exhibit "I-1" and made a part hereof is
a true, complete and accurate list, as of the date thereof, of all tenant
leases respecting the Property ("Rent Roll"), and Seller has not received
any written notice of a material default under any of such tenant leases
that remains uncured. Except as disclosed in the Rent Roll, no Tenant
Lease has been modified, altered or amended in any respect. There are no
leases, tenancies or other rights of occupancy or use for any portion of
the Property other than as set forth in the Rent Roll. Except as set forth
in Exhibit "I-2" attached hereto and made a part hereof (the "Additional
Tenant Information List"), there are no outstanding tenant improvement or
leasing commission obligations of the landlord under the Tenant Leases, and
no understanding or agreement with any party exists as to payment of any
leasing commissions or fees regarding future tenant leases or as to the
procuring of tenants. Notwithstanding anything to the contrary contained
herein, Seller shall have no obligation or liability to Buyer with respect
to any of the foregoing matters which shall be confirmed as correct in any
tenant estoppel certificate which may be delivered hereunder.
(b) LITIGATION. There is no pending action, litigation,
condemnation or other proceeding against the Property or against Seller (or
any of its partners or principals) with respect to the Property.
(c) COMPLIANCE. Seller has received no written notice from any
governmental authority having jurisdiction over the Property to the effect
that the Property is not in compliance with applicable laws and ordinances.
(d) SERVICE AGREEMENTS; OPERATING STATEMENTS. Other than those
which are cancelable on 30 days' notice without payment of any fees, there
are no service agreements or contracts ("Service Agreements") or other
agreements (other than as expressly set forth in this Agreement) relating
to the Property which will be in force on the Closing Date, except as
described in Exhibit "J" attached hereto and made a part hereof, and Seller
is not in monetary default or material non-monetary default thereunder that
remains uncured. The documents constituting the Service Agreements that
have been delivered to Buyer by Seller or its agents are true, correct and
complete copies of all of the Service Agreements affecting the Property.
The operating statements for the Property that have been delivered to Buyer
by Seller or its agents were prepared in the ordinary course of business
and are revised in connection with the operation of the Property.
(e) DUE AUTHORITY. This Agreement and all agreements, instruments
and documents herein provided to be executed or to be caused to be executed
by Seller are and on the Closing Date will be duly authorized, executed and
delivered by and are binding upon Seller. Seller is a limited partnership,
duly organized and validly existing under the laws of the State of
Illinois, and is duly authorized and qualified to do all things required of
it under this Agreement. Seller has the legal capacity and authority to
enter into this Agreement and consummate the transactions herein provided
without the consent or joinder of any other party (except as otherwise set
forth in this Agreement).
(f) ENVIRONMENTAL MATTERS. Except as set forth in the reports
described in Exhibit "K" attached hereto and made a part hereof (the
"Environmental Reports"), Seller has received no written notice of the
existence, deposit, storage, removal, burial or discharge of any material
known to Seller to be a "Hazardous Material" at, upon, under or within the
Property, in an amount which, in Seller's reasonable judgment, would, as of
the date hereof, give rise to an "Environmental Compliance Cost". The term
"Hazardous Material" shall mean (i) asbestos and any chemicals, flammable
substances or explosives, any radioactive materials (including radon), any
hazardous wastes or substances which have, as of the date hereof, been
determined by any applicable Federal, State or local government law to be
hazardous or toxic by the U.S. Environmental Protection Agency, the U.S.
Department of Transportation, and/or any instrumentality now or hereafter
authorized to regulate materials and substances in the environment which
has jurisdiction over the Property ("Environmental Agency"), and (ii) any
oil, petroleum or petroleum derived substance, any drilling fluids,
produced waters and other wastes associated with the exploration,
development or production of crude oil, which materials listed under items
(i) and (ii) above cause the Property (or any part thereof) to be in
material violation of any applicable environmental laws or the regulations
of any Environmental Agency; provided, however, that the term "Hazardous
Material" shall not include (x) motor oil and gasoline contained in or
discharged from vehicles not used primarily for the transport of motor oil
or gasoline, or (y) materials which are stored or used in the ordinary
course of a tenant's occupancy at the Property, and which are stored, used,
held or disposed of in compliance with all applicable environmental laws.
The term "Environmental Compliance Cost" means any reasonable out-of-pocket
cost, fee or expense exceeding $2,500 and incurred directly to satisfy any
requirement imposed by an Environmental Agency to bring the Property into
compliance with applicable Federal, State and local laws and regulations
directly relating to the existence on the Property of any Hazardous
Material. Buyer hereby acknowledges that it is acquiring the Property
subject to the matters disclosed in the Environmental Reports.
B. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows: This Agreement and all agreements,
instruments and documents herein provided to be executed or to be caused to
be executed by Buyer are and on the Closing Date will be duly authorized,
executed and delivered by and are binding upon Buyer; Buyer is a real
estate investment trust, duly organized and validly existing and in good
standing under the laws of the State of Maryland, and is duly authorized
and qualified to do all things required of it under this Agreement; and
Buyer has the legal capacity and authority to enter into this Agreement and
consummate the transactions herein provided without the consent or joinder
of any other party (except as otherwise set forth in this Agreement).
Buyer's actual knowledge shall mean the actual knowledge of Morgan Scott or
Thomas McDonough as of the Closing Date.
C. SURVIVAL. Any cause of action of a party for a breach of the
foregoing representations and warranties, or any cause of action arising
out of, or related to, the Property or the transaction that is the subject
of this Agreement, shall survive until September 15, 1998, at which time
such representations and warranties (and any cause of action resulting from
a breach thereof not then in litigation), and any and all obligations
arising out of, or related to, the Property or the transaction that is the
subject of this Agreement (and any cause of action related thereto not then
in litigation) shall terminate. Notwithstanding the foregoing, if Buyer
shall have actual knowledge as of the Closing Date that any of the
representations or warranties of Seller contained herein are false or
inaccurate or that Seller is in breach or default of any of its obligations
under this Agreement, and Buyer nonetheless closes the transactions
hereunder and acquires the Property, then Seller shall have no liability or
obligation respecting such false or inaccurate representations or
warranties or other breach or default (and any cause of action resulting
therefrom shall terminate upon such closing hereunder).
8. INTERIM COVENANTS OF SELLER. Until the Closing Date or the
sooner termination of this Agreement:
A. Seller shall maintain the Property in the same manner as prior
hereto pursuant to its normal course of business (such maintenance
obligations not including extraordinary capital expenditures or
expenditures not incurred in such normal course of business), subject to
reasonable wear and tear and further subject to destruction by casualty or
other events beyond the control of Seller.
B. Seller shall not enter into any additional service contracts or
other similar agreements without the prior consent of Buyer, except those
deemed reasonably necessary by Seller which are cancelable on thirty (30)
days' notice (and Seller shall promptly provide Buyer with copies of all
such additional service contracts prior to execution).
C. Seller shall continue to offer the Property for lease in the
same manner as prior hereto pursuant to its normal course of business and
shall keep Buyer reasonably informed as to the status of leasing prior to
the Closing Date. From and after the Effective Date, Seller shall not
materially amend, terminate, grant concessions regarding, waive any
material default under or incur any leasing commissions in connection with,
the Tenant Leases, or enter in any new leases thereafter without the prior
written consent of Buyer (which consent will not be unreasonably withheld
or materially delayed). Notwithstanding anything herein to the contrary,
Seller shall have no obligation to enter into any new leases or
modifications of existing leases unless Buyer shall agree to pay all tenant
improvement costs, leasing commissions and other similar costs or expenses
in connection therewith (Buyer agreeing not to unreasonably withhold or
unduly delay any such approval if requested by Seller).
9. DISPOSITION OF DEPOSITS. IF THE TRANSACTION HEREIN PROVIDED
SHALL NOT BE CLOSED BY REASON OF SELLER'S DEFAULT UNDER THIS AGREEMENT OR
THE FAILURE OF SATISFACTION OF THE CONDITIONS DESCRIBED IN PARAGRAPH 4
HEREOF OR THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH PARAGRAPH 6
HEREOF, THEN THE ESCROW DEPOSIT SHALL BE RETURNED TO BUYER, AND NEITHER
PARTY SHALL HAVE ANY FURTHER OBLIGATION OR LIABILITY TO THE OTHER;
PROVIDED, HOWEVER, IF THE TRANSACTIONS HEREUNDER SHALL FAIL TO CLOSE SOLELY
BY REASON OF A MATERIAL DEFAULT BY SELLER, BUYER SHALL HAVE FULLY PERFORMED
ITS OBLIGATIONS HEREUNDER AND SHALL BE READY, WILLING AND ABLE TO CLOSE,
THEN BUYER SHALL BE ENTITLED TO SPECIFICALLY ENFORCE THIS AGREEMENT; AND
PROVIDED FURTHER HOWEVER, IF SELLER SHALL WILLFULLY TAKE ACTIONS SO AS TO
PREVENT THE AVAILABILITY OF A SPECIFIC PERFORMANCE TO BUYER, BUYER SHALL BE
ENTITLED TO A RETURN OF THE ESCROW DEPOSIT AND REIMBURSEMENT OF ITS ACTUAL
OF-OF-POCKET COSTS PAID TO THIRD PARTIES IN CONNECTION WITH THE
TRANSACTIONS HEREUNDER (SUCH REIMBURSEMENT NOT TO EXCEED $75,000 IN THE
AGGREGATE). EXCEPT AS SET FORTH ABOVE, NO OTHER ACTIONS, FOR DAMAGES OR
OTHERWISE, SHALL BE PERMITTED IN CONNECTION WITH ANY DEFAULT BY SELLER. IN
THE EVENT THE TRANSACTION HEREIN PROVIDED SHALL NOT CLOSE BY REASON OF
BUYER'S DEFAULT UNDER THIS AGREEMENT, THEN THE ESCROW DEPOSIT SHALL BE
DELIVERED TO SELLER AS FULL COMPENSATION AND LIQUIDATED DAMAGES UNDER AND
IN CONNECTION WITH THIS AGREEMENT. IN THE EVENT THE TRANSACTION HEREIN
PROVIDED SHALL CLOSE, THE ESCROW DEPOSIT SHALL BE APPLIED AS A PARTIAL
PAYMENT OF THE PURCHASE PRICE. IN CONNECTION WITH THE FOREGOING, THE
PARTIES RECOGNIZE THAT SELLER WILL INCUR EXPENSE IN CONNECTION WITH THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND THAT THE PROPERTY WILL BE
REMOVED FROM THE MARKET; FURTHER, THAT IT IS EXTREMELY DIFFICULT AND
IMPRACTICABLE TO ASCERTAIN THE EXTENT OF DETRIMENT TO SELLER CAUSED BY THE
BREACH BY BUYER UNDER THIS AGREEMENT AND THE FAILURE OF THE CONSUMMATION OF
THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR THE AMOUNT OF
COMPENSATION SELLER SHOULD RECEIVE AS A RESULT OF BUYER'S BREACH OR
DEFAULT. IN THE EVENT THE SALE OF THE PROPERTY SHALL NOT BE CONSUMMATED ON
ACCOUNT OF BUYER'S DEFAULT, THEN THE RETENTION OF THE ESCROW DEPOSIT SHALL
BE SELLER'S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT BY REASON OF
SUCH DEFAULT, SUBJECT TO THE PROVISIONS OF PARAGRAPH 10I HEREOF.
_______________
Seller's Initials Buyer's Initials
10. MISCELLANEOUS.
A. BROKERS.
(1) Except as provided in subparagraph (2) below, Seller represents
and warrants to Buyer, and Buyer represents and warrants to Seller, that no
broker or finder has been engaged by it, respectively, in connection with
any of the transactions contemplated by this Agreement or to its knowledge
is in any way connected with any of such transactions. In the event of a
claim for broker's or finder's fee or commissions in connection herewith,
then Seller shall indemnify and defend Buyer from the same if it shall be
based upon any statement or agreement alleged to have been made by Seller,
and, except for any claims by Broker which are Seller's responsibility
hereunder, Buyer shall indemnify and defend Seller from the same if it
shall be based upon any statement or agreement alleged to have been made by
Buyer. The indemnification obligations under this paragraph 10A(1) shall
survive the closing of the transactions hereunder or the earlier
termination of this Agreement.
(2) If and only if the sale contemplated herein closes, Seller
agrees to pay a brokerage commission to Richard Ellis, LLC (the "Broker")
pursuant to separate written agreements between the Broker and Seller. The
foregoing payments shall be the sole commissions, fees or payments payable
to the Broker in connection with the transactions hereunder.
B. LIMITATION OF LIABILITY.
(1) Notwithstanding anything to the contrary contained herein, if
the closing of the transactions hereunder shall have occurred (and Buyer
shall not have waived, relinquished or released any applicable rights in
further limitation), the aggregate liability of Seller arising pursuant to
or in connection with or related in any manner to the Property (including,
without limitation, the representations, warranties, indemnifications,
covenants or other obligations, whether express or implied, of Seller under
this Agreement or any document executed or delivered in connection
herewith) shall not exceed $800,000.
(2) No constituent partner in or agent of Seller, nor any advisor,
trustee, director, officer, employee, beneficiary, shareholder,
participant, representative or agent of any corporation or trust that is or
becomes a constituent partner in Seller (including, but not limited to,
JMB Realty Corporation and the individual(s) specified in paragraph 7A(2)
above) shall have any personal liability, directly or indirectly, under or
in connection with this Agreement or any agreement made or entered into
under or pursuant to the provisions of this Agreement, or any amendment or
amendments to any of the foregoing made at any time or times, heretofore or
hereafter, and Buyer and its successors and assigns and, without
limitation, all other persons and entities, shall look solely to Seller's
assets for the payment of any claim or for any performance, and Buyer, on
behalf of itself and its successors and assigns, hereby waives any and all
such personal liability. Notwithstanding anything to the contrary
contained in this Agreement, neither the negative capital account of any
constituent partner in Seller (or in any other constituent partner of
Seller), nor any obligation of any constituent partner in Seller (or in any
other constituent partner of Seller) to restore a negative capital account
or to contribute capital to Seller (or to any other constituent partner of
Seller), shall at any time be deemed to be the property or an asset of
Seller or any such other constituent partner (and neither Buyer nor any of
its successors or assigns shall have any right to collect, enforce or
proceed against or with respect to any such negative capital account of
partner's obligation to restore or contribute).
C. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties respecting the matters herein set forth and supersedes
all prior agreements between the parties hereto respecting such matters.
The rights and remedies of Buyer and Seller specifically set forth in this
Agreement shall be the sole and exclusive rights and remedies of Buyer and
Seller with respect to the transaction that is the subject of this
Agreement and the Property. This Agreement may not be modified or amended
except by written agreement signed by both parties.
D. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
E. INTERPRETATION. Paragraph headings shall not be used in
construing this Agreement. Each party acknowledges that such party and its
counsel, after negotiation and consultation, have reviewed and revised this
Agreement. As such, the terms of this Agreement shall be fairly construed
and the usual rule of construction, to the effect that any ambiguities
herein should be resolved against the drafting party, shall not be employed
in the interpretation of this Agreement or any amendments, modifications or
exhibits hereto or thereto.
F. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of California.
G. SUCCESSORS AND ASSIGNS. Buyer may not assign or transfer its
rights or obligations under this Agreement without the prior written
consent of Seller (in which event such transferee shall assume in writing
all of the transferor's obligations hereunder, but such transferor shall
not be released from its obligations hereunder); provided, however, Buyer
may assign its interest in this Agreement to an "Affiliate". For purposes
of this paragraph, the term "Affiliate" means: (I) an entity that directly
or indirectly controls, in controlled by or is under common control with
Buyer; or (ii) an entity at least a majority of whose economic interest is
owned by Buyer; and the term "control" means the power to direct the
management of such entity through voting rights, ownership or contractual
obligations. No consent given by Seller to any transfer or assignment of
Buyer's rights or obligations hereunder shall be construed as a consent to
any other transfer or assignment of Buyer's rights or obligations
hereunder. No transfer or assignment in violation of the provisions hereof
shall be valid or enforceable. Subject to the foregoing, this Agreement
and the terms and provisions hereof shall inure to the benefit of and be
binding upon the successors and assigns of the parties.
H. NOTICES. Any notice which a party is required or may desire to
give the other shall be in writing and shall be sent the addresses set
forth in this paragraph. Any such notices shall be either: (a) sent by
overnight delivery using a nationally recognized overnight courier, in
which case notice shall be deemed delivered one business day after deposit
with such courier; (b) sent by facsimile transmission, in which case notice
shall be deemed delivered upon receipt of electronic confirmation of
transmission of such notice; or (c) sent by personal delivery, in which
case notice shall be deemed delivered upon receipt. A party's address may
be changed by written notice to the other party; provided, however, that no
notice of a change of address shall be effective until actual receipt of
such notice.
To Buyer:
Pacific Retail Trust
8140 Walnut Hill Lane, Suite 400
Dallas, Texas 75231
Attention: Morgan Scott
Facsimile: (214) 750-9033
Telephone: (214) 969-9500
And To:
Pacific Retail Trust
14200 Culver Drive, Suite S
Irvine, California 92604
Attention: Mr. Thomas E. McDonough
Facsimile No. (714) 653-9515
Telephone No. (714) 653-9500
With Copy To:
Mayer, Brown & Platt
141 E. Palace Avenue
Sante Fe, New Mexico 87501
Attention: Carrie Brower, Esq.
Facsimile No. (505) 820-7334
Telephone No. (505) 820-8186
To Seller:
JMB Income Properties, Ltd.-XII
c/o JMB Realty Corporation
900 North Michigan Avenue
Chicago, Illinois 60611
Attention: Andrea Backman
Facsimile No. (312) 915-1910
Telephone No. (312) 915-2367
With Copies To:<PAGE>
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (GML)
Facsimile No. (310) 201-8922
Telephone No. (310) 201-8900
And To:
Richard Ellis, LLC
Three First National Plaza
Chicago, Illinois 60602
Attention: Ms. Kathleen Casey
Facsimile No. (312) 899-0923
Telephone No. (312) 899-1900
I. LEGAL COSTS. The parties hereto agree that they shall pay
directly any and all legal costs which they have incurred on their own
behalf in the preparation of this Agreement, all deeds and other agreements
pertaining to this transaction and that such legal costs shall not be part
of the closing costs. In addition, if either Buyer or Seller brings any
suit or other proceeding with respect to the subject matter or the
enforcement of this Agreement, the prevailing party (as determined by the
court, agency or other authority before which such suit or proceeding is
commenced), in addition to such other relief as may be awarded, shall be
entitled to recover reasonable attorneys' fees, expenses and costs of
investigation actually incurred. The foregoing includes, but is not
limited to, attorneys' fees, expenses and costs of investigation
(including, without limitation, those incurred in appellate proceedings),
costs incurred in establishing the right to indemnification, or in any
action or participation in, or in connection with, any case or proceeding
under Chapter 7, 11 or 13 of the Bankruptcy Code (11 United States Code
Sections 101 et seq.), or any successor statutes.
J. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
K. ORIGINAL TENANT ESTOPPELS. To the extent not previously
delivered to Buyer, or at or prior to the Closing, Seller shall deliver to
Buyer the original Tenant Estoppels.
L. POSSESSION. At the time of Closing, Seller shall deliver to
Buyer possession of the Property, subject only to the Permitted Exceptions.
M. DELIVERY OF BOOKS AND RECORDS. At Closing, Seller shall turn
over to Buyer at the Property: the original Tenant Leases and Service
Agreements; copies or originals of all books and records of account,
contracts, copies of correspondence with tenants and suppliers, receipts
for deposits, unpaid bills and other papers or documents which pertain to
the Property; all permits and warranties; all advertising materials,
booklets, keys and other items, if any, used in the operation of the
Property (except those containing proprietary information relating to
either Seller or its third party property manager); and, if in Seller's
possession or control, the original "as-built" plans and specification.
Seller shall reasonably cooperate with Buyer after Closing to transfer to
Buyer any such information stored electronically. The obligations of Seller
under this paragraph shall survive Closing.
N. CONFIDENTIALITY. Seller shall make no public announcement or
disclosure of any information related to this Agreement to outside brokers
or third parties, before or after Closing, without the specific, prior
written consent of Buyer, except for such disclosures to Seller's lenders,
creditors, officers, employees and agents as are necessary to perform
Seller's obligations hereunder.
O. CALCULATION OF TIME PERIODS. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event
after which the designated period of time begins to run is not to be
included and the last day of the period so computed is to be included,
unless such last day is a Saturday, Sunday or legal holiday for national
banks in the location where the Property is located, in which event the
period shall run until the end of the next day which is neither a Saturday,
Sunday, or legal holiday. The last day of any period of time described
herein shall be deemed to end at 5 p.m. (Chicago time).
P. INFORMATION AND AUDIT COOPERATION. At Buyer's request, at any
time before or after Closing, Seller shall provide to Buyer's designated
independent auditor access to the books and records of the Property, and
all related information, regarding the period for which Buyer is required
to have the Property audited under the regulations of the Securities and
Exchange Commission. The Buyer agrees to indemnify and hold harmless the
Seller from any claim, damage, loss, or liability to which Seller is at any
time subjected by any person who is not a party to this Agreement as a
result of Seller's compliance with this paragraph.
Q. FURTHER ASSURANCES. In addition to the acts and deeds recited
herein and contemplated to be performed, executed and/or delivered by
either party at Closing, each party agrees to perform, execute and deliver,
on or after Closing any further actions, documents, and will obtain such
consents, as may be reasonably necessary or as may be reasonably requested
to fully effectuate the purposes, terms and conditions of this Agreement or
to further perfect the conveyance, transfer and assignment of the Property
to Buyer.
R. STATUS OF BUYER. In accordance with the declaration of trust of
Buyer, notice is hereby given that all persons dealing with Buyer shall
look solely to the assets of Buyer for the enforcement of any claim against
Buyer, as neither the trustees, officers, employees nor shareholders of
Buyer assume any personal liability for obligations entered into by or on
behalf of Buyer.
S. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11. ESCROW DEPOSIT PROVISIONS.
A. INVESTMENT AND USE OF FUNDS. The Escrow Agent shall invest the
Escrow Deposit in government insured interest-bearing accounts satisfactory
to Buyer and Seller, shall not commingle the Escrow Deposit with any funds
of the Escrow Agent or others, and shall promptly provide Buyer and Seller
with confirmation of the investments made. If the Closing under this
Agreement occurs, the Escrow Agent shall deliver the Escrow Deposit to
Seller on the Closing Date.
B. TERMINATION BEFORE EXPIRATION OF DUE DILIGENCE PERIOD. The
Buyer shall notify the Escrow Agent of the date that the Due Diligence
Period ends promptly after such date is established under this Agreement,
and Escrow Agent may rely upon such notice. If Buyer elects to terminate
the Purchase Agreement pursuant to paragraph 4B, Escrow Agent shall pay the
entire Escrow Deposit to Buyer one business day following receipt of a copy
of the notice of termination delivered to Seller by Buyer (as long as the
current investment can be liquidated in one day). During the Due Diligence
Period, no notice to Escrow Agent from Seller shall be required for the
release of the Escrow Deposit to Buyer by Escrow Agent. The Escrow Deposit
shall be released and delivered to Buyer from Escrow Agent upon Escrow
Agents receipt of a copy of the notice of termination delivered to Seller
by Buyer prior to the termination of the Due Diligence Period despite any
objection or potential objection by Seller. Seller agrees it shall, prior
to the termination of the Due Diligence Period, have no right to bring any
action against Escrow Agent which would have the effect of delaying,
preventing, or in any way interrupting Escrow Agent's delivery of the
Escrow Deposit to Buyer pursuant to this paragraph, any remedy of Seller
being against Buyer, not Escrow Agent.
C. TERMINATION AFTER EXPIRATION OF DUE DILIGENCE PERIOD. At any
time after the expiration of the Due Diligence Period, Escrow Agent shall
retain the Escrow Deposit until it receives written instructions executed
by both Seller and Buyer as to the disposition and disbursement of the
Escrow Deposit or until ordered by final court order, decree or judgment,
which is not subject to appeal, to deliver the Escrow Deposit to a
particular party, in which event the Escrow Deposit shall be delivered in
accordance with such notice, instruction, order, decree or judgment.
D. INTERPLEADER. Seller and Buyer mutually agree that in the event
of any controversy regarding the Escrow Deposit, unless mutual written
instructions are received by the Escrow Agent directing the Escrow
Deposit's disposition, the Escrow Agent shall not take any action, but
instead shall await the disposition of any proceeding relating to the
Escrow Deposit or, at the Escrow Agent's option, the Escrow Agent may
interplead all parties and deposit the Escrow Deposit with a court of
competent jurisdiction in which event the Escrow Agent may recover all of
its court costs and reasonable attorneys' fees. Seller or Buyer, whichever
loses in any such interpleader action, shall be solely obligated to pay
such costs and fees of the Escrow Agent, as well as the reasonable
attorneys' fees of the prevailing party in accordance with the other
provisions of this Agreement.
E. LIABILITY OF ESCROW AGENT. The parties acknowledge that the
Escrow Agent is acting solely as a stakeholder at their request and for
their convenience, that the Escrow Agent shall not be deemed to be the
agent of either of the parties, and that the Escrow Agent shall not be
liable to either of the parties for any action or omission on its part
taken or made in good faith, and not in disregard of this Agreement, but
shall be liable for its negligent acts and for any loss, cost or expense
incurred by Seller or Buyer resulting from the Escrow Agent's mistake of
law respecting the Escrow Agent's scope or nature of its duties. Seller and
Buyer shall jointly and severally indemnify and hold the Escrow Agent
harmless from and against all costs, claims and expenses, including
reasonable attorneys' fees, incurred in connection with the performance of
the Escrow Agent's duties hereunder, except with respect to actions or
omissions taken or made by the Escrow Agent in bad faith, in disregard of
this Agreement or involving negligence on the part of the Escrow Agent.
F. ESCROW FEE. Except as expressly provided herein to the
contrary, the escrow fee, if any, charged by the Escrow Agent for holding
the Escrow Deposit or conducting the Closing, shall be shared equally by
Seller and Buyer.
THE SUBMISSION OF THIS AGREEMENT FOR EXAMINATION IS NOT INTENDED TO
NOR SHALL CONSTITUTE AN OFFER TO SELL, OR A RESERVATION OF, OR OPTION OR
PROPOSAL OF ANY KIND FOR THE PURCHASE OF THE PROPERTY. IN NO EVENT SHALL
ANY DRAFT OF THIS AGREEMENT CREATE ANY OBLIGATION OR LIABILITY, IT BEING
UNDERSTOOD THAT THIS AGREEMENT SHALL BE EFFECTIVE AND BINDING ONLY WHEN A
COUNTERPART HEREOF HAS BEEN EXECUTED AND DELIVERED BY EACH PARTY HERETO TO
ESCROW HOLDER. ESCROW HOLDER SHALL DATE THIS AGREEMENT WITH THE DATE ON
WHICH ESCROW HOLDER SHALL HAVE RECEIVED THIS AGREEMENT EXECUTED BY BOTH
OPTIONEE AND OPTIONOR (AND SUCH DATE SHALL BE THE "EFFECTIVE DATE" FOR
PURPOSES HEREOF).
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
JMB INCOME PROPERTIES, LTD.-XII,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation
Corporate General Partner
By: ________________________
Name: _____________________
Title: _______________________
"Seller"
<PAGE>
PACIFIC RETAIL TRUST,
a Maryland real estate investment trust
By: ________________________
Name: _____________________
Title: _______________________
"Buyer"
ESCROW HOLDER'S ACKNOWLEDGEMENT
The undersigned hereby executes this Agreement to evidence its
agreement to act as Escrow Holder in accordance with the terms of this
Agreement.
Date: ________________
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation
By: ____________________________
Name: ____________________________
Title: ____________________________
"Escrow Holder"
<PAGE>
EXHIBIT LIST
"A" - Property Description
"B" - Personal Property List
"C" - Form of Surveyor's Certificate
"D" - List of Due Diligence Materials
"E" - Form of Tenant Estoppel Certificate
"F" - Deed
"G" - Assignment and Assumption Agreement
"H" - Exceptions to Seller's Representations and
Warranties
"I-1" - Rent Roll
"I-2" - Additional Tenant Information
"J" - Service Agreements
"K" - Environmental Reports
<PAGE>
EXHIBIT "J"
LIST OF SERVICE AGREEMENTS
<PAGE>
December 31, 1997
Pacific Retail Trust
8140 Walnut Hill Lane, Suite 400
Dallas, Texas 75231
Attention: Mr. Morgan Scott
Re: Amendment to Purchase Agreement and Joint Escrow
Instructions dated as of November 25, 1997 by and between JMB Income
Properties, Ltd.-XII, an Illinois limited partnership and Pacific Retail
Trust, a Maryland real estate investment trust
Ladies and Gentlemen:
Reference is made to that certain Purchase Agreement and Joint Escrow
Instructions dated as of November 25, 1997 (the "Purchase Agreement") by
and between JMB Income Properties, Ltd.-XII, an Illinois limited
partnership ("Seller") and Pacific Retail Trust, a Maryland real estate
investment trust ("Buyer") with respect to "Plaza Hermosa Shopping Center".
All of the terms used herein with capitalized initial letters and not
otherwise defined in this letter agreement (the "Letter Agreement") shall
have the meanings as set forth in the Purchase Agreement.
The parties hereby agree that, in consideration of the mutual
undertakings of the parties and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the second
sentence of paragraph 5 of the Purchase Agreement is hereby amended in its
entirety to read as follows:
"As used herein, "Closing Date" means January 5, 1998, or such
earlier date as may be agreed upon by Buyer and Seller in writing."
Except as otherwise expressly modified herein, the Purchase Agreement
shall remain unmodified and in full force and effect.
This Letter Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one
and the same document. This Agreement may be executed by facsimile.
Please indicate your consent to the foregoing by signing where noted
below.
Very truly yours,
JMB INCOME PROPERTIES, LTD.-XII,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation
Corporate General Partner
By:
Name:
Title:
AGREED AND ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN:
PACIFIC RETAIL TRUST,
a Maryland real estate investment trust
By:
Name:
Title:
<PAGE>
January 5, 1998
Pacific Retail Trust
8140 Walnut Hill Lane, Suite 400
Dallas, Texas 75231
Attention: Mr. Morgan Scott
Re: Second Amendment to Purchase Agreement and Joint Escrow
Instructions dated as of November 25, 1997 by and between JMB Income
Properties, Ltd.-XII, an Illinois limited partnership ("Seller") and
Pacific Retail Trust, a Maryland real estate investment trust ("Buyer")
Ladies and Gentlemen:
Reference is made to that certain Purchase Agreement and Joint Escrow
Instructions dated as of November 25, 1997 (the "Purchase Agreement") by
and between Seller and Buyer, as amended by that certain Amendment to
Purchase Agreement and Joint Escrow Instructions dated as of December 31,
1997 (collectively, the "Purchase Agreement"), with respect to "Plaza
Hermosa Shopping Center". All of the terms used herein with capitalized
initial letters and not otherwise defined in this letter agreement (the
"Letter Agreement") shall have the meanings as set forth in the Purchase
Agreement.
The parties hereby agree that, in consideration of the mutual
undertakings of the parties and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the second
sentence of paragraph 5 of the Purchase Agreement is hereby amended in its
entirety to read as follows:
"As used herein, "Closing Date" means January 6,
1998, or such earlier date as may be agreed upon by Buyer and Seller in
writing."
Except as otherwise expressly modified herein, the Purchase Agreement
shall remain unmodified and in full force and effect.
This Letter Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one
and the same document. This Agreement may be executed by facsimile.
Please indicate your consent to the foregoing by signing where noted
below.
Very truly yours,
JMB INCOME PROPERTIES, LTD.-XII,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation
Corporate General Partner
By:
Name:
Title:
AGREED AND ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN:
PACIFIC RETAIL TRUST,
a Maryland real estate investment trust
By:
Name:
Title:
<PAGE>
January 6, 1998
Pacific Retail Trust
8140 Walnut Hill Lane, Suite 400
Dallas, Texas 75231
Attention: Mr. Morgan Scott
Re: Fourth Amendment to Purchase Agreement and Joint Escrow
Instructions dated as of November 25, 1997 by and between JMB Income
Properties, Ltd.-XII, an Illinois limited partnership ("Seller") and
Pacific Retail Trust, a Maryland real estate investment trust ("Buyer")
Ladies and Gentlemen:
Reference is made to that certain Purchase Agreement and Joint Escrow
Instructions dated as of November 25, 1997 (the "Purchase Agreement") by
and between Seller and Buyer, as amended by that certain Amendment to
Purchase Agreement and Joint Escrow Instructions dated as of December 31,
1997, as further amended by that certain Second Amendment to Purchase
Agreement and Joint Escrow Instructions dated as of January 5, 1998, and as
further amended by that certain Third Amendment to Purchase Agreement and
Joint Escrow Instructions dated as of January 6, 1998 (collectively, the
"Purchase Agreement"), with respect to "Plaza Hermosa Shopping Center".
All of the terms used herein with capitalized initial letters and not
otherwise defined in this letter agreement (the "Letter Agreement") shall
have the meanings as set forth in the Purchase Agreement.
The parties hereby agree that, in consideration of the mutual
undertakings of the parties and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the second
sentence of paragraph 5 of the Purchase Agreement is hereby amended in its
entirety to read as follows:
"As used herein, "Closing Date" means January 9,
1998, or such earlier date as may be agreed upon by Buyer and Seller in
writing."
Except as otherwise expressly modified herein, the Purchase Agreement
shall remain unmodified and in full force and effect.
This Letter Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one
and the same document. This Agreement may be executed by facsimile.
Please indicate your consent to the foregoing by signing where noted
below.
Very truly yours,
JMB INCOME PROPERTIES, LTD.-XII,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation
Corporate General Partner
By:
Name:
Title:
AGREED AND ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN:
PACIFIC RETAIL TRUST,
a Maryland real estate investment trust
By:
Name:
Title:
<PAGE>
January 9, 1998
Pacific Retail Trust
8140 Walnut Hill Lane, Suite 400
Dallas, Texas 75231
Attention: Mr. Morgan Scott
Re: Fifth Amendment to Purchase Agreement and Joint Escrow
Instructions dated as of November 25, 1997 by and between JMB Income
Properties, Ltd.-XII, an Illinois limited partnership ("Seller") and
Pacific Retail Trust, a Maryland real estate investment trust ("Buyer")
Ladies and Gentlemen:
Reference is made to that certain Purchase Agreement and Joint Escrow
Instructions dated as of November 25, 1997, by and between Seller and
Buyer, as amended by that certain Amendment to Purchase Agreement and Joint
Escrow Instructions dated as of December 31, 1997, as further amended by
that certain Second Amendment to Purchase Agreement and Joint Escrow
Instructions dated as of January 5, 1998, as further amended by that
certain Third Amendment to Purchase Agreement and Joint Escrow Instructions
dated as of January 6, 1998, and as further amended by that certain Fourth
Amendment to Purchase Agreement and Joint Escrow Instructions dated as of
January 6, 1998 (collectively, the "Purchase Agreement"), with respect to
"Plaza Hermosa Shopping Center". All of the terms used herein with
capitalized initial letters and not otherwise defined in this letter
agreement (the "Letter Agreement") shall have the meanings as set forth in
the Purchase Agreement.
The parties hereby agree that, in consideration of the mutual
undertakings of the parties and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the second
sentence of paragraph 5 of the Purchase Agreement is hereby amended in its
entirety to read as follows:
"As used herein, "Closing Date" means January 13,
1998, or such earlier date as may be agreed upon by Buyer and Seller in
writing."
Except as otherwise expressly modified herein, the Purchase Agreement
shall remain unmodified and in full force and effect.
This Letter Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one
and the same document. This Agreement may be executed by facsimile.<PAGE>
Please indicate your consent to the foregoing by signing where noted
below.
Very truly yours,
JMB INCOME PROPERTIES, LTD.-XII,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation
Corporate General Partner
By:
Name:
Title:
AGREED AND ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN:
PACIFIC RETAIL TRUST,
a Maryland real estate investment trust
By:
Name:
Title : <PAGE>
PACIFIC RETAIL TRUST
8140 Walnut Hill Lane, Suite 8140
Dallas, Texas 75231
214/696-9500
214/750-9033 (fax)
January 6, 1998
VIA FACSIMILE (312/915-2367)
JMB INCOME PROPERTIES, LTD.-XII
c/o JMB Realty Corporation
900 North Michigan Avenue
Chicago, IL 60611
Attn: Andrea Backman
Re: Third Amendment to Purchase Agreement and Joint Escrow
Instructions dated as of November 24, 1997 (as amended, the "Purchase
Agreement") by and between JMB INCOME PROPERTIES, LTD.-XII ("Seller") and
PACIFIC RETAIL TRUST, a Maryland real estate investment trust ("Buyer"),
for the property known as Plaza Hermosa, Hermosa Beach, California (the
"Property")
Dear Ms. Backman:
This letter sets forth our agreement concerning certain matters
relating to the Purchase Agreement. Terms used herein and not otherwise
defined shall have the respective meanings given such terms in the Purchase
Agreement.
In consideration of the mutual covenants hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, we agree as follows:
1. The Purchase Price as set forth in Section 2 of the Purchase
Agreement is hereby reduced by $265,000, such that the Purchase Price shall
be $13,335,000.
2. (a) With respect to the exception to Seller's representations
and warranties set forth in Section 7.A(2) and Exhibit "H" of the Purchase
Agreement, regarding potential litigation with Fran's Hallmark, and the
provisions of the estoppel certificate dated December 10, 1997, regarding
common area maintenance charges and taxes (the "Fran's Dispute"), Seller
agrees to set aside at Closing, from the proceeds due Seller, the amount of
$40,000 (the "Escrow Funds"), to be held by Escrow Agent in accordance with
the terms and provisions of this letter agreement. Escrow Agent shall
invest the Escrow Funds in government-insured interest-bearing accounts
satisfactory to Buyer and Seller, shall not commingle the Escrow Funds with
any funds of Escrow Agent, and shall promptly provide Buyer and Seller with
confirmation of the investments made. All interest accruing on the Escrow
Funds shall be deemed to be a part of the Escrow Funds. Any escrow fee due
Escrow Agent, if any, for its services pursuant to this letter agreement
shall be deducted from the Escrow Funds at the time of disbursement of the
Escrow Funds as set forth below.
(b) Buyer shall use reasonable efforts to resolve the Fran's
Dispute in good faith no later than September 15, 1998. In the event Buyer
settles the Fran's Dispute by such date, Buyer shall be entitled,
JMB Income Properties, Ltd.-XII
Attn: Andrea Backman
January 6, 1998
Page 2
upon written notice to Seller and Escrow Agent, to direct Escrow Agent to
disburse the Escrow Funds as follows: (i) to Fran's Hallmark, the amount of
such settlement; (ii) to Buyer, the amount of Buyer's reasonable legal fees
incurred by Buyer in connection with negotiating such settlement (such
settlement negotiation legal fees not to exceed $5,000), plus any
reasonable legal fees incurred by Buyer regarding any litigation with
Fran's Hallmark in connection with the Fran's Dispute; and (iii) to Seller,
any remaining Escrow Funds.
(c) Seller shall have the right to participate jointly with
Buyer in connection with any settlement discussions with Fran's Hallmark.
Unless otherwise consented to by Seller in its sole discretion, any
settlement with Fran's Hallmark shall contain a full release of Seller by
all appropriate parties regarding the Fran's Dispute.
(d) In the event such settlement contains such a release but
results in a settlement amount which exceeds $20,000 (without, however,
taking into account any reasonable legal fees due to Buyer), Seller shall
have the right of reasonable approval of such settlement. If the
settlement contains such a release but results in a settlement amount which
amounts is less than or equal to $20,000, Seller's consent shall not be
required.
(e) If Buyer does not settle the Fran's Dispute by September
15, 1998, Escrow Agent shall disburse the Escrow Funds as follows: (i) to
Buyer, $20,000 plus Buyer's reasonable legal fees (whether incurred in
connection with (i) settlement negotiations [but subject to the maximum of
$5,000] or (ii) as a result of litigation with Fran's Hallmark), and (ii)
the remainder to Seller.
(f) In consideration of Seller's agreeing to this paragraph 2
of this letter agreement, Buyer hereby waives any rights it may have had
against Seller in connection with the Fran's Dispute. Seller's liability
for any and all obligations or liabilities arising with respect to the
Fran's dispute shall be limited to the Escrow Funds. Except as otherwise
set forth herein, Buyer agrees to take subject to and assume any and all
liabilities and obligation arising with respect to the Fran's Dispute.
Buyer hereby releases Seller from any and all losses, costs, damages or
expenses (including attorneys' fees and costs) in excess of the Escrow
Funds regarding the Fran's Dispute.
(g) The limitation on Seller's liabilities created pursuant to
this letter agreement shall be in addition to and not a limitation on the
provisions set forth in Section 10.B of the Purchase Agreement.
3. Seller shall deliver, prior to Closing, proof of payment
(reasonable acceptable to Purchaser) of the following rent credits; (a)
$21,180 regarding Wherehouse; and (b) $1,442.76 regarding Blockbuster.
4. This agreement may be executed in any number of counterparts
and by the different parties on separate counterparts, and each such
counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same agreement. The parties hereto
may execute and deliver this agreement by forwarding facsimile, telefax, or
other means of copies of this agreement showing execution by the parties
sending the same, and the parties agree and intend that such signature
shall have the same effect<PAGE>
JMB Income Properties, Ltd.-XII
Attn: Andrea Backman
January 6, 1998
Page 3
as an original signature, that the parties shall be bound and such means of
execution and delivery, and that the parties hereby waive any defense to
validity based on any such copies or signatures.
5. Except as amended hereby, the Purchase Agreement shall remain
in full force and effect as originally written and executed and previously
amended.
Please acknowledge your agreement to the foregoing by executing a
copy of this letter, and returning it to the undersigned by facsimile
transmission.
Sincerely yours,
PACIFIC RETAIL TRUST
By: /s/ Morgan L. Scott
---------------------------
Name: /s/ Morgan L. Scott
---------------------------
Date: 1/6/97 Title: Vice President
--------------- --------------------------
"Buyer"
AGREED TO AND ACCEPTED:
JMB INCOME PROPERTIES, LTD.-XII, an Illinois
limited partnership
By: JMB Realty Corporation, a Delaware
corporation, its corporate general partner
By:
---------------------------
Name:
---------------------------
Date: Title:
--------------- --------------------------
"Seller"
cc: Gregg Bernhard (310/201-8922)
Morgan Scott (214/750-9033)
Tom McDonough (714/653-9515)
Matt Seeberger (505/820-7334)
Marley Harrill (213/891-0834)
Frank Jansen (213/891-0834)
Fran Butler (213/488-4386)
Nate Glover (213/488-4385)
Kathy Casey (312/899-0923)<PAGE>
JMB Income Properties, Ltd.-XII
Attn: Andrea Backman
January 6, 1998
Page 3
as an original signature, that the parties shall be bound and such means of
execution and delivery, and that the parties hereby waive any defense to
validity based on any such copies or signatures.
5. Except as amended hereby, the Purchase Agreement shall remain
in full force and effect as originally written and executed and previously
amended.
Please acknowledge your agreement to the foregoing by executing a
copy of this letter, and returning it to the undersigned by facsimile
transmission.
Sincerely yours,
PACIFIC RETAIL TRUST
By:
---------------------------
Name:
---------------------------
Date: Title:
--------------- --------------------------
"Buyer"
AGREED TO AND ACCEPTED:
JMB INCOME PROPERTIES, LTD.-XII, an Illinois
limited partnership
By: JMB Realty Corporation, a Delaware
corporation, its corporate general partner
By: /s/ Andrea M. Backman
---------------------------
Name: /s/ Andrea M. Backman
---------------------------
Date: 1/7/98 Title: Vice President
--------------- --------------------------
"Seller"
cc: Gregg Bernhard (310/201-8922)
Morgan Scott (214/750-9033)
Tom McDonough (714/653-9515)
Matt Seeberger (505/820-7334)
Marley Harrill (213/891-0834)
Frank Jansen (213/891-0834)
Fran Butler (213/488-4386)
Nate Glover (213/488-4385)
Kathy Casey (312/899-0923)
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 held title to the 40 Broad Street
Building prior to its sale in December 1997. 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, 1997, 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 30th day of January, 1998.
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, 1997,
and any and all amendments thereto, the 30th day of January, 1998.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<PAGE>
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, 1997, 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 30th day of January, 1998.
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, 1997,
and any and all amendments thereto, the 30th day of January, 1998.
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, 1997 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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 54,580,706
<SECURITIES> 0
<RECEIVABLES> 1,276,293
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 55,856,999
<PP&E> 91,675,837
<DEPRECIATION> 0
<TOTAL-ASSETS> 160,776,991
<CURRENT-LIABILITIES> 1,795,941
<BONDS> 63,123,525
<COMMON> 0
0
0
<OTHER-SE> 70,694,199
<TOTAL-LIABILITY-AND-EQUITY>160,776,991
<SALES> 26,345,595
<TOTAL-REVENUES> 48,208,830
<CGS> 0
<TOTAL-COSTS> 11,464,314
<OTHER-EXPENSES> 764,151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,108,328
<INCOME-PRETAX> 27,714,839
<INCOME-TAX> 0
<INCOME-CONTINUING> 27,714,839
<DISCONTINUED> (6,455,513)
<EXTRAORDINARY> 393,705
<CHANGES> 0
<NET-INCOME> 21,653,031
<EPS-PRIMARY> 111.81
<EPS-DILUTED> 111.81
</TABLE>
