UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-14348
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BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3354308
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(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 ]
<PAGE>
PART I
Item 1. Business
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Balcor Equity Pension Investors-III A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1985 under the laws of the
State of Illinois. The Registrant raised $170,801,000 from sales of Limited
Partnership Interests. The Registrant's operations consist exclusively of
investment in and operation of income-producing real property, and all
information included in this report relates to this industry segment.
The Registrant originally funded four first mortgage loans, two of which were
jointly funded with affiliates, and acquired five real property investments
and a minority joint venture interest in another real property investment. Two
properties were acquired through foreclosure and the two remaining loans were
reclassified to investment in joint ventures with affiliates. During 1996, the
Registrant sold two properties and the three properties in which it held a
minority joint venture interest. As of December 31, 1996, the Registrant owned
the five properties described under "Item 2. Properties." One of the remaining
properties was sold in February 1997. The Partnership Agreement provides that
the proceeds of any sale or refinancing of the Registrant's properties will
not be reinvested in new acquisitions, but will be distributed to Limited
Partners to the extent not required to meet the Registrant's cash
requirements.
The Registrant's remaining properties face various levels of competition for
retention of their tenants from similar types of properties in the vicinities
in which they are located. The Registrant has no plans to change the current
use of or to renovate any of its remaining properties.
Real estate values, especially for good quality, well located property,
increased significantly during 1996 due to a combination of readily
available capital, low interest rates, and decreased vacancy rates
resulting from steady demand and an acceptable level of new construction.
While 1996 proved to be an excellent year to sell real estate, projected
yields by buyers on new acquisitions have declined significantly due to
competition and rising prices. Although there will be variances by asset
class and geographic area, the investment climate is expected to remain
strong for 1997. However, values could begin to level off as they
approach replacement cost triggering new construction and an increase in
capitalization rates.
The investment market for apartments was excellent during 1996 due to a
number of factors. Investor interest was strong, driven primarily by
institutions, as Real Estate Investment Trusts aggressively expanded their
portfolios and pension funds viewed apartments as an attractive asset
class due to their perceived low volatility and the emergence of large
professional property management companies. Operationally, existing
apartment properties registered on a national basis occupancy in the mid
90's and rental rate increases of 3-4% in 1996. While above the rate of
inflation, the rate of rental growth in 1996 was below that of the
previous two years suggesting that the apartment cycle may have plateaued,
especially as the impact of new construction in many areas is being felt.
While 1997 is projected to be another solid year, values should begin to
level off as capitalization rates move upward continuing a trend which
began during the second half of 1996.
<PAGE>
Currently, office properties are attracting the most interest from real
estate investors. While new apartment construction has been underway
since 1995, the office sector has just entered its development phase in
most markets and new construction is generally only proceeding with strong
tenant pre-leasing. Occupancy rates are at their highest level in years,
reaching the 90s in a vast number of markets. As a result, rents have
finally begun to increase at rates well in excess of inflation in many
markets around the country. As a result of these fundamentals, office
properties have increasingly become in strong demand by investors. Values
increased significantly during 1996 and are expected to do so again in
1997. Suburban properties are attracting attention as well. Still,
office properties remain a highly volatile sector where one new
build-to-suit office building for a major tenant could throw a market into
relapse. In addition, office space is highly vulnerable to corporate
restructuring and the growing "telecommuting" trend. The Registrant
believes the combination of strong price increases and future volatility
make this an excellent time to sell office assets.
The outlook for the retail sector of the investment real estate industry
is uncertain for 1997. The retail industry is being simultaneously
impacted by a number of factors which are likely to affect values for
quite some time. As retailers battle to gain market dominance, tenant
bankruptcies have grown. Consolidation among retailers has and is
expected to continue to occur. Unlike other asset classes, new
construction of power centers went unabated in the early 1990's, creating
an oversupply of space including "big box" anchor tenant space. Regional
malls, which are not the dominant center in the market, face continued
out-migration of retailers to the power centers. Finally shopping patterns
continue to shift due to the aging baby boomers, high consumer debt,
alternative distribution channels, and the greater emphasis on
entertainment. As a result, the capital requirements necessary to
maintain a shopping center's competitiveness are all significant, but with
uncertain returns. The Registrant believes there is significant risk to
holding retail assets for future upside potential.
During June and July 1996, the Registrant sold the Westlake Meadows and Green
Trails apartment complexes. During December 1996, the General Partner also
sold the 1275 K Street, Westech 360, and Perimeter 400 office buildings, in
which the Registrant held minority joint venture interests. During February
1997, the Registrant sold the Ammendale Technology Park - Phase II office
buildings. The Registrant currently has contracts to sell the Arborland
Consumer Mall and the Erindale Centre Shopping Center for the sales prices of
$7,750,000 and $7,600,000, respectively. The Registrant is actively marketing
for sale the remaining two properties in its portfolio.
The timing of the termination of the Registrant and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Registrant including, but not limited
to, the lawsuits discussed in "Item 3. Legal Proceedings." In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Registrant for a longer period of time.
<PAGE>
The Registrant received notice of an unsolicited offer for the purchase of
Tax-Exempt Limited Partnership Interests ("tender offer") in December 1996.
The tender offer was made by First Trust Co., L.P. and stated that their
primary motive in making the offer is to make a profit from the purchase of the
Interests. First Trust Co., L.P. is seeking to acquire up to 4.9% of the total
Interests outstanding in the Registrant. The Registrant will incur
administrative costs in responding to the tender offer and may incur additional
costs if additional tender offers are made in the future. The General Partner
cannot predict with any certainty what impact this tender offer or any future
tender offers will have on the operations or management of the Registrant.
The Registrant received notice of an unsolicited offer for the purchase of
Tax-Exempt Limited Partnership Interests ("tender offer") in March 1997. The
tender offer was made by Madison Partnership Liquidity Investors XX, LLC and
stated that their primary motive in making the offer is to make a profit from
the purchase of the Interests. Madison Partnership Liquidity Investors XX, LLC
is seeking to acquire up to 4.9% of the total Interests outstanding in the
Registrant. The Registrant will incur administrative costs in responding to the
tender offer and may incur additional costs if additional tender offers are
made in the future. The General Partner cannot predict with any certainty what
impact this tender offer or any future tender offers will have on the
operations or management of the Registrant.
During June and July 1996, the Registrant sold the Westlake Meadows and Green
Trails apartment complexes in all cash sales for $10,800,000 and $33,050,000,
respectively. During December 1996, the General Partner also sold the 1275 K
Street, Westech 360, and Perimeter 400 office buildings, in which the
Registrant held minority joint venture interests, in all cash sales for
$28,300,000, $18,330,000, and $40,700,000, respectively. See Item 7. "Liquidity
and Capital Resources" for additional information.
During February 1997, the Registrant sold the Ammendale Technology Park - Phase
II office building in an all cash sale for $5,768,000. See Item 1. "Other
Information" below and Item 7. "Liquidity and Capital Resources" for additional
information.
The Registrant, by virtue of its ownership of real estate, is subject to
Federal and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware of
any potential liability due to environmental issues or conditions that would be
material to the Registrant.
The officers and employees of Balcor Equity Partners-III, the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Other Information
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Ammendale Technology Park - Phase II
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<PAGE>
As previously reported, on November 29, 1996, the Registrant contracted to sell
Ammendale Technology Park - Phase II, Prince George's County, Maryland (the
"Property"), to an unaffiliated party, Writ Limited Partnership. The Registrant
and the purchaser agreed to reduce the sale price to $5,768,000. In addition,
the closing of the sale was extended from January 13, 1997 and the sale closed
on February 28, 1997. From the proceeds of the sale, the Registrant paid
$116,377 in closing costs and a total of $173,040 as a brokerage commission to
two unaffiliated parties, one of which is an affiliate of the third party
providing property management services for the Property.
An affiliate of the Registrant which owned Ammendale Technology Park - Phase I
("Phase I"), located adjacent to the Property, simultaneously sold Phase I to
the purchaser. From the proceeds of the sale of the Property, $170,904 has been
placed in escrow. Additionally, $229,096 has been deposited into the escrow
from the proceeds of the sale of Phase I. These funds will not be disbursed to
the Registrant and/or the affiliate until the later of the settlement of any
claims presented by the purchaser or November 1997.
The Registrant will receive total net proceeds from the sale of the Property of
approximately $5,479,000, including the escrow funds.
Arborland Consumer Mall
- ------------------------
In 1986, the Registrant acquired a 99% interest in the limited partnership (the
"Limited Partnership") which owned the Arborland Consumer Mall, Ann Arbor,
Michigan, utilizing approximately $20,745,000 of offering proceeds. The seller
of the property retained a 1% interest in the Limited Partnership.
On March 18, 1997, the Limited Partnership contracted to sell the property for
a sale price of $7,750,000 to an unaffiliated party, Crosstown Asset Corp. I, a
Delaware corporation. The purchaser has deposited $77,500 into an escrow
account as earnest money and is obligated to deposit an additional $62,000 upon
completion of the purchaser's due diligence review. The remaining portion of
the sale price will be payable in cash at closing, which is scheduled to occur
on April 30, 1997. From the proceeds of the sale, the Limited Partnership will
pay $193,750 as a brokerage commission to an affiliate of the third party
providing property management services for the property. The Limited
Partnership will receive the remaining proceeds of approximately $7,556,000
less closing costs. The Registrant is entitled to receive all of the net sale
proceeds. Of such proceeds, $387,500 will be retained by the Registrant and
will not be available for use or distribution by the Registrant until November
30, 1997. Neither the General Partner nor any affiliate will receive a
brokerage commission in connection with the sale of the property. The General
Partner will be reimbursed by the Limited Partnership for actual expenses
incurred in connection with the sale.
The Registrant has simultaneously contracted to sell another property, Erindale
Centre, to the purchaser, as described below. Affiliates of the Registrant have
simultaneously contracted to sell three other properties to the purchaser.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.
<PAGE>
Erindale Centre
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In 1986, the Registrant acquired the Erindale Centre shopping center, Colorado
Springs, Colorado, utilizing approximately $17,340,000 of offering proceeds.
On March 18, 1997, the Registrant contracted to sell the property for a sale
price of $7,600,000 to an unaffiliated party, Crosstown Asset Corp. I, a
Delaware corporation. The purchaser has deposited $76,000 into an escrow
account as earnest money and is obligated to deposit an additional $60,800 upon
completion of the purchaser's due diligence review. The remaining portion of
the sale price will be payable in cash at closing, which is scheduled to occur
on April 30, 1997. From the proceeds of the sale, the Registrant will pay
$190,000 as a brokerage commission to an affiliate of the third party providing
property management services for the property. The Registrant will receive the
remaining proceeds of approximately $7,410,000, less closing costs. Of such
proceeds, $380,000 will be retained by the Registrant and will not be available
for use or distribution by the Registrant until November 30, 1997. Neither the
General Partner nor any affiliate will receive a brokerage commission in
connection with the sale of the property. The General Partner will be
reimbursed by the Registrant for actual expenses incurred in connection with
the sale.
The Registrant has simultaneously contracted to sell another property,
Arborland Consumer Mall, to the purchaser, as described above. Affiliates of
the Registrant have simultaneously contracted to sell three other properties to
the purchaser.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.
Item 2. Properties
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As of December 31, 1996, the Registrant directly owns the five properties
described below, all of which are owned in fee simple:
Location Description of Property
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Prince George's County, ** Ammendale Technology Park - Phase II: three
Maryland one-story office buildings containing
approximately 109,000 square feet on
approximately 16 acres.
Ann Arbor, Michigan * Arborland Consumer Mall: a regional enclosed mall
containing approximately 348,000 square feet
located on approximately 37 acres.
Renton, Washington Belmont Apartments: a 202-unit apartment complex
located on approximately 11 acres.
Bingham Farms, Michigan Bingham Farms Office Plaza - Phase IV: a 4-story
office building containing approximately 145,000
square feet.
<PAGE>
Colorado Springs, Colorado Erindale Centre: a neighborhood shopping center
containing approximately 167,000 square feet
located on approximately 13 acres.
* Owned by the Registrant through a joint venture with the seller.
** This property was sold February 1997. See Note 15 of Notes to the
Financial Statements for additional information.
<PAGE>
The average occupancy rates and the effective average rent per unit for each of
the last five years for the residential property owned by the Registrant at
December 31, 1996, is described below. Apartment units in this property are
rented with leases of one year or less, with no tenant occupying greater than
10% of the property.
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Belmont Apartments
Occupancy rate 92% 93% 90% 94% 91%
Effective rent $643 $635 $616 $603 $603
The average occupancy rates and the effective rate per square foot for each of
the last five years for the four commercial properties owned by the Registrant
at December 31, 1996, are described below:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Ammendale Technology Park
Occupancy rate 87% 95% 82% 87% 91%
Effective rate $6.69 $5.60 $6.81 $6.46 $5.81
Arborland Consumer Mall
Occupancy rate 71% 86% 86% 90% 91%
Effective rate $9.67 $8.49 $8.76 $8.40 $8.60
Bingham Farms
Occupancy rate 95% 96% 94% 100% 99%
Effective rate $16.11 $15.93 $15.64 $14.99 $15.35
Erindale Centre
Occupancy rate 92% 90% 92% 77% 81%
Effective rate $7.67 $7.60 $7.01 $8.97 $6.79
Information regarding tenants occupying 10% or more of the leasable square feet
of each commercial property is provided below:
Scheduled
Lease Lease
Square Base Rent Expiration Renewal
Property Tenant Feet Per Annum Date Option
- -------- ------ ------ --------- ---- -------
Erindale Center Kacey Fine 19,833 $149,441 8/2000 Yes
Furniture
(Furniture
Store)
Arborland Mall Burlington Coat 57,413 $200,946 7/1998 Yes
Factory (Discount
Clothing Store)
Marshall's 31,786 $222,502 1/1999 Yes
(Discount Clothing
Store)
<PAGE>
Service Merchandise64,650 $250,000 2/1999 Yes
(Catalog/Showroom)
Toys R Us (Toy 48,346 $253,844 1/2004 Yes
Store)
Ammendale II ICF Kaiser 15,041 $114,312 10/2001 Yes
(Mechanical
Engineering)
Bingham IV Plaza Frontier 129,282 $2,544,076 7/1998 No
Communications
(Telephone-Local
& Long Distance)
Real estate taxes incurred in 1996 for the above residential and commercial
properties totaled $1,122,335.
The Federal tax basis of the Registrant's properties totaled $76,599,629 as of
December 31, 1996. For Federal income tax purposes, the acquisition costs of
the properties are depreciated over a useful life of 40 years, using the
straight-line method. Other minor assets are depreciated over their applicable
recovery periods.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
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Proposed Class and Derivative Action Lawsuits
- ----------------------------------------------
On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the "Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Registrant, the "Affiliated
Partnerships"), as well as the Affiliated Partnerships, as defendants.
Additional defendants were Insignia Management Group ("Insignia") and Walton
Street Capital Acquisition II, LLC ("Walton") and certain of their affiliates
and principals (collectively, the "Walton and Insignia Defendants"). The
complaint alleged, among other things, that the tender offers for the purchase
of limited partnership interests in the Affiliated Partnerships made by a joint
venture consisting of affiliates of Insignia and Walton were coercive and
unfair.
On July 1, 1996, another proposed class action complaint was filed in the
Chancery Court, Anderson vs. Balcor Mortgage Advisors (Case No. 96 CH 06884)
(the "Anderson Case"). An amended complaint consolidating the Dee and Anderson
Cases (the "Dee/Anderson Case") was filed on July 25, 1996.
<PAGE>
The complaint seeks to assert class and derivative claims again the Walton and
Insignia Defendants and alleges that, in connection with the tender offers, the
Walton and Insignia Defendants misused the Balcor Defendants' and Insignia's
fiduciary positions and knowledge in breach of the Walton and Insignia
Defendants' fiduciary duty and in violation of the Illinois Securities and
Consumer Fraud Acts. The plaintiffs amended their complaint on October 8, 1996,
adding additional claims. The plaintiffs requested certification as a class and
derivative action, unspecified compensatory damages and rescission of the
tender offers. Each of the defendants filed motions to dismiss the complaint.
On January 7, 1997, the Chancery Court denied the plaintiffs' motion for leave
to amend the complaint and dismissed the matter with prejudice.
On February 3, 1997, the plaintiffs filed a Notice of Appeal of the Chancery
Court's order to the Appellate Court of Illinois.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. The Registrant believes it has meritorious
defenses to contest the claims. It is not determinable at this time whether or
not an unfavorable decision in this action would have a material adverse impact
on the Registrant.
Proposed class action
- ---------------------
On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al., Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company (together with the
Partnership, the "Affiliated Partnerships"), American Express Company, Lehman
Brothers, Inc., additional limited partnerships sponsored by the predecessor of
Lehman Brothers, Inc. (together with the Registrant and the Affiliated
Partnerships, the "Defendant Partnerships") and Smith Barney Holdings, Inc. are
the named defendants in the action. The complaint was amended on October 18,
1996 to add additional plaintiffs. The amended complaint alleges, among other
things, common law fraud and deceit, negligent misrepresentation, breach of
contract, breach of fiduciary duty and violation of certain New Jersey statutes
relating to the disclosure of information in the offering of limited
partnership interests in the Defendant Partnerships. The amended complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest; general damages for
injuries arising from the defendants' alleged actions; equitable relief,
including rescission, on certain counts; punitive damages; treble damages on
certain counts; recovery from the defendants of all profits received by them as
a result of their alleged actions relating to the Defendant Partnerships;
attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Registrant believes it has meritorious defenses
to contest the claims. It is not determinable at this time whether or not an
unfavorable decision in this action would have a material adverse impact on the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1996.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources.
As of December 31, 1996, the number of record holders of Limited Partnership
Interests of the Registrant was 30,870.
Item 6. Selected Financial Data
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Year ended December 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
Total income $20,284,354 $17,804,510$16,938,456 $16,634,266 $12,253,384
Provision for
investment
property
writedown 3,777,000 None None 2,700,000 6,700,000
Income (loss)
before gain
(loss) on sales
of properties 6,033,505 6,150,471 4,820,354 2,288,740 (5,152,193)
Net income (loss) 20,642,345 6,150,471 4,820,354 2,288,740 (5,327,305)
Net income (loss)
per Limited
Partnership
Interest 29.23 7.63 5.88 2.17 (8.87)
Total assets 71,472,288 103,241,269105,268,922 107,200,193 112,597,525
Distributions per
taxable Limited
Partnership
Interest 16.35 7.90 7.00 7.50 9.25
Distributions per
tax-exempt
Limited
Partnership
Interest (A) 78.24 10.51 9.32 9.98 12.30
(A) These amounts include distributions of original capital of $56.50 per
tax-exempt Limited Partnership Interest for 1996.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
<PAGE>
Operations
- ----------
Summary of Operations
- ---------------------
During 1996, Balcor Equity Pension Investors - III A Real Estate Limited
Partnership (the "Partnership") recognized gains on the sales of two of its
properties and two of the three properties in which it held a joint venture
interest. These gains were partially offset by its share of a loss on the sale
of one of the properties in which it held a joint venture interest, and a
provision for investment property writedown on one of the Partnership's
remaining properties. The combined effect of these events resulted in higher
net income during 1996 as compared to 1995 and 1994. Improved operations at
several of the properties caused net income to increase in 1995 as compared to
1994. Further discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
- --------------------
The Partnership sold Westlake Meadows and Green Trails apartment complexes in
June and July 1996, respectively, which was the primary reason for the decrease
in rental income during 1996 when compared to 1995.
Participation in income of joint ventures with affiliates represents the
Partnership's share of the income or loss of the 1275 K Street, Westech 360 and
Perimeter 400 office buildings. As a result of the Partnership's share of the
gains recognized on the sales of the Westech 360 and Perimeter 400 office
buildings totaling approximately $7,014,000, participation in income from joint
ventures with affiliates increased during 1996 as compared to 1995. This
increase was partially offset by the Partnership's share of a loss recognized
on the sale of the 1275 K Street office building of approximately $1,925,000.
Higher average cash balances due to the investment of the proceeds from the
property sales prior to distribution to Partners, resulted in an increase in
interest income on short-term investments during 1996 as compared to 1995.
Depreciation expense decreased during 1996 as compared to 1995 due to the sales
of the Westlake Meadows and Green Trails apartment complexes.
Property operating expense decreased during 1996 when compared to 1995 by
approximately $500,000 which was primarily due to the sales of the Westlake
Meadows and Green Trails apartment complexes of approximately $566,000. In
addition, there was a decrease in property operating expense at the Bingham
Farms Office Plaza - Phase IV due to structural repairs in 1995 of
approximately $197,000. These decreases were partially offset by an increase
in property operating expense at the Arborland Consumer Mall due to leasing
costs of approximately $350,000 incurred in 1996.
Real estate tax expense decreased during 1996 as compared to 1995 primarily due
to the sales of the Westlake Meadows and Green Trails apartment complexes.
Property management fees decreased during 1996 as compared to 1995 due to the
sales of the Westlake Meadows and Green Trails apartment complexes.
<PAGE>
The Partnership incurred higher consulting, investor processing, printing and
postage costs in connection with a response to a tender offer during 1996. As
a result, administrative expenses increased during 1996 as compared to 1995.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties. Determinations of fair
value are made periodically, but not less than annually, on the basis of
property operations. Determinations of fair value represent estimations based
on many variables which affect the value of real estate, including economic and
demographic conditions. During 1996, the Partnership recognized a provision
for investment property writedown of $3,777,000 for the Arborland Consumer
Mall. This estimate was based on the property's sale value less estimated
closing costs.
The Partnership sold the Westlake Meadows and Green Trails apartment complexes
in 1996, and recognized gains totaling $14,608,840 during 1996.
1995 Compared to 1994
- ---------------------
Primarily as a result of higher rental rates at the Green Trails Apartments,
rental income increased during 1995 as compared to 1994.
Improved operations at the Westech 360 Office Buildings resulting from higher
rental rates, and a recovery of a provision related to the change in the
estimate of the fair value of the Perimeter 400 Center Office Building, caused
participation in income of joint ventures with affiliates to increase during
1995 as compared to 1994.
Due to higher average cash balances and higher average interest rates, interest
income on short-term investments increased during 1995 as compared to 1994.
As a result of decreased leasing costs and structural repairs at the Erindale
Centre Shopping Center and lower advertising costs and repairs and maintenance
expenditures at the Arborland Consumer Mall, property operating expense
decreased during 1995 as compared to 1994.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $24,243,000 as
of December 31, 1996 as compared to December 31, 1995 primarily due to proceeds
received from the sales of the Westlake Meadows and Green Trails apartment
complexes and the three properties in which the Partnership held minority joint
venture interests. The Partnership generated cash flow of approximately
$6,542,000 from operating activities which represent the operations of the
Partnership's properties and interest income on short-term investments, which
were partially offset by the payment of administrative expenses. Investing
activities consisted of net proceeds received from the sales of the Westlake
Meadows and Green Trails apartment complexes of approximately $42,647,000,
improvements to properties of approximately $359,000, and net distributions
received from joint ventures with affiliates of approximately $27,446,000.
Financing activities consisted of distributions to the Partners of
approximately $52,034,000. In January 1997, the Partnership made a special Net
<PAGE>
Cash Proceeds distribution to tax-exempt Limited Partners of approximately
$23,955,000.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures.
During 1996 and 1995, all of the remaining properties as of December 31, 1996
generated positive cash flow. The Westlake Meadows and Green Trails apartment
complexes, which were sold in June and July 1996, respectively, generated
positive cash flow during 1995 and prior to their sales in 1996. All of the
three properties in which the Partnership held minority joint venture
interests, generated positive cash flow in 1995 and prior to their sales in
1996.
As of December 31, 1996, the occupancy rate of the Partnership's remaining
residential property was 92% and the occupancy rates of the commercial
properties ranged from 87% to 95% except for the Arborland Consumer Mall which
had an occupancy rate of 77%.
During June 1996 and July 1996, the Partnership sold the Westlake Meadows and
Green Trails apartment complexes, respectively. During December 1996, the
General Partner also sold the 1275 K Street, Westech 360, and Perimeter 400
office buildings, in which the Partnership held minority joint venture
interests. During 1997, the Partnership sold the Ammendale Technology Park -
Phase II office buildings. The Partnership currently has contracts to sell the
Arborland Consumer Mall and the Erindale Centre Shopping Center for the sales
prices of $7,750,000 and $7,600,000, respectively. The Partnership is actively
marketing the remaining two properties in its portfolio.
The timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to, the lawsuits discussed in "Item 3. Legal Proceedings." In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Partnership for a longer period of time.
In June 1996, the Partnership sold the Westlake Meadows Apartments in an all
cash sale for $10,800,000. From the proceeds of the sale, the Partnership paid
$344,963 in selling costs. In accordance with the Partnership Agreement, the
Partnership distributed the proceeds to the Tax-exempt Limited Partners in
October 1996. See Note 11 of Notes to Financial Statements for additional
information.
In July 1996, the Partnership sold the Green Trails Apartments in an all cash
sale for $33,050,000. In addition, the buyer assumed a $415,682 liability for
the real estate taxes. From the proceeds of the sale, the Partnership paid
$857,567 in selling costs. Pursuant to the terms of the sale, $250,000 of the
proceeds were retained by the Partnership until December 1996. The full amount
of the holdback was released in December 1996. In accordance with the
Partnership Agreement, the Partnership distributed a majority of the proceeds
to the Tax-exempt Limited Partners in October 1996. The remaining proceeds were
distributed to the Tax-exempt Limited Partners in January 1997. See Note 11 of
Notes to Financial Statements for additional information.
<PAGE>
The 1275 K Street Office Building was owned by a joint venture consisting of
the Partnership and an affiliate. In December 1996, the joint venture sold the
property in an all cash sale for $28,300,000. From the proceeds of the sale,
the joint venture paid $911,470 in selling costs. The net proceeds of the sale
were $27,388,530, of which $10,812,992 was the Partnership's share. Pursuant
to the terms of the sale, $2,287,500 of the proceeds will be retained by the
joint venture until September 1997. In accordance with the Partnership
Agreement, the remaining proceeds received by the Partnership were distributed
to the Tax-exempt Limited Partners in January 1997. See Note 8 of Notes to
Financial Statements for additional information.
The Westech 360 Office Building was owned by a joint venture consisting of the
Partnership and an affiliate. In December 1996, the joint venture sold the
property in an all cash sale for $18,330,000. From the proceeds of the sale,
the joint venture paid $477,653 in selling costs. The net proceeds of the sale
were $17,852,348, of which $7,730,067 was the Partnership's share. Pursuant to
the terms of the sale, $1,395,000 of the proceeds will be retained by the joint
venture until September 1997. In accordance with the Partnership Agreement,
the remaining proceeds received by the Partnership were distributed to the
Tax-exempt Limited Partners in January 1997. See Note 8 of Notes to Financial
Statements for additional information.
The Perimeter 400 Office Building was owned by a joint venture consisting of
the Partnership and three affiliates. In December 1996, the joint venture sold
the property in an all cash sale for $40,700,000. From the proceeds of the
sale, the joint venture paid $882,765 in selling costs. The net proceeds of
the sale were $39,817,235, of which $8,739,883 was the Partnership's share.
Pursuant to the terms of the sale, $1,750,000 of the proceeds will be retained
by the joint venture until September 1997. In accordance with the Partnership
Agreement, the remaining proceeds received by the Partnership were distributed
to the Tax-exempt Limited Partners in January 1997. See Note 8 of Notes to
Financial Statements for additional information.
In February 1997, the Partnership sold the Ammendale Technology Park - Phase II
in an all cash sale for $5,768,000. From the proceeds of the sale, the
Partnership paid $289,417 in selling costs. Pursuant to the terms of the sale,
$170,904 of the proceeds has been placed in escrow until November 1997. The
Partnership expects to distribute the remaining proceeds to the Tax-exempt
Limited Partners in 1997 in accordance with the Partnership Agreement. See
Note 15 of Notes to Financial Statements for additional information.
In January 1997, the Partnership made a distribution of $26,451,647 ($2.80 per
Taxable Interest and $41.50 per Tax-exempt Interest) to the holders of Limited
Partnership Interests for the fourth quarter of 1996. This distribution
includes a regular quarterly distribution of $2.80 per Taxable Interest and
$3.72 per Tax-exempt Interest, and a special distribution of $37.78 per
Tax-exempt Interest pursuant to the Partnership Agreement from Net Cash
Proceeds from the sales of the three properties in which the Partnership held
minority joint venture interests. In January 1997, the Partnership also paid
$208,027 to the General Partner as its distributive share of Net Cash Receipts
distributed for the fourth quarter of 1996 and made a contribution to the
Repurchase Fund of $69,342.
<PAGE>
The Partnership made four distributions totaling $16.35, $7.90 and $7.00 per
Taxable Interest and $78.24, $10.51 and $9.32 per Tax-exempt Interest in 1996,
1995 and 1994, respectively. Distributions to Tax-Exempt Limited Partners were
comprised of $21.74 of Net Cash Receipts and $56.50 of Net Cash Proceeds in
1996, $10.51 of Net Cash Receipts in 1995 and $9.32 of Net Cash Receipts in
1994. Distributions to Taxable Limited Partners were comprised of Net Cash
Receipts in all three years. Net Cash Receipts distributions increased from
1995 to 1996 due to improved operations at the Partnership's properties and due
to a special distribution of Net Cash Receipts reserves in 1996. Including the
January 1997 distribution, Limited Partners have received Net Cash Receipts
distributions of $100.60 per $250 Taxable Interest and $133.86 per Tax-exempt
Interest, and Net Cash Proceeds of $94.28 per $250 Tax-exempt Interest. Future
distributions will be made from cash flow generated from property operations
from the remaining properties and future property sales. In light of results to
date, the General Partner does not anticipate that taxable investors will
recover all of their original investment.
During 1996, the General Partner, on behalf of the Partnership, used amounts
placed in the Repurchase Fund to repurchase 7,554 Interests from Limited
Partners at a total cost of $992,928. In February 1997, the Partnership
discontinued the repurchase of Interests from Limited Partners.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements and Financial Statement Schedule in this
Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1996 December 31, 1995
----------------------- -----------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
----------- ---------- ----------- ----------
Total assets $71,472,288 $97,441,511 $103,241,269 $136,998,206
Partners' (deficit)
capital accounts:
General Partner (597,954) (42,382) 352,981 729,542
Limited Partners 71,279,934 113,945,510 101,720,792 152,084,863
Net income:
General Partner 669,960 933,735 938,472 1,068,061
Limited Partners 19,972,385 11,919,036 5,211,999 6,565,191
Per Limited Part-
nership Interest 29.23 (A) 7.63 (A)
<PAGE>
(A) Net income is $17.53 per Tax-exempt Interest and $16.35 per Taxable
Interest for 1996, and $9.74 per Tax-exempt Interest and $7.90 per
Taxable Interest for 1995.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
On September 14, 1995, the Registrant approved the engagement of Coopers &
Lybrand L.L.P. as its independent auditors for the fiscal year ending December
31, 1995 to replace the firm of Ernst & Young LLP, who were dismissed as
auditors of the Registrant effective September 14, 1995. The General Partner
of the Registrant approved the change in auditors.
The reports of Ernst & Young LLP on the Registrant's financial statements for
each of the two fiscal years ended December 31, 1994 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
In connection with the audits of the Registrant's financial statements for each
of the two fiscal years ended December 31, 1994, and in the subsequent interim
period, there were no disagreements with Ernst & Young LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Ernst &
Young LLP, would have caused Ernst & Young LLP to make reference to the matter
in their report.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Equity Partners - III, its General
Partner, has a Board of Directors.
(b, c & e) The names, ages and business experiences of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President James E. Mendelson
Senior Vice President John K. Powell, Jr.
Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 49) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company. He
is also Senior Vice President of American Express Company and is responsible
for its real estate operations worldwide. Prior to joining Balcor, Mr.
Meador was employed at the Harris Trust and Savings Bank in the commercial
real estate division where he was involved in various lending activities.
Mr. Meador received his M.B.A. degree from the Indiana University Graduate
School of Business.
Alexander J. Darragh (age 42) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility
for Balcor's environmental matters. Mr. Darragh received masters' degrees in
Urban Geography from Queen's University and in Urban Planning from
Northwestern University.
James E. Mendelson (age 34) joined Balcor in July 1984 and is responsible
for Balcor's property sales activities. He also has supervisory
responsibility for Balcor's accounting, financial, treasury, investor
services and investment administration functions. From 1989 to 1995, Mr.
Mendelson was Vice President - Transaction Management and Vice President -
Senior Transaction Manager and had responsibility for various asset
management matters relating to real estate investments made by Balcor,
including negotiations for the restructuring of mortgage loan investments.
Mr. Mendelson received his M.B.A. degree from the University of Chicago.
<PAGE>
John K. Powell, Jr. (age 46) joined Balcor in September 1985 and is
responsible for portfolio and asset management matters relating to Balcor's
partnerships. Mr. Powell also has supervisory responsibility for Balcor's
risk management function. He received a Master of Planning degree from the
University of Virginia. Mr. Powell has been designated a Certified Real
Estate Financier by the National Society for Real Estate Finance and is a
full member of the Urban Land Institute.
Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and
private partnerships. She is also Treasurer and a Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1996.
Item 11. Executive Compensation
- -------------------------------
The Registrant paid $6,624 in 1996 with respect to one of the executive
officers and directors of Balcor Equity Partners-III, the General Partner. The
Registrant has not paid and does not propose to pay any remuneration to the
remaining executive officers and directors of the General Partner. Certain of
the remaining officers receive compensation from The Balcor Company (but not
from the Registrant) for services performed for various affiliated entities,
which may include services performed for the Registrant. However, the General
Partner believes that any such compensation attributable to services performed
for the Registrant is immaterial to the Registrant. See Note 10 of Notes to
Financial Statements for the information relating to transactions with
affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) The following entity is the sole Limited Partner which owns beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant:
<PAGE>
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Title of Class Owner Ownership Class
- -----------------------------------------------------------
Limited Walton 30,599.93 4.48%
Partnership Street Limited
Interests Capital Partnership
Acquisition Interests
Co. II, L.C.C.
Chicago,
Illinois
Limited Beattie 16,455.35 2.41%
Partnership Place Limited
Interests Greenville, Partnership
South Interests
Carolina
While Walton Street Capital Acquisition Co. II, L.C.C. and Beattie Place
individually own less than 5% of the Interests, for purposes of this Item 12,
Walton Street Capital Acquisition Co. II, L.C.C. is an affiliate of Beattie
Place and, collectively, they own 6.89% of the Interests.
(b) Balcor Equity Partners-III (principally through the Repurchase Fund) and
its officers and partners own as a group the following Limited Partnership
Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
------------------- --------------- ----------------
Limited Partnership
Interest 20,165 Interests 2.95%
Relatives and affiliates of the partners and officers of the General Partner do
not own any additional interests.
(c) The Registrant is not aware of any arrangements, the operations of which
may result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 10 of Notes to Financial Statements for information relating to
transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
- ------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
previously filed as Exhibit 3 to Amendment No. 2 to Registrant's Registration
Statement on Form S-11 dated September 25, 1985 (Registration Statement No.
2-97579) is incorporated herein by reference.
(4) Specimen Subscription Agreement set forth as Exhibit 4.1 to Amendment No.
2 to the Registrant's Registration Statement on Form S-11 dated September 25,
1985 (Registration Statement No. 2-97579) and Form of Confirmation regarding
Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1992 are incorporated herein by
reference.
(10) Material Contract:
(a) Agreement of Sale and attachment thereto relating to the sale of the Green
Trails Apartments located in Lisle, Illinois previously filed as Exhibit 2 to
the Registrant's Report on Form 8-K dated June 28, 1996 is incorporated herein
by reference.
(b) Agreement of Sale and attachments thereto relating to the sale of the 1275
K Street Office Building, Washington, D.C., as previously filed as Exhibit (2)
to the Registrant's Report on Form 8-K dated November 29, 1996 is incorporated
herein by reference.
(c) Agreement of Sale and attachment thereto relating to the sale of the
Arborland Consumer Mall, Ann Arbor, Michigan is attached hereto.
(16)Letter from Ernst & Young LLP dated September 19, 1995 regarding the
change in the Registrant's certifying accountant previously filed as Exhibit 16
to the Registrant's Report on Form 8-K/A dated October 27, 1995 is hereby
incorporated herein by reference.
(27)Financial Data Schedule of the Registrant for 1996 is attached hereto.
(99) Additional Exhibits:
(i) First Amendment to Agreement of Sale relating to the sale of the Ammendale
Technology Park - Phase II, Prince George's County, Maryland, is attached
hereto.
(ii) Second Amendment to Agreement of Sale relating to the sale of the
Ammendale Technology Park - Phase II, Prince George's County, Maryland, is
attached hereto.
<PAGE>
(iii) Third Amendment to Agreement of Sale relating to the sale of the
Ammendale Technology Park - Phase II, Prince George's County, Maryland, is
attached hereto.
(iv) Fourth Amendment to Agreement of Sale relating to the sale of the
Ammendale Technology Park - Phase II, Prince George's County, Maryland, is
attached hereto.
(v) Agreement of Sale and attachment thereto relating to the sale of the
Erindale Centre Shopping Center, Colorado Springs, Colorado is attached hereto.
(b) Report on Form 8-K: A Current Report on Form 8-K dated November 29, 1996,
was filed reporting the Agreement of Sale relating to the sale of the 1275 K
Street office building, the Agreement of Sale relating to the sale of Ammendale
Technology Park - Phase II, the Agreement of Sale relating to the sale of the
Westech 360 office buildings, and the Agreement of Sale relating to the sale of
the Perimeter 400 Center office building.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedule: See Index to Financial Statements and
Financial Statement Schedule in this Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Jayne A. Kosik
--------------------------------
Jayne A. Kosik
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of Balcor
Equity Partners-III, the General
Partner
Date: March 27, 1997
--------------------
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.
Signature Title Date
- --------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
/s/Thomas E. Meador Partners-III, the General Partner March 27, 1997
- -------------------- --------------
Thomas E. Meador
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of Balcor
Equity Partners-III, the General
/s/Jayne A. Kosik Partner March 27, 1997
- -------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE:
Report of Independent Accountants
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1996 and 1995
Statements of Partners' Capital, for the years ended December 31, 1996, 1995
and 1994
Statements of Income and Expenses, for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows, for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1996
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Pension Investors-III
A Real Estate Limited Partnership:
We have audited the accompanying balance sheets of Balcor Equity Pension
Investors-III A Real Estate Limited Partnership (An Illinois Limited
Partnership) as of December 31, 1996 and 1995, and the related statements of
partners' capital, income and expenses, and cash flows for each of the two
years in the period ended December 31, 1996. We have also audited the
financial statement schedule. These financial statements and the financial
statement schedule are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
the 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 management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Equity Pension
Investors-III A Real Estate Limited Partnership at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the two years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
As described in Note 2 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests. The Partnership is presently marketing for sale its
remaining real estate assets. Upon disposition of its remaining real estate
assets and resolution of the litigation described in Note 14 to the financial
statements, the Partnership intends to cease operations and dissolve.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 24, 1997
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Equity Pension Investors-III
A Real Estate Limited Partnership:
We have audited the accompanying statements of partners' capital, income and
expenses and cash flows of Balcor Equity Pension Investors-III A Real Estate
Limited Partnership (An Illinois Limited Partnership) for the year ended
December 31, 1994. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the financial
statements of Balcor Equity Pension Investors-II, an affiliate, which is the
majority joint venturer of the partnerships which own the 1275 K Street and
Westech 360 Investments. The Partnership's share of the combined operating
income of these joint ventures included in the accompanying 1994 statement of
income and expenses totaled approximately $919,000. The financial statements of
Balcor Equity Pension Investors-II were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for the aforementioned investments in joint ventures, is based solely
on the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit on the report of the other auditors, the
financial statements referred to above present fairly, in all material
respects, the results of operations and cash flows of Balcor Equity Pension
Investors-III A Real Estate Limited Partnership for the year ended December 31,
1994, in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1995
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Pension Investors-III
A Real Estate Limited Partnership:
We have audited the statements of partners' capital, income and expenses, and
cash flows of Balcor Equity Pension Investors-II A Real Estate Limited
Partnership (An Illinois Limited Partnership) for the year ended December 31,
1994. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Balcor
Equity Pension Investors-II A Real Estate Limited Partnership for the year
ended December 31, 1994, in conformity with generally accepted accounting
principles.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 24, 1995
<PAGE>
BALCOR EQUITY PENSION INVESTORS - III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
-------------- --------------
Cash and cash equivalents $ 35,523,271 $ 11,280,395
Accounts and accrued interest receivable 1,202,372 1,775,121
Prepaid expenses, principally real
estate taxes and insurance 469,833 531,549
Deferred expenses, net of accumulated
amortization of $384,914 in 1996 and
$311,855 in 1995 131,377 204,436
-------------- --------------
37,326,853 13,791,501
-------------- --------------
Investment in real estate:
Land 7,925,685 14,394,281
Buildings and improvements 49,748,165 81,277,182
-------------- --------------
57,673,850 95,671,463
Less accumulated depreciation 25,600,858 29,238,934
-------------- --------------
Investment in real estate, net of
accumulated depreciation 32,072,992 66,432,529
Investment in joint ventures with
affiliates 2,072,443 23,017,239
-------------- --------------
$ 71,472,288 $ 103,241,269
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 389,388 $ 289,191
Due to affiliates 119,215 29,973
Accrued liabilities, principally
real estate taxes 106,625 519,233
Security deposits 175,080 329,099
-------------- --------------
Total liabilities 790,308 1,167,496
-------------- --------------
Commitments and Contingencies
Limited Partners' capital (683,204
Interests issued and outstanding) 71,279,934 101,720,792
General Partner's (deficit) capital (597,954) 352,981
-------------- --------------
Total partners' capital 70,681,980 102,073,773
-------------- --------------
$ 71,472,288 $ 103,241,269
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1996, 1995, and 1994
Partners' Capital (Deficit) Accounts
-----------------------------------------------
General Limited
Total Partner Partners
--------------- -------------- ----------------
Balance at December 31,
1993 $ 105,887,090 $ 89,955 $ 105,797,135
Cash distributions to:
Limited Partners (A) (6,253,480) (6,253,480)
General Partner (694,832) (694,832)
Net income for the year
ended December 31, 1994 4,820,354 802,970 4,017,384
--------------- -------------- ----------------
Balance at December 31,
1994 103,759,132 198,093 103,561,039
Cash distributions to:
Limited Partners (A) (7,052,246) (7,052,246)
General Partner (783,584) (783,584)
Net income for the year
ended December 31, 1995 6,150,471 938,472 5,211,999
--------------- -------------- ----------------
Balance at December 31,
1995 102,073,773 352,981 101,720,792
Cash distributions to:
Limited Partners (A) (50,413,243) (50,413,243)
General Partner (1,620,895) (1,620,895)
Net income for the year
ended December 31, 1996 20,642,345 669,960 19,972,385
--------------- -------------- ----------------
Balance at December 31,
1996 $ 70,681,980 $ (597,954) $ 71,279,934
=============== ============== ================
(A) Summary of cash distributions paid per Interest:
<PAGE>
1996 1995 1994
--------------- -------------- ----------------
Taxable
- -------------
First Quarter $ 1.75 $ 1.75 $ 1.75
Second Quarter 2.80 1.75 1.75
Third Quarter 2.80 2.65 1.75
Fourth Quarter 9.00 1.75 1.75
Tax-Exempt
- -------------
First Quarter 2.33 2.33 2.33
Second Quarter 3.72 2.33 2.33
Third Quarter 3.72 3.52 2.33
Fourth Quarter 68.47 2.33 2.33
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1996, 1995, and 1994
1996 1995 1994
--------------- -------------- ----------------
Income:
Rental $ 10,311,282 $ 12,986,774 $ 12,650,105
Service 2,290,095 2,445,471 2,508,431
Participation in income
of joint ventures
with affiliates 6,501,382 1,757,775 1,382,726
Interest on short-term
investments 1,181,595 614,490 397,194
--------------- -------------- ----------------
Total income 20,284,354 17,804,510 16,938,456
--------------- -------------- ----------------
Expenses:
Depreciation 2,487,264 2,979,544 2,971,629
Amortization of deferred
expenses 73,059 73,060 72,623
Property operating 4,961,218 5,461,616 5,925,587
Real estate taxes 1,379,433 1,696,995 1,668,374
Property management fees 585,864 715,113 707,876
Administrative 987,011 727,711 772,013
Provision for investment
property writedown 3,777,000
--------------- -------------- ----------------
Total expenses 14,250,849 11,654,039 12,118,102
--------------- -------------- ----------------
Income before gain on sales
of properties 6,033,505 6,150,471 4,820,354
Gain on sales of properties 14,608,840
--------------- -------------- ----------------
Net income $ 20,642,345 $ 6,150,471 $ 4,820,354
=============== ============== ================
Net income allocated to
General Partner $ 669,960 $ 938,472 $ 802,970
=============== ============== ================
Net income allocated to
Limited Partners $ 19,972,385 $ 5,211,999 $ 4,017,384
=============== ============== ================
Net income per Limited
Partnership Interest
(683,204 issued and
outstanding) $ 29.23 $ 7.63 $ 5.88
=============== ============== ================
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995, and 1994
1996 1995 1994
--------------- -------------- ----------------
Operating activities:
Net income $ 20,642,345 $ 6,150,471 $ 4,820,354
Adjustments to recon-
cile net income to
net cash provided by
operating activities:
Gain on sales of
properties (14,608,840)
Participation in
income of joint
ventures with
affiliates (6,501,382) (1,757,775) (1,382,726)
Depreciation of
properties 2,487,264 2,979,544 2,971,629
Amortization of
deferred expenses 73,059 73,060 72,623
Provision for
investment property
writedown 3,777,000
Payment of leasing
commissions (28,816)
Net change in:
Accounts and
accrued interest
receivable 572,749 556,064 (35,916)
Prepaid expenses 61,716 (42,519) (18,105)
Accounts payable 100,197 (298,209) 169,683
Due to affiliates 89,242 (73,000) 11,423
Accrued liabilities 3,074 5,199 3,507
Security deposits (154,019) 23,716 12,074
--------------- -------------- ----------------
Net cash provided by
operating activities 6,542,405 7,616,551 6,595,730
--------------- -------------- ----------------
Investing activities:
Capital contribution to
joint venture with
an affiliate (62,975) (17,347) (26,096)
Distributions from joint
ventures with affil-
iates 27,509,153 2,060,484 2,134,932
Improvements to properties (359,039) (405,806) (162,463)
Proceeds from sales of
properties 43,850,000
Payment of selling costs (1,202,530)
--------------- -------------- ----------------
Net cash provided by
investing activities 69,734,609 1,637,331 1,946,373
<PAGE>
--------------- -------------- ----------------
Financing activities:
Distributions to
Limited Partners (50,413,243) (7,052,246) (6,253,480)
Distributions to
General Partner (1,620,895) (783,584) (694,832)
--------------- -------------- ----------------
Cash used in financing
activities (52,034,138) (7,835,830) (6,948,312)
--------------- -------------- ----------------
Net change in cash and
cash equivalents 24,242,876 1,418,052 1,593,791
Cash and cash equivalents
at beginning of year 11,280,395 9,862,343 8,268,552
--------------- -------------- ----------------
Cash and cash equivalents
at end of year $ 35,523,271 $ 11,280,395 $ 9,862,343
=============== ============== ================
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Partnership's Business:
Balcor Equity Pension Investors-III A Real Estate Limited Partnership (the
"Partnership") is engaged principally in the operation of residential,
commercial and retail real estate located in various markets within the United
States.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold Westlake Meadows Apartments and
the Green Trails Apartments. In addition, the 1275 K Street, Westech 360, and
Perimeter 400 office buildings, in which the Partnership held minority joint
venture interests were also sold in 1996. A majority of the proceeds from the
sales of these properties was distributed to Tax-exempt Limited Partners in
1996 and January 1997. During 1997, the Partnership sold the Ammendale
Technology Park - Phase II office buildings. The Partnership currently has
contracts to sell the Arborland Consumer Mall and the Erindale Centre Shopping
Center. The Partnership is actively marketing the remaining two properties in
its portfolio. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees stemming from litigation involving the Partnership including,
but not limited to, the lawsuits discussed in Note 14 of Notes to the Financial
Statements. In the absence of any contingency, the reserves will be paid within
twelve months of the last property being sold. In the event a contingency
exists, reserves may be held by the Partnership for a longer period of time.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent 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 vary from those estimates.
(b) Depreciation expense is computed using the straight-line and accelerated
methods. Rates used in the determination of depreciation are based upon the
following estimated useful lives:
Buildings and improvements 20 to 31 years
Furniture and fixtures 4 to 5 years
<PAGE>
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
As properties are sold, the related costs and accumulated depreciation are
removed from the respective accounts. Any gain or loss on disposition is
recognized in accordance with generally accepted accounting principles.
Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121,
the Partnership records its investments in real estate at the lower of cost or
fair value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties based on the current sales price
less estimated closing costs. In the event the General Partner determines an
impairment in value has occurred, and the carrying amount of the real estate
asset will not be recovered, a provision is recorded to reduce the carrying
basis of the property to its estimated fair value. The General Partner
considers the method referred to above to result in a reasonable measurement
of a property's fair value, unless other factors affecting the property's value
indicate otherwise.
(c) Investment in joint ventures with affiliates represents the Partnership's
39.48%, 43.3% and 21.95% interests, under the equity method of accounting, in
three joint ventures with affiliated partnerships. Under the equity method of
accounting, the Partnership records its initial investment at cost and adjusts
its investment account for additional capital contributions, distributions and
its share of joint venture income or loss.
(d) Deferred expenses consist of leasing commissions which are amortized over
the life of each respective lease. Upon the sale of the property, the remaining
unamortized portion of the commissions will be written off.
(e) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases is recognized on a straight line
basis over the respective lease term. Service income includes reimbursements
for operating costs such as real estate taxes, maintenance and insurance and is
recognized as revenue in the period the applicable costs are incurred.
(f) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Statement No. 107 does not apply to all balance sheet items and
excludes certain financial instruments and all non-financial instruments such
as real estate and investment in joint ventures from its disclosure
requirements.
(g) Cash and cash equivalents include all unrestricted highly liquid
investments with an original maturity of three months or less. Cash is held or
invested in one financial institution.
(h) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
<PAGE>
4. Partnership Agreement:
The Partnership was organized in April 1985. The Partnership Agreement provides
for Balcor Equity Partners-III to be the General Partner and for the admission
of Limited Partners through the sale of up to 1,000,000 Limited Partnership
Interests at $250 per Interest, 683,204 of which were sold on or prior to
August 1, 1986, the termination date of the offering.
"Operating Income" of the Partnership is allocated 10% to the General Partner
and 90% to the Limited Partners; however, certain components are specially
allocated as described in the Partnership Agreement. "Operating Losses" and
certain other components are allocated 1% to the General Partner and 99% to the
Limited Partners pursuant to terms set forth in the Partnership Agreement.
The Partnership Agreement provides for different allocations of profits and
losses and Net Cash Receipts and Net Cash Proceeds distributions to Limited
Partners depending on whether the investor originally acquiring the Interest
was a taxable or tax-exempt entity.
"Net Cash Receipts" available for distribution are distributed as follows: 90%
to Limited Partners, 7.5% to the General Partner as its distributive share from
Partnership operations and an additional 2.5% to the General Partner for
allocation to the Repurchase Fund which was utilized to repurchase Interests
from Limited Partners pursuant to the terms set forth in the Partnership
Agreement.
At the sole discretion of the General Partner and subject to certain
limitations, amounts placed in the Repurchase Fund were available to be used to
repurchase Interests from existing Limited Partners. During 1996, the General
Partner used amounts placed in the Repurchase Fund to repurchase 7,554
Interests from Limited Partners at a cost of $992,928. In February 1997, the
Partnership discontinued the repurchase of Interests from Limited Partners. An
amount not to exceed the amount originally allocated to the Repurchase Fund
will be returned to the Partnership at liquidation, if necessary, to permit
payment to the Limited Partners of their "Original Capital" plus any deficiency
in their "Liquidation Preference" as defined in the Partnership Agreement.
Subject to the provisions of the Partnership Agreement, "Net Cash Proceeds"
which are available for distribution will be distributed only among the Limited
Partners until such time as the Limited Partners have received a return of
their "Original Capital" and their "Liquidation Preference"; thereafter, the
remaining "Net Cash Proceeds" will be distributed 90% to the Limited Partners
and 10% to the General Partner. Net Cash Proceeds will be distributed among
Taxable and Tax-exempt Limited Partners in accordance with the Partnership
Agreement. The General Partner's share of Net Cash Proceeds shall be returned
to the Partnership if necessary to permit payment to the Limited Partners of
any deficiency in the return of their Original Capital and Preferential
Cumulative Distributions.
5. Investment Property Writedown:
In 1996, the Partnership determined that an impairment to the asset value of
the Arborland Consumer Mall had occurred. During 1996, the property was written
down to its current sales price, less estimated closing costs, and a $3,777,000
provision for investment property writedown was recognized.
6. Management Agreements:
<PAGE>
As of December 31, 1996, all of the properties owned by the Partnership are
under management agreements with third-party management companies. These
management agreements provide for annual fees of 5% of gross operating receipts
for residential properties, and 3% to 6% of gross operating receipts for
commercial and retail properties.
7. Seller's Participation in Joint Venture:
The Arborland Consumer Mall is owned by a joint venture between the Partnership
and the seller. Consequently, the seller retains an interest in the property
through its interest in the joint venture. All assets, liabilities, income and
expenses of the joint venture are included in the financial statements of the
Partnership with the appropriate deduction from income or loss, if any, for the
seller's participation in the joint venture. The seller shares in the cash flow
of the property only after the Partnership receives a preferential
distribution. The Partnership made no distribution to the seller in 1996, 1995
or 1994.
8. Investment in Joint Ventures with Affiliates:
(a) In 1986, the Partnership and an affiliate acquired the 1275 K Street Office
Building. Profits and losses, all capital contributions and distributions were
allocated in accordance with the participants' original funding percentages.
The Partnership's sharing percentage was 39.48%. In December 1996, the joint
venture sold the property in an all cash sale for $28,300,000. From the
proceeds of the sale, the joint venture paid $911,470 in selling costs.
Pursuant to the terms of the sale, $2,287,500 of the sale proceeds will be
retained by the joint venture until September 1997. For financial statement
purposes, the joint venture recognized a loss of $5,028,903 from the sale of
this property, of which $1,924,848 is the Partnership's share. In addition,
during 1996, 1995 and 1994, the Partnership received distributions from this
joint venture totaling $11,236,549, $1,240,391 and $1,379,998, respectively.
(b) In 1988, the Partnership and an affiliate acquired the Westech 360 Office
Building. Profits and losses, all capital contributions and distributions were
allocated in accordance with the participants' original funding percentages.
The Partnership's sharing percentage was 43.30%. In December 1996, the joint
venture sold the property in an all cash sale for $18,330,000. From the
proceeds of the sale, the joint venture paid $477,653 in selling costs.
Pursuant to the terms of the sale, $1,395,000 of the sale proceeds will be
retained by the joint venture until September 1997. For financial statement
purposes, the joint venture recognized a gain of $9,904,922 from the sale of
this property, of which $4,288,415 is the Partnership's share. In addition,
during 1996, 1995, and 1994, the Partnership received distributions from this
joint venture totaling $7,560,143, $357,562, and $290,889, respectively.
(c) In 1990, the Partnership and three affiliates acquired the Perimeter 400
Office Center. Profits and losses, all capital contributions and distributions
were allocated in accordance with the participants' original funding
percentages. The Partnership's sharing percentage was 21.95%. In December
1996, the joint venture sold the property in an all cash sale for $40,700,000.
From the proceeds of the sale, the joint venture paid $882,765 in selling
costs. Pursuant to the terms of the sale, $1,750,000 of the sale proceeds will
be retained by the joint venture until September 1997. The joint venture
recognized a gain of $12,420,982 from the sale of this property, of which
$2,725,820 is the Partnership's share. During 1995, the Partnership recognized
<PAGE>
income of $145,968 as its share of the recovery related to the change in the
estimate of the fair value of the property. This amount was included in the
Partnership's participation in income of joint venture with affiliates. In
addition, during 1996, 1995, and 1994, the Partnership received distributions
from this joint venture totaling $8,712,461, $462,531, and $464,045,
respectively; and made contributions of $62,975, $17,347 and $26,096 in 1996,
1995 and 1994, respectively.
The following combined information has been summarized from the financial
statements of the joint ventures:
1996 1995 1994
---------- ---------- ----------
Net investment in real estate
as of December 31 None $67,113,953 $68,282,318
Total liabilities as of
December 31 $200,899 650,669 751,926
Total income 14,019,918 14,167,508 13,124,088
(Loss) income before net
gain on sales (6,559,548) 2,424,601 4,437,187
Net gain on sales 17,297,001 None None
Net income 10,737,453 2,424,601 4,437,187
9. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, differ from the tax
returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net income for 1996 in the financial statements is $7,789,574 greater than
the tax income for the same period.
10. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Property management fees None None None None $706,757 None
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $ 19,529 $ 14,768 $ 56,355 $ 4,277 77,188 $28,693
Data processing 5,553 2,236 48,537 2,297 79,700 23,037
Investment processing 8,340 None 46,869 8,340 16,063 1,290
Investor communica-
tions None None 9,607 None 12,740 7,211
Legal 10,885 8,231 23,554 1,908 18,725 10,009
Portfolio management 118,728 89,781 104,228 13,139 67,524 27,154
Other 5,554 4,200 7,597 12 27,922 5,579
<PAGE>
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program; however, the General Partner is reimbursed
for expenses. The Partnership paid premiums to the deductible insurance program
of $15,835, $63,162 and $89,149 in 1996, 1995 and 1994, respectively.
11. Property Sales:
(a) In June 1996, the Partnership sold the Westlake Meadows Apartments in an
all cash sale for $10,800,000. From the proceeds of the sale, the Partnership
paid $344,963 in selling costs. The basis of the property was $5,607,034 which
is net of accumulated depreciation of $2,884,709. For financial statement
purposes, the Partnership recognized a gain of $4,848,003 from the sale of this
property.
(b) In July 1996, the Partnership sold the Green Trails Apartments in an all
cash sale for $33,050,000. In addition, the buyer assumed a $415,682 liability
for accrued real estate taxes. From the proceeds of the sale, the Partnership
paid $857,567 in selling costs. The basis of the property was $22,847,278
which is net of accumulated depreciation of $3,240,631. For financial
statement purposes, the Partnership recognized a gain of $9,760,837 from the
sale of this property.
12. Rentals under Operating Leases:
The Partnership receives rental income from the leasing of office and retail
space under operating leases. The minimum future rentals (excluding amounts
representing executory costs such as taxes, maintenance and insurance) to be
received by the Partnership for Arborland Consumer Mall, Bingham Farms Office
Plaza-Phase IV, and the Erindale Centre shopping center based on operating
leases held at December 31, 1996 are approximately as follows:
1997 $ 5,325,000
1998 4,254,000
1999 2,017,000
2000 1,539,000
2001 1,164,000
Thereafter 2,421,000
-----------
$16,720,000
===========
These rentals include amounts relating to land leases which the Partnership
entered into with certain tenants of the shopping center.
Minimum rentals do not include amounts which may be received from certain
tenants based upon a percentage of their gross sales in excess of stipulated
minimums. Percentage rentals were not significant during 1996, 1995 and 1994.
The Partnership is subject to the usual business risks regarding the collection
of these rentals.
Approximately 12% of the space at the Erindale Centre shopping center is leased
to Kacey Fine Furniture. Of the Partnership's total rental income recognized
<PAGE>
during 1996, approximately 1% related to Kacey Fine Furniture. Kacey Fine
Furniture's lease runs through August 2000.
Approximately 19%, 10%, 21%, and 16% of the space at the Arborland Consumer
Mall is leased to Burlington Coat Factory, Marshall's, Service Merchandise, and
Toys R Us, respectively. Of the Partnership's total rental income recognized
during 1996, approximately 2% relates to each of Burlington Coat Factory,
Marshall's, Service Merchandise, and Toys R Us. Burlington Coat Factory's lease
runs through July 1998, Marshall's lease runs through January 1999, Service
Merchandise's lease runs through February 1999, and Toys R Us's lease runs
through January 2004.
Approximately 87% of the space at the Bingham Farms Office Plaza - Phase IV is
leased to Frontier Communications. Of the Partnership's total rental income
recognized during 1996, approximately 19% relates to Frontier Communications.
Frontier Communications's lease runs through July 1998.
13. Fair Value of Financial Investments:
At December 31, 1996 and 1995, the carrying value of cash and cash equivalents,
accounts and accrued interest receivable, and accounts payable approximates the
fair value.
14. Contingencies:
(a) The Partnership is currently involved in a lawsuit whereby the Partnership,
the General Partner and certain third parties have been named as defendants
seeking damages relating to tender offers to purchase interests in the
Partnership and nine affiliated partnerships initiated by the third party
defendants in 1996. The defendants continue to vigorously contest this action.
The action has been dismissed with prejudice and plaintiffs have filed an
appeal. It is not determinable at this time whether or not an unfavorable
decision in this action would have a material adverse impact on the financial
position, operations, and liquidity of the Partnership. The Partnership
believes it has meritorious defenses to contest the claims.
(b) The Partnership is currently involved in a lawsuit whereby the Partnership
and certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning, as well as the marketing efforts related
to, the offering of the Limited Partnership Interests of the Partnership. The
defendants continue to vigorously contest this action. A plaintiff class has
not yet been certified, and no determination of the merits have been made. It
is not determinable at this time whether or not an unfavorable decision in this
action would have a material adverse impact on the financial position,
operations, and liquidity of the Partnership. The Partnership believes it has
meritorious defenses to contest the claims.
15. Subsequent Events:
(a) In January 1997, the Partnership paid $26,451,647 to Limited Partners
representing the regular quarterly distribution of available Net Cash Receipts
of $2.80 per Taxable Interest and $3.72 per Tax-exempt Interest for the fourth
quarter of 1996, and a special distribution of $37.78 per Tax-exempt Interest
from Net Cash Proceeds from the sales of the three properties in which the
Partnership held minority joint venture interests.
<PAGE>
(b) In February 1997, the Partnership sold the Ammendale Technology Park -
Phase II office building in an all cash sale for $5,768,000. From the proceeds
of the sale, the Partnership paid $289,417 in selling costs. For financial
statement purposes, the Partnership will recognize a gain of approximately
$800,000 from the sale of this property during the first quarter of 1997.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
<CAPTION>
Col. A Col. B Col. C Col. D
- --------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ---------------------------------
Buildings Carrying Reduction
Encum- and Im- Improve- Costs of Basis
Description brances Land provements ments (a) (b)
- --------------------- ------- -------- ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ammendale Technology
Park-Phase II, three
109,000 sq. ft. one-
story ofc. bldgs. in
Prince George's County, MD None $4,642,744 $2,416,214 $ 597,673 $177,650 $(2,700,000)
Arborland Consumer Mall,
348,000-sq. ft. mall
in Ann Arbor, MI None 2,400,000 18,344,680 375,059 85,161 (3,777,000)
Belmont Apts., 202-
units in Renton, WA None 1,011,730 7,672,086 None 12,317
Bingham Farms Office
Plaza-Phase IV, 4-
story 145,000-sq.
ft. office bldg. in
Bingham Farms, MI None 1,000,000 17,180,850 1,112,040 15,047 (3,400,000)
Erindale Centre,
167,000-sq. ft.
shpg. cntr. in
Colorado Springs, CO None 2,630,000 14,710,425 280,901 86,273 (7,200,000)
----------- ----------- ---------- -------- ------------
Total $11,684,474 $60,324,255 $2,365,673 $376,448 $(17,077,000)
=========== =========== ========== ======== ============
</TABLE>
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
- ------------------- -------------------------------- -------- -------- ------ --------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (c)(d) tion(d) struction uired is Computed
- ---------------------- --------- ----------- --------- ---------- --------- ----- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ammendale Technology
Park-Phase II, three
one-story ofc. bldgs.
containing 109,000
sq. ft. in Prince
George's County, MD(j)$2,991,777 $ 2,142,504 $ 5,134,281 $ 407,322 (e) 10/91(f) (g)
Arborland Consumer Mall,
348,000-sq. ft. mall
in Ann Arbor, MI 1,594,948 15,832,954 17,427,902 10,035,486 (h) 5/86 (g)
Belmont Apts., 202-
units in Renton, WA 1,013,169 7,682,963 8,696,132 3,275,843 1986 7/86 (g)
Bingham Farms Office
Plaza-Phase IV, 4-
story 145,000-sq.
ft. office bldg. in
Bingham Farms, MI 820,628 15,087,309 15,907,937 6,390,646 1982 1/86 (g)
Erindale Centre,
167,000-sq. ft.
shpg. cntr. in
Colorado Springs, CO 1,567,300 8,940,298 10,507,598 5,491,561 (i) 9/86 (g)
----------- ----------- ----------- -----------
Total $7,987,822 $49,686,028 $57,673,850 $25,600,858
=========== =========== =========== ===========
</TABLE>
<PAGE>
BALCOR EQUITY PENSION INVESTORS-III
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of legal fees, appraisal fees, title costs and other related
professional fees.
(b) Represents a reduction of basis due to a permanent impairment of the asset
value.
(c) The aggregate cost of land for Federal income tax purposes is $11,825,877
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $64,773,752. The total of these is $76,599,629.
(d) Reconciliation of Real Estate
-------------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $95,671,463 $95,265,657 $95,103,194
Additions during the year:
Improvements 359,039 405,806 162,463
Reductions during the year:
Cost of real estate sold (34,579,652) None None
Provision for investment
property writedown (3,777,000)
----------- ----------- -----------
Balance at end of year $57,673,850 $95,671,463 $95,265,657
=========== =========== ===========
Reconciliation of Accumulated Depreciation
------------------------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $29,238,934 $26,259,390 $23,287,761
Depreciation expense for
the year 2,487,264 2,979,544 2,971,629
Accumulated depreciation of
real estate sold (6,125,340) None None
----------- ----------- -----------
Balance at end of year $25,600,858 $29,238,934 $26,259,390
=========== =========== ===========
(e) The office buildings were completed in phases in 1985 and 1987.
(f) This property was acquired through foreclosure.
(g) Depreciation expense is computed based upon the following estimated useful
lives:
<PAGE>
Buildings and improvements 20 to 31 years
Furniture and fixtures 4 to 5 years
Depreciation expense for tenant improvements is computed using a straight-line
method over the term of the lease.
(h) This consumer mall was completed in 1960 and enclosed in 1973.
(i) This shopping center was completed in phases in 1983 and 1985.
(j) In February 1997, this property was sold. See Note 15 of Notes to
Financial Statements for additional information.
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 18th
day of March, 1997, by and between CROSSTOWN ASSET CORP. I, a Delaware
corporation ("Purchaser"), and ARBORLAND ASSOCIATES LIMITED PARTNERSHIP, a
Michigan limited partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of Seven Million Seven Hundred Fifty Thousand and No/100 Dollars
($7,750,000) (the "Purchase Price"), the following property commonly known as
Arborland Consumer Mall, Ann Arbor, Michigan (collectively, the "Property"):
1.1. The land located in Washtenaw County, Michigan, and legally described
on Exhibit A attached hereto, together with all easements, appurtenances and
hereditaments thereto (the "Land") together with all buildings, structures,
fixtures and improvements located thereon (the "Improvements"). The Land and
Improvements are collectively referred to herein as the "Real Property";
1.2. The items of personal property set forth on Exhibit B attached hereto
(the "Personal Property");
1.3. The tenant leases with respect to the Property listed on the rent
roll attached hereto as Exhibit M (the "Leases");
1.4. All licenses and permits relating to the Real Property or the
Personal Property, including all certificates of occupancy and other permits,
licenses or approvals issued under applicable law set forth on Exhibit P (the
"Permits");
1.5. The service contracts and agreements listed on Exhibit H (the
"Contracts");
1.6. All warranties and guaranties given to, assigned to or benefiting the
Seller, the Real Property or the Personal Property, to the extent assignable
without cost to Seller (the "Warranties"); and
1.7. All records (exclusive of computer software) of Seller relating to
the operation and physical condition of the Property to the extent in Seller's
possession, including (a) all records regarding real estate taxes and
assessments, insurance, maintenance, repairs, capital improvements and
services, (b) all environmental, soil and engineering reports and studies,
including all drafts and letters and other documents which describe or limit
the scope of such tests, reports or studies), (c) all originals and copies of
surveys, blueprints, plans and specifications regarding the Real Property and
the Personal Property, and (d) equipment manuals, excluding all appraisals,
internal memoranda to Seller's asset management committee and all software
(collectively, the "Records").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Within two (2) business days of the execution of this Agreement, the
sum of Seventy-Seven Thousand Five Hundred and No/100 Dollars ($77,500) (the
"Earnest Money") to be held in escrow by and in accordance with the provisions
of the Escrow Agreement ("Escrow Agreements") attached hereto as Exhibit C;
<PAGE>
2.2. On or before the expiration of the "Inspection Period" (as
hereinafter defined), Purchaser shall deposit an additional Sixty-Two Thousand
and No/100 Dollars ($62,000) to be held by and in accordance with the
provisions of the Escrow Agreement (the "Additional Earnest Money", which, to
the extent deposited, shall be included within the definition of "Earnest
Money"); and
2.3. On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 11:00 a.m. Chicago time.
3. TITLE REVIEW.
3.1. Title Evidence. As soon as reasonably practical following the mutual
execution and delivery of this Agreement, Seller shall furnish the following
title evidence to Purchaser ("Title Evidence"):
3.1.1. A commitment to insure title to the Real Property (the
"Commitment") issued by Near North National Title Corporation as agent for
First American Title Insurance Company (the "Title Insurer"). The commitment
shall (a) be issued on ALTA Owner's Form B-1970 (revised 10-17-70) in an amount
equal to the Purchase Price, (b) show Seller as owner of the Real Property, (c)
commit to delete all of the so-called "standard exceptions" to coverage, and
(d) include legible copies of all documents, instruments and matters shown as
exceptions or referenced therein.
3.1.2. A current survey of the Property (the "Survey"), prepared
and certified by a registered land surveyor licensed in the jurisdiction in
which the Real Property is located reasonably satisfactory to Purchaser. The
Survey shall (a) conform to the "Minimum Standard Detail Requirement for Land
Title Surveys" as adopted in 1992 by the American Land Title Association and
the American Congress on Surveying & Mapping, and (b) contain a certification
to Purchaser, Title Insurer and any other party designated by Purchaser
substantially in the form attached hereto as Exhibit D, to the extent possible.
The Title Evidence shall be deemed received by Purchaser for purposes of
Section 3.2 only when a Commitment and Survey conforming to the foregoing
requirements have been received by Purchaser.
3.2. Purchaser's Objections and Requirements. Purchaser shall be allowed
until the later to occur of (i) the end of the Inspection Period, or (ii) ten
(10) business days after receipt of the last of the Title Evidence, for
examination thereof and making any objections to the form and/or content of the
same. Any objections not made within said period shall be deemed to be waived
by Purchaser and shall be "Permitted Exceptions". Purchaser's objections may
include additional requirements with regard to the Title Evidence based upon
its initial review of the same, including requiring (a) satisfaction of Title
Insurer's requirements as set forth in the Commitment, (b) deletion of all the
so-called "standard exceptions" to coverage, and (c) affirmative insurance of
any easements appurtenant to the Real Property.
3.3. Correction of Title. Seller shall have the right, but not the
obligation to cure any objections made by Purchaser pursuant to Section 3.2.
Seller shall provide Purchaser with notice within five (5) business days of
Purchaser's objection stating whether Seller intends to cure any objection. If
Seller elects to cure any objection, Seller shall be allowed thirty (30) days
after the making of Purchaser's objections to cure the same and shall
<PAGE>
diligently proceed and use all reasonable efforts to do so. Pending such cure,
the Closing shall be postponed to the extent necessary to accommodate such time
period; provided however, Seller shall not be allowed any additional time
beyond the originally scheduled Closing Date to discharge or satisfy any
mortgage, judgment or other monetary lien set forth on the original Commitment.
Upon such cure, the Closing (hereinafter defined) shall be held on the later of
(a) the Closing Date and (b) the first business day occurring five (5) days
after the date such cure is completed. If Seller elects not to cure any
objection or if such cure is not completed within said thirty (30) day period,
Purchaser shall have the option to do any of the following:
3.3.1. Terminate this Agreement.
3.3.2. Withhold from the Purchase Price an amount which in the
reasonable judgement of Title Insurer is sufficient to discharge at Closing any
mortgage, judgment or other monetary lien objected to by Purchaser only in the
event such lien appears on the original Commitment. Any amount so withheld
shall be placed in escrow with Title Insurer pending cure and satisfaction. If
Seller has not discharged such mortgage, judgment or other monetary lien within
thirty (30) days after Closing, Purchaser may then proceed in its discretion to
do so and charge the reasonable costs of cure (including reasonable attorneys'
fees) against the amount so escrowed; or
3.3.3. Waive one or more of its objections and proceed to Closing
and such exceptions to title which are waived by Purchaser shall be deemed
additional "Permitted Exceptions" and Purchaser shall have no right to deduct
any amount against the Purchase Price except in connection with Paragraph
3.3.2.
3.4. Cost of Title Evidence and Title Policy. In the event that the
Closing occurs, Purchaser agrees to reimburse Seller for one-half of the cost
of obtaining the Title Evidence. Seller and Purchaser each agree to pay
one-half of the costs of the Title Policy (as hereinafter defined) and
Purchaser shall pay for all of the costs of any endorsements to, or extended
coverage on, the Title Policy.
3.5. Date Downs to Title. If, prior to Closing but after the end of the
Inspection Period, a date-down to the Commitment discloses any new exception
which is not a Permitted Exception ("Unpermitted Exception"), Seller shall
provide Purchaser with notice within five (5) business days of notice by
Purchaser to Seller of the existence of such Unpermitted Exception stating
whether Seller intends to cure any objection. If Seller elects to cure any
objection, Seller shall have thirty (30) days from the date of receipt by
Seller of such notice, at Seller's expense, to (i) cure and/or, subject to
Purchaser's reasonable approval, have any Unpermitted Exceptions which, in the
aggregate, do not exceed $25,000.00, removed from the Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions, or (ii) have the right, but not the obligation, to
cure and/or, subject to Purchaser's reasonable approval, have any Unpermitted
Exceptions which, in the aggregate, equal or exceed $25,000.00, removed from
the Commitment or to have the Title Insurer commit to insure against loss or
damage that may be occasioned by such Unpermitted Exceptions. In such event,
the time of Closing shall be delayed, if necessary, to give effect to said
aforementioned time periods. If Seller fails to cure or have said Unpermitted
Exception removed or have the Title Insurer commit to insure as specified above
within said thirty (30) day period or if Seller elects not to exercise its
rights under (ii) in the preceding sentence, Purchaser may terminate this
<PAGE>
Agreement upon notice to Seller within five (5) days after the expiration of
said thirty (30) day period. Absent notice from Purchaser to Seller in
accordance with the preceding sentence, Purchaser shall be deemed to have
elected to take title subject to said Unpermitted Exception. If Purchaser
terminates this Agreement in accordance with the terms of this Paragraph 3.5,
this Agreement shall become null and void without further action of the parties
and all Earnest Money theretofore deposited into the escrow by Purchaser
together with any interest accrued thereon, shall be returned to Purchaser, and
neither party shall have any further liability to the other, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7.
4. PAYMENT OF CLOSING COSTS. Purchaser and Seller shall each pay for
one-half of the costs of the documentary or transfer stamps to be paid with
reference to the "Deed" (hereinafter defined) and all other stamps, intangible,
transfer, documentary, recording, sales tax and surtax imposed by law with
reference to any other sale documents delivered in connection with the sale of
the Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction.
5. CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE. The obligations of
Purchaser under this Agreement are contingent upon each of the following:
5.1. Estoppel Certificates. The following terms have been defined as
follows for convenience of reference:
5.1.1. "Tenant Certificate" means a certificate, commonly known as
an estoppel certificate, signed by a tenant with respect to its Lease, either
in the form set forth on Exhibit L hereto or on such other form as is
substantially consistent with the requirements of the tenant's lease for such
certificates.
5.1.2. "Seller Tenant Certificate" means a Tenant Certificate
signed by the Seller with respect to a particular Lease for which the Tenant in
question has failed to execute and deliver a Tenant Certificate, in which case
the Seller Tenant Certificate shall be in the form of Exhibit L, provided that
a Seller Tenant Certificate shall in all cases be limited to Seller's knowledge
as defined in Paragraph 16.1 above.
5.1.3. "Qualification" means any assertion in a Tenant Certificate
or Seller Tenant Certificate (whether in the form of Exhibit L or otherwise) of
(i) a claim, counterclaim, offset or defense against the landlord, (ii) a
default on the part of the landlord, (iii) unpaid credits, allowances or other
sums due from the landlord prior to the date of the estoppel (other than
disclosed on Exhibit M or Exhibit N attached hereto), (iv) an unfulfilled
construction or other obligation on the part of the landlord prior to the date
of estoppel (other than disclosed on Exhibit M or Exhibit N attached hereto),
(v) information which is contrary (in an adverse respect to the landlord) (x)
to the information contained in the rent roll attached hereto as Exhibit M, or
(y) to the information pertaining to tenant allowances and concessions and
leasing commissions contained on Exhibit N or (vi) the existence of any of the
following which are not set forth in the Lease: rights of tenant to terminate
the Lease, rights of tenant to purchase any part of the Property, rights of
tenant to expand the leased premises or renew the term of the Lease, or rights
of tenants to exclusives;
<PAGE>
5.1.4. "Unacceptable Qualification" means any Qualification other
than the following:
(a) a Qualification which is expressly disclosed on the rent roll
attached hereto as Exhibit M or the schedule attached hereto as Exhibit N or a
Qualification relating to non-payment of March, 1997 or April, 1997 rent,
provided the same is not as a result of a default by Seller; or
(b) a Qualification expressly disclosed on the other Exhibits
attached hereto and made a part hereof.
5.1.5. If a Qualification is not an Unacceptable Qualification, it
shall not affect Purchaser's obligations to close hereunder or give rise to any
liability from Seller to Purchaser.
5.1.6. Seller shall promptly upon execution of this Agreement
request a Tenant Certificate in the form of Exhibit L from all tenants, and
shall in good faith pursue the collection of the same. Seller shall deliver to
Purchaser, upon Seller's receipt thereof, all Tenant Certificates signed by
tenants (whether in the form of Exhibit L or otherwise).
5.1.7. It shall be a condition to Purchaser's obligations
hereunder (the "Estoppel Condition") that Purchaser shall have received
estoppel certificates as required pursuant to Paragraph 17. Notwithstanding
the foregoing to the contrary, Seller shall not have satisfied the Estoppel
Condition if any of the Tenant Certificates received by Seller or Seller Tenant
Certificates disclose Unacceptable Qualifications other than Unacceptable
Qualifications that can be cured by the payment of money or for which Purchaser
can be compensated as set forth below and with an "Estoppel Qualification Sum"
(hereinafter defined) of less than $100,000 per tenant and $250,000 in the
aggregate. The "Estoppel Qualification Sum" shall mean the following:
(i) if the claim asserted arises out of a defect which can be cured,
with the expenditure of money on a one time basis, such as a physical defect,
then such sum shall be calculated by a reasonable estimate of the cost to
repair or remediate said defect; and
(ii) if the claim asserted affects a continuing obligation of a
tenant under the lease, such as the payment of rent, then the claim shall be
calculated by (i) determining the amount of the claim on a per annum basis,
(ii) multiplying said amount by the number of years or partial years said claim
would affect the monetary obligations under the lease and (iii) discounting
said product on a present value basis using a discount rate of 10% per annum.
If the Unacceptable Qualifications have an Estoppel Qualification Sum of
less than $100,000 per tenant and $250,000 in the aggregate, then Seller shall
either (i) grant Purchaser a credit at Closing for an amount equal to the
Estoppel Qualification Sum, or (ii) cure all conditions giving rise to an
Unacceptable Qualification on or before the Closing. The determination to
perform the covenant contained in subparagraphs (i) or (ii) in the preceding
sentence shall be made by Seller in its sole discretion. Provided Seller
performs its covenant in this Paragraph 5.1.7, the disclosure of Unacceptable
Qualifications having an Estoppel Qualification Sum of less than $100,000 per
tenant and $250,000 in the aggregate shall not affect Purchaser's obligations
to close hereunder or give rise to any additional liability from Seller to
Purchaser.
<PAGE>
5.1.8. If Seller delivers any Seller Tenant Certificates, then
upon receipt after Closing by Purchaser of a Tenant Certificate from a tenant
under a Lease for whom Seller has executed and delivered a Seller Tenant
Certificate at Closing, the Seller Tenant Certificate executed and delivered by
Seller at Closing shall become null and void and the Tenant Certificate
received from the tenant shall be substituted therefor, solely to the extent
that the information contained in the Tenant Certificate is the same as the
information set forth in the Seller Tenant Certificate. Seller's liability
under Seller Tenant Certificates shall be limited pursuant to Paragraph 18
herein.
5.2. Title Policy. On the Closing Date, Title Insurer shall be
irrevocably committed to issue to Purchaser the title policy pursuant to the
Commitment with respect to the Real Property and any appurtenant easements
designated by Purchaser pursuant to Section 3.2, subject only to the Permitted
Exceptions (the "Title Policy").
5.3. Seller's Representations and Warranties. On the Closing Date, each
of the representations and warranties of Seller in Section 16 shall be true and
correct in all material respects as if the same were made on the Closing Date;
provided, however, that if the status of any of the tenancies changes from the
date of the rent roll attached hereto as Exhibit M and the date of the rent
roll delivered at Closing, provided the change in status is not caused by a
breach by Seller of its obligations under any Lease, then Purchaser shall not
have the right to terminate this Agreement or make any claim for a breach of a
representation or warranty hereunder involving the rent roll or tenancies
thereunder.
5.4. No Material Adverse Charge. On the Closing Date, there shall not
have been any "Material Adverse Change" (as hereinafter defined) with respect
to the Property. For the purposes of this Paragraph 5.4, "Material Adverse
Change" shall mean solely that after the date hereof, any tenant or tenants
leasing in the aggregate in excess of 50,000 square feet of the Property become
entitled to terminate their lease.
5.5. Seller's Obligations. On the Closing Date, Seller shall have
performed all of the obligations required to be performed by Seller under this
Agreement as and when required under this Agreement.
If any conditions in this Paragraph 5 have not been satisfied on or before
the Closing Date, then Purchaser may terminate this Agreement by notice to
Seller on or before the Closing Date. To the extent that any of the conditions
in this Paragraph 5 require satisfaction of Purchaser, such satisfaction shall
be determined by Purchaser in its reasonable discretion. The conditions in
this Paragraph 5 are specifically stated and for the sole benefit of Purchaser.
Purchaser in its discretion may unilaterally waive (conditionally or
absolutely) the fulfillment of any one or more of the conditions, or any part
thereof, by notice to Seller, without any offset against the Purchase Price or
claim against Seller. Seller shall not take or authorize, directly or
indirectly, any action that modifies or changes the circumstances upon which
the conditions set forth in this Paragraph 5 were deemed satisfied or waived by
Purchaser without Purchaser's consent.
<PAGE>
6. DAMAGE AND CASUALTY; CONDEMNATION.
6.1. Damage and Casualty. Except as provided in the indemnity provisions
contained in Paragraph 7.1 of this Agreement, Seller shall bear all risk of
loss with respect to the Property up to the Closing Date. Notwithstanding the
foregoing, in the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as determined by Seller and Purchaser in good faith) Purchaser
shall not have the right to terminate its obligations under this Agreement by
reason thereof, unless otherwise specifically set forth herein, but Seller
shall have the right to elect to either repair and restore the Property (in
which case the Closing Date shall be extended until completion of such
restoration) or to assign and transfer to Purchaser on the Closing Date all of
Seller's right, title and interest in and to all insurance proceeds paid or
payable to Seller on account of such fire or casualty and in addition, Seller
shall pay to Purchaser the amount of any deductible maintained by Seller under
any insurance policy covering such fire or casualty. Seller shall promptly
notify Purchaser in writing of any such fire or other casualty and Seller's
determination of the cost to repair the damage caused thereby. In the event of
damage to the Property by fire or other casualty prior to the Closing Date,
repair of which would cost in excess of $100,000.00 (as determined by Seller
and Purchaser in good faith), then this Agreement may be terminated at the
option of Purchaser, which option shall be exercised, if at all, by Purchaser's
written notice thereof to Seller within fifteen (15) business days after
Purchaser receives written notice of such fire or other casualty (which notice
shall specifically call Purchaser's attention to this Paragraph 6.1 and state
that Purchaser has fifteen (15) business days to respond), and upon the
exercise of such option by Purchaser this Agreement shall become null and void,
the Earnest Money deposited by Purchaser shall be returned to Purchaser
together with interest thereon, and neither party shall have any further
liability or obligations hereunder. In the event that Purchaser does not
exercise the option set forth in the preceding sentence, the Closing shall take
place on the Closing Date and Seller shall assign and transfer to Purchaser on
the Closing Date all of Seller's right, title and interest in and to all
insurance proceeds paid or payable to Seller on account of the fire or casualty
and in addition, Seller shall pay to Purchaser the amount of any deductible
maintained by Seller under any insurance policy covered by such fire or
casualty. Seller represents, warrants and covenants that it will maintain
property damage insurance insuring the Property for its full replacement cost
during the executory period of this Agreement.
6.2. Condemnation. If between the date of this Agreement and the Closing
Date, any condemnation or eminent domain proceedings are initiated which might
result in the taking of any part of the Property or the taking or closing of
any right of access to the Property, Seller shall immediately notify Purchaser
of such occurrence, which notice shall specifically call Purchaser's attention
to this Paragraph 6.2 and state that Purchaser has fifteen (15) business days
to respond. In the event that the taking of any part of the Property shall:
(i) materially impair access to or parking on the Property; (ii) cause any
material non-compliance with any applicable law, ordinance, rule or regulation
of any federal, state or local authority or governmental agencies having
jurisdiction over the Property or any portion thereof; or (iii) materially and
adversely impair the use of the Property as it is currently being operated
(hereinafter referred to as a "Material Event"), Purchaser may:
<PAGE>
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease;
or
6.2.2. proceed with the Closing, in which event Seller shall assign
to Purchaser all of Seller's right, title and interest in and to any award made
in connection with such condemnation or eminent domain proceedings.
Purchaser shall notify Seller, within fifteen (15) business days after
Purchaser's receipt of Seller's notice, whether Purchaser elects to exercise
its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be delayed,
if necessary, until Purchaser makes such election. If Purchaser fails to make
an election within such fifteen (15) business day period, Purchaser shall be
deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. Inspection Period. During the period commencing on January 22, 1997
and ending at 5:00 p.m. Chicago time on April 8th, 1997 (said period being
herein referred to as the "Inspection Period"), Purchaser and the agents,
engineers, employees, contractors and surveyors retained by Purchaser may enter
upon the Property, at any reasonable time and upon reasonable prior notice to
Seller, to inspect the Property, and to conduct and prepare such studies, tests
and surveys as Purchaser may deem reasonably necessary and appropriate. In
connection with Purchaser's review of the Property, Seller has delivered to
Purchaser complete and accurate copies of the following: the Leases, the
Contracts, the Permits in Seller's possession, the Warranties in Seller's
possession, the Records in Seller's possession, the current rent roll for the
Property, the most recent tax and insurance bills, utility account numbers, and
year end 1995 and year end 1996 operating statements, and plans and
specifications for the Improvements in Seller's possession.
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Property to the condition existing
prior to the performance of such tests or investigations by or on behalf of
Purchaser. Purchaser shall defend, indemnify and hold Seller and any
affiliate, parent of Seller, and all shareholders, employees, officers and
directors of Seller or Seller's affiliate or parent (hereinafter collectively
referred to as "Affiliates of Seller") harmless from any and all liability,
cost and expense (including without limitation, reasonable attorney's fees,
court costs and costs of appeal) suffered or incurred by Seller or Affiliates
of Seller for injury to persons or property caused by Purchaser's
investigations and inspection of the Property. Purchaser shall undertake its
obligation to defend set forth in the preceding sentence using attorneys
selected by Purchaser and reasonably acceptable to Purchaser.
<PAGE>
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph
7.1, Purchaser shall have the right to terminate this Agreement by giving
written notice of such termination to Seller at any time prior to the
expiration of the Inspection Period. If written notice is not received by
Seller pursuant to this Paragraph 7.1 prior to the expiration of the Inspection
Period, then the right of Purchaser to terminate this Agreement pursuant to
this Paragraph 7.1 shall be waived. If Purchaser terminates this Agreement by
written notice to Seller prior to the expiration of the Inspection Period: (i)
Purchaser shall promptly deliver to Seller copies of all studies, reports and
other investigations obtained by Purchaser in connection with its due diligence
during the Inspection Period; and (ii) the Earnest Money deposited by Purchaser
shall be immediately paid to Purchaser, together with any interest earned
thereon, and neither Purchaser nor Seller shall have any right, obligation or
liability under this Agreement, except for Purchaser's obligation to indemnify
Seller and restore the Property, as more fully set forth in this Paragraph 7.1.
Notwithstanding anything contained herein to the contrary, the terms of this
Paragraph 7.1, shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
7.2. As-Is. Purchaser acknowledges and agrees that it will be purchasing
the Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that except as
otherwise specifically set forth in this Agreement, Purchaser will be
purchasing the Property and the Personal Property "AS IS" and "WITH ALL
FAULTS", based upon the condition of the Property and the Personal Property as
of the date of this Agreement, wear and tear and loss by fire or other casualty
or condemnation excepted. Without limiting the foregoing, Purchaser
acknowledges that, except as may otherwise be specifically set forth elsewhere
in this Agreement, neither Seller nor its consultants, brokers or agents have
made any representations or warranties of any kind upon which Purchaser is
relying as to any matters concerning the Property or the Personal Property,
including, but not limited to, the Land or the Improvements, the existence or
non-existence of Hazardous Materials (as hereinafter defined), economic
projections or market studies concerning the Property, any development rights,
taxes, bonds, covenants, conditions and restrictions affecting the Property,
water or water rights, topography, drainage, soil, subsoil of the Property, the
utilities serving the Property or any zoning or building laws, rules or
regulations or "Environmental Laws" (hereinafter defined) affecting the
Property. Except as specifically set forth herein, Seller makes no
representation or warranty that the Property complies with Title III of the
Americans with Disabilities Act or any fire code or building code. Purchaser
hereby releases Seller and the Affiliates of Seller from any and all liability
in connection with any claims which Purchaser may have against Seller or the
Affiliates of Seller relating directly or indirectly to the existence of
asbestos or Hazardous Materials on, or environmental conditions of, the
Property, whether known or unknown; provided, however, that Purchaser may
assert claims for contribution or cost recovery against Seller or the
Affiliates of Seller, relating directly or indirectly to the existence of
asbestos or Hazardous Materials on, or environmental conditions of, the
Property, whether known or unknown, only in the event that Purchaser is sued by
<PAGE>
a third party in connection therewith. As used herein, "Environmental Laws"
means all federal, state and local statutes, codes, regulations, rules,
ordinances, orders, standards, permits, licenses, policies and requirements
(including consent decrees, judicial decisions and administrative orders)
relating to the protection, preservation, remediation or conservation of the
environment or worker health or safety, all as amended or reauthorized, or as
hereafter amended or reauthorized, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq., the Emergency
Planning and Community Right-to-Know Act ("Right-to-Know Act"), 42 U.S.C.
Section 11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. Section 7401
et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33 U.S.C.
Section 1251 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
Section 2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water Act"),
42 U.S.C. Section 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C.
Section 2011 et seq., the Occupational Safety and Health Act ("OSHA"),
29 U.S.C. Section 651 et seq., and the Hazardous Materials Transportation Act
(the "Transportation Act"), 49 U.S.C. Section 1802 et seq. As used herein,
"Hazardous Materials" means: (1) "hazardous substances," as defined by CERCLA;
(2) "hazardous wastes," as defined by RCRA; (3) any radioactive material
including, without limitation, any source, special nuclear or by-product
material, as defined by AEA; (4) asbestos in any form or condition; (5)
polychlorinated biphenyls; and (6) any other material, substance or waste to
which liability or standards of conduct may be imposed under any Environmental
Laws. Notwithstanding anything contained herein to the contrary, the terms of
this Paragraph 7.2 shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Except as expressly set forth herein,
Seller makes no representation or warranty that such material is complete or
accurate or that Purchaser will achieve similar financial or other results with
respect to the operations of the Property, it being acknowledged by Purchaser
that Seller's operation of the Property and allocations of revenues or expenses
may be vastly different than Purchaser may be able to attain. Purchaser
acknowledges that it is a sophisticated and experienced purchaser of real
estate and further that Purchaser has relied upon its own investigation and
inquiry with respect to the operation of the Property and releases Seller and
the Affiliates of Seller from any liability with respect to such historical
information. Notwithstanding anything contained herein to the contrary, the
terms of this Paragraph 7.3 shall survive the Closing and the delivery of the
Deed and termination of this Agreement.
<PAGE>
7.4. Seller has provided to Purchaser the following existing report: Phase
I Environmental Site Assessment Report, dated August 17, 1995 ("Existing
Report"). Seller makes no representation or warranty concerning the accuracy
or completeness of the Existing Report, except as expressly set forth herein.
Purchaser hereby releases Seller and the Affiliates of Seller from any
liability whatsoever with respect to the Existing Report, or, including,
without limitation, the matters set forth in the Existing Report, and the
accuracy and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report. Notwithstanding anything contained herein to the
contrary, the terms of this Paragraph 7.4 shall survive the Closing and the
delivery of the Deed and termination of this Agreement.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
April 30, 1997 (the "Closing Date"), at the office of Seller's attorney,
Chicago, Illinois at which time Seller shall deliver possession of the Property
to Purchaser. This transaction shall be closed through an escrow with Title
Insurer, in accordance with the general provisions of the usual and customary
form of deed and money escrow for similar transactions in Michigan, or at the
option of either party, the Closing shall be a "New York style" closing at
which the Purchaser shall wire the Purchase Price to Title Insurer on the
Closing Date and prior to the release of the Purchase Price to Seller,
Purchaser shall receive the Title Policy or marked up commitment dated the date
of the Closing Date. In the event of a New York style closing, Seller shall
deliver to Title Insurer any customary affidavit in connection with a New York
style closing. All closing and escrow fees shall be divided equally between
the parties hereto.
9. CLOSING DOCUMENTS.
9.1. Closing Statement. On or prior to the Closing Date, Seller and
Purchaser shall execute and deliver to one another a joint closing statement.
In addition, Purchaser shall deliver to Seller the balance of the Purchase
Price, an assumption of the documents set forth in Paragraph 9.2.3 and 9.2.4
and such other documents as may be reasonably required by the Title Insurer in
order to consummate the transaction as set forth in this Agreement.
9.2. Seller's Deliveries. On the Closing Date, Seller shall deliver to
Purchaser the following:
9.2.1. the special warranty deed (the "Deed") (in the form of
Exhibit E attached hereto), in recordable form conveying fee simple title to
the Real Property to Purchaser subject only to Permitted Exceptions;
9.2.2. a special warranty bill of sale conveying the Personal
Property to Purchaser free and clear of any liens, claims or encumbrances (in
the form of Exhibit F attached hereto);
9.2.3. an assignment and assumption of intangible property (in the
form attached hereto as Exhibit G), including, without limitation, the
Contracts, the Permits, the Warranties and the Records;
9.2.4. an assignment and assumption of Leases and security
deposits (in the form attached hereto as Exhibit I);
<PAGE>
9.2.5. a certificate in the form of Exhibit O certifying that the
representations and warranties set forth in Paragraph 16.2 are true and correct
as of the Closing Date as if made on the Closing Date subject to the
limitations contained in Paragraph 5.3 hereof, and subject to the limitations
on survival and liability set forth herein;
9.2.6. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.7. original copies, or duplicate copies if originals are not
available, of the Leases, the Contracts, the Permits, the Warranties and the
Records (which shall be delivered at the Property);
9.2.8. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.9. possession of the Property to Purchaser, subject to the
terms of the Leases;
9.2.10. evidence of the termination of the management agreement and
any other contracts or agreements which are not Contracts;
9.2.11. notice to the tenants of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the Leases
and the obligation to refund the security deposits (in the form of Exhibit K);
and
9.2.12. an updated rent roll in the same form as Exhibit M
certified by Seller to be true and correct as of the Closing Date;
9.2.13. an original estoppel certificate addressed to Purchaser in
the form of Exhibit L (or containing such modifications as are permitted
hereunder) from each tenant of the Property (or from Seller, to the extent
permitted by Paragraph 17); and
9.2.14. an opinion of Seller's counsel, dated as of the Closing
Date and in form reasonably satisfactory to Purchaser, that Seller has been
duly formed under the laws of the State of Michigan and is in good standing
under the laws of the jurisdiction in which the Property is located, that
Seller is duly qualified to transact business in the jurisdiction in which the
property is located, that Seller has the requisite power and authority to enter
into and perform this Agreement and the documents and instruments required to
be executed and delivered by Seller pursuant to this Agreement, and that such
documents and instruments have been duly authorized by all necessary
partnership action on the part of Seller and have been duly executed and
delivered.
10. PURCHASER'S DEFAULT. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, THE PARTIES ACKNOWLEDGE THAT
<PAGE>
THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES'
REASONABLE ESTIMATE OF SELLER'S DAMAGES.
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7 AND PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL, DOCUMENTED
THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF ITS DUE DILIGENCE HEREUNDER
AND THE PREPARATION OF THIS AGREEMENT, NOT TO EXCEED $75,000 IN THE AGGREGATE.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT
IS ITS REFUSAL TO DELIVER THE CLOSING DOCUMENTS SET FORTH IN PARAGRAPH 9.2.1-8,
and 9.2.10-12 HEREOF, THEN PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC
PERFORMANCE.
12. PRORATIONS.
12.1. Prorations Generally. Rents (exclusive of delinquent rents, but
including prepaid rents); refundable security deposits (which will be assigned
to and assumed by Purchaser and credited to Purchaser at Closing); water and
other utility charges; fuels; prepaid operating expenses; management fees
payable to Insignia Management Co. not to exceed 6% of gross rent; real and
personal property taxes prorated on a "net" basis (i.e. adjusted for all
tenants' liability, if any, for such items); operating expenses which are
reimbursable by the tenants for the period prior to the Closing Date less any
amount previously paid by the Tenants shall be credited to Seller; and other
similar items shall be adjusted ratably as of 11:59 p.m. on the Closing Date,
and credited against the balance of the cash due at Closing. Assessments
payable in installments which are due subsequent to the Closing Date shall be
paid by Purchaser. Where the Leases impose on tenants obligations for taxes,
common area expenses, operating expenses or additional charges of any other
nature, and where Seller shall have collected any portion thereof in excess of
amounts incurred by Seller for such items for the period prior to the Closing
Date, then there shall be an adjustment and credit given to Purchaser at the
Closing for such excess amounts collected. In addition, prorations shall be
made at Closing as required pursuant to Paragraph 26 hereof. If the amount of
any of the items to be prorated is not then ascertainable, the adjustments
thereof shall be on the basis of the most recent ascertainable data. All
prorations will be final except as to delinquent rent referred to in Paragraph
12.2 below.
12.2. Post-Closing Receipts. In the event that any rentals for any of
the Leases remain unpaid at the Closing Date, Purchaser shall use reasonable
efforts after the Closing Date to collect such rentals and promptly deliver all
rentals so collected ("Post-Closing Receipts") to Seller; provided, however,
that Purchaser shall not be required to institute any legal actions as a means
of attempting to collect such rentals. In the event that any tenant's legal
right to possession has been terminated prior to the end of the Inspection
Period, Seller retains all rights to any delinquent rent from such tenant,
including the right to institute any legal actions as a means of attempting to
collect such rentals. In the event that any tenant is delinquent in the
payment of rent by more than 60 days as of the end of the Inspection Period,
but such tenant's legal right to possession has not been terminated, all such
delinquent rent received by Purchaser after Closing shall belong to Purchaser.
All other delinquent rentals received by Purchaser prior to November 30, 1997
<PAGE>
shall be applied first to amounts owing Seller, and then to pay any current
obligations of the tenant(s) in question, and Seller waives the right to
institute any legal actions as a means of attempting to collect such rentals.
Seller retains the right to conduct an audit, at reasonable times and upon
reasonable notice, but not after December 31, 1997, of Purchaser's books and
records to verify the accuracy of the Post-Closing Receipts reconciliation
statement and upon the verification of additional funds owing to Seller,
Purchaser shall pay to Seller said additional Post-Closing Receipts and the
cost of performing Seller's audit. Paragraph 12.2 of this Agreement shall
survive the Closing and the delivery and recording of the deed.
12.3. Percentage Rent. Percentage rent payable under the Leases shall
be prorated as of the Closing Date as follows:
12.3.1. Any percentage rent attributable to a specified period
("Percentage Rent Period") ending prior to the Closing Date shall be promptly
paid over to the Seller if and when collected. Seller shall be entitled to all
percentage rent attributable to the period prior to Closing Date for any
Percentage Rent Period ending prior to Closing Date. Paragraph 12.3.1 of this
Agreement shall survive the Closing and the delivery of the Deed.
12.3.2. Percentage rent payable with respect to a Percentage Rent
Period a portion of which occurs prior to the Closing Date and a portion of
which occurs subsequent to the Closing Date shall be apportioned between
Purchaser and Seller on the basis of their respective period of ownership
during the applicable Percentage Rent Period and shall be calculated in the
following manner. Seller shall be entitled to a percentage rent proration
determined by (x) multiplying the amount of the total gross sales from the most
recently completed and not estimated Percentage Rent Period by the applicable
formula for percentage rent contained in the applicable Lease, (y) multiplying
such product by 80% (reflecting a discount rate of 20%), and (z) then
multiplying such product by a fraction, the numerator of which shall be the
total number of days in the current Percentage Rent Period prior to the Closing
Date and the denominator of which shall be the total number of days in the
current Percentage Rent Period (in order to allocate the correct time period to
each party). Purchaser shall be entitled to the remainder of such percentage
rent. Notwithstanding the foregoing, Seller shall not receive any proration of
percentage rent pursuant to this paragraph 12.3.2 with respect to any tenant
which has gone dark prior to Closing. This percentage rent proration will
obviate the need to perform a future reconciliation.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest
in this Agreement without the prior written consent of the Seller.
Notwithstanding the foregoing, Purchaser shall have the right to assign its
interest in this Agreement without the prior written consent of the Seller to
any entity which, directly or indirectly, controls, is controlled by or is
under common control with Purchaser or Cargill Financial Services Corporation,
but such assignment shall not release Purchaser from its obligations hereunder.
If any assignee of Purchaser under this Agreement petitions or applies for
relief in bankruptcy or said assignee is adjudicated as a bankrupt or
insolvent, or said assignee files any petition, application for relief or
answer-seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
<PAGE>
present or future federal, state or other statute, law, code or regulation
relating to bankruptcy, insolvency, or other relief for debtors (collectively,
a "Bankruptcy Filing") on or before the Closing Date, said Bankruptcy Filing
shall be a default under this Agreement and Purchaser shall indemnify Seller
for all costs, attorney's fees and expenses of Seller resulting from Seller's
efforts to obtain the Earnest Money as liquidated damages and to clear title to
the Property from any encumbrance resulting from the Bankruptcy Filing.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Insignia Mortgage and Investment Company, Inc. (to be paid by
Seller) and to Schostak Brokerage (to be paid by Insignia Mortgage and
Investment Company, Inc.). Seller's commission to Insignia Mortgage and
Investment Company, Inc. and the resulting commission to Schostak Brokerage
shall only be payable out of the proceeds of the sale of the Property in the
event the transaction set forth herein closes. Purchaser and Seller shall
indemnify, defend and hold the other party hereto harmless from any claim
whatsoever (including without limitation, reasonable attorney's fees, court
costs and costs of appeal) from anyone claiming by or through the indemnifying
party any fee, commission or compensation on account of this Agreement, its
negotiation or the sale hereby contemplated other than to Insignia Mortgage and
Investment Company, Inc and Schostak Brokerage. The indemnifying party shall
undertake its obligations set forth in this Paragraph 15 using attorneys
selected by the indemnifying party and reasonably acceptable to the indemnified
party. The provisions of this Paragraph 15 will survive the Closing and
delivery of the Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter
or thing shall only mean such knowledge or notice that has actually been
received by Michael Conter (the asset manager responsible for the Property) or
Seller's property manager responsible for the management of the Property (the
"Seller's Representative"), and any representation or warranty of the Seller
that is qualified by Seller's knowledge is based upon those matters of which
the Seller's Representative has actual knowledge. Any knowledge or notice
given, had or received by any of Seller's agents, servants or employees shall
not be imputed to Seller, the general partner or limited partners of Seller,
the subpartners of the general partner or limited partners of Seller or
Seller's Representative. Seller hereby covenants to deliver a copy of this
Agreement to Seller's property manager, and to instruct such property manager
to review the Agreement and notify Seller's Representative of any and all
information known to such property manager regarding the representations and
warranties contained herein.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties:
16.2.1.Seller has not entered into any contracts for the sale of any
of the Property other than this Agreement. Seller has received no notice of
and has no knowledge of any rights of first refusal or first offer, options to
purchase any of the Property or any other rights or agreements which may delay
or prevent this transaction.
<PAGE>
16.2.2.To Seller's knowledge, there has been no labor or material of
any kind furnished to or for the benefit of the Property at Seller's request
for which payment in full has not been made, except in connection with tenant
improvements as set forth on Exhibit N attached hereto.
16.2.3.No person or entity is entitled to possession of any of the
Property, other than Seller, the tenants under the Leases or otherwise pursuant
to a recorded instrument.
16.2.4.Seller has received no notice of and has no knowledge of any
pending or threatened condemnation or transfer in lieu thereof affecting any of
the Property, nor has Seller agreed or committed to dedicate any of the
Property.
16.2.5.Seller has received no notice of and has no knowledge of any
pending or threatened action which would impair access to the Property.
16.2.6.Seller has received no notice and has no knowledge of any
actual or threatened curtailment, cancellation or suspension of any utilities
serving the Property.
16.2.7.Seller has received no notice of and has no knowledge of any
action, litigation, investigation or proceeding of any kind pending or
threatened against Seller or any of the Property which materially and
adversely affect the value of the Property.
16.2.8.Seller has received no notice of and has no knowledge of any
uncured default under any easement agreement or joint operation agreement
affecting the Property, and Seller has no knowledge of any amendment or
modification to such agreements except as of record.
16.2.9.Seller has not received written notice of any violation of
any Environmental Laws, statute, rule, law, obligation, ordinance, or other
legal regulation or requirement pertaining to the use, maintenance, ownership,
or operation of the Property, which such violation has not been cured without
waiver or variance of the applicable Environmental Laws.
16.2.10. To Seller's knowledge, there are no leases or
possessory rights in favor of any party, service or maintenance contracts,
equipment leases or other contracts regarding any of the Property except for
the Leases, the Contracts and any matters of record.
16.2.11. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Contract and their
respective amendments. Seller has received no notice and has no knowledge that
either Seller or any other party under a Contract is in default of their
respective obligations and liabilities thereunder. To Seller's knowledge,
except for the Contracts, there are no other service or maintenance contracts,
equipment leases or other contracts regarding any of the Property which will
not be terminated on or before the Closing Date.
16.2.12. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of the Records.
<PAGE>
16.2.13. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Lease and their respective
amendments. To Seller's knowledge, the information regarding the Leases
contained in the rent roll attached as Exhibit M is true, correct and complete
as of the date set forth therein. Seller has received no notice and has no
knowledge that either Seller or the applicable tenant is in default of their
respective obligations and liabilities under any of the Leases, including those
provisions relating to bankruptcy or insolvency.
16.2.14. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Permit in Seller's
possession and their respective amendments. Seller has received no notice and
has no knowledge (a) that Seller is in default of its obligations and
liabilities under any of the Permits, or (b) of any actual or threatened
cancellation or suspension of any Permit, or (c) that any additional licenses
or permits are required under applicable law to operate the Property as it is
now operated.
16.2.15. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Warranty in Seller's
possession and their respective amendments. Seller has received no notice that
either Seller or the applicable warrantor is in default of their respective
obligations and liabilities under any of the Warranties.
16.2.16. No management, leasing or maintenance personnel or
agents employed in connection with the operation of the Property have the right
to continue such employment after Closing except pursuant to a Contract. No
person or entity is entitled to claim any brokerage or leasing commissions or
other payments with respect to any of the Property, including regarding any of
the Leases, except as set forth in Exhibit N.
16.2.17. Seller has been duly formed under the laws of the
State of Michigan and is in good standing under the laws of the jurisdiction in
which the Property is located, is duly qualified to transact business in the
jurisdiction in which the Property is located, and has the requisite power and
authority to enter into and perform this Agreement and the document sand
instruments required to be executed and delivered by Seller pursuant hereto.
This Agreement has been duly executed and delivered by Seller and is a valid
and binding obligation of Seller enforceable in accordance with its terms.
This Agreement and the documents and instruments required to be executed and
delivered by Seller pursuant hereto have each been duly authorized by all
necessary partnership action on the part of Seller and that such execution,
delivery and performance does and will not conflict with or result in a
violation of Seller's partnership agreement or any judgment, order or decree of
any court or arbiter to which Seller is a party, or any agreement to which
Seller and/or any of the Property is bound or subject including the Contracts
and the Leases.
16.2.18. Seller has not (i) made a general assignment for the
benefit of creditors, (ii) filed any involuntary petition in bankruptcy or
suffered the filing of any involuntary petition by its creditors, (iii)
suffered the appointment of a receiver to take possession of all or
substantially all of its assets, (iv) suffered the attachment or other judicial
seizure of all or substantially all of its assets, (v) admitted in writing its
inability to pay its debts as they come due, or (vi) made an offer of
settlement, extension or composition to its creditors generally.
<PAGE>
16.2.19. Seller is not a "foreign person", "foreign
partnership", "foreign trust" or "foreign estate" as those terms are defined in
Section 1445 of the Internal Revenue Code.
16.2.20. Seller shall at all times prior to the Closing operate
and maintain the Property in substantially the same manner as it is now
operated and maintained, ordinary wear and tear and damage by fire and casualty
excepted.
16.3. Purchaser hereby represents and warrants to Seller that
Purchaser has the full right, power and authority to execute and deliver this
Agreement and consummate the transactions contemplated herein.
16.4. If at any time after the execution of this Agreement, either
Purchaser or Seller becomes aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question to
become untrue in any material respect, said party shall not be in default under
this Agreement and the sole remedy of the other party shall be to terminate
this Agreement. Except as set forth in Paragraph 5.4, if the status of any of
the tenancies changes from the date of the rent roll attached hereto and the
date of the rent roll delivered at Closing, provided the change in status is
not caused by a breach by Seller of its obligations under any Lease, then
Purchaser shall not have the right to terminate this Agreement or make any
claim for a breach of a representation or warranty hereunder involving the rent
roll or tenancies thereunder. Purchaser and Seller are prohibited from making
any claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in this
Agreement that the claiming party has actual knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein
shall survive Closing until November 30, 1997. The claiming party shall have
no right to make any claims against the other party for a breach of a
representation or warranty unless the claiming party delivers written notice of
such claim to the other party before November 30, 1997.
17. ESTOPPEL CERTIFICATES. Promptly following the mutual execution and
delivery of this Agreement, Seller shall diligently proceed and use its
diligent efforts to obtain estoppel certificates in the form of Exhibit L from
each of the tenants under the Leases. If a tenant shall fail or refuse to
deliver an estoppel certificate with respect to its Lease on or before the
Closing Date, Seller shall execute and deliver to Purchaser at Closing an
estoppel certificate with respect to such Lease in substitution from such
tenant based on the knowledge of Seller as set forth in Paragraph 16.1;
provided, however, such certificate of Seller shall not be deemed to have
satisfied the condition in Paragraph 5.1, except as to Leases of up to 50% of
the rentable square feet leased pursuant to Leases of 7,500 square feet or
less. Seller's liability under Seller Tenant Certificates shall be limited
pursuant to Paragraph 16.5 and 18 herein.
<PAGE>
18. LIMITATION OF LIABILITY. None of the Affiliates of Seller, nor any of
Seller's or the Affiliates of Seller's respective beneficiaries, shareholders,
partners, officers, directors, agents or employees, heirs, successors or
assigns shall have any personal liability of any kind or nature for or by
reason of any matter or thing whatsoever under, in connection with, arising out
of or in any way related to this Agreement and the transactions contemplated
herein, and Purchaser hereby waives for itself and anyone who may claim by,
through or under Purchaser any and all rights to sue or recover on account of
any such alleged personal liability. Notwithstanding anything contained herein
to the contrary, Purchaser hereby agrees that the maximum liability of Seller
after the Closing, in connection with, arising out of or in any way related to
a breach by Seller under this Agreement or any document or conveyance agreement
in connection with the transaction, shall be $387,500. Seller further agrees
not to distribute $387,500 of the proceeds of the Purchase Price to its
partners until the later of (i) November 30, 1997 and (ii) final resolution of
any claims by Purchaser and asserted in writing against Seller prior to
November 30, 1997 in accordance with the terms of this Agreement ("Claims");
provided, however, that if any Claims are disputed by Seller, Seller shall have
the right, by written notice to Purchaser, to require Purchaser to file suit in
a court of competent jurisdiction within ninety (90) days after such notice to
Purchaser. If no suit is filed by such date, said notice with respect to the
Claim in question shall no longer prevent Seller from distributing the
proceeds.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
<PAGE>
20. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James Mendelson
(847) 317-4367
(847) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: c/o Ellis Partners, Inc.
351 California Street, Suite 1150
San Francisco, CA 94104
Attention: Harold A. Ellis, Jr.
(415) 391-9800
(415) 391-4711 (FAX)
with copies to: Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, MN 55345
Attention: Tim Clark
(612) 984-3449
(612) 984-3905 (FAX)
and to: Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Matthew R. Bogart
(612) 336-3435
(612) 336-3026 (FAX)
<PAGE>
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or the same day as given if sent by facsimile transmission and
received by 5:00 p.m. Chicago time or on the 4th business day after the same is
deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be sent to the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution. Seller will forward one (1) copy of the
executed Agreement to Purchaser and will forward the following to the Escrow
Agent:
(A) One (1) fully executed copy of this Agreement; and
(B) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
Within two (2) business days after its receipt of a fully-executed counterpart
of this Agreement and the Escrow Agreement, Purchaser agrees to deposit the
Earnest Money with Escrow Agent pursuant to the terms of the Escrow Agreement.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of Michigan.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
26. NEW LEASES. On or before ten (10) business days prior to the expiration
of the Inspection Period, Seller may execute any new lease or modify or renew
any existing lease affecting the Property without Purchaser's consent. Seller
shall deliver a copy of any such new lease or existing lease modification or
renewal (together with an estimation of the "New Lease Costs" (as hereinafter
defined)), as applicable, to Purchaser within ten (10) business days of
execution by Seller and the new tenant or existing tenant, as applicable, but
in any event on or before ten (10) business days prior to the expiration of the
Inspection Period. In the event Purchaser disapproves of such new lease or
existing lease modification or renewal, Purchaser's sole remedy shall be to
terminate this Agreement in accordance with Paragraph 7 hereof. In the event
that Purchaser does not terminate this Agreement as aforesaid, Purchaser shall
<PAGE>
be responsible for the costs of all tenant improvements and leasing commissions
associated with the negotiation and execution of any such new lease or existing
lease modification or renewal ("New Lease Costs") and Purchaser shall assume
all such obligations at the Closing. Seller shall receive a credit at Closing
for any New Lease Cost incurred by Seller prior to Closing.
After the date ten (10) business days prior to the expiration of the
Inspection Period, Seller shall not execute any new lease or existing lease
modification or renewal affecting the Property without Purchaser's prior
written consent. Purchaser's consent shall be deemed given if Purchaser has
not responded to the contrary within ten (10) business days after Seller's
written request and Purchaser's receipt of such new lease or existing lease
modification or renewal (together with an estimation of the New Lease Costs).
If approved by Purchaser, a complete copy of any such new lease or existing
lease modification or renewal shall be delivered to Purchaser within ten (10)
days of the full execution thereof. All New Lease Costs shall be paid by
Purchaser and Purchaser shall assume all such obligations at the Closing and
Seller shall receive a credit at Closing for any New Lease Costs incurred by
Seller prior to Closing.
Purchaser acknowledges that there currently exists the unsatisfied tenant
improvement obligations and leasing commissions set forth on Exhibit N attached
hereto. Seller agrees to pay the unsatisfied leasing commission obligations
and tenant improvement obligations set forth on Exhibit N on or before the
Closing or credit Purchaser for the amount of said unsatisfied obligation and
Purchaser shall assume all obligations therefor at Closing.
27. SELLER'S POSSESSION. All references herein to "Seller's possession" shall
mean in the possession of Seller and the property manager of the Property.
28. EXECUTION BY THE BALCOR COMPANY. The Balcor Company executes this
Agreement solely for the purpose of assuring to Purchaser that if the Seller
fails to withhold or pay the sums required of Seller pursuant to Paragraph 18
and if Purchaser is successful in any claims asserted against the Seller for a
breach of a representation or warranty, then The Balcor Company shall pay to
Purchaser the amount of such claim(s), the total of which shall not exceed
$387,500. Purchaser may name The Balcor Company in any suit against Seller,
provided that Purchaser may not name The Balcor Company in any suit unless
Seller is also named therein.
29. COSTS OF LITIGATION. If either party to this Agreement shall institute an
action or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney fees actually incurred; provided, however, that the
aggregate liability of Seller in connection with this Agreement, including
Seller's liability under this Paragraph 29, shall be limited in accordance with
Paragraph 18 hereof.
30. NEGOTIATION WITH TENANTS. Purchaser shall have the right during the
Inspection Period and at any time prior to the Closing Date to contact and
negotiate with any current, former or potential tenant or occupant of the
Property. Purchaser shall inform such party that it is not the owner of the
Property and any agreement that Purchaser and such party enter into shall
specifically state that it is contingent on Purchaser acquiring the Property.
In the event that Purchaser does not acquire the Property, Purchaser shall
deliver a copy of all such agreements to Seller.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
CROSSTOWN ASSET CORP. I, a Delaware corporation
By: /s/Thomas Haller
----------------------------------
Name: Thomas Haller
----------------------------------
Its: Vice President
----------------------------------
SELLER:
ARBORLAND ASSOCIATES LIMITED PARTNERSHIP, a
Michigan limited partnership
By: Balcor Equity Pension Investors-III, a Real
Estate Limited Partnership, a co-general
partner
By: Balcor Equity Partners-III, an Illinois
general partnership
By: The Balcor Company, a Delaware
corporation
By: /s/John K. Powell, Jr.
----------------------------
Name: John K. Powell, Jr.
----------------------------
Its: Senior Vice President
----------------------------
<PAGE>
JOINDER
The undersigned executes this joinder solely for the purposes of
effectuating its obligations arising under Paragraph 28 of this Agreement.
THE BALCOR COMPANY, a Delaware corporation
By: /s/John K. Powell, Jr.
-------------------------------------
Name: John K. Powell, Jr.
-------------------------------------
Its: Senior Vice President
-------------------------------------
<PAGE>
[Arborland Consumer Mall]
Al Lieberman of Insignia Mortgage and Investment Company, Inc. ("Seller's
Broker") executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated 11/20, 1996 between Seller and Seller's Broker (the "Listing
Agreement"). Seller's Broker also acknowledges that payment of the aforesaid
fee or commission is conditioned upon the Closing and the receipt of the
Purchase Price by the Seller. Seller's Broker agrees to deliver a receipt to
the Seller at the Closing for the fee or commission due Seller's Broker and a
release, in the appropriate form, stating that no other fees or commissions are
due to it from Seller or Purchaser.
INSIGNIA MORTGAGE AND INVESTMENT COMPANY,
INC.
By: /s/Al Lieberman
----------------------------------
<PAGE>
_________________ of Schostak Brokerage ("Cooperating Broker") executed this
Agreement in its capacity as a real estate broker and acknowledges that the fee
or commission due it from Seller's Broker as a result of the transaction
described in this Agreement is as set forth in that certain Listing Agreement,
dated _____________, 199_ between Seller's Broker and Cooperating Broker (the
"Cooperating Broker's Listing Agreement"). Cooperating Broker also
acknowledges that payment of the aforesaid fee or commission is conditioned
upon the Closing and the receipt of the Purchase Price by the Seller and the
receipt of the resulting commission by Seller's Broker. Cooperating Broker
agrees to deliver a receipt to Seller's Broker at the Closing for the fee or
commission due Cooperating Broker and a release, in the appropriate form,
stating that no other fees or commissions are due to it from Seller, Purchaser,
or Seller's Broker.
SCHOSTAK BROKERAGE
By: ___________________________________
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Survey Certification
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Tenant Certificate
M - Rent Roll
N - Leasing Commissions and Tenant Improvements
O - Reaffirmation of Representations and Warranties and Certification of
Rent Roll
P - Permits
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF SALE
(Ammendale II)
THIS FIRST AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is entered
into as of the day of December, 1996, by and between WRIT LIMITED
PARTNERSHIP ("Purchaser") and AMMENDALE-II LIMITED PARTNERSHIP ("Seller").
W I T N E S S E T H:
A. Purchaser and Seller have heretofore entered into a certain Agreement
of Sale (Ammendale II) dated November 29, 1996 ("Agreement") for the purchase
and sale of the property commonly known as Lot 17, Ammendale Business Campus,
located in Beltsville, Maryland (the "Premises"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the
Agreement.
B. Purchaser and Seller now desire to amend the Agreement as follows:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. The end of the Inspection Period shall be 5:00 p.m. Chicago time on
January 16, 1997.
2. Except as specifically modified herein, the terms and conditions of
the Agreement shall remain unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first set forth above.
PURCHASER:
WRIT LIMITED PARTNERSHIP
By: Washington Real Estate Investment Trust,
General Partner
By: /s/ Thomas L. Regnell
------------------------------------
Name: Thomas L. Regnell
------------------------------------
Its: Vice President
------------------------------------
SELLER:
AMMENDALE-II LIMITED PARTNERSHIP
By: Prince George Partners, Inc.,
its general partner
By: /s/ John K. Powell, Jr.
-----------------------------------
Name: John K. Powell, Jr.
-----------------------------------
Its: Senior Vice President
-----------------------------------
<PAGE>
SECOND AMENDMENT TO AGREEMENT OF SALE
(Ammendale II)
THIS SECOND AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is entered
into as of the 15th day of January, 1997, by and between WRIT LIMITED
PARTNERSHIP ("Purchaser") and AMMENDALE-II LIMITED PARTNERSHIP ("Seller").
WITNESSETH:
A. Purchaser and Seller have heretofore entered into a certain Agreement
of Sale (Ammendale II) dated November 29, 1996 (as amended, the "Agreement")
for the purchase and sale of the property commonly known as Lot 17, Ammendale
Business Campus, located in Beltsville, Maryland (the "Premises"). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in the Agreement.
B. Purchaser and Seller now desire to amend the Agreement as follows:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The end of the Inspection Period shall be 5:00 p.m. Chicago time on
January 23 1997.
2. The Closing Date, as defined in Paragraph 8 of the Agreement, shall be
changed to February 19, 1997.
3. The Escrow Agreement is hereby modified to conform with 1 and 2.
4. Except as specifically modified herein, the terms and conditions of
the Agreement shall remain unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first set forth above.
PURCHASER:
WRIT LIMITED PARTNERSHIP
By: Washington Real Estate Investment Trust,
General Partner
By: /s/ Thomas L. Regnell
-------------------------------
Name: Thomas L. Regnell
-------------------------------
Its: Vice President
-------------------------------
SELLER:
By: Prince George Partners, Inc.,
its general partner
By: /s/ John K. Powell, Jr.
-------------------------------
Name: John K. Powell, Jr.
-------------------------------
Its: Senior Vice President
-------------------------------
<PAGE>
THIRD AMENDMENT TO AGREEMENT OF SALE
(Ammendale II)
THIS THIRD AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is entered
into as of the 23rd day of January, 1997, by and between WRIT LIMITED
PARTNERSHIP ("Purchaser") and AMMENDALE-II LIMITED PARTNERSHIP ("Seller").
W I T N E S S E T H:
A. Purchaser and Seller have heretofore entered into a certain Agreement
of Sale (Ammendale II) dated November 29, 1996 (as amended, the "Agreement")
for the purchase and sale of the property commonly known as Lot 17, Ammendale
Business Campus, located in Beltsville, Maryland (the "Premises"). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in the Agreement.
B. Purchaser and Seller now desire to amend the Agreement as follows:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. The Purchase Price as defined in Paragraph 1 of the Agreement, is
hereby changed to $5,768,000.
2. The end of the Inspection Period shall be 5:00 p.m. Chicago time on
January 30, 1997.
3. The following terms are added to Paragraph 21 of the Agreement as new
subparagraphs (e) and (f) thereof:
"(e) Seller shall deliver to Purchaser on or before February 13, 1997 a
letter from a certified environmental consultant reasonably acceptable to
Purchaser stating that the portion of the Premises commonly known as Suite
113, 11800 Baltimore Avenue is environmentally clean and fit for use by a
tenant.
(f) Seller shall deliver to Purchaser on or before the Closing Date, a
Certificate of Occupancy for the building commonly known as 12240
Baltimore Avenue."
4. The following provision shall be added as a new last sentence to
Paragraph 21 of the Agreement:
"Notwithstanding anything contained in this Article 21, if (x) the
condition set forth in either subparagraph (e) or subparagraph (f) above
is not satisfied by the date required hereunder and (y) Seller or
Purchaser requests an additional period of thirty (30) days for Seller to
satisfy such condition, Purchaser shall not have the right to terminate
this Agreement under this Section 21 unless such thirty (30) day period
passes and such condition remains unsatisfied. Provided any such
condition is satisfied within the thirty (30) day period, the Closing Date
shall occur on the business day which is nearest the tenth (10th) day
after the last of the satisfied of either such condition."
<PAGE>
5. The Escrow Agreement is hereby modified to conform with the terms of
this Amendment.
6. Except as specifically modified herein, the terms and conditions of
the Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first set forth above.
PURCHASER:
WRIT LIMITED PARTNERSHIP
By: Washington Real Estate Investment Trust,
General Partner
By: /s/ Thomas L. Regnell
---------------------------------------
Name: Thomas L. Regnell
---------------------------------------
Its: Vice President
---------------------------------------
SELLER:
AMMENDALE LIMITED PARTNERSHIP
By: Ammendale Partners, Inc., its general
partner
By: /s/ Jerry M. Ogle
------------------------------------
Name: Jerry M. Ogle
------------------------------------
Its: Managing Partner and Secretary
------------------------------------
<PAGE>
FOURTH AMENDMENT TO AGREEMENT OF SALE
(Ammendale II)
THIS FOURTH AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is entered
into as of the 18th day of February, 1997, by and between WRIT LIMITED
PARTNERSHIP ("Purchaser") and AMMENDALE-II LIMITED PARTNERSHIP ("Seller").
WITNESSETH:
A. Purchaser and Seller have heretofore entered into a certain Agreement
of Sale (Ammendale II) dated November 29, 1996 (as amended, the "Agreement")
for the purchase and sale of the property commonly known as Lot 17, Ammendale
Business Campus, located in Beltsville, Maryland (the "Premises"). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in the Agreement.
B. Purchaser and Seller now desire to amend the Agreement as follows:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The Closing Date, as defined in Paragraph 8 of the Agreement, shall be
changed to December February 28, 1997.
2. The Escrow Agreement is hereby modified to conform with Paragraph 1 .
3. Except as specifically modified herein, the terms and conditions of
the Agreement shall remain unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first set forth above.
PURCHASER:
WRIT LIMITED PARTNERSHIP
By: Washington Real Estate Investment Trust,
General Partner
By: /s/ Thomas L. Regnell
------------------------------------
Name: Thomas L. Regnell
------------------------------------
Its: Vice President
------------------------------------
SELLER:
AMMENDALE-II LIMITED PARTNERSHIP
By: Prince George Partners, Inc.,
its general partner
By: /s/ Jerry M. Ogle
-------------------------------------
Name: Jerry M. Ogle
-------------------------------------
Its: Managing Director and Secretary
-------------------------------------
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 18th
day of March, 1997, by and between CROSSTOWN ASSET CORP. I, a Delaware
corporation ("Purchaser"), and ERINDALE INVESTORS, an Illinois limited
partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of Seven Million Six Hundred Thousand and No/100 Dollars
($7,600,000.00) (the "Purchase Price"), the following property commonly known
as Erindale Center, Colorado Springs, Colorado (collectively, the "Property"):
1.1. The land located in El Paso County, Colorado and legally described on
Exhibit A attached hereto, together with all easements, appurtenances and
hereditaments thereto (the "Land") together with all buildings, structures,
fixtures and improvements located thereon (the "Improvements"). The Land and
Improvements are collectively referred to herein as the "Real Property";
1.2. The items of personal property set forth on Exhibit B attached hereto
(the "Personal Property");
1.3. The tenant leases with respect to the Property listed on the rent
roll attached hereto as Exhibit M (the "Leases");
1.4. All licenses and permits relating to the Real Property or the
Personal Property, including all certificates of occupancy and other permits,
licenses or approvals issued under applicable law set forth on Exhibit P (the
"Permits");
1.5. The service contracts and agreements listed on Exhibit H (the
"Contracts");
1.6. All warranties and guaranties given to, assigned to or benefiting the
Seller, the Real Property or the Personal Property, to the extent assignable
without cost to Seller (the "Warranties"); and
1.7. All records (exclusive of computer software) of Seller relating to
the operation and physical condition of the Property to the extent in Seller's
possession, including (a) all records regarding real estate taxes and
assessments, insurance, maintenance, repairs, capital improvements and
services, (b) all environmental, soil and engineering reports and studies,
including all drafts and letters and other documents which describe or limit
the scope of such tests, reports or studies), (c) all originals and copies of
surveys, blueprints, plans and specifications regarding the Real Property and
the Personal Property, and (d) equipment manuals, excluding all appraisals,
internal memoranda to Seller's asset management committee and all software
(collectively, the "Records").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Within two (2) business days after the full execution hereof, the
sum of Seventy-Six Thousand and No/100 Dollars ($76,000.00) (the "Earnest
Money") to be held in escrow by and in accordance with the provisions of the
Escrow Agreement ("Escrow Agreements") attached hereto as Exhibit C;
<PAGE>
2.2. On or before the expiration of the "Inspection Period" (as
hereinafter defined), Purchaser shall deposit an additional Sixty Thousand
Eight Hundred and No/100 Dollars ($60,800.00) to be held by and in accordance
with the provisions of the Escrow Agreement (the "Additional Earnest Money",
which, to the extent deposited, shall be included within the definition of
"Earnest Money"); and
2.3. On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 11:00 a.m. Chicago time.
3. TITLE REVIEW.
3.1. Title Evidence. As soon as reasonably practical following the mutual
execution and delivery of this Agreement, Seller shall furnish the following
title evidence to Purchaser ("Title Evidence"):
3.1.1. A commitment to insure title to the Real Property (the
"Commitment") issued by Near North National Title Corporation as agent for
First American Title Insurance Company (the "Title Insurer"). The commitment
shall (a) be issued on ALTA Owner's Form B-1970 (revised 10-17-70) in an amount
equal to the Purchase Price, (b) show Seller as owner of the Real Property, (c)
commit to delete all of the so-called "standard exceptions" to coverage, and
(d) include legible copies of all documents, instruments and matters shown as
exceptions or referenced therein.
3.1.2. A current survey of the Property (the "Survey"), prepared
and certified by a registered land surveyor licensed in the jurisdiction in
which the Real Property is located reasonably satisfactory to Purchaser. The
Survey shall (a) conform to the "Minimum Standard Detail Requirement for Land
Title Surveys" as adopted in 1992 by the American Land Title Association and
the American Congress on Surveying & Mapping, and (b) contain a certification
to Purchaser, Title Insurer and any other party designated by Purchaser
substantially in the form attached hereto as Exhibit D, to the extent possible.
The Title Evidence shall be deemed received by Purchaser for purposes of
Section 3.2 only when a Commitment and Survey conforming to the foregoing
requirements have been received by Purchaser.
3.2. Purchaser's Objections and Requirements. Purchaser shall be allowed
until the later to occur of (i) the end of the Inspection Period, or (ii) ten
(10) business days after receipt of the last of the Title Evidence, for
examination thereof and making any objections to the form and/or content of the
same. Any objections not made within said period shall be deemed to be waived
by Purchaser and shall be "Permitted Exceptions". Purchaser's objections may
include additional requirements with regard to the Title Evidence based upon
its initial review of the same, including requiring (a) satisfaction of Title
Insurer's requirements as set forth in the Commitment, (b) deletion of all the
so-called "standard exceptions" to coverage, and (c) affirmative insurance of
any easements appurtenant to the Real Property.
<PAGE>
3.3. Correction of Title. Seller shall have the right, but not the
obligation to cure any objections made by Purchaser pursuant to Section 3.2.
Seller shall provide Purchaser with notice within five (5) business days of
Purchaser's objection stating whether Seller intends to cure any objection. If
Seller elects to cure any objection, Seller shall be allowed thirty (30) days
after the making of Purchaser's objections to cure the same and shall
diligently proceed and use all reasonable efforts to do so. Pending such cure,
the Closing shall be postponed to the extent necessary to accommodate such time
period; provided however, Seller shall not be allowed any additional time
beyond the originally scheduled Closing Date to discharge or satisfy any
mortgage, judgment or other monetary lien set forth on the original Commitment.
Upon such cure, the Closing (hereinafter defined) shall be held on the later of
(a) the Closing Date and (b) the first business day occurring five (5) days
after the date such cure is completed. If Seller elects not to cure any
objection or if such cure is not completed within said thirty (30) day period,
Purchaser shall have the option to do any of the following:
3.3.1. Terminate this Agreement.
3.3.2. Withhold from the Purchase Price an amount which in the
reasonable judgement of Title Insurer is sufficient to discharge at Closing any
mortgage, judgment or other monetary lien objected to by Purchaser only in the
event such lien appears on the original Commitment. Any amount so withheld
shall be placed in escrow with Title Insurer pending cure and satisfaction. If
Seller has not discharged such mortgage, judgment or other monetary lien within
thirty (30) days after Closing, Purchaser may then proceed in its discretion to
do so and charge the reasonable costs of cure (including reasonable attorneys'
fees) against the amount so escrowed; or
3.3.3. Waive one or more of its objections and proceed to Closing
and such exceptions to title which are waived by Purchaser shall be deemed
additional "Permitted Exceptions" and Purchaser shall have no right to deduct
any amount against the Purchase Price except in connection with Paragraph
3.3.2.
3.4. Cost of Title Evidence and Title Policy. In the event that the
Closing occurs, Purchaser agrees to reimburse Seller for one-half of the cost
of obtaining the Title Evidence. Seller and Purchaser each agree to pay
one-half of the costs of the Title Policy (as hereinafter defined) and
Purchaser shall pay for all of the costs of any endorsements to, or extended
coverage on, the Title Policy.
3.5. Date Downs to Title. If, prior to Closing but after the end of the
Inspection Period, a date-down to the Commitment discloses any new exception
which is not a Permitted Exception ("Unpermitted Exception"), Seller shall
provide Purchaser with notice within five (5) business days of notice by
Purchaser to Seller of the existence of such Unpermitted Exception stating
whether Seller intends to cure any objection. If Seller elects to cure any
objection, Seller shall have thirty (30) days from the date of receipt by
Seller of such notice, at Seller's expense, to (i) cure and/or, subject to
Purchaser's reasonable approval, have any Unpermitted Exceptions which, in the
aggregate, do not exceed $25,000.00, removed from the Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions, or (ii) have the right, but not the obligation, to
cure and/or, subject to Purchaser's reasonable approval, have any Unpermitted
Exceptions which, in the aggregate, equal or exceed $25,000.00, removed from
the Commitment or to have the Title Insurer commit to insure against loss or
<PAGE>
damage that may be occasioned by such Unpermitted Exceptions. In such event,
the time of Closing shall be delayed, if necessary, to give effect to said
aforementioned time periods. If Seller fails to cure or have said Unpermitted
Exception removed or have the Title Insurer commit to insure as specified above
within said thirty (30) day period or if Seller elects not to exercise its
rights under (ii) in the preceding sentence, Purchaser may terminate this
Agreement upon notice to Seller within five (5) days after the expiration of
said thirty (30) day period. Absent notice from Purchaser to Seller in
accordance with the preceding sentence, Purchaser shall be deemed to have
elected to take title subject to said Unpermitted Exception. If Purchaser
terminates this Agreement in accordance with the terms of this Paragraph 3.5,
this Agreement shall become null and void without further action of the parties
and all Earnest Money theretofore deposited into the escrow by Purchaser
together with any interest accrued thereon, shall be returned to Purchaser, and
neither party shall have any further liability to the other, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7.
4. PAYMENT OF CLOSING COSTS. Purchaser and Seller shall each pay for
one-half of the costs of the documentary or transfer stamps to be paid with
reference to the "Deed" (hereinafter defined) and all other stamps, intangible,
transfer, documentary, recording, sales tax and surtax imposed by law with
reference to any other sale documents delivered in connection with the sale of
the Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction.
5. CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE. The obligations of
Purchaser under this Agreement are contingent upon each of the following:
5.1. Estoppel Certificates. The following terms have been defined as
follows for convenience of reference:
5.1.1. "Tenant Certificate" means a certificate, commonly known as
an estoppel certificate, signed by a tenant with respect to its Lease, either
in the form set forth on Exhibit L hereto or on such other form as is
substantially consistent with the requirements of the tenant's lease for such
certificates and shall also mean an estoppel certificate from Levitz Furniture
Company of the Midwest, Inc. ("Levitz") or its successor or assign and Standard
Brands Realty Co., Inc. ("Standard") or its successor or assign, parties to
that certain First Amended and Restated Declaration of Easements and Covenants
dated January 28, 1983, as amended (the "REA") between Levitz, Standard and
Town and Country S.C., Ltd., in the form required by the REA.
5.1.2. "Seller Tenant Certificate" means a Tenant Certificate
signed by the Seller with respect to a particular Lease for which the Tenant in
question has failed to execute and deliver a Tenant Certificate, in which case
the Seller Tenant Certificate shall be in the form of Exhibit L, provided that
a Seller Tenant Certificate shall in all cases be limited to Seller's knowledge
as defined in Paragraph 16.1 above.
<PAGE>
5.1.3. "Qualification" means any assertion in a Tenant Certificate
or Seller Tenant Certificate (whether in the form of Exhibit L or otherwise) of
(i) a claim, counterclaim, offset or defense against the landlord, (ii) a
default on the part of the landlord, (iii) unpaid credits, allowances or other
sums due from the landlord prior to the date of the estoppel (other than
disclosed on Exhibit M, Exhibit N or Exhibit Q attached hereto), (iv) an
unfulfilled construction or other obligation on the part of the landlord prior
to the date of estoppel (other than disclosed on Exhibit M, Exhibit N or
Exhibit Q attached hereto), (v) information which is contrary (in an adverse
respect to the landlord) (x) to the information contained in the rent roll
attached hereto as Exhibit M, or (y) to the information pertaining to tenant
allowances and concessions and leasing commissions contained on Exhibit N or
(vi) the existence of any of the following which are not set forth in the
Lease: rights of tenant to terminate the Lease, rights of tenant to purchase
any part of the Property, rights of tenant to expand the leased premises or
renew the term of the Lease, or rights of tenants to exclusives;
5.1.4. "Unacceptable Qualification" means any Qualification other
than the following:
(a) a Qualification which is expressly disclosed on the rent roll
attached hereto as Exhibit M or the schedules attached hereto as Exhibit N or
Exhibit Q or a Qualification relating to non-payment of March, 1997 or April,
1997 rent, provided the same is not as a result of a default by Seller; or
(b) a Qualification expressly disclosed on the other Exhibits
attached hereto and made a part hereof.
5.1.5. If a Qualification is not an Unacceptable Qualification, it
shall not affect Purchaser's obligations to close hereunder or give rise to any
liability from Seller to Purchaser.
5.1.6. Seller shall promptly upon execution of this Agreement
request a Tenant Certificate in the form of Exhibit L from all tenants, and
shall in good faith pursue the collection of the same. Seller shall deliver to
Purchaser, upon Seller's receipt thereof, all Tenant Certificates signed by
tenants (whether in the form of Exhibit L or otherwise).
5.1.7. It shall be a condition to Purchaser's obligations
hereunder (the "Estoppel Condition") that Purchaser shall have received
estoppel certificates as required pursuant to Paragraph 17 and the Levitz and
Standard estoppel certificates described in Paragraph 5.1.1. Notwithstanding
the foregoing to the contrary, Seller shall not have satisfied the Estoppel
Condition if any of the Tenant Certificates received by Seller or Seller Tenant
Certificates disclose Unacceptable Qualifications other than Unacceptable
Qualifications that can be cured by the payment of money or for which Purchaser
can be compensated as set forth below and with an "Estoppel Qualification Sum"
(hereinafter defined) of less than $100,000 per tenant and $250,000 in the
aggregate. The "Estoppel Qualification Sum" shall mean the following:
(i) if the claim asserted arises out of a defect which can be cured,
with the expenditure of money on a one time basis, such as a physical defect,
then such sum shall be calculated by a reasonable estimate of the cost to
repair or remediate said defect; and
<PAGE>
(ii) if the claim asserted affects a continuing obligation of a
tenant under the lease, such as the payment of rent, then the claim shall be
calculated by (i) determining the amount of the claim on a per annum basis,
(ii) multiplying said amount by the number of years or partial years said claim
would affect the monetary obligations under the lease and (iii) discounting
said product on a present value basis using a discount rate of 10% per annum.
If the Unacceptable Qualifications have an Estoppel Qualification Sum of
less than $100,000 per tenant and $250,000 in the aggregate, then Seller shall
either (i) grant Purchaser a credit at Closing for an amount equal to the
Estoppel Qualification Sum, or (ii) cure all conditions giving rise to an
Unacceptable Qualification on or before the Closing. The determination to
perform the covenant contained in subparagraphs (i) or (ii) in the preceding
sentence shall be made by Seller in its sole discretion. Provided Seller
performs its covenant in this Paragraph 5.1.7, the disclosure of Unacceptable
Qualifications having an Estoppel Qualification Sum of less than $100,000 per
tenant and $250,000 in the aggregate shall not affect Purchaser's obligations
to close hereunder or give rise to any additional liability from Seller to
Purchaser.
5.1.8. If Seller delivers any Seller Tenant Certificates, then
upon receipt after Closing by Purchaser of a Tenant Certificate from a tenant
under a Lease for whom Seller has executed and delivered a Seller Tenant
Certificate at Closing, the Seller Tenant Certificate executed and delivered by
Seller at Closing shall become null and void and the Tenant Certificate
received from the tenant shall be substituted therefor, solely to the extent
that the information contained in the Tenant Certificate is the same as the
information set forth in the Seller Tenant Certificate. Seller's liability
under Seller Tenant Certificates shall be limited pursuant to Paragraph 18
herein.
5.2. Title Policy. On the Closing Date, Title Insurer shall be
irrevocably committed to issue to Purchaser the title policy pursuant to the
Commitment with respect to the Real Property and any appurtenant easements
designated by Purchaser pursuant to Section 3.2, subject only to the Permitted
Exceptions (the "Title Policy").
5.3. Seller's Representations and Warranties. On the Closing Date, each
of the representations and warranties of Seller in Section 16 shall be true and
correct in all material respects as if the same were made on the Closing Date;
provided, however, that if the status of any of the tenancies changes from the
date of the rent roll attached hereto as Exhibit M and the date of the rent
roll delivered at Closing, provided the change in status is not caused by a
breach by Seller of its obligations under any Lease, then Purchaser shall not
have the right to terminate this Agreement or make any claim for a breach of a
representation or warranty hereunder involving the rent roll or tenancies
thereunder.
5.4. No Material Adverse Charge. On the Closing Date, there shall not
have been any "Material Adverse Change" (as hereinafter defined) with respect
to the Property. For the purposes of this Paragraph 5.4, "Material Adverse
Change" shall mean solely that after the date hereof, any tenant or tenants
leasing in the aggregate in excess of 50,000 square feet of the Property become
entitled to terminate their lease.
<PAGE>
5.5. Seller's Obligations. On the Closing Date, Seller shall have
performed all of the obligations required to be performed by Seller under this
Agreement as and when required under this Agreement.
If any conditions in this Paragraph 5 have not been satisfied on or before
the Closing Date, then Purchaser may terminate this Agreement by notice to
Seller on or before the Closing Date. To the extent that any of the conditions
in this Paragraph 5 require satisfaction of Purchaser, such satisfaction shall
be determined by Purchaser in its reasonable discretion. The conditions in
this Paragraph 5 are specifically stated and for the sole benefit of Purchaser.
Purchaser in its discretion may unilaterally waive (conditionally or
absolutely) the fulfillment of any one or more of the conditions, or any part
thereof, by notice to Seller, without any offset against the Purchase Price or
claim against Seller. Seller shall not take or authorize, directly or
indirectly, any action that modifies or changes the circumstances upon which
the conditions set forth in this Paragraph 5 were deemed satisfied or waived by
Purchaser without Purchaser's consent.
6. DAMAGE AND CASUALTY; CONDEMNATION.
6.1. Damage and Casualty. Except as provided in the indemnity provisions
contained in Paragraph 7.1 of this Agreement, Seller shall bear all risk of
loss with respect to the Property up to the Closing Date. Notwithstanding the
foregoing, in the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as determined by Seller and Purchaser in good faith) Purchaser
shall not have the right to terminate its obligations under this Agreement by
reason thereof, unless otherwise specifically set forth herein, but Seller
shall have the right to elect to either repair and restore the Property (in
which case the Closing Date shall be extended until completion of such
restoration) or to assign and transfer to Purchaser on the Closing Date all of
Seller's right, title and interest in and to all insurance proceeds paid or
payable to Seller on account of such fire or casualty and in addition, Seller
shall pay to Purchaser the amount of any deductible maintained by Seller under
any insurance policy covering such fire or casualty. Seller shall promptly
notify Purchaser in writing of any such fire or other casualty and Seller's
determination of the cost to repair the damage caused thereby. In the event of
damage to the Property by fire or other casualty prior to the Closing Date,
repair of which would cost in excess of $100,000.00 (as determined by Seller
and Purchaser in good faith), then this Agreement may be terminated at the
option of Purchaser, which option shall be exercised, if at all, by Purchaser's
written notice thereof to Seller within fifteen (15) business days after
Purchaser receives written notice of such fire or other casualty (which notice
shall specifically call Purchaser's attention to this Paragraph 6.1 and state
that Purchaser has fifteen (15) business days to respond), and upon the
exercise of such option by Purchaser this Agreement shall become null and void,
the Earnest Money deposited by Purchaser shall be returned to Purchaser
together with interest thereon, and neither party shall have any further
liability or obligations hereunder. In the event that Purchaser does not
exercise the option set forth in the preceding sentence, the Closing shall take
place on the Closing Date and Seller shall assign and transfer to Purchaser on
the Closing Date all of Seller's right, title and interest in and to all
insurance proceeds paid or payable to Seller on account of the fire or casualty
and in addition, Seller shall pay to Purchaser the amount of any deductible
maintained by Seller under any insurance policy covered by such fire or
casualty. Seller represents, warrants and covenants that it will maintain
<PAGE>
property damage insurance insuring the Property for its full replacement cost
during the executory period of this Agreement.
6.2. Condemnation. If between the date of this Agreement and the Closing
Date, any condemnation or eminent domain proceedings are initiated which might
result in the taking of any part of the Property or the taking or closing of
any right of access to the Property, Seller shall immediately notify Purchaser
of such occurrence, which notice shall specifically call Purchaser's attention
to this Paragraph 6.2 and state that Purchaser has fifteen (15) business days
to respond. In the event that the taking of any part of the Property shall:
(i) materially impair access to or parking on the Property; (ii) cause any
material non-compliance with any applicable law, ordinance, rule or regulation
of any federal, state or local authority or governmental agencies having
jurisdiction over the Property or any portion thereof; or (iii) materially and
adversely impair the use of the Property as it is currently being operated
(hereinafter referred to as a "Material Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease;
or
6.2.2. proceed with the Closing, in which event Seller shall assign
to Purchaser all of Seller's right, title and interest in and to any award made
in connection with such condemnation or eminent domain proceedings.
Purchaser shall notify Seller, within fifteen (15) business days after
Purchaser's receipt of Seller's notice, whether Purchaser elects to exercise
its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be delayed,
if necessary, until Purchaser makes such election. If Purchaser fails to make
an election within such fifteen (15) business day period, Purchaser shall be
deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. Inspection Period. During the period commencing on January 22, 1997
and ending at 5:00 p.m. Chicago time on April 8, 1997 (said period being herein
referred to as the "Inspection Period"), Purchaser and the agents, engineers,
employees, contractors and surveyors retained by Purchaser may enter upon the
Property, at any reasonable time and upon reasonable prior notice to Seller, to
inspect the Property, and to conduct and prepare such studies, tests and
surveys as Purchaser may deem reasonably necessary and appropriate. In
connection with Purchaser's review of the Property, Seller has delivered to
Purchaser complete and accurate copies of the following: the Leases, the
Contracts, the Permits in Seller's possession, the Warranties in Seller's
possession, the Records in Seller's possession, the current rent roll for the
Property, the most recent tax and insurance bills, utility account numbers, and
year end 1995 and year end 1996 operating statements, and plans and
specifications for the Improvements in Seller's possession.
<PAGE>
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Property to the condition existing
prior to the performance of such tests or investigations by or on behalf of
Purchaser. Purchaser shall defend, indemnify and hold Seller and any
affiliate, parent of Seller, and all shareholders, employees, officers and
directors of Seller or Seller's affiliate or parent (hereinafter collectively
referred to as "Affiliates of Seller") harmless from any and all liability,
cost and expense (including without limitation, reasonable attorney's fees,
court costs and costs of appeal) suffered or incurred by Seller or Affiliates
of Seller for injury to persons or property caused by Purchaser's
investigations and inspection of the Property. Purchaser shall undertake its
obligation to defend set forth in the preceding sentence using attorneys
selected by Purchaser and reasonably acceptable to Purchaser.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph
7.1, Purchaser shall have the right to terminate this Agreement by giving
written notice of such termination to Seller at any time prior to the
expiration of the Inspection Period. If written notice is not received by
Seller pursuant to this Paragraph 7.1 prior to the expiration of the Inspection
Period, then the right of Purchaser to terminate this Agreement pursuant to
this Paragraph 7.1 shall be waived. If Purchaser terminates this Agreement by
written notice to Seller prior to the expiration of the Inspection Period: (i)
Purchaser shall promptly deliver to Seller copies of all studies, reports and
other investigations obtained by Purchaser in connection with its due diligence
during the Inspection Period; and (ii) the Earnest Money deposited by Purchaser
shall be immediately paid to Purchaser, together with any interest earned
thereon, and neither Purchaser nor Seller shall have any right, obligation or
liability under this Agreement, except for Purchaser's obligation to indemnify
Seller and restore the Property, as more fully set forth in this Paragraph 7.1.
Notwithstanding anything contained herein to the contrary, the terms of this
Paragraph 7.1, shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
7.2. As-Is. Purchaser acknowledges and agrees that it will be purchasing
the Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that except as
otherwise specifically set forth in this Agreement, Purchaser will be
purchasing the Property and the Personal Property "AS IS" and "WITH ALL
FAULTS", based upon the condition of the Property and the Personal Property as
of the date of this Agreement, wear and tear and loss by fire or other casualty
or condemnation excepted. Without limiting the foregoing, Purchaser
acknowledges that, except as may otherwise be specifically set forth elsewhere
in this Agreement, neither Seller nor its consultants, brokers or agents have
made any representations or warranties of any kind upon which Purchaser is
relying as to any matters concerning the Property or the Personal Property,
including, but not limited to, the Land or the Improvements, the existence or
non-existence of Hazardous Materials (as hereinafter defined), economic
projections or market studies concerning the Property, any development rights,
taxes, bonds, covenants, conditions and restrictions affecting the Property,
<PAGE>
water or water rights, topography, drainage, soil, subsoil of the Property, the
utilities serving the Property or any zoning or building laws, rules or
regulations or "Environmental Laws" (hereinafter defined) affecting the
Property. Except as specifically set forth herein, Seller makes no
representation or warranty that the Property complies with Title III of the
Americans with Disabilities Act or any fire code or building code. Purchaser
hereby releases Seller and the Affiliates of Seller from any and all liability
in connection with any claims which Purchaser may have against Seller or the
Affiliates of Seller relating directly or indirectly to the existence of
asbestos or Hazardous Materials on, or environmental conditions of, the
Property, whether known or unknown; provided, however, that Purchaser may
assert claims for contribution or cost recovery against Seller or the
Affiliates of Seller, relating directly or indirectly to the existence of
asbestos or Hazardous Materials on, or environmental conditions of, the
Property, whether known or unknown, only in the event that Purchaser is sued by
a third party in connection therewith. As used herein, "Environmental Laws"
means all federal, state and local statutes, codes, regulations, rules,
ordinances, orders, standards, permits, licenses, policies and requirements
(including consent decrees, judicial decisions and administrative orders)
relating to the protection, preservation, remediation or conservation of the
environment or worker health or safety, all as amended or reauthorized, or as
hereafter amended or reauthorized, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq., the Emergency
Planning and Community Right-to-Know Act ("Right-to-Know Act"), 42 U.S.C.
Section 11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. Section 7401
et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33 U.S.C.
Section 1251 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
Section 2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water Act"),
42 U.S.C. Section 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C.
Section 2011 et seq., the Occupational Safety and Health Act ("OSHA"),
29 U.S.C. Section 651 et seq., and the Hazardous Materials Transportation Act
(the "Transportation Act"), 49 U.S.C. Section 1802 et seq. As used herein,
"Hazardous Materials" means: (1) "hazardous substances," as defined by CERCLA;
(2) "hazardous wastes," as defined by RCRA; (3) any radioactive material
including, without limitation, any source, special nuclear or by-product
material, as defined by AEA; (4) asbestos in any form or condition; (5)
polychlorinated biphenyls; and (6) any other material, substance or waste to
which liability or standards of conduct may be imposed under any Environmental
Laws. Notwithstanding anything contained herein to the contrary, the terms of
this Paragraph 7.2 shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Except as expressly set forth herein,
Seller makes no representation or warranty that such material is complete or
accurate or that Purchaser will achieve similar financial or other results with
respect to the operations of the Property, it being acknowledged by Purchaser
that Seller's operation of the Property and allocations of revenues or expenses
may be vastly different than Purchaser may be able to attain. Purchaser
acknowledges that it is a sophisticated and experienced purchaser of real
estate and further that Purchaser has relied upon its own investigation and
inquiry with respect to the operation of the Property and releases Seller and
<PAGE>
the Affiliates of Seller from any liability with respect to such historical
information. Notwithstanding anything contained herein to the contrary, the
terms of this Paragraph 7.3 shall survive the Closing and the delivery of the
Deed and termination of this Agreement.
7.4. Seller has provided to Purchaser the following existing report:
Environmental Site Assessment prepared by Woodward-Clyde Consultants dated July
16, 1993 ("Existing Report"). Seller makes no representation or warranty
concerning the accuracy or completeness of the Existing Report, except as
expressly set forth herein. Purchaser hereby releases Seller and the
Affiliates of Seller from any liability whatsoever with respect to the Existing
Report, or, including, without limitation, the matters set forth in the
Existing Report, and the accuracy and/or completeness of the Existing Report.
Furthermore, Purchaser acknowledges that it will be purchasing the Property
with all faults disclosed in the Existing Report. Notwithstanding anything
contained herein to the contrary, the terms of this Paragraph 7.4 shall survive
the Closing and the delivery of the Deed and termination of this Agreement.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
April 30, 1997 (the "Closing Date"), at the office of Seller's attorney,
Chicago, Illinois at which time Seller shall deliver possession of the Property
to Purchaser. This transaction shall be closed through an escrow with Title
Insurer, in accordance with the general provisions of the usual and customary
form of deed and money escrow for similar transactions in Colorado, or at the
option of either party, the Closing shall be a "New York style" closing at
which the Purchaser shall wire the Purchase Price to Title Insurer on the
Closing Date and prior to the release of the Purchase Price to Seller,
Purchaser shall receive the Title Policy or marked up commitment dated the date
of the Closing Date. In the event of a New York style closing, Seller shall
deliver to Title Insurer any customary affidavit in connection with a New York
style closing. All closing and escrow fees shall be divided equally between
the parties hereto.
9. CLOSING DOCUMENTS.
9.1. Closing Statement. On or prior to the Closing Date, Seller and
Purchaser shall execute and deliver to one another a joint closing statement.
In addition, Purchaser shall deliver to Seller the balance of the Purchase
Price, an assumption of the documents set forth in Paragraph 9.2.3 and 9.2.4
and such other documents as may be reasonably required by the Title Insurer in
order to consummate the transaction as set forth in this Agreement.
9.2. Seller's Deliveries. On the Closing Date, Seller shall deliver to
Purchaser the following:
9.2.1. the special warranty deed (the "Deed") (in the form of
Exhibit E attached hereto), in recordable form conveying fee simple title to
the Real Property to Purchaser subject only to Permitted Exceptions;
9.2.2. a special warranty bill of sale conveying the Personal
Property to Purchaser free and clear of any liens, claims or encumbrances (in
the form of Exhibit F attached hereto);
9.2.3. an assignment and assumption of intangible property (in the
form attached hereto as Exhibit G), including, without limitation, the
Contracts, the Permits, the Warranties and the Records;
<PAGE>
9.2.4. an assignment and assumption of Leases and security
deposits (in the form attached hereto as Exhibit I);
9.2.5. a certificate in the form of Exhibit O certifying that the
representations and warranties set forth in Paragraph 16.2 are true and correct
as of the Closing Date as if made on the Closing Date subject to the
limitations contained in Paragraph 5.3 hereof, and subject to the limitations
on survival and liability set forth herein;
9.2.6. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.7. original copies, or duplicate copies if originals are not
available, of the Leases, the Contracts, the Permits, the Warranties and the
Records (which shall be delivered at the Property);
9.2.8. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.9. possession of the Property to Purchaser, subject to the
terms of the Leases;
9.2.10. evidence of the termination of the management agreement and
any other contracts or agreements which are not Contracts;
9.2.11. notice to the tenants of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the Leases
and the obligation to refund the security deposits (in the form of Exhibit K);
and
9.2.12. an updated rent roll in the same form as Exhibit M
certified by Seller to be true and correct as of the Closing Date;
9.2.13. an original estoppel certificate addressed to Purchaser in
the form of Exhibit L (or containing such modifications as are permitted
hereunder) from each tenant of the Property (or from Seller, to the extent
permitted by Paragraph 17); and
9.2.14. an opinion of Seller's counsel, dated as of the Closing
Date and in form reasonably satisfactory to Purchaser, that Seller has been
duly formed under the laws of the State of Illinois and is in good standing
under the laws of the jurisdiction in which the Property is located, that
Seller is duly qualified to transact business in the jurisdiction in which the
property is located, that Seller has the requisite power and authority to enter
into and perform this Agreement and the documents and instruments required to
be executed and delivered by Seller pursuant to this Agreement, and that such
documents and instruments have been duly authorized by all necessary
partnership action on the part of Seller and have been duly executed and
delivered.
<PAGE>
10. PURCHASER'S DEFAULT. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, THE PARTIES ACKNOWLEDGE THAT
THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES'
REASONABLE ESTIMATE OF SELLER'S DAMAGES.
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7 AND PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL, DOCUMENTED
THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF ITS DUE DILIGENCE HEREUNDER
AND THE PREPARATION OF THIS AGREEMENT, NOT TO EXCEED $75,000 IN THE AGGREGATE.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT
IS ITS REFUSAL TO DELIVER THE CLOSING DOCUMENTS SET FORTH IN PARAGRAPH 9.2.1-8,
and 9.2.10-12 HEREOF, THEN PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC
PERFORMANCE.
12. PRORATIONS.
12.1. Prorations Generally. Rents (exclusive of delinquent rents, but
including prepaid rents); refundable security deposits (which will be assigned
to and assumed by Purchaser and credited to Purchaser at Closing); water and
other utility charges; fuels; prepaid operating expenses; management fees
payable to Insignia Management Co. not to exceed 6% of gross rent; real and
personal property taxes prorated on a "net" basis (i.e. adjusted for all
tenants' liability, if any, for such items); operating expenses which are
reimbursable by the tenants for the period prior to the Closing Date less any
amount previously paid by the Tenants shall be credited to Seller; and other
similar items shall be adjusted ratably as of 11:59 p.m. on the Closing Date,
and credited against the balance of the cash due at Closing. Assessments
payable in installments which are due subsequent to the Closing Date shall be
paid by Purchaser. Where the Leases impose on tenants obligations for taxes,
common area expenses, operating expenses or additional charges of any other
nature, and where Seller shall have collected any portion thereof in excess of
amounts incurred by Seller for such items for the period prior to the Closing
Date, then there shall be an adjustment and credit given to Purchaser at the
Closing for such excess amounts collected. In addition, prorations shall be
made at Closing as required pursuant to Paragraph 26 hereof. If the amount of
any of the items to be prorated is not then ascertainable, the adjustments
thereof shall be on the basis of the most recent ascertainable data. All
prorations will be final except as to delinquent rent referred to in Paragraph
12.2 below; provided that in the case of real property taxes such proration
shall be based upon 110% of the real property taxes payable with respect to the
Property in 1996.
<PAGE>
12.2. Post-Closing Receipts. In the event that any rentals for any of
the Leases remain unpaid at the Closing Date, Purchaser shall use reasonable
efforts after the Closing Date to collect such rentals and promptly deliver all
rentals so collected ("Post-Closing Receipts") to Seller; provided, however,
that Purchaser shall not be required to institute any legal actions as a means
of attempting to collect such rentals. In the event that any tenant's legal
right to possession has been terminated prior to the end of the Inspection
Period, Seller retains all rights to any delinquent rent from such tenant,
including the right to institute any legal actions as a means of attempting to
collect such rentals. In the event that any tenant is delinquent in the
payment of rent by more than 60 days as of the end of the Inspection Period,
but such tenant's legal right to possession has not been terminated, all such
delinquent rent received by Purchaser after Closing shall belong to Purchaser.
All other delinquent rentals received by Purchaser prior to November 30, 1997
shall be applied first to amounts owing Seller, and then to pay any current
obligations of the tenant(s) in question, and Seller waives the right to
institute any legal actions as a means of attempting to collect such rentals.
Seller retains the right to conduct an audit, at reasonable times and upon
reasonable notice, but not after December 31, 1997, of Purchaser's books and
records to verify the accuracy of the Post-Closing Receipts reconciliation
statement and upon the verification of additional funds owing to Seller,
Purchaser shall pay to Seller said additional Post-Closing Receipts and the
cost of performing Seller's audit. Paragraph 12.2 of this Agreement shall
survive the Closing and the delivery and recording of the Deed.
12.3. Percentage Rent. Percentage rent payable under the Leases shall
be prorated as of the Closing Date as follows:
12.3.1. Any percentage rent attributable to a specified period
("Percentage Rent Period") ending prior to the Closing Date shall be promptly
paid over to the Seller if and when collected. Seller shall be entitled to all
percentage rent attributable to the period prior to Closing Date for any
Percentage Rent Period ending prior to Closing Date. Paragraph 12.3.1 of this
Agreement shall survive the Closing and the delivery and recording of the Deed.
12.3.2. Percentage rent payable with respect to a Percentage Rent
Period a portion of which occurs prior to the Closing Date and a portion of
which occurs subsequent to the Closing Date shall be apportioned between
Purchaser and Seller on the basis of their respective period of ownership
during the applicable Percentage Rent Period and shall be calculated in the
following manner. Seller shall be entitled to a percentage rent proration
determined by (x) multiplying the amount of the total gross sales from the most
recently completed and not estimated Percentage Rent Period by the applicable
formula for percentage rent contained in the applicable Lease, (y) multiplying
such product by 80% (reflecting a discount rate of 20%), and (z) then
multiplying such product by a fraction, the numerator of which shall be the
total number of days in the current Percentage Rent Period prior to the Closing
Date and the denominator of which shall be the total number of days in the
current Percentage Rent Period (in order to allocate the correct time period to
each party). Purchaser shall be entitled to the remainder of such percentage
rent. Notwithstanding the foregoing, Seller shall not receive any proration of
percentage rent pursuant to this paragraph 12.3.2 with respect to any tenant
which has gone dark prior to Closing. This percentage rent proration will
obviate the need to perform a future reconciliation.
<PAGE>
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest
in this Agreement without the prior written consent of the Seller.
Notwithstanding the foregoing, Purchaser shall have the right to assign its
interest in this Agreement without the prior written consent of the Seller to
any entity which, directly or indirectly, controls, is controlled by or is
under common control with Purchaser or Cargill Financial Services Corporation,
but such assignment shall not release Purchaser from its obligations hereunder.
If any assignee of Purchaser under this Agreement petitions or applies for
relief in bankruptcy or said assignee is adjudicated as a bankrupt or
insolvent, or said assignee files any petition, application for relief or
answer-seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
present or future federal, state or other statute, law, code or regulation
relating to bankruptcy, insolvency, or other relief for debtors (collectively,
a "Bankruptcy Filing") on or before the Closing Date, said Bankruptcy Filing
shall be a default under this Agreement and Purchaser shall indemnify Seller
for all costs, attorney's fees and expenses of Seller resulting from Seller's
efforts to obtain the Earnest Money as liquidated damages and to clear title to
the Property from any encumbrance resulting from the Bankruptcy Filing.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Insignia Mortgage and Investment Company, Inc. (to be paid by
Seller). Seller's commission to Insignia Mortgage and Investment Company, Inc.
shall only be payable out of the proceeds of the sale of the Property in the
event the transaction set forth herein closes. Purchaser and Seller shall
indemnify, defend and hold the other party hereto harmless from any claim
whatsoever (including without limitation, reasonable attorney's fees, court
costs and costs of appeal) from anyone claiming by or through the indemnifying
party any fee, commission or compensation on account of this Agreement, its
negotiation or the sale hereby contemplated other than to Insignia Mortgage and
Investment Company, Inc. The indemnifying party shall undertake its
obligations set forth in this Paragraph 15 using attorneys selected by the
indemnifying party and reasonably acceptable to the indemnified party. The
provisions of this Paragraph 15 will survive the Closing and delivery of the
Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter
or thing shall only mean such knowledge or notice that has actually been
received by Alan Muench (the asset manager responsible for the Property) or
Seller's property manager responsible for the management of the Property (the
"Seller's Representative"), and any representation or warranty of the Seller
that is qualified by Seller's knowledge is based upon those matters of which
the Seller's Representative has actual knowledge. Any knowledge or notice
given, had or received by any of Seller's agents, servants or employees shall
not be imputed to Seller, the general partner or limited partners of Seller,
the subpartners of the general partner or limited partners of Seller or
Seller's Representative. Seller hereby covenants to deliver a copy of this
Agreement to Seller's property manager, and to instruct such property manager
to review the Agreement and notify Seller's Representative of any and all
<PAGE>
information known to such property manager regarding the representations and
warranties contained herein.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties:
16.2.1.Seller has not entered into any contracts for the sale of any
of the Property other than this Agreement. Seller has received no notice of
and has no knowledge of any rights of first refusal or first offer, options to
purchase any of the Property or any other rights or agreements which may delay
or prevent this transaction.
16.2.2.To Seller's knowledge, there has been no labor or material of
any kind furnished to or for the benefit of the Property at Seller's request
for which payment in full has not been made, except in connection with tenant
improvements as set forth on Exhibit N attached hereto.
16.2.3.No person or entity is entitled to possession of any of the
Property, other than Seller, the tenants under the Leases or otherwise pursuant
to a recorded instrument.
16.2.4.Seller has received no notice of and has no knowledge of any
pending or threatened condemnation or transfer in lieu thereof affecting any of
the Property, nor has Seller agreed or committed to dedicate any of the
Property.
16.2.5.Seller has received no notice of and has no knowledge of any
pending or threatened action which would impair access to the Property.
16.2.6.Seller has received no notice and has no knowledge of any
actual or threatened curtailment, cancellation or suspension of any utilities
serving the Property.
16.2.7.Seller has received no notice of and has no knowledge of any
action, litigation, investigation or proceeding of any kind pending or
threatened against Seller or any of the Property which materially and
adversely affect the value of the Property except as disclosed in Exhibit Q
attached hereto (if litigation exists on the property).
16.2.8.Seller has received no notice of and has no knowledge of any
uncured default under any easement agreement or joint operation agreement
affecting the Property, and Seller has no knowledge of any amendment or
modification to such agreements except as of record.
16.2.9.Seller has not received written notice of any violation of
any Environmental Laws, statute, rule, law, obligation, ordinance, or other
legal regulation or requirement pertaining to the use, maintenance, ownership,
or operation of the Property, which such violation has not been cured without
waiver or variance of the applicable Environmental Laws.
16.2.10. To Seller's knowledge, there are no leases or
possessory rights in favor of any party, service or maintenance contracts,
equipment leases or other contracts regarding any of the Property except for
the Leases, the Contracts and any matters of record.
<PAGE>
16.2.11. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Contract and their
respective amendments. Seller has received no notice and has no knowledge that
either Seller or any other party under a Contract is in default of their
respective obligations and liabilities thereunder. To Seller's knowledge,
except for the Contracts, there are no other service or maintenance contracts,
equipment leases or other contracts regarding any of the Property which will
not be terminated on or before the Closing Date.
16.2.12. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of the Records.
16.2.13. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Lease and their respective
amendments. To Seller's knowledge, the information regarding the Leases
contained in the rent roll attached as Exhibit M is true, correct and complete
as of the date set forth therein. Seller has received no notice and has no
knowledge that either Seller or the applicable tenant is in default of their
respective obligations and liabilities under any of the Leases, including those
provisions relating to bankruptcy or insolvency.
16.2.14. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Permit in Seller's
possession and their respective amendments. Seller has received no notice and
has no knowledge (a) that Seller is in default of its obligations and
liabilities under any of the Permits, or (b) of any actual or threatened
cancellation or suspension of any Permit, or (c) that any additional licenses
or permits are required under applicable law to operate the Property as it is
now operated.
16.2.15. To Seller's knowledge, Seller has delivered to
Purchaser true, correct and complete copies of each Warranty in Seller's
possession and their respective amendments. Seller has received no notice that
either Seller or the applicable warrantor is in default of their respective
obligations and liabilities under any of the Warranties.
16.2.16. No management, leasing or maintenance personnel or
agents employed in connection with the operation of the Property have the right
to continue such employment after Closing except pursuant to a Contract. No
person or entity is entitled to claim any brokerage or leasing commissions or
other payments with respect to any of the Property, including regarding any of
the Leases, except as set forth in Exhibit N.
16.2.17. Seller has been duly formed under the laws of the
State of Illinois and is in good standing under the laws of the jurisdiction in
which the Property is located, is duly qualified to transact business in the
jurisdiction in which the Property is located, and has the requisite power and
authority to enter into and perform this Agreement and the document sand
instruments required to be executed and delivered by Seller pursuant hereto.
This Agreement has been duly executed and delivered by Seller and is a valid
and binding obligation of Seller enforceable in accordance with its terms.
This Agreement and the documents and instruments required to be executed and
delivered by Seller pursuant hereto have each been duly authorized by all
necessary partnership action on the part of Seller and that such execution,
delivery and performance does and will not conflict with or result in a
violation of Seller's partnership agreement or any judgment, order or decree of
any court or arbiter to which Seller is a party, or any agreement to which
<PAGE>
Seller and/or any of the Property is bound or subject including the Contracts
and the Leases.
16.2.18. Seller has not (i) made a general assignment for the
benefit of creditors, (ii) filed any involuntary petition in bankruptcy or
suffered the filing of any involuntary petition by its creditors, (iii)
suffered the appointment of a receiver to take possession of all or
substantially all of its assets, (iv) suffered the attachment or other judicial
seizure of all or substantially all of its assets, (v) admitted in writing its
inability to pay its debts as they come due, or (vi) made an offer of
settlement, extension or composition to its creditors generally.
16.2.19. Seller is not a "foreign person", "foreign
partnership", "foreign trust" or "foreign estate" as those terms are defined in
Section 1445 of the Internal Revenue Code.
16.2.20. Seller shall at all times prior to the Closing operate
and maintain the Property in substantially the same manner as it is now
operated and maintained, ordinary wear and tear and damage by fire and casualty
excepted.
16.3. Purchaser hereby represents and warrants to Seller that
Purchaser has the full right, power and authority to execute and deliver this
Agreement and consummate the transactions contemplated herein.
16.4. If at any time after the execution of this Agreement, either
Purchaser or Seller becomes aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question to
become untrue in any material respect, said party shall not be in default under
this Agreement and the sole remedy of the other party shall be to terminate
this Agreement. Except as set forth in Paragraph 5.4, if the status of any of
the tenancies changes from the date of the rent roll attached hereto and the
date of the rent roll delivered at Closing, provided the change in status is
not caused by a breach by Seller of its obligations under any Lease, then
Purchaser shall not have the right to terminate this Agreement or make any
claim for a breach of a representation or warranty hereunder involving the rent
roll or tenancies thereunder. Purchaser and Seller are prohibited from making
any claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in this
Agreement that the claiming party has actual knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein
shall survive Closing until November 30, 1997. The claiming party shall have
no right to make any claims against the other party for a breach of a
representation or warranty unless the claiming party delivers written notice of
such claim to the other party before November 30, 1997.
<PAGE>
17. ESTOPPEL CERTIFICATES. Promptly following the mutual execution and
delivery of this Agreement, Seller shall diligently proceed and use its
diligent efforts to obtain estoppel certificates in the form of Exhibit L from
each of the tenants under the Leases. If a tenant shall fail or refuse to
deliver an estoppel certificate with respect to its Lease on or before the
Closing Date, Seller shall execute and deliver to Purchaser at Closing an
estoppel certificate with respect to such Lease in substitution from such
tenant based on the knowledge of Seller as set forth in Paragraph 16.1;
provided, however, such certificate of Seller shall not be deemed to have
satisfied the condition in Paragraph 5.1, except as to Leases of up to 50% of
the rentable square feet leased pursuant to Leases of 7,500 square feet or
less. Seller's liability under Seller Tenant Certificates shall be limited
pursuant to Paragraph 16.5 and 18 herein.
18. LIMITATION OF LIABILITY. None of the Affiliates of Seller, nor any of
Seller's or the Affiliates of Seller's respective beneficiaries, shareholders,
partners, officers, directors, agents or employees, heirs, successors or
assigns shall have any personal liability of any kind or nature for or by
reason of any matter or thing whatsoever under, in connection with, arising out
of or in any way related to this Agreement and the transactions contemplated
herein, and Purchaser hereby waives for itself and anyone who may claim by,
through or under Purchaser any and all rights to sue or recover on account of
any such alleged personal liability. Notwithstanding anything contained herein
to the contrary, Purchaser hereby agrees that the maximum liability of Seller
after the Closing, in connection with, arising out of or in any way related to
a breach by Seller under this Agreement or any document or conveyance agreement
in connection with the transaction, shall be $380,000.00. Seller further
agrees not to distribute $380,000.00 of the proceeds of the Purchase Price to
its partners until the later of (i) November 30, 1997 and (ii) final resolution
of any claims by Purchaser and asserted in writing against Seller prior to
November 30, 1997 in accordance with the terms of this Agreement ("Claims");
provided, however, that if any Claims are disputed by Seller, Seller shall have
the right, by written notice to Purchaser, to require Purchaser to file suit in
a court of competent jurisdiction within ninety (90) days after such notice to
Purchaser. If no suit is filed by such date, said notice with respect to the
Claim in question shall no longer prevent Seller from distributing the
proceeds.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
<PAGE>
20. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James Mendelson
(847) 317-4367
(847) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: c/o Ellis Partners, Inc.
351 California Street, Suite 1150
San Francisco, CA 94104
Attention: Harold A. Ellis, Jr.
(415) 391-9800
(415) 391-4711 (FAX)
with copies to: Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, MN 55345
Attention: Tim Clark
(612) 984-3449
(612) 984-3905 (FAX)
and to: Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Matthew R. Bogart
(612) 336-3435
(612) 336-3026 (FAX)
<PAGE>
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or the same day as given if sent by facsimile transmission and
received by 5:00 p.m. Chicago time or on the 4th business day after the same is
deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be sent to the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution. Seller will forward one (1) copy of the
executed Agreement to Purchaser and will forward the following to the Escrow
Agent:
(A) One (1) fully executed copy of this Agreement; and
(B) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
Within two (2) business days after its receipt of a fully-executed counterpart
of this Agreement and the Escrow Agreement, Purchaser agrees to deposit the
Earnest Money with Escrow Agent pursuant to the terms of the Escrow Agreement.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of Colorado.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
26. NEW LEASES. On or before ten (10) business days prior to the expiration
of the Inspection Period, Seller may execute any new lease or modify or renew
any existing lease affecting the Property without Purchaser's consent. Seller
shall deliver a copy of any such new lease or existing lease modification or
renewal (together with an estimation of the "New Lease Costs" (as hereinafter
defined)), as applicable, to Purchaser within ten (10) business days of
execution by Seller and the new tenant or existing tenant, as applicable, but
in any event on or before ten (10) business days prior to the expiration of the
Inspection Period. In the event Purchaser disapproves of such new lease or
existing lease modification or renewal, Purchaser's sole remedy shall be to
terminate this Agreement in accordance with Paragraph 7 hereof. In the event
that Purchaser does not terminate this Agreement as aforesaid, Purchaser shall
<PAGE>
be responsible for the costs of all tenant improvements and leasing commissions
associated with the negotiation and execution of any such new lease or existing
lease modification or renewal ("New Lease Costs") and Purchaser shall assume
all such obligations at the Closing. Seller shall receive a credit at Closing
for any New Lease Cost incurred by Seller prior to Closing.
After the date ten (10) business days prior to the expiration of the
Inspection Period, Seller shall not execute any new lease or existing lease
modification or renewal affecting the Property without Purchaser's prior
written consent. Purchaser's consent shall be deemed given if Purchaser has
not responded to the contrary within ten (10) business days after Seller's
written request and Purchaser's receipt of such new lease or existing lease
modification or renewal (together with an estimation of the New Lease Costs).
If approved by Purchaser, a complete copy of any such new lease or existing
lease modification or renewal shall be delivered to Purchaser within ten (10)
days of the full execution thereof. All New Lease Costs shall be paid by
Purchaser and Purchaser shall assume all such obligations at the Closing and
Seller shall receive a credit at Closing for any New Lease Costs incurred by
Seller prior to Closing.
Purchaser acknowledges that there currently exists the unsatisfied tenant
improvement obligations and leasing commissions set forth on Exhibit N attached
hereto. Seller agrees to pay the unsatisfied leasing commission obligations
and tenant improvement obligations set forth on Exhibit N on or before the
Closing or credit Purchaser for the amount of said unsatisfied obligation and
Purchaser shall assume all obligations therefor at Closing.
27. SELLER'S POSSESSION. All references herein to "Seller's possession" shall
mean in the possession of Seller and the property manager of the Property.
28. EXECUTION BY THE BALCOR COMPANY. The Balcor Company executes this
Agreement solely for the purpose of assuring to Purchaser that if the Seller
fails to withhold or pay the sums required of Seller pursuant to Paragraph 18
and if Purchaser is successful in any claims asserted against the Seller for a
breach of a representation or warranty, then The Balcor Company shall pay to
Purchaser the amount of such claim(s), the total of which shall not exceed
$380,000. Purchaser may name The Balcor Company in any suit against Seller,
provided that Purchaser may not name The Balcor Company in any suit unless
Seller is also named therein.
29. COSTS OF LITIGATION. If either party to this Agreement shall institute an
action or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney fees actually incurred; provided, however, that the
aggregate liability of Seller in connection with this Agreement, including
Seller's liability under this Paragraph 29, shall be limited in accordance with
Paragraph 18 hereof.
30. NEGOTIATION WITH TENANTS. Purchaser shall have the right during the
Inspection Period and at any time prior to the Closing Date to contact and
negotiate with any current, former or potential tenant or occupant of the
Property. Purchaser shall inform such party that it is not the owner of the
Property and any agreement that Purchaser and such party enter into shall
specifically state that it is contingent on Purchaser acquiring the property.
In the event that Purchaser does not acquire the Property, Purchaser shall
deliver a copy of all such agreements to Seller.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
CROSSTOWN ASSET CORP. I, a Delaware corporation
By: /s/Thomas Haller
----------------------------------
Name: Thomas Haller
----------------------------------
Its: Vice President
----------------------------------
SELLER:
ERINDALE INVESTORS, an Illinois limited
partnership
By: Balcor Equity Partners-III, an Illinois
general partnership, its general partner
By: The Balcor Company, a Delaware
corporation
By: /s/John K. Powell, Jr.
--------------------------------
Name: John K. Powell, Jr.
--------------------------------
Its: Senior Vice President
--------------------------------
JOINDER
The undersigned executes this joinder solely for the purposes of
effectuating its obligations arising under Paragraph 28 of this Agreement.
THE BALCOR COMPANY, a Delaware corporation
By: /s/John K. Powell, Jr.
--------------------------------
Name: John K. Powell
--------------------------------
Its: Senior Vice President
--------------------------------
<PAGE>
[Erindale Center]
Al Lieberman of Insignia Mortgage and Investment Company, Inc. ("Seller's
Broker") executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated 8/8, 1996 between Seller and Seller's Broker (the "Listing
Agreement"). Seller's Broker also acknowledges that payment of the aforesaid
fee or commission is conditioned upon the Closing and the receipt of the
Purchase Price by the Seller. Seller's Broker agrees to deliver a receipt to
the Seller at the Closing for the fee or commission due Seller's Broker and a
release, in the appropriate form, stating that no other fees or commissions are
due to it from Seller or Purchaser.
INSIGNIA MORTGAGE AND INVESTMENT COMPANY,
INC.
By: /s/Al Lieberman
-----------------------------------
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Survey Certification
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Tenant Certificate
M - Rent Roll
N - Leasing Commissions and Tenant Improvements
O - Reaffirmation of Representations and Warranties and Certification of
Rent Roll
P - Permits
Q - Disclosed Litigation
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 35523
<SECURITIES> 0
<RECEIVABLES> 1202
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37195
<PP&E> 57674
<DEPRECIATION> 25601
<TOTAL-ASSETS> 71472
<CURRENT-LIABILITIES> 907
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 70682
<TOTAL-LIABILITY-AND-EQUITY> 71472
<SALES> 0
<TOTAL-REVENUES> 34893
<CGS> 0
<TOTAL-COSTS> 6927
<OTHER-EXPENSES> 3547
<LOSS-PROVISION> 3777
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20642
<INCOME-TAX> 0
<INCOME-CONTINUING> 20642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20642
<EPS-PRIMARY> 29.23
<EPS-DILUTED> 29.23
</TABLE>
