SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-15649
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BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3327914
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Rd.
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
---------------
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
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BALCOR REALTY INVESTORS 86 - SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
-------------- ---------------
Cash and cash equivalents $ 5,745,129 $ 1,093,098
Escrow deposits 2,719,724 2,246,696
Accounts and accrued interest receivable 17,032 5,857
Prepaid expenses 54,512 229,129
Deferred expenses, net of accumulated
amortization of $76,488 in 1996 and
$378,475 in 1995 595,015 619,028
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9,131,412 4,193,808
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Investment in real estate:
Land 7,849,735 11,137,023
Buildings and improvements 49,471,098 83,187,367
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57,320,833 94,324,390
Less accumulated depreciation 19,560,639 34,286,807
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Investment in real estate, net of
accumulated depreciation 37,760,194 60,037,583
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$ 46,891,606 $ 64,231,391
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LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable $ 76,515 $ 119,006
Due to affiliates 40,842 28,823
Accrued liabilities, principally
real estate taxes and interest 293,166 330,070
Security deposits 350,657 420,724
Mortgage notes payable 47,166,874 74,196,579
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Total liabilities 47,928,054 75,095,202
Affiliates' participation in
joint ventures (1,382,134) (1,283,650)
Limited Partners' capital (deficit)
(59,791 Interests issued and
outstanding) 862,105 (8,962,989)
General Partner's deficit (516,419) (617,172)
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Total partners' capital (deficit) 345,686 (9,580,161)
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<PAGE>
$ 46,891,606 $ 64,231,391
============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 86 - SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1996 and 1995
(UNAUDITED)
1996 1995
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Income:
Rental and service $ 3,850,096 $ 4,056,812
Interest on short-term
investments 27,882 23,856
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Total income 3,877,978 4,080,668
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Expenses:
Interest on mortgage
notes payable 1,943,897 1,668,721
Depreciation 591,285 697,914
Amortization of deferred
expenses 24,013 37,551
Property operating 1,409,358 1,206,302
Real estate taxes 293,563 341,320
Property management fees 196,780 201,588
Administrative 136,848 95,661
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Total expenses 4,595,744 4,249,057
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Loss before gain on sales of
properties and participation
in joint ventures (717,766) (168,389)
Gain on sales of properties 10,800,286
Affiliates' participation in
(income) loss from joint
ventures (7,195) 9,329
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Net income (loss) $ 10,075,325 $ (159,060)
============== ===============
Net income (loss) allocated to
General Partner $ 100,753 $ (1,591)
============== ===============
Net income (loss) allocated to
Limited Partners $ 9,974,572 $ (157,469)
============== ===============
Net income (loss) per Limited
Partnership Interest (59,791
issued and outstanding) $ 166.82 $ (2.63)
============== ===============
Distribution to Limited Partners $ 149,478 None
============== ===============
Distribution per Limited Partnership
Interest $ 2.50 None
============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 86 - SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1996 and 1995
(UNAUDITED)
1996 1995
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Operating activities:
Net income (loss) $ 10,075,325 $ (159,060)
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities:
Gain on sales of properties (10,800,286)
Affiliates' participation
in income (loss) from
joint ventures 7,195 (9,329)
Depreciation of properties 591,285 697,914
Amortization of deferred expenses 24,013 37,551
Net change in:
Escrow deposits (138,028) 1,031
Accounts and accrued interest
receivable (11,175) (142,250)
Prepaid expenses 174,617
Accounts payable (42,491) 1,072
Due to affiliates 12,019 32,577
Accrued liabilities (36,904) 170,223
Security deposits (70,067) (3,427)
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Net cash (used in) provided by
operating activities (214,497) 626,302
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Investing activities:
Proceeds from sales of properties 33,074,000
Payment of selling costs (587,610)
Funding of escrow required in
connection with the sale
of property (335,000)
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Net cash provided by investing
activities 32,151,390
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Financing activities:
Capital contribution by joint venture
partner - affiliate 342,760
Distribution to joint venture
partner - affiliate (105,679)
Distribution to Limited
Partners (149,478)
Principal payments on mortgage notes
payable (394,666) (446,610)
Repayment of mortgage notes payable (26,635,039)
Deposit for mortgage loan refinancing (851,580)
<PAGE>
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Net cash used in financing
activities (27,284,862) (955,430)
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Net change in cash and cash equivalents 4,652,031 (329,128)
Cash and cash equivalents at beginning
of period 1,093,098 1,058,935
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Cash and cash equivalents at end of
period $ 5,745,129 $ 729,807
============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1996, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the quarters ended March 31, 1996 and 1995, the Partnership incurred
interest expense on mortgage notes payable of $1,943,897 and $1,668,721 and
paid interest expense of $1,908,419 and $1,668,721, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1996 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $27,704 $40,842
4. Property Sales:
(a) In March 1996, the Partnership sold the Pines of Cloverlane apartment
complex in an all cash sale for $18,974,000. From the proceeds of the sale, the
Partnership paid $14,208,240 to the third party mortgage holder in full
satisfaction of the first mortgage loan, as well as brokerage commissions and
other closing costs totaling $288,460. The Partnership also funded an escrow of
$335,000 required in connection with the sale and received the remaining
$4,142,300 of net sale proceeds. The basis of the property was $12,369,952, net
of accumulated depreciation of $10,441,365. The Partnership recognized a gain
of $6,315,588 related to this sale.
(b) In March 1996, the Partnership sold the Lakeside apartment complex in an
all cash sale for $14,100,000. From the proceeds of the sale, the Partnership
paid $12,894,356 to the third party mortgage holder in full satisfaction of the
first mortgage loan, as well as brokerage commissions and other closing costs
totaling $299,150 and received $906,494 of net sale proceeds. The amount paid
to the mortgage holder includes the outstanding principal balance of the loan
and additional interest expense of $467,557, as required by the loan documents,
which is equal to 50% of the net sale proceeds in excess of $12,654,000. The
basis of the property was $9,316,152, net of accumulated depreciation of
$4,876,088. The Partnership recognized a gain of $4,484,698 related to this
sale.
5. Subsequent Event:
In April 1996, the Partnership paid $4,424,534 to the holders of Limited
Partnership Interests representing the regular quarterly distribution of Net
Cash Receipts of $2.50 per Interest for the first quarter of 1996 and $71.50
<PAGE>
per Interest representing Net Cash Proceeds from the sales of the Lakeside and
Pines of Cloverlane apartment complexes.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors 86-Series I A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1984 to invest in and operate
income-producing real property. The Partnership raised $59,791,000 through the
sale of Limited Partnership Interests and utilized these proceeds to acquire
eight real property investments and a minority joint venture interest in one
additional real property. Prior to 1996, title to two of these properties and
the property in which the Partnership held a minority joint venture interest
were relinquished through foreclosure. During 1996, the Partnership sold two
additional properties. The Partnership continues to operate its four remaining
properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership sold two properties in March 1996. As a result of the gains
recognized on these sales, the Partnership generated net income during the
quarter ended March 31, 1996 as compared to a net loss for the same period in
1995. These gains were partially offset by additional interest expense on
mortgage notes payable paid to the lender on Lakeside Apartments. Further
discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
- ---------------------
Discussions of fluctuations between 1996 and 1995 refer to the quarters ended
March 31, 1996 and 1995.
In March 1996, the Partnership sold the Pines of Cloverlane and Lakeside
apartment complexes. As a result, the Partnership recognized gains totaling
$10,800,286 during 1996. These sales also resulted in decreases in rental and
service income, depreciation, real estate taxes and property management fees
during 1996 as compared to 1995.
Increased rental income due to higher rental rates at certain of the
Partnership's remaining properties during 1996 as compared to 1995 partially
offset the decrease in rental and service income due to the property sales.
<PAGE>
Interest expense on mortgage notes payable increased during 1996 as compared to
1995 due to a $467,557 payment made to the lender in connection with the sale
of the Lakeside Apartments, as required by the loan documents. This increase
was partially offset by lower interest expense at the Lakeville Apartments due
to the 1995 loan refinancing at a lower interest rate and the sales of the
Lakeside and the Pines of Cloverlane apartment complexes during March 1996.
The amortization of deferred loan fees on the current Lakeville Resort
Apartments mortgage note is lower than the amortization related to the former
mortgage note, resulting in a decrease in amortization expense for 1996 as
compared to 1995.
Increases in sewer and water expenses, structural repairs, landscaping
expenses, and interior upgrades at the Pines of Cloverlane Apartments prior to
its sale and increases in sewer and water expenses and interior upgrades at the
Lake Ridge Apartments, resulted in higher property operating expenses during
1996 as compared to 1995.
The Partnership incurred increased legal, portfolio management, printing and
postage costs in connection with a tender offer during the first quarter of
1996. This resulted in an increase in administrative expenses during 1996 as
compared to 1995.
Lower interest expense and amortization expense at the Lakeville Resort
Apartments due to the June 1995 refinancing, resulted in affiliates'
participation in income from joint ventures during 1996 as compared to
affiliates participation in loss from joint venture during 1995.
Liquidity and Capital Resources
- -------------------------------
The Partnership's cash position increased by approximately $4,652,000 as of
March 31, 1996 when compared to December 31, 1995 primarily as a result of the
sales of the Lakeside and Pines of Cloverlane apartment complexes in March
1996. The Partnership used cash of approximately $214,000 for its operating
activities which consisted primarily of operating cash flow from the properties
which was offset by the payment of additional interest expense relating to the
sale of the Lakeside Apartments as well as administrative expenses. Investing
activities consisted of proceeds received from the sales of properties of
$33,074,000, the payment of closing costs of approximately $588,000 and the
funding of an escrow relating to the Pines of Cloverlane sale of $335,000.
Financing activities consisted of the repayment of mortgage notes payable
relating to the Pines of Cloverlane and Lakeside apartment complexes of
approximately $26,635,000, principal payments on mortgage notes payable of
approximately $395,000 and distributions to Limited Partners and the Lakeville
joint venture partner of approximately $149,000 and $106,000, respectively. The
Partnership made a special distribution to the Limited Partners from sales
proceeds in April 1996.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered significant if it exceeds $250,000 annually or 20% of the property's
rental and service income. The Partnership defines cash flow generated from its
properties as an amount equal to the property's revenue receipts less property
related expenditures, which include debt service payments. During the quarters
ended March 31, 1996 and 1995, the Partnership's four remaining properties
<PAGE>
generated positive cash flow. The Lakeside Apartments generated a marginal cash
flow deficit prior to its sale in March 1996 and during the first quarter of
1995. The Pines of Cloverlane Apartments generated a significant cash flow
deficit prior to its sale in March 1996 as compared to positive cash flow
during the first quarter of 1995 due to expenses incurred to enhance the
property's sale value. As of March 31, 1996, the occupancy rates of the
Partnership's properties ranged from 95% to 100%.
While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties, including improving operating
performance and seeking rent increases where market conditions allow.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. The third party financing of
approximately $6,900,000 on the Brighton Townhomes Apartments matures in 1996
and the Partnership has entered into a contract to sell this property. The
Partnership does not own any other properties with third party financing which
matures prior to 1998.
The General Partner believes that the market for multifamily housing properties
has become increasingly favorable to sellers of these properties. During March
1996, the Partnership sold the Lakeside and Pines of Cloverlane apartment
complexes. The Partnership has also entered into contracts to sell the
Lakeville Resort Apartments and the Brighton Townhomes for sales prices of
$27,200,00 and $11,500,000, respectively. See Item 5. Other Information for
further details concerning the sale contract on Brighton Townhomes. Currently,
the Partnership is preparing to market the two remaining properties. If current
market conditions remain favorable and the General Partner can obtain
appropriate sales prices, the Partnership's liquidation strategy may be
accelerated.
During March 1996, the Partnership sold the Pines of Cloverlane and Lakeside
apartment complexes in all cash sales for $18,974,000 and $14,100,000,
respectively. From the proceeds, the Partnership paid $14,208,240 and
$12,894,356, respectively, to the third party mortgage holders in full
satisfaction of the first mortgage loans on the properties. After payment of
related closing costs, escrows and additional interest expense, the sales
generated proceeds of approximately $5,049,000. See Note 4 of Notes to
Financial Statements for additional information.
During April 1996, the Partnership paid $4,424,534 ($74.00 Per Interest) to the
holders of Limited Partnership Interests for the first quarter of 1996. The
regular quarterly distribution level of $2.50 per Interest remained unchanged
from the amount distributed for the fourth quarter of 1995. In addition, Net
Cash Proceeds of $71.50 per Interest from the sales of the Pines of Cloverlane
and Lakeside apartment complexes were distributed to holders of Limited
Partnership Interests. To date, including the April 1996 distribution,
investors have received cumulative distributions of Net Cash Receipts of $7.50
per $1,000 Interest and Net Cash Proceeds of $71.50 per $1,000 Interest,
totaling $79.00 per $1,000 Interest, as well as certain tax benefits. The
General Partner expects to continue quarterly distributions to Limited Partners
based on the current performance of the Partnership's properties. However, the
level of future distributions, if available, will depend on cash flow from the
Partnership's remaining properties and proceeds from future property sales, as
to all of which there can be no assurances. In light of results to date and
<PAGE>
current market conditions, the General Partner does not anticipate that
investors will recover a substantial portion of their original investment.
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
will increase operating costs and replacement costs and may lead to increased
rental revenues and real estate values.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
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Brighton Townhomes
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In 1986, the Partnership acquired Brighton Townhomes, Washington County,
Oregon, utilizing approximately $2,640,000 of offering proceeds. The
Partnership acquired the property subject to first mortgage financing in the
amount of $7,402,000.
On May 6, 1996, the Partnership contracted to sell the property for a sale
price of $11,500,000 to an unaffiliated party, Security Capital Pacific Trust,
a Maryland real estate investment trust. The purchaser has deposited $300,000
into an escrow account as earnest money. The remaining $11,200,000 of the sale
price will be paid in cash by the purchaser at closing, scheduled to be held on
June 17, 1996. The purchaser has two thirty-day options to extend the closing
which may be exercised upon 5 days written notice to the Partnership and a
deposit into escrow of an additional $25,000 in earnest money for each
extension. From the proceeds of the sale, the Partnership will pay the
outstanding balance of the first mortgage loan, which is expected to be
$6,858,644 at closing, $172,500 to an unaffiliated party as a brokerage
commission and closing costs. Neither the General Partner nor any of its
affiliates will receive a brokerage commission in connection with the sale. The
General Partner will be reimbursed by the Partnership for its actual expenses
incurred in connection with the sale.
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 that the sale of the property may not
occur.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
of the Registrant's Registration Statement on Form S-11 dated December 16, 1985
<PAGE>
(Registration No. 33-361), and Form of Confirmation regarding Interests in the
Partnership set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q
for the quarter ended June 30, 1992 (Commission File No. 0-15649) are
incorporated herein by reference.
(10) Material Contracts:
(i) The Agreement of Sale and attachment thereto relating to the sale of Pines
of Cloverlane Apartments previously filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated January 25, 1996 is incorporated herein by
reference.
(ii) First, Second and Third Amendments to Agreement of Sale relating to the
sale of Pines of Cloverlane Apartments previously filed as Exhibits (10) (ii),
(10)(iii) and (10)(iv), respectively, to the Registrant's Report on Form 10-K
for the year ended December 31, 1995 is incorporated herein by reference.
(iii) The Agreement of Sale and attachment thereto relating to the sale of the
Lakeside Apartments previously filed as Exhibit 2 to the Registrant's Current
Report on Form 8-K dated February 21, 1996 is incorporated herein by reference.
(iv) The Agreement of Sale and attachment thereto relating to the sale of
Lakeville Resort Apartments previously filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated April 23, 1996 is incorporated herein by
reference.
(v) The Agreement of Sale relating to the sale of Brighton Townhomes is
attached hereto.
(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1996 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated April 23, 1996 was
filed reporting the contract to sell the Lakeville Resort Apartments in
Petaluma, California.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
--------------------------------
Thomas E. Meador
President and Chief Executive Officer (Principal
Executive Officer) of Balcor Partners-XIX, the
General Partner
By: /s/Brian D. Parker
---------------------------------
Brian D. Parker
Senior Vice President, and Chief
Financial Officer (Principal Accounting and
Financial Officer) of Balcor Partners-XIX,
the General Partner
Date: May 15, 1996
------------------------
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 6 day
of May, 1996, by and between SECURITY CAPITAL PACIFIC TRUST, a Maryland real
estate investment trust ("Purchaser"), and BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE 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 Eleven Million Five Hundred Thousand And No/100 Dollars
($11,500,000.00) (the "Purchase Price"), that certain property commonly known
as Brighton Townhomes, Portland, Oregon, a 232 unit apartment complex legally
described on Exhibit A attached hereto, together with all improvements thereon
and appurtenances thereto belonging (the "Property"). Included in the Purchase
Price is all of the personal property set forth on Exhibit B attached hereto
(the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Within three (3) business days following the execution of this
Agreement, the sum of Three Hundred Thousand and No/100 Dollars ($300,000.00)
(the "Earnest Money") to be held in escrow by and in accordance with the
provisions of the Escrow Agreement ("Escrow Agreement") attached hereto as
Exhibit C; and
2.2. 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 COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by Charter Title Insurance
Company, as agent for Chicago Title Insurance Company (hereinafter referred to
as "Title Insurer") dated April 26, 1996 for the Property (the "Title
Commitment"). For purposes of this Agreement, "Permitted Exceptions" shall
mean: (a) general real estate taxes, association assessments, special district
taxes and related charges not yet due and payable; (b) matters shown on the
"Survey" (hereinafter defined); (c) matters caused by the actions of Purchaser;
and (d) the title exceptions set forth in Schedule B of the Title Commitment as
Numbers 6 (no liens as of the date of "Title Policy" (hereinafter defined)), 7
(no liens as of the date of the Title Policy), 8 through 16, 21 through 23 and
28, inclusive, to the extent that same effect the Property. All other
exceptions to title shall be referred to as "Unpermitted Exceptions". The
Title Commitment shall be conclusive evidence of good title as therein shown as
to all matters to be insured by the title policy, subject only to the
exceptions therein stated. On the Closing Date, Title Insurer shall deliver to
Purchaser an ALTA Form 1992 Title Policy in conformance with the previously
delivered Title Commitment, subject to Permitted Exceptions and Unpermitted
Exceptions waived by Purchaser (the "Title Policy"). Seller shall pay the
costs of the Title Commitment and Title Policy. Purchaser shall pay the cost
of any endorsements to, and the extended coverage on, the Title Policy.
3.2. Purchaser has received an updated survey of the Property prepared by
Westlake Consultants Inc., dated April 3, 1996 (the "Survey"). Purchaser and
Seller shall equally share the costs relating to the Survey. Purchaser hereby
<PAGE>
acknowledges that all matters disclosed by the Survey are acceptable to
Purchaser.
3.3. The obligation of Purchaser to pay various costs set forth in
Paragraphs 3.1 and 3.2 shall survive the termination of this Agreement.
4. PAYMENT OF CLOSING COSTS. In addition to the costs set forth in
Paragraphs 3.1 and 3.2, Seller and Purchaser shall equally share the costs of
the transfer taxes, if any, to be paid with reference to the recording of the
"Deed" (hereinafter defined), together with the costs of 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. Each party shall pay for its respective
attorney's fees.
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to the
Title Commitment or the Updated Survey discloses any new Unpermitted Exception,
Seller shall have thirty (30) days from the date of the date-down to the Title
Commitment or the Updated Survey, as applicable, at Seller's expense, to (i)
bond over, cure and/or have any Unpermitted Exceptions which, in the aggregate,
do not exceed $25,000.00, removed from the Title 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
bond over, cure and/or have any Unpermitted Exceptions which, in the aggregate,
equal or exceed $25,000.00, removed from the Title 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 first
sentence of this Paragraph 5.1, 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 5.1, 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.
5.2. Seller agrees to convey fee simple title to the Property to
Purchaser by special warranty deed (the "Deed") in recordable form subject only
to the Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. 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 earlier of the dates upon which either
possession or title is transferred to Purchaser in accordance with this
Agreement. Notwithstanding the foregoing, in the event of damage to the
<PAGE>
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 in good
faith), Purchaser shall not have the right to terminate its obligations under
this Agreement by reason thereof, 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 together with a credit for any deductible applicable to the claim
relating to such insurance proceeds. 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 both 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 five (5) business days after Purchaser receives
written notice of such fire or other casualty and Seller's determination of the
amount of such damages, 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, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7. 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 together
with a credit for any deductible applicable to the claim relating to such
insurance proceeds.
6.2. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated or threatened in
writing 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. In the event that the taking
of any part of the Property shall: (i) materially impair access to 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 collectively 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.
6.3. Purchaser shall then notify Seller, within five (5) 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
<PAGE>
delayed, if necessary, until Purchaser makes such election. If Purchaser fails
to make an election within such five (5) 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. During the period commencing on April 16, 1996 and ending at 5:00
p.m. Chicago time on May 31, 1996 (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, including a review of leases located at 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 agrees to deliver to Purchaser copies of the current rent roll
for the Property, the most recent tax and insurance bills, utility account
numbers, service contracts, and unaudited year end 1995 and year-to-date 1996
operating statements. Seller agrees to make all existing leases for the
Property or any portion thereof available for review by the Purchaser at the
Property.
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
or parent of Seller, and all shareholders, employees, officers and directors of
Seller or Seller's affiliate or parent (hereinafter collectively referred to as
"Affiliate 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,
subject to Seller's reasonable approval.
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, in Purchaser's sole discretion, 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 given by Purchaser 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
<PAGE>
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, Purchaser's obligation to indemnify Seller and restore
the Property, as more fully set forth in this Paragraph 7.1, shall survive the
Closing and the delivery of the Deed and termination of this Agreement.
7.2. Seller makes no representations or warranties relating to the
condition of the Property or the Personal Property, except as specifically set
forth herein. 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 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 condition of the land or any improvements
comprising the Property, 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. 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, and Purchaser hereby agrees not to assert any claims for
contribution, cost recovery or otherwise, 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. The provisions of this Paragraph 7.2 shall in no event be
construed as providing Seller with any rights to indemnification from Purchaser
in connection with the existence of asbestos or Hazardous Materials on, or
environmental condition of, the Property, whether known or unknown. 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
<PAGE>
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, Purchaser's
obligations, as more fully set forth in 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. 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, Purchaser's obligations, as more
fully set forth in 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 reports: (a)
Phase I Environmental Site Assessment and Limited Asbestos Survey, prepared by
Law Engineering & Environmental Services, Inc., dated January 5, 1996, and (b)
Phase II Environmental Site Assessment, prepared by Law Engineering &
Environmental Services, Inc., dated February 15, 1996 (together, the "Existing
Reports"). Seller makes no representation or warranty concerning the accuracy
or completeness of the Existing Reports. Purchaser hereby releases Seller and
the Affiliates of Seller from any liability whatsoever with respect to the
Existing Reports, or, including, without limitation, the matters set forth in
the Existing Reports, and the accuracy and/or completeness of the Existing
Reports. Furthermore, Purchaser acknowledges that it will be purchasing the
Property with all faults disclosed in the Existing Reports.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
June 17, 1996 (the "Closing Date"), at the office of Title Insurer, Portland,
Oregon, at which time Seller shall deliver possession of the Property to
Purchaser, provided, however, that so long as Purchaser is not in default
hereunder, Purchaser shall have two (2) options to extend the Closing Date for
purposes of a 1031 Exchange (see Paragraph 18) for a period of thirty (30) days
each (i.e. to July 17, 1996 and August 16, 1996, respectfully) by (a) giving
written notice to Seller of the exercise of the applicable option to extend no
later than five (5) business days prior to the Closing Date (as the same may
<PAGE>
have been extended) and (b) depositing in each instance at least five (5)
business days prior to the Closing Date (as the same may have been extended) an
amount equal to Twenty-Five Thousand and No/100 Dollars with the Title Insurer,
which sum(s) shall be part of and included in the definition of "Earnest Money"
and shall be governed by the terms of the Escrow Agreement. 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 Oregon, provided, however, that in any instance, the
sale proceeds shall not be disbursed from such escrow unless and until the
Title Insurer shall be unconditionally committed to issuing the Title Policy.
All closing and escrow fees shall be divided equally between the parties
hereto.
9. CLOSING DOCUMENTS.
9.1. On the Closing Date, Seller shall prepare, subject to Purchaser's
reasonable approval, a joint closing statement which shall be executed and
delivered by both Seller and Purchaser to one another. 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. On the Closing Date, Seller shall deliver to Purchaser the
following:
9.2.1. the Deed (in the form of Exhibit E attached hereto),
subject to Permitted Exceptions and those Unpermitted Exceptions waived by
Purchaser;
9.2.2. a special warranty bill of sale conveying the Personal
Property (in the form of Exhibit F attached hereto);
9.2.3. assignment and assumption of intangible property (in the form
attached hereto as Exhibit G), including, without limitation, the service
contracts listed in Exhibit H and Seller's interest, if any, in the name
"Brighton Townhomes";
9.2.4. an assignment and assumption of leases and security deposits
(in the form attached hereto as Exhibit I);
9.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.6. original, and/or copies of, leases affecting the Property in
Seller's possession;
9.2.7. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.8. possession of the Property to Purchaser;
9.2.9. evidence of the termination of the management agreement as of
the Closing Date;
9.2.10. notice to the tenants of the Property (in the form of
Exhibit K) of the transfer of title and assumption by Purchaser of the
<PAGE>
landlord's obligation under the leases and the obligation to refund the
security deposits for which Purchaser receives a credit at closing; and
9.2.11. an updated rent roll.
10. DEFAULT BY PURCHASER. 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, BY PLACING THEIR INITIALS
BELOW, 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 IN THE PREPARATION OF THIS AGREEMENT, NOT TO EXCEED $50,000 IN THE
AGGREGATE. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF
SELLER'S DEFAULT IS ITS WILLFUL REFUSAL TO DELIVER THE DEED, THEN PURCHASER
WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
12. PRORATIONS.
12.1. Rents (exclusive of delinquent rents, but including prepaid rents);
prepaid associations dues, refundable security deposits as shown on the updated
rent roll (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 if and to the extent payable to the
existing property manager for rent received and prorated for the month of
Closing; real and personal property taxes; and other similar items shall be
adjusted ratably as of 12:01 a.m. on the Closing Date, and credited to 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. 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. All basic rent paid following the Closing Date by any tenant of the
Property who is indebted under a lease for basic rent for any period prior to
and including the Closing Date after the payment to Purchaser of all current
basic rent shall be deemed a "Post-Closing Receipt" until such time as all such
indebtedness is paid in full. Within ten (10) days following each receipt by
Purchaser of a Post-Closing Receipt, Purchaser shall pay such Post-Closing
Receipt to Seller. Purchaser shall use its best efforts to collect all amounts
which, upon collection, would constitute Post-Closing Receipts hereunder.
Within 120 days after the Closing Date, Purchaser shall deliver to Seller a
reconciliation statement of Post-Closing Receipts through the first 90 days
<PAGE>
after the Closing Date. Upon the delivery of the Post-Closing Receipts
reconciliation, Purchaser shall deliver to Seller any Post-Closing Receipts
owing to Seller and not previously delivered to Seller in accordance with the
terms hereof. Seller retains the right to conduct an audit, at reasonable
times and upon reasonable notice, 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 in an amount greater than
$5,000.00, 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.
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. Any
assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement shall be an act of default hereunder by Purchaser
and subject to the provisions of Paragraph 10 hereof. Notwithstanding the
foregoing, Purchaser may assign its interest in this Agreement without the
consent of Seller to any entity in which Purchaser owns a controlling interest
and which assumes in writing the obligations of Purchaser hereunder. If any
such assignment occurs, Purchaser shall nonetheless remain liable for all
obligations of Purchaser hereunder
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 CB Commercial Real Estate Group, Inc. ("CB"), to be paid by
Seller in accordance with Seller's listing agreement with CB. Seller's
commission to CB 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 CB.
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 Phillip Schechter or Mike Becker (together referred to as the
"Seller's Representative"), and any representation or warranty of the Seller is
based upon those matters of which the Seller's Representative has actual
knowledge. Seller's Representative shall deliver a copy of the representations
contained in Paragraph 16.2 below to the existing property manager for its
review and request the property manager to inform Seller's Representative of
any inaccuracies contained in such representations. Except as set forth in the
previous two sentences, 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.
<PAGE>
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties, which
representations and warranties are made to Seller's knowledge and which shall,
subject to Paragraph 16.4, survive Closing: (i) Seller has no knowledge of any
pending or threatened litigation, claim, cause of action or administrative
proceeding concerning the Property; (ii) the rent rolls attached hereto as
Exhibit L which Seller has submitted to the Purchaser and updated as of the
Closing Date are accurate as of the dates set forth thereon; (iii) Seller has
no knowledge of any additional environmental reports of the Property
commissioned by Seller since May 1, 1994 other than the Existing Reports; (iv)
Seller has no knowledge of any due and unpaid leasing commission; (v) Seller
has no knowledge of a material default by Seller under any lease for the
Property; and (vi) the list of Service Contracts attached hereto as Exhibit H
is complete and Seller has no knowledge of any material default by Seller under
the terms of any said Service Contracts. Seller hereby represents and warrants
to Purchaser the following: (i) Seller has the power to execute this Agreement
and consummate the transactions contemplated herein; and (ii) Seller has not
entered into any agreement concerning the sale of the Property which conflicts
with the terms of this Agreement.
16.3. Purchaser hereby represents and warrants to Seller that
Purchaser has the full right, power and authority to execute this Agreement and
consummate the transactions contemplated herein.
16.4. The parties agree that the representations contained herein
shall survive Closing for a period of ninety (90) days (i.e., the claiming
party shall have no right to make any claims against the other party for a
breach of a representation or warranty after the expiration of ninety (90) days
immediately following Closing).
16.5. Seller covenants to operate and manage the Property in the same
manner that it has managed, maintained and operated the Property during the
period of Seller's ownership, subject to reasonable wear and tear and casualty.
17. LIMITATION OF LIABILITY.
17.1. Neither Seller, nor any of its respective beneficiaries,
shareholders, partners, officers, 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.
17.2. Notwithstanding anything contained herein to the contrary,
Purchaser hereby agrees that the maximum aggregate liability of Seller, in
connection with, arising out of or in any way related to a breach by Seller
under this Agreement after the Closing shall be $200,000. Purchaser hereby
waives for itself and anyone who may claim by, through or under Purchaser any
and all rights to sue or recover from Seller any amount greater than said
limit.
18. PROPERTY EXCHANGE. The Property is intended by Purchaser to constitute
replacement property, in an exchange under Section 1031 of the Internal Revenue
Code, for certain property which Purchaser currently owns (the "Relinquished
Property"). Seller will cooperate with Purchaser (at no cost to Seller) in
<PAGE>
effecting such an exchange in compliance with the Internal Revenue Code and
applicable treasury regulations, to the extent that Seller will consent to and
acknowledge an assignment of Purchaser's rights under this Agreement to the
Title Company, or to another qualified intermediary designated by Purchaser for
purposes of acquiring the Property with proceeds from the disposition of the
Relinquished Property. Seller will not be responsible for the tax consequences
to Purchaser of the transactions contemplated under this Agreement and under
the agreement to sell the Relinquished Property. Seller will not be required
to accept title to the Relinquished Property and will have no obligations
whatsoever to the owner of the Relinquished Property. The assignment by
Purchaser of its rights hereunder to the Title Company, or to another qualified
intermediary, for purposes of effecting such an exchange, will not relieve
Purchaser of any of its obligations under this Agreement.
19. INFORMATION AND AUDIT COOPERATION. At Purchaser's request, at any time
before or after the Closing, Seller shall provide to Purchaser's designated
independent auditor access to all of the books and records of the Property, and
all related information regarding the period for which Purchaser is required to
have the Property audited under the regulations of the Securities and Exchange
Commission. The Purchaser agrees to indemnify and hold harmless the Seller
from any claim, damage, loss, or liability to which Seller is at any time
subjected by any person who is not a party to this Agreement as a result of
Seller's compliance with this paragraph.
20. TIME OF ESSENCE. Time is of the essence of this Agreement.
21. 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 messenger (hand
delivery), 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: Alan Lieberman
(708) 317-4360
(708) 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)
<PAGE>
TO PURCHASER: Security Capital Group
125 Lincoln Avenue
3rd Floor
Sante Fe, New Mexico
Attention: Mr. Tony Arnest
(505) 820-8258
(505) 820-0643 (FAX)
with copies to: Security Capital Pacific Trust
330 112th Avenue, N.E.
Bellevue, WA 98004
Attention: Mark Petersen
(206) 451-9292
(206) 451-2692 (FAX)
and to: Mayer Brown & Platt
190 S. LaSalle Street
Chicago, Illinois 60603-3441
Attention: John F. Edelbrock, Jr., Esq.
(312) 701-7158
(312) 701-7711 (FAX)
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 served upon the Escrow Agent.
22. 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. Purchaser shall forward the Earnest
Money payable to the Escrow Agent as set forth in the Escrow Agreement and this
Agreement. 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.
23. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the Oregon, except that with respect to the retainage of the Earnest
Money as liquidated damages, the laws of the State of Illinois shall govern.
24. 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.
<PAGE>
25. 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.
26. 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.
27. CONFIDENTIALITY. Neither Seller nor Purchaser shall make any public
announcement or disclosure of any information related to this Agreement to
outside brokers or third parties, before or after the Closing, without the
prior written specific consent of the other party; provided, however, that
Purchaser or Seller may make disclosure of this Agreement to its lenders,
creditors, investors, beneficiaries, officers, employees and agents as
necessary to perform its obligations hereunder and to be in compliance with
applicable Securities and Exchange Commission filing requirements.
28. LIMITATION OF PURCHASER'S LIABILITY. Seller shall look to the assets of
Purchaser for the enforcement of any claim against Purchaser, as none of the
trustees, officers, employees and shareholders of Purchaser assume any personal
liability for obligations entered into by or on behalf of Purchaser.
29. SERVICE CONTRACTS. Attached hereto as Exhibit H is a list of service
contracts affecting the Property. Seller shall assign the service contracts to
Purchaser at Closing, and Purchaser shall assume responsibility and obligations
under the service contracts. Seller agrees not to enter into any other service
contracts affecting the Property, except for service contracts which are
terminable on not more than thirty (30) days notice. Seller agrees to
terminate any and all management agreements affecting the Property as of the
Closing Date.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
SECURITY CAPITAL PACIFIC TRUST, a Maryland real
estate investment trust
By: /s/Anthony D. Arnest
------------------------------------
Name: Anthony D. Arnest
Its: Vice President
SELLER:
BALCOR REALTY INVESTORS 86-SERIES I A REAL ESTATE
LIMITED PARTNERSHIP
By: Balcor Partners-XIX, an Illinois general
partnership, its general partner
By: The Balcor Company, a general partner
By: /s/Phillip Schechter
--------------------------------
Name: Phillip Schechter
Title: Authorized Agent
<PAGE>
___________________ of CB Commercial Real Estate Group, 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 as of January 12, 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 stating that no other fees or commissions are due to it
from Seller or Purchaser.
By: CB COMMERCIAL REAL ESTATE
GROUP, INC.
By:
--------------------------------
Name:
Its:
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Deed
F - Special Warranty 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 - Rent Roll
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5745
<SECURITIES> 0
<RECEIVABLES> 17
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8536
<PP&E> 57321
<DEPRECIATION> 19561
<TOTAL-ASSETS> 46892
<CURRENT-LIABILITIES> 761
<BONDS> 47167
0
0
<COMMON> 0
<OTHER-SE> 346
<TOTAL-LIABILITY-AND-EQUITY> 46892
<SALES> 0
<TOTAL-REVENUES> 14671
<CGS> 0
<TOTAL-COSTS> 1900
<OTHER-EXPENSES> 752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1944
<INCOME-PRETAX> 10075
<INCOME-TAX> 0
<INCOME-CONTINUING> 10075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10075
<EPS-PRIMARY> 166.82
<EPS-DILUTED> 166.82
</TABLE>
