<PAGE> 1
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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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9016
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C>
TEXAS 75-6335572
(State of Organization) (I.R.S. Employer Identification Number)
6210 NORTH BELTLINE, SUITE 170 75063
IRVING, TEXAS (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
Registrant's telephone number, including area code: (972) 756-6000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Shares of Beneficial Interest, New York Stock Exchange
par value $0.10 per share
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 Regulations 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]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $225,350,449 as of March 29, 1999. The aggregate market value
has been computed by reference to the closing price at which the stock was sold
on the New York Stock Exchange on March 24, 1999.
20,486,409 Common Shares of Beneficial Interest were outstanding as of
March 29, 1999.
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<PAGE> 2
AMERICAN INDUSTRIAL PROPERTIES REIT
FOR THE YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
FORM 10-K
<TABLE>
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PAGE
SECURITIES AND EXCHANGE COMMISSION ITEM NUMBER AND DESCRIPTION ----
<S> <C> <C>
PART I
Item 1. Business.................................................... 1
The Company................................................. 1
Business Objectives and Strategy............................ 1
Recent Developments......................................... 2
Revenue and Loss from Operations............................ 6
Geographic Analysis of Revenue.............................. 6
Competition................................................. 6
Employees................................................... 7
Item 2. Properties.................................................. 7
Item 3. Legal Proceedings........................................... 13
Item 4. Submission of Matters to a Vote of Shareholders............. 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters....................................... 14
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
Results of Operations....................................... 16
Year 2000 Issues............................................ 19
Liquidity and Capital Resources............................. 20
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 22
Item 8. Financial Statements and Supplementary Data................. 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 22
PART III
Item 10. Trust Managers and Executive Officers of the Registrant..... 23
Item 11. Executive Compensation...................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 29
Item 13. Certain Relationships and Related Party Transactions........ 30
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form
8-K....................................................... 31
Index to Consolidated Financial Statements and Financial Statement F-1
Schedule............................................................
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ii
<PAGE> 3
PART I.
ITEM 1. BUSINESS
THE COMPANY
American Industrial Properties REIT (together with its subsidiaries, the
"Trust" or the "Company") is a Texas real estate investment trust that was
organized on September 26, 1985. On November 27, 1985, the Trust completed an
initial public offering of its common shares of beneficial interest (the
"Shares") and commenced operations. In addition to wholly owned subsidiaries,
the Trust owns a general partner interest and substantially all of the economic
interests, directly or indirectly, in three operating partnerships, a 55.84%
interest in a joint venture owning an office building and a 50% interest in a
partnership developing a build-to-suit property.
As of December 31, 1998, the Trust directly or indirectly owned a portfolio
of 65 real estate properties, excluding the build-to-suit property, aggregating
7.4 million net rentable square feet ("nrsf"). The Trust's emphasis is in the
light industrial sector, which is characterized as office showroom, service
center and flex properties, low rise offices, and small bay distribution
properties (see "Business Objectives and Strategy" below). Based on net rentable
square feet, as of December 31, 1998, approximately 76% of the Trust's portfolio
is represented by light industrial properties, 20% of the portfolio is
represented by office properties and 4% of the portfolio is represented by
retail properties. The light industrial properties are leased for office, office
showroom, warehouse, distribution, research and development, and light assembly
purposes. The retail properties are leased to retail merchandise establishments,
restaurants and a cinema. No single tenant accounts for more than 10% of the
Trust's consolidated gross revenue. No individual property accounted for more
than 10% of total revenues of the Trust for the year ended December 31, 1998.
The Trust has qualified as a real estate investment trust ("REIT") for
federal income tax purposes since 1985 and intends to maintain its REIT
qualification in the future. In order to preserve its REIT status, the Trust
must meet certain criteria with respect to assets, income, and shareholder
ownership. In addition, the Trust is required to distribute at least 95% of
taxable income (as defined in the Internal Revenue Code of 1986, as amended (the
"Code") to its shareholders.
The Trust's executive offices are located at 6210 North Beltline Road,
Suite 170, Irving, Texas 75063. The Trust's main telephone number is
(972)756-6000. The Trust's web site address is www.aipreit.com.
BUSINESS OBJECTIVES AND STRATEGY
The Trust's business objective is to increase shareholder value through
opportunistic investments and efficient operations in the light industrial
property sector, including office showroom, service center and flex properties,
low rise offices, and small bay distribution properties.
Focus on Light Industrial Properties. The Trust intends to focus on the
light industrial sector of the real estate market, believing that this sector
offers a number of compelling benefits. The light industrial property sector
serves the smaller tenant population and, in many instances, serves as a low
cost office space alternative. In general, rents in light industrial office
space offer the opportunity for increased returns as suburban office rents rise.
The Trust believes that this sector a) is characterized by highly fragmented
ownership, b) offers current opportunities to purchase properties at attractive
yields and at a discount to replacement cost, and c) has, to date, avoided much
of the institutional activity leading to higher prices and lower yields common
to many other sectors of the real estate market. The Trust also believes that
there are inherent benefits to its strategy of consolidating ownership in this
sector, including greater returns through economies of scale and the ability to
offer space alternatives to tenants which may not be currently available.
Geographic Focus. The Trust will concentrate its efforts in the Southern
and Western regions of the United States with primary target markets in Texas
(Dallas, Houston, Austin), California (San Francisco, Los Angeles, San Diego),
Florida (Orlando, Tampa), Phoenix, Denver and Washington, D.C. The target
markets are characterized by above average economic growth, strong levels of new
business formation and favorable supply and demand characteristics.
1
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Experienced Management. The Trust has seasoned management with extensive
experience in all phases of the real estate cycle. Management utilizes
research-driven analysis of markets and sub-markets to identify targeted
opportunities and intensive due diligence efforts to evaluate potential
acquisitions. Management believes it has strong acquisition and networking
capabilities to identify acquisition opportunities on both a single property and
portfolio basis.
Growth from Existing Portfolio. The Trust will pursue increases in cash
flow from its existing portfolio through intensive management of the portfolio
and its tenant base. Portfolio management is focused on tenant service, leasing
the portfolio to stabilized occupancy (generally 94-96%), retaining existing
tenants and increasing rental rates. In addition, the Trust will seek to control
operating expenses and should benefit from economies of scale as the size of its
portfolio increases. The Trust is currently transitioning from third party
property management to internal property management and has taken over the
management of approximately 24% of the portfolio on a total revenue basis.
Although the Trust does not expect to convert to internal property
management in markets where it does not own a sufficient critical mass to
justify internalization of management, it has begun the process of reducing fees
paid to third party providers in those markets by taking responsibility for the
property accounting from the third party property managers. When combined with
expected savings resulting from changes in its property insurance program, the
Trust expects to realize net contribution from these efforts during 1999 in
excess of $1.0 million. In addition to these savings, the Trust expects to
realize future benefits from a more direct relationship with its tenants.
Growth from Acquisitions. The Trust believes that it will be able to
acquire properties in the light industrial sector at prices which justify
investment. The Trust evaluates potential acquisitions from both a current yield
and an internal rate of return perspective. The Trust periodically estimates its
cost of capital in an effort to ensure that the internal rate of return on
proposed acquisitions exceeds such cost of capital, thereby ensuring that an
acquisition will be accretive on an equity basis. The Trust will, on occasion,
utilize an operating partnership structure to acquire properties, which offers
certain tax advantages to the seller of such properties.
Financial Strategy. On a long term basis, the Trust seeks to lower its cost
of capital through the appropriate use of debt and equity capital. The Trust is
currently operating at higher levels of leverage than it would foresee on a
longer term basis. The Trust believes that the use of leverage, which is 56.3%
on a debt to total market capitalization ratio at December 31, 1998, is
justified given existing acquisition prospects and the benefits of the Trust's
transition to a larger entity. Although there is no assurance of ultimate
availability, the Trust anticipates that future equity offerings will serve to
deleverage the Trust.
RECENT DEVELOPMENTS
For the twelve months ended December 31, 1998, the Trust acquired
approximately $237 million in real estate properties (see "ITEM 2. Properties"
for additional information on these properties). From January 1, 1999 through
March 29, 1999 the Trust acquired approximately $127 million of additional real
estate properties. The Trust's acquisitions on a chronological basis are as
follows:
- On February 11, 1998, the Trust, through an indirect subsidiary,
purchased Spring Valley Business Park #6, a 92,631 nrsf office and
service center development in a suburb of Dallas, Texas for total
consideration of $9.3 million. Of the total consideration, $6.5 million
was borrowed under the Trust's acquisition line of credit with Prudential
Securities Credit Corporation ("PSCC") and $0.9 million of limited
partnership units in AIP Operating, L.P. were issued to the seller. After
satisfaction of certain requirements, each limited partnership unit may
be redeemed in exchange for cash equal to the value, as determined in
accordance with the partnership agreement, of a Share (or, at the Trust's
election, the Trust may purchase each limited partnership unit offered
for redemption for one Share).
- On March 26, 1998, the Trust purchased Southeast Commercial Center, a
light industrial property in Austin, Texas with 35,673 nrsf for $1.8
million.
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- On March 31, 1998, the Trust purchased Cameron Creek Business Park, a
light industrial property in Austin, Texas with 50,000 nrsf. The Trust
borrowed $1.4 million of the $4.8 million purchase price under its
acquisition line of credit.
- On April 30, 1998, the Trust purchased Northview Business Center, an
office property in Austin, Texas with 252,280 nrsf for total
consideration of $22.3 million. The Trust borrowed $15.5 million of the
purchase price under a secured bridge loan from PSCC.
- On May 6, 1998, the Trust purchased a portfolio consisting of five light
industrial properties and one low-rise office property totaling 537,907
nrsf and two developed land parcels capable of accommodating 200,000
square feet of expansion space located in four markets throughout the
Southwest for total consideration of $43.5 million. The purchase price
was funded with $27.2 million in borrowings under a secured bridge loan
from PSCC and the remainder from cash proceeds from private placements of
equity.
- On July 30, 1998, the Trust purchased Norfolk Commerce Center, a 323,731
nrsf light industrial property consisting of three buildings in Norfolk,
Virginia. The $20.5 million purchase price was initially financed through
an unsecured borrowing from Developers Diversified Realty Corporation
("DDR"). On August 3, 1998, the Trust repaid $14.7 million of this
borrowing with funds received from DDR's initial purchase of Shares.
- On August 3, 1998, the Trust acquired five industrial properties, valued
at approximately $19.5 million, under the merger agreement between the
Trust and DDR Office Flex Corporation, a wholly owned subsidiary of DDR.
The five properties total 463,980 nrsf and are located in the Cleveland,
Ohio market. The Trust issued 1,258,477 shares to DDR in connection with
this merger.
- On August 28, 1998, the Trust acquired 2121 Glenville, a light industrial
property with a total of 20,645 nrsf for $1.8 million. The property is
located in Dallas, Texas.
- On September 23, 1998, the Trust purchased Metro Business Park, a 109,933
nrsf light industrial property located in Phoenix, Arizona for $9.9
million. The Trust borrowed $6.2 million of the purchase price under its
acquisition line of credit with PSCC.
- On October 5, 1998, the Trust purchased TechniPark 10 Service Center, a
light industrial property located in Houston, Texas. The 71,635 nrsf
property was acquired for $4.1 million.
- Effective October 8, 1998, DDR acquired an 89% limited partnership
interest and a 1% general partnership interest in DDR/Tech 29 Limited
Partnership, a limited partnership whose assets consist of two light
industrial properties and one office property totaling 290,991 nrsf
located in Silver Springs, Maryland. Several selling entities and
affiliates thereof acquired the remaining partnership interests. These
partnership interests are convertible into DDR common shares. As of
November 20, 1998, the Trust acquired 88.5% of DDR's limited partnership
interest and, in consideration therefor, issued approximately $16.1
million in Shares to DDR. The acquisition was deemed to be effective as
of October 8, 1998 and the purchase price included interest accrued from
such date. To date, an Equalization Agreement, which provides, among
other things, that DDR shall reimburse the Trust for certain
dividend-based distributions to the holders of partnership interests has
not been executed. It is anticipated that the Equalization Agreement will
have an effective date in January 1999.
- On October 16, 1998, the Trust completed the purchase of a portfolio
consisting of four light industrial properties totaling 560,812 nrsf
located in Virginia. The properties were acquired from five entities for
total consideration of $40.2 million. The purchase price was funded with
$22.4 million in assumed debt and the remainder in borrowings from an
unsecured loan from DDR.
- On December 8, 1998, the Trust purchased Columbia Corporate Center, a
128,122 nrsf light industrial property located in Aliso Viejo, California
for $13.1 million. To fund the transaction, the Trust issued $5.3 million
in Shares to DDR and received an unsecured loan of $7.8 million from DDR.
3
<PAGE> 6
- On December 11, 1998, the Trust purchased Winter Park Business Center, a
119,685 nrsf light industrial property located in Orlando, Florida for
$9.2 million. To fund the transaction, the Trust issued $4.1 million in
Shares to DDR and borrowed $5.1 million under its acquisition line of
credit.
- On December 30, 1998, the Trust purchased Washington Business Park, a
137,018 nrsf light industrial property located in Phoenix, Arizona for
$9.3 million. To fund the transaction, the Trust issued $4.1 million in
Shares to DDR and borrowed $5.2 million under its acquisition line of
credit.
- On January 15, 1999, the Trust purchased a portfolio of nine properties
totaling 955,564 nrsf of one-and two-story office/industrial flex
buildings located in northern California and Colorado. The properties
were acquired from an institutional seller for a purchase price of $127.3
million. The purchase price was funded with $75.2 million in borrowings
secured under a secured bridge loan with PSCC. The remainder of the
purchase price was funded with $51.8 million in Shares issued to DDR.
The Trust completed the following equity and/or financing transactions
during the period January 1, 1998 through March 29, 1999:
- On January 30, 1998, the Trust completed a $10 million private placement
of Shares at $13.625 per Share.
- In February 1998, two shareholders exercised their preemptive rights and
acquired $8.7 million of Shares at $13.625 per Share. The shareholders
preemptive rights have since expired.
- On March 24, 1998, the Trust announced a dividend reinvestment and share
purchase plan. Through December 31, 1998, 84,287 Shares were issued under
the plan for proceeds of $945,072.
- On April 15, 1998, the Trust completed a $24.7 million permanent
refinancing of six properties under its secured acquisition line. Terms
of the permanent financing include an interest rate of 7.28%, 25 year
principal amortization and a maturity of June 2008.
- On April 27, 1998, the Trust negotiated an increase in its secured
acquisition line with PSCC from $35 million to $75 million. The variable
interest rate was reduced from the 30 day LIBOR rate plus 2% to LIBOR
plus 1.75% and the maturity was extended to April 1999. On March 26,
1999, the loan was extended to April 2000 and the interest rate was
reduced to LIBOR plus 1.55%. The Trust currently has $68.5 million
outstanding under this acquisition line.
- In April 1998, the Trust obtained a $42.6 million secured bridge loan
from PSCC. The bridge loan provides for a variable interest rate based on
the 30 day LIBOR rate plus 1.75% and a maturity date of January 8, 1999
as extended. The loan was paid off on January 8, 1999 with the proceeds
from a $41 million permanent financing (see below).
- On August 3, 1998, the Trust entered into a definitive agreement
providing for a strategic investment by DDR in the Trust. Under the terms
of the Share Purchase Agreement (the "Agreement"), the transaction has
three stages. The first stage, effective as of July 30, 1998, resulted in
DDR acquiring 2,207,618 Shares at a price of $15.50 per Share.
In the second stage, DDR is obligated to purchase 5,226,583 Shares for
$15.50 per Share (for total consideration of approximately $81 million)
to fund property acquisitions approved by the Trust's board.
In the third stage, the Trust has the option to require DDR, under
certain circumstances, to purchase additional Shares with a total
purchase price not to exceed $200 million to fund property acquisitions.
DDR's obligation to purchase Shares, the price of the Shares and the
amount to be invested in the third stage are contingent upon several
factors, including the trading prices of DDR and Trust Shares, the market
capitalization of DDR and whether common or preferred shares are issued
to DDR. As of March 29, 1999, DDR had purchased a total of 9,301,817
shares, representing 45.4% of the outstanding Shares of the Trust.
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- In November 1998, shareholders of the Trust approved the issuance of up
to 11,064,193 shares and 10,266,795 Series A Convertible Preferred Shares
of Beneficial Interest of the Trust pursuant to (i) the Share Purchase
Agreement, effective July 30, 1998, between the Trust and DDR, as amended
on September 14, 1998, and (ii) the Agreement and Plan of Merger, dated
as of July 30, 1998, among the Trust, DDR and DDR Office Flex
Corporation.
- On January 8, 1999, the Trust paid off the $42.7 million bridge loan with
proceeds from a permanent financing of seven properties. Terms of the
permanent financing include a principal amount of $41 million, a fixed
rate of interest of 7.375%, a ten year term and 25 year principal
amortization.
- On January 19, 1999, the Trust refinanced existing indebtedness of
approximately $1.8 million on a property acquired in October 1998 with
proceeds from a new permanent financing of $7.6 million. Terms of the
permanent financing include a fixed rate of interest of 7.33%, seven year
term with a three year renewal option, and 30 year principal
amortization.
- On January 29, 1999, the Trust entered into a secured revolving credit
agreement with Bank One, Texas, N.A ("Bank One"). The agreement
contemplates a $150,000,000 credit line with an initial Bank One
commitment of $25,000,000. The remainder of the credit line will be
syndicated on a "best efforts" basis by Bank One. The credit line will be
secured by mortgage liens on properties, provides for a graduated
variable interest rate (depending on the Trust's overall leverage) of
LIBOR plus 1.4% to LIBOR plus 2.0%, a maximum loan to value of 60%, and a
maturity in January 2001. As of March 24, 1999, the Trust has $13.0
million outstanding under this credit line.
- On March 26, 1999, the Trust negotiated an extension of the maturity of
its acquisition credit line to April 2000 and a decrease in the interest
rate to LIBOR plus 1.55%.
On January 29, 1998, the Board of Trust Managers announced a reinstatement
of quarterly distributions. A distribution of $0.18 per Share was paid on April
14, 1998 and a distribution of $0.20 was paid on July 14, 1998, October 14, 1998
and January 20, 1999. In addition, the Trust has declared a distribution of
$0.20 per Share payable on April 15, 1999, to shareholders of record on April 5,
1999.
On February 18, 1998, the Trust filed a Form S-3 shelf registration with
the Securities and Exchange Commission which would provide for the issuance of
up to $500 million in Shares, Preferred Shares of Beneficial Interest, and
unsecured senior debt securities and/or warrants to purchase such securities in
amounts, at prices and on terms to be determined by market conditions at the
time of future offerings. The Trust anticipates utilization of this shelf
registration in the future to fund acquisitions and growth of the Company.
On March 5, 1998, the Trust announced a Share repurchase program, wherein
the Trust was authorized to purchase up to 1,000,000 Shares over the following
six months. Purchases were to be made in open market transactions, as price and
market conditions allowed. During the program, the Trust purchased 123,783
Shares in the open market, for an aggregate cost of $1,598,000. These Shares are
held in treasury. Under the terms of its agreement with DDR, the Trust is
prohibited from purchasing its own Shares if such purchases would result in DDR
owning in excess of 49.9% of the Trust's outstanding Shares.
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REVENUE AND LOSS FROM OPERATIONS
The breakdown of revenue and loss from operations for each of the years
ended December 31, 1998, 1997 and 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Property revenues:
Industrial........................................... $ 27,013 $ 8,312 $ 7,374
Office............................................... 17,044 633 638
Retail............................................... 4,300 3,256 3,308
-------- ------- -------
Total........................................ 48,357 12,201 11,320
Property operating expenses............................ (16,046) (4,315) (4,022)
-------- ------- -------
Income from property operations........................ 32,311 7,886 7,298
-------- ------- -------
Administrative expenses................................ (3,729) (2,504) (3,378)
Depreciation and amortization.......................... (8,383) (3,157) (2,909)
Interest income........................................ 705 546 158
Interest expense....................................... (15,139) (5,778) (5,901)
Provisions for possible losses on real estate.......... (10,060) -- --
-------- ------- -------
Loss from operations................................... $ (4,295) $(3,007) $(4,732)
======== ======= =======
</TABLE>
GEOGRAPHIC ANALYSIS OF REVENUE
The breakdown of the Trust's property revenues, geographically and by
reporting segment, for each of the years ended December 31, 1998, 1997, and 1996
is as follows (in thousands):
<TABLE>
<CAPTION>
REGION 1998(A) 1997(B) 1996(C)
------ ------- ------- -------
<S> <C> <C> <C>
WESTERN REGION
Industrial............................................ $15,709 $ 5,147 $ 2,949
Office................................................ 13,341 633 638
Retail................................................ 3,186 3,256 3,308
EASTERN REGION
Industrial............................................ 11,304 3,165 4,425
Office................................................ 3,703 -- --
Retail................................................ 1,114 -- --
------- ------- -------
Total property revenues................................. $48,357 $12,201 $11,320
======= ======= =======
</TABLE>
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(a) For the year ended December 31, 1998, the Trust acquired 29 properties.
There were no properties sold in 1998.
(b) For the year ended December 31, 1997, the Trust acquired 15 properties. The
Trust sold two properties in 1997.
(c) For the year ended December 31, 1996, the Trust did not acquire any
properties. The Trust sold two properties in 1996.
COMPETITION
The Trust owns properties in various markets and sub-markets in 13 states
(See "ITEM 2. Properties"). The principal competitive factors in these markets
are price, location, quality of space, and amenities. In each case, the Trust
owns a small portion of the total similar space in the market and competes with
owners of other space for tenants. Each of these markets is highly competitive,
and other owners of property may have competitive advantages not available to
the Trust.
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EMPLOYEES
The Trust currently employs 36 people on a full-time basis. Information
regarding executive officers of the Trust is set forth in "ITEM 10. Trust
Managers and Executive Officers of the Registrant" of Part III of this Form 10-K
and is incorporated herein by reference.
The Trust has begun the process to internalize the property management and
leasing duties which are currently contracted out to third parties. The number
of employees is expected to increase as more properties are acquired and as the
Trust transitions to internal property management. No employees are presently
covered by collective bargaining agreements.
ITEM 2. PROPERTIES
As of December 31, 1998, the Trust owned 65 real estate properties,
excluding the one build-to-suit property, consisting of 52 light industrial
developments, 11 office buildings, and 2 retail properties. The Trust's light
industrial classification includes office showroom, service center and flex
properties, low rise offices, and small bay distribution properties. In 1998,
the Trust acquired 29 properties. There were no properties sold in 1998.
The following tables set forth certain information about the light
industrial, office, and retail properties owned as of December 31, 1998, without
giving effect to the build-to-suit property or 1999 acquisitions. Based on
annualized rental revenues in place as of December 31, 1998, no single tenant
would have accounted for more than 10% of the Company's total annualized light
industrial, office, and retail revenues for 1998. No individual property
accounted for more than 10% of total revenues for the Trust for the twelve
months ended December 31, 1998.
PROPERTY INFORMATION
<TABLE>
<CAPTION>
NET
RENTABLE
ACQUISITION YEAR NUMBER OF AREA
PROPERTY LOCATION DATE CONSTRUCTED BUILDINGS (SQ. FT.)
-------- -------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
LIGHT INDUSTRIAL PROPERTIES
2121 Glenville Dallas, TX 1998 1984 1 20,645
Aerotech Colorado Springs, CO 1998 1985 2 75,892
Alumax Cleveland, OH 1998 1982 1 66,200
Avion Business Center Dallas, TX 1997 1985 3 70,784
Battlefield Business Park Manassas, VA 1998 1989 1 154,226
Black Canyon Tech Center Phoenix, AZ 1998 1983 2 100,000
Bowater Lakeland, FL 1997 1989 1 111,720
Broadbent Business Park IV Albuquerque, NM 1998 1989 2 59,269
Cameron Creek Bus Park Austin, TX 1998 1996 1 50,000
Carpenter Center Dallas, TX 1997 1983 1 44,114
Carrier Place Grand Prairie, TX 1997 1984 1 84,431
Central Park Office Tech Richardson, TX 1997 1984 2 74,459
Columbia Corporate Center Aliso Viejo, CA 1998 1988 4 128,122
Commerce Center Houston, TX 1997 1974 9 299,748
Commerce Park North Houston, TX 1985 1984 2 87,163
Continental Plastic Elk Grove Village, IL 1997 1963/68 2 208,290
Corporex Plaza I Tampa, FL 1997 1982 3 93,508
DFW North Grapevine, TX 1997 1985 2 76,217
Gateway 5 & 6 Irving, TX 1985 1985 2 79,669
Greenbrier Circle Corp Center Chesapeake, VA 1998 1981/83 2 228,690
Greenbrier Tech Center Chesapeake, VA 1998 1981 1 95,162
Hardline Services Bldg Cleveland, OH 1998 1974 1 236,225
Heritage Business I Cleveland, OH 1998 1990 1 35,555
Huntington Drive Monrovia, CA 1985 1985 2 62,218
Inverness Business Park Denver, CO 1997 1980 2 96,386
</TABLE>
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<TABLE>
<CAPTION>
NET
RENTABLE
ACQUISITION YEAR NUMBER OF AREA
PROPERTY LOCATION DATE CONSTRUCTED BUILDINGS (SQ. FT.)
-------- -------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Kodak San Diego, CA 1997 1976 1 59,600
Meridian Street Warehouse Arlington, TX 1995 1981 1 72,000
Metro Business Park Phoenix, AZ 1998 1987 4 109,933
Norfolk Commerce Center Norfolk, VA 1998 1981/87 3 323,731
Northgate II Dallas, TX 1985 1983 4 237,039
Northgate III Dallas, TX 1997 1979/80/86 6 262,287
Northpointe B & C Sterling, VA 1998 1987/88 2 82,734
Northwest Business Pk Milwaukee, WI 1985 1983/85/86 3 143,120
Parkway Tech Center Plano, TX 1997 1984 1 69,561
Patapsco Industrial Center Linthicum Heights, MD 1985 1981/85 2 95,151
Plaza Southwest 1-5 Houston, TX 1985 1975 5 149,780
President's Plaza Tampa, FL 1997 1987 2 41,690
Shady Trail Business Center Dallas, TX 1997 1984 4 67,846
Skyway Business Center Irving, TX 1997 1981 1 67,150
Southeast Commercial Center Austin, TX 1998 1984 1 35,673
Steris Building Cleveland, OH 1998 1980 1 40,200
Summit Park Austin, TX 1998 1985 2 96,950
Tech Center 29 -- Phase I Silver Springs, MD 1998 1970 1 176,914
Tech Center 29 -- Phase II Silver Springs, MD 1998 1991 1 58,280
TechniPark 10 Service Center Houston, TX 1998 1983/84 2 71,635
Tucson Tech Tucson, AZ 1998 1986 1 115,030
Valley View Commerce Park Dallas, TX 1997 1986 4 144,896
Valwood II Business Center Carrollton, TX 1997 1984 1 52,452
VSA Bldg Cleveland, OH 1998 1989 1 85,800
Washington Bus. Park Phoenix, AZ 1998 1985 4 137,018
Westchase Park 1-2 Houston, TX 1985 1984 2 47,733
Winter Park Business Center Orlando, FL 1998 1981/83/85 6 119,685
--- ---------
Total Light Industrial
Properties 117 5,602,581
--- ---------
OFFICE PROPERTIES
10505 Sorrento Valley San Diego, CA 1997 1982 1 54,094
1881 Pine Street St Louis, MO 1997 1987 1 111,047
Academy Point Atrium II Colorado Springs, CO 1998 1984 1 90,766
Apollo Drive Office Building(a) Chelmsford, MA 1997 1987 1 291,424
Beltline Business Center Dallas, TX 1985 1984 3 60,145
Gateway West Phoenix, AZ 1997 1964/69/74 3 155,487
Linear Technology Milpitas, CA 1997 1987 1 42,130
Manhattan Towers Manhattan Beach, CA 1997 1987 2 309,484
Northview Business Center Austin, TX 1998 1970 1 252,280
Spring Valley Business Park #6 Dallas, TX 1998 1980/98 3 92,631
Tech Center 29 -- Phase III Silver Springs, MD 1998 1988 1 55,797
--- ---------
Total Office Properties 18 1,515,285
--- ---------
RETAIL PROPERTIES
Tamarac Square Mall Denver, CO 1985 1976/78 2 196,455
Volusia Daytona Beach, FL 1997 1984 1 76,579
--- ---------
Total Retail Properties 3 273,034
--- ---------
Total Light Industrial, Office, and Retail Properties 138 7,390,900
=== =========
</TABLE>
- ---------------
(a) The Trust owns a 55.84% joint venture interest in the property.
8
<PAGE> 11
TENANT INFORMATION
<TABLE>
<CAPTION>
AVERAGE BASE
PERCENT NUMBER RENTAL RATE ANNUALIZED
PROPERTY LOCATION LEASED(A) TENANTS(A) PER SQ. FT.(A) BASE RENT(A)
-------- -------- --------- ---------- -------------- ------------
(000)
<S> <C> <C> <C> <C> <C>
LIGHT INDUSTRIAL PROPERTIES
2121 Glenville Dallas, TX 100.0% 1 $10.00 $ 206
Aerotech Colorado Springs, CO 87.6% 4 14.26 948
Alumax Cleveland, OH 100.0% 1 4.49 297
Avion Business Center Dallas, TX 97.1% 9 10.08 693
Battlefield Business Park Manassas, VA 100.0% 1 7.00 1,080
Black Canyon Tech Center Phoenix, AZ 60.0% 1 8.40 504
Bowater Lakeland, FL 100.0% 1 4.10 458
Broadbent Business Park IV Albuquerque, NM 59.3% 2 10.08 354
Cameron Creek Bus Park Austin, TX 64.9% 3 7.60 247
Carpenter Center Dallas, TX 81.6% 7 4.69 169
Carrier Place Grand Prairie, TX 100.0% 17 4.70 397
Central Park Office Tech Richardson, TX 85.3% 8 8.25 524
Columbia Corporate Center Aliso Viejo, CA 100.0% 8 10.62 1,361
Commerce Center Houston, TX 81.5% 29 4.72 1,153
Commerce Park North Houston, TX 100.0% 11 5.71 498
Continental Plastic Elk Grove Village, IL 100.0% 2 3.60 750
Corporex Plaza I Tampa, FL 100.0% 23 6.12 572
DFW North Grapevine, TX 46.0% 6 5.98 210
Gateway 5 & 6 Irving, TX 100.0% 7 6.36 507
Greenbrier Circle Corp Center Chesapeake, VA 72.7% 20 15.08 2,507
Greenbrier Tech Center Chesapeake, VA 90.7% 10 8.68 749
Hardline Services Bldg Cleveland, OH 100.0% 1 3.15 744
Heritage Business I Cleveland, OH 100.0% 4 7.55 268
Huntington Drive Monrovia, CA 94.6% 5 15.33 902
Inverness Business Park Denver, CO 100.0% 9 8.09 780
Kodak San Diego, CA 100.0% 2 10.31 614
Meridian Street Warehouse Arlington, TX 100.0% 1 2.31 166
Metro Business Park Phoenix, AZ 100.0% 26 8.67 953
Norfolk Commerce Center Norfolk, VA 94.0% 34 9.53 2,900
Northgate II Dallas, TX 100.0% 13 3.27 775
Northgate III Dallas, TX 89.3% 19 4.64 1,087
Northpointe B & C Sterling, VA 100.0% 5 6.54 541
Northwest Business Pk Milwaukee, WI 63.0% 10 6.15 555
Parkway Tech Center Plano, TX 82.7% 6 4.64 267
Patapsco Industrial Center Linthicum Heights, MD 88.1% 21 6.72 563
Plaza Southwest 1-5 Houston, TX 93.3% 30 3.97 555
President's Plaza Tampa, FL 93.2% 12 7.85 305
Shady Trail Business Center Dallas, TX 83.5% 20 4.08 231
Skyway Business Center Irving, TX 100.0% 6 4.81 323
Southeast Commercial Center Austin, TX 49.4% 2 6.45 114
Steris Building Cleveland, OH 100.0% 1 5.90 237
Summit Park Austin, TX 100.0% 3 9.20 892
Tech Center 29 -- Phase I Silver Springs, MD 86.2% 14 9.58 1,461
Tech Center 29 -- Phase II Silver Springs, MD 100.0% 4 12.31 717
TechniPark 10 Service Center Houston, TX 100.0% 7 6.96 499
Tucson Tech Tucson, AZ 100.0% 1 3.96 456
Valley View Commerce Park Dallas, TX 90.6% 6 6.13 805
Valwood II Business Center Carrollton, TX 79.2% 1 6.50 270
VSA Bldg Cleveland, OH 100.0% 1 4.65 399
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
AVERAGE BASE
PERCENT NUMBER RENTAL RATE ANNUALIZED
PROPERTY LOCATION LEASED(A) TENANTS(A) PER SQ. FT.(A) BASE RENT(A)
-------- -------- --------- ---------- -------------- ------------
(000)
<S> <C> <C> <C> <C> <C>
Washington Bus. Park Phoenix, AZ 99.6% 6 7.63 1,041
Westchase Park 1-2 Houston, TX 100.0% 10 5.54 264
Winter Park Business Center Orlando, FL 90.8% 34 11.33 1,231
----- --- ------ -------
Total Light Industrial
Properties 90.9% 485 6.89 35,099
----- --- ------ -------
OFFICE PROPERTIES
10505 Sorrento Valley San Diego, CA 69.1% 5 13.80 516
1881 Pine Street St. Louis, MO 86.0% 3 12.69 1,212
Academy Point Atrium II Colorado Springs, CO 100.0% 15 14.03 1,273
Apollo Drive Office
Building(b) Chelmsford, MA 100.0% 1 6.86 1,999
Beltline Business Center Dallas, TX 93.8% 26 7.00 395
Gateway West Phoenix, AZ 82.6% 2 16.09 2,066
Linear Technology Milpitas, CA 100.0% 1 9.00 379
Manhattan Towers Manhattan Beach, CA 100.0% 8 11.48 3,554
Northview Business Center Austin, TX 100.0% 7 10.87 2,742
Spring Valley Business Park
#6 Dallas, TX 100.0% 3 11.96 1,108
Tech Center 29 -- Phase III Silver Springs, MD 100.0% 7 19.61 1,094
----- --- ------ -------
Total Office Properties 95.8% 78 11.25 16,338
----- --- ------ -------
RETAIL PROPERTIES
Tamarac Square Mall(c) Denver, CO 83.8% 51 12.95 2,132
Volusia Daytona Beach, FL 98.5% 21 10.87 820
----- --- ------ -------
Total Retail Properties 87.9% 72 12.29 2,952
----- --- ------ -------
Total Light Industrial, Office, and Retail
Properties 91.9% 635 $ 7.86 $54,389
===== === ====== =======
</TABLE>
- ---------------
(a) Based on leases executed on or before December 31, 1998.
(b) The Trust owns a 55.84% joint venture interest in the property.
(c) The denominator of average base rental rate per square foot calculation for
this property includes ground lease income.
INFORMATION BY PROPERTY TYPE
<TABLE>
<CAPTION>
NET RENTABLE
SQUARE FEET ANNUALIZED BASE RENT(A)
------------------- --------------------------------
AMOUNT PERCENT AMOUNT PERCENT PSF
--------- ------- ----------- ------- ------
<S> <C> <C> <C> <C> <C>
Light Industrial................ 5,602,581 75.8% $35,099,000 64.5% $ 6.89
Office.......................... 1,515,285 20.5% 16,338,000 30.0% 11.25
Retail.......................... 273,034 3.7% 2,952,000 5.4% 12.29
--------- ----- ----------- ----- ------
Total................. 7,390,900 100.0% $54,389,000 100.0% $ 7.86
========= ===== =========== ===== ======
</TABLE>
- ---------------
(a) Based on leased net rentable square footage as of December 31, 1998.
Includes revenues from ground leases.
10
<PAGE> 13
LEASE EXPIRATION DETAIL
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL ANNUALIZED ANNUALIZED
NO. OF SQUARE BASE RENT OF BASE RENT
LEASES SQUARE FEET EXPIRING OF EXPIRING
YEAR EXPIRING FEET AVAILABLE LEASES PERCENTAGE LEASES-PSF
---- -------- --------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1999.................... 187 1,527,387 20.7% $10,734,431 19.3% $ 7.03
2000.................... 142 1,299,323 17.6% 9,686,321 17.4% 7.45
2001.................... 128 1,073,335 14.5% 8,680,622 15.6% 8.09
2002.................... 88 1,277,353 17.3% 12,496,778 22.5% 9.78
2003.................... 64 751,419 10.2% 6,232,764 11.2% 8.29
2004.................... 16 209,455 2.8% 1,456,597 2.6% 6.95
2005.................... 6 56,502 0.8% 432,301 0.8% 7.65
2006.................... 7 122,863 1.7% 1,237,473 2.2% 10.07
2007.................... 8 354,843 4.8% 4,506,042 8.1% 12.70
2008.................... 1 5,030 0.1% 92,602 0.2% 18.41
--- --------- ---- ----------- ----- ------
Total......... 647 6,677,510 90.5% $55,555,931 100.0% $ 8.32
=== ========= ==== =========== ===== ======
</TABLE>
SUMMARY TENANT INFORMATION
<TABLE>
<CAPTION>
LEASED SPACE NO. OF SQUARE
(SQUARE FEET) TENANTS FOOTAGE PERCENTAGE
------------- ------- --------- ----------
<S> <C> <C> <C>
0 - 5,000........................................ 347 935,303 12.7%
5,001 - 10,000........................................ 135 926,624 12.5%
10,001 - 20,000........................................ 76 1,066,027 14.4%
20,001 - 50,000........................................ 59 1,773,209 24.0%
50,001 - +............................................. 17 2,050,051 27.7%
Vacant Space........................................... -- 639,686 8.7%
--- --------- -----
Total........................................ 634 7,390,900 100.0%
=== ========= =====
</TABLE>
MORTGAGE INDEBTEDNESS
<TABLE>
<CAPTION>
PRINCIPAL INTEREST RATE AT MATURITY PRINCIPAL DUE
PROPERTY BALANCE DECEMBER 31, 1998 DATE AT MATURITY
-------- ------------ ----------------- -------- -------------
<S> <C> <C> <C> <C>
LIGHT INDUSTRIAL PROPERTIES
Battlefield Business Park................ $ 8,071,487 7.70%(d) Oct-04 $ 7,525,563
Commerce Park North...................... 2,029,836 8.61%(d) Dec-03 1,796,333
Gateway 5 & 6............................ 2,754,777 8.61%(d) Dec-03 2,437,880
Greenbrier Circle Corp Center............ 7,202,186 8.13%(d) Jan-02 6,838,342
Greenbrier Tech.......................... 4,290,618 8.05%(d) Jul-07 3,960,554
Huntington Drive......................... 4,422,143 8.61%(d) Dec-03 3,913,439
Meridian Street Warehouse................ 1,123,659 8.61%(d) Dec-03 994,398
Northgate II............................. 5,002,096 8.61%(d) Dec-03 4,426,677
Northpointe B & C........................ 2,799,409 7.38%(d) Mar-16 2,602,284
Patapsco Industrial Center............... 3,008,507 8.61%(d) Dec-03 2,662,422
Plaza Southwest 1-5...................... 3,262,236 8.61%(d) Dec-03 2,886,963
Tech Center 29 Phase I................... 1,834,181 8.50%(d) Jul-03 1,451,414
Tech Center 29 Phase II.................. 3,879,866 9.05%(d) Sep-06 3,309,462
Westchase Park 1-2....................... 1,283,146 8.61%(d) Dec-03 1,135,539
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
PRINCIPAL INTEREST RATE AT MATURITY PRINCIPAL DUE
PROPERTY BALANCE DECEMBER 31, 1998 DATE AT MATURITY
-------- ------------ ----------------- -------- -------------
<S> <C> <C> <C> <C>
Mortgage Loan Secured by:................ 30,279,780 7.25%(d) Jan-08 26,416,613
Carpenter Center.......................
Carrier Place..........................
Commerce Center........................
DFW North..............................
Northgate III..........................
Parkway Tech Center....................
Valley View Commerce Park..............
Valwood II Business Center.............
Shady Trail Business Center............
Mortgage Loan Secured by:................ 24,484,164 7.28%(d) Jun-08 19,567,225
Corporex Plaza I.......................
President's Plaza......................
Central Park Office Tech...............
Skyway Business Center.................
Avion Business Center..................
Inverness Business Park................
Acquisition Line Secured by:
Bowater................................ 2,100,000 7.38%(e) Apr-99 2,100,000
Cameron Creek Business Park............ 1,416,000 7.38%(e) Apr-99 1,416,000
Kodak.................................. 3,360,000 7.38%(e) Apr-99 3,360,000
Metro Business Park.................... 6,200,000 7.38%(e) Apr-99 6,200,000
Norfolk Commerce Center................ 13,000,000 7.38%(e) Apr-99 13,000,000
Washington Business Park............... 5,190,000 7.38%(e) Apr-99 5,190,000
Winter Park Business Center............ 5,100,000 7.38%(e) Apr-99 5,100,000
Bridge Loan Secured by:.................. 27,152,769 7.38%(e) Apr-99 27,152,769
AeroTech...............................
Black Canyon Technical Center..........
Broadbent Business Park IV.............
Summit Park............................
Tucson Tech Center.....................
Academy Point Atrium II(a).............
------------ ------------
Total Light Industrial
Properties................... 169,246,860 155,443,877
------------ ------------
OFFICE PROPERTIES
Apollo Drive Office Building(b).......... 14,922,279 9.13%(d) Aug-01 14,340,606
Beltline Business Ctr.................... 2,682,283 8.61%(d) Dec-03 2,373,725
Tech Center 29 -- Phase III.............. 4,442,964 8.58%(d) May-02 4,227,429
Acquisition Line Secured by:
1881 Pine Street.................... 3,641,235 7.38%(e) Apr-99 3,641,235
Linear Tech......................... 2,237,633 7.38%(e) Apr-99 2,237,633
Manhattan Towers.................... 20,300,000 7.38%(e) Apr-99 20,300,000
Gateway West........................ 5,978,007 7.38%(e) Apr-99 5,978,007
Bridge Loan Secured by:
Northview Business Center.............. 15,497,512 7.38%(e) Apr-99 15,497,512
------------ ------------
Total Office Properties........ 69,701,913 68,596,147
------------ ------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL INTEREST RATE AT MATURITY PRINCIPAL DUE
PROPERTY BALANCE DECEMBER 31, 1998 DATE AT MATURITY
-------- ------------ ----------------- -------- -------------
<S> <C> <C> <C> <C>
RETAIL PROPERTIES
Tamarac Square Mall...................... 11,573,973 8.40%(d) Dec-01 10,907,186
------------ ------------
Total Retail Properties........ 11,573,973 10,907,186
------------ ------------
Total Light Industrial, Office
and Retail Properties........ 250,522,746 234,947,210
Debt Premiums(c)......................... 1,958,000 --
------------ ------------
Total mortgage notes payable... $252,480,746 $234,947,210
============ ============
</TABLE>
- ---------------
(a) Office property.
(b) The Trust owns 55.84% joint venture interest in this property.
(c) Represents the unamortized difference between mortgage debt assumed and
fair value of such debt. (See Note 2 to Consolidated Financial Statements.)
(d) Interest rate is fixed.
(e) Interest rate is variable based on 30 day LIBOR rate plus 1.75%.
ITEM 3. LEGAL PROCEEDINGS
The Trust is currently named as a defendant in a lawsuit related to the
Trust's merger with four real estate limited partnerships. The lawsuit purports
to be both a class action and a derivative lawsuit against the defendants. The
plaintiffs have asserted various claims, including breach of fiduciary duty and
various securities law violations, against the parties to the merger and certain
individuals and are seeking monetary damages. On April 13, 1998, the Trust was
named as a defendant in an additional purported class action lawsuit related to
the Trust's merger with the four real estate limited partnerships. The
plaintiffs have asserted various claims, including breach of fiduciary and
contractual duties and various securities law violations, against the parties to
the merger and are seeking monetary damages.
The Trust is also a defendant in a lawsuit over claims of breach of
contract and civil conspiracy allegedly injuring a commercial tenant in a
building sold by the Trust to Dallas Area Rapid Transit ("DART") under threat of
eminent domain. DART has agreed to indemnify, defend and hold harmless the Trust
from any and all losses and liabilities arising from obligations under this
lease.
The Trust intends to vigorously defend against these claims. The lawsuits
described above are on-going, therefore, management cannot predict the outcome
of such litigation, however, management believes the liabilities, if any, that
may ultimately result from such legal actions are not expected to have a
material adverse effect on the consolidated financial position or results of
operations of the Trust.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
On May 27, 1998, an Annual Meeting of Shareholders was held for purposes of
electing seven Trust Managers and to ratify the selection of independent
auditors. Results of the items voted on are as follows:
1. Election of Trust Managers
<TABLE>
<CAPTION>
FOR WITHHELD
--------- --------
<S> <C> <C>
William H. Bricker.......................................... 8,643,578 59,151
T. Patrick Duncan........................................... 8,643,999 58,730
Robert E. Giles............................................. 8,645,829 56,900
Edward B. Kelley............................................ 8,641,043 61,686
Stanley J. Kraska, Jr. ..................................... 8,645,091 57,638
Russell C. Platt............................................ 8,644,990 57,739
Charles W. Wolcott.......................................... 8,644,361 58,368
</TABLE>
13
<PAGE> 16
2. Ratification of Ernst & Young LLP as Independent Auditors
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
8,649,770.. 28,499 24,460
</TABLE>
On November 20, 1998, a Special Meeting of Shareholders was held for the
approval of the issuance of up to 11,064,193 shares and 10,266,795 Series A
Convertible Preferred Shares of Beneficial Interest pursuant to (i) the Share
Purchase Agreement, effective July 30, 1998, between the Trust and DDR, as
amended on September 14, 1998, and (ii) the Agreement and Plan of Merger, dated
as of July 30, 1998, among the Trust, DDR and DDR Office Flex Corporation. This
proposal was approved by the shareholders by the following vote: 10,378,429 for,
258,986 against and 108,222 abstained.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Trust's Shares are listed and traded on the New York Stock Exchange
(the "NYSE") under the symbol "IND." The following table sets forth for the
periods indicated the high and low closing sales price of the Trust's Shares,
and the cash distributions declared per Share:
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW DISTRIBUTIONS
------------- ---- --- -------------
<S> <C> <C> <C>
December 31, 1998......................................... $11 3/4 $11 3/16 $.20
September 30, 1998........................................ 10 1/16 9 7/8 .20
June 30, 1998............................................. 13 12 7/16 .20
March 31, 1998............................................ 13 7/8 13 1/4 .18
December 31, 1997......................................... 15 5/16 13 1/4 --
September 30, 1997(a)..................................... 15 15/16 14 3/8 --
June 30, 1997(a).......................................... 15 5/8 11 7/8 --
March 31, 1997(a)......................................... 13 3/4 11 1/4 .20
</TABLE>
As of March 29, 1999, the closing sale price per Share on the NYSE was
$11.00. On such date, there were 20,486,409 outstanding Shares held by 8,856
shareholders of record.
On January 29, 1998, the Trust reinstated quarterly distributions to
shareholders. A distribution of $0.18 per Share was paid on April 14, 1998 and a
distribution of $0.20 was paid on July 14, 1998, October 14, 1998 and January
20, 1999. In addition, the Trust declared a distribution of $0.20 per Share
payable on April 15, 1999 to shareholders of record on April 5, 1999. The Trust
anticipates paying distributions for the foreseeable future.
14
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Trust and
its subsidiaries for each of the five years in the period ended December 31,
1998. This information should be read in conjunction with the discussion set
forth in "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Trust and accompanying Notes included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Property revenues..................... $ 48,357 $ 12,201 $11,320 $11,410 $11,080
Income from property operations....... 32,311 7,886 7,298 7,559 7,128
Net income (loss)(a).................. (10,070) 1,799 1,255 (4,584) (4,655)
======== ======== ======= ======= =======
Per share (Basic and Diluted):(b)
Net income (loss)(a)............... $ (0.82) $ 0.54 $ 0.70 $ (2.55) $ (2.55)
======== ======== ======= ======= =======
Distributions declared............. 0.78 -- 0.20 0.20 --
======== ======== ======= ======= =======
BALANCE SHEET DATA:(C)
Total assets.......................... $500,330 $258,395 $78,936 $89,382 $92,550
======== ======== ======= ======= =======
Total debt............................ 266,539 121,426 53,216 62,815 65,613
======== ======== ======= ======= =======
Shareholders' equity.................. 205,579 121,771 22,683 19,248 24,196
======== ======== ======= ======= =======
</TABLE>
- ---------------
(a) Net loss for 1998, 1995 and 1994 include provisions for possible losses on
real estate of $10,060, $600 and $650, respectively. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
the Trust" for a discussion of extraordinary gains (losses) of $(5,803),
$2,643 and $5,810 in 1998, 1997 and 1996, respectively.
(b) Diluted earnings per share is the same as basic earnings per share as all
outstanding options were anti-dilutive for each period presented.
(c) The Trust acquired $237 million in assets in 1998 and incurred or assumed
$150 million in net new debt during the year. Net proceeds from private
placements of Shares totaled approximately $105 million in 1998.
15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with "Item 6.
Selected Financial Data" and the Consolidated Financial Statements of the Trust
and accompanying Notes included elsewhere in this Form 10-K. The statements
contained in this report that are not historical facts are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results may differ materially from those included in the forward-looking
statements. These forward-looking statements involve risks and uncertainties
including, but not limited to, changes in general economic conditions in the
markets that could impact demand for the Trust's properties and changes in
financial markets and interest rates impacting the Trust's ability to meet its
financing needs and obligations.
RESULTS OF OPERATIONS
Comparison of 1998 to 1997
During 1998, the Trust completed acquisitions with an aggregate purchase
price of $237 million. As a result of these acquisitions, the weighted average
property square footage owned by the Trust increased to 5,453,000 in 1998 from
1,687,000 in 1997, an increase of 221%. Property revenues increased 296% to
$48,357,000 in 1998 from $12,201,000 in 1997, and income from property
operations (which is defined as property revenues less property operating
expenses, excluding depreciation and amortization, interest expense, Trust
administration and overhead expenses, or provision for possible losses on real
estate) increased 310% to $32,311,000 in 1998 from $7,886,000 in 1997. On a same
property basis, for properties owned as of January 1, 1997, property revenues
increased to $9,916,000 in 1998 from $9,527,000, an increase of 4.1%, comprised
of a 3.2% increase in revenue related to industrial properties, a 16.7% increase
in revenue related to one office property and a 3.3% increase in revenue at the
Trust's retail property in Denver, Colorado. These increases in revenue stemmed
principally from an increase in rental rates and/or an increase in overall
occupancy at a number of the properties. Overall leased occupancy of the Trust's
portfolio was 91.9% at December 31, 1998 compared to 92.4% at December 31, 1997.
On a same property basis, income from property operations increased to
$6,073,000 in 1998 from $5,920,000 in 1997, an increase of 2.6%. This overall
increase is a result of the increase in revenue explained above and is comprised
of a 1.0% increase related to industrial properties, a 38.3% increase related to
one office property and a 1.7% increase related to the Trust's retail
properties. Same property operating expenses increased by 6.5%, primarily as a
result of higher property taxes. Due to the small number of properties in the
same property comparison, results can be unduly influenced by results from, or
non-renewal of, a single large lease.
Loss from operations increased to $4,295,000 in 1998 from $3,007,000 in
1997 as a result of the increase in income from property operations explained
above, an increase in total interest expense of $9,361,000 due to an additional
$145,100,000 in property financing in 1998 and a full year of interest expense
on properties acquired in 1997 and a provision for losses on real estate of
$10,060,000 (see below). In addition, Trust administration and overhead expenses
increased $1,225,000 due to a 170% increase in full time employees, expensing
internal acquisition department costs in accordance with Emerging Issues Task
Force Consensus No. 97-11 ("EITF 97-11") and higher general costs due to the
increased activity of the Trust in 1998. Depreciation and amortization increased
$5,226,000 due to the acquisition of properties in 1998 and a full year of
depreciation on properties acquired in 1997.
In December 1998, the Trust recorded a provision for possible loss of
$10,060,000 as a result of its decision to sell its retail property in Colorado
in 1999. The Trust estimated the net sale proceeds to be received on such sale
and recorded the provision. The estimate of net sale proceeds is based on
subjective judgments. The actual proceeds to be received in the event of a sale
will most likely differ from the estimated net sale proceeds and may differ
substantially. The difference, if any, will be reflected as a gain or loss on
sale of real estate at such time.
16
<PAGE> 19
During 1998, the Trust recognized extraordinary losses totaling $5,803,000
($0.47 per Share) comprised of loss on extinguishment of debt of $23,000 and
costs related to a change in control of $5,780,000. The costs related to change
in control include approximately $2,484,000 for payments made to the Trust's
senior officers under severance and change in control agreements which were
triggered when DDR's ownership position exceeded 33%, an accrual of $2,960,000
related to the fair market value of future payments through 2008 to the senior
officers under previously granted dividend equivalent rights, approximately
$300,000 related to vesting of restricted shares previously granted to the
senior officers and $36,000 in payroll taxes associated with the payments to the
senior officers. In 1997, the Trust recognized extraordinary gains on the
extinguishment of debt of $2,643,000 ($0.80 per Share). During 1997, the Trust
sold two properties for a total gain of $2,163,000 ($0.65 per Share). The Trust
did not sell any properties in 1998.
The Trust's emphasis in the light industrial sector is ideally suited for
the entrepreneurial segment of the economy, which consistently leads the United
States in job growth. This property type is attractive to technology companies,
which typically prefer flexible property space. The majority of the Trust's
properties are situated in markets that have a concentration of technology
firms, such as San Francisco, San Diego, and Northern Virginia.
Comparison of 1997 to 1996
During 1997, the Trust completed acquisitions with an aggregate purchase
price of $166.7 million. The majority of these acquisitions occurred during the
latter part of the fourth quarter of 1997 and, as a result, did not materially
impact the results of operations for 1997. The Trust's weighted average property
square footage increased to 1,687,000 in 1997 from 1,577,000 in 1996, an
increase of 7.0%. Property revenues increased 7.8% to $12,201,000 in 1997 from
$11,320,000 in 1996, and income from property operations increased 8.1% to
$7,886,000 in 1997 from $7,298,000 in 1996 as a result of these acquisitions. On
a same property basis, property revenues increased to $9,814,000 in 1997 from
$9,422,000 in 1996, an increase of 4.2%, comprised of a 7.3% increase in revenue
related to industrial properties and a 1.6% decrease in revenue at the Trust's
retail property in Denver, Colorado. The decrease in revenue at the Trust's
retail property stemmed principally from slower than anticipated leasing of
vacancies and higher tenant rollover. The sale of two properties in 1997, one in
the first quarter and one in the fourth quarter, resulted in a net decrease in
1997 combined property revenue of $229,000 and a net increase in income from
property operations of $141,000 when compared to 1996. Overall leased occupancy
of the Trust's portfolio was 92.4% at December 31, 1997 compared to 94.2% at
December 31, 1996, reflecting lower occupancy rates of certain properties
acquired during the fourth quarter of 1997.
On a same property basis, income from property operations increased to
$6,209,000 in 1997 from $5,987,000 in 1996, an increase of 3.7%. This overall
increase is comprised of an 8.0% increase related to industrial properties and a
5.2% decrease related to the Trust's retail properties. The decrease in the
Trust's retail properties is a result of the decrease in revenue explained
above, as well as increase in expenses due to higher repairs and maintenance
costs. Same property operating expenses increased by 4.9%, primarily as a result
of higher property taxes.
Loss from operations decreased to $3,007,000 in 1997 from $4,732,000 in
1996 as a result of the increase in income from property operations explained
above, an increase in interest income of $388,000 (due to the private equity
placements in 1997 of approximately $35 million), a decrease in total interest
expense of $123,000 (due to the paydown of debt during late 1996 and 1997 as
offset by an accrual of $1,022,000 of interest expense related to the conversion
of certain debt to equity in December 1997), a decrease in Trust administration
and overhead expenses of $874,000 (due to the conclusion of shareholder
litigation in 1996 as offset by higher general costs due to the increased
activity of the Trust in 1997), and an increase in depreciation and amortization
of $248,000 (due to the acquisition of properties during the fourth quarter of
1997).
During 1997 and 1996, the Trust recognized extraordinary gains on
extinguishment of debt of $2,643,000 ($0.80 per Share) and $5,810,000 ($3.20 per
Share), respectively, resulting from the settlement of litigation.
17
<PAGE> 20
During 1997, the Trust sold two properties for a total gain of $2,163,000 ($0.65
per Share) compared to the sale of two properties for a total gain $177,000
($0.10 per Share) in 1996.
Analysis of Cash Flows
COMPARISON OF 1998 TO 1997
Cash flow provided by operating activities in 1998 was $2,961,000. This
results from the Trust's net loss of $10,070,000 offset by net non-cash charges
totaling $21,984,000 related to change in control costs, provision for possible
real estate losses, minority interests, depreciation and amortization and
issuance of shares to Trust Managers. This is offset by an increase in
restricted cash of $3,301,000 and other assets of $10,073,000. In addition, an
increase in accounts payable, other liabilities and tenant security deposits of
$3,213,000 and an increase in accrued interest of $1,208,000 further increased
cash flow provided by operating activities.
Cash flow used in investing activities in 1998 was $179,673,000,
representing amounts expended on the acquisition of real estate and related
working capital totaling $172,133,000 and capitalized expenditures of
$7,540,000.
Cash flow provided by financing activities in 1998 was $171,174,000. This
amount reflects net proceeds from mortgage financings and notes payable of
$153,273,000 and proceeds from the private placements of Shares for net proceeds
of $28,578,000 offset by the payment of loan costs of $1,852,000, the repurchase
of Shares totaling $1,600,000 and distributions to shareholders and limited
partnership unit holders of $7,225,000.
Cash flow used in operating activities in 1997 was $776,000. This is
primarily the net result of property operations, interest expense,
administrative expenses, and an increase in restricted cash as a result of the
Trust's property acquisitions and financings in 1997. Other assets increased
$1,318,000 and restricted cash increased $1,019,000 in 1997. In addition,
administrative expenses includes $439,000 in litigation and proxy costs which
management believes is of a non-recurring nature.
Cash flow used in investing activities in 1997 was $61,898,000,
representing proceeds from the sale of two properties of $7,129,000, amounts
expended on the acquisition of real estate and related working capital totaling
$67,116,000, and capitalized expenditures of $1,911,000.
Cash flow provided by financing activities in 1997 was $70,347,000. This
amount reflects proceeds from the mortgage financing on fifteen properties of
$44,001,000, proceeds from the private placements of Shares in July 1997 and
December 1997 for net proceeds of $33,481,000, the payment of loan costs of
$169,000 and principal repayments on mortgage and notes payable totaling
approximately $6,340,000.
FUNDS FROM OPERATIONS
The Board of Governors of the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") defines Funds from Operations ("FFO") as net
income (loss) computed in accordance with generally accepted accounting
principles, excluding gains or losses from debt restructuring and sales of
property, plus real estate related depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. The Trust
calculates FFO in a manner consistent with the NAREIT definition. In addition,
NAREIT recommends that extraordinary items or significant non-recurring items
that distort comparability should not be considered in arriving at FFO.
Accordingly, the Trust does not include extraordinary items, provision for
possible losses on real estate or the non-recurring interest accrual related to
the conversion of the modified notes held by an affiliate into Shares.
The Trust believes FFO is an appropriate measure of performance relative to
other REITs. FFO provides investors with an understanding of the ability of the
Trust to incur and service debt and make capital expenditures. There can be no
assurance that FFO presented by the Trust is comparable to similarly titled
measures of other REITs. While other REITs may not always use a similar
definition, this information does add comparability to those which have adopted
the NAREIT definition. FFO should not be considered as an alternative to net
income or other measurements under generally accepted accounting principles as
an indicator of the Trust's operating performance or to cash flows from
operating, investing, or financing activities
18
<PAGE> 21
as a measure of liquidity. FFO does not reflect working capital changes, cash
expenditures for capital improvements, or principal payments on indebtedness.
The following table shows the Trust's cash flows from its operating,
investing and financing activities prepared in accordance with generally
accepted accounting principles:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
--------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in) operating
activities......................................... $ 2,961 $ (776) $(4,764)
========= ======== =======
Net cash provided by (used in) investing
activities......................................... (179,673) (61,898) 5,173
========= ======== =======
Net cash provided by (used in) financing
activities......................................... 171,174 70,347 (4,093)
========= ======== =======
</TABLE>
The following table shows the Trust's calculation of FFO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
------------ ----------- -----------
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S> <C> <C> <C>
Net Income (Loss)............................... $ (10,070) $ 1,799 $ 1,255
Exclude effects of:
Extraordinary items:
(Gain) loss on extinguishment of debt.... 23 (2,643) (5,810)
Provision for change in control costs.... 5,780 -- --
Gain on sales of real estate............... -- (2,163) (177)
Provision for possible losses on real
estate................................... 10,060 -- --
Real estate depreciation and
amortization............................. 8,108 3,144 2,890
Default rate interest...................... -- -- 369
Minority interest in operating
partnerships............................. (188) -- --
Non-recurring interest accrual assuming
future conversion of debt to equity...... -- 1,022 --
----------- ---------- ----------
Funds from Operations........................... $ 13,713 $ 1,159 $ (1,473)
=========== ========== ==========
Weighted average Shares and operating
partnership units outstanding(a).............. 12,484,472 3,317,004 $1,821,648
=========== ========== ==========
</TABLE>
YEAR 2000 ISSUES
Some older computer software was written using two digits rather than four
to define the applicable year. As a result, those computer programs have
time-sensitive programming software that recognize a date using "00" as the year
1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, create tenant statements,
or engage in similar normal business activities.
The Trust's plan to resolve Year 2000 issues involves the following four
phases: assessment, remediation, testing and implementation. To date, the Trust
has assessed all existing internally used hardware and systems (both information
technology and non-information technology) that could be significantly affected
by the Year 2000 issue. Based on these assessments, management believes that
existing hardware and systems used by the Trust are Year 2000 compliant.
Additionally, as of December 31, 1998, the Trust has successfully upgraded the
existing network and property operations/accounting systems. These upgrades were
instituted to meet current and future needs of the Trust, not as a result of our
initial Year 2000 assessment. The Trust has taken precautions, including testing
these systems prior to implementation, to insure that all upgrades and
modifications are Year 2000 compliant.
The Trust has queried and/or received disclosure statements from
significant external service providers. To date, the Trust is not aware of any
Year 2000 problems with these third parties that would materially impact the
Trust's results of operations, liquidity or capital resources. However, the
Trust has no means of ensuring that external service providers will be Year 2000
compliant. The inability of these service providers to complete their Year 2000
resolution processes in a timely manner could impact the Trust. The effect of
non-
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<PAGE> 22
compliance by service providers is not determinable. The Trust is also reviewing
all properties which may use date sensitive software in elevators, heating and
cooling equipment and security systems to confirm no problem exists.
Although a potential area of significant exposure to the Trust is the
contracting to third parties of property management, accounting, and leasing
services, the Trust generally utilizes thirty-day cancelable contracts and,
should a material risk arise with respect to the Year 2000 problem, anticipates
terminating the contract and hiring a new vendor. In addition, the Trust has
initiated the transition to internal property management, accounting and leasing
of its own properties, thereby significantly reducing the use of third parties
in these areas.
As noted above, the Trust has completed the initial assessment and believes
the existing internal systems and upgrades are Year 2000 compliant. The Trust
does not expect historical and future costs related to the Year 2000 issue to
have a material effect on the consolidated financial position or results of
operations of the Trust. Although management does not currently believe that the
effect of the Year 2000 problem will have a material impact on the Trust, there
is no guarantee that unforeseen circumstances will not arise which could cause a
material adverse effect upon the Trust's operations.
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of funds for the Trust's liquidity requirements are
funds generated from operation of the Trust's real estate assets, equity
offerings, debt financings and/or refinancings, and unrestricted cash reserves.
In addition, the Trust may from time to time sell properties that do not
compliment the Trust's property emphasis or geographic target markets. Proceeds
from such sales could be used for working capital purposes, debt reduction or
reinvested into other properties. As of December 31, 1998, the Trust had $6.1
million in unrestricted cash.
During 1998, the Trust purchased $237 million in properties and, on January
15, 1999, the Trust purchased a $127 million portfolio. In order to fund this
growth, the Trust entered into several equity transactions during 1998. In
January 1998, the Trust completed a $10 million private placement of Shares at
$13.625 per Share. In February 1998, two shareholders exercised their preemptive
rights and acquired $8.7 million of Shares at $13.625 per Share. In August 1998,
the Trust entered into a definitive agreement providing for a strategic
investment by DDR in the Trust. Under the terms of the agreement, DDR was
obligated to purchase $115 million of equity (Shares up to 49.9% ownership and
preferred shares thereafter) and up to $200 million in additional equity,
subject to certain conditions, to fund property acquisitions approved by the
Trust's Board. From August 1998 through March 29, 1999, DDR purchased 9.3
million Shares for $143 million. Proceeds of these equity placements were used
for property acquisitions.
In addition to the equity raised, the Trust utilized both long term and
short term secured financing to fund property acquisitions. The Trust has a $75
million secured acquisition line with PSCC which bears interest at a variable
rate based on LIBOR plus 1.75%. The Trust currently has approximately $68.5
million outstanding under this line. In January 1999, the Trust initiated a
secured acquisition credit facility with Bank One. The agreement contemplates a
$150,000,000 credit line of which Bank One has committed to $25,000,000. The
remainder of the credit line will be syndicated on a "best efforts" basis by
Bank One. The credit line, which will be secured by mortgage liens on
properties, provides for a graduated variable interest rate (depending on the
Trust's overall leverage) of LIBOR plus 1.4% to LIBOR plus 2.0%, a maximum loan
to value of 60%, and a maturity in January 2001. As of March 29, 1999, the Trust
has $13.0 million outstanding under this credit line, which bears interest at
LIBOR plus 1.75%, currently 6.7125%.
At December 31, 1998, the Trust had $252.5 million in mortgage debt
outstanding, of which approximately $141.3 million was represented by fixed rate
debt with an effective weighted average interest rate of 7.44%, and $111.2
million was represented by variable rate debt with a weighted average interest
rate of 6.95%. These weighted average interest rates represent an average of the
applicable stated interest rate and do not include the amortization of deferred
loan costs (or debt premiums) which will produce a higher (or lower) weighted
average interest rate. The variable rate debt is comprised of $68.5 million
borrowed under the Trust's secured acquisition line and $42.7 million borrowed
under a bridge loan. The bridge loan was repaid with
20
<PAGE> 23
proceeds from a permanent financing on January 8, 1999. The Trust also had $14.1
million of unsecured borrowings from DDR with an interest rate at December 31,
1998 of 10.25%. The unsecured borrowings from DDR were repaid in full in January
1999.
At December 31, 1998, the Trust's total market capitalization (based upon a
December 31, 1998 closing Share price of $11.69 per Share) was approximately
$461.5 million. Based upon this amount, the Trust's debt to total market
capitalization at December 31, 1998 was 56.3%. The Trust is currently operating
at higher levels of leverage than it would foresee on a longer term basis. The
Trust believes that the use of leverage is justified given existing acquisition
prospects and the benefits of the Trust's transition to a larger entity.
Although there is no assurance of ultimate availability, the Trust anticipates
that equity will be raised in the future will serve to deleverage the Trust.
On a long term basis, the Trust expects to meet liquidity requirements
generated by property operating expenses, debt service, and future distributions
with funds generated by the operations of its real properties. Should such funds
not cover these needs, the possibility of future distributions may be reduced or
eliminated. Although the Trust believes that its current leverage is justified,
the risk of financial default could rise substantially if the Trust is unable to
complete future equity offerings or if property operating results decline.
The nature of the Trust's operating properties, which generally provide for
leases with a term of between three and five years, results in an approximate
annual turnover rate of 20% to 25% of the Trust's tenants and related revenue.
Such turnover requires capital expenditures related to tenant improvements and
leasing commissions, capital repairs and replacements, initial capital
expenditures, (which are costs necessary to bring acquired properties to
intended leasable condition at the time of acquisition), and expansions and
renovations related to properties acquired in order to maintain or improve the
Trust's occupancy levels. These costs were $7,540,000 in the year ended December
31, 1998, compared to $1,911,000 in the year ended December 31, 1997. These
costs have historically been funded out of the Trust's operating cash flow and
cash reserves. The Trust has made no commitments for additional capital
expenditures beyond those related to normal leasing and releasing activities,
related escrows and initial capital expenditures.
The Trust initiated distributions during 1998 at $0.18 per Share for the
first quarter and increased the distribution to $0.20 per Share for the second,
third and fourth quarters. The Trust's distribution policy is to conserve
capital by, over time, lowering its FFO payout ratio. During 1998, the Trust
declared a total of $0.78 per share in dividends, which represents an FFO payout
ratio of 71%. The Trust believes that the minimum FFO payout ratio in order to
comply with the requirement to distribute 95% of taxable income, is
approximately 50-55% based on the Trust's current capital structure. Future
distributions will be at the discretion of the Board of Trust Managers. The
Trust has approximately $34,301,000 in net operating loss carryforwards, a
portion of which could be utilized to reduce the payout of 95% taxable income
required by the Internal Revenue Code.
On February 18, 1998, the Trust filed a Form S-3 shelf registration with
the Securities and Exchange Commission which would provide for the issuance of
up to $500 million in Shares, Preferred Shares of Beneficial Interest, unsecured
senior debt securities and/or warrants to purchase such securities in amounts,
at prices and on terms to be determined by market conditions at the time of
future offerings. The Trust anticipates utilization of this shelf registration
in the future to fund acquisitions and growth of the Company.
On March 9, 1998, the Board of Trust Managers authorized a Share repurchase
program allowing the Trust to purchase up to 1,000,000 shares from time to time
in open market transactions, as price and market conditions allowed, over the
following six months. Through August 31, 1998, the Trust had purchased 123,783
shares in the open market, for an aggregate cost of $1,598,000. These Shares are
held in Treasury. Under the terms of its agreement with DDR, the Trust is
prohibited from purchasing its own Shares if such purchases would result in DDR
owning in excess of 49.9% of the Trust's outstanding Shares.
21
<PAGE> 24
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Trust's risk management includes
forward-looking statements that involve risks and uncertainties. Actual results
could differ materially from the results discussed in the forward-looking
statements.
The Trust's primary market risk exposure is to changes in interest rates.
The Trust is exposed to market risk related to its secured acquisition line and
secured bridge loan, with PSCC and the Bank One credit line as discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources." The interest on the acquisition
line, bridge loan and credit line are subject to fluctuations in the market.
The Trust also uses long-term and medium-term secured debt as a source of
capital. These debt instruments are typically issued at fixed interest rates.
When these debt instruments mature, the Trust typically refinances such debt at
then-existing market interest rates which may be more or less than the interest
rates on the maturing debt.
If the interest rate for variable rate debt was 100 basis points higher or
lower during 1998, the Trust's interest expense would have been increased or
decreased by approximately $700,000. There is no fixed rate debt maturing in
1999.
The Trust historically has not hedged its exposure to fluctuations in
interest rates and currently has no plans to do so in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed in the Index to
Financial Statements and Financial Statement Schedule appearing on Page F-1 of
this Form 10-K.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
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<PAGE> 25
PART III.
ITEM 10. TRUST MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
On July 30, 1998, in connection with the execution of a definitive
agreement for an investment in the Trust by DDR, the Trust increased the number
of Trust Managers on the Board of Trust Managers from seven to eleven and
appointed DDR nominees Scott A. Wolstein, James A. Schoff, Robert H. Gidel and
Albert T. Adams as Trust Managers. Mr. Wolstein was also elected to the position
of Chairman of the Board of Trust Managers on July 30, 1998. The persons who
serve as Trust Managers and executive officers of the Trust, their ages and
their respective positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) AND OFFICE(S) HELD
---- --- ------------------------------
<S> <C> <C>
Scott A. Wolstein.................... 46 Chairman of the Board of Trust Managers
Albert T. Adams...................... 48 Trust Manager
William H. Bricker................... 67 Trust Manager
T. Patrick Duncan.................... 50 Trust Manager
Robert H. Gidel...................... 47 Trust Manager
Robert E. Giles...................... 51 Trust Manager
Edward B. Kelley..................... 58 Trust Manager
Stanley J. Kraska, Jr. .............. 39 Trust Manager
J. Timothy Morris.................... 32 Trust Manager
James A. Schoff...................... 53 Trust Manager
Charles W. Wolcott................... 46 Trust Manager, President and Chief Executive
Officer
Lewis D. Friedland................... 39 Executive Vice President and Chief Operating
Officer
Marc A. Simpson...................... 44 Senior Vice President and Chief Financial
Officer, Secretary and Treasurer
David B. Warner...................... 40 Senior Vice President -- Real Estate Operations
</TABLE>
Scott A. Wolstein was appointed as a Trust Manager and as Chairman of the
Board of Trust Managers on July 30, 1998. Mr. Wolstein became Chairman of DDR in
February 1997, and has served as President and Chief Executive Officer of DDR
since its organization in 1992 and February 1993 initial public offering. Mr.
Wolstein was a principal and executive officer of DDR's predecessors prior to
1993. Mr. Wolstein is a graduate of the Wharton School at the University of
Pennsylvania and of the University of Michigan Law School. Following his
graduation from the University of Michigan Law School, Mr. Wolstein was
associated with the Cleveland law firm of Thompson, Hine & Flory. He is
currently a member of the Board of Trustees of the National Association of Real
Estate Investment Trusts and the International Council of Shopping Centers and
serves as the General Co-Chairman of the Cleveland Campaign for the State of
Israel Bonds. He is also a member of the Young Presidents Organization, The
Urban Land Institute, the National Realty Committee and the Wharton Real Estate
Center.
Albert T. Adams was appointed as a Trust Manager on July 30, 1998. Mr.
Adams has been a partner with the law firm of Baker & Hostetler LLP in
Cleveland, Ohio, since 1984, and has been affiliated with the firm since 1977.
Mr. Adams is a graduate of Harvard College, Harvard Business School and Harvard
Law School. He serves as a member of the Board of Trustees of the Greater
Cleveland Roundtable and of the Western Reserve Historical Society and is a Vice
President of the Harvard Business School Club of Northeastern Ohio. Mr. Adams
also serves as a director of DDR, Associated Estates Realty Corporation, Boykin
Lodging Company, Captec Net Lease Realty, Inc. and Dairy Mart Convenience
Stores, Inc.
William H. Bricker has served as a Trust Manager of the Trust since
September 1985. Mr. Bricker has served as President of DS Energy Services
Incorporated and has consulted in the energy field and on international trade
since 1987. In May 1987, Mr. Bricker retired as the Chairman and Chief Executive
Officer of Diamond Shamrock Corporation where he held various management
positions from 1969 through May 1987. Mr. Bricker is a director of the LTV
Corporation, the Eltech Systems Corporation and the National
23
<PAGE> 26
Paralysis Foundation. He received his Bachelor of Science and Master of Science
degrees from Michigan State University.
T. Patrick Duncan has served as a Trust Manager since December 1996 Mr.
Duncan joined USAA Real Estate Company ("Realco") in November 1986 as Chief
Financial Officer. With over 24 years of experience, Mr. Duncan serves as Senior
Vice President of Real Estate Operations with responsibilities which include the
direction of all acquisitions, sales, management and leasing of real estate for
USAA-affiliated companies. Mr. Duncan received degrees from the University of
Arizona in Accounting and Finance. He is a Certified Public Accountant,
Certified Commercial Investment Manager, and holds a Texas Real Estate Broker's
License. Mr. Duncan is also a member of the Board of Directors of Meridian
Industrial Trust and a member of the Board of Directors of USAA Equity Advisors,
Inc.
Robert H. Gidel was appointed as a Trust Manager on July 30, 1998. Mr.
Gidel has been the managing partner of Liberty Partners, LP, an investment
partnership formed to purchase securities interests in private and public real
estate companies, since 1993. Prior to this, Mr. Gidel was a Managing Director
and Member of the Board of Directors of Alex. Brown Kleinwort Benson Realty
Advisors, a real estate investment management firm formed in 1990 as a merger of
Alex. Brown Realty Advisors ("ABRA") and Financial Investment Advisors. Mr.
Gidel had been President of ABRA since 1986. From 1981-1985, Mr. Gidel served in
a wide range of positions at Heller Financial and its subsidiary, Abacus Real
Estate Finance. He is a graduate of University of Florida's Warrington College
of Business with a major in real estate. Mr. Gidel is currently the Chairman of
the Real Estate Advisory Board at the College of Business and a Hoyt Fellow at
the Homer Hoyt Institute.
Robert E. Giles has served as a Trust Manager since March 1996. Mr. Giles
is currently the owner and President of Robert E. Giles Interests, Inc., a real
estate consulting and development firm based in Houston, Texas. Mr. Giles also
serves as President of Title Network, Ltd., a national title insurance agency.
Mr. Giles was a Vice President with the J.E. Robert Companies, Inc. from 1994 to
1995. From 1990 to 1994, Mr. Giles was President and a Director of National Loan
Bank, a publicly-held company created through the merger of Chemical Bank and
Texas Commerce Bank. Mr. Giles received his Bachelor of Arts degree from
University of Texas -- Austin in 1970 and received a Master of Arts degree from
University of Texas -- Arlington in 1973.
Edward B. Kelley has served as a Trust Manager since December 1996. Mr.
Kelley is President of Realco. He joined Realco in April 1989 as Executive Vice
President and Chief Operating Officer before assuming his new title in August
1989. Mr. Kelley received his Bachelor of Business Administration degree from
St. Mary's University in 1964 and a Masters in Business Administration from
Southern Methodist University in 1967, and is a Member of the Appraisal
Institute ("MAI"). Mr. Kelley is a member of the Board of Directors of USAA
Equity Advisors, Inc.
Stanley J. Kraska, Jr. has served as a Trust Manager since July 1997,when
he was appointed as an independent Trust Manager at the request of ABKB/LaSalle
Securities Limited Partnership ("ABKB") and LaSalle Advisors Capital Management,
Inc. ("LaSalle Advisors") pursuant to the terms of the Common Share Purchase
Agreements between the Trust and ABKB (as agent for the benefit of a particular
client) dated as of July 3, 1997. Mr. Kraska has been employed by ABKB or its
affiliates since February 1988. He currently serves as Managing Director, with
responsibility for private placement investment. Mr. Kraska graduated from
Dartmouth College in 1982 with a Bachelor of Arts degree and received a Master
of Business Administration degree from Harvard University in 1986.
J. Timothy Morris has served as a Trust Manager since January 15, 1999. Mr.
Morris is a Principal at Morgan Stanley Dean Witter and head of Morgan Stanley's
Real Estate Special Situations Program. Mr. Morris has over 11 years of
experience at Morgan Stanley in the investment banking direct investment areas.
Prior to heading up the Special Situations initiative, Mr. Morris spent five
years in Hong Kong running Morgan Stanley's real estate business for Asia. Mr.
Morris currently serves on the boards of Grove Property Trust and Tower Realty
Trust, as well as on the boards of two private REITs. He is a graduate of
Indiana University and holds a Bachelors degree in Finance.
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<PAGE> 27
James A. Schoff was appointed as a Trust Manager on July 30, 1998. Mr.
Schoff is Vice Chairman of the Board and Chief Investment Officer of DDR. Prior
to this promotion, Mr. Schoff served as DDR's Executive Vice President and Chief
Operating Officer from the time of the DDR's initial public offering, and he was
a principal and executive officer of DDR's predecessors. Mr. Schoff is a
graduate of Hamilton College and Cornell University Law School. Mr. Schoff
practiced law with the firm of Thompson, Hine and Flory where he specialized in
the acquisition and syndication of real estate properties. Mr. Schoff currently
serves as a member of the Executive Committee and Board of Trustees of the
Western Reserve Historical Society and the National Committee for Community and
Justice.
Charles W. Wolcott currently serves as Trust Manager, President and Chief
Executive Officer. Mr. Wolcott was hired as the President and Chief Executive
Officer of the Trust in May 1993 and has served as a Trust Manager since August
1993. Mr. Wolcott was President and Chief Executive Officer for Trammell Crow
Asset Services, a real estate asset and portfolio management affiliate of
Trammell Crow Company, from 1990 to 1992. He served as Vice President and Chief
Financial and Operating Officer of the Trust from 1988 to 1991. From 1988 to
1990, Mr. Wolcott was a partner in Trammell Crow Ventures Operating Partnership.
Prior to joining the Trammell Crow Company in 1984, Mr. Wolcott was President of
Wolcott Corporation, a firm engaged in the development and management of
commercial real estate properties. Mr. Wolcott graduated from the University of
Texas at Austin in 1975 with a Bachelor of Science degree and received a Master
of Business Administration degree from Harvard University in 1977.
Lewis D. Friedland currently serves as Executive Vice President and Chief
Operating Officer. He was hired as the Vice President and Chief Investment
Officer of the Trust in 1997. Prior to joining the Trust, Mr. Friedland was a
founding partner of Crimson Partners, an investment firm formed in 1992 that
engaged in the acquisition and development of real estate assets. Prior to
founding this firm, he was a Division Partner and Managing Director of Trammell
Crow Company where he was responsible for that firm's development, leasing, and
property management activities in Richmond, Va. Mr. Friedland graduated from the
Wharton School of the University of Pennsylvania in 1981 with a Bachelor of
Science Degree in Economics and received a Master of Business Administration
degree from Harvard University in 1985.
Marc A. Simpson currently serves as Senior Vice President and Chief
Financial Officer, Secretary and Treasurer. Mr. Simpson was hired as the Vice
President and Chief Financial Officer, Secretary and Treasurer of the Trust in
March 1994. From November 1989 through March 1994, Mr. Simpson was a Manager in
the Financial Advisory Services Group of Coopers & Lybrand L.L.P. Prior to that
time, he served as Controller of Pacific Realty Corporation, a real estate
development company. Mr. Simpson graduated with a Bachelor of Business
Administration from Midwestern State University in 1978, and received a Master
of Business Administration from Southern Methodist University in 1990.
David B. Warner currently serves as Senior Vice President-Real Estate
Operations. Mr. Warner was hired as Vice President and Chief Operating Officer
of the Trust in May 1993. From 1989 through the date he accepted a position with
the Trust, Mr. Warner was a Director of the Equity Investment Group for the
Prudential Realty Group. From 1985 to 1989, he served in the Real Estate Banking
Group of NCNB Texas National Bank. Mr. Warner graduated from the University of
Texas at Austin in 1981 with a degree in finance and received a Master of
Business Administration from the same institution in 1984.
COMMITTEES OF THE TRUST MANAGERS
AUDIT COMMITTEE. The Audit Committee of the Trust Managers met twice during
the 1998 fiscal year. The Audit Committee reviews and approves the scope and
results of any outside audit of the Trust, and the fees therefore, and makes
recommendations to the Trust Managers or management concerning auditing and
accounting matters and the efficacy of the Trust's internal control systems. The
Audit Committee selects the Trust's independent auditors subject to shareholder
ratification. During the 1998 fiscal year, Messrs. Bricker, Kelley and Giles
served on the Audit Committee. Current members of the Audit Committee are
Messrs. Bricker, Kelley and Giles.
COMPENSATION COMMITTEE. The Compensation Committee met three times during
the 1998 fiscal year. The Compensation Committee recommends to the Board of
Trust Managers guidelines for compensation and
25
<PAGE> 28
benefits of the executive officers of the Trust based upon achievement of
objectives and other factors. The Compensation Committee is also responsible for
acting upon all matters concerning, and exercising such authority as is
delegated to it under the provisions of, any benefit, retirement or pension
plan. During the 1998 fiscal year, Messrs. Bricker, Duncan and Giles served on
the Compensation Committee. Current members of the Compensation Committee are
Messrs. Bricker, Duncan and Giles.
INVESTMENT COMMITTEE. The Investment Committee met three times during 1998
prior to being dissolved on July 29, 1998. The Investment Committee reviewed
potential real property acquisitions and made recommendations to the Board of
Trust Managers. During the 1998 fiscal year, Messrs. Duncan, Giles, Kraska and
Wolcott served on the Investment Committee.
EXECUTIVE COMMITTEE. The Executive Committee was formed on July 29, 1998
and granted the power to authorize acquisitions and dispositions not to exceed
$50 million and to bind the Trust to capital raising transactions not to exceed
$100 million. The Executive Committee met seven times during 1998. During the
1998 fiscal year, Messrs. Wolstein, Gidel, Duncan and Wolcott served on the
Executive Committee. Current members of the Executive Committee are Messrs.
Wolstein, Gidel, Duncan, Morris and Wolcott.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Bricker, Duncan and
Giles. No executive officer of the Trust served as a member of the Compensation
Committee or as a director of any other entity, one of whose executive officers
served on the Compensation Committee or as a Trust Manager of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3, 4 and 5 (and any amendments thereto)
furnished to the Trust with respect to the 1998 Fiscal Year or written
representations from certain reporting persons that no forms were required, no
person failed to disclose on a timely basis, as disclosed in such forms, reports
required by Section 16(a) of the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Trust to the
executive officers of the Trust for the three years ended December 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
NAME AND -------------------------- ALL OTHER UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS
------------------ ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Charles W. Wolcott..................... 1998 $223,750 $152,375 $1,120,630(2) 250,000
President and CEO 1997 202,500 153,750 8,071(6) 50,000
1996 195,000 100,000 8,039(6) --
Lewis D. Friedland..................... 1998 178,750 122,563 816,680(3) 135,000
Executive Vice President and COO(7) 1997 102,462 72,000 5,168(6) 35,000
Marc A. Simpson........................ 1998 135,000 66,150 542,305(4) 70,000
Senior Vice President and CFO, 1997 117,500 72,000 8,071(6) 20,000
Secretary and Treasurer 1996 110,000 55,000 8,039(6) --
David B. Warner........................ 1998 131,250 63,788 525,430(5) 70,000
Senior Vice President 1997 117,500 72,000 8,071(6) 20,000
Real Estate Operations 1996 110,000 55,000 8,039(6) --
</TABLE>
26
<PAGE> 29
- ---------------
(1) Represents bonus payments for current year paid in January of the following
year.
(2) Includes change of control payment ($862,500), payments made under fully
vested dividend equivalent rights granted in April 1998 ($116,000), vesting
of restricted shares ($135,100) pursuant to change in control and
contribution to Retirement and Profit Sharing Plan ($7,030).
(3) Includes change of control payment ($693,750), payments made under fully
vested dividend equivalent rights granted in April 1998 ($58,000), vesting
of restricted shares ($57,900) pursuant to change in control and
contribution to Retirement and Profit Sharing Plan ($7,030).
(4) Includes change of control payment ($472,500), payments made under fully
vested dividend equivalent rights granted in April 1998 ($29,000), vesting
of restricted shares ($33,775) pursuant to change in control and
contribution to Retirement and Profit Sharing Plan ($7,030).
(5) Includes change of control payment ($455,625), payments made under fully
vested dividend equivalent rights granted in April 1998 ($29,000), vesting
of restricted shares ($33,775) pursuant to change in control and
contribution to Retirement and Profit Sharing Plan ($7,030).
(6) Trust's contribution to the Retirement and Profit Sharing Plan for current
year made in January of following year.
(7) Hired in May 1997.
SEVERANCE AND CHANGE IN CONTROL AGREEMENTS
On April 29, 1998, the Trust entered into Severance and Change in Control
Agreements with each of Messrs. Wolcott, Friedland, Simpson and Warner, which
agreements replaced and superseded existing Bonus and Severance Agreements with
such officers. Among other things, the agreements provide that, upon a Change in
Control (as defined), the respective officer will receive an amount equal to
2.50 times such officer's annualized base salary rate plus targeted bonus amount
for the fiscal year in which the first event constituting a Change in Control
occurs. In addition, each such officer will receive certain employee benefits
for, in general, a one-year period commencing on the date of a Change in
Control. Each agreement also provides that (1) if any payment made by the Trust
to the respective officer would be subject to the "golden parachute" excise tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, the
Trust will pay to such officer an additional amount to offset the effects of
such excise tax, (2) the Trust agrees to pay certain attorneys' and related fees
and expenses incurred by the respective officer to enforce his rights under the
agreement, and (3) all deferred or unvested awards under the Trust's Employee
and Trust Manager Incentive Share Plan shall immediately vest upon a Change in
Control and the officer shall have the right to exercise any vested awards
during the balance of the award's term. Each agreement commenced on April 29,
1998 and continues for a five-year term and shall automatically renew for
one-year terms unless earlier terminated in accordance with the agreement.
CHANGE IN CONTROL
Per the Severance and Change in Control Agreements, the term "Change in
Control" is defined, among other things, as an acquisition of over 33% of the
Trust's securities. On December 10, 1998, a Change in Control occurred upon the
filing by DDR of Amendment No. 3 to Schedule 13D. Accordingly, payments totaling
$2,484,375 to Messrs. Wolcott, Friedland, Simpson and Warner were made. In
addition, outstanding options to purchase shares held by these employees became
immediately exercisable and the restrictions on any restricted shares held by
these employees were lifted.
27
<PAGE> 30
OPTION GRANTS
The following table sets forth the share option grants made in the 1998
Fiscal Year to each of the Trust's executive officers. The table also sets forth
the potential realizable value that would exist for the options at the end of
their ten-year terms, assuming compound rates of stock appreciation of 5% and
10%. The actual future value of the options will depend on the market value of
the Company's Common Shares. All option exercise prices are based on a price
higher than the market price on the grant date.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF SHARE PRICE APPRECIATION
SHARES OPTIONS AT END OF TEN YEAR
UNDERLYING GRANTED TO OPTION TERMS(1)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED(2) FISCAL 1998 PER SHARE DATE 5% 10%
---- ---------- ------------ -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Wolcott......... 200,000 43% $13.625 4/1/08 $1,673,015 $4,278,105
Lewis D. Friedland......... 100,000 22% 13.625 4/1/08 836,508 2,139,052
Marc A. Simpson............ 50,000 11% 13.625 4/1/08 418,254 1,069,526
David B. Warner............ 50,000 11% 13.625 4/1/08 418,254 1,069,526
</TABLE>
- ---------------
(1) "Potential Realizable Value" is disclosed in response to Securities and
Exchange Commission rules, which require such disclosure for illustrative
purposes only, and is based on the difference between the potential market
value of shares issuable (based upon assumed appreciation rates) upon
exercise of such options and the exercise price of such options. The values
disclosed are not intended to be, and should not be interpreted as,
representations or projections of future value of the Trust's shares or of
the share price.
(2) Share option grants vest in equal increments on their date of grant and on
each of the first four anniversaries of their date of grant. All share
options were vested on December 10, 1998 pursuant to the Change in Control.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the value of
the unexercised options as of December 31, 1998 held by the Trust's executive
officers. No options were exercised in the 1998 Fiscal Year by any of the
executive officers.
AGGREGATE OPTION EXERCISES IN FISCAL 1998 AND FISCAL 1998
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/98 AT 12/31/98
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles. W. Wolcott............................ 250,000 0 (a) (a)
Lewis D. Friedland............................. 135,000 0 (a) (a)
Marc A. Simpson................................ 70,000 0 (a) (a)
David B. Warner................................ 70,000 0 (a) (a)
</TABLE>
- ---------------
(a) The Trust's share price at December 31, 1998 was $11.6875, which is less
than the option exercise prices of either $13.625 or $15.00 per share.
Therefore, the value of unexercised in-the-money options at December 31,
1998 is zero.
TRUST MANAGER COMPENSATION
In fiscal year 1998, the Trust paid an annual retainer of $25,000 to
non-employee Trust Managers plus $1,000 for each Trust Manager meeting attended
in person, $500 for each Trust Manager meeting attended via teleconference, $500
for each committee meeting attended in person and $250 for each committee
meeting attended via teleconference. Additionally, the Trust Managers are
reimbursed for their expenses incurred in connection with their duties as Trust
Managers. Each non-employee Trust Manager has the right to receive
28
<PAGE> 31
his annual retainer in cash and/or Shares. In addition to the annual retainer,
Mr. Bricker earned $14,750, Mr. Giles earned $13,750, Mr. Kelley earned $7,500,
Mr. Duncan earned $12,750, Mr. Kraska earned $11,250, Mr. Wolstein earned
$2,250, Mr. Schoff earned $1,500, Mr. Gidel earned $2,250 and Mr. Adams earned
$1,500 in 1998 for attendance at Board of Trust Managers and committee meetings.
In December 1998, the Trust adopted a deferred compensation plan for
non-employee Trust Managers which will give Trust Managers the option to defer
receipt of fees otherwise payable. Such deferred fees are credited to a deferral
account in units representing Shares. The value of the units is increased or
decreased as measured by the market value of Shares.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Shares by (i) each Trust Manager, (ii) the Trust's Chief
Executive Officer and each executive officer of the Trust, (iii) all Trust
Managers and executive officers of the Trust as a group, and (iv) to the Trust's
knowledge, by any person owning beneficially more than 5% of the outstanding
shares of such class, in each case at March 29, 1999. Except as otherwise noted,
each person named in the table has sole voting and investment power with respect
to all Common Shares shown as beneficially owned by such person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------- ----------------- ----------
<S> <C> <C>
Albert T. Adams........................................ 1,000(1) *
William H. Bricker..................................... 4,400(2) *
T. Patrick Duncan...................................... 600 *
Robert H. Gidel........................................ 9,000(1) *
Robert E. Giles........................................ 7,012(2) *
Edward B. Kelley....................................... 1,000 *
Stanley J. Kraska, Jr. ................................ 4,000(2) *
J. Timothy Morris...................................... 0 *
James A. Schoff........................................ 1,000(1) *
Charles W. Wolcott..................................... 336,000(3) 1.60%
Scott A. Wolstein...................................... 1,006(1)(9) *
Lewis D. Friedland..................................... 158,383(4) *
Marc A. Simpson........................................ 90,434(5) *
David B. Warner........................................ 78,700(5) *
USAA Real Estate Company............................... 1,680,086(6) 7.99%
9830 Colonnade Boulevard, Suite 600
San Antonio, Texas 782302239
Morgan Stanley, Dean Witter, Discover & Co.
The Morgan Stanley Real Estate Special Situations
Fund II, L.P.
Morgan Stanley Asset Management Inc.................. 1,999,653(7) 9.51%
1585 Broadway
New York, New York 10036
ABKB/LaSalle Securities Limited Partnership and LaSalle
Advisors Limited Partnership......................... 1,502,578(8) 7.15%
100 East Pratt Street
Baltimore, MD 21202
Scott A. Wolstein and Developers Diversified Realty
Corporation.......................................... 9,401,817(9) 44.71%
34555 Chagrin Boulevard
Moreland Hills, OH 44022
All Trust Managers and executive officers as a group
(11 persons)......................................... 692,535(1)(2)(3)(4)(5) 3.29%
</TABLE>
29
<PAGE> 32
- ---------------
* Ownership is less than 1% of outstanding Common Shares.
(1) Includes vested options to purchase 1,000 Common Shares.
(2) Includes vested options to purchase 4,000 Common Shares.
(3) Includes vested options to purchase 250,000 Common Shares.
(4) Includes vested options to purchase 135,000 Common Shares.
(5) Includes vested options to purchase 70,000 Common Shares.
(6) Based upon Amendment No. 4 to Schedule 13D filed jointly by United Services
Automobile Association ("USAA"), USAA Capital Corporation ("USAA CC"), and
USAA Real Estate Company ("Realco") on August 6, 1998. USAA is the sole
stockholder of USAA CC and USAA CC is the sole stockholder of Realco. Based
upon these relationships, USAA, USAA CC, and Realco have shared voting and
dispositive power over 1,680,086 Common Shares.
(7) Based upon Amendment No. 1 to Schedule 13D filed jointly by Morgan Stanley,
MSAM and Morgan Stanley Real Estate Special Situations Fund II, L.P. on
March 17, 1998 (the "MSAM Schedule 13D"), Morgan Stanley has sole voting and
dispositive power over 120,231 Common Shares and shared voting and
dispositive power over 1,879,422 Common Shares held by the investors for
whom MSAM acts as an investment advisor (the "MSAM Purchasers"). Pursuant to
separate investment management agreements between MSAM and MSRE, MSAM has
been granted voting and dispositive power with respect to the Common Shares
held by MSRE. MSAM has shared voting and dispositive power over 1,879,422
Common Shares held by the MSAM Purchasers and the Morgan Stanley Real Estate
Special Situations Fund II, L.P. has shared voting and dispositive power
over 652,415 of such Common Shares. Pursuant to separate investment
management agreements between MSAM and the MSAM Purchasers, MSAM has been
granted voting and dispositive power with respect to the Common Shares held
by each of the MSAM Purchasers.
(8) Based upon Amendment No. 2 to Schedule 13D filed jointly by ABKB and LaSalle
Advisors on February 10, 1998, (i) ABKB has sole voting and dispositive
power over 480,213 Common Shares and shared voting and dispositive power
with respect to 480,212 Common Shares; and (ii) LaSalle Advisors has shared
dispositive power with respect to 542,153 Common Shares.
(9) Based upon Amendment No. 5 to Schedule 13D filed jointly by Developers
Diversified Realty Corporation and Scott A. Wolstein on January 19, 1999,
DDR has sole voting and dispositive power over 9,401,817 Common Shares and
Mr. Wolstein has sole voting and dispositive power over 6 Common Shares. Mr.
Wolstein, as Chairman of the Board, President and Chief Executive Officer of
DDR, may be deemed to beneficially own all shares held by DDR.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During the fiscal year 1998, the Trust on occasion entered into unsecured
borrowings with DDR. Such borrowings bear a fixed rate of interest of 10.25%,
provide for quarterly payments of interest and are due thirty days after demand.
The highest amount outstanding under such borrowings from DDR during 1998 was
$23,510,000. The total amount of interest on such borrowings during 1998 was
$661,000 and the balance outstanding at December 31, 1998 was $14,058,000.
Effective October 8, 1998, DDR acquired an 89% limited partnership interest
and a 1% general partnership interest in DDR/Tech 29 Limited Partnership, a
limited partnership whose assets consist of two light industrial properties and
one office property totaling 290,991 nrsf located in Silver Springs, Maryland.
Several selling entities and affiliates thereof acquired the remaining
partnership interests. These partnership interests are convertible into DDR
common shares. As of November 20, 1998, the Trust acquired 88.5% of DDR's
limited partnership interest and, in consideration therefor, issued
approximately $16.1 million in Shares to DDR. The acquisition was deemed to be
effective as of October 8, 1998 and the purchase price included interest accrued
from such date. To date, an Equalization Agreement, which provides, among other
things, that DDR shall reimburse the Trust for certain dividend-based
distributions to the holders of
30
<PAGE> 33
partnership interests has not been executed. It is anticipated that the
Equalization Agreement will have an effective date in January 1999.
On November 20, 1998, the Trust purchased undeveloped land from DDR in the
amount of $2.3 million plus interest. The purchase was accomplished through the
issuance of shares to DDR in accordance with the Share Purchase Agreement dated
July 30, 1998. This land was then contributed by the Trust to a development
joint venture with a third party.
DDR also provided real estate management services. DDR is paid a
competitive rate for the management services, including, but not limited to,
tenant finish, leasing and reporting. For the year ended December 31, 1998 the
Trust paid $19,000 for such management services.
Certain real estate investments are managed by Quorum Real Estate Services
Corporation ("Quorum") an affiliate of a major shareholder of the Trust. Quorum
is paid competitive rates, for services, including, but not limited to,
construction, tenant finish, leasing and management. For the year ended December
31, 1998, management fees and leasing commissions paid by the Trust to Quorum
were $548,000 and $24,000, respectively. No such fees were paid by the Trust in
1997.
The Trust currently leases space to an individual serving as a Trust
Manager at competitive market rates. For the year ended December 31, 1998, this
Trust Manager paid $9,800 in lease payments to the Trust.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Financial Statement Schedule:
See Index to Consolidated Financial Statements and Financial Statement
Schedule appearing on page F-1 of this Form 10-K
(3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
2.1 -- Form of Amended and Restated Agreement and Plan of
Merger, dated as of June 30, 1997, by and between the
Trust and each of USAA Real Estate Income Investments I,
a California Limited Partnership, USAA Real Estate Income
Investments II Limited Partnership, USAA Income
Properties III Limited Partnership and USAA Income
Properties IV Limited Partnership (included as Annex I to
the Joint Proxy Statement/Prospectus of the Trust
included in Form S-4, Registration No. 333-31823)
2.2 -- Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation, as Purchaser, and
Merit Industrial Properties Limited Partnership, as
Seller, as amended by (i) First Amendment to Purchase
Agreement dated as of July 30, 1997, (ii) Second
Amendment to Purchase Agreement dated as of July 31,
1997, (iii) Third Amendment to Purchase Agreement dated
as of August 8, 1997, (iv) Fourth Amendment to Purchase
Agreement dated as of August 12, 1997, and (v) Fifth
Amendment to Purchase Agreement dated as of October 2,
1997 (incorporated herein by reference from Exhibit 2.1
to Form 8-K of the Trust dated October 3, 1997)
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
2.3 -- Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation, as Purchaser, and
Merit 1995 Industrial Portfolio Limited Partnership, as
Seller, as amended by (i) First Amendment to Purchase
Agreement dated as of July 30, 1997, (ii) Second
Amendment to Purchase Agreement dated as of July 31,
1997, (iii) Third Amendment to Purchase Agreement dated
as of August 8, 1997, and (iv) Fourth Amendment to
Purchase Agreement dated as of August 12, 1997
(incorporated herein by reference from Exhibit 2.2 to
Form 8-K of the Trust dated October 3, 1997)
2.4 -- Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation, as Purchaser, and
Merit VV 1995 Industrial Portfolio Limited Partnership,
as Seller, as amended by (i) First Amendment to Purchase
Agreement dated as of July 30, 1997, (ii) Second
Amendment to Purchase Agreement dated as of July 31,
1997, (iii) Third Amendment to Purchase Agreement dated
as of July 31, 1997, (iv) Fourth Amendment to Purchase
Agreement dated as of August 12, 1997, and (v) Fifth
Amendment to Purchase Agreement dated as of October 2,
1997 (incorporated herein by reference from Exhibit 2.3
to Form 8-K of the Trust dated October 3, 1997)
2.5 -- Purchase Agreement dated as of June 30, 1997 between
Shidler West Investment Corporation, as Purchaser, and
Merit VV Land 1995 Industrial Portfolio Limited
Partnership, as Seller, as amended by (i) First Amendment
to Purchase Agreement dated as of July 30, 1997, (ii)
Second Amendment to Purchase Agreement dated as of July
31, 1997, (iii) Third Amendment to Purchase Agreement
dated as of July 31, 1997, and (iv) Fourth Amendment to
Purchase Agreement dated as of August 12, 1997
(incorporated herein by reference from Exhibit 2.4 to
Form 8-K of the Trust dated October 3, 1997)
2.6 -- Purchase and Sale Agreement dated as of September 24,
1997 by and between Midway/Commerce Center Limited
Partnership, as Seller, and the Trust, as Buyer
(incorporated herein by reference from Exhibit 2.1 to
Form 8-K of the Trust dated October 3, 1997)
2.7 -- First Amendment to Purchase and Sale Agreement dated as
of October 22, 1997 by and between Midway/Commerce Center
Limited Partnership and the Trust (incorporated herein by
reference from Exhibit 2.2 to Form 8-K of the Trust dated
November 13, 1997)
2.8 -- Second Amendment to Purchase and Sale Agreement dated as
of October 31, 1997 by and between Midway/Commerce Center
Limited Partnership and the Trust (incorporated herein by
reference from Exhibit 2.3 to Form 8-K of the Trust dated
November 13, 1997)
2.9 -- Amended and Restated Agreement and Plan of Merger dated
as of June 30, 1998 between the Trust and USAA Real
Estate Income Investments I, a California Limited
Partnership (incorporated herein by reference from
Exhibit 2.1 to Form 8-K of the Trust dated January 20,
1998)
2.10 -- Amended and Restated Agreement and Plan of Merger dated
as of June 30, 1998 between the Trust and USAA Real
Estate Income Investments II Limited Partnership
(incorporated herein by reference from Exhibit 2.2 to
Form 8-K of the Trust dated January 20, 1998)
2.11 -- Amended and Restated Agreement and Plan of Merger dated
as of June 30, 1998 between the Trust and USAA Real
Estate Income Investments III Limited Partnership
(incorporated herein by reference from Exhibit 2.3 to
Form 8-K of the Trust dated January 20, 1998)
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
2.12 -- Amended and Restated Agreement and Plan of Merger dated
as of June 30, 1998 between the Trust and USAA Real
Estate Income Investments IV Limited Partnership
(incorporated herein by reference from Exhibit 2.4 to
Form 8-K of the Trust dated January 20, 1998)
2.13 -- Agreement and Plan of Merger by and among the Trust,
Developers Diversified Realty Corporation ("DDR") and DDR
Office Flex Corporation ("DDR Flex") dated July 30, 1998
(incorporated herein by reference from Exhibit 2.1 to
Form 8-K of the Trust dated July 30, 1998)
*3.1 -- Third Amended and Restated Declaration of Trust
*3.2 -- First Amendment to the Third Amended and Restated
Declaration of Trust
*3.3 -- Second Amendment to the Third Amended and Restated
Declaration of Trust
*3.4 -- Third Amendment to the Third Amended and Restated
Declaration of Trust
*3.5 -- Fifth Amended and Restated Bylaws
*3.6 -- Amendment to the Fifth Amended and Restated Bylaws
3.7 -- Statement of Designation of Series A Preferred Shares of
Beneficial Interest of the Trust dated July 30, 1998
(incorporated herein by reference from Exhibit 3.1 to
Form 8-K of the Trust dated July 30, 1998)
4.1 -- Indenture dated November 15, 1985, by and between the
Trust and IBJ Schroder Bank & Trust Company (incorporated
herein by reference from Exhibit 10.4 to Form S-4 of
American Industrial Properties REIT, Inc. ("AIP Inc.")
dated March 16, 1994; Registration No. 33-74292)
4.2 -- Form of Common Share Certificate (incorporated herein by
reference from Exhibit 4.2 to Amendment No. 3 to Form S-4
of the Trust filed October 28, 1997; Registration No.
333-31823)
10.1 -- Form of Indemnification Agreement (incorporated by
reference from Exhibit 10.1 to Form S-4 of the Trust
dated July 22, 1997; Registration No. 333-31823)
10.2 -- Employee and Trust Manager Incentive Share Plan
(incorporated by reference from Exhibit 10.2 to Form S-4
of the Trust dated July 22, 1997; Registration No.
333-31823)
10.3 -- Common Share Purchase Agreement dated as of July 3, 1997,
by and between the Trust and ABKB/LaSalle Securities
Limited Partnership ("ABKB") as Agent for and for the
benefit of a particular client (incorporated herein by
reference from Exhibit 10.7 to Form 8-K of the Trust
dated July 22, 1997)
10.4 -- Common Share Purchase Agreement dated as of July 3, 1997,
by and between the Trust and ABKB as Agent for and for
the benefit of a particular client (incorporated herein
by reference from Exhibit 10.8 to Form 8-K of the Trust
dated July 22, 1997)
10.5 -- Common Share Purchase Agreement dated as of July 3, 1997,
by and between the Trust and ABKB/LaSalle Advisors
Limited Partnership ("LaSalle") as Agent for and for the
benefit of a particular client (incorporated herein by
reference from Exhibit 10.9 to Form 8-K of the Trust
dated July 22, 1997)
10.6 -- Registration Rights Agreement dated as of July 10, 1997,
by and between the Trust, ABKB as Agent for and for the
benefit of particular clients and LaSalle Advisors
Limited Partnership as Agent for and for the benefit of a
particular client (incorporated herein by reference from
Exhibit 10.6 to Form 8-K of the Trust dated July 22,
1997)
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
10.7 -- Common Share Purchase Agreement dated as of June 20,
1997, by and among the Trust, MS Real Estate Special
Situations, Inc. ("MSRE") and Morgan Stanley Asset
Management, Inc. ("MSAM") as agent and attorney-in-fact
for specified clients (the "MSAM") (incorporated herein
by reference from Exhibit 10.5 to Form 8-K of the Trust
dated July 22, 1997)
10.8 -- Registration Rights Agreement dated as of June 20, 1997,
by and among the Trust, MSRE and MSAM on behalf of the
MSAM Purchaser (incorporated herein by reference from
Exhibit 10.6 to the Trust's Form 8-K dated July 22, 1997)
10.9 -- Renewal, Extension, Modification and Amendment Agreement
dated February 26, 1997, executed by the Trust in favor
of USAA Real Estate Company ("Realco") (incorporated
herein by reference from Exhibit 10.1 to Form 8-K of the
Trust dated March 4, 1997)
10.10 -- Share Purchase Agreement dated as of December 20, 1996,
by and among the Trust, Realco and AIP Inc. (incorporated
herein by reference from Exhibit 99.7 to Form 8-K of the
Trust dated December 23, 1996)
10.11 -- Share Purchase Agreement dated as of December 13, 1996,
by and between the Trust and Realco (incorporated herein
be reference from Exhibit 99.4 to Form 8-K of the Trust
dated December 23, 1996)
10.12 -- Registration Rights Agreement dated as of December 20,
1996, by and between the Trust and Realco, as amended
(incorporated herein by reference from Exhibit 99.9 to
Form 8-K of the Trust dated December 23, 1996)
10.13 -- Registration Rights Agreement dated as of December 19,
1996, by and between the Trust and Realco (incorporated
herein by reference from Exhibit 99.8 to Form 8-K of the
Trust dated December 23, 1996)
10.14 -- 401(k) Retirement and Profit Sharing Plan (incorporated
herein by reference from Exhibit 10.5 to Amendment No. 1
to Form S-4 of AIP Inc. dated March 4, 1994; Registration
No. 33-74292)
10.15 -- Amendments to 401(k) Retirement and Profit Sharing Plan
(incorporated herein by reference from Exhibit 10.4 to
Form 10-K of the Trust dated March 27, 1995)
10.16 -- Settlement Agreement by and between the Trust, Patapsco
#1 Limited Partnership, Patapsco #2 Limited Partnership,
The Manufacturers Life Insurance Company and The
Manufacturers Life Insurance Company (U.S.A.) dated as of
May 22, 1996 (incorporated herein by reference from
Exhibit 99.1 to Form 8-K of the Trust dated May 22, 1996)
10.17 -- Agreement and Assignment of Partnership Interest, Amended
and Restated Agreement and Certificate of Limited
Partnership and Security Agreement for Patapsco
Center -- Linthicum Heights, Maryland (incorporated
herein by reference from Exhibit 10.8 to Amendment No. 2
to Form S-4 of AIP Inc. dated March 4, 1994; Registration
No. 33-74292)
10.18 -- Note dated November 15, 1994 in the original principal
amount of $12,250,000 with AIP Properties #1 L.P. as
Maker and AMRESCO Capital Corporation as Payee
(incorporated herein by reference from Exhibit 99.1 to
Form 8-K of the Trust dated November 22, 1994)
10.19 -- Mortgage, Deed of Trust and Security Agreement dated
November 15, 1994 between AIP Properties #1 L.P. and
AMRESCO Capital Corporation (incorporated herein by
reference from Exhibit 99.20 Form 8-K of the Trust dated
November 22, 1994)
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
10.20 -- Loan Modification Agreement modifying the Note dated
November 15, 1994 in the original principal amount of
$12,250,000 (incorporated herein by reference from
Exhibit 99.2 to Form 8-K of the Trust dated June 23,
1995)
10.21 -- Note dated November 15, 1994 in the original principal
amount of $2,150,000 with AIP Properties #2 L.P. as Maker
and AMRESCO Capital Corporation as Payee (incorporated
herein by reference from Exhibit 99.3 to Form 8-K of the
Trust dated November 22, 1994)
10.22 -- Mortgage, Deed of Trust and Security Agreement dated
November 15, 1994 between AIP Properties #2 L.P. and
AMRESCO Capital Corporation (incorporated herein by
reference from Exhibit 99.4 to Form 8-K of the Trust
dated November 22, 1994)
10.23 -- Loan Modification Agreement modifying the Note dated
November 15, 1994 in the original principal amount of
$2,250,000 (incorporated herein by reference from Exhibit
99.1 to Form 8-K of the Trust dated June 23, 1995)
10.24 -- Promissory Note dated November 25, 1996, by and between
AIP Inc. and Realco (incorporated herein by reference
from Exhibit No. 99.5 to Form 8-K of the Trust dated
December 23, 1996)
10.25 -- Deed of Trust and Security Agreement dated November 15,
1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America (Huntington Drive Center)
(incorporated herein by reference from Exhibit 99.1 to
Form 8-K of the Trust dated November 20, 1996)
10.26 -- Note dated November 15, 1996 in the original principal
amount of $4,575,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Huntington Drive Center ) (incorporated herein by
reference from Exhibit 99.2 to Form 8-K of the Trust
dated November 20, 1996)
10.27 -- Deed of Trust and Security Agreement dated November 15,
1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America (Patapsco Industrial Center)
(incorporated herein by reference from Exhibit 99.3 to
Form 8-K of the Trust dated November 20, 1996)
10.28 -- Note dated November 15, 1996 in the original principal
amount of $3,112,500 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Patapsco Industrial Center) (incorporated herein by
reference from Exhibit 99.4 to Form 8-K of the Trust
dated November 20, 1996)
10.29 -- Deed of Trust and Security Agreement dated November 15,
1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America (Woodlake Distribution
Center) (incorporated herein by reference from Exhibit
99.5 to Form 8-K of the Trust dated November 20, 1996)
10.30 -- Note dated November 15, 1996 in the original principal
amount of $1,537,500 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Woodlake Distribution Center) (incorporated herein by
reference from Exhibit 99.6 to Form 8-K of the Trust
dated November 20, 1996)
10.31 -- Deed of Trust and Security Agreement dated November 15,
1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America (all Texas properties except
Woodlake) (incorporated herein by reference from Exhibit
99.7 to Form 8-K of the Trust dated November 20, 1996)
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
10.32 -- Note dated November 15, 1996 in the original principal
amount of $1,162,500 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Meridian Street Warehouse) (incorporated herein by
reference from Exhibit 99.8 to Form 8-K of the Trust
dated November 20, 1996)
10.33 -- Note dated November 15, 1996 in the original principal
amount of $2,775,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Beltline Business Center) (incorporated herein by
reference from Exhibit 99.9 to Form 8-K of the Trust
dated November 20, 1996)
10.34 -- Note dated November 15, 1996 in the original principal
amount of $3,375,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Plaza South) (incorporated herein by reference from
Exhibit 99.10 to Form 8-K of the Trust dated November 20,
1996)
10.35 -- Note dated November 15, 1996 in the original principal
amount of $2,100,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Commerce North Park) (incorporated herein by reference
from Exhibit 99.11 to Form 8-K of the Trust dated
November 20, 1996)
10.36 -- Note dated November 15, 1996 in the original principal
amount of $2,850,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Gateway 5 & 6) (incorporated herein by reference from
Exhibit 99.12 to Form 8-K of the Trust dated November 20,
1996)
10.37 -- Note dated November 15, 1996 in the original principal
amount of $5,175,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Northgate II) (incorporated herein by reference from
Exhibit 99.13 to Form 8-K of the Trust dated November 20,
1996)
10.38 -- Note dated November 15, 1996 in the original principal
amount of $1,327,500 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Westchase Park) (incorporated herein by reference from
Exhibit 99.4 to Form 8-K of the Trust dated November 20,
1996)
10.39 -- Bonus and Severance Agreement dated March 13, 1996, by
and between the Trust and Charles W. Wolcott
(incorporated herein by reference from Exhibit 10.12 to
Form 10-K of the Trust for the year ended December 31,
1996)
10.40 -- Bonus and Severance Agreement dated March 13, 1996, by
and between the Trust and Marc A. Simpson (incorporated
herein by reference from Exhibit 10.13 to Form 10-K of
the Trust for the year ended December 31, 1996)
10.41 -- Bonus and Severance Agreement dated March 13, 1996, by
and between the Trust and David B. Warner (incorporated
herein by reference from Exhibit 10.14 to Form 10-K of
the Trust for the year ended December 31, 1996)
10.42 -- Amendment No. 1 to Share Purchase Agreement dated as of
December 13, 1996 by and between the Trust and Realco
(incorporated herein by reference from Exhibit 10.2 to
Form 8-K of the Trust dated March 4, 1997)
10.44 -- Common Share Purchase Agreement dated as of January 29,
1998, by and between the Trust and Praedium II Industrial
Associates LLC ("Praedium") (incorporated herein by
reference from Exhibit 10.1 to Form 8-K of the Trust
dated January 29, 1998)
10.45 -- Registration Rights Agreement dated as of January 29,
1998, by and between the Trust and Praedium (incorporated
herein by reference from Exhibit 10.2 to Form 8-K of the
Trust dated January 29, 1998)
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
10.46 -- Agreement dated as of January 29, 1998, by and among the
Trust, Realco, ABKB (as Agent for and for the benefit of
particular clients), MSRE and MSAM (incorporated herein
by reference from Exhibit 10.3 to Form 8-K of the Trust
dated January 29, 1998)
10.47 -- Contribution and Exchange Agreement dated as of September
25, 1997 among Shidler West Investment Corporation,
AIP-SWAG Operating Partnership, L.P. and the Trust
(incorporated herein by reference from Exhibit 99.1 to
Form 8-K of the Trust dated October 3, 1997)
10.48 -- Assignment and Assumption of Purchase Agreements dated as
of October 3, 1997 between Shidler West Investment
Corporation and AIP-SWAG Operating Partnership, L.P.
(incorporated herein by reference from Exhibit 99.2 to
Form 8-K of the Trust dated October 3, 1997)
10.49 -- Amended and Restated Agreement of Limited Partnership of
AIP-SWAG Operating Partnership, L.P. dated as of October
3, 1997 (incorporated herein by reference from Exhibit
99.3 to Form 8-K of the Trust dated October 3, 1997)
10.50 -- Warrant Agreement dated as of October 3, 1997 between the
Trust and Shidler West Acquisition Company, LLC
(incorporated herein by reference from Exhibit 99.4 to
Form 8-K of the Trust dated October 3, 1997)
10.51 -- Warrant Agreement dated as of October 3, 1997 between the
Trust and AG Industrial Investors, L.P. (incorporated
herein by reference from Exhibit 99.5 to Form 8-K of the
Trust dated October 3, 1997)
10.52 -- Registration Rights Agreement dated as of October 3, 1997
between the Trust and Shidler West Acquisition Company,
LLC (incorporated herein by reference from Exhibit 99.6
to Form 8-K of the Trust dated October 3, 1997)
10.53 -- Registration Rights Agreement dated as of October 3, 1997
between the Trust and AG Industrial Investors, L.P.
(incorporated herein by reference from Exhibit 99.7 to
Form 8-K of the Trust dated October 3, 1997)
10.54 -- Credit Agreement dated as of October 3, 1997 between the
Trust and AIP-SWAG Operating Partnership, L.P., as
Borrower, and Prudential Securities Credit Corporation,
as Lender (incorporated herein by reference from Exhibit
99.9 to Form 8-K of the Trust dated October 3, 1997)
10.55 -- Credit Agreement dated as of October 3, 1997 between the
Trust and AIP-SWAG Operating Partnership, L.P., as
Borrower, and Prudential Securities Credit Corporation,
as Lender (incorporated herein by reference from Exhibit
99.8 to Form 8-K of the Trust dated October 3, 1997)
10.56 -- Common Share Purchase dated as of January 29, 1998, by
and between the Trust and Praedium (incorporated herein
by reference from Exhibit 10.1 to Form 8-K of the Trust
dated January 29, 1998)
10.57 -- Registration Rights Agreement dated as of January 29,
1998, by and between the Trust and Praedium (incorporated
herein by reference from Exhibit 10.2 to Form 8-K of the
Trust dated January 29, 1998)
10.58 -- Agreement dated as of January 29, 1998, by and among the
Trust, Realco, ABKB (as Agent for and for the benefit of
particular clients), MSRE and MSAM (incorporated herein
by reference from Exhibit 10.3 to Form 8-K dated January
29, 1998)
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
10.59 -- Contract of Sale by and between Nationwide Life Insurance
Company and ALCU Investments, Inc. (incorporated herein
by reference from Exhibit 10.1 to Form 8-K/A of the Trust
dated February 11, 1998)
10.60 -- Assignment of Contract of Sale dated as of February 11,
1998, by and among ALCU Investments, Ltd., AIP Operating,
L.P. and the Trust (incorporated herein by reference from
Exhibit 10.2 to Form 8-K/A of the Trust dated February
11, 1998)
10.61 -- Contribution and Exchange Agreement dated as of January
29, 1998, by and among ALCU Investments, Ltd., AIP
Operating, L.P., and the Trust (incorporated herein by
reference from Exhibit 10.3 to Form 8-K/A of the Trust
dated February 11, 1998)
10.62 -- Amended and Restated Agreement of Limited Partnership of
AIP Operating, L.P. dated as of February 11, 1998, by and
among the Trust, General Electric Capital Corporation,
and ALCU Investments, Ltd. (incorporated herein by
reference from Exhibit 10.4 to Form 8-K/A of the Trust
dated February 11, 1998)
10.63 -- Promissory Note by and among the Trust, AIP Operating,
L.P., and Prudential Securities Credit Corporation
(incorporated herein by reference from Exhibit 10.5 to
Form 8-K/A of the Trust dated February 11, 1998)
10.64 -- First Amendment to Credit Agreement dated as of February
11, 1998, by and among the Trust, AIP Operating, L.P.,
and Prudential Securities Credit Corporation
(incorporated herein by reference from Exhibit 10.6 to
Form 8-K/A of the Trust dated February 11, 1998)
*10.65 -- Industrial Property Portfolio Agreement of Purchase and
Sale by and between Spieker Northwest, Inc. and the Trust
*10.66 -- Purchase and Sale Agreement by and between North Austin
Office, Ltd. and the Trust
10.67 -- Purchase and Sale Agreement and Joint Escrow Instructions
by and between CM Property Management, Inc. and the Trust
dated July 15, 1997 (incorporated herein by reference
from Exhibit 10.1 to Form 8-K/A of the Trust dated March
23, 1998)
10.68 -- Purchase and Sale Agreement and Escrow Instructions by
and between Corporex Properties of Tampa, Inc.,
CFX-Westshore Corporation, and the Trust (incorporated
herein by reference from Exhibit 10.2 to From 8-K/A of
the Trust dated March 23, 1998)
10.69 -- Amendment to Purchase and Sale Agreement and Escrow
Instructions by and between Corporex Properties of Tampa,
Inc., CPX-Westshore Corporation, and the Trust
(incorporated herein by reference from Exhibit 10.3 to
Form 8-K/A of the Trust dated March 23, 1998)
10.70 -- Purchase and Sale Agreement between the Equitable Life
Assurance Society of the United States and the Trust
(incorporated herein by reference from Exhibit 10.4 to
Form 8-K/A of the Trust dated March 23, 1998)
10.71 -- Purchase and Sale Agreement between Nanook Partners, L.P.
and the Trust (incorporated herein by reference from
Exhibit 10.5 to Form 8-K/A of the Trust dated March 23,
1998)
10.72 -- Severance and Change in Control Agreement dated as of
April 29, 1998, by and between Charles W. Wolcott and the
Trust (incorporated herein by reference from Exhibit 10.1
to Form 8-K of the Trust dated April 29, 1998)
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
10.73 -- Severance and Change in Control Agreement dated as of
April 29, 1998, by and between Marc A. Simpson and the
Trust (incorporated herein by reference from Exhibit 10.2
to Form 8-K of the Trust dated April 29, 1998)
10.74 -- Severance and Change in Control Agreement dated as of
April 29, 1998, by and between David B. Warner and the
Trust (incorporated herein by reference from Exhibit 10.3
to Form 8-K of the Trust dated April 29, 1998)
10.75 -- Severance and Change in Control Agreement dated as of
April 29, 1998, by and between Lewis D. Friedland and the
Trust (incorporated herein be reference from Exhibit 10.4
to Form 8-K of the Trust dated April 29, 1998)
10.76 -- Amendments to the Trust's Employee and Trust Manager
Incentive Share Plan (incorporated herein by reference
from Exhibit 10.5 to Form 8-K of the Trust dated April
29, 1998)
10.77 -- Share Purchase Agreement by and between the Trust and DDR
dated July 30, 1998 (incorporated herein by reference
from Exhibit 10.1 to Form 8-K of the Trust dated July 30,
1998)
10.78 -- Demand Promissory Note dated July 30, 1998 (incorporated
herein by reference from Exhibit 10.2 to Form 8-K of the
Trust dated July 30, 1998)
10.79 -- Second Amended and Restated Registration Rights Agreement
by and among the Trust, MSRE and MSAM dated July 30, 1998
(incorporated herein by reference from Exhibit 10.3 to
Form 8-K of the Trust dated July 30, 1998)
10.80 -- Second Amended and Restated Registration Rights Agreement
by and between the Trust and Realco July 30, 1998
(incorporated herein by reference from Exhibit 10.4 to
Form 8-K of the Trust dated July 30, 1998)
10.81 -- Registration Rights Agreement by and between the Trust
and DDR dated July 30, 1998 (incorporated herein by
reference from Exhibit 10.5 to Form 8-K of the Trust
dated July 30, 1998)
10.82 -- First Amended and Restated Registration Rights Agreement
by and between the Trust and Praedium dated July 30, 1998
(incorporated herein by reference from Exhibit 10.6 to
Form 8-K of the Trust dated July 30, 1998)
10.83 -- Second Amended and Restated Registration Rights Agreement
by and between the Trust, ABKB and LaSalle dated July 30,
1998 (incorporated herein by reference from Exhibit 10.7
to Form 8-K of the Trust dated July 30, 1998)
10.84 -- Letter Agreement by and between MSRE/MSAM and DDR dated
July 30, 1998 (incorporated herein by reference from
Exhibit 10.8 to Form 8-K of the Trust dated July 30,
1998)
10.85 -- Letter Agreement by and between ABKB, LaSalle and DDR
dated July 30, 1998 (incorporated herein by reference
from Exhibit 10.9 to Form 8-K of the Trust dated July 30,
1998)
10.86 -- Letter Agreement by and between Praedium and DDR dated
July 30, 1998 (incorporated herein by reference from
Exhibit 10.10 to Form 8-K of the Trust dated July 30,
1998)
10.87 -- Letter Agreement by and between Realco and DDR dated July
30, 1998 (incorporated herein by reference from Exhibit
10.11 to Form 8-K of the Trust dated July 30, 1998)
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
10.88 -- Amendment No. One, dated as of September 14, 1998, to the
Share Purchase Agreement, dated as of July 30, 1998,
between the Trust and DDR (incorporated herein by
reference from Exhibit 10.1 to Form 8-K of the Trust
dated September 16, 1998)
10.89 -- Purchase and Sale Agreement, dated as of April 3, 1998,
by and between the Norfolk Commerce Center Limited
Partnership and DDR (incorporated herein by reference
from Exhibit 10.1 to Form 8-K of the Trust dated July 30,
1998 and filed October 23, 1998)
10.90 -- Amendment to Purchase and Sale Agreement dated June 19,
1998, by and between the Norfolk Commerce Center Limited
Partnership and DDR (incorporated herein by reference
from Exhibit 10.2 to Form 8-K of the Trust dated July 30,
1998 and filed October 23, 1998)
10.91 -- Purchase and Sale Agreement, dated as of May 10, 1998, by
and between A&A Greenbrier, Inc., A&A Northpointe B,
Inc., A&A Northpointe C, Inc. and A&A Greenbrier Tech,
Inc. and DDR Flex (incorporated herein by reference from
Exhibit 10.1 to Form 8-K of the Trust dated October 14,
1998)
10.92 -- Purchase and Sale Agreement, dated as of May 10, 1998, by
and between Battlefield/Virginia, Inc. and DDR Flex
(incorporated herein by reference from Exhibit 10.2 to
Form 8-K of the Trust dated October 14, 1998)
10.93 -- Amendment to Purchase and Sale Agreement dated July 8,
1998 by and between A&A Greenbrier, Inc., A&A Northpointe
B, Inc., A&A Northpointe C, Inc. and A&A Greenbrier Tech,
Inc. and DDR Flex (incorporated herein by reference from
Exhibit 10.3 to Form 8-K of the Trust dated October 14,
1998)
10.94 -- Amendment to Purchase and Sale Agreement dated July 8,
1998, by and between Battlefield/Virginia, Inc., and DDR
Flex (incorporated herein by reference from Exhibit 10.4
to Form 8-K of the Trust dated October 14, 1998)
10.95 -- Second Amendment to Purchase and Sale Agreement dated
September 30, 1998 by and between A&A Greenbrier, Inc.,
A&A Northpointe B, Inc., A&A Northpointe C, Inc. and A&A
Greenbrier Tech, Inc. and DDR Flex (incorporated herein
by reference from Exhibit 10.5 to Form 8-K of the Trust
dated October 14, 1998)
10.96 -- Second Amendment to Purchase and Sale Agreement dated
September 30, 1998, by and between Battlefield/Virginia,
Inc. and DDR Flex (incorporated herein by reference from
Exhibit 10.6 to Form 8-K of the Trust dated October 14,
1998)
10.97 -- Special Warranty Deed, dated as of October 14, 1998, by
and between A&A Greenbrier, Inc. and the Trust
(incorporated herein by reference from Exhibit 10.7 to
Form 8-K of the Trust dated October 14, 1998)
10.98 -- Special Warranty Deed, dated as of October 14, 1998, by
and between A&A Northpointe B, Inc. and the Trust
(incorporated herein by reference from Exhibit 10.8 to
Form 8-K of the Trust dated October 14, 1998)
10.99 -- Special Warranty Deed, dated as of October 14, 1998, by
and between A&A Northpointe C, Inc. and the Trust
(incorporated herein by reference from Exhibit 10.9 to
Form 8-K of the Trust dated October 14, 1998)
10.100 -- Special Warranty Deed, dated as of October 14, 1998, by
and between A&A Greenbrier Tech, Inc. and the Trust
(incorporated herein by reference from Exhibit 10.10 to
Form 8-K of the Trust dated October 14, 1998)
*21.1 -- Listing of Subsidiaries
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
*23.1 -- Consent of Ernst & Young LLP
*24.1 -- Power of Attorney (Included on signature page hereto)
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
(b) Reports on Form 8-K:
The following information summarizes the events reported on Form 8-K during
the quarter ended December 31, 1998:
(1) Current Report on Form 8-K/A filed with the Commission on October
2, 1998 amending Form 8-K filed with the Commission on August 5,
1998;
(2) Current Report on Form 8-K filed with the Commission on October
23, 1998;
(3) Current Report on Form 8-K filed with the Commission on October
29, 1998;
(4) Current Report on Form 8-K filed with the Commission on November
24, 1998;
(5) Current Report on Form 8-K/A filed with the Commission on December
28, 1998 amending Form 8-K filed with the Commission on October
29, 1998.
41
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 30, 1999.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ CHARLES W. WOLCOTT
--------------------------------------
Charles W. Wolcott,
Trust Manager, President and Chief
Executive Officer
POWER OF ATTORNEY
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. Each of the
undersigned officers and Trust Managers of the registrant hereby appoints
Charles W. Wolcott or Marc A. Simpson, either of whom may act, his true and
lawful attorneys-in-fact with full power to sign for him and in his name in the
capacities indicated below and to file any and all amendments to the
registration statement filed herewith, making such changes in the registration
statement as the registrant deems appropriate, and generally to do all such
things in his name and behalf in his capacity as an officer and director to
enable the registrant to comply with the provisions of the Securities Act of
1934 and all requirements of the Securities and Exchange Commission.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ ALBERT T. ADAMS Trust Manager March 30, 1999
- -----------------------------------------------------
Albert T. Adams
/s/ WILLIAM H. BRICKER Trust Manager March 30, 1999
- -----------------------------------------------------
William H. Bricker
/s/ T. PATRICK DUNCAN Trust Manager March 30, 1999
- -----------------------------------------------------
T. Patrick Duncan
/s/ ROBERT E. GILES Trust Manager March 30, 1999
- -----------------------------------------------------
Robert E. Giles
/s/ EDWARD B. KELLEY Trust Manager March 30, 1999
- -----------------------------------------------------
Edward B. Kelley
/s/ J. TIMOTHY MORRIS Trust Manager March 30, 1999
- -----------------------------------------------------
J. Timothy Morris
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ CHARLES W. WOLCOTT Trust Manager, President and March 30, 1999
- ----------------------------------------------------- Chief Executive Officer
Charles W. Wolcott (Principal Executive
Officer)
/s/ MARC A. SIMPSON Senior Vice President and March 30, 1999
- ----------------------------------------------------- Chief Financial Officer,
Marc A. Simpson Secretary and Treasurer
(Principal Accounting and
Financial Officer)
</TABLE>
43
<PAGE> 46
AMERICAN INDUSTRIAL PROPERTIES REIT
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Financial Statements:
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997, and 1996...................... F-3
Consolidated Balance Sheets as of December 31, 1998 and
1997................................................... F-4
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1998, 1997 and 1996... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996....................... F-6
Notes to Consolidated Financial Statements................ F-8
Financial Statement Schedule:
Schedule III -- Consolidated Real Estate and Accumulated
Depreciation........................................... F-25
Notes to Schedule III..................................... F-28
</TABLE>
All other financial statements and schedules not listed have been omitted
because the required information is either included in the Consolidated
Financial Statements and the Notes thereto as included herein or is not
applicable or required.
F-1
<PAGE> 47
REPORT OF INDEPENDENT AUDITORS
Trust Managers and Shareholders
American Industrial Properties REIT:
We have audited the accompanying consolidated balance sheets of American
Industrial Properties REIT (the "Trust") as of December 31, 1998 and 1997, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1998.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and schedule are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American Industrial Properties REIT at December 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
Dallas, Texas
February 10, 1999,
except for Note 19, as to which the date is
March 26, 1999
F-2
<PAGE> 48
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Property Revenues
Rents............................................... $ 39,559 $ 9,367 $ 8,592
Tenant Reimbursements............................... 8,798 2,834 2,728
----------- ---------- ----------
Total Property Revenues..................... 48,357 12,201 11,320
----------- ---------- ----------
Property Expenses
Property taxes...................................... 4,980 1,607 1,421
Property management fees............................ 1,474 418 430
Utilities........................................... 2,673 480 476
General operating................................... 2,489 891 849
Repairs and maintenance............................. 2,218 524 529
Other property operating expenses................... 2,212 395 317
----------- ---------- ----------
Total Property Expenses..................... 16,046 4,315 4,022
----------- ---------- ----------
Income from Property Operations.................. 32,311 7,886 7,298
Administrative expenses:
Trust administration and overhead................ (3,729) (2,065) (1,830)
Litigation, refinancing and proxy costs.......... -- (439) (1,548)
Depreciation........................................ (7,928) (2,774) (2,577)
Amortization........................................ (455) (383) (332)
Interest Income..................................... 705 546 158
Interest on notes payable........................... (869) (1,462) (4,003)
Interest on mortgages payable....................... (14,270) (4,316) (1,898)
Provision for possible losses on real estate........ (10,060) -- --
----------- ---------- ----------
Loss from operations................................ (4,295) (3,007) (4,732)
Minority interests in consolidated subsidiaries..... 28 -- --
Gain on sales of real estate........................ -- 2,163 177
----------- ---------- ----------
Loss before extraordinary items..................... (4,267) (844) (4,555)
Extraordinary items:
Gain (loss) on extinguishment of debt............ (23) 2,643 5,810
Provision for change in control costs............ (5,780) -- --
----------- ---------- ----------
NET INCOME (LOSS)..................................... $ (10,070) $ 1,799 $ 1,255
=========== ========== ==========
PER SHARE DATA (BASIC AND DILUTED)
Loss before extraordinary items..................... $ (0.35) $ (0.26) $ (2.50)
Extraordinary gain (loss)........................... (0.47) 0.80 3.20
----------- ---------- ----------
Net income (loss)................................... $ (0.82) $ 0.54 $ 0.70
=========== ========== ==========
Distributions paid.................................. $ 0.78 $ -- $ 0.20
=========== ========== ==========
Weighted average Shares outstanding................. 12,251,591 3,316,788 1,821,648
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 49
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Real estate:
Held for investment....................................... $476,641 $265,312
Held for sale............................................. 28,491 --
-------- --------
Total real estate......................................... 505,132 265,312
Accumulated depreciation.................................. (33,449) (25,521)
-------- --------
Net real estate........................................... 471,683 239,791
Cash and cash equivalents:
Unrestricted.............................................. 6,145 11,683
Restricted................................................ 5,422 2,121
-------- --------
Total cash and cash equivalents........................... 11,567 13,804
Other assets, net........................................... 17,080 4,800
-------- --------
Total Assets.............................................. $500,330 $258,395
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable.................................... $252,481 $114,226
Unsecured notes payable to related parties................ 14,058 7,200
Accrued interest.......................................... 1,477 269
Accounts payable, accrued expenses and other
liabilities............................................ 17,651 7,231
Tenant security deposits.................................. 2,138 1,254
-------- --------
Total Liabilities................................. 287,805 130,180
-------- --------
Minority interests.......................................... 6,946 6,444
Shareholders' Equity:
Shares of beneficial interest, $0.10 par value; authorized
500,000,000
Shares; issued and outstanding 17,201,591 shares at 1998
and 9,817,171
Shares at 1997............................................ 1,721 982
Additional paid-in capital................................ 330,031 224,989
Less 165,886 shares in treasury at 1998 and 42,103 shares
at 1997, at cost....................................... (2,226) (626)
Accumulated distributions................................. (68,756) (58,456)
Accumulated deficit....................................... (55,191) (45,118)
-------- --------
Total Shareholders' Equity........................ 205,579 121,771
-------- --------
Total Liabilities and Shareholders' Equity........ $500,330 $258,395
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 50
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
SHARES OF BENEFICIAL
INTEREST ADDITIONAL RETAINED TREASURY STOCK
--------------------- PAID-IN EARNINGS -------------------
NUMBER(A) AMOUNT CAPITAL (DEFICIT) NUMBER(A) AMOUNT TOTAL
----------- ------- ---------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1996................... 1,815,080 $ 182 $125,331 $(106,265) -- $ -- $ 19,248
Issuance of additional
Shares.............. 184,920 18 2,525 -- -- -- 2,543
Net income............. -- -- -- 1,255 -- -- 1,255
Distributions to
shareholders........ -- -- -- (363) -- -- (363)
---------- ------ -------- --------- ------- ------- --------
Balance at December 31,
1996................... 2,000,000 200 127,856 (105,373) -- -- 22,683
Issuance of additional
Shares.............. 7,817,171 782 97,133 -- -- -- 97,915
Repurchase of Shares... -- -- -- -- 42,103 (626) (626)
Net income............. -- -- -- 1,799 -- -- 1,799
---------- ------ -------- --------- ------- ------- --------
Balance at December 31,
1997................... 9,817,171 982 224,989 (103,574) 42,103 (626) 121,771
Issuance of additional
Shares.............. 7,384,420 739 105,042 -- -- -- 105,781
Repurchase of Shares... -- -- -- -- 123,783 (1,600) (1,600)
Net income............. -- -- -- (10,070) -- -- (10,070)
Distributions to
shareholders........ -- -- -- (10,303) -- -- (10,303)
---------- ------ -------- --------- ------- ------- --------
Balance at December 31,
1998................... 17,201,591 $1,721 $330,031 $(123,947) 165,886 $(2,226) $205,579
========== ====== ======== ========= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 51
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(10,070) $ 1,799 $ 1,255
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Gains on extinguishment of debt........................ -- (2,643) (5,810)
Change in control costs................................ 2,960 -- --
Losses on sales of real estate......................... -- (2,163) (177)
Provisions for possible losses on real estate.......... 10,060 -- --
Minority interest in consolidated subsidiaries......... (28) -- --
Depreciation........................................... 7,928 2,774 2,577
Amortization of deferred financing costs............... 584 195 70
Other amortization..................................... 168 383 332
Issuance of shares to Trust Managers................... 312 115 --
Interest accrued assuming future conversion of debt to
equity............................................... -- 1,022 --
Changes in operating assets and liabilities:
Other assets and restricted cash..................... (13,374) (2,337) (376)
Accounts payable, other liabilities and tenant
security deposits................................. 3,213 147 351
Accrued interest..................................... 1,208 (68) (2,986)
-------- -------- --------
Net Cash Provided By (Used In) Operating
Activities...................................... 2,961 (776) (4,764)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sales of real estate.................... -- 7,129 6,545
Capitalized expenditures.................................. (7,540) (1,911) (1,372)
Acquisition of real estate and related working capital.... (172,133) (67,116) --
-------- -------- --------
Net Cash Provided By (Used In) Investing
Activities...................................... (179,673) (61,898) 5,173
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on mortgage notes payable............ (49,163) (6,340) (31,832)
Proceeds from mortgage financing.......................... 202,436 44,001 26,453
Payment of deferred loan costs............................ (1,852) (169) (894)
Proceeds from sale of shares.............................. 28,578 33,481 2,543
Purchase of treasury shares............................... (1,600) (626) --
Distributions to shareholders............................. (6,880) -- (363)
Distributions to limited partnership unit holders......... (345) -- --
-------- -------- --------
Net Cash (Used In) Provided By Financing Activities......... 171,174 70,347 (4,093)
-------- -------- --------
Net (Decrease) Increase in Cash and Cash Equivalents........ (5,538) 7,673 (3,684)
Cash and Cash Equivalents at Beginning of Year.............. 11,683 4,010 7,694
-------- -------- --------
Cash and Cash Equivalents at End of Year.................... $ 6,145 $ 11,683 $ 4,010
======== ======== ========
Cash Paid for Interest...................................... $ 13,634 $ 4,629 $ 8,817
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 52
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property Operations. During 1998, the Trust acquired six properties from
DDR in exchange for 2,207,618 shares valued at $34.2 million. In addition, with
the acquisition of other properties, the Trust issued $0.9 million in limited
partnership units and assumed $34.9 million in mortgage notes payable.
During 1997, in connection with the merger with four real estate limited
partnerships, the Trust issued Shares valued at $57.9 million and $3.7 million
in limited partnership units. The Trust also assumed $31.2 million in mortgage
notes payable and $7.2 million in unsecured notes payable. In addition, with the
acquisition of other properties, the Trust issued $2.7 million in limited
partnership units.
Debt Conversion. During 1998, the Trust issued $42.7 million of Shares to
DDR in exchange for unsecured notes payable to DDR. During 1997, the Trust
issued $5.5 million of Shares to Realco in exchange for unsecured notes payable
to Realco.
F-7
<PAGE> 53
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES:
General. American Industrial Properties REIT (the "Trust") is a
self-administered Texas real estate investment trust which, as of December 31,
1998, directly or indirectly owns and operates 65 commercial real estate
properties consisting of 52 industrial properties, 11 office buildings and 2
retail properties. The Trust currently has one industrial property under
development. The Trust was formed September 26, 1985 and commenced operations on
November 27, 1985.
Principles of Consolidation. The consolidated financial statements of the
Trust include the accounts of American Industrial Properties REIT and its
wholly-owned subsidiaries and controlled subsidiaries. Significant intercompany
balances and transactions have been eliminated in consolidation.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ significantly from
such estimates and assumptions.
Real Estate. The Trust carries its real estate held for investment at
depreciated cost unless the asset is determined to be impaired. Real estate
classified as held for sale is carried at lower of depreciated cost or fair
value less costs to sell. The Trust records impairment losses on long-lived
assets used in operations when events and circumstances indicate that the assets
might be impaired and the expected undiscounted cash flows estimated to be
generated by those assets are less than the related carrying amounts. If an
asset held for investment is determined to be impaired, the impairment would be
measured based upon the excess of the asset's carrying value over the fair
value. In addition, the Trust records impairment losses on assets held for sale
when the estimated sales proceeds, after estimated selling costs, are less than
the carrying value of the related asset (see Note 2).
Property improvements which extend the useful life are capitalized while
maintenance and repairs are expensed as incurred. Depreciation of buildings and
capital improvements is computed using the straight-line method over forty
years. Depreciation of tenant improvements is computed using the straight-line
method over the lease term, but not to exceed ten years.
Interest is capitalized during the period in which real estate assets are
undergoing construction or major renovation. For the year ended December 31,
1998 the Trust capitalized $78,000 in interest.
Cash and Cash Equivalents. Cash equivalents include demand deposits and all
highly liquid instruments purchased with an original maturity of three months or
less. Restricted cash amounts reflect escrow deposits held by third parties for
the payment of taxes and insurance and reserves held by third parties for
property repairs or tenant improvements.
Other Assets. Other assets primarily consist of direct costs related to
potential property acquisitions, deferred rents receivable, deferred commissions
and loan fees. Potential property acquisition costs are capitalized and
depreciated on a straight-line basis over the life of the asset when the asset
is acquired. Leasing commissions are capitalized and amortized on a
straight-line basis over the life of the lease. Loan fees are capitalized and
amortized to interest expense on a level yield basis over the term of the
related loan.
Rents and Tenant Reimbursements. Rental income, including contractual rent
increases or delayed rent starts, is recognized on a straight-line basis over
the lease term. The Trust has recorded deferred rent receivable (representing
the excess of rental revenue recognized on a straight-line basis over actual
rents received under the applicable lease provisions) of $1,398,000 and $525,000
at December 31, 1998 and 1997, respectively.
F-8
<PAGE> 54
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Several tenants in the Trust's retail properties are also required to pay
as rent a percentage of their gross sales volume, to the extent such percentage
rent exceeds their base rents. Such percentage rents amounted to $172,000,
$94,000 and $154,000 for the years ended December 31, 1998, 1997, and 1996,
respectively. In addition to paying base and percentage rents, most tenants are
required to reimburse the Trust for operating expenses in excess of a negotiated
base amount.
Income Tax Matters. The Trust operates as a real estate investment trust
("REIT") for federal income tax purposes. Under the REIT provisions, the Trust
is required to distribute 95% of REIT taxable income and is allowed a deduction
for distributions paid during the year. The Trust had taxable income for the
year ended December 31, 1997, a taxable loss for the year ended December 31,
1996 and expects to report taxable income for the year ending December 31, 1998.
The Trust has a net operating loss carryforward from 1997 and prior years
of approximately $34,301,000. The net operating losses are subject to
restrictions on their use due to an ownership change occurring in 1997, and as
such, can only be used against approximately $1,200,000 of taxable income per
year. The losses may be carried forward for up to 15 years. The present losses
will expire beginning in the year 2004. Management intends to operate the Trust
in such a manner as to continue to qualify as a REIT and to continue to
distribute cash flow in excess of taxable income.
Earnings and profits, which will determine the taxability of distributions
to shareholders, will differ from that reported for financial reporting purposes
due primarily to differences in the basis of the assets and the estimated useful
lives used to compute depreciation.
Earnings Per Share. Basic earnings per share excludes any dilutive effects
of options, warrants and convertible securities. The computation of diluted
earnings per share does not include common share equivalents where the inclusion
of such does not result in dilution (based upon application of the "treasury
stock" method) or, in periods where there is a net loss from operations, is
anti-dilutive.
Share Compensation. The Trust accounts for its share compensation
arrangements using the intrinsic value method.
Concentrations. The Trust owns 65 real estate properties, excluding the one
build-to-suit property, in 13 states. The Trust's industrial properties are
concentrated in the Texas market with 23 of the 52 properties located in the
Dallas, Houston and Austin areas. The office buildings are primarily located in
the west with three of the eleven located in California. The two retail
properties are located in Colorado and Florida. The principal competitive
factors in these markets are price, location, quality of space, and amenities.
In each case, the Trust owns a small portion of the total similar space in the
market and competes with owners of other space for tenants. Each of these
markets is highly competitive, and other owners of property may have competitive
advantages not available to the Trust.
Segment Reporting. The Trust has adopted the provisions of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" for fiscal
year 1998. This statement establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. Where
applicable, it also establishes standards for related disclosures about products
and services, geographic areas, and major tenants. See Note 16 for the Trust's
segment disclosures.
Reclassification. Certain amounts in prior years financial statements have
been reclassified to conform with the current year presentation.
F-9
<PAGE> 55
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- REAL ESTATE AND PROVISIONS FOR POSSIBLE LOSSES ON REAL ESTATE:
At December 31, 1998 and 1997, real estate was comprised of the following:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Held for investment:
Land................................................... $102,891,000 $ 56,315,000
Buildings and improvements............................. 373,750,000 208,997,000
------------ ------------
476,641,000 265,312,000
------------ ------------
Held for sale:
Land................................................... 6,000,000 --
Buildings and improvements............................. 22,491,000 --
------------ ------------
28,491,000 --
------------ ------------
Total.......................................... $505,132,000 $265,312,000
============ ============
</TABLE>
During 1998, the Trust acquired 29 real estate properties for approximately
$237 million. To fund these acquisitions, the Trust paid approximately $37.8
million in cash, obtained $28.3 million and $42.7 million of financing under its
acquisition line of credit and secured bridge loan, respectively, assumed
approximately $32.7 million in mortgage debt with a fair value of $34.9 million,
obtained $47.2 million of financing through unsecured borrowings with DDR,
issued $0.9 million of limited partnership units and issued $47.7 million in
Shares to DDR (see Note 8). The difference between the assumed amount and the
fair value of the mortgage debt assumed was recorded as debt premium.
At December 31, 1998, the Trust recorded a $10.1 million writedown of its
retail property in Denver, Colorado and reclassified the property from held for
investment to held for sale. The Trust's current intent is to sell this property
in 1999, thereby allowing the Trust to continue its focus on the light
industrial sector of the real estate market. This property is included in the
"Retail" operating segment and reported a net operating loss of $0.3 million for
the year ended December 31, 1998.
The Trust did not sell any properties in 1998.
Effective December 31, 1997, the Trust acquired, via a merger, four real
estate limited partnerships. The partnerships were affiliated with Realco, a
significant shareholder of the Trust. As a result of the merger, the Trust
acquired ownership of seven office properties, including a 55.84% interest in a
joint venture owning an office property. The Trust also acquired two industrial
properties and one retail property. The total purchase price was approximately
$93.1 million, inclusive of costs of the merger. Of this amount, approximately
$38.4 million was assumed in debt, $57.9 million was issued in Shares to the
former partners and $3.8 million was received in cash, relating to the net
working capital received. The $38.4 million in debt includes $15 million due to
Las Colinas Management Company, an affiliate of Realco, $7.2 million of
unsecured debt owed to Realco, and $16.2 million due to third party lenders. The
acquisition was accounted for on the purchase method of accounting.
F-10
<PAGE> 56
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the purchase price of the four real estate limited
partnerships is as follows:
<TABLE>
<S> <C>
Real estate................................................. $100,206,000
Other assets................................................ 3,916,000
Less: Mortgage notes payable......................... (31,178,000)
Unsecured notes payable.............................. (7,200,000)
Other liabilities.................................... (4,194,000)
Minority interests................................... (3,704,000)
------------
Value of Shares issued...................................... $ 57,846,000
============
</TABLE>
From August 29, 1997 through December 31, 1997, exclusive of the merger,
the Trust acquired an additional 15 real estate properties for approximately
$73.5 million. To fund these acquisitions, the Trust paid approximately $30.5
million in cash, incurred approximately $23.5 million of permanent financing,
obtained $16.7 million of financing under the acquisition line of credit and
issued $2.8 million of limited partnership units. In addition, the limited
partners received warrants to purchase 40,000 shares at $17.50 per Share.
During 1997, the Trust sold two industrial properties, including one of the
two properties classified as held for sale at December 31, 1996. Net proceeds
from this sale totaled $2.0 million resulting in a gain on sale of $0.3 million.
Net proceeds received from the sale of the second property sold in 1997 totaled
$5.1 million resulting in a gain on sale of $1.9 million. The Trust reclassified
the second held for sale property to held for investment in 1997. There were no
properties classified as held for sale at December 31, 1997.
In accordance with EITF 97-11, the Trust has changed its capitalization
policy with respect to internal acquisition costs. On March 19, 1998, the Trust
ceased the capitalization of costs related to its internal acquisition
department. The Trust capitalized $160,000 through March 19, 1998 and $401,000
for the year ended December 31, 1997.
NOTE 3 -- MORTGAGE NOTES PAYABLE:
At December 31, 1998, 51 of the Trust's 65 properties were subject to liens
securing mortgage notes payable with principal balances totaling $252,481,000,
including $1,958,000 of debt premiums (see Note 2). Of this amount,
approximately $141,308,000 was represented by mortgage notes with stated fixed
interest rates ranging from 7.25% to 9.13%, a stated weighted average interest
rate of 8.01% and maturity dates in 2001 to 2016. Mortgage notes payable with
variable interest rates consisted of $68,523,000 and $42,650,000 under the
Trust's secured acquisition credit line and secured bridge loan, respectively.
The acquisition credit line and bridge loan bear interest at the 30 day LIBOR
rate plus 1.75% and mature in April 1999 and January 1999 as extended,
respectively. The interest rate on these loans at December 31, 1998 was 7.38%.
Debt premiums are amortized into interest expense over the terms of the
related mortgages using the effective interest method. As of December 31, 1998,
the unamortized debt premiums were $1,958,000.
Certain of the mortgage notes payable contain cross default and cross
collateralization provisions whereby a default under one note can trigger a
default under other notes. Certain of the mortgage notes payable, including the
acquisition credit line and bridge loan, also contain various borrowing
restrictions and operating performance covenants. The Trust is in compliance
with all such restrictions and covenants as of December 31, 1998. The unused
commitment under the acquisition credit line at December 31, 1998 is $4,195,000,
subject to certain restrictions and provisions.
Principal payments during each of the next five years are as follows:
$113,331,000 in 1999, $2,338,000 in 2000, $30,183,000 in 2001, $16,877,000 in
2002, $25,893,000 in 2003, and $61,900,000 thereafter. Of the amount due in
1999, $68,523,000 and $42,650,000 are due under the Trust's acquisition credit
line and secured bridge loan, respectively. The bridge loan was paid off on
January 8, 1999 with proceeds from a
F-11
<PAGE> 57
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
permanent financing of seven properties. Terms of the permanent financing
include a principal amount of $41.0 million, a fixed rate of interest of 7.375%,
a ten year term and 25 year principal amortization (See Note 19). The Trust is
currently negotiating an extension of the maturity date of the acquisition
credit line (see Note 19).
During 1998 the Trust recognized extraordinary loss on extinguishment of
debt of $23,000 resulting from prepayment penalties on the early retirement of
$1.2 million of mortgage debt.
At December 31, 1997, 29 of the Trust's 36 properties were subject to liens
securing mortgage notes payable totaling $114,226,000. Of this amount,
approximately $97,501,000 was represented by mortgage notes ($15,000,000 with a
related party) with fixed interest rates ranging from 7.25% to 11.0% and a
weighted average interest rate of 8.47%. Approximately $16,725,000 represented
borrowings under the Trust's acquisition credit line. The acquisition credit
line bears interest at the 30 day LIBOR rate plus 2% and matures in December
1998. The interest rate on this acquisition credit line at December 31, 1997 was
7.72%.
NOTE 4 -- UNSECURED NOTES PAYABLE -- RELATED PARTY:
During 1998, the Trust obtained unsecured loans from DDR to finance
acquisitions. The notes are payable on demand and bear interest at 10.25%. At
December 31, 1998, the Trust had three unsecured notes outstanding totaling
$14,058,000. The notes were repaid in full in January 1999 (see Note 19). The
Trust paid interest of $660,850 to DDR for the period ended December 31, 1998.
As a result of the merger with four real estate limited partnerships,
effective December 31, 1997, (see Note 2), the Trust assumed an unsecured
indebtedness of $7,200,000 payable to Realco. The note was paid off in April
1998.
NOTE 5 -- ZERO COUPON NOTES:
As part of its original capitalization in 1985, the Trust issued
$179,698,000 (face amount at maturity) of Zero Coupon Notes due 1997 (the
"Notes"). These Notes, which were collateralized by first and second mortgage
liens on each of the Trust's real estate properties, accreted at 12%, compounded
semiannually. In 1991, the Trust began a program to retire the outstanding
Notes, resulting in a reduction of the outstanding Notes to $19,491,000 (face
amount at maturity) at December 31, 1993. On December 31, 1993, the Trust
effected a partial in-substance defeasance on $12,696,000 (face amount at
maturity) of the Notes and recorded an extraordinary loss of $2,530,000. In
November 1994, the Trust completed a partial in-substance defeasance on
$3,669,000 (face amount at maturity) of Notes and recorded an extraordinary loss
of $344,000. In December 1994, the Trust purchased the remaining non-defeased
Notes outstanding in the open market and submitted the Notes to the Trustee for
cancellation. The legal defeasance of the Notes resulted in the release of the
Zero Coupon Note mortgage liens which encumbered each of the Trust's properties.
In November 1997, the Notes were retired.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES:
Environmental Matters
The Trust has been notified of the existence of limited underground
petroleum based contamination at a portion of Tamarac Square, the Trust's Denver
retail property. The source of the contamination is apparently related to
underground storage tanks ("USTs") located on adjacent property. The owner of
the adjacent property has agreed to remediate the property to comply with state
standards and has indemnified the Trust against costs related to its sampling
activity. The responsible party for the adjacent USTs has submitted a corrective
Action Plan to the Colorado Department of Public Health and Environment.
Implementation of the plan is ongoing. The responsible party is negotiating to
obtain access agreements from impacted landowners, including the Trust.
F-12
<PAGE> 58
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Trust has been notified of the existence limited cleaning solvents
("mineral spirits") contamination at Tech Center 29 Phase I. The contamination
is the apparent result of a service center operated on the property until 1996.
The tenant's primary operations consisted of the distribution of parts, cleaning
equipment and cleaning solvents to industrial customers. Two USTs used in the
operation were removed in 1996. The former tenant has been working with the
Maryland Department of the Environment since the onset and has issued a letter
of credit and standby trust agreement as financial assurance for remediation of
the site.
With the exception of Tamarac Square and Tech 29 Phase I, the Trust has not
been notified, and is not otherwise aware, of any material non-compliance,
liability or claim relating to hazardous or toxic substances in connection with
any of its properties.
Litigation
The Trust is currently named as a defendant in a lawsuit related to the
Trust's merger with four real estate limited partnerships. The lawsuit purports
to be both a class action and a derivative lawsuit against the defendants. The
plaintiffs have asserted various claims, including breach of fiduciary duty and
various securities law violations, against the parties to the merger and certain
individuals and are seeking monetary damages. On April 13, 1998, the Trust was
named as a defendant in an additional purported class action lawsuit related to
the Trust's merger with the four real estate limited partnerships. The
plaintiffs have asserted various claims, including breach of fiduciary and
contractual duties and various securities law violations, against the parties to
the merger and are seeking monetary damages.
The Trust is also a defendant in a lawsuit over claims of breach of
contract and civil conspiracy allegedly injuring a commercial tenant in a
building sold by the Trust to DART under threat of eminent domain. DART has
agreed to indemnify, defend and hold harmless the Trust from any and all losses
and liabilities arising from obligations under this lease.
The Trust intends to vigorously defend against these claims. The lawsuits
described above are on-going, therefore, management cannot predict the outcome
of such litigation, however, management believes the liabilities, if any, that
may ultimately result from such legal actions are not expected to have a
material adverse effect on the consolidated financial position or results of
operations of the Trust.
NOTE 7 -- MINORITY INTEREST:
Operating Partnerships. AIP-SWAG Operating L.P. and AIP Operating, L.P.
have 179,085 and 58,333 limited partnership units outstanding, respectively, as
of December 31, 1998 (excluding limited partnership units held by the Trust).
Pursuant to the limited partnership agreement for each partnership, the limited
partners received rights (the "Redemption Rights") that enable them to cause the
partnership to redeem each limited partnership unit for cash equal to the value,
as determined in accordance with the partnership agreement, of a Share (or, at
the Trust's election, the Trust may purchase each limited partnership unit
offered for redemption for one Share). The Redemption Rights generally may be
exercised at any time after one year following the issuance of the limited
partnership units. The number of Shares issuable upon exercise of the Redemption
Rights will be adjusted for share splits, mergers, consolidations or similar pro
rata transactions, which would have the effect of diluting the ownership
interests of the limited partners or the shareholders of the Trust. The limited
partners' interest in each partnership is reflected as minority interest in the
accompanying consolidated financial statements.
Other Partnerships. In connection with the merger of four real estate
limited partnerships, effective December 31, 1997, the Trust acquired a 55.84%
interest in Chelmsford Associates LLC, formerly Chelmsford Associates Joint
Venture, a joint venture owning one office property. The remaining 44.16%
interest is owned by a significant shareholder of the Trust. The financial
position and results of operations of
F-13
<PAGE> 59
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the joint venture is included in the consolidated financial statements of the
Trust. The other venturer's interest in the partnership is reflected as minority
interest in the accompanying consolidated financial statements.
NOTE 8 -- SHAREHOLDERS' EQUITY:
Capital Stock. The Trust is authorized to issue up to 500,000,000 Shares.
The Shares have dividend, distribution, liquidation and other rights as
disclosed in the Declaration of the Trust. As of December 31, 1998, 17,035,705
shares are issued and outstanding.
The Trust is authorized to issue up to 50,000,000 Preferred Shares of
Beneficial Interest in one or more series. The number of shares in each series
and the designation, powers, preferences and rights of each such series and the
qualifications, limitations or restrictions thereof have not been established.
As of December 31, 1998, no Preferred Shares of Beneficial Interest were issued.
On March 9, 1998, the Board of Trust Managers authorized a Share repurchase
program allowing the Trust to purchase up to 1,000,000 Shares from time to time
in open market transactions, as price and market conditions allow, over the
following six months. This program resulted in the Trust purchasing 123,783
Shares in the open market, for an aggregate cost of $1,598,000. These Shares are
held in Treasury. As a result of the one-for-five reverse Share split and the
odd lot redemption program, effective on October 15, 1997, the Trust repurchased
42,103 Shares which are held in treasury.
Private Placement. On January 30, 1998, the Trust completed a $10 million
private equity placement at $13.625 per Share. In February 1998, two investment
groups exercised their preemptive rights (which subsequently expired) and
acquired $5 million and $3.75 million, respectively, of Shares at $13.625 per
Share. The Shares are of the same class as the Trust's existing Shares and are
entitled to the same voting and distribution rights as all Shares, subject to
certain restrictions on the resale of the Shares.
On August 3, 1998, the Trust entered into a definitive agreement providing
for a strategic investment by DDR in the Trust. Under the terms of the Share
Purchase Agreement, the transaction has three stages. The first stage of equity
investment, effective as of July 30, 1998, resulted in DDR acquiring 2,207,618
Shares at a price of $15.50 per share in exchange for consideration valued at
approximately $34.2 million. As of December 31, 1998, the Trust has issued an
additional 3,683,578 Shares related to the second stage of the Agreement at a
price of $15.50 per Share to fund property acquisitions. The Shares issued in
the first and second stages are of the same class as the Trust's existing Shares
and are entitled to the same voting and distribution rights as all Shares,
subject to certain restrictions on the resale of the Shares. The remainder of
the second stage, 1,543,005 Shares at $15.50 per Share, and the entire third
stage, $200 million of equity investment, have not occurred as of December 31,
1998. (See Note 11).
In July 1997, the Trust completed a $35 million private equity placement of
2,857,143 Shares at $12.25 per Share (of which approximately $32.6 million was
funded in July 1997 and $2.4 million in December 1997). The shares are of the
same class as the Trust's existing shares and are entitled to the same voting
and distribution rights as all Shares, subject to certain restrictions on the
resale of the shares.
Share Incentive Plans. The Trust adopted the Employee and Trust Managers
Incentive Share Plan (the "Plan") for the purpose of (i) attracting and
retaining employees, directors and others, (ii) providing incentives to those
deemed important to the success of the Trust, and (iii) associating the
interests of these individuals with the interests of the Trust and its
shareholders through opportunities for increased share ownership.
All awards under the Plan are determined by the Compensation Committee of
the Board of Directors and a maximum limit of 10% of the total number of Shares
outstanding at any time on a fully-diluted basis may be issued under the Plan.
F-14
<PAGE> 60
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the terms of the Plan, any person who is a full-time employee or a
Trust Manager of the Trust or of an affiliate (as defined in the Plan) of the
Trust or a person designated by the Compensation Committee as eligible because
such person performs bona fide consulting or advisory services for the Trust or
an affiliate of the Trust (other than services in connection with the offer or
sale of securities in a capital-raising transaction) and has a direct and
significant effect on the financial development of the Trust or an affiliate of
the Trust, shall be eligible to receive awards under the Plan.
Share Option Awards. In connection with the Agreement with DDR, on July 29,
1998, the Trust granted share options to purchase 100,000 shares to the Chairman
of the Board of Trust Managers, who, in accordance with DDR's request,
transferred the options to his employer, DDR. The exercise price of the options
was $12.625 (the market price of the Trust's Shares on the date of the grant)
and the fair value of the options was $221,000. The options vested on November
20, 1998.
The Trust granted to each non-employee Trust Manager an option to purchase
2,000 shares on June 30, 1997. On an annual basis beginning in 1997, each
non-employee Trust Manager shall receive a non-qualified share option to
purchase 1,000 Shares. Each of these non-employee Trust Manager options is fully
exercisable upon the date of grant and generally terminates (unless sooner
terminated under the terms of the Plan) ten years after the date of grant. The
exercise price is determined by the Compensation Committee and must have an
exercise price equal to not less than 100% of the fair market value of a Share
on the date of grant. On December 31, 1998 and 1997, 10,000 Shares and 7,000
Shares, respectively, were granted.
During 1998, pursuant to the plan, the Trust Managers granted share options
to purchase 460,000 Shares to 12 members of management. The exercise price of
the options granted is $13.625. The option to purchase shares vest annually over
a period of five years, beginning April 1, 1998. In addition, the Board approved
the award of 27,000 restricted shares to the Trust's senior officers. The
restricted shares vest annually beginning on the first anniversary date of the
date of grant.
During 1997, pursuant to the Plan, the Trust Managers granted share options
to purchase 125,000 Shares to the Trust's officers. The exercise price of the
options granted to the officers is $15.00 (the market price of the Trust's
Shares on the date of the grant, June 30, 1997). The options to purchase Shares
vest annually over a period of five years, beginning on June 30, 1997.
As of December 31, 1998, no options had been exercised.
Pursuant to agreements between the Trust and four senior officers, a Change
in Control (as defined) occurred on December 10, 1998 when DDR's ownership
position exceeded 33% of the Trust's voting shares. As a result, all options
held by these officers became fully vested and the restrictions on 27,000
restricted shares held by these officers were lifted. A total of 395,000
previously unvested options became vested on this date.
The Trust has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and related Interpretations
in accounting for its employee share options because, as discussed below, the
alternative fair value accounting provided for under Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation
("Statement 123") requires use of option valuation models that were not
developed for use in valuing employee share options. Under APB 25, because the
exercise price of the Trust's employee share options equals the market price of
the underlying shares on the date of grant, no compensation expense is
recognized.
At December 31, 1998, 716,000 options are outstanding of which 668,000 are
fully vested. The remaining 48,000 options vest annually through April 2002. The
term of these options range from June 2007 through December 2008.
Pro forma information regarding net income and earnings per share is
required by Statement 123. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with
F-15
<PAGE> 61
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the following weighted-average assumptions for 1998: risk-free interest rates of
4.80% to 6.50%; a dividend yield of 4.96% to 5.50%; volatility factors of the
expected market price of the Trust's Shares of .275 to .283; and a
weighted-average expected life of the options of 7 years.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1997: risk-free interest rates of 5.98% to 6.50%; a dividend
yield of 5.5%; volatility factors of the expected market price of the Trust's
Shares of .283; and a weighted-average expected life of the options of 7 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Trust's employee share options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee share options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Trust's
pro forma information follows (in thousands except for earnings per Share
information):
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Pro forma net income..................... $(10,070) $(10,350) $1,799 $1,749
======== ======== ====== ======
Pro forma earnings/(loss) per Share
Basic and diluted...................... $ (0.82) $ (0.84) $ 0.54 $ 0.53
======== ======== ====== ======
</TABLE>
A summary of the Trust's share option activity, and related information for
the year ended December 31 follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- ---------------- ------- ----------------
(000) (000)
<S> <C> <C> <C> <C>
Outstanding-beginning of year........ 139 $14.99 -- $ --
Granted.............................. 577 13.42 139 14.99
Exercised............................ -- -- -- --
Forfeited............................ -- -- -- --
----- ------ ----- ------
Outstanding-end of year.............. 716 $13.71 139 $14.99
===== ====== ===== ======
Exercisable at end of year........... 668 $14.85 39 $14.97
===== ====== ===== ======
Weighted-average fair value of
options granted during the year.... $2.74 $3.10
===== =====
</TABLE>
The options outstanding at December 31, 1998 have exercise prices ranging
from $11.6875 to $15.00 per share and have a weighted average contractual
remaining life of 9.16 years. At December 31, 1998, there were 1,004,200 options
that have not been granted under the Plan.
The limited partners of AIP-SWAG Operating Partnership L.P. received
warrants to purchase 40,000 Shares at $17.50 per Share. The warrants expire on
October 3, 2000 (See Note 2).
F-16
<PAGE> 62
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- DISTRIBUTIONS:
On January 29, 1998, the Board of Trust Managers announced a reinstatement
of quarterly distributions. A distribution of $0.18 per Share was paid on April
14, 1998 and a distribution of $0.20 was paid on July 14, 1998 and October 14,
1998. On October 29, 1998 the Trust declared a distribution of $0.20 per Share,
payable on January 20, 1999 to shareholders of record on January 7, 1999. There
were no distributions paid during 1997.
The Trust has declared a distribution of $0.20 per Share payable on April
15, 1999, to shareholders of record on April 5, 1999 (see Note 19).
NOTE 10 -- OPERATING LEASES:
The Trust's properties are leased to others under operating leases with
expiration dates ranging from 1999 to 2011. Future minimum rentals on
noncancellable tenant leases at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------------
<S> <C>
1999........................................................ $ 51,662,000
2000........................................................ 43,299,000
2001........................................................ 33,938,000
2002........................................................ 23,472,000
2003........................................................ 13,912,000
Thereafter.................................................. 29,950,000
------------
$196,233,000
============
</TABLE>
NOTE 11 -- TRANSACTIONS WITH RELATED PARTIES:
During the fiscal year 1998, the Trust on occasion entered into unsecured
borrowings with DDR. Such borrowings bear a fixed rate of interest of 10.25%,
provide for quarterly payments of interest and are due thirty days after demand.
The highest amount outstanding under such borrowings from DDR during 1998 was
$23,510,000. The total amount of interest on such borrowings during 1998 was
$661,000 and the balance outstanding at December 31, 1998 was $14,058,000.
Effective October 8, 1998, DDR acquired an 89% limited partnership interest
and a 1% general partnership interest in DDR/Tech 29 Limited Partnership, a
limited partnership whose assets consist of two light industrial properties and
one office property totaling 290,991 nrsf located in Silver Springs, Maryland.
Several selling entities and affiliates thereof acquired the remaining
partnership interests. These partnership interests are convertible into DDR
common shares. As of November 20, 1998, the Trust acquired 88.5% of DDR's
limited partnership interest and, in consideration therefor, issued
approximately $16.1 million in Shares to DDR. The acquisition was deemed to be
effective as of October 8, 1998 and the purchase price included interest accrued
from such date. To date, an Equalization Agreement, which provides, among other
things, that DDR shall reimburse the Trust for certain dividend-based
distributions to the holders of partnership interests has not been executed. It
is anticipated that the Equalization Agreement will have an effective date in
January 1999.
On November 20, 1998, the Trust purchased undeveloped land from DDR in the
amount of $2.3 million plus interest. The purchase was accomplished through the
issuance of shares to DDR in accordance with the Share Purchase Agreement dated
July 30, 1998. This land was then contributed by the Trust to a development
joint venture with a third party.
In addition to DDR's equity investment (see Note 8) and the items noted
above, DDR also provided real estate management services and interim financing
for real estate acquisitions. DDR is paid a competitive rate
F-17
<PAGE> 63
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for the management services, including, but not limited to, tenant finish,
leasing and reporting. For the year ended December 31, 1998 the Trust paid
$19,000 for management services.
Certain real estate investments are managed by Quorum Real Estate Services
Corporation ("Quorum") an affiliate of a major shareholder of the Trust. Quorum
is paid competitive rates, for services, including, but not limited to,
construction, tenant finish, leasing and management. For the year ended December
31, 1998, management fees and leasing commissions paid by the Trust to Quorum
were $548,000 and $24,000, respectively. No such fees were paid by the Trust in
1997.
The Trust currently leases space to an individual serving as a Trust
Manager at competitive market rates. For the year ended December 31, 1998, this
Trust Manager paid $9,800 in lease payments to the Trust.
At December 31, 1998, DDR and Realco owned approximately 34.6% and 9.8% of
the Shares outstanding, respectively.
NOTE 12 -- RETIREMENT AND PROFIT SHARING PLAN:
During 1993, the Trust adopted a retirement and profit sharing plan which
qualifies under section 401(k) of the Internal Revenue Code. All existing Trust
employees at adoption and subsequent employees who have completed one month of
service are eligible to participate in the plan. Subject to certain limitations,
employees may contribute up to 15% of their salary. The Trust may make annual
discretionary contributions to the plan. Contributions by the Trust related to
the years ended December 31, 1998, 1997 and 1996 were $70,000, $40,000 and
$30,000, respectively.
NOTE 13 -- CHANGE IN CONTROL COSTS:
During 1998, the Trust recognized costs related to a change in control of
$5,780,000. The costs related to change in control include approximately
$2,484,000 for payments made to the Trust's senior officers under severance and
change in control agreements which were triggered when DDR's ownership position
exceeded 33%, an accrual of $2,960,000 related to the future payments through
2008 to the senior officers under previously granted dividend equivalent rights,
approximately $300,000 related to vesting of restricted shares previously
granted to the senior officers and $36,000 in payroll taxes associated with the
payments to the senior officers.
NOTE 14 -- PER SHARE DATA:
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
------------ ---------- -----------
<S> <C> <C> <C>
Basic and diluted earnings per share:
Numerator:
Loss before extraordinary items............. $ (4,267,000) $ (844,000) $(4,555,000)
Extraordinary items......................... (5,803,000) 2,643,000 5,810,000
------------ ---------- -----------
Net income/(loss)................... $(10,070,000) $1,799,000 $ 1,255,000
============ ========== ===========
Denominator:
Weighted average shares..................... 12,251,591 3,316,788 1,821,648
------------ ---------- -----------
Basic and diluted earnings per share:
Loss before extraordinary items............. $ (0.35) $ (0.26) $ (2.50)
Extraordinary items......................... (0.47) 0.80 3.20
------------ ---------- -----------
Net income/(loss)................... $ (0.82) $ 0.54 $ 0.70
============ ========== ===========
</TABLE>
F-18
<PAGE> 64
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Options to purchase 716,000 shares at prices ranging from $11.6875 to
$15.00 per Share were outstanding at December 31, 1998 and options to purchase
139,000 shares at prices ranging from $13.625 to $15.00 were outstanding at
December 31, 1997. These options were not included in a computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the Shares and, therefore, the effect would be
antidilutive. The Trust had no options outstanding during 1996.
At December 31, 1998, 40,000 warrants were outstanding. The warrants have
an exercise price of $17.50 per Share and expire in October 2000. Because the
warrants exercise price was greater than the average market price of the Shares
the effect would be antidilutive.
In January and February 1999, the Trust issued 3,445,709 Shares (see Note
19).
NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS:
Accounts receivable, accounts payable and accrued expenses and other
liabilities are carried at amounts that reasonably approximate their fair
values. The fair values of the Trust's mortgage notes payable are estimated
using discounted cash flow analyses, based on the Trust's incremental borrowing
rates for similar types of borrowing arrangements. The carrying values of such
mortgage notes payable reasonably approximate their fair values.
NOTE 16 -- SEGMENT REPORTING
The Trust classifies its reportable segments by property type: light
industrial, office, and retail. Light industrial represents 56% of property
revenue. Office and retail represent 35% and 9%, respectively.
The Trust's emphasis is in the light industrial sector, which is
characterized as office showroom, service center and flex properties, low rise
offices, and small bay distribution properties. Based on net rentable square
feet, as of December 31, 1998, approximately 76% of the Trust's portfolio is
represented by light industrial properties, 20% of the portfolio is represented
by office properties and 4% of the portfolio is represented by retail
properties.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Senior management evaluates
performance based on net operating income from the combined properties in each
segment.
The Trust's reportable segments are a consolidation of related properties
which offer different products. They are managed separately because each segment
requires different operating, pricing and leasing strategies. All of the
properties have been acquired separately and are incorporated into the
applicable segment.
F-19
<PAGE> 65
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998
------------------------------------------------------------
LIGHT OFFICE CORPORATE
INDUSTRIAL BUILDINGS RETAIL AND OTHER CONSOLIDATED
---------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Property revenues...................... $ 27,013 $ 17,044 $ 4,300 $ -- $ 48,357
Property expenses...................... 7,908 6,362 1,776 -- 16,046
-------- -------- -------- -------- --------
Income from property operations........ 19,105 10,682 2,524 -- 32,311
Administrative expenses................ -- -- -- (3,729) (3,729)
Depreciation and amortization.......... -- -- -- (8,383) (8,383)
Other income........................... -- -- -- 705 705
Interest expense....................... -- -- -- (15,139) (15,139)
Provision for possible losses on real
estate............................... -- -- (10,060) -- (10,060)
-------- -------- -------- -------- --------
Loss from operations................... 19,105 10,682 (7,536) (26,546) (4,295)
Minority interests in consolidated
subsidiaries......................... -- -- -- 28 28
Extraordinary items.................... -- -- -- (5,803) (5,803)
-------- -------- -------- -------- --------
Net income (loss)...................... $ 19,105 $ 10,682 $ (7,536) $(32,321) $(10,070)
======== ======== ======== ======== ========
Total real estate............ $334,503 $133,643 $ 35,769 $ 1,217 $505,132
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------
LIGHT OFFICE CORPORATE
INDUSTRIAL BUILDINGS RETAIL AND OTHER CONSOLIDATED
---------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
Property revenues........................ $ 8,312 $ 633 $ 3,256 $ -- $ 12,201
Property expenses........................ 2,496 399 1,420 -- 4,315
-------- ------- ------- -------- --------
Income from property operations.......... 5,816 234 1,836 -- 7,886
Administrative expenses.................. -- -- -- (2,504) (2,504)
Depreciation and amortization............ -- -- -- (3,157) (3,157)
Other income............................. -- -- -- 546 546
Interest expense......................... -- -- -- (5,778) (5,778)
-------- ------- ------- -------- --------
Loss from operations..................... 5,830 234 1,836 (10,893) (3,007)
Gain on sales of real estate............. -- -- -- 2,163 2,163
Extraordinary items...................... -- -- -- 2,643 2,643
-------- ------- ------- -------- --------
Net income (loss)........................ $ 5,830 $ 234 $ 1,836 $ (6,087) $ 1,799
======== ======= ======= ======== ========
Total real estate.............. $136,103 $83,352 $45,592 $ 265 $265,312
======== ======= ======= ======== ========
</TABLE>
F-20
<PAGE> 66
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The breakdown of the Trust's property revenues, geographically and by
reporting segment, for each of the years ended December 31, 1998, 1997, and 1996
is as follows (in thousands):
<TABLE>
<CAPTION>
REGION 1998 1997 1996
------ ------- ------- -------
<S> <C> <C> <C>
WESTERN REGION
Industrial............................................ $15,709 $ 5,147 $ 2,949
Office................................................ 13,341 633 638
Retail................................................ 3,186 3,256 3,308
EASTERN REGION
Industrial............................................ 11,304 3,165 4,425
Office................................................ 3,703 -- --
Retail................................................ 1,114 -- --
------- ------- -------
Total property revenues....................... $48,357 $12,201 $11,320
======= ======= =======
</TABLE>
F-21
<PAGE> 67
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth the quarterly results of operations for the
years ended December 31, 1998 and 1997 (in thousands, except per Share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
1998
Revenues......................... $ 16,740 $ 12,521 $ 11,075 $ 8,726
Income (loss) before
extraordinary items(a)......... (7,755) 1,289 1,101 1,098
Extraordinary gain/(loss)........ (5,780) (23) -- --
----------- ----------- ----------- -----------
Net income....................... $ (13,535) $ 1,266 $ 1,101 $ 1,098
=========== =========== =========== ===========
Per Share Data (Basic and
Diluted)
Income/(loss) before
extraordinary items......... $ (0.52) $ 0.10 $ 0.10 $ 0.10
Extraordinary gain/(loss)...... (0.39) -- -- --
----------- ----------- ----------- -----------
Net income..................... $ (0.91) $ 0.10 $ 0.10 $ 0.10
=========== =========== =========== ===========
Weighted average number of shares
outstanding:
Basic.......................... 14,783,824 12,470,471 11,080,452 10,617,617
=========== =========== =========== ===========
Diluted........................ 14,783,824 12,497,471 11,107,452 10,617,617
=========== =========== =========== ===========
1997
Revenues......................... $ 4,524 $ 2,971 $ 2,586 $ 2,666
Gain of sale of real estate...... 1,851 -- -- 312
Income/(loss) before
extraordinary items............ 1,258 (341) (1,054) (707)
Extraordinary gain/(loss)........ -- -- -- 2,643
----------- ----------- ----------- -----------
Net income....................... 1,258 (341) (1,054) 1,936
=========== =========== =========== ===========
Per Share Data (Basic and
Diluted)
Income/(loss) before
extraordinary items......... $ 0.26 $ (0.08) $ (0.55) $ (0.35)
Extraordinary gain/(loss)...... -- -- -- 1.32
----------- ----------- ----------- -----------
Net income..................... $ 0.26 $ (0.08) $ (0.55) $ 0.97
=========== =========== =========== ===========
Weighted average number of shares
outstanding:
Basic and diluted.............. 4,912,775 4,354,378 2,000,000 2,000,000
=========== =========== =========== ===========
</TABLE>
- ---------------
(a) In the fourth quarter of 1998 the Trust recognized a $10,060,000 provision
for real estate losses for a property held for sale.
NOTE 18 -- PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited pro forma condensed consolidated statements of operations of
the Trust are presented as if (i) the merger with four real estate limited
partnerships in 1997; (ii) the acquisition of 15 industrial properties in 1997;
(iii) the disposition of two properties during 1997; (iv) the acquisition of 28
properties in 1998, and (v) the conversion of $42.7 million in notes payable to
DDR into Shares had occurred at the beginning of each period presented. These
unaudited pro forma condensed consolidated statements of operations are not
necessarily indicative of what actual results of operations of the Trust would
have been assuming such
F-22
<PAGE> 68
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
transactions had been completed as of the beginning of each period presented,
nor do they purport to represent the results of operations for future periods.
Further the pro forma statements of operations do not include the effects of
extraordinary items or provision for possible losses on real estate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
INCOME
Rents and tenant reimbursements............................. $66,896 $58,594
Interest and other income................................... 739 516
------- -------
67,635 59,110
EXPENSES
Property operating expenses................................. 20,659 20,054
Depreciation and amortization............................... 11,297 10,831
Interest expense............................................ 19,539 20,130
General and administrative.................................. 3,942 4,216
------- -------
Total expenses.................................... 55,437 55,231
------- -------
Income (loss) before minority interests..................... 12,198 3,879
Minority interests.......................................... 28 208
------- -------
Income (loss) from operations............................... $12,226 $ 4,087
======= =======
Income (loss) from operations per share..................... $ 0.71 $ 0.24
======= =======
Weighted average number of common shares outstanding........ 17,292 17,271
======= =======
</TABLE>
NOTE 19 -- SUBSEQUENT EVENTS:
On January 8, 1999, the Trust retired a $42.6 million bridge loan with
proceeds from a permanent financing of seven properties. Terms of the permanent
financing include a principal amount of $41 million, a fixed rate of interest of
7.375%, a ten year term and 25 year principal amortization.
On January 15, 1999, the Trust acquired a nine-property portfolio for
approximately $127 million, consisting of almost 1 million square feet of one
and two story office/flex properties located in northern California and
Colorado. The acquisition cost was funded with a $75.2 million secured bridge
loan from PSCC and with $51.8 million of common equity issued to DDR. Terms of
the bridge loan include a maturity of July 15, 1999 and a variable rate of
interest equal to the 30 day LIBOR rate plus 1.75%. The equity was issued to DDR
pursuant to the Agreement dated July 30, 1998, as amended and resulted in
3,410,615 Shares delivered to DDR.
On January 19, 1999, the Trust refinanced existing indebtedness of
approximately $1.8 million on a property acquired in October 1998 with proceeds
from a new permanent financing of $7.6 million. Terms of the permanent financing
include a fixed rate of interest of 7.33%, seven year term with a three year
renewal option, and 30 year principal amortization.
On January 29, 1999, the Trust entered into a secured revolving credit
agreement with Bank One. The agreement contemplates a $150,000,000 credit line
of which Bank One has committed to $25,000,000. The remainder of the credit line
will be syndicated on a "best efforts" basis by Bank One. The credit line will
be secured by mortgage liens on properties, provides for a graduated variable
interest rate (depending on the Trust's overall leverage) of LIBOR plus 1.4% to
LIBOR plus 2.0%, a maximum loan to value of 60%, and a maturity in January 2001.
As of March 24, 1999, the Trust has $13.0 million outstanding under this credit
line, which bears interest at LIBOR plus 1.75%.
F-23
<PAGE> 69
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 23, 1999, the Trust declared a distribution of $0.20 per Share
payable on April 15, 1999, to shareholders of record on April 5, 1999.
On March 26, 1999, the Trust negotiated an extension of the maturity of its
acquisition credit line to April 2000 and a decrease in the interest rate to
LIBOR plus 1.55%.
F-24
<PAGE> 70
SCHEDULE III
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT
COSTS CAPITALIZED CARRIED AT
SUBSEQUENT TO DECEMBER 31, 1998
INITIAL COSTS ACQUISITION OF -----------------------
----------------------- LAND, BUILDINGS, RETIREMENTS BUILDINGS,
BUILDINGS FURNITURE, WRITEDOWNS FURNITURE,
AND FIXTURES AND AND FIXTURES AND
LAND IMPROVEMENTS EQUIPMENT ALLOWANCES LAND EQUIPMENT TOTAL
-------- ------------ ----------------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
LIGHT INDUSTRIAL PROPERTIES
2121 Glenville.................. $ 426 $ 1,392 $ -- $ 426 $ 1,392 $ 1,818
Aerotech........................ 914 5,735 12 914 5,747 6,661
Alumax.......................... 260 2,820 -- 260 2,820 3,080
Avion........................... 770 4,006 30 -- 770 4,036 4,806
Battlefield..................... 2,020 11,635 -- 2,020 11,635 13,655
Ben White....................... 303 1,515 110 303 1,625 1,928
Black Canyon Tech............... 1,052 6,846 5 1,052 6,851 7,903
Bowater......................... 581 2,535 -- -- 581 2,535 3,116
Broadbent Business Park......... 700 4,595 42 700 4,637 5,337
Broadbent Land.................. 2,075 -- -- 2,075 -- 2,075
Cameron Creek................... 524 3,379 3 524 3,382 3,906
Cameron Creek Land.............. 840 -- -- -- 840 -- 840
Carpenter Center................ 650 1,354 61 -- 650 1,415 2,065
Carrier Place................... 560 2,682 182 -- 560 2,864 3,424
Central Park.................... 839 3,361 43 -- 839 3,404 4,243
Columbia Corporate Ctr.......... 6,500 6,623 -- 6,500 6,623 13,123
Commerce Center................. 4,420 6,328 1,064 -- 4,420 7,392 11,812
Commerce Park North............. 1,108 4,431 558 (2,014) 705 3,378 4,083
Continental Plastic............. 2,350 5,128 5 -- 2,350 5,133 7,483
Corporex Plaza I................ 998 4,130 254 -- 998 4,384 5,382
Corporex Presidents Plaza....... 491 1,932 189 -- 491 2,121 2,612
DFW IV.......................... 470 3,364 74 -- 470 3,438 3,908
Gateway 5 & 6................... 935 3,741 907 (1,861) 563 3,159 3,722
Greenbrier Circle............... 1,930 12,787 -- 1,930 12,787 14,717
Greenbrier Tech................. 1,060 6,293 -- 1,060 6,293 7,353
Hardline........................ 1,040 6,935 45 1,040 6,980 8,020
Heritage Business Ctr........... 360 2,141 -- 360 2,141 2,501
Heritage VSA.................... 205 3,928 -- 205 3,928 4,133
<CAPTION>
ACCUMULATED YEAR ACQ. ENCUM-
DEPRECIATION CONSTRUCTED DATE BRANCES
------------ ----------- ---- -------
<S> <C> <C> <C> <C>
LIGHT INDUSTRIAL PROPERTIES
2121 Glenville.................. $ (12) 1984 1998 $ --
Aerotech........................ (96) 1985 1998 4,210
Alumax.......................... (29) 1982 1998
Avion........................... (102) 1984 1997 (b)
Battlefield..................... (71) 1989 1998 8,334
Ben White....................... (30) 1984 1998
Black Canyon Tech............... (114) 1983 1998 5,887
Bowater......................... (63) 1989 1997 2,100
Broadbent Business Park......... (79) 1989 1998 1,782
Broadbent Land.................. -- -- 1998
Cameron Creek................... (63) 1996 1998 1,416
Cameron Creek Land.............. -- -- 1998
Carpenter Center................ (48) 1983 1997 (a)
Carrier Place................... (101) 1984 1997 (a)
Central Park.................... (113) 1984 1997 (b)
Columbia Corporate Ctr.......... (14) 1988 1998
Commerce Center................. (115) 1971/74 1997 (a)
Commerce Park North............. (1,407) 1984 1985 2,030
Continental Plastic............. (128) 1963/96 1997
Corporex Plaza I................ (131) 1982 1997 (b)
Corporex Presidents Plaza....... (68) 1987 1997 (b)
DFW IV.......................... (112) 1985 1997 (a)
Gateway 5 & 6................... (1,469) 1984/85 1985 2,755
Greenbrier Circle............... (78) 1981/83 1998 7,422
Greenbrier Tech................. (38) 1981 1998 4,428
Hardline........................ (73) 1974 1998
Heritage Business Ctr........... (22) 1990 1998
Heritage VSA.................... (41) 1989 1998
</TABLE>
F-25
<PAGE> 71
<TABLE>
<CAPTION>
SCHEDULE III -- (CONTINUED)
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION -- (CONTINUED)
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COSTS ACQUISITION OF
----------------------- LAND, BUILDINGS, RETIREMENTS
BUILDINGS FURNITURE, WRITEDOWNS
AND FIXTURES AND
LAND IMPROVEMENTS AND EQUIPMENT ALLOWANCES
-------- ------------ ----------------- -----------
<S> <C> <C> <C> <C>
Huntington Drive................ 1,559 6,237 821 --
Inverness....................... 1,532 6,054 304 --
Kodak........................... 1,749 2,998 332 --
Meridian........................ 262 1,047 1 --
Metro Business Park............. 2,050 7,957 -- --
Norfolk Commerce................ 2,400 19,093 -- --
Northgate II.................... 2,153 8,612 784 (4,122)
Northgate III................... 1,280 10,013 208 --
Northpointe B & C............... 640 5,252 -- --
Northwest Business Park......... 1,296 5,184 773 (131)
Parkway Tech.................... 440 2,795 49 --
Patapsco........................ 1,147 4,588 475 (1,250)
Plaza SW........................ 1,312 5,248 1,302 --
Skyway.......................... 444 1,778 68 --
Steris.......................... 300 2,251 -- --
Summit Park..................... 2,232 5,734 80 --
Summit Park Land................ 732 -- -- --
Tech 29 Bldg I.................. 3,900 6,968 -- --
Tech 29 Bldg II................. 2,000 5,998 -- --
Technipark 10................... 920 3,211 -- --
Tucson Tech..................... 663 3,518 -- --
Valley View..................... 1,460 6,648 24 --
Valley View Land................ 1,024 -- -- --
Valwood II...................... 420 2,021 117 --
Shady Trail..................... 530 1,738 56 --
Washington Business Park........ 1,850 7,453 -- --
Westchase....................... 697 2,787 327 (1,232)
Winter Park..................... 2,000 7,198 -- --
-------- -------- ------- --------
Total Light
Industrial............ $ 71,373 $261,997 $ 9,305 $(10,610)
<CAPTION>
SCHEDULE III -- (CONTINUED)
AMER AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED REAL ESTATE IN CONSOLIDATED REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION -- (CONTINUED)
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1998
-----------------------
BUILDINGS,
FURNITURE,
FIXTURES AND ACCUMULATED YEAR ACQ. ENCUM-
LAND EQUIPMENT TOTAL DEPRECIATION CONSTRUCTED DATE BRANCES
-------- ------------ -------- ------------ ----------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Huntington Drive................ 1,559 7,058 8,617 (2,459) 1984/85 1985 4,422
Inverness....................... 1,532 6,358 7,890 (159) 1980 1997 (b)
Kodak........................... 1,749 3,330 5,079 (104) 1987 1997 3,360
Meridian........................ 262 1,048 1,310 (87) 1981 1995 1,124
Metro Business Park............. 2,050 7,957 10,007 (50) 1987 1998 6,200
Norfolk Commerce................ 2,400 19,093 21,493 (199) 1981/87 1998 13,000
Northgate II.................... 1,329 6,098 7,427 (2,692) 1982/83 1985 5,002
Northgate III................... 1,280 10,221 11,501 (248) 1979/86 1997 (a)
Northpointe B & C............... 640 5,252 5,892 (22) 1987/88 1998 2,820
Northwest Business Park......... 1,296 5,826 7,122 (2,043) 1983/86 1986
Parkway Tech.................... 440 2,844 3,284 (91) 1984 1997 (a)
Patapsco........................ 897 4,063 4,960 (1,400) 1980/84 1985 3,008
Plaza SW........................ 1,312 6,550 7,862 (2,206) 1970/74 1985 3,262
Skyway.......................... 444 1,846 2,290 (61) 1981 1997 (b)
Steris.......................... 300 2,251 2,551 (23) 1980 1998
Summit Park..................... 2,232 5,814 8,046 (101) 1985 1998 6,150
Summit Park Land................ 732 -- 732 -- -- 1998
Tech 29 Bldg I.................. 3,900 6,968 10,868 (44) 1970 1998 1,834
Tech 29 Bldg II................. 2,000 5,998 7,998 (35) 1991 1998 4,327
Technipark 10................... 920 3,211 4,131 (20) 1983/84 1998
Tucson Tech..................... 663 3,518 4,181 (59) 1986 1998 2,772
Valley View..................... 1,460 6,672 8,132 (128) 1986 1997 (a)
Valley View Land................ 1,024 -- 1,024 -- 1986 1997 (a)
Valwood II...................... 420 2,138 2,558 (66) 1983 1997 (a)
Shady Trail..................... 530 1,794 2,324 (58) 1984 1997 (a)
Washington Business Park........ 1,850 7,453 9,303 -- 1985 1998 5,190
Westchase....................... 465 2,114 2,579 (903) 1983 1985 1,283
Winter Park..................... 2,000 7,198 9,198 (15) 1981/83/85 1998 5,100
-------- -------- -------- --------
Total Light
Industrial............ $ 69,292 $262,773 $332,065 $(17,890)
</TABLE>
F-26
<PAGE> 72
<TABLE>
<CAPTION>
SCHEDULE III -- (CONTINUED)
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION -- (CONTINUED)
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COSTS ACQUISITION OF
----------------------- LAND, BUILDINGS, RETIREMENTS
BUILDINGS FURNITURE, WRITEDOWNS
AND FIXTURES AND
LAND IMPROVEMENTS AND EQUIPMENT ALLOWANCES
-------- ------------ ----------------- -----------
<S> <C> <C> <C> <C>
OFFICE PROPERTIES
1881 PineStreet................. $ 776 $ 5,924 $ 121 $ --
Academy Point................... 881 7,832 62 --
Apollo Computer................. 6,106 17,901 972 --
BeltlineBusiness Ctr............ 1,303 5,213 699 (3,521)
Linear Tech..................... 1,235 3,231 -- --
Manhattan....................... 5,156 23,053 1,350 --
Skygate......................... 1,923 8,451 328 --
Spring Valley................... 959 8,362 27 --
Systech (10505 Sorrento)........ 879 3,691 13 --
Tech 29 Bldg III................ 1,600 6,840 -- --
Northview Business Center....... 7,600 14,676 -- --
-------- -------- ------- --------
Total Office
Properties............ $ 28,418 $105,174 $ 3,572 $ (3,521)
RETAIL PROPERTIES
Tamarac......................... $ 6,799 $ 27,194 $ 4,558 $(10,060)
Volusia......................... 3,445 3,826 7 --
-------- -------- ------- --------
Total Retail
Properties............ $ 10,244 $ 31,020 $ 4,565 $(10,060)
DEVELOPMENT PROPERTY
Post Office Land................ 2,438 -- -- --
-------- -------- ------- --------
Total Development
Property.............. 2,438 -- -- --
Trust........................... -- -- 265 --
-------- -------- ------- --------
TOTAL ALL PROPERTIES.... $112,473 $398,191 $17,707 $(24,191)
<CAPTION>
SCHEDULE III -- (CONTINUED)
AMER AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED REAL ESTATE IN CONSOLIDATED REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION -- (CONTINUED)
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1998
-----------------------
BUILDINGS,
FURNITURE,
FIXTURES AND ACCUMULATED YEAR ACQ. ENCUM-
LAND EQUIPMENT TOTAL DEPRECIATION CONSTRUCTED DATE BRANCES
-------- ------------ -------- ------------ ----------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES
1881 PineStreet................. $ 776 $ 6,045 $ 6,821 $ (160) 1987 1997 $ 3,641
Academy Point................... 881 7,894 8,775 (135) 1984 1998 6,352
Apollo Computer................. 6,106 18,873 24,979 (456) 1987 1997 15,587
BeltlineBusiness Ctr............ 600 3,094 3,694 (1,530) 1984 1985 2,682
Linear Tech..................... 1,235 3,231 4,466 (81) 1986 1997 2,238
Manhattan....................... 5,156 24,403 29,559 (711) 1985 1997 20,300
Skygate......................... 1,923 8,779 10,702 (219) 1964/73 1997 5,978
Spring Valley................... 959 8,389 9,348 (184) 1980/98 1998 (b)
Systech (10505 Sorrento)........ 879 3,704 4,583 (93) 1982 1997
Tech 29 Bldg III................ 1,600 6,840 8,440 (41) 1988 1998 4,650
Northview Business Center....... 7,600 14,676 22,276 (245) 1970 1998 15,497
-------- -------- -------- --------
Total Office
Properties............ $ 27,715 $105,928 $133,643 $ (3,855)
RETAIL PROPERTIES
Tamarac......................... $ 6,000 $ 22,491 $ 28,491 $(11,491) 1976/79 1985 11,574
Volusia......................... 3,445 3,833 7,278 (96) 1984 1997
-------- -------- -------- --------
Total Retail
Properties............ $ 9,445 $ 26,324 $ 35,769 $(11,587)
DEVELOPMENT PROPERTY
Post Office Land................ 2,438 -- 2,438 -- -- 1998
-------- -------- -------- -------- ----------
Total Development
Property.............. 2,438 -- 2,438 -- --
Trust........................... -- 1,217 1,217 (117)
-------- -------- -------- --------
TOTAL ALL PROPERTIES.... $108,890 $396,242 $505,132 $(33,449)
</TABLE>
- ---------------
(a) Property encumbered by a first mortgage loan of $30,280 at December 31,
1998.
(b) Property encumbered by a first mortgage loan of $24,484 at December 31,
1998.
F-27
<PAGE> 73
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO SCHEDULE III
DECEMBER 31, 1997
(IN THOUSANDS)
RECONCILIATION OF REAL ESTATE:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year................................ $265,312 $ 94,472 $101,897
Additions during period:
Improvements.............................................. 6,659 1,366 982
Acquisitions.............................................. 243,231 175,469 --
-------- -------- --------
515,202 271,307 102,879
Deductions during period:
Dispositions.............................................. -- 5,995 8,407
Writedowns................................................ 10,060 -- --
Asset retirements...................................... 10 -- --
-------- -------- --------
Balance at end of year...................................... $505,132 $265,312 $ 94,472
======== ======== ========
</TABLE>
RECONCILIATION OF ACCUMULATED DEPRECIATION:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year................................ $ 25,521 $ 23,973 $ 23,441
Additions during period:
Depreciation expense for period........................... 7,928 2,774 2,577
-------- -------- --------
33,449 26,747 26,018
Deductions during period:
Accumulated depreciation of real estate sold.............. -- 1,226 2,045
Asset retirements...................................... -- -- --
-------- -------- --------
Balance at end of year...................................... $ 33,449 $ 25,521 $ 23,973
======== ======== ========
</TABLE>
TAX BASIS:
The income tax basis of real estate, net of accumulated tax depreciation,
is approximately $495,232 at December 31, 1998.
DEPRECIABLE LIFE:
Depreciation is provided by the straight-line method over the estimated
useful lives which are as follows:
<TABLE>
<S> <C>
Buildings and capital improvements: 40 years
Tenant improvements:
Term of the lease not to
exceed 10 years
</TABLE>
F-28
<PAGE> 74
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
2.1 -- Form of Amended and Restated Agreement and Plan of
Merger, dated as of June 30, 1997, by and between the
Trust and each of USAA Real Estate Income Investments I,
a California Limited Partnership, USAA Real Estate Income
Investments II Limited Partnership, USAA Income
Properties III Limited Partnership and USAA Income
Properties IV Limited Partnership (included as Annex I to
the Joint Proxy Statement/Prospectus of the Trust
included in Form S-4, Registration No. 333-31823)
2.2 -- Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation, as Purchaser, and
Merit Industrial Properties Limited Partnership, as
Seller, as amended by (i) First Amendment to Purchase
Agreement dated as of July 30, 1997, (ii) Second
Amendment to Purchase Agreement dated as of July 31,
1997, (iii) Third Amendment to Purchase Agreement dated
as of August 8, 1997, (iv) Fourth Amendment to Purchase
Agreement dated as of August 12, 1997, and (v) Fifth
Amendment to Purchase Agreement dated as of October 2,
1997 (incorporated herein by reference from Exhibit 2.1
to Form 8-K of the Trust dated October 3, 1997)
2.3 -- Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation, as Purchaser, and
Merit 1995 Industrial Portfolio Limited Partnership, as
Seller, as amended by (i) First Amendment to Purchase
Agreement dated as of July 30, 1997, (ii) Second
Amendment to Purchase Agreement dated as of July 31,
1997, (iii) Third Amendment to Purchase Agreement dated
as of August 8, 1997, and (iv) Fourth Amendment to
Purchase Agreement dated as of August 12, 1997
(incorporated herein by reference from Exhibit 2.2 to
Form 8-K of the Trust dated October 3, 1997)
2.4 -- Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation, as Purchaser, and
Merit VV 1995 Industrial Portfolio Limited Partnership,
as Seller, as amended by (i) First Amendment to Purchase
Agreement dated as of July 30, 1997, (ii) Second
Amendment to Purchase Agreement dated as of July 31,
1997, (iii) Third Amendment to Purchase Agreement dated
as of July 31, 1997, (iv) Fourth Amendment to Purchase
Agreement dated as of August 12, 1997, and (v) Fifth
Amendment to Purchase Agreement dated as of October 2,
1997 (incorporated herein by reference from Exhibit 2.3
to Form 8-K of the Trust dated October 3, 1997)
2.5 -- Purchase Agreement dated as of June 30, 1997 between
Shidler West Investment Corporation, as Purchaser, and
Merit VV Land 1995 Industrial Portfolio Limited
Partnership, as Seller, as amended by (i) First Amendment
to Purchase Agreement dated as of July 30, 1997, (ii)
Second Amendment to Purchase Agreement dated as of July
31, 1997, (iii) Third Amendment to Purchase Agreement
dated as of July 31, 1997, and (iv) Fourth Amendment to
Purchase Agreement dated as of August 12, 1997
(incorporated herein by reference from Exhibit 2.4 to
Form 8-K of the Trust dated October 3, 1997)
2.6 -- Purchase and Sale Agreement dated as of September 24,
1997 by and between Midway/Commerce Center Limited
Partnership, as Seller, and the Trust, as Buyer
(incorporated herein by reference from Exhibit 2.1 to
Form 8-K of the Trust dated October 3, 1997)
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
2.7 -- First Amendment to Purchase and Sale Agreement dated as
of October 22, 1997 by and between Midway/Commerce Center
Limited Partnership and the Trust (incorporated herein by
reference from Exhibit 2.2 to Form 8-K of the Trust dated
November 13, 1997)
2.8 -- Second Amendment to Purchase and Sale Agreement dated as
of October 31, 1997 by and between Midway/Commerce Center
Limited Partnership and the Trust (incorporated herein by
reference from Exhibit 2.3 to Form 8-K of the Trust dated
November 13, 1997)
2.9 -- Amended and Restated Agreement and Plan of Merger dated
as of June 30, 1998 between the Trust and USAA Real
Estate Income Investments I, a California Limited
Partnership (incorporated herein by reference from
Exhibit 2.1 to Form 8-K of the Trust dated January 20,
1998)
2.10 -- Amended and Restated Agreement and Plan of Merger dated
as of June 30, 1998 between the Trust and USAA Real
Estate Income Investments II Limited Partnership
(incorporated herein by reference from Exhibit 2.2 to
Form 8-K of the Trust dated January 20, 1998)
2.11 -- Amended and Restated Agreement and Plan of Merger dated
as of June 30, 1998 between the Trust and USAA Real
Estate Income Investments III Limited Partnership
(incorporated herein by reference from Exhibit 2.3 to
Form 8-K of the Trust dated January 20, 1998)
2.12 -- Amended and Restated Agreement and Plan of Merger dated
as of June 30, 1998 between the Trust and USAA Real
Estate Income Investments IV Limited Partnership
(incorporated herein by reference from Exhibit 2.4 to
Form 8-K of the Trust dated January 20, 1998)
2.13 -- Agreement and Plan of Merger by and among the Trust,
Developers Diversified Realty Corporation ("DDR") and DDR
Office Flex Corporation ("DDR Flex") dated July 30, 1998
(incorporated herein by reference from Exhibit 2.1 to
Form 8-K of the Trust dated July 30, 1998)
*3.1 -- Third Amended and Restated Declaration of Trust
*3.2 -- First Amendment to the Third Amended and Restated
Declaration of Trust
*3.3 -- Second Amendment to the Third Amended and Restated
Declaration of Trust
*3.4 -- Third Amendment to the Third Amended and Restated
Declaration of Trust
*3.5 -- Fifth Amended and Restated Bylaws
*3.6 -- Amendment to the Fifth Amended and Restated Bylaws
3.7 -- Statement of Designation of Series A Preferred Shares of
Beneficial Interest of the Trust dated July 30, 1998
(incorporated herein by reference from Exhibit 3.1 to
Form 8-K of the Trust dated July 30, 1998)
4.1 -- Indenture dated November 15, 1985, by and between the
Trust and IBJ Schroder Bank & Trust Company (incorporated
herein by reference from Exhibit 10.4 to Form S-4 of
American Industrial Properties REIT, Inc. ("AIP Inc.")
dated March 16, 1994; Registration No. 33-74292)
4.2 -- Form of Common Share Certificate (incorporated herein by
reference from Exhibit 4.2 to Amendment No. 3 to Form S-4
of the Trust filed October 28, 1997; Registration No.
333-31823)
10.1 -- Form of Indemnification Agreement (incorporated by
reference from Exhibit 10.1 to Form S-4 of the Trust
dated July 22, 1997; Registration No. 333-31823)
</TABLE>
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10.2 -- Employee and Trust Manager Incentive Share Plan
(incorporated by reference from Exhibit 10.2 to Form S-4
of the Trust dated July 22, 1997; Registration No.
333-31823)
10.3 -- Common Share Purchase Agreement dated as of July 3, 1997,
by and between the Trust and ABKB/LaSalle Securities
Limited Partnership ("ABKB") as Agent for and for the
benefit of a particular client (incorporated herein by
reference from Exhibit 10.7 to Form 8-K of the Trust
dated July 22, 1997)
10.4 -- Common Share Purchase Agreement dated as of July 3, 1997,
by and between the Trust and ABKB as Agent for and for
the benefit of a particular client (incorporated herein
by reference from Exhibit 10.8 to Form 8-K of the Trust
dated July 22, 1997)
10.5 -- Common Share Purchase Agreement dated as of July 3, 1997,
by and between the Trust and ABKB/LaSalle Advisors
Limited Partnership ("LaSalle") as Agent for and for the
benefit of a particular client (incorporated herein by
reference from Exhibit 10.9 to Form 8-K of the Trust
dated July 22, 1997)
10.6 -- Registration Rights Agreement dated as of July 10, 1997,
by and between the Trust, ABKB as Agent for and for the
benefit of particular clients and LaSalle Advisors
Limited Partnership as Agent for and for the benefit of a
particular client (incorporated herein by reference from
Exhibit 10.6 to Form 8-K of the Trust dated July 22,
1997)
10.7 -- Common Share Purchase Agreement dated as of June 20,
1997, by and among the Trust, MS Real Estate Special
Situations, Inc. ("MSRE") and Morgan Stanley Asset
Management, Inc. ("MSAM") as agent and attorney-in-fact
for specified clients (the "MSAM") (incorporated herein
by reference from Exhibit 10.5 to Form 8-K of the Trust
dated July 22, 1997)
10.8 -- Registration Rights Agreement dated as of June 20, 1997,
by and among the Trust, MSRE and MSAM on behalf of the
MSAM Purchaser (incorporated herein by reference from
Exhibit 10.6 to the Trust's Form 8-K dated July 22, 1997)
10.9 -- Renewal, Extension, Modification and Amendment Agreement
dated February 26, 1997, executed by the Trust in favor
of USAA Real Estate Company ("Realco") (incorporated
herein by reference from Exhibit 10.1 to Form 8-K of the
Trust dated March 4, 1997)
10.10 -- Share Purchase Agreement dated as of December 20, 1996,
by and among the Trust, Realco and AIP Inc. (incorporated
herein by reference from Exhibit 99.7 to Form 8-K of the
Trust dated December 23, 1996)
10.11 -- Share Purchase Agreement dated as of December 13, 1996,
by and between the Trust and Realco (incorporated herein
be reference from Exhibit 99.4 to Form 8-K of the Trust
dated December 23, 1996)
10.12 -- Registration Rights Agreement dated as of December 20,
1996, by and between the Trust and Realco, as amended
(incorporated herein by reference from Exhibit 99.9 to
Form 8-K of the Trust dated December 23, 1996)
10.13 -- Registration Rights Agreement dated as of December 19,
1996, by and between the Trust and Realco (incorporated
herein by reference from Exhibit 99.8 to Form 8-K of the
Trust dated December 23, 1996)
10.14 -- 401(k) Retirement and Profit Sharing Plan (incorporated
herein by reference from Exhibit 10.5 to Amendment No. 1
to Form S-4 of AIP Inc. dated March 4, 1994; Registration
No. 33-74292)
</TABLE>
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10.15 -- Amendments to 401(k) Retirement and Profit Sharing Plan
(incorporated herein by reference from Exhibit 10.4 to
Form 10-K of the Trust dated March 27, 1995)
10.16 -- Settlement Agreement by and between the Trust, Patapsco
#1 Limited Partnership, Patapsco #2 Limited Partnership,
The Manufacturers Life Insurance Company and The
Manufacturers Life Insurance Company (U.S.A.) dated as of
May 22, 1996 (incorporated herein by reference from
Exhibit 99.1 to Form 8-K of the Trust dated May 22, 1996)
10.17 -- Agreement and Assignment of Partnership Interest, Amended
and Restated Agreement and Certificate of Limited
Partnership and Security Agreement for Patapsco
Center -- Linthicum Heights, Maryland (incorporated
herein by reference from Exhibit 10.8 to Amendment No. 2
to Form S-4 of AIP Inc. dated March 4, 1994; Registration
No. 33-74292)
10.18 -- Note dated November 15, 1994 in the original principal
amount of $12,250,000 with AIP Properties #1 L.P. as
Maker and AMRESCO Capital Corporation as Payee
(incorporated herein by reference from Exhibit 99.1 to
Form 8-K of the Trust dated November 22, 1994)
10.19 -- Mortgage, Deed of Trust and Security Agreement dated
November 15, 1994 between AIP Properties #1 L.P. and
AMRESCO Capital Corporation (incorporated herein by
reference from Exhibit 99.20 Form 8-K of the Trust dated
November 22, 1994)
10.20 -- Loan Modification Agreement modifying the Note dated
November 15, 1994 in the original principal amount of
$12,250,000 (incorporated herein by reference from
Exhibit 99.2 to Form 8-K of the Trust dated June 23,
1995)
10.21 -- Note dated November 15, 1994 in the original principal
amount of $2,150,000 with AIP Properties #2 L.P. as Maker
and AMRESCO Capital Corporation as Payee (incorporated
herein by reference from Exhibit 99.3 to Form 8-K of the
Trust dated November 22, 1994)
10.22 -- Mortgage, Deed of Trust and Security Agreement dated
November 15, 1994 between AIP Properties #2 L.P. and
AMRESCO Capital Corporation (incorporated herein by
reference from Exhibit 99.4 to Form 8-K of the Trust
dated November 22, 1994)
10.23 -- Loan Modification Agreement modifying the Note dated
November 15, 1994 in the original principal amount of
$2,250,000 (incorporated herein by reference from Exhibit
99.1 to Form 8-K of the Trust dated June 23, 1995)
10.24 -- Promissory Note dated November 25, 1996, by and between
AIP Inc. and Realco (incorporated herein by reference
from Exhibit No. 99.5 to Form 8-K of the Trust dated
December 23, 1996)
10.25 -- Deed of Trust and Security Agreement dated November 15,
1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America (Huntington Drive Center)
(incorporated herein by reference from Exhibit 99.1 to
Form 8-K of the Trust dated November 20, 1996)
10.26 -- Note dated November 15, 1996 in the original principal
amount of $4,575,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Huntington Drive Center ) (incorporated herein by
reference from Exhibit 99.2 to Form 8-K of the Trust
dated November 20, 1996)
</TABLE>
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10.27 -- Deed of Trust and Security Agreement dated November 15,
1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America (Patapsco Industrial Center)
(incorporated herein by reference from Exhibit 99.3 to
Form 8-K of the Trust dated November 20, 1996)
10.28 -- Note dated November 15, 1996 in the original principal
amount of $3,112,500 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Patapsco Industrial Center) (incorporated herein by
reference from Exhibit 99.4 to Form 8-K of the Trust
dated November 20, 1996)
10.29 -- Deed of Trust and Security Agreement dated November 15,
1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America (Woodlake Distribution
Center) (incorporated herein by reference from Exhibit
99.5 to Form 8-K of the Trust dated November 20, 1996)
10.30 -- Note dated November 15, 1996 in the original principal
amount of $1,537,500 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Woodlake Distribution Center) (incorporated herein by
reference from Exhibit 99.6 to Form 8-K of the Trust
dated November 20, 1996)
10.31 -- Deed of Trust and Security Agreement dated November 15,
1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America (all Texas properties except
Woodlake) (incorporated herein by reference from Exhibit
99.7 to Form 8-K of the Trust dated November 20, 1996)
10.32 -- Note dated November 15, 1996 in the original principal
amount of $1,162,500 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Meridian Street Warehouse) (incorporated herein by
reference from Exhibit 99.8 to Form 8-K of the Trust
dated November 20, 1996)
10.33 -- Note dated November 15, 1996 in the original principal
amount of $2,775,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Beltline Business Center) (incorporated herein by
reference from Exhibit 99.9 to Form 8-K of the Trust
dated November 20, 1996)
10.34 -- Note dated November 15, 1996 in the original principal
amount of $3,375,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Plaza South) (incorporated herein by reference from
Exhibit 99.10 to Form 8-K of the Trust dated November 20,
1996)
10.35 -- Note dated November 15, 1996 in the original principal
amount of $2,100,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Commerce North Park) (incorporated herein by reference
from Exhibit 99.11 to Form 8-K of the Trust dated
November 20, 1996)
10.36 -- Note dated November 15, 1996 in the original principal
amount of $2,850,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Gateway 5 & 6) (incorporated herein by reference from
Exhibit 99.12 to Form 8-K of the Trust dated November 20,
1996)
10.37 -- Note dated November 15, 1996 in the original principal
amount of $5,175,000 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Northgate II) (incorporated herein by reference from
Exhibit 99.13 to Form 8-K of the Trust dated November 20,
1996)
10.38 -- Note dated November 15, 1996 in the original principal
amount of $1,327,500 with AIP Properties #3, L.P. as
Maker and Life Investors Insurance Company as Payee
(Westchase Park) (incorporated herein by reference from
Exhibit 99.4 to Form 8-K of the Trust dated November 20,
1996)
</TABLE>
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10.39 -- Bonus and Severance Agreement dated March 13, 1996, by
and between the Trust and Charles W. Wolcott
(incorporated herein by reference from Exhibit 10.12 to
Form 10-K of the Trust for the year ended December 31,
1996)
10.40 -- Bonus and Severance Agreement dated March 13, 1996, by
and between the Trust and Marc A. Simpson (incorporated
herein by reference from Exhibit 10.13 to Form 10-K of
the Trust for the year ended December 31, 1996)
10.41 -- Bonus and Severance Agreement dated March 13, 1996, by
and between the Trust and David B. Warner (incorporated
herein by reference from Exhibit 10.14 to Form 10-K of
the Trust for the year ended December 31, 1996)
10.42 -- Amendment No. 1 to Share Purchase Agreement dated as of
December 13, 1996 by and between the Trust and Realco
(incorporated herein by reference from Exhibit 10.2 to
Form 8-K of the Trust dated March 4, 1997)
10.44 -- Common Share Purchase Agreement dated as of January 29,
1998, by and between the Trust and Praedium II Industrial
Associates LLC ("Praedium") (incorporated herein by
reference from Exhibit 10.1 to Form 8-K of the Trust
dated January 29, 1998)
10.45 -- Registration Rights Agreement dated as of January 29,
1998, by and between the Trust and Praedium (incorporated
herein by reference from Exhibit 10.2 to Form 8-K of the
Trust dated January 29, 1998)
10.46 -- Agreement dated as of January 29, 1998, by and among the
Trust, Realco, ABKB (as Agent for and for the benefit of
particular clients), MSRE and MSAM (incorporated herein
by reference from Exhibit 10.3 to Form 8-K of the Trust
dated January 29, 1998)
10.47 -- Contribution and Exchange Agreement dated as of September
25, 1997 among Shidler West Investment Corporation,
AIP-SWAG Operating Partnership, L.P. and the Trust
(incorporated herein by reference from Exhibit 99.1 to
Form 8-K of the Trust dated October 3, 1997)
10.48 -- Assignment and Assumption of Purchase Agreements dated as
of October 3, 1997 between Shidler West Investment
Corporation and AIP-SWAG Operating Partnership, L.P.
(incorporated herein by reference from Exhibit 99.2 to
Form 8-K of the Trust dated October 3, 1997)
10.49 -- Amended and Restated Agreement of Limited Partnership of
AIP-SWAG Operating Partnership, L.P. dated as of October
3, 1997 (incorporated herein by reference from Exhibit
99.3 to Form 8-K of the Trust dated October 3, 1997)
10.50 -- Warrant Agreement dated as of October 3, 1997 between the
Trust and Shidler West Acquisition Company, LLC
(incorporated herein by reference from Exhibit 99.4 to
Form 8-K of the Trust dated October 3, 1997)
10.51 -- Warrant Agreement dated as of October 3, 1997 between the
Trust and AG Industrial Investors, L.P. (incorporated
herein by reference from Exhibit 99.5 to Form 8-K of the
Trust dated October 3, 1997)
10.52 -- Registration Rights Agreement dated as of October 3, 1997
between the Trust and Shidler West Acquisition Company,
LLC (incorporated herein by reference from Exhibit 99.6
to Form 8-K of the Trust dated October 3, 1997)
10.53 -- Registration Rights Agreement dated as of October 3, 1997
between the Trust and AG Industrial Investors, L.P.
(incorporated herein by reference from Exhibit 99.7 to
Form 8-K of the Trust dated October 3, 1997)
</TABLE>
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10.54 -- Credit Agreement dated as of October 3, 1997 between the
Trust and AIP-SWAG Operating Partnership, L.P., as
Borrower, and Prudential Securities Credit Corporation,
as Lender (incorporated herein by reference from Exhibit
99.9 to Form 8-K of the Trust dated October 3, 1997)
10.55 -- Credit Agreement dated as of October 3, 1997 between the
Trust and AIP-SWAG Operating Partnership, L.P., as
Borrower, and Prudential Securities Credit Corporation,
as Lender (incorporated herein by reference from Exhibit
99.8 to Form 8-K of the Trust dated October 3, 1997)
10.56 -- Common Share Purchase dated as of January 29, 1998, by
and between the Trust and Praedium (incorporated herein
by reference from Exhibit 10.1 to Form 8-K of the Trust
dated January 29, 1998)
10.57 -- Registration Rights Agreement dated as of January 29,
1998, by and between the Trust and Praedium (incorporated
herein by reference from Exhibit 10.2 to Form 8-K of the
Trust dated January 29, 1998)
10.58 -- Agreement dated as of January 29, 1998, by and among the
Trust, Realco, ABKB (as Agent for and for the benefit of
particular clients), MSRE and MSAM (incorporated herein
by reference from Exhibit 10.3 to Form 8-K dated January
29, 1998)
10.59 -- Contract of Sale by and between Nationwide Life Insurance
Company and ALCU Investments, Inc. (incorporated herein
by reference from Exhibit 10.1 to Form 8-K/A of the Trust
dated February 11, 1998)
10.60 -- Assignment of Contract of Sale dated as of February 11,
1998, by and among ALCU Investments, Ltd., AIP Operating,
L.P. and the Trust (incorporated herein by reference from
Exhibit 10.2 to Form 8-K/A of the Trust dated February
11, 1998)
10.61 -- Contribution and Exchange Agreement dated as of January
29, 1998, by and among ALCU Investments, Ltd., AIP
Operating, L.P., and the Trust (incorporated herein by
reference from Exhibit 10.3 to Form 8-K/A of the Trust
dated February 11, 1998)
10.62 -- Amended and Restated Agreement of Limited Partnership of
AIP Operating, L.P. dated as of February 11, 1998, by and
among the Trust, General Electric Capital Corporation,
and ALCU Investments, Ltd. (incorporated herein by
reference from Exhibit 10.4 to Form 8-K/A of the Trust
dated February 11, 1998)
10.63 -- Promissory Note by and among the Trust, AIP Operating,
L.P., and Prudential Securities Credit Corporation
(incorporated herein by reference from Exhibit 10.5 to
Form 8-K/A of the Trust dated February 11, 1998)
10.64 -- First Amendment to Credit Agreement dated as of February
11, 1998, by and among the Trust, AIP Operating, L.P.,
and Prudential Securities Credit Corporation
(incorporated herein by reference from Exhibit 10.6 to
Form 8-K/A of the Trust dated February 11, 1998)
*10.65 -- Industrial Property Portfolio Agreement of Purchase and
Sale by and between Spieker Northwest, Inc. and the Trust
*10.66 -- Purchase and Sale Agreement by and between North Austin
Office, Ltd. and the Trust
10.67 -- Purchase and Sale Agreement and Joint Escrow Instructions
by and between CM Property Management, Inc. and the Trust
dated July 15, 1997 (incorporated herein by reference
from Exhibit 10.1 to Form 8-K/A of the Trust dated March
23, 1998)
</TABLE>
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10.68 -- Purchase and Sale Agreement and Escrow Instructions by
and between Corporex Properties of Tampa, Inc.,
CFX-Westshore Corporation, and the Trust (incorporated
herein by reference from Exhibit 10.2 to From 8-K/A of
the Trust dated March 23, 1998)
10.69 -- Amendment to Purchase and Sale Agreement and Escrow
Instructions by and between Corporex Properties of Tampa,
Inc., CPX-Westshore Corporation, and the Trust
(incorporated herein by reference from Exhibit 10.3 to
Form 8-K/A of the Trust dated March 23, 1998)
10.70 -- Purchase and Sale Agreement between the Equitable Life
Assurance Society of the United States and the Trust
(incorporated herein by reference from Exhibit 10.4 to
Form 8-K/A of the Trust dated March 23, 1998)
10.71 -- Purchase and Sale Agreement between Nanook Partners, L.P.
and the Trust (incorporated herein by reference from
Exhibit 10.5 to Form 8-K/A of the Trust dated March 23,
1998)
10.72 -- Severance and Change in Control Agreement dated as of
April 29, 1998, by and between Charles W. Wolcott and the
Trust (incorporated herein by reference from Exhibit 10.1
to Form 8-K of the Trust dated April 29, 1998)
10.73 -- Severance and Change in Control Agreement dated as of
April 29, 1998, by and between Marc A. Simpson and the
Trust (incorporated herein by reference from Exhibit 10.2
to Form 8-K of the Trust dated April 29, 1998)
10.74 -- Severance and Change in Control Agreement dated as of
April 29, 1998, by and between David B. Warner and the
Trust (incorporated herein by reference from Exhibit 10.3
to Form 8-K of the Trust dated April 29, 1998)
10.75 -- Severance and Change in Control Agreement dated as of
April 29, 1998, by and between Lewis D. Friedland and the
Trust (incorporated herein be reference from Exhibit 10.4
to Form 8-K of the Trust dated April 29, 1998)
10.76 -- Amendments to the Trust's Employee and Trust Manager
Incentive Share Plan (incorporated herein by reference
from Exhibit 10.5 to Form 8-K of the Trust dated April
29, 1998)
10.77 -- Share Purchase Agreement by and between the Trust and DDR
dated July 30, 1998 (incorporated herein by reference
from Exhibit 10.1 to Form 8-K of the Trust dated July 30,
1998)
10.78 -- Demand Promissory Note dated July 30, 1998 (incorporated
herein by reference from Exhibit 10.2 to Form 8-K of the
Trust dated July 30, 1998)
10.79 -- Second Amended and Restated Registration Rights Agreement
by and among the Trust, MSRE and MSAM dated July 30, 1998
(incorporated herein by reference from Exhibit 10.3 to
Form 8-K of the Trust dated July 30, 1998)
10.80 -- Second Amended and Restated Registration Rights Agreement
by and between the Trust and Realco July 30, 1998
(incorporated herein by reference from Exhibit 10.4 to
Form 8-K of the Trust dated July 30, 1998)
10.81 -- Registration Rights Agreement by and between the Trust
and DDR dated July 30, 1998 (incorporated herein by
reference from Exhibit 10.5 to Form 8-K of the Trust
dated July 30, 1998)
10.82 -- First Amended and Restated Registration Rights Agreement
by and between the Trust and Praedium dated July 30, 1998
(incorporated herein by reference from Exhibit 10.6 to
Form 8-K of the Trust dated July 30, 1998)
</TABLE>
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10.83 -- Second Amended and Restated Registration Rights Agreement
by and between the Trust, ABKB and LaSalle dated July 30,
1998 (incorporated herein by reference from Exhibit 10.7
to Form 8-K of the Trust dated July 30, 1998)
10.84 -- Letter Agreement by and between MSRE/MSAM and DDR dated
July 30, 1998 (incorporated herein by reference from
Exhibit 10.8 to Form 8-K of the Trust dated July 30,
1998)
10.85 -- Letter Agreement by and between ABKB, LaSalle and DDR
dated July 30, 1998 (incorporated herein by reference
from Exhibit 10.9 to Form 8-K of the Trust dated July 30,
1998)
10.86 -- Letter Agreement by and between Praedium and DDR dated
July 30, 1998 (incorporated herein by reference from
Exhibit 10.10 to Form 8-K of the Trust dated July 30,
1998)
10.87 -- Letter Agreement by and between Realco and DDR dated July
30, 1998 (incorporated herein by reference from Exhibit
10.11 to Form 8-K of the Trust dated July 30, 1998)
10.88 -- Amendment No. One, dated as of September 14, 1998, to the
Share Purchase Agreement, dated as of July 30, 1998,
between the Trust and DDR (incorporated herein by
reference from Exhibit 10.1 to Form 8-K of the Trust
dated September 16, 1998)
10.89 -- Purchase and Sale Agreement, dated as of April 3, 1998,
by and between the Norfolk Commerce Center Limited
Partnership and DDR (incorporated herein by reference
from Exhibit 10.1 to Form 8-K of the Trust dated July 30,
1998 and filed October 23, 1998)
10.90 -- Amendment to Purchase and Sale Agreement dated June 19,
1998, by and between the Norfolk Commerce Center Limited
Partnership and DDR (incorporated herein by reference
from Exhibit 10.2 to Form 8-K of the Trust dated July 30,
1998 and filed October 23, 1998)
10.91 -- Purchase and Sale Agreement, dated as of May 10, 1998, by
and between A&A Greenbrier, Inc., A&A Northpointe B,
Inc., A&A Northpointe C, Inc. and A&A Greenbrier Tech,
Inc. and DDR Flex (incorporated herein by reference from
Exhibit 10.1 to Form 8-K of the Trust dated October 14,
1998)
10.92 -- Purchase and Sale Agreement, dated as of May 10, 1998, by
and between Battlefield/Virginia, Inc. and DDR Flex
(incorporated herein by reference from Exhibit 10.2 to
Form 8-K of the Trust dated October 14, 1998)
10.93 -- Amendment to Purchase and Sale Agreement dated July 8,
1998 by and between A&A Greenbrier, Inc., A&A Northpointe
B, Inc., A&A Northpointe C, Inc. and A&A Greenbrier Tech,
Inc. and DDR Flex (incorporated herein by reference from
Exhibit 10.3 to Form 8-K of the Trust dated October 14,
1998)
10.94 -- Amendment to Purchase and Sale Agreement dated July 8,
1998, by and between Battlefield/Virginia, Inc., and DDR
Flex (incorporated herein by reference from Exhibit 10.4
to Form 8-K of the Trust dated October 14, 1998)
10.95 -- Second Amendment to Purchase and Sale Agreement dated
September 30, 1998 by and between A&A Greenbrier, Inc.,
A&A Northpointe B, Inc., A&A Northpointe C, Inc. and A&A
Greenbrier Tech, Inc. and DDR Flex (incorporated herein
by reference from Exhibit 10.5 to Form 8-K of the Trust
dated October 14, 1998)
</TABLE>
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10.96 -- Second Amendment to Purchase and Sale Agreement dated
September 30, 1998, by and between Battlefield/Virginia,
Inc. and DDR Flex (incorporated herein by reference from
Exhibit 10.6 to Form 8-K of the Trust dated October 14,
1998)
10.97 -- Special Warranty Deed, dated as of October 14, 1998, by
and between A&A Greenbrier, Inc. and the Trust
(incorporated herein by reference from Exhibit 10.7 to
Form 8-K of the Trust dated October 14, 1998)
10.98 -- Special Warranty Deed, dated as of October 14, 1998, by
and between A&A Northpointe B, Inc. and the Trust
(incorporated herein by reference from Exhibit 10.8 to
Form 8-K of the Trust dated October 14, 1998)
10.99 -- Special Warranty Deed, dated as of October 14, 1998, by
and between A&A Northpointe C, Inc. and the Trust
(incorporated herein by reference from Exhibit 10.9 to
Form 8-K of the Trust dated October 14, 1998)
10.100 -- Special Warranty Deed, dated as of October 14, 1998, by
and between A&A Greenbrier Tech, Inc. and the Trust
(incorporated herein by reference from Exhibit 10.10 to
Form 8-K of the Trust dated October 14, 1998)
*21.1 -- Listing of Subsidiaries
*23.1 -- Consent of Ernst & Young LLP
*24.1 -- Power of Attorney (Included on signature page hereto)
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
<PAGE> 1
EXHIBIT 3.1
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST
OF
AMERICAN INDUSTRIAL PROPERTIES REIT
The undersigned, acting as the Trust Managers of a real estate
investment trust under the Texas Real Estate Investment Trust Act (the "Texas
REIT Act"), hereby adopt the following Third Amended and Restated Declaration of
Trust for such trust, which replaces in its entirety the previously enacted
Second Amended and Restated Declaration of Trust, which Third Amended and
Restated Declaration of Trust was adopted by the Shareholders of the Trust on
June 30, 1997 pursuant to the affirmative vote of the holders of at least
two-thirds of the outstanding Shares of the Trust.
ARTICLE ONE
The name of the trust (the "Trust") is "American Industrial Properties
REIT." An assumed name certificate setting forth such name has been filed in the
manner prescribed by law.
ARTICLE TWO
The Trust is formed pursuant to the Texas REIT Act and has the
following as its purpose:
To purchase, hold, lease, manage, sell, exchange, develop,
subdivide and improve real property and interests in real
property, and in general, to carry on any other business and
do any other acts in connection with the foregoing and to have
and exercise all powers conferred by the laws of the State of
Texas upon real estate investment trusts formed under the
Texas REIT Act, and to do any or all of the things hereinafter
set forth to the same extent as natural persons might or could
do. The term "real property" and the term "interests in real
property" for the purposes stated herein shall not include
severed mineral, oil or gas royalty interests.
ARTICLE THREE
The address of the Trust's principal office and place of business is
6220 North Beltline, Suite 205, Irving, Texas 75063.
ARTICLE FOUR
The street address of the Trust's registered office is 6220 North
Beltline, Suite 205, Irving, Texas 75063. The name of the Trust's registered
agent at that address is Marc A. Simpson.
ARTICLE FIVE
The names and business addresses of the Trust Managers approving and
adopting this Declaration of Trust are as follows:
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<TABLE>
<CAPTION>
Name Mailing Address
- ---- ---------------
<S> <C>
William H. Bricker 16475 Dallas Parkway, Suite 350
Dallas, Texas 75248
T. Patrick Duncan 8000 Robert F. McDermott Frwy., Suite 600
San Antonio, Texas 78230
Robert E. Giles 5051 Westheimer, Suite 300
Houston, Texas 77056
Edward B. Kelley 8000 Robert F. McDermott Frwy., Suite 600
San Antonio, Texas 78230
Charles W. Wolcott 6220 North Beltline, Suite 205
Irving, Texas 75063
</TABLE>
ARTICLE SIX
The period of the Trust's duration is perpetual. The Trust may be
sooner terminated by the vote of the holders of at least a majority of the
outstanding voting Shares.
ARTICLE SEVEN
The aggregate number of shares of beneficial interest which the Trust
shall have authority to issue is five hundred million common shares, par value
$0.10 per share ("Common Shares"), and fifty million preferred shares, par value
$0.10 per share ("Preferred Shares"). All of the Common Shares shall be equal in
all respects to every other such Common Share, and shall have no preference,
conversion, exchange or preemptive rights.
Unless otherwise specified, the term "Shares" in this Declaration of
Trust shall be deemed to refer to the Common Shares and, solely to the extent
specifically required by law or as specifically provided in any resolution or
resolutions of the Trust Managers providing for the issue of any particular
series of Preferred Shares, to the Preferred Shares. For purposes of Articles
Ten and Nineteen (other than Article Nineteen (j)) of this Declaration of Trust,
the term Shares shall be deemed to refer to both the Common Shares and the
Preferred Shares and, for purposes of such Articles Ten and Nineteen (other than
Article Nineteen (j)), the number of outstanding Shares shall be deemed to be
equal to the value of the Trust's outstanding Shares as determined from time to
time by resolution of the Trust Managers, such determination to include an
allocation of relative value among the Common Shares and any outstanding series
of Preferred Shares.
The Trust may issue one or more series of Preferred Shares, each such
series to consist of such number of shares as shall be determined by resolution
of the Trust Managers creating such series. The Preferred Shares of each such
series shall have such designations, preferences, conversion, exchange or other
rights, participations, voting powers, options, restrictions, limitations,
special rights or relations, limitations as to dividends, qualifications or
terms, or conditions of redemption thereof, as shall be stated and expressed by
the Trust Managers in the resolution or resolutions providing for the issuance
of such series of Preferred Shares pursuant to the authority to do so which is
hereby expressly vested in the Trust Managers.
Except as otherwise specifically provided in any resolution or
resolutions of the Trust Managers providing for the issue of any particular
series of Preferred Shares, the number of shares of any such series so set forth
in such resolution or resolutions may be increased or decreased (but not below
the number of shares of such series then outstanding) by a resolution or
resolutions likewise adopted by the Trust Managers.
Except as otherwise specifically provided in any resolution or
resolutions of the Trust Managers providing for the issue of any particular
series of Preferred Shares, Preferred Shares redeemed or otherwise acquired by
the Trust shall assume the status of authorized but unissued Preferred Shares
and shall be unclassified as to series and may thereafter, subject to the
provisions of this Article Seven and to any restrictions contained in any
resolution
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or resolutions of the Trust Managers providing for the issuance of any such
series of Preferred Shares, be reissued in the same manner as other authorized
but unissued Preferred Shares.
Except as otherwise specifically provided in any resolution or
resolutions of the Trust Managers providing for the issue of any particular
series of Preferred Shares, holders of Preferred Shares shall have no preemptive
rights.
Except as otherwise specifically required by law or this Declaration of
Trust or as specifically provided in any resolution or resolutions of the Trust
Managers providing for the issuance of any particular series of Preferred
Shares, the exclusive voting power of the Trust shall be vested in the Common
Shares of the Trust. Each Common Share entitles the holder thereof to one vote
at all meetings of the shareholders of the Trust.
ARTICLE EIGHT
The Trust shall issue Shares for consideration consisting of any
tangible or intangible benefit to the Trust, including cash, promissory notes,
services performed, contracts for services to be performed, or other securities
of the Trust, such consideration to be determined by the Trust Managers.
ARTICLE NINE
The Trust Managers shall manage all money and/or property received for
the issuance of Shares for the benefit of the shareholders of the Trust.
ARTICLE TEN
The Trust will not commence business until it has received for the
issuance of Shares consideration of at least $1,000 value.
ARTICLE ELEVEN
The Trust shall not engage in any activities beyond the scope of the
purpose of a real estate investment trust formed pursuant to the Texas REIT Act,
as such purpose is set forth in Article Two hereof.
ARTICLE TWELVE
Cumulative voting for the election of Trust Managers is prohibited.
ARTICLE THIRTEEN
(a) The affirmative vote of the holders of not less than 80% of the
outstanding Shares of the Trust, including the affirmative vote of the holders
of not less than 50% of the outstanding Shares not owned, directly or
indirectly, by any Related Person (as hereinafter defined), shall be required
for the approval or authorization of any Business Combination (as hereinafter
defined); provided, however, that the 50% voting requirement referred to above
shall not be applicable if the Business Combination is approved by the
affirmative vote of the holders of not less than 90% of the outstanding Shares;
provided further, that neither the 80% voting requirement nor the 50% voting
requirement referred to above shall be applicable if:
(i) The Trust Managers of the Trust by a vote of not less
than 80% of the Trust Managers then holding office
(A) have expressly approved in advance the
acquisition of Shares of the Trust that caused the
Related Person to become a Related Person or (B) have
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expressly approved the Business Combination prior to
the date on which the Related Person involved in the
Business Combination shall have become a Related
Person; or
(ii) The Business Combination is solely between the Trust
and another entity, 100% of the voting stock, shares
or comparable interests of which is owned directly or
indirectly by the Trust; or
(iii) The Business Combination is proposed to be
consummated within one year of the consummation of a
Fair Tender Offer (as hereinafter defined) by the
Related Person in which Business Combination the cash
or Fair Market Value (as hereinafter defined) of the
property, securities or other consideration to be
received per Share by all remaining holders of Shares
of the Trust in the Business Combination is not less
than the price offered in the Fair Tender Offer; or
(iv) All of conditions (A) through (D) of this
subparagraph (iv) shall have been met: (A) if and to
the extent permitted by law, the Business Combination
is a merger or consolidation, consummation of which
is proposed to take place within one year of the date
of the transaction pursuant to which such person
became a Related Person and the cash or Fair Market
Value of the property, securities or other
consideration to be received per share by all
remaining holders of Shares of the Trust in the
Business Combination is not less than the Fair Price
(as hereinafter defined); (B) the consideration to be
received by such holders is either cash or, if the
Related Person shall have acquired the majority of
its holdings of the Trust's Shares for a form of
consideration other than cash, in the same form of
consideration with which the Related Person acquired
such majority; (C) after such person has become a
Related Person and prior to consummation of such
Business Combination: (1) there shall have been no
reduction in the annual rate of dividends, if any,
paid per share on the Trust's Shares (adjusted as
appropriate for recapitalizations and for Share
splits, reverse Share splits and Share dividends),
except any reduction in such rate that is made
proportionately with any decline in the Trust's net
income for the period for which such dividends are
declared and except as approved by a majority of the
Continuing Trust Managers (as hereinafter defined),
and (2) such Related Person shall not have received
the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the Trust prior to the consummation of
such Business Combination (other than in connection
with financing a Fair Tender Offer); and (D) a proxy
statement that conforms in all respects with the
provisions of the Securities Exchange Act of 1934
(the "Exchange Act") and the rules and regulations
thereunder (or any subsequent provisions replacing
the Exchange Act or the rules or regulations
thereunder) shall be mailed to holders of the Trust's
Shares at least 45 days prior to the consummation of
the Business Combination for the purpose of
soliciting shareholder approval of the Business
Combination; or
(v) The Rights (as defined in paragraph (b) of this
Article Thirteen) shall have become exercisable.
(b) If a person has become a Related Person and within one year after
the date (the "Acquisition Date") of the transaction pursuant to which the
Related Person became a Related Person (x) a Business Combination meeting all of
the requirements of subparagraph (iv) of the proviso to paragraph (a) of this
Article Thirteen regarding the applicability of the 80% voting requirement shall
not have been consummated and (y) a Fair Tender Offer shall not have been
consummated and (z) the Trust shall not have been dissolved and liquidated,
then, in such event the beneficial owner of each Share (not including Shares
beneficially owned by the Related Person) (each such beneficial owner being
hereinafter referred to as a "Holder") shall have the right (individually a
"Right" and collectively the "Rights"), which may be exercised subject to the
provisions of paragraph (d) of this Article Thirteen, commencing at the opening
of business on the one-year anniversary date of the Acquisition Date and
continuing for a period of 90 days thereafter, subject to extensions as provided
in paragraph (d) of this Article Thirteen (the
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"Exercise Period"), to sell to the Trust on the terms set forth herein one Share
upon exercise of such Right. Within five business days after the commencement of
the Exercise Period the Trust shall notify the Holders of the commencement of
the Exercise Period, specifying therein the terms and conditions for exercise of
the Rights. During the Exercise Period, each certificate representing Shares
beneficially owned by a Holder (a "Certificate") shall also represent the number
of Rights equal to the number of Shares represented thereby and the surrender
for transfer of any Certificate shall also constitute the transfer of the Rights
represented by such Shares. At 5:00 P.M., Dallas, Texas time, on the last day of
the Exercise Period, each Right not exercised shall become void, all rights in
respect thereof shall cease as of such time and the Certificates shall no longer
represent Rights.
(c) The purchase price for a Share upon exercise of an accompanying
Right shall be equal to the then-applicable Fair Price paid by the Related
Person (plus, as an allowance for interest, an amount equal to the prime rate of
interest as published in the Wall Street Journal and as in effect from time to
time from the Acquisition Date until the date of the payment for such Share but
less the amount of any cash and the Fair Market Value of any property or
securities distributed with respect to such Shares as dividends or otherwise
during such time period), pursuant to the exercise of the Right relating
thereto. In the event the Related Person shall have acquired any of its holdings
of the Trust's Shares for a form of consideration other than cash, the value of
such other consideration shall be the Fair Market Value thereof.
(d) Notwithstanding the foregoing in paragraph (b) of this Article
Thirteen, the Exercise Period will be deferred in the event (a "Deferral Event")
that the Trust is otherwise prohibited under applicable law from repurchasing
Shares pursuant to the Rights. In the event the Exercise Period is deferred, or
if at any time the Trust reasonably anticipates that a Deferral Event will
exist, the Trust will, as soon as practicable, notify the Holders. If at the end
of any fiscal quarter the Deferral Event ceases to exist, notice shall be given
to the Holders of the commencement of the deferred Exercise Period, which
Exercise Period shall commence no sooner than 15 days nor more than 45 days from
the date of such notice and which shall continue in effect for a period of time
equal in duration to the previously unexpired portion of the Exercise Period.
Notwithstanding any other provision of this Declaration of Trust to the
contrary, during the Exercise Period (including during the existence of any
Deferral Event), neither the Trust nor any subsidiary may declare or pay any
dividend or make any distribution on its shares or to its shareholders (other
than dividends or distributions payable in its Shares or, in the case of any
subsidiary, dividends payable to the Trust) or purchase, redeem or otherwise
acquire or retire for value, or permit any subsidiary to purchase or otherwise
acquire for value, any Shares of the Trust if, upon giving effect to such
dividend, distribution, purchase, redemption, or other acquisition or
retirement, the aggregate amount expended for all such purposes (the amount
expended for such purposes, if other than in cash, to be determined by a
majority of the Continuing Trust Managers, whose determination shall be
conclusive) would prejudice the ability of the Trust to satisfy its maximum
obligation to purchase Shares upon exercise of the Rights.
(e) Rights may be exercised upon surrender to the Trust's principal
transfer agent (the "Transfer Agent") at its principal office of the Certificate
or Certificates evidencing the Shares to be tendered for purchase by the Trust,
together with the form on the reverse thereof completed and duly signed in
accordance with the instructions thereon. In the event that a Holder shall
tender a Certificate which represents greater than the number of Shares which
the Holder elects to require the Trust to purchase upon exercise of the Rights,
the Holder shall designate on the reverse side of such Certificate the number of
Shares to be sold from such Certificate. The Transfer Agent shall thereupon
issue a new Certificate or Certificates for the balance of the number of Shares
not sold to the Trust, which new Certificate or Certificates shall also
represent Rights for an equivalent number of Shares.
(f) For the purposes of this Article:
(i) The term "Business Combination" shall mean (A) any
merger or consolidation, if and to the extent
permitted by law, of the Trust or a subsidiary, with
or into a Related Person, (B) any sale, lease,
exchange, mortgage, pledge, transfer or other
disposition, of all or any Substantial Part (as
hereinafter defined) of the assets of the Trust and
its subsidiaries (taken as a whole) (including,
without limitation, any voting securities of a
subsidiary) to or with a Related Person, (C) the
issuance or transfer by the Trust or a subsidiary
(other than by way of a pro rata distribution to all
shareholders) of any securities of the Trust or a
subsidiary of the Trust to a Related Person, (D) any
reclassification of securities
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(including any reverse Share split) or
recapitalization by the Trust, the effect of which
would be to increase the voting power (whether or not
currently exercisable) of the Related Person, (E) the
adoption of any plan or proposal for the liquidation
or dissolution of the Trust proposed by or on behalf
of a Related Person which involves any transfer of
assets, or any other transaction, in which the
Related Person has any direct or indirect interest
(except proportionately as a shareholder), (F) any
series or combination of transactions having,
directly or indirectly, the same or substantially the
same effect as any of the foregoing, and (G) any
agreement, contract or other arrangement providing,
directly or indirectly, for any of the foregoing.
(ii) The term "Continuing Trust Manager' shall mean (x)
any Trust Manager of the Trust who is not affiliated
with a Related Person and who was a Trust Manager
immediately prior to the time that the Related Person
became a Related Person, and (y) any other Trust
Manager who is not affiliated with the Related Person
and is recommended either by a majority of the
persons described in clause (x) of this subparagraph
(ii) or by persons described in this clause (y) who
are then Trust Managers of the Trust to succeed a
person described in either the said clause (x) or
clause (y) as a Trust Manager of the Trust.
(iii) The term "Fair Market Value" shall mean: (A) in the
case of securities, the highest closing sale price
during the 30-day period immediately preceding the
date in question of such security on the Composite
Tape for New York Stock Exchange-Listed Stocks, or,
if such security is not quoted on the Composite Tape
on the New York Stock Exchange, or, if such security
is not listed on such Exchange, on the principal
United States securities exchange registered under
the Exchange Act on which such security is listed,
or, if such security is not listed on any such
exchange, the highest closing bid quotation with
respect to such security during the 30-day period
preceding the date in question on the National
Association of Securities Dealers, Inc. Automated
Quotation System or any system then in use, or if no
such quotations are available, the fair market value
on the date in question of such security as
reasonably determined by an independent appraiser
selected by a majority of the Continuing Trust
Managers (or, if there are no Continuing Trust
Managers, by the investment banking firm most
recently retained by the Trust) in good faith; and
(B) in the case of property other than cash or stock,
the fair market value of such property on the date in
question as reasonably determined by an independent
appraiser selected by a majority of the Continuing
Trust Managers (or, if there are no Continuing Trust
Managers, by the investment banking firm most
recently retained by the Trust) in good faith. In
each case hereunder in which an independent appraiser
is to be selected to determine Fair Market Value, (1)
in the event (x) there are no Continuing Trust
Managers, and (y) the investment banking firm most
recently retained by the Trust is unable or elects
not to serve as such appraiser, or (2) in the event
there are Continuing Trust Managers that do not
select an independent appraiser within 10 days of a
request for such appointment made by a Related
Person, such independent appraiser may be selected by
such Related Person.
(iv) The term "Fair Price" shall mean the highest
per-Share price (which, to the extent not paid in
cash, shall equal the Fair Market Value of any other
consideration paid), with appropriate adjustments for
recapitalizations and for Share splits, reverse Share
splits and Share dividends, paid by the Related
Person in acquiring any of its holdings of the
Trust's Shares.
(v) The term "Fair Tender Offer" shall mean a bona fide
tender offer for all of the Trust's Shares
outstanding (and owned by persons other than a
Related Person if the tender offer is made by the
Related Person), whether or not such offer is
conditional upon any minimum number of Shares being
tendered, in which the aggregate amount of cash or
the Fair Market Value of any securities or other
property to be received by all holders who tender
their Shares for each Share so tendered shall be at
least equal to the then applicable
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Fair Price paid by a Related Person or paid by the
person making the tender offer if such person is not
a Related Person. In the event that at the time such
tender offer is commenced the terms and conduct
thereof are not directly regulated by Section 14(d)
or 13(e) of the Exchange Act and the general rules
and regulations promulgated thereunder, then the
terms of such tender offer regarding the time such
offer is held open and regarding withdrawal rights
shall conform in all respects with such terms
applicable to tender offers regulated by either of
such Sections of the Exchange Act. A Fair Tender
Offer shall not be deemed to be "consummated" until
Shares are purchased and payment in full has been
made for all duly tendered Shares.
(vi) The term "Related Person" shall mean and include any
individual, corporation, partnership or other
"person" (as defined in Section 13(d)(3) of the
Exchange Act), and the "Affiliates" and "Associates"
(as defined in Rule 12b-2 of the Exchange Act) of any
such individual, corporation, partnership or other
person) which individually or together is the
"Beneficial Owner" (as defined in Rule 13d-3 of the
Exchange Act) in the aggregate of more than 50% of
the outstanding Shares of the Trust, other than the
Trust or any employee benefit plan(s) sponsored by
the Trust, except that an individual, corporation,
partnership or other person which individually or
together Beneficially Owns or upon conversion of debt
securities (owned or with regard to which such
individual, corporation, partnership or other person
is committed to purchase as of the date of adoption
of this Declaration of Trust) would own in excess of
20% of the outstanding Shares at the time this
provision is adopted by vote of the Trust's
shareholders shall only be considered a Related
Person at such time as he, she, it or they acquire in
the aggregate Beneficial Ownership of more than 80%
of the outstanding Shares.
(vii) The term "Substantial Part" shall mean more than 35%
of the book value of the total assets of the Trust
and its subsidiaries (taken as a whole) as of the end
of the fiscal year ending prior to the time the
determination is being made.
(viii) Any person (as such term is defined in subsection
(vi) of this paragraph (f)) that has the right to
acquire any Shares of the Trust pursuant to any
agreement, or upon the exercise of conversion rights,
warrants or options, or otherwise, shall be deemed a
Beneficial Owner of such Shares for purposes of
determining whether such person, individually or
together with its Affiliates and Associates, is a
Related Person.
(ix) For purposes of subparagraph (iii) of paragraph (a)
of this Article Thirteen, the term "other
consideration to be received" shall include, without
limitation, Shares of the Trust retained by its
existing public shareholders in the event of a
Business Combination in which the Trust is the
surviving entity.
(g) The affirmative vote of the holders of not less than 80% of the
outstanding Shares of the Trust, including the affirmative vote of the holders
of not less than 50% of the outstanding Shares not owned, directly or
indirectly, by any Related Person (such 50% voting requirement shall not be
applicable if such amendment, alteration, change, repeal or rescission is
approved by the affirmative vote of not less than 90% of the outstanding Shares)
shall be required to amend, alter, change, repeal or rescind, or adopt any
provisions inconsistent with, this Article Thirteen.
(h) The provisions of this Article Thirteen shall be subject to all
valid and applicable laws, including, without limitation, the Texas REIT Act,
and, in the event this Article Thirteen or any of the provisions hereof are
found to be inconsistent with or contrary to any such valid laws, such laws
shall be deemed to control and this Article Thirteen shall be regarded as
modified accordingly, and, as so modified, to continue in full force and effect.
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ARTICLE FOURTEEN
The Trust Managers may from time to time declare, and the Trust may
pay, dividends on its outstanding Shares in cash, in property or in its Shares,
except that no dividend shall be declared or paid when the Trust is unable to
pay its debts as they become due in the usual course of its business, or when
the payment of such dividend would result in the Trust being unable to pay its
debts as they become due in the usual course of business.
ARTICLE FIFTEEN
Upon resolution adopted by the Trust Managers, the Trust shall be
entitled to purchase or redeem, directly or indirectly, its own Shares, subject
to any limitations of the Texas REIT Act.
ARTICLE SIXTEEN
(a) In this Article:
(i) "Indemnitee" means (A) any present or former Trust
Manager or officer of the Trust, (B) any person who
while serving in any of the capacities referred to in
clause (A) hereof served at the Trust's request as a
trust manager, director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar
functionary of another real estate investment trust
or foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise and (C) any person
nominated or designated by (or pursuant to authority
granted by) the Trust Managers or any committee
thereof to serve in any of the capacities referred to
in clauses (A) or (B) hereof.
(ii) "Official Capacity" means (A) when used with respect
to a Trust Manager, the office of Trust Manager of
the Trust and (B) when used with respect to a person
other than a Trust Manager, the elective or
appointive office of the Trust held by such person or
the employment or agency relationship undertaken by
such person on behalf of the Trust, but in each case
does not include service for any other real estate
investment trust or foreign or domestic corporation
or any partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other
enterprise.
(iii) "Proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit or
proceeding, and any inquiry or investigation that
could lead to such an action, suit or proceeding.
(b) The Trust shall indemnify every Indemnitee against all judgments,
penalties (including excise and similar taxes), fines, amounts paid in
settlement and reasonable expenses actually incurred by the Indemnitee in
connection with any Proceeding in which he or she was, is or is threatened to be
named defendant or respondent, or in which he or she was or is a witness without
being named a defendant or respondent, by reason, in whole or in part, of his or
her serving or having served, or having been nominated or designated to serve,
in any of the capacities referred to in paragraph (a)(i) of this Article
Sixteen, to the fullest extent that indemnification is permitted by Texas law.
An Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after the Indemnitee shall have been so adjudged by a court
of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable
expenses shall include, without limitation, all court costs and all fees and
disbursements of attorneys for the Indemnitee.
(c) Without limitation of paragraph (b) of this Article Sixteen and in
addition to the indemnification provided for in paragraph (b) of this Article
Sixteen, the Trust shall indemnify every Indemnitee against reasonable expenses
incurred by such person in connection with any proceeding in which he or she is
a witness or a named
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defendant or respondent because he or she served in any of the capacities
referred to in paragraph (a)(i) of this Article Sixteen.
(d) Reasonable expenses (including court costs and attorneys' fees)
incurred by an Indemnitee who was or is a witness or was, is or is threatened to
be made a named defendant or respondent in a Proceeding shall be paid or
reimbursed by the Trust at reasonable intervals in advance of the final
disposition of such Proceeding after receipt by the Trust of a written
undertaking by or on behalf of such Indemnitee to repay the amount paid or
reimbursed by the Trust if it shall ultimately be determined that he or she is
not entitled to be indemnified by the Trust as authorized in this Article
Sixteen. Such written undertaking shall be an unlimited obligation of the
Indemnitee but need not be secured and it may be accepted without reference to
financial ability to make repayment. Notwithstanding any other provision of this
Article Sixteen, the Trust may pay or reimburse expenses incurred by an
Indemnitee in connection with his or her appearance as a witness or other
participation in a Proceeding at a time when he or she is not named a defendant
or respondent in the Proceeding.
(e) The indemnification provided by this Article Sixteen shall (i) not
be deemed exclusive of, or to preclude, any other rights to which those seeking
indemnification may at any time be entitled under the Trust's Bylaws, any law,
agreement or vote of shareholders or disinterested Trust Managers, or otherwise,
or under any policy or policies of insurance purchased and maintained by the
Trust on behalf of any Indemnitee, both as to action in his or her Official
Capacity and as to action in any other capacity, (ii) continue as to a person
who has ceased to be in the capacity by reason of which he or she was an
Indemnitee with respect to matters arising during the period he or she was in
such capacity, and (iii) inure to the benefit of the heirs, executors and
administrators of such a person.
(f) The provisions of this Article Sixteen (i) are for the benefit of,
and may be enforced by, each Indemnitee of the Trust, the same as if set forth
in their entirety in a written instrument duly executed and delivered by the
Trust and such Indemnitee and (ii) constitute a continuing offer to all present
and future Indemnitees. The Trust, by its adoption of this Declaration of Trust,
(x) acknowledges and agrees that each Indemnitee of the Trust has relied upon
and will continue to rely upon the provisions of this Article Sixteen in
becoming, and serving in any of the capacities referred to in paragraph (a)(i)
of this Article Sixteen, (y) waives reliance upon, and all notice of acceptance
of, such provisions by such Indemnitees and (z) acknowledges and agrees that no
present or future Indemnitee shall be prejudiced in his or her right to enforce
the provisions of this Article Sixteen in accordance with their terms by any act
or failure to act on the part of the Trust.
(g) No amendment, modification or repeal of this Article Sixteen or any
provision of this Article Sixteen shall in any manner terminate, reduce or
impair the right of any past, present or future Indemnitees to be indemnified by
the Trust, nor the obligation of the Trust to indemnify any such Indemnitees,
under and in accordance with the provisions of this Article Sixteen as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may be
asserted.
(h) If the indemnification provided in this Article Sixteen is either
(i) insufficient to cover all costs and expenses incurred by any Indemnitee as a
result of such Indemnitee being made or threatened to be made a defendant or
respondent in a Proceeding by reason of his or her holding or having held a
position named in paragraph (a)(i) of this Article Sixteen or (ii) not permitted
by Texas law, the Trust shall indemnify, to the fullest extent that
indemnification is permitted by Texas law, every Indemnitee with respect to all
costs and expenses incurred by such Indemnitee as a result of such Indemnitee
being made or threatened to be made a defendant or respondent in a Proceeding by
reason of his or her holding or having held a position named in paragraph (a)(i)
of this Article Sixteen.
(i) The indemnification provided by this Article Sixteen shall be
subject to all valid and applicable laws, including, without limitation, the
Texas REIT Act, and, in the event this Article Sixteen or any of the provisions
hereof or the indemnification contemplated hereby are found to be inconsistent
with or contrary to any such valid laws, such laws shall be deemed to control
and this Article Sixteen shall be regarded as modified accordingly, and, as so
modified, to continue in full force and effect.
9
<PAGE> 10
ARTICLE SEVENTEEN
No Trust Manager or officer of the Trust shall be liable to the Trust
for any act, omission, loss, damage, or expense arising from the performance of
his or her duties under the Trust save only for his or her own willful
misfeasance or malfeasance or negligence. In discharging their duties to the
Trust, Trust Managers and officers of the Trust shall be entitled to rely upon
experts and other matters as provided in the Texas REIT Act and the Trust's
Bylaws.
ARTICLE EIGHTEEN
The number of Trust Managers may be increased from time to time by the
affirmative vote of the majority of the Trust Managers or decreased by the
unanimous vote of the Trust Managers. Each Trust Manager shall serve until his
or her successor is elected and qualified or until his or her death, retirement,
resignation or removal.
A Trust Manager may be removed by the vote of the holders of two-thirds
of the outstanding Shares at a special meeting of the shareholders called for
such purpose pursuant to the Trust's Bylaws.
ARTICLE NINETEEN
(a) No Person may own Shares of any class with an aggregate value in
excess of 9.8% of the aggregate value of all outstanding Shares of such class of
Shares or more than 9.8% of the number of outstanding Shares of any class of
Shares (the limitation on the ownership of outstanding Shares is referred to in
this Article Nineteen as the "Ownership Limit" and the 9.8% threshold is
referred to in this Article Nineteen as the "Percentage Limit"), and no
Securities (as hereinafter defined) shall be accepted, purchased, or in any
manner acquired by any Person if such issuance or transfer would result in that
Person's ownership of Shares exceeding the Percentage Limit. For purposes of
determining if the Ownership Limit is exceeded by a Person, Convertible
Securities (as hereinafter defined) owned by such Person shall be treated as if
the Convertible Securities owned by such Person had been converted into Shares
if the effect of such treatment would be to increase the ownership percentage of
such Person in the Trust. The Ownership Limit shall not apply (i) to
acquisitions of Securities by any Person that has made a tender offer for all
outstanding Shares of the Trust (including Convertible Securities) in conformity
with applicable federal securities laws, (ii) to the acquisition of Securities
of the Trust by an underwriter in a public offering of Securities of the Trust,
or in any transaction involving the issuance of Securities by the Trust, in
which a majority of the Trust Managers determines that the underwriter or other
Person or party initially acquiring such Securities will timely distribute such
Securities to or among others so that, following such distribution, none of such
Securities will be Excess Securities (as hereinafter defined), (iii) to the
acquisition of Securities pursuant to the exercise of employee share options, or
(iv) to the acquisition of Securities pursuant to an exception made pursuant to
paragraph (h) hereof.
(b) Nothing in this Article Nineteen shall preclude the settlement of
any transaction in Securities entered into through the facilities of the New
York Stock Exchange. If any Securities are accepted, purchased, or in any manner
acquired by any Person resulting in a violation of paragraph (a) or (e) hereof,
such issuance or transfer shall be valid only with respect to such amount of
Securities issued or transferred as does not result in a violation of paragraph
(a) or (e) hereof, and such acceptance, purchase or acquisition shall be void ab
initio with respect to the amount of Securities that results in a violation of
paragraph (a) or (e) hereof (the "Excess Securities"), and the intended
transferee of such Excess Securities shall acquire no rights in such Excess
Securities except as set forth in subsection (d) below.
(c) Each shareholder shall, within ten days of demand by the Trust,
disclose to the Trust in writing such information with respect to his, her or
its ownership of shares as the Trust Managers in their discretion deem necessary
or appropriate in order that the Trust may fully comply with all provisions of
the Internal Revenue Code of 1986, as amended, and any successor statute (the
"Code") relating to REITs and all regulations, rulings and cases promulgated or
decided thereunder (the "REIT Provisions") and to comply with the requirements
of any taxing
10
<PAGE> 11
authority or governmental agency. All Persons who own Shares of any class with
an aggregate value in excess of 9.8% of the aggregate value of such class of
Shares or 9.8% of the number of outstanding Shares of any class must disclose in
writing such ownership information to the Trust no later than January 31 of each
year. Failure to provide such information, upon reasonable request, shall result
in the Securities so owned being treated as Excess Securities pursuant to
paragraph (b) hereof for so long as such failure continues.
(d) The Excess Securities, and the owners thereof, shall have the
following characteristics, rights and powers:
(i) Upon any purported purchase, sale, exchange,
acquisition, disposition or other transfer or upon
any change in the capital structure of the Trust
(including any redemption of Securities) that results
in Excess Securities pursuant to paragraphs (a) or
(e) of this Article Nineteen, such Excess Securities
shall be deemed to have been transferred to the
Trust, as trustee of a trust for the exclusive
benefit of such beneficiary or beneficiaries to whom
an interest in such Excess Securities may later be
transferred pursuant to subparagraph (v) of this
subsection (d) (the "Beneficial Trust"). Any such
Excess Securities so held in the Beneficial Trust
shall be issued and outstanding shares of the Trust.
The purported transferee shall have no rights in such
Excess Securities except as provided in subparagraph
(v) of this subsection (d).
(ii) The holder of Excess Securities shall not be entitled
to receive any dividends, interest payments or other
distributions. Any dividend or distribution paid
prior to the discovery by the Trust that the
Securities have become Excess Securities shall be
repaid to the Trust upon demand.
(iii) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any
distribution of the assets of, the Trust, each holder
of Excess Securities shall be entitled to receive,
ratably with each other holder of Securities and
Excess Securities, that portion of the assets of the
Trust available for distribution to its shareholders.
The Trust as holder of all Excess Securities in the
Beneficial Trust or if the Trust shall have been
dissolved, any trustee of such Beneficial Trust
appointed by the Trust prior to its dissolution,
shall distribute ratably to the beneficiaries of such
Beneficial Trust any such assets received in respect
of the Excess Securities in any liquidation,
dissolution or winding up of, or any distribution of
the assets of, the Trust.
(iv) The holders of shares of Excess Securities shall not
be entitled to vote on any matters (except as
required by law).
(v) Except as otherwise provided in this Article
Nineteen, Excess Securities shall not be
transferable. The purported transferee may freely
designate a beneficiary of an interest in the
Beneficial Trust (representing the number of shares
of Excess Securities that have not been acquired by
the Trust pursuant to subparagraph (vi) of this
subsection (d) that are held by the Beneficial Trust
attributable to a purported transfer that resulted in
the Excess Securities), if (A) the shares of Excess
Securities held in the Beneficial Trust would not be
Excess Securities in the hands of such beneficiary
and (B) the purported transferee does not receive a
price from such beneficiary that reflects a price per
share for such Excess Securities that exceeds (x) the
price per share such purported transferee paid for
the Securities in the purported transfer that
resulted in the Excess Securities, or (y) if the
purported transferee did not give value for such
Excess Securities (through a gift, devise or other
transaction), a price per share equal to the Market
Price (as hereinafter defined) on the date of the
purported transfer that resulted in the Excess
Securities. Upon such transfer of an interest in the
Beneficial Trust, the corresponding shares of Excess
Securities in the Beneficial Trust shall be
automatically exchanged for an equal number of shares
of the applicable Securities and such Securities
shall be transferred of record to the transferee of
the interest in the Beneficial Trust if such
Securities would not be
11
<PAGE> 12
Excess Securities in the hands of such transferee.
Prior to any transfer of any interest in the
Beneficial Trust, the purported transferee must give
advance notice to the Trust of the intended transfer
and the Trust must have waived in writing its
purchase rights under subparagraph (vi) of this
subsection (d). Notwithstanding the foregoing, if a
purported transferee receives a price for designating
a beneficiary of an interest in the Beneficial Trust
that exceeds the amounts allowable under the
foregoing provisions of this subparagraph (v), such
purported transferee shall pay, or cause such
beneficiary to pay, such excess to the Trust
immediately upon demand.
(vi) Excess Securities shall be deemed to have been
offered for sale to the Trust, or its designee, at a
price per share equal to the lesser of (A) the price
per share in the transaction that created such Excess
Securities (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and
(B) the Market Price on the date the Trust, or its
designee, accepts such offer. The Trust shall have
the right to accept such offer for a period of 90
days after the later of (x) the date of the transfer
which resulted in such Excess Securities and (y) the
date the Trust Managers determine in good faith that
a transfer resulting in Excess Securities has
occurred.
(e) Any sale, transfer, gift, assignment, devise or other disposition
of Shares (a "transfer") that, if effective, would result in (i) the Shares of
the Trust being owned by less than 100 persons (determined without reference to
any rules of attribution) shall be void ab initio as to the Shares which would
otherwise be beneficially owned by the transferee, (ii) the Trust being "closely
held" within the meaning of Section 856(h) of the Code, shall be void ab initio
as to the transfer of the Shares that would cause the Trust to be "closely held"
within the meaning of Section 856(h) of the Code, (iii) the Trust owning,
directly or indirectly, 10% or more of the ownership interest in any tenant or
subtenant of the Trust's real property within the meaning of Section
856(d)(2)(B) of the Code and the Treasury Regulations thereunder, shall be void
ab initio, or (iv) the disqualification of the Trust as a REIT shall be void ab
initio as to the transfer of the Shares that would cause the Trust to be
disqualified as a REIT, and, in the case of each of clauses (i), (ii), (iii) and
(iv) of this paragraph (e), the intended transferee shall acquire no rights in
such Shares except as set forth in subsection (d) above.
(f) For purposes of this Article Nineteen:
(i) The term "Convertible Securities" means any
securities of the Trust that are convertible into
Shares.
(ii) The term "individual" shall mean any natural person
as well as those organizations treated as natural
persons under Section 542(a) of the Code.
(iii) The term "Market Price" means the average of the last
reported sales price of Common Shares reported on the
New York Stock Exchange on the five trading days
immediately preceding the relevant __te, or if the
Common Shares are not then traded on the New York
Stock Exchange, the last reported sales price of the
Common Shares on the five trading days immediately
preceding the relevant date as reported on any
exchange or quotation system over which the Common
Shares may be traded, or if the Common Shares are not
then traded over any exchange or quotation system,
then the market price of the Common Shares on the
relevant date as determined in good faith by the
Trust Managers.
(iv) The term "ownership" (including "own" or "owns") of
Shares means beneficial ownership. Beneficial
ownership, for this purpose shall be defined to
include actual ownership by a Person as well as
constructive ownership by such Person after
application of principles in accordance with or by
reference to Sections 856 or 544 of the Code.
(v) The term "Person" includes an individual,
corporation, partnership, association, joint stock
company, limited liability company, trust,
unincorporated association or other
12
<PAGE> 13
entity and also includes a "group" as that term is
defined in Section 13(d)(3) of the Exchange Act.
(vi) The term "REIT" means a "real estate investment
trust" as defined in Section 856 of the Code and
applicable Treasury Regulations.
(vii) The term "Securities" means Shares and Convertible
Securities.
(g) If any of the restrictions on transfer set forth in this
Article Nineteen are determined to be void, invalid or
unenforceable by virtue of any legal decision, statute, rule
or regulation, then the intended transferee of any Excess
Securities may be deemed, at the option of the Trust, to have
acted as an agent on behalf of the Trust in acquiring the
Excess Securities and to hold the Excess Securities on behalf
of the Trust.
(h) The Percentage Limit set forth in paragraph (a) hereof shall not
apply to Securities which the Trust Managers in their sole discretion may exempt
from the Percentage Limit while owned by a Person who has provided the Trust
with evidence and assurances acceptable to the Trust Managers that the
qualification of the Trust as a REIT would not be jeopardized thereby. The Trust
Managers, in their sole discretion, may at any time revoke any exception
pursuant to this paragraph (h) in the case of any Person, and upon such
revocation, the provisions of paragraph (a) hereof shall immediately become
applicable to such Person and all Securities which such Person may own. A
decision to exempt or refuse to exempt from the Percentage Limit the ownership
of certain designated Securities, or to revoke an exemption previously granted,
shall be made by the Trust Managers in their sole discretion, based on any
reason whatsoever, including, but not limited to, the preservation of the
Trust's qualification as a REIT.
(i) Subject to the provisions of the first sentence of paragraph (b)
hereof, nothing herein contained shall limit the ability of the Trust to impose
or to seek judicial or other imposition of additional restrictions if deemed
necessary or advisable to protect the Trust and the interests of its security
holders by preservation of the Trust's status as a qualified REIT under the
Code.
(j) All Persons who own 5% or more of the Trust's outstanding Shares
during any taxable year of the Trust shall file with the Trust an affidavit
setting forth the number of Shares during such taxable year (i) owned directly
(held of record by such Person or by a nominee or nominees of such Person) and
(ii) constructively owned (within the meaning of Section 544 of the Code or for
purposes of Rule 13(d) of the Exchange Act) by the Person filing the affidavit.
The affidavit to be filed with the Trust shall set forth all the information
required to be reported (i) in returns of shareholders under Section 1.857-9 of
the Treasury Regulations or similar provisions of any successor Treasury
Regulations and (ii) in reports to be filed under Section 13(d) of the Exchange
Act. The affidavit or an amendment to a previously filed affidavit shall be
filed with the Trust annually within 60 days after the close of the Trust's
taxable year. A Person shall have satisfied the requirements of this paragraph
(j) if the person furnishes to the Trust the information in such person's
possession after such person has made a good faith effort to determine the
Shares it owns and to acquire the information required by income tax regulation
1.857-9 or similar provisions of any successor regulation.
ARTICLE TWENTY
The Board of Trust Managers shall use its best efforts to cause the
Trust and its shareholders to qualify for U.S. federal income tax treatment in
accordance with the provisions of the Code applicable to REITs. In furtherance
of the foregoing, the Board of Trust Managers shall use its best efforts to take
such actions as are necessary, and may take such actions as it deems desirable
(in its sole discretion) to preserve the status of the Trust as a REIT.
13
<PAGE> 14
ARTICLE TWENTY-ONE
Special meetings of the shareholders for any purpose or purposes,
unless otherwise prescribed by law or by the Declaration of Trust, may be called
by the Trust Managers, any officer of the Trust or the holders of at least five
percent (5%) of all of the shares entitled to vote at such meeting.
ARTICLE TWENTY-TWO
This Declaration of Trust may be amended from time to time by the
affirmative vote of the holders of at least two-thirds of the outstanding voting
Shares, except that (i) Article Eleven hereof (relating to the prohibition
against engaging in non-real estate investment trust businesses); (ii) Article
Thirteen hereof (relating to the approval of Business Combinations); (iii)
Article Eighteen hereof (relating to the number and removal of Trust Managers);
(iv) Article Nineteen hereof (relating to Share ownership requirements); and (v)
this Article Twenty-Two may not be amended or repealed, and provisions
inconsistent therewith and herewith may not be adopted, except by the
affirmative vote of the holders of at least 80% of the outstanding voting
Shares.
ARTICLE TWENTY-THREE
If any provision of this Declaration of Trust or any application of any
such provision is determined to be invalid by any federal or state court having
jurisdiction over the issue, the validity of the remaining provisions shall not
be affected and other applications of such provision shall be affected only to
the extent necessary to comply with the determination of such court. In lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as a part of this Declaration of Trust, a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible, and the parties hereto request the
court or any arbitrator to whom disputes relating to this Declaration of Trust
are submitted to reform the otherwise illegal, invalid or unenforceable
provision in accordance with this Article Twenty-Three.
IN WITNESS WHEREOF, the undersigned Trust Managers do hereby execute
this Third Amended and Restated Declaration of Trust as of the 30th day of June,
1997.
/s/ William S. Bricker
----------------------------------
WILLIAM H. BRICKER
/s/ T. Patrick Duncan
----------------------------------
T. PATRICK DUNCAN
/s/ Robert E. Giles
----------------------------------
ROBERT E. GILES
/s/ Edward B. Kelley
----------------------------------
EDWARD B. KELLEY
/s/ Charles W. Wolcott
----------------------------------
CHARLES W. WOLCOTT
14
<PAGE> 1
EXHIBIT 3.2
AMENDMENT
TO THE
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST
OF
AMERICAN INDUSTRIAL PROPERTIES REIT
The undersigned, acting as the Trust Managers of American Industrial
Properties REIT, a real estate investment trust formed under the Texas Real
Estate Investment Trust Act (the "Texas REIT Act"), hereby adopt the following
amendment to the Third Amended and Restated Declaration of Trust for such trust
which amendment replaces in its entirety the following Article of the Third
Amended and Restated Declaration of Trust for such trust.
ARTICLE FIVE
The names and mailing addresses of the Trust Managers are as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
William H. Bricker 16475 Dallas Parkway, Suite 350
Dallas, Texas 75248
T. Patrick Duncan 8000 Robert F. McDermott Freeway
Suite 600, IH-10 West
San Antonio, Texas 78230-3884
Robert E. Giles 5051 Westheimer, Suite 300
Houston, Texas 77056
Edward B. Kelley 8000 Robert F. McDermott Freeway
Suite 600, IH-10 West
San Antonio, Texas 78230-3884
Stanley J. Kraska, Jr. 100 East Pratt Street
Baltimore, Maryland 21202
Russell C. Platt 1221 Avenue of the Americas, 22nd Floor
New York, New York 10020
Charles W. Wolcott 6210 North Belt Line Road, Suite 170
Irving, Texas 75063
</TABLE>
<PAGE> 2
IN WITNESS WHEREOF, the undersigned Trust Managers do hereby execute
this Amendment to the Third Amended and Restated Declaration of Trust as of the
16th day of July, 1998.
/s/ William H. Bricker
---------------------------
WILLIAM H. BRICKER
/s/ T. Patrick Duncan
---------------------------
T. PATRICK DUNCAN
/s/ Robert E. Giles
---------------------------
ROBERT E. GILES
/s/ Edward B. Kelley
---------------------------
EDWARD B. KELLEY
/s/ Stanley J. Kraska, Jr.
---------------------------
STANLEY J. KRASKA, JR.
/s/ Russell C. Platt
---------------------------
RUSSELL C. PLATT
/s/ Charles W. Wolcott
---------------------------
CHARLES W. WOLCOTT
<PAGE> 1
EXHIBIT 3.3
SECOND AMENDMENT
TO THE
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST
OF
AMERICAN INDUSTRIAL PROPERTIES REIT
The undersigned, acting as the Trust Managers of American Industrial
Properties REIT, a real estate investment trust formed under the Texas Real
Estate Investment Trust Act (the "Texas REIT Act"), hereby adopt the following
amendment to the Third Amended and Restated Declaration of Trust for such Trust,
which amendment replaces in its entirety the following Article of the Third
Amended and Restated Declaration of Trust for such Trust.
ARTICLE FIVE
The names and mailing addresses of the Trust Managers are as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
William H. Bricker 16475 Dallas Parkway, Suite 300
Dallas, Texas 75248
T. Patrick Duncan 8000 Robert F. McDermott Freeway
Suite 600, IH-10 West
San Antonio, Texas 78230-3884
Robert E. Giles 5051 Westheimer, Suite 300
Houston, Texas 77056
Edward B. Kelley 8000 Robert F. McDermott Freeway
Suite 600, IH-10 West
San Antonio, Texas 78230-3884
Stanley J. Kraska, Jr. 100 East Pratt Street
Baltimore, Maryland 21202
Russell C. Platt 1221 Avenue of the Americas, 22nd Floor
New York, New York 10020
Charles W. Wolcott 6210 North Belt Line Road, Suite 170
Irving, Texas 75063
Scott A. Wolstein 34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
Robert H. Gidel 34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
Albert T. Adams 34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
James A. Schoff 34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
</TABLE>
<PAGE> 2
IN WITNESS WHEREOF, the undersigned Trust Managers do hereby execute
this Amendment to the Third Amended and Restated Declaration of Trust as of the
____ day of January, 1999.
<TABLE>
<S> <C>
/s/ William H. Bricker /s/ Charles W. Wolcott
- ---------------------------------- ----------------------------------
WILLIAM H. BRICKER CHARLES W. WOLCOTT
/s/ T. Patrick Duncan /s/ Scott A. Wolstein
- ---------------------------------- ----------------------------------
T. PATRICK DUNCAN SCOTT A. WOLSTEIN
/s/ Robert E. Giles /s/ Robert H. Gidel
- ---------------------------------- ----------------------------------
ROBERT E. GILES ROBERT H. GIDEL
/s/ Edward B. Kelley /s/ Albert T. Adams
- ---------------------------------- ----------------------------------
EDWARD B. KELLEY ALBERT T. ADAMS
/s/ Stanley J. Kraska /s/ James A. Schoff
- ---------------------------------- ----------------------------------
STANLEY J. KRASKA, JR. JAMES A. SCHOFF
/s/ Russell C. Platt
- ----------------------------------
RUSSELL C. PLATT
</TABLE>
<PAGE> 1
EXHIBIT 3.4
THIRD AMENDMENT
TO THE
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST
OF
AMERICAN INDUSTRIAL PROPERTIES REIT
The following amendment to the Third Amended and Restated Declaration
of Trust for American Industrial Properties REIT, a real estate investment trust
formed under the Texas Real Estate Investment Trust Act (the "Texas REIT Act"),
replaces in its entirety the following Article of the Third Amended and Restated
Declaration of Trust for such Trust.
ARTICLE FIVE
The names and mailing addresses of the Trust Managers are as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
William H. Bricker 2155 Chenault Dr., Suite 300
Carrollton, Texas 75006-4955
T. Patrick Duncan 8000 Robert F. McDermott Freeway
Suite 600, IH-10 West
San Antonio, Texas 78230-3884
Robert E. Giles 5051 Westheimer, Suite 300
Houston, Texas 77056
Edward B. Kelley 8000 Robert F. McDermott Freeway
Suite 600, IH-10 West
San Antonio, Texas 78230-3884
Stanley J. Kraska, Jr. 100 East Pratt Street
Baltimore, Maryland 21202
J. Timothy Morris 1221 Avenue of the Americas, 22nd Floor
New York, New York 10020
Charles W. Wolcott 6210 North Belt Line Road, Suite 170
Irving, Texas 75063
Scott A. Wolstein 34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
Robert H. Gidel 34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
Albert T. Adams 34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
James A. Schoff 34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
</TABLE>
<PAGE> 2
IN WITNESS WHEREOF, the undersigned hereby executes this Third
Amendment to the Third Amended and Restated Declaration of Trust as of the 5th
day of March, 1999.
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/ Marc A. Simpson
------------------------------
Marc A. Simpson
Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
2
<PAGE> 1
EXHIBIT 3.5
FIFTH AMENDED AND RESTATED
BYLAWS
OF
AMERICAN INDUSTRIAL PROPERTIES REIT
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
ARTICLE I OFFICES
<S> <C> <C>
Section 1.1 Principal Office..........................................................1
Section 1.2 Other Offices.............................................................1
ARTICLE II MEETINGS OF SHAREHOLDERS
Section 2.1 Place of Meetings.........................................................1
Section 2.2 Annual Meeting............................................................1
Section 2.3 Special Meetings..........................................................1
Section 2.4 Notice of Meetings........................................................1
Section 2.5 Business at Annual Meeting................................................1
Section 2.6 Voting Lists..............................................................2
Section 2.7 Quorum....................................................................2
Section 2.8 Organization..............................................................3
Section 2.9 Proxies...................................................................3
Section 2.10 Voting of Shares..........................................................3
Section 2.11 Voting of Shares by Certain Holders.......................................3
Section 2.12 Election of Trust Managers................................................4
Section 2.13 Telephone Meetings........................................................4
Section 2.14 Action Without Meeting....................................................4
Section 2.15 Inspectors and Voting Procedures..........................................4
ARTICLE III TRUST MANAGERS
Section 3.1 Powers and Responsibilities...............................................5
Section 3.2 Number and Qualification..................................................5
Section 3.3 Election and Term of Office...............................................5
Section 3.4 Nomination of Trust Managers..............................................5
Section 3.5 Resignation...............................................................6
Section 3.6 Removal...................................................................6
Section 3.7 Vacancies.................................................................6
Section 3.8 Bond Not Required; Time Commitment........................................6
Section 3.9 Compensation..............................................................7
Section 3.10 Execution of Documents....................................................7
ARTICLE IV MEETINGS OF THE TRUST MANAGERS
Section 4.1 Place of Meetings.........................................................7
Section 4.2 Annual Meeting............................................................7
Section 4.3 Regular Meetings..........................................................7
Section 4.4 Special Meetings..........................................................7
Section 4.5 Quorum and Action.........................................................7
Section 4.6 Presumption of Assent to Action...........................................7
Section 4.7 Telephone Meetings........................................................8
Section 4.8 Action Without Meeting....................................................8
Section 4.9 Minutes...................................................................8
Section 4.10 Interest of Trust Managers............................................. 8
Section 4.11 Right of Trust Managers and Officers to Own Shares or Other Property and
to Engage in Other Business...............................................8
Section 4.12 Transactions Between Trust Managers and the Trust.........................8
Section 4.13 Persons Dealing with Trust Managers or Officers...........................8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.14 Reliance..................................................................9
Section 4.15 Liability of Trust Managers...............................................9
ARTICLE V COMMITTEES OF THE TRUST MANAGERS
Section 5.1 Membership and Authorities................................................9
Section 5.2 Minutes and Rules of Procedure............................................9
Section 5.3 Vacancies.................................................................9
Section 5.4 Telephone Meetings........................................................9
Section 5.5 Action Without Meeting....................................................9
ARTICLE VI OFFICERS
Section 6.1 Number....................................................................9
Section 6.2 Election, Term of Office and Qualification...............................10
Section 6.3 Subordinate Officers.....................................................10
Section 6.4 Resignation..............................................................10
Section 6.5 Removal..................................................................10
Section 6.6 Vacancies................................................................10
Section 6.7 The Chief Executive Officer..............................................10
Section 6.8 The President............................................................10
Section 6.9 The Vice Presidents......................................................10
Section 6.10 The Secretary............................................................11
Section 6.11 Assistant Secretaries....................................................11
Section 6.12 The Treasurer............................................................11
Section 6.13 Assistant Treasurers.....................................................11
Section 6.14 Treasurer's Bond.........................................................11
Section 6.15 Salaries.................................................................11
Section 6.16 Execution of Documents...................................................11
ARTICLE VII TRUST SHARES
Section 7.1 Share Certificates.......................................................12
Section 7.2 Lost Certificates, etc...................................................12
Section 7.3 Transfer of Shares.......................................................12
Section 7.4 Ownership of Shares......................................................12
Section 7.5 Closing of Transfer Books................................................12
Section 7.6 Dividends................................................................13
Section 7.7 Surplus and Reserves.....................................................13
ARTICLE VIII GENERAL PROVISIONS
Section 8.1 General Policies.........................................................13
Section 8.2 Limited Liability of Shareholders........................................13
Section 8.3 Waiver of Notice.........................................................13
Section 8.4 Seal.....................................................................13
Section 8.5 Fiscal Year..............................................................13
Section 8.6 Checks, Notes, etc ......................................................13
Section 8.7 Examination of Books and Records.........................................13
Section 8.8 Voting Upon Shares Held by the Trust.....................................14
Section 8.9 Number, Gender, Etc......................................................14
Section 8.10 Annual and Quarterly Reports.............................................14
Section 8.11 Independent Committee....................................................14
ARTICLE IX AMENDMENTS
Section 9.1 Amendment of Bylaws......................................................14
ARTICLE X SUBJECT TO ALL LAWS
Section 10.1 Subject to All Laws......................................................14
</TABLE>
<PAGE> 4
AMERICAN INDUSTRIAL PROPERTIES REIT
FIFTH AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
SECTION 1.1 PRINCIPAL OFFICE . The principal office of the Trust shall
be in the City of Irving, Dallas County, Texas or at such other location as the
Trust Managers may from time to time determine.
SECTION 1.2 OTHER OFFICES. The Trust may also have offices at such
other places, both within and without the State of Texas, as the Trust Managers
may from time to time determine or the business of the Trust may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1 PLACE OF MEETINGS. The Trust Managers may designate any
place, either within or without the State of Texas, as the place of meeting for
any annual meeting or for any special meeting called by the Trust Managers. A
waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Texas, as the place
for the holding of such meeting. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the principal office
of the Trust.
SECTION 2.2 ANNUAL MEETING. The annual meeting of shareholders shall
be held at such time, on such day and at such place as may be designated by the
Trust Managers. At the annual meeting, the shareholders shall, subject to
Section 2.5 and Section 3.3 of these Bylaws, elect Trust Managers and transact
such other business as may properly be brought before the meeting. Failure to
hold the annual meeting at the designated time shall not cause the dissolution
of the Trust.
SECTION 2.3 SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by law or by the
Declaration of Trust, may be called by the Trust Managers, any officer of the
Trust or the holders of at least five percent (5%) of all of the shares entitled
to vote at the meetings. Business transacted at all special meetings shall be
confined to the purpose or purposes stated in the call.
SECTION 2.4 NOTICE OF MEETINGS. Written or printed notice of all
meetings of shareholders stating the place, day and hour thereof, and in the
case of a special meeting the purpose or purposes for which the meeting is
called, shall be personally delivered or mailed, not less than ten (10) days nor
more than sixty (60) days prior to the date of the meeting, to the shareholders
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States Mail addressed to the
shareholder at his address as it appears on the share transfer books of the
Trust and the postage shall be prepaid. Personal delivery of any such notice to
any officer of a corporation or association, or to any member of a partnership,
shall constitute delivery of such notice to such corporation, association or
partnership.
SECTION 2.5 BUSINESS AT ANNUAL MEETING. No business may be transacted
at an annual meeting of shareholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Trust Managers (or any duly authorized committee thereof),
(b) otherwise properly brought before the annual meeting by or at the direction
of the Trust Managers (or any duly authorized committee thereof) or (c)
otherwise properly brought before the annual meeting by any shareholder of the
Trust (i) who is a shareholder of record on the date of the giving of the notice
provided for in this Section 2.5 and on the record date for the determination of
shareholders entitled to vote at such annual meeting, and (ii) who complies with
the notice procedures set forth in this Section 2.5.
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In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a shareholder, such shareholder
must have given timely notice thereof in proper written form to the Secretary of
the Trust. To be timely, a shareholder's notice to the Secretary must be
delivered to or mailed and received at the principal office of the Trust (i)
with respect to the Trust's first annual meeting of shareholders following the
adoption of this bylaw, notice by the shareholder to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which public disclosure of the adoption of this Section 2.5 is first
made and (ii) thereafter, not less than sixty (60) days nor more than ninety
(90) days prior to the date of the applicable annual meeting of shareholders,
provided, however, that in the event that less than seventy (70) days' notice or
prior public disclosure of the date of the meeting be given or made, notice by
the shareholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the applicable annual meeting was mailed or such public disclosure of
the date of such annual meeting was made, whichever first occurs. For purposes
of this Section 2.5, the date of a public disclosure shall include, but not be
limited to, the date on which such disclosure is made in a press release
reported by the Dow Jones News Services, the Associated Press or any comparable
news service or in a document publicly filed by the Trust with the Securities
and Exchange Commission pursuant to Sections 13, 14 or 15(d) (or the rules and
regulations promulgated thereunder) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such shareholder, (iii) the
number of shares of the Trust that are owned beneficially or of record by such
shareholder, (iv) a description of all arrangements or understandings between
such shareholder and any other person or persons (including their names) in
connection with the proposal of such business by such shareholder and any
material interest of such shareholder in such business, and (v) a representation
that such shareholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of shareholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 2.5; provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 2.5 shall be deemed to preclude discussion
by any shareholder of any such business. If the presiding officer of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the presiding officer shall
declare to the meeting that the business was not properly brought before the
meeting and such business shall not be transacted.
SECTION 2.6 VOTING LISTS. The officer or agent having charge of the
share transfer books for shares of the Trust shall make, at least ten (10) days
before each meeting of the shareholders, a complete list of shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of each shareholder and the number of
shares held by each shareholder, which list, for a period of ten (10) days prior
to such meeting, shall be kept on file at the registered office of the Trust and
shall be subject to inspection by any shareholders at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
for the duration of the meeting. The original share transfer books shall be
prima facie evidence as to who are the shareholders entitled to examine such
list or transfer books or to vote at any meeting of shareholders. Failure to
comply with this Section 2.6 with respect to any meeting of shareholders shall
not affect the validity of any action taken at such meeting.
SECTION 2.7 QUORUM. The holders of a majority of the shares entitled
to vote, present in person or represented by proxy, shall constitute a quorum at
all meetings of the shareholders for the transaction of business, except as
otherwise provided by law or by the Declaration of Trust. If, however, such
quorum shall not be present or represented at any meeting of the shareholders,
the shareholders entitled to vote at such meeting, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time without notice other than announcement at the meeting until a quorum shall
be present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally convened. The shareholders present at a
duly organized meeting at which a quorum was present may continue to transact
business until adjournment notwithstanding the withdrawal of enough shareholders
to leave less than a quorum present, provided that there remain at such meeting
the holder or holders of at least one-third (1/3) of the shares issued and
outstanding and entitled to vote thereat, present in person or represented in
the manner specified above. A holder of a share shall be treated as being
present at a meeting if the holder of such share
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is (i) present in person at the meeting, or (ii) represented at the meeting by a
valid proxy, whether the instrument granting such proxy is marked as casting a
vote or abstaining, is left blank or does not empower such proxy to vote with
respect to some or all matters to be voted upon at the meeting.
SECTION 2.8 ORGANIZATION. (a) The Chief Executive Officer, if one
shall be elected, shall preside at all meetings of the shareholders. In the
absence of the Chief Executive Officer or should one not be elected, the
following officers shall preside in order of priority: President , Chief
Financial Officer, Chief Operating Officer or Secretary. If no such officer is
available, the meeting shall be adjourned until such an officer is available to
preside over the meeting . The presiding officer shall set the agenda for the
meeting, shall conduct all aspects of the meeting and shall establish and
interpret the rules of order for the conduct of the meeting.
(b) The Secretary of the Trust shall act as secretary at all meetings
of the shareholders. In his or her absence an Assistant Secretary shall so act
and in the absence of all of these officers the presiding officer may appoint
any person to act as secretary of the meeting .
SECTION 2.9 PROXIES. (a) At any meeting of the shareholders every
shareholder entitled to vote at such meeting shall be entitled to vote in person
or by proxy executed in writing by such shareholder or by his duly authorized
attorney in fact. Proxies shall be filed with the Secretary or Trust Managers
immediately after the meeting has been called to order.
(b) No proxy shall be valid after eleven (11) months from the date of
its execution unless such proxy otherwise provides.
(c) A proxy shall be revocable unless the proxy form conspicuously
states that the proxy is irrevocable and the proxy is coupled with an interest
but in no event shall it remain irrevocable for a period of more than eleven
(11) months. A proxy which is revocable as aforesaid may be revoked at any time
by filing with the Secretary an instrument revoking it or a duly executed proxy
bearing a later date. Any revocable proxy which is not so revoked shall, subject
to paragraph (b) above, continue in full force and effect.
(d) In the event that any instrument in writing shall designate two
(2) or more persons to act as proxies, a majority of such persons present at the
meeting or, if only one shall be present, then that one, shall have and may
exercise all of the powers conferred by such written instrument upon all the
persons so designated unless the instrument shall otherwise provide.
SECTION 2.10 VOTING OF SHARES. Except as otherwise provided by law,
the Declaration of Trust or these Bylaws, each shareholder shall be entitled at
each meeting of shareholders to one (1) vote on each matter submitted to a vote
at such meeting for each share having voting rights registered in his name on
the books of the Trust at the time of the closing of the share transfer books
(or at the record date) for such meeting. When a quorum is present at any
meeting (and notwithstanding the subsequent withdrawal of enough shareholders to
leave less than a quorum present) in accordance with Section 2.7 of these
Bylaws, the votes of holders of a majority of the shares entitled to vote,
present in person or represented by proxy, shall decide any matter submitted to
such meeting, unless the matter is one upon which by law or by express provision
of the Declaration of Trust or of these Bylaws the vote of a greater number is
required, in which case the vote of such greater number shall govern and control
the decision of such matter. In determining the number of shares entitled to
vote, shares abstaining from voting or not voted on a matter (including
elections) will not be treated as entitled to vote. The provisions of this
Section 2.10 will govern with respect to all votes of shareholders except as
otherwise provided for in these Bylaws or in the Declaration of Trust or by some
specific statutory provision superseding the provisions contained in these
Bylaws or the Declaration of Trust.
SECTION 2.11 VOTING OF SHARES BY CERTAIN HOLDERS. (a) Shares standing
in the name of another business organization may be voted by such officer, agent
or proxy as the organizational documents of such organization may authorize or,
in the absence of such authorization, as may be determined by the governing body
of such organization.
(b) Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name so long as such shares forming a part of an estate are in
the possession and form a part of the estate being served by him. Shares
standing in the name of a trustee may
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be voted by him, either in person or by proxy, but no trustee shall be entitled
to vote shares held by him without a transfer of such shares into his name as
trustee.
(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority to do so
is contained in an appropriate order of the court by which such receiver was
appointed.
(d) A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
SECTION 2.12 ELECTION OF TRUST MANAGERS. At each election for Trust
Managers, each shareholder entitled to vote at such election shall, unless
otherwise provided by the Declaration of Trust or by applicable law, have the
right to vote the number of shares owned by him for as many persons as there are
to be elected and for whose election he has a right to vote. No shareholder
shall have the right or be permitted to cumulate his votes on any basis.
SECTION 2.13 TELEPHONE MEETINGS. Shareholders may participate in and
hold a meeting of the shareholders by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
SECTION 2.14 ACTION WITHOUT MEETING. Any action required by any
provision of law or of the Declaration of Trust or these Bylaws to be taken at a
meeting of the shareholders or any action which may be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof, and such consent shall have
the same force and effect as a unanimous vote of the shareholders.
SECTION 2.15 INSPECTORS AND VOTING PROCEDURES.
(a) The Trust shall, in advance of any meeting of shareholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Trust may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of shareholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares represented
at a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
(c) The date and time of the opening and closing of the polls for each
matter upon which the shareholders will vote at a meeting shall be announced at
the meeting. No ballots, proxies or votes, nor any revocations thereof or
changes thereto, shall be accepted by the inspectors after the closing of the
polls unless a court of appropriate jurisdiction, upon application by a
shareholder, shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots,
the inspectors may examine and consider such records or factors as allowed by
the Texas Real Estate Investment Trust Act (the "Texas REIT Act").
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ARTICLE III
TRUST MANAGERS
SECTION 3.1 POWERS AND RESPONSIBILITIES. The business and affairs of
the Trust shall be managed under the direction of its Trust Managers who may
exercise all such powers of the Trust and do all such lawful acts and things as
are not by statute, the Declaration of Trust or these Bylaws directed or
required to be exercised or done by the shareholders. The enumeration of any
specific power or authority herein shall not be construed as limiting the
aforesaid powers or the general powers or authority or any other specified power
or authority conferred herein upon the Trust Managers.
SECTION 3.2 NUMBER AND QUALIFICATION. There shall at all times be no
less than two (2) nor more than eight (8) Trust Managers who, subject to Section
3.3 below, shall be elected annually by the shareholders. Subject to any
limitations specified by law or in the Declaration of Trust, the number of Trust
Managers may be fixed from time to time by resolution adopted by a majority of
the Trust Managers. No decrease in the number of Trust Managers shall have the
effect of shortening the term of any incumbent Trust Manager. A majority of the
Trust Managers shall be natural persons. Trust Managers need not be
shareholders, must be at least eighteen (18) years of age and must not be
subject to any legal disability. At least two (2) of the Trust Managers shall at
all times be Independent Trust Managers. For purposes of these Bylaws, the term
"Independent Trust Manager" shall mean a Trust Manager who (i) does not perform
any services for the Trust (except in the capacity of a Trust Manager) whether
as an agent, advisor, consultant, employee, property manager or in any other
capacity whatsoever (other than as a Trust Manager), and (ii) is not an
"affiliate" of any person or entity that performs any services for the Trust
(other than as a Trust Manager). The term "affiliate" as used in these Bylaws
means any individual, corporation, partnership, trust, unincorporated
organization, association or other entity that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with any person or entity that performs any services for the Trust
(other than as a Trust Manager).
SECTION 3.3 ELECTION AND TERM OF OFFICE. The Trust Manager nominees
who have not been previously elected as Trust Managers by the shareholders of
the Trust shall be elected at the annual meeting of the shareholders (except as
provided in Section 3.7) by the affirmative vote of the holders of majority of
the outstanding shares of the Trust. Trust Managers who have been previously
elected as Trust Managers by the shareholders of the Trust shall be re-elected
at the annual meeting of the shareholders by the affirmative vote of the holders
of a majority of the outstanding shares of the Trust present in person or
represented by proxy at such meeting; provided, however, that any Trust Manager
that has been previously elected as a Trust Manager by the shareholders who is
not re-elected by such majority vote at a subsequent annual meeting shall
nevertheless remain in office until his successor is elected and qualified. Each
Trust Manager shall hold office until his successor is elected and qualified, or
until his death, resignation or removal in the manner provided in these Bylaws.
SECTION 3.4 NOMINATION OF TRUST MANAGERS. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as Trust Managers of the Trust. Nominations of persons for election as
Trust Managers may be made at any annual meeting of shareholders (a) by or at
the direction of the Trust Managers (or any duly authorized committee thereof)
or (b) by any shareholder of the Trust (i) who is a shareholder of record on the
date of the giving of the notice provided for in this Section 3.4 and on the
record date for the determination of shareholders entitled to vote at such
annual meeting, and (ii) who complies with the notice procedures set forth in
this Section 3.4.
In addition to any other applicable requirements, for a nomination to
be made by a shareholder, such shareholder must have given timely notice thereof
in proper written form to the Secretary of the Trust. To be timely, a
shareholder's notice to the Secretary must be delivered to or mailed and
received at the principal offices of the Trust (i) with respect to the Trust's
first annual meeting of shareholders following the adoption of this bylaw,
notice by the shareholder to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which public
disclosure of the adoption of this Section 3.4 is first made and (ii)
thereafter, not less than sixty (60) days nor more than ninety (90) days prior
to the date of the applicable annual meeting of shareholders; provided, however,
that in the event that less than seventy (70) days' notice or prior public
disclosure of the date of the meeting is given or made, notice by the
shareholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the applicable annual meeting was mailed or such public disclosure of
the date of such annual meeting was made, whichever first
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occurs. For purposes of this Section 3.4, the date of a public disclosure shall
include, but not be limited to, the date on which such disclosure is made in a
press release reported by the Dow Jones News Services, the Associated Press or
any comparable national news service or in a document publicly filed by the
Trust with the Securities and Exchange Commission pursuant to Sections 13, 14 or
15(d) (or the rules and regulations promulgated thereunder) of the Exchange Act.
To be in proper written form, a shareholder's notice to the Secretary
must set forth (a) as to each person whom the shareholder proposes to nominate
for election as a Trust Manager (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the number of shares of the Trust that are owned beneficially
or of record by the person, and (iv) any other information relating to the
person that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitation of proxies for
election of Trust Managers pursuant to Section 14 of the Exchange Act, and (b)
as to the shareholder giving the notice (i) the name and record address of such
shareholder, (ii) the number of shares of the Trust that are owned beneficially
or of record by such shareholder, (iii) a description of all arrangements or
understandings between such shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such shareholders, (iv) a representation that such shareholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in the notice, and (v) any other information relating to such shareholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
Trust Managers pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
Trust Manager if elected.
No person shall be eligible for election as a Trust Manager of the
Trust unless nominated in accordance with the procedures set forth in this
Section 3.4. If the presiding officer of the meeting determines that a
nomination was not made in accordance with the foregoing procedures, the
presiding officer shall declare to the meeting that the nomination was defective
and such defective nomination shall be disregarded.
SECTION 3.5 RESIGNATION. Any Trust Manager may resign at any time by
giving written notice to the remaining Trust Managers. Such resignation shall
take effect at the time specified therein, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. A Trust Manager judged incompetent or for whom a guardian or
conservator has been appointed, shall be deemed to have resigned as of the date
of such adjudication or appointment.
SECTION 3.6 Removal. A Trust Manager may be removed at any time with
or without cause by the vote of holders of shares representing two-thirds (2/3)
of the total votes authorized to be cast by shares then outstanding and entitled
to vote thereon. Upon the resignation or removal of any Trust Manager, or his
otherwise ceasing to be a Trust Manager, he shall execute and deliver such
documents as the remaining Trust Managers shall require for the conveyance of
any Trust property held in his name, shall account to the remaining Trust
Managers as they require for all property which he holds as Trust Manager and
shall thereupon be discharged as Trust Manager. Upon the incapacity or death of
any Trust Manager, his legal representative shall perform the acts set forth in
the preceding sentence and the discharge mentioned therein shall run to such
legal representative and to the incapacitated Trust Manager or the estate of the
deceased Trust Manager, as the case may be.
SECTION 3.7 VACANCIES. If there is an increase in the number of Trust
Managers or if any or all of the Trust Managers cease to be Trust Managers
hereunder, whether by reason of resignation, removal, incapacity, death or
otherwise, such event shall not terminate the Trust or affect its continuity.
Until vacancies are filled, the remaining Trust Manager or Trust Managers may
exercise the powers of the Trust Managers hereunder. Vacancies may be filled by
successor Trust Managers either appointed by a majority of the remaining Trust
Managers or elected by the vote of the holders of at least a majority of the
outstanding shares at an annual or special meeting of the shareholders. Any
Trust Manager elected to fill a vacancy shall hold office until the next annual
meeting for the election of Trust Managers. The election of a successor Trust
Manager shall be considered an amendment to the Declaration of Trust.
SECTION 3.8 BOND NOT REQUIRED; TIME COMMITMENT. Unless otherwise
required by law, no Trust Manager shall be required to give bond, surety or
security in any jurisdiction for the performance of his duties or
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obligations to the Trust. No Trust Manager shall be required to devote his
entire time to the business and affairs of the Trust.
SECTION 3.9 COMPENSATION. Trust Managers shall receive compensation
for their services to the Trust as may be determined from time to time by the
Trust Managers; provided, however, that the cash compensation of the Trust
Managers shall not be increased by more than 20% over the prior year without the
approval of the holders of a majority of the shares cast at the annual meeting
of shareholders of the Trust. The Trust Managers may delegate to any committee
the power to fix from time to time the compensation of Trust Managers. Officers
of the Trust who also serve as Trust Managers shall not receive compensation for
their service as Trust Managers.
SECTION 3.10 EXECUTION OF DOCUMENTS. Each Trust Manager and any one of
them is authorized to execute on behalf of the Trust any document or instrument
of any nature whatsoever, provided that the execution by the Trust of any such
document or instrument shall have been previously authorized by such action of
the Trust Managers as may be required by statute, the Declaration of Trust or
these Bylaws.
ARTICLE IV
MEETINGS OF THE TRUST MANAGERS
SECTION 4.1 PLACE OF MEETINGS. The Trust Managers of the Trust may
hold their meetings, both regular and special, either within or without the
State of Texas.
SECTION 4.2 ANNUAL MEETING. The annual meeting of the Trust Managers
shall be held immediately following the adjournment of the annual meeting of the
shareholders and no notice of such meeting shall be necessary to the Trust
Managers in order to legally constitute the meeting, provided a quorum shall be
present, or they may meet at such time and place as shall be fixed by the
consent in writing of all of the Trust Managers.
SECTION 4.3 REGULAR MEETINGS. Regular meetings of the Trust Managers,
in addition to the annual meetings referred to in Section 4.2, may be held
without notice at such time and place as shall from time to time be determined
by the Trust Managers.
SECTION 4.4 SPECIAL MEETINGS. Special meetings of the Trust Managers
may be called by the Chief Executive Officer, if one shall be elected, or by the
President, if a Chief Executive Officer is not elected, on ten (10) business
day's notice (oral or written) to each Trust Manager. Special meetings shall be
called by the Chief Executive Officer (if one shall be elected), the President
or the Secretary on like notice on the oral or written request of any Trust
Manager. Neither the purpose of, nor the business to be transacted at, any
special meeting of the Trust Managers need be specified in the notice or waiver
of notice of such meeting. Attendance of a Trust Manager at a meeting shall
constitute a waiver of notice of such meeting except where a Trust Manager
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the grounds that the meeting is
not lawfully called or convened.
SECTION 4.5 QUORUM AND ACTION. At all meetings of the Trust Managers,
the presence of a majority of the Trust Managers shall be necessary and
sufficient to constitute a quorum for the transaction of business and the act of
a majority of the Trust Managers at any meeting at which a quorum is present
shall be the act of the Trust Managers unless the act of a greater number is
required by law, the Declaration of Trust or these Bylaws. If a quorum shall not
be present at any meeting of Trust Managers, the Trust Managers present may
adjourn the meeting from time to time without notice other than announcement at
the meeting until a quorum shall be present. If there are only two Trust
Managers, the presence of both Trust Managers shall be necessary to constitute a
quorum.
SECTION 4.6 PRESUMPTION OF ASSENT TO ACTION. A Trust Manager who is
present at a meeting of the Trust Managers at which action on any Trust matter
is taken shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the Trust immediately after the adjournment of the meeting. Such
right to dissent shall not apply to a Trust Manager who voted in favor of such
action.
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SECTION 4.7 TELEPHONE MEETINGS. Trust Managers may participate in and
hold a meeting of the Trust Managers by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this Section
shall constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
SECTION 4.8 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the Trust Managers may be taken without a meeting if
a consent in writing, setting forth the action so taken, is signed by all the
Trust Managers, and such consent shall have the same force and effect as a
unanimous vote at a meeting.
SECTION 4.9 MINUTES. The Trust Managers shall keep regular minutes of
their proceedings. The minutes shall be placed in the minute book of the Trust.
SECTION 4.10 INTEREST OF TRUST MANAGERS. With respect to the actions
of the Trust Managers, Trust Managers who have any direct or indirect interest
in connection with any matter being acted upon may be counted for all quorum
purposes under this Article IV.
SECTION 4.11 RIGHT OF TRUST MANAGERS AND OFFICERS TO OWN SHARES OR
OTHER PROPERTY AND TO ENGAGE IN OTHER BUSINESS. Any Trust Manager or officer of
the Trust may acquire, own, hold and dispose of shares of the Trust for his
individual account, and may exercise all rights of a shareholder to the same
extent and in the same manner as if he were not a Trust Manager or officer of
the Trust. Except as provided specifically to the contrary in a written
agreement with the Trust, any Trust Manager may, in a capacity other than that
of Trust Manager, have business interests and engage in business activities
similar to or in addition to those relating to the Trust, which interests and
activities may be similar to and competitive with those of the Trust and may
include the acquisition, syndication, holding, management, development,
operation or disposition, for his own account or for the account of others, of
interests in mortgages, interests in real property, or interests in entities
engaged in the real estate business. Except as provided specifically to the
contrary in a written agreement with the Trust, each Trust Manager shall be free
of any obligation to present to the Trust any investment opportunity which comes
to him in any capacity other than solely as Trust Manager of the Trust, even if
such opportunity is of a character which, if presented to the Trust, could be
exploited by the Trust. Subject to the provisions of Article III hereof, any
Trust Manager or officer of the Trust may be a trustee, officer, director,
shareholder, partner, member, advisor or employee of, or otherwise have a direct
or indirect interest in any person who may be engaged to render advice or
services to the Trust, and may receive compensation from such person as well as
compensation as Trust Manager or officer or otherwise hereunder.
SECTION 4.12 TRANSACTIONS BETWEEN TRUST MANAGERS AND THE TRUST. Except
as otherwise provided by the Declaration of Trust or these Bylaws, and in the
absence of fraud, a contract, act or other transaction, between the Trust and
any other person, or in which the Trust is interested, shall be valid and no
Trust Manager or officer of the Trust shall have any liability as a result of
entering into any such contract, act or transaction, even though (a) one or more
of the Trust Managers, directly or indirectly is interested in or connected
with, or is a trustee, partner, director, shareholder, member, employee, officer
or agent of such other person, or (b) one or more of the Trust Managers,
individually or jointly with others, is a party to, or directly or indirectly is
interested in, or connected with, such contract, act or transaction, provided
that (i) such interest or connection is disclosed in reasonable detail or known
to the Trust Managers and thereafter the Trust Managers authorize or ratify such
contract, act or other transaction by affirmative vote of a majority of the
Trust Managers who are not interested in the transaction, or (ii) such interest
or connection is disclosed in reasonable detail or known to the shareholders,
and thereafter such contract, act or transaction is approved by shareholders
holding a majority of the shares then outstanding and entitled to vote thereon.
SECTION 4.13 PERSONS DEALING WITH TRUST MANAGERS OR OFFICERS. Any act
of the Trust Managers or officers of the Trust purporting to be done in their
capacity as such shall, as to any person dealing with such Trust Managers or
officers, conclusively be deemed to be within the purposes of the Trust and
within the powers of the Trust Managers or officers. No person dealing with the
Trust Managers or any of them or with the officers of the Trust or any of them,
shall be bound to see to the application of any funds or property passing into
their hands or control. The receipt of the Trust Managers or any of the officers
of the Trust of moneys or other consideration shall be binding upon the Trust.
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SECTION 4.14 RELIANCE. Trust Managers and officers of the Trust shall
not be liable for any claims or damages that may result from their acts in the
discharge of any duty imposed or power conferred upon them by the Trust, if, in
the exercise of ordinary care, they acted in good faith and in reliance upon the
written opinion of an attorney for the Trust. In discharging their duties, Trust
Managers and officers of the Trust, when acting in good faith and exercising
ordinary care, may rely upon financial statements of the Trust, stated in a
written report by an independent certified public accountant, to fairly present
the financial position of the Trust. The Trust Managers and officers of the
Trust may rely upon any instrument or other document reasonably believed by them
to be genuine.
SECTION 4.15 LIABILITY OF TRUST MANAGERS. No Trust Manager of the
Trust shall be liable to the Trust for any act, omission, loss, damage or
expense arising from the performance of his duty under the Trust, except to the
extent specifically required by statute, the Declaration of Trust or these
Bylaws.
ARTICLE V
COMMITTEES OF THE TRUST MANAGERS
SECTION 5.1 MEMBERSHIP AND AUTHORITIES. The Trust Managers, by
resolution adopted by a majority of the Trust Managers, may designate one (1) or
more Trust Managers to constitute such committees as the Trust Managers may
determine, including, but not limited to, a Compensation Committee and an Audit
Committee, each of which committees to the extent provided in such resolution
shall have and may exercise all of the authority of the Trust Managers in the
business and affairs of the Trust, except in those cases where the authority of
the Trust Managers is specifically denied to the committee or committees by the
Trust Managers, applicable law, the Declaration of Trust or these Bylaws. No
committee shall have the power to alter or to repeal any resolution adopted by
the Trust Managers. The designation of a committee and the delegation thereto of
authority shall not operate to relieve the Trust Managers, or any member
thereof, of any responsibility imposed upon each of them by law. The members of
each such committee shall serve at the pleasure of the Trust Managers. A
majority of the members of each committee shall be Independent Trust Managers;
provided, however, that if a committee shall consist of two (2) members, only
one (1) of such members shall be required to be an Independent Trust Manager.
SECTION 5.2 MINUTES AND RULES OF PROCEDURE. Each committee designated
by the Trust Managers shall keep regular minutes of its proceedings and report
the same to the Trust Managers when required. Subject to the provisions of these
Bylaws, the members of any committee may fix such committee's own rules of
procedure.
SECTION 5.3 VACANCIES. The Trust Managers shall have the power at any
time to fill vacancies in, to change the membership of, or to dissolve, any
committee.
SECTION 5.4 TELEPHONE MEETINGS. Members of any committee designated by
the Trust Managers may participate in or hold a meeting by use of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the grounds that the meeting is
not lawfully called or convened.
SECTION 5.5 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of any committee designated by the Trust Managers may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the committee, and such consent shall
have the same force and effect as a unanimous vote at a meeting.
ARTICLE VI
OFFICERS
SECTION 6.1 NUMBER. The officers of the Trust shall include a
President and a Secretary. The Trust Managers may also elect a Chief Executive
Officer, one (1) or more Vice Presidents, a Treasurer, one (1) or more Assistant
Secretaries and one (1) or more Assistant Treasurers. One (1) person may hold
any two (2) or more of these offices.
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SECTION 6.2 ELECTION, TERM OF OFFICE AND QUALIFICATION. The Trust
Managers shall elect officers, none of whom need be a Trust Manager, except for
the Chief Executive Officer, if one shall be elected, at any time and from time
to time as they deem necessary. Each officer so elected shall hold office until
his successor shall have been duly elected and qualified or until his death,
resignation or removal in the manner hereinafter provided.
SECTION 6.3 SUBORDINATE OFFICERS. The Trust Managers may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms, have such authority and perform such duties as the Trust
Managers may from time to time determine. The Trust Managers may delegate to any
committee or officer the power to appoint any such subordinate officer or agent.
No subordinate officer appointed by any committee or superior officer as
aforesaid shall be considered as an officer of the Trust, the officers of the
Trust being limited to the officers elected or appointed as such by the Trust
Managers.
SECTION 6.4 RESIGNATION. Any officer may resign at any time by giving
written notice thereof to the Trust Managers or to the President or Secretary of
the Trust. Any such resignation shall take effect at the time specified therein
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 6.5 REMOVAL. Any officer elected or appointed by the Trust
Managers may be removed by the Trust Managers at any time with or without cause
by majority vote of the entire Board of Trust Managers. Any other officer may be
removed at any time with or without cause by the Trust Managers or by any
committee or superior officer upon whom such power of removal may be conferred
by the Trust Managers. The removal of any officer shall be without prejudice to
the contract rights, if any, of the person so removed. Election or appointment
of an officer or agent shall not of itself create any contract rights.
SECTION 6.6 VACANCIES. A vacancy in any office shall be filled for the
unexpired portion of the term by the Trust Managers, but in case of a vacancy
occurring in an office filled by a committee or superior officer in accordance
with the provisions of Section 6.3, such vacancy may be filled by such committee
or superior officer.
SECTION 6.7 THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer,
if one shall be elected, shall be the chief executive officer of the Trust,
shall preside at all meetings of the shareholders and Trust Managers, shall be
an ex officio member of all standing committees, shall have general and active
management of the business of the Trust, shall have the general supervision and
direction of all other officers of the Trust with full power to see that their
duties are properly performed and shall see that all orders and resolutions of
the Trust Managers are carried into effect. He may sign, with any other proper
officer, certificates for shares of the Trust and any deeds, bonds, mortgages,
contracts and other documents which the Trust Managers have authorized to be
executed, except where required by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Trust Managers or these Bylaws, to some other officer or agent of the Trust.
In addition, the Chief Executive Officer shall perform whatever duties and shall
exercise all powers that are given to him by the Trust Managers.
SECTION 6.8 THE PRESIDENT. If no Chief Executive Officer shall be
elected, the President shall be the chief executive officer of the Trust and
shall have the powers and duties of the Chief Executive Officer as set forth in
Section 6.7. In the absence of the Chief Executive Officer, if one shall be
elected, the President shall preside at all meetings of the shareholders and
Trust Managers. He may sign, with any other proper officer, certificates for
shares of the Trust and any deeds, bonds, mortgages, contracts and other
documents which the Trust Managers have authorized to be executed, except where
required by law to be otherwise signed and executed and except where the signing
and execution thereof shall be expressly delegated by the Trust Managers or
these Bylaws to some other officer or agent of the Trust. In addition, the
President shall perform whatever duties and shall exercise whatever powers given
to him by the Trust Managers or by the Chief Executive Officer, if one shall be
elected.
SECTION 6.9 THE VICE PRESIDENTS. The Vice Presidents shall perform
such duties as are given to them by these Bylaws and as may from time to time be
assigned to them by the Trust Managers, by the Chief Executive Officer, if one
shall be elected, or by the President, if a Chief Executive Officer is not
elected, and may sign, with any other proper officer, certificates for shares of
the Trust. At the request of the President, or in his absence or disability, the
Vice President designated by the President (or in the absence of such
designation, the Vice President
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who has served the longest term of office with the Trust) shall perform the
duties and exercise the powers of the President.
SECTION 6.10 THE SECRETARY. The Secretary, when available, shall
attend all meetings of the Trust Managers and all meetings of the shareholders
and record all votes and the minutes of all proceedings in a book to be kept for
that purpose and shall perform like duties for the Trust Manager committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Trust Managers as required by law or these
Bylaws, be custodian of the Trust records and have general charge of the share
books of the Trust and shall perform such other duties as may be prescribed by
the Trust Managers, by the Chief Executive Officer, if one shall be elected, or
by the President, if a Chief Executive Officer is not elected, under whose
supervision he shall be. The Secretary may sign, with any other proper officer,
certificates for shares of the Trust and shall keep in safe custody the seal of
the Trust, and, when authorized by the Trust Managers, affix the same to any
instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of the Treasurer or an Assistant Secretary.
SECTION 6.11 ASSISTANT SECRETARIES. The Assistant Secretaries shall
perform such duties as are given to them by these Bylaws or as may from time to
time be assigned to them by the Trust Managers or by the Secretary. At the
request of the Secretary, or in his absence or disability, the Assistant
Secretary designated by the Secretary (or in the absence of such designation the
Assistant Secretary who has served the largest term of office with the Trust),
shall perform the duties and exercise the powers of the Secretary.
SECTION 6.12 THE TREASURER. The Treasurer shall have the custody and
be responsible for all Trust funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the Trust
and shall deposit all monies and other valuable effects in the name and to the
credit of the Trust in such depositories as may be designated by the Trust
Managers. The Treasurer shall disburse the funds of the Trust as may be ordered
by the Trust Managers, taking proper vouchers for such disbursements, and shall
render to the Chief Executive Officer, if one shall be elected, the President
and the Trust Managers, at the regular meetings of the Trust Managers, or
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Trust. The Treasurer may sign, with any
other proper officer, certificates for shares of the Trust.
SECTION 6.13 ASSISTANT TREASURERS. The Assistant Treasurers shall
perform such duties as are given to them by these Bylaws or as may from time to
time be assigned to them by the Trust Managers or by the Treasurer. At the
request of the Treasurer, or in his absence or disability, the Assistant
Treasurer designated by the Treasurer (or in the absence of such designation,
the Assistant Treasurer who has served the longest term of office with the
Trust), shall perform the duties and exercise the powers of the Treasurer.
SECTION 6.14 TREASURER'S BOND. If required by the Trust Managers, the
Treasurer and any Assistant Treasurer shall give the Trust a bond in such sum
and with such surety or sureties as shall be satisfactory to the Trust Managers
for the faithful performance of the duties of his office and for the restoration
to the Trust, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Trust.
SECTION 6.15 SALARIES. The salary or other compensation of officers
shall be fixed from time to time by the Trust Managers. The Trust Managers may
delegate to any committee or officer the power to fix from time to time the
salary or other compensation of subordinate officers and agents appointed in
accordance with the provisions of Section 6.3.
SECTION 6.16 EXECUTION OF DOCUMENTS. Each officer of the Trust and any
one of them is authorized to execute on behalf of the Trust any document or
instrument of any nature whatsoever, provided that the execution by the Trust of
any such document or instrument shall have been previously authorized by such
action of the Trust Managers as may be required by statute, the Declaration of
Trust or these Bylaws.
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ARTICLE VII
TRUST SHARES
SECTION 7.1 SHARE CERTIFICATES. (a) The certificates representing
shares of beneficial interest of the Trust shall be in such form, not
inconsistent with statutory provisions and the Declaration of Trust, as shall be
approved by the Trust Managers. The certificates shall be signed by the Chief
Executive Officer, if one shall be elected, the President or a Vice President
and a Secretary or Assistant Secretary, or such other or additional officers as
may be prescribed from time to time by the Trust Managers. The signatures of
such officer or officers upon a certificate may be facsimiles if the certificate
is countersigned by a transfer agent or registered by a registrar, either of
which is other than the Trust itself or an employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued with the same effect as if he were such officer at the
date of its issuance.
(b) In the event the Trust has, by its Declaration of Trust, limited
or denied the preemptive right of shareholders, there shall be set forth on the
face or back of the certificates, which the Trust shall issue to represent
beneficial interests such legends or statements, if any, as shall be required by
applicable law or the Declaration of Trust or as may be approved by the Trust
Managers.
(c) All certificates shall be consecutively numbered and the name of
the person owning the shares represented thereby, with the number of such shares
and the date of issue, shall be entered on the Trust's books.
(d) All certificates surrendered to the Trust shall be canceled and,
except as provided in Section 7.2 with respect to lost, destroyed or mutilated
certificates, no new certificate shall be issued until the former certificate
for the same number of shares has been surrendered and canceled.
SECTION 7.2 LOST CERTIFICATES, ETC. The Trust Managers may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Trust alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. In authorizing such issue of a
new certificate or certificates, the Trust Managers may, in their discretion and
as a condition precedent to the issue thereof, require the owner of such lost or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as the Trust Managers shall require and/or indemnify the
Trust as the Trust Managers may prescribe.
SECTION 7.3 TRANSFER OF SHARES. Subject to any restrictions upon
transfer, upon surrender to the Trust or the transfer agent of the Trust of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer and satisfaction of the Trust
that the requested transfer complies with the provisions of applicable state and
federal laws and regulations, the Declaration of Trust and any agreements to
which the Trust is a party, the Trust shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books.
SECTION 7.4 OWNERSHIP OF SHARES. The Trust shall be entitled to treat
and recognize the holder of record of any share or shares as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Texas.
SECTION 7.5 CLOSING OF TRANSFER BOOKS. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the Trust
(other than a distribution involving a purchase or redemption by the Trust of
its own shares) or a share dividend, or in order to make a determination of
shareholders for any other proper purpose, the Trust Managers may provide that
the share transfer books shall be closed for a stated period but not to exceed,
in any case, sixty (60) days. If the share transfer books shall be closed for
the purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the share transfer books,
the Trust Managers may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days and, in case of a meeting of shareholders, not less than ten (10) days
prior to the date on which the particular action
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requiring such determination of shareholders is to be taken, and the
determination of shareholders on such record date shall apply with respect to
the particular action requiring the same notwithstanding any transfer of shares
on the books of the Trust after such record date.
SECTION 7.6 DIVIDENDS. The Trust Managers may, from time to time,
declare, and the Trust may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by the Declaration of Trust
and by law, such dividends to be paid in cash or in property or in shares of
beneficial interest of the Trust, except no dividends shall be paid when the
Trust is insolvent or when the payment thereof would render the Trust insolvent.
When making a determination of whether to declare a dividend, the Trust Managers
shall make the determination consistent with their fiduciary duties as Trust
Managers.
SECTION 7.7 RESERVES. By resolution the Trust Managers may create such
reserve or reserves of the Trust as the Trust Managers from time to time, in
their absolute discretion, determine to be proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Trust, or for such other purpose as the Trust Managers shall
determine to be beneficial to the interest of the Trust. The Trust Managers may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 GENERAL POLICIES. The Trust intends to make investments
that are consistent with the applicable requirements of the Internal Revenue
Code of 1986, as amended, and the Texas REIT Act, as amended, and related
regulations with respect to the composition of the Trust's investments and the
derivation of its income.
SECTION 8.2 LIMITED LIABILITY OF SHAREHOLDERS. A shareholder shall not
be personally or individually liable in any manner whatsoever for any debt, act,
omission or obligation incurred by the Trust or the Trust Managers. A
shareholder shall be under no obligation to the Trust or to its creditors with
respect to such shares other than the obligation to pay to the Trust the full
amount of the consideration for which such shares were issued or to be issued.
Upon the payment of such consideration, such shares shall be fully paid and
non-assessable by the Trust.
SECTION 8.3 WAIVER OF NOTICE. (a) Whenever, under the provisions of
applicable law or of the Declaration of Trust or of these Bylaws, any notice is
required to be given to any shareholder or Trust Manager, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be equivalent to the giving of such
notice.
(b) Attendance of a Trust Manager at a meeting shall constitute a
waiver of notice of such meeting except where a Trust Manager attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the grounds that the meeting is not lawfully
called or convened.
SECTION 8.4 SEAL. If one be adopted, the Trust seal shall have
inscribed thereon the name of the Trust and shall be in such form as may be
approved by the Trust Managers. Said seal shall be kept in the custody of the
Secretary and may be used by causing it or a facsimile of it to be impressed or
affixed or in any manner reproduced.
SECTION 8.5 FISCAL YEAR. The fiscal year of the Trust shall be fixed
by resolution of the Trust Managers.
SECTION 8.6 CHECKS, NOTES, ETC. All checks or demands for money and
notes of the Trust shall be signed by such officer or officers or such other
person or persons as the Trust Managers may from time to time designate. The
Trust Managers may authorize any officer or officers or such other person or
persons to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the Trust, and such authority may be general or
confined to specific instances.
SECTION 8.7 EXAMINATION OF BOOKS AND RECORDS. The Trust Managers shall
determine from time to time whether, and if allowed, when and under what
conditions and regulations the accounts and books of the Trust
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(except such as may by statute be specifically opened to inspection) or any of
them shall be open to inspection by the shareholders, and the shareholders'
rights in this respect are and shall be restricted and limited accordingly.
SECTION 8.8 VOTING UPON SHARES HELD BY THE TRUST. Unless otherwise
ordered by the Trust Managers, the Chief Executive Officer, or if no Chief
Executive Officer shall be elected, the President, acting on behalf of the
Trust, shall have full power and authority to attend and to act and to vote at
any meeting of shareholders of any corporation or other entity in which the
Trust may hold shares and at any such meeting, shall possess and may exercise
any and all of the rights and powers incident to the ownership of such shares
which, as the owner thereof, the Trust might have possessed and exercised, if
present. The Trust Managers by resolution from time to time may confer like
powers upon any other person or persons.
SECTION 8.9 NUMBER, GENDER, ETC. WHENEVER the singular number is used
in these Bylaws and when required by the context, the same shall include the
plural, and the masculine gender shall include the feminine and neuter genders.
The term "person," as used herein and as the context requires shall mean and
include individuals, corporations, limited partnerships, general partnerships,
joint stock companies or associations, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts, or other entities
and governments and agencies and political subdivisions thereof.
SECTION 8.10 ANNUAL AND QUARTERLY REPORTS. The Trust shall furnish to
its shareholders annual reports containing audited financial statements with a
report thereon by its independent accountants. The Trust shall also furnish to
its shareholders quarterly reports for each of the first three quarters of each
fiscal year containing unaudited financial information.
SECTION 8.11 INDEPENDENT COMMITTEE. If the Trust receives an offer to
purchase all or substantially all of the assets of the Trust, or if the Trust
receives a proposal for a merger transaction in which the Trust will not be the
surviving entity, the Trust Managers shall create a committee consisting
entirely of Independent Trust Managers (as defined in the Declaration of Trust)
who shall, consistent with their fiduciary duties, review any such offer and
make a recommendation to all of the Trust Managers.
ARTICLE IX
AMENDMENTS
SECTION 9.1 AMENDMENT OF BYLAWS. Except as otherwise provided by
applicable law or the Declaration of Trust, the power to alter, amend or repeal
these Bylaws or to adopt new Bylaws shall be vested in the Trust Managers and
(to the extent not inconsistent with the Texas REIT Act and the Declaration of
Trust and specified in the notice of the meeting) the shareholders. Such action
to amend the Bylaws shall be taken (i) with respect to all Bylaw provisions, by
the affirmative vote of a majority of the Trust Managers , or (ii)(a) with
respect to Section 2.5, Section 3.3, Section 3.4, Section 3.6, Section 3.7 or
Article X of these Bylaws, by the affirmative vote of the holders of two-thirds
(2/3) of the Trust's outstanding shares, or (b) with respect to all other
Bylaws, by the affirmative vote of the holders of a majority of the Trust's
outstanding shares.
ARTICLE X
SUBJECT TO ALL LAWS
The provisions of these Bylaws shall be subject to all valid and
applicable laws, including, without limitation, the Texas REIT Act as now or
hereafter amended, and in the event that any of the provisions of these Bylaws
are found to be inconsistent with or contrary to any such valid laws, the latter
shall be deemed to control and these Bylaws shall be deemed modified
accordingly, and, as so modified, shall continue in full force and effect.
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EXHIBIT 3.6
AMENDMENT TO THE FIFTH AMENDED AND RESTATED BYLAWS
OF AMERICAN INDUSTRIAL PROPERTIES REIT
RESOLVED, that Section 3.2 of the Trust's Fifth Amended and Restated
Bylaws be, and it hereby is, amended to provide that the maximum number of Trust
Managers that shall constitute the Board is 11.
<PAGE> 1
EXHIBIT 10.65
INDUSTRIAL PROPERTY PORTFOLIO
AGREEMENT OF PURCHASE AND SALE
This Agreement, dated as of April 30, 1998, is between Spieker
Northwest, Inc., a California corporation ("Seller"), and American Industrial
Properties REIT, a Texas Real Estate Investment Trust ("Buyer").
ARTICLE I
PURCHASE AND SALE OF PROPERTY
SECTION 1.1 SALE.
Seller agrees to sell to Buyer, and Buyer agrees to purchase from
Seller, subject to the terms, covenants and conditions set forth herein, that
certain real property located in Austin, Texas; Albuquerque, New Mexico;
Colorado Springs, Colorado; Phoenix, Arizona; and Tucson, Arizona, together
with any and all rights, privileges and easements appurtenant thereto owned by
Seller, which real property is more particularly described in EXHIBIT A
(comprised of EXHIBIT A-1 through EXHIBIT A-6) attached hereto and made a part
hereof (collectively the "Land"), together with all of Seller's right, title
and interest in all rights, privileges and easements appurtenant to the Land,
including, without limitation, all minerals, oil, gas and other hydrocarbon
substances on and under and that may be produced from the Land, as well as all
of Seller's right, title and interest in all development rights, land use
entitlements, including without limitation building permits, licenses, permits
and certificates, utilities commitments, air rights, water, water rights,
riparian rights, and water stock relating to the Land and any rights-of-way or
other appurtenances used in connection with the beneficial use and enjoyment of
the Land and all of Seller's right, title and interest in and to all roads,
easements, rights-of-way and alleys adjoining, serving or servicing the Land
(collectively, the "Appurtenances"); together with all of Seller's right, title
and interest in all improvements and fixtures located on the Land and
Appurtenances, and all of Seller's right, title and interest in all apparatus,
and equipment used in connection with the operation or occupancy of the Land
and Appurtenances, such as heating and air conditioning systems and facilities
used to provide any utility, refrigeration, ventilation, garbage disposal or
other services on the Land and Appurtenances, and along with all on-site
parking facilities (collectively, the "Improvements", and together with the
Land and Appurtenances, the "Real Property"); together with the personal
property owned by Seller, if any, located on the Real Property and used
exclusively in the operation or maintenance of the Real Property, as described
in SCHEDULE 1 attached hereto and made a part hereof but excluding any such
personal property in Seller's property management offices, if any, on the Real
Property (the "Personal Property"); together with any intangible personal
property now or hereafter owned by Seller and used in the use or operation of
the Real Property and Personal Property, including, without limitation,
Seller's rights, if any, to the use of any trade names or trademarks in
connection with the Real Property, provided that Seller makes no representation
or warranty as to whether Seller has rights to the use of any trade names or
trademarks or any other rights with respect to any trade names or trademarks,
and Seller's right, title and interest with respect to
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leases, rental agreements, subleases and tenancies affecting the Real Property
and Seller's interest in all security deposits, prepaid rents and lease
guaranties (collectively, the "Intangible Property"). The Real Property,
Personal Property and Intangible Property are collectively referred to herein
as the "Property".
SECTION 1.2 PURCHASE PRICE.
(a) The purchase price of the Property is Forty-Three Million
Five Hundred Thousand Dollars ($43,500,000) (the "Purchase Price"), allocated
as provided on Exhibit B.
(b) The Purchase Price shall be paid as follows:
(1) UPON THE EXECUTION OF THIS AGREEMENT BY BUYER AND
SELLER, BUYER SHALL DEPOSIT IN ESCROW WITH COMMONWEALTH LAND TITLE COMPANY OF
DALLAS (THE "TITLE COMPANY") AN ALL-CASH PAYMENT IN THE AMOUNT OF FOUR HUNDRED
THIRTY-FIVE THOUSAND DOLLARS ($435,000) (THE "DEPOSIT").
(2) THE DEPOSIT SHALL BE HELD IN AN INTEREST BEARING
ACCOUNT AND ALL INTEREST THEREON SHALL BE DEEMED A PART OF THE DEPOSIT. IF THE
SALE OF THE PROPERTY AS CONTEMPLATED HEREUNDER IS CONSUMMATED, THEN THE DEPOSIT
SHALL BE PAID TO SELLER AT THE CLOSING AND CREDITED AGAINST THE PURCHASE PRICE.
IF THE SALE OF THE PROPERTY IS NOT CONSUMMATED DUE TO SELLER'S DEFAULT
HEREUNDER, THEN, AS BUYER'S SOLE REMEDIES, BUYER MAY EITHER: (1) TERMINATE THIS
AGREEMENT AND RECEIVE A REFUND OF THE DEPOSIT, IN WHICH EVENT NEITHER PARTY
SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER EXCEPT AS PROVIDED IN
SECTIONS 6.1, 9.3 AND 9.9 BELOW, OR (2) BUYER MAY ENFORCE SPECIFIC PERFORMANCE
OF THIS AGREEMENT. IF THE SALE IS NOT CONSUMMATED DUE TO ANY DEFAULT BY BUYER
HEREUNDER, THEN SELLER SHALL RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES. THE
PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A FAILURE TO
CONSUMMATE THIS SALE DUE TO BUYER'S DEFAULT, WOULD BE EXTREMELY DIFFICULT OR
IMPRACTICABLE TO DETERMINE. AFTER NEGOTIATION, THE PARTIES HAVE AGREED THAT,
CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, THE
AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE OF THE DAMAGES THAT SELLER WOULD
INCUR IN SUCH EVENT. BY PLACING THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY
CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY
WAS REPRESENTED BY COUNSEL WHO EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE,
THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION. THE FOREGOING IS NOT
INTENDED TO LIMIT BUYER'S OBLIGATIONS UNDER SECTIONS 6.1, 9.3 AND 9.9.
INITIALS: SELLER ________ BUYER _______
(3) THE BALANCE OF THE PURCHASE PRICE, WHICH IS FORTY-THREE
MILLION SIXTY-FIVE THOUSAND DOLLARS ($43,065,000), SHALL BE PAID TO SELLER IN
IMMEDIATELY AVAILABLE FUNDS, SUBJECT TO THE PRORATIONS AND ADJUSTMENTS AS
PROVIDED IN THIS AGREEMENT, AT THE CONSUMMATION OF THE PURCHASE AND SALE
CONTEMPLATED HEREUNDER (THE "CLOSING").
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ARTICLE II
CONDITIONS
SECTION 2.1 CONDITION PRECEDENT.
Buyer's obligation to purchase the Property is conditioned upon the
following:
(a) Buyer's review and approval of updated preliminary title
reports or commitments, together with copies of the underlying documents, and
any surveys of the Property in Seller's possession. Seller shall furnish to
Buyer a copy of such reports, together with the underlying documents, and any
surveys in Seller's possession, within three (3) days after the date Seller
receives a fully executed original of this Agreement (the "Delivery Period").
(b) Buyer's review and approval of all tenant leases and any
other occupancy agreements (as may have been amended, restated or renewed,
hereinafter collectively referred to as the "leases") affecting the Property.
Seller shall furnish to Buyer copies of the leases within the Delivery Period.
(c) Buyer's review and approval of the physical condition of
the Property.
(d) Buyer's review and approval of all zoning, land use,
building, environmental and other statutes, rules, or regulations applicable to
the Property.
(e) Subject to the provisions of the paragraph below, Buyer's
review and approval of operating statements with respect to the Property for
1995, 1996, 1997 and for January and February 1998, and if prepared, March
1998, certificates of occupancy, licenses, approvals and permits regarding the
Property, plans and specifications, soils and other reports, service contracts,
and other contracts or documents which will be binding on Buyer after Closing.
Seller shall deliver to Buyer within the Delivery Period copies of all such
items in Seller's possession or in the possession of any current third party
property manager of Seller which pertain to the Property; provided, however,
Seller shall make any plans and specifications in its possession and any such
contracts or documents of significance to the Property in its possession which
pertain to the Property, available at the Property for Buyer's inspection and
copying, at Buyer's expense, during reasonable business hours, and in lieu of
Seller's furnishing Buyer with copies thereof. Notwithstanding the foregoing,
Buyer's review shall not include a review of Seller's internal economic
memoranda or reports, attorney-client privileged materials or Seller's
appraisals of the Property, if any.
(f) Buyer's review and approval of any other matters Buyer
deems relevant to the Property, including, but not limited to, the following
items to the extent in Seller's possession: a current rent roll, a schedule of
the Personal Property, copies of the most recent tax bills, security incident
reports, a schedule of filed litigation regarding or affecting the Property, a
current aged receivables report, and copies of construction and equipment
warranties.
(g) Seller's agreement to cooperate, and to cause its third
party employees, including without limitation its property manager and
consultants, to cooperate with Buyer and Buyer's agents and consultants during
the Contingency Period.
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<PAGE> 4
SECTION 2.2 CONTINGENCY PERIOD.
(a) Buyer shall have until April 27, 1998 to review and approve
the matters described in Sections 2.1(b)-(g) above in Buyer's sole discretion
and Buyer shall have until April 29, 1998, to review and approve the matters
described in 2.1(a) (such period being referred to herein as the "Contingency
Period"). If Buyer determines to proceed with the purchase of the Property,
then Buyer shall, before the end of the Contingency Period, notify Seller in
writing that Buyer has approved all of the matters described in Section
2.1(a)-(g) above subject to other termination rights contained herein,
including the right to terminate this Agreement pursuant to subsection 4.1(c)
below. If before the end of the Contingency Period, Buyer fails to provide
written notice of its election to proceed with the purchase of the Property or
to terminate this Agreement, then Buyer shall be deemed to have elected to
terminate this Agreement. In the event Buyer elects to terminate this Agreement
by written notice to Seller or is deemed to have elected to terminate this
Agreement pursuant to the terms hereof, the Deposit and any accrued interest
thereon shall be returned to Buyer, and neither party shall have any further
rights or obligations hereunder except as provided in Sections 6.1, 9.3 and 9.9
below.
(b) Promptly following the execution of this Agreement, Seller
shall provide to Buyer's representatives and its independent accounting firm
access to all financial and other information relating to the operation of the
Property which is Seller's possession. Seller shall authorize any attorneys who
have represented Seller in any material litigation pertaining to or affecting
the Property to respond, at Buyer's expense, to inquiries from Buyer's
representatives and independent accounting firm. If this Agreement terminates
prior to the Closing, other than by reason of a default of Seller, Buyer shall
deliver to Seller copies of any audited financial statements of the Property
prepared for Buyer and assign to Seller without warranty all of Buyer's rights
thereto.
ARTICLE III
BUYER'S EXAMINATION
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF SELLER.
Subject to the provisions of Sections 3.2 and 3.3 below, Seller hereby
makes the following representations and warranties, provided that Seller makes
no representations or warranties with respect to the matters (the "Disclosure
Items") which will be set forth in SCHEDULE 2 which Seller shall deliver to
Buyer within five (5) business days after the mutual execution and delivery
hereof and which at that time will be attached hereto and made a part hereof.
Notwithstanding anything to the contrary contained herein or in any document
delivered in connection herewith, Seller shall have no liability with respect
to the Disclosure Items.
(a) Seller has not (i) made a general assignment for the
benefit of creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by Seller's creditors, (iii)
suffered the appointment of a receiver to take possession of all, or
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substantially all, of Seller's assets, (iv) suffered the attachment or other
judicial seizure of all, or substantially all, of Seller's 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.
(b) Seller is not a "foreign person" as defined in Section 1445
of the Internal Revenue Code of 1986, as amended (the "Code") and any related
regulations.
(c) This Agreement (i) has been duly authorized, executed and
delivered by Seller, and (ii) does not violate any provision of any agreement
or judicial order to which Seller is a party or to which Seller or the Property
is subject.
(d) Seller has the power and authority to enter into this
Agreement and to perform its obligations hereunder.
(e) To the best of Seller's knowledge, the only tenant leases
in force for the Property are set forth in the tenant list attached hereto as
EXHIBIT C and made a part hereof and to the best of Seller's knowledge, there
are no tenant improvement obligations of Landlord except as set forth in the
leases or as otherwise disclosed to Buyer in writing.
(f) To the best of Seller's knowledge, no consents are required
for the performance of Seller's obligations hereunder.
(g) To the best of Seller's knowledge, Seller has not received
written notice from any Significant Tenant, as defined below, that Seller has
not performed its material obligations under such Significant Tenant's lease.
As used herein, the term Significant Tenant shall mean any tenant occupying
five percent (5%) or more of any one of the six (6) real properties comprising
the Real Property.
(h) To the best of Seller's knowledge, the only service
contracts and amendments thereto that will be in effect on the Closing Date are
described on SCHEDULE 5 attached hereto and made a part hereof, subject to the
provisions of Article VII below.
(i) As of the date of this Agreement, Seller has not received
any written notice of any pending or threatened condemnation of all or any
portion of the Property.
(j) As of the date of this Agreement, Seller has not received
written notice of any litigation that is pending or threatened with respect to
the Property, except (i) litigation fully covered by insurance policies
(subject to customary deductibles), or (ii) litigation set forth in SCHEDULE 6
attached hereto and made a part hereof.
(k) As of the date of this Agreement, except as set forth in
the Due Diligence Materials, as defined below, Seller has not received any
written notice from any governmental authority that all or any portion of any
Property is in material violation of any applicable building codes or any
applicable environmental law (relating to clean-up or abatement), zoning law or
land use law, or any other applicable local, state or federal law or regulation
relating to the Property, which material violation has not been cured or
remedied prior to the date of this Agreement.
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(l) Seller has not granted any option or right of first refusal
or first opportunity to any party of acquire any fee or ground leasehold
interest in any portion of the Property.
Each of the representations and warranties of Seller contained in this
Section 3.1: (1) is true as of the date of this Agreement; (2) shall be deemed
remade by Seller, and shall be true in all material respects as of the date of
Closing, subject to (A) any Exception Matters (as defined below), (B) the
Disclosure Items, and (C) other matters expressly permitted in this Agreement
or otherwise specifically approved in writing by Buyer including, without
limitation, the documents, surveys, reports, items and other materials
delivered to or made available to Buyer pursuant to Article II hereof (the "Due
Diligence Materials"), and (3) shall survive the close of escrow as provided in
Section 3.3 below.
SECTION 3.2 NO LIABILITY FOR EXCEPTION MATTERS.
(a) As used herein, the term "Exception Matter" shall refer to
a matter disclosed to Buyer in writing or discovered by Buyer before the
Closing, that would make a representation or warranty of Seller contained in
this Agreement untrue or incorrect, including, without limitation, matters
disclosed in writing to Buyer by Seller or by any other person. If Buyer
obtains knowledge of any Exception Matter after the date hereof, Buyer may
terminate this Agreement and receive a return of the Deposit upon written
notice to Seller within five (5) days after Buyer learns of such Exception
Matter if Seller elects not to cure or remedy any such Exception Matter.
(b) Buyer shall promptly notify Seller in writing of any
Exception Matter of which Buyer obtains knowledge before the Closing. If Buyer
obtains knowledge of any Exception Matter before the Closing, but nonetheless
elects to proceed with the acquisition of the Property, Buyer shall consummate
the acquisition of the Property subject to such Exception Matter and Seller
shall have no liability with respect to such Exception Matter, notwithstanding
any contrary provision, covenant, representation or warranty contained in this
Agreement or in any document delivered pursuant to the terms hereof. If Buyer
elects to terminate this Agreement on the basis of any Exception Matter, Buyer
shall so notify Seller in writing within five (5) days following Buyer's
discovery of the Exception Matter, and the Deposit shall be returned to Buyer.
Buyer's failure to give such notice within such 5-day period shall be deemed a
waiver by Buyer of such Exception Matter. Upon any such termination of this
Agreement, neither party shall have any further rights or obligations
hereunder, except as provided in Sections 6.1, 9.3 and 9.9 below. Seller shall
have no obligation to cure or remedy any Exception Matter, and, subject to
Buyer's right to terminate this Agreement as set forth above, Seller shall have
no liability whatsoever to Buyer with respect to any Exception Matters.
SECTION 3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Seller and Buyer contained
herein shall survive six months from the Closing, except that Buyer's
representations and warranties in Sections 3.5(d) shall survive indefinitely.
Any claim which Buyer or Seller may have at any time against the other for a
breach of any such representation or warranty (other than those contained in
Sections 3.5(d), whether known or unknown, which is not asserted by written
notice to Seller or Buyer
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within nine (9) months after the Closing shall not be valid or effective, and
the party shall have no liability with respect thereto.
SECTION 3.4 SELLER'S KNOWLEDGE
For purposes of this Agreement and any document delivered at Closing,
whenever the phrase "to the best of Seller's knowledge" or the "knowledge" of
Seller or words of similar import are used, they shall be deemed to refer to
the current actual knowledge of Dennis Singleton and John Foster at the times
indicated only and not any implied, imputed or constructive knowledge, without
any independent investigation having been made or any implied duty to
investigate.
SECTION 3.5 REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
(a) Buyer represents and warrants to Seller that this Agreement
and all documents executed by Buyer which are to be delivered to Seller at
Closing do not and at the time of Closing will not violate any provision of any
agreement or judicial order to which Buyer is a party or to which Buyer is
subject.
(b) Buyer represents and warrants to Seller that Buyer has not
(i) made a general assignment for the benefit of creditors, (ii) filed any
voluntary petition in bankruptcy or suffered the filing of any involuntary
petition by Buyer's creditors, (iii) suffered the appointment of a receiver to
take possession of all, or substantially all, of Buyer's assets, (iv) suffered
the attachment or other judicial seizure of all, or substantially all, of
Buyer's 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.
(c) Buyer is duly formed and validly existing under the laws of
the State of Texas. Buyer has duly authorized, executed and delivered this
Agreement.
(d) Buyer is purchasing the Property as investment rental
property, and not for Buyer's own operations or use.
Each of the representations and warranties of Buyer contained in this
Section shall be deemed remade by Buyer as of the Closing and shall survive the
Closing as provided in Section 3.3 above.
SECTION 3.6 BUYER'S INDEPENDENT INVESTIGATION.
(a) Buyer acknowledges and agrees that it has been given or
will be given before the end of the Contingency Period, a full opportunity to
inspect and investigate each and every aspect of the Property, either
independently or through agents of Buyer's choosing, including, without
limitation:
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(1) ALL MATTERS RELATING TO TITLE, TOGETHER WITH ALL
GOVERNMENTAL AND OTHER LEGAL REQUIREMENTS SUCH AS TAXES, ASSESSMENTS, ZONING,
USE PERMIT REQUIREMENTS AND BUILDING CODES.
(2) THE PHYSICAL CONDITION AND ASPECTS OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE INTERIOR, THE EXTERIOR, THE SQUARE FOOTAGE
WITHIN THE IMPROVEMENTS ON THE REAL PROPERTY AND WITHIN EACH TENANT SPACE
THEREIN, THE STRUCTURE, SEISMIC ASPECTS OF THE PROPERTY, THE PAVING, THE
UTILITIES, AND ALL OTHER PHYSICAL AND FUNCTIONAL ASPECTS OF THE PROPERTY. SUCH
EXAMINATION OF THE PHYSICAL CONDITION OF THE PROPERTY SHALL INCLUDE AN
EXAMINATION FOR THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS, AS DEFINED
BELOW, WHICH SHALL BE PERFORMED OR ARRANGED BY BUYER AT BUYER'S SOLE EXPENSE.
FOR PURPOSES OF THIS AGREEMENT, "HAZARDOUS MATERIALS" SHALL MEAN INFLAMMABLE
EXPLOSIVES, RADIOACTIVE MATERIALS, ASBESTOS, POLYCHLORINATED BIPHENYLS, LEAD,
LEAD-BASED PAINT, UNDER AND/OR ABOVE GROUND TANKS, HAZARDOUS MATERIALS,
HAZARDOUS WASTES, HAZARDOUS SUBSTANCES, OIL, OR RELATED MATERIALS, WHICH ARE
LISTED OR REGULATED IN THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION
AND LIABILITY ACT OF 1980, AS AMENDED (42 U.S.C. SECTIONS 6901, ET SEQ.), THE
RESOURCES CONSERVATION AND RECOVERY ACT OF 1976 (42 U.S.C. SECTION 6901, ET
SEQ.), THE CLEAN WATER ACT (33 U.S.C. SECTION 1251, ET SEQ.), THE SAFE DRINKING
WATER ACT (14 U.S.C. SECTION 1401, ET SEQ.), THE HAZARDOUS MATERIALS
TRANSPORTATION ACT (49 U.S.C. SECTION 1801, ET SEQ.), THE AND TOXIC SUBSTANCE
CONTROL ACT (15 U.S.C. SECTION 2601, ET SEQ.), THE ARIZONA ENVIRONMENTAL
QUALITY ACT, A.R.S. SECTIONS 49-201, ET SEQ.; THE ARIZONA "STATE SUPERFUND"
PROVISIONS, A.R.S. SECTIONS 49-281, ET SEQ.; THE ARIZONA SOLID WASTE MANAGEMENT
PROVISIONS, A.R.S. SECTIONS 49-701, ET SEQ.; THE ARIZONA HAZARDOUS WASTE
MANAGEMENT ACT, A.R.S. SECTIONS 49-921, ET SEQ.; AND THE ARIZONA UNDERGROUND
STORAGE TANK PROVISIONS, A.R.S. SECTIONS 49-1001, AND ANY OTHER APPLICABLE
FEDERAL, STATE OR LOCAL LAWS.
(3) ANY EASEMENTS AND/OR ACCESS RIGHTS AFFECTING THE
PROPERTY.
(4) THE LEASES AND ALL MATTERS IN CONNECTION THEREWITH,
INCLUDING, WITHOUT LIMITATION, THE ABILITY OF THE TENANTS TO PAY THE RENT AND
THE ECONOMIC VIABILITY OF THE TENANTS.
(5) THE SERVICE CONTRACTS AND ANY OTHER DOCUMENTS OR
AGREEMENTS OF SIGNIFICANCE AFFECTING THE PROPERTY.
(6) ALL OTHER MATTERS OF MATERIAL SIGNIFICANCE AFFECTING
THE PROPERTY.
(b) BUYER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT SELLER IS
SELLING AND BUYER IS PURCHASING THE PROPERTY ON AN "AS IS WITH ALL FAULTS"
BASIS AND THAT BUYER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY
KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM SELLER, ITS AGENTS, OR BROKERS AS TO
ANY MATTERS CONCERNING THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH IN SECTION
3.1 ABOVE, INCLUDING WITHOUT LIMITATION: (i) the quality, nature, adequacy and
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physical condition and aspects of the Property, including, but not limited to,
the structural elements, seismic aspects of the Property, foundation, roof,
appurtenances, access, landscaping, parking facilities and the electrical,
mechanical, HVAC, plumbing, sewage, and utility systems, facilities and
appliances, the square footage within the improvements on the Real Property and
within each tenant space therein, (ii) the quality, nature, adequacy, and
physical condition of soils, geology and any groundwater, (iii) the existence,
quality, nature, adequacy and physical condition of utilities serving the
Property, (iv) the development potential of the Property, and the Property's
use, habitability, merchantability, or fitness, suitability, value or adequacy
of the Property for any particular purpose, (v) the zoning or other legal
status of the Property or any other public or private restrictions on use of
the Property, (vi) the compliance of the Property or its operation with any
applicable codes, laws, regulations, statutes, ordinances, covenants,
conditions and restrictions of any governmental or quasi-governmental entity or
of any other person or entity, (vii) the presence of Hazardous Materials on,
under or about the Property or the adjoining or neighboring property, (viii)
the quality of any labor and materials used in any improvements on the Real
Property, (ix) the condition of title to the Property, (x) the leases, service
contracts, or other agreements affecting the Property and (xi) the economics of
the operation of the Property.
SECTION 3.7 RELEASE.
(a) Without limiting the above, but subject to the
representations and warranties of Seller contained in Section 3.1 hereof, Buyer
on behalf of itself and its successors and assigns waives its right to recover
from, and forever releases and discharges, Seller, Seller's affiliates,
Seller's investment manager, the partners, trustees, beneficiaries,
shareholders, members, directors, officers, employees and agents of each of
them, and their respective heirs, successors, personal representatives and
assigns (collectively, the "Seller Related Parties"), from any and all demands,
claims, legal or administrative proceedings, losses, liabilities, damages,
penalties, fines, liens, judgments, costs or expenses whatsoever (including,
without limitation, attorneys' fees and costs), whether direct or indirect,
known or unknown, foreseen or unforeseen, that may arise on account of or in
any way be connected with (i) the physical condition of the Property including,
without limitation, all structural and seismic elements, all mechanical,
electrical, plumbing, sewage, heating, ventilating, air conditioning and other
systems, the environmental condition of the Property and Hazardous Materials
on, under or about the Property, or (ii) any law or regulation applicable to
the Property, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
Sections 6901, et seq.), the Resources Conservation and Recovery Act of 1976
(42 U.S.C. Section 6901, et seq.), the Clean Water Act (33 U.S.C. Section 1251,
et seq.), the Safe Drinking Water Act (14 U.S.C. Section 1401, et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.), and
the Toxic Substance Control Act (15 U.S.C. Section 2601, et seq.), and any
other federal, state or local law.
SECTION 3.8 SURVIVAL.
The provisions of this Article III shall survive the Closing, subject
to the qualifications and limitations contained herein.
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ARTICLE IV
TITLE
SECTION 4.1 CONDITIONS OF TITLE.
At the Closing, Seller shall convey title to the Real Property to
Buyer by special warranty deeds (the "Deeds") subject to no exceptions other
than:
(a) Interests of tenants in possession;
(b) Non-delinquent liens for real estate taxes and assessments;
and
(c) Any exceptions disclosed by the preliminary title reports
and commitments and any amendments or supplements thereto delivered to Buyer
during the Contingency Period, or the Due Diligence Materials, and any other
exceptions to title which would be disclosed by an inspection and/or survey of
the Property, except for any exceptions which Seller, in Seller's sole
discretion, elects to remove from title pursuant to the provisions of this
Section below.
Buyer shall notify Seller in writing before the expiration of the
Contingency Period if Buyer has an objection to any of the aforesaid matters.
If Buyer does not give Seller timely written notice of any such objection, all
of the foregoing exceptions shall be the "Conditions of Title." If Buyer does
give Seller timely written notice of any such matters objected to by Buyer (the
"Disapproved Matters"), then Seller shall notify Buyer in writing within one
(1) business day after receipt, as to whether Seller will remove any of the
Disapproved Matters from title to the Property prior to Closing. Seller shall
have absolutely no obligation to remove any Disapproved Matter. If Seller
elects in writing to remove any Disapproved Matter, then Seller shall do so at
Seller's cost prior to Closing and the Conditions of Title shall include all
said matters referred to in clauses (b) and (c) above except for any such
Disapproved Matter removed by Seller. If Seller elects not to remove all such
Disapproved Matters or if Seller does not give Buyer written notice of its
election within the one (1) business day period, then this Agreement shall
terminate, the Deposit shall be returned to Buyer and neither party shall have
any further rights or obligations hereunder, except as provided in Section 6.1,
9.3 and 9.9 hereof unless on or before three (3) business days after Seller's
receipt of Buyer's Disapproved Matters, Buyer gave Seller written notice that
Buyer is waiving its objections to the Disapproved Matters and agrees in such
notice that the Disapproved Matters shall be part of the Conditions of Title.
If there are additional exceptions to title that were not disclosed to Buyer
during the Contingency Period and that are disclosed to Buyer after the
expiration of the Contingency Period, then Buyer shall have, as Buyer's sole
rights and remedies, the right to approve such additional exceptions and
proceed with the Closing or to terminate this Agreement as provided below.
Buyer shall notify Seller in writing on or before three (3) business days after
receiving notice of any additional exception to title as to whether Buyer
approves or disapproves such exceptions. Buyer's failure to give Seller written
notice of Buyer's approval during such three (3) business day period shall be
deemed an election by Buyer to disapprove the title exceptions. If Buyer
disapproves the additional exceptions by providing written notice to Seller
within said three (3) business day period, then this Agreement shall terminate
and the Deposit shall be returned to Buyer and neither party shall have any
further rights or obligations hereunder except as provided in Sections 6.1, 9.3
and 9.9
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below. If Buyer approves the additional title exceptions, such additional title
exceptions shall become part of the Conditions of Title.
By acceptance of the Deeds and the Closing of the purchase and sale of the
Property, (i) Buyer agrees it is assuming for the benefit of Seller all of the
obligations of Seller with respect to the Conditions of Title from and after
the Closing, and (ii) Buyer agrees that Seller shall have conclusively
satisfied its obligations with respect to title to the Property. The provisions
of this Section shall survive the Closing. Nothing herein is intended to limit
Buyer's right to approve title matters in its sole discretion during the
Contingency Period pursuant to the provisions of Article II above.
SECTION 4.2 EVIDENCE OF TITLE.
Delivery of title in accordance with the foregoing shall be evidenced
by the willingness of the Title Company to issue, at Closing, its Owner's ALTA
Policies of Title Insurance (for the properties located in Arizona and
Colorado) and a standard form owner policy of title insurance (for the
properties located in Texas and New Mexico), in the amount of the Purchase
Price showing title to the Real Property vested in Buyer, subject to the
Conditions of Title (the "Title Policy"). Buyer shall have prepared, at Buyer's
cost, the ALTA surveys of the Property necessary to support the issuance of the
Title Policy. Buyer shall provide Seller with copies of such surveys at no cost
to Seller.
ARTICLE V
RISK OF LOSS AND INSURANCE PROCEEDS
SECTION 5.1 MINOR LOSS.
Buyer shall be bound to purchase the Property for the full Purchase
Price as required by the terms hereof, without regard to the occurrence or
effect of any damage to the Property or destruction of any improvements thereon
or condemnation of any portion of the Property, provided that: (a) the cost to
repair any such damage or destruction, or the diminution in the value of the
remaining Property as a result of a partial condemnation, does not exceed Four
Hundred Thirty-Five Thousand Dollars ($435,000) and (b) upon the Closing, there
shall be a credit against the Purchase Price due hereunder equal to the amount
of any insurance proceeds or condemnation awards collected by Seller as a
result of any such damage or destruction or condemnation, plus the amount of
any insurance deductible, less any sums expended by Seller toward the
restoration or repair of the Property. If the proceeds or awards have not been
collected as of the Closing, then the amount of such proceeds or awards shall
be a credit against the Purchase Price, subject to the amount needed to
reimburse Seller for sums expended to repair or restore the Property, and
Seller shall retain the rights to such proceeds and awards.
SECTION 5.2 MAJOR LOSS.
If the amount of the damage or destruction or condemnation as
specified above exceeds Four Hundred Thirty-Five Thousand Dollars ($435,000),
then Buyer may, at its option to be exercised within ten (10) days of Seller's
notice of the occurrence of the damage or destruction or the commencement of
condemnation proceedings, either terminate this Agreement or
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consummate the purchase for the full Purchase Price as required by the terms
hereof. If Buyer elects to terminate this Agreement or fails to give Seller
notice within such 10-day period that Buyer will proceed with the purchase, then
the Deposit shall be returned to Buyer and neither party shall have any further
rights or obligations hereunder except as provided in Sections 6.1, 9.3 and 9.9
below. If Buyer elects to proceed with the purchase, then upon the Closing,
there shall be a credit against the Purchase Price due hereunder equal to the
amount of any insurance proceeds or condemnation awards collected by Seller as a
result of any such damage or destruction or condemnation, plus the amount of any
insurance deductible, less any sums expended by Seller toward the restoration or
repair of the Property. If the proceeds or awards have not been collected as of
the Closing, then the amount of such proceeds or awards shall be a credit
against the Purchase Price, subject to the amount needed to reimburse Seller for
sums expended to repair or restore the Property, and Seller shall retain the
rights to such proceeds and awards.
ARTICLE VI
BROKERS AND EXPENSES
SECTION 6.1 BROKERS.
The parties represent and warrant to each other that no broker or
finder was instrumental in arranging or bringing about this transaction except
for CB Commercial Real Estate ("Seller's Broker"). There are no claims or
rights for brokerage commissions or finder's fees in connection with the
transactions contemplated by this Agreement, except for the commission due, if
any, to Seller's Broker, which shall be paid at Closing pursuant to a separate
agreement between Seller and Seller's Broker. If any other person brings a
claim for a commission or finder's fee based upon any contact, dealings or
communication with Buyer or Seller, then the party through whom such person
makes his claim shall defend the other party (the "Indemnified Party") from
such claim, and shall indemnify the Indemnified Party and hold the Indemnified
Party harmless from any and all costs, damages, claims, liabilities or expenses
(including without limitation, reasonable attorneys' fees and disbursements)
incurred by the Indemnified Party in defending against the claim. The
provisions of this Section 6.1 shall survive the Closing or, if the purchase
and sale is not consummated, any termination of this Agreement.
SECTION 6.2 EXPENSES.
Except as provided in Sections 4.2 above and 8.5 below, each party
hereto shall pay its own expenses incurred in connection with this Agreement
and the transactions contemplated hereby.
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ARTICLE VII
LEASES AND OTHER AGREEMENTS
SECTION 7.1 BUYER'S APPROVAL OF NEW LEASES AND AGREEMENTS
AFFECTING THE PROPERTY.
Between the date hereof and the Closing, Seller shall not enter into
any new lease or other agreement affecting the Property, or modify or terminate
any existing lease or other agreement affecting the Property, without first
obtaining Buyer's written approval, which, during the Contingency Period, will
not be unreasonably withheld or delayed. Buyer shall have sole discretion after
the Contingency Period to approve or disapprove any such proposed action.
Notwithstanding the foregoing, if Buyer fails to give Seller notice of its
approval or disapproval of any such proposed action within three (3) business
days after Seller notifies Buyer in writing of Seller's desire to take such
action and provides to Buyer an economic term sheet for the lease, reasonable
financial information on the tenant and other information reasonably requested
by Buyer, then Buyer shall be deemed to have given its approval. Buyer agrees
that Buyer has approved the proposed leases and lease terms more particularly
described in SCHEDULE 3 attached hereto and made a part hereof.
SECTION 7.2 TENANT IMPROVEMENT COSTS AND LEASING COMMISSIONS.
With respect to any new lease or lease modification entered into by
Seller before the Closing Date and not shown on the original list of leases
presented to Buyer and attached hereto as SCHEDULE 4 and made a part hereof or
lease renewal or lease extension that is approved by Buyer or deemed approved
by Buyer, if Seller performs or pays or contracts for any tenant improvement
work or pays or contracts for any leasing commissions before the Closing, then
such expenses shall be reimbursed by Buyer to Seller at Closing, and Buyer
shall, at Closing, assume any and all remaining obligations with respect to
such tenant improvements and leasing commissions pursuant to the Assignment of
Leases as defined below. Buyer shall reimburse Seller for Seller's out of
pocket legal costs incurred to negotiate any new lease or lease modification,
or any lease renewal or extension occurring after the date on SCHEDULE 4. On
and after the Closing, Seller shall have no further obligations with respect to
any leases or other agreements affecting the Property, including, without
limitation, tenant improvement work and leasing commissions. Notwithstanding
the foregoing, Buyer and Seller acknowledge that at Closing, Buyer shall
receive a credit of (i) Ninety-Six Thousand Sixty-Three Dollars and
Thirty-Three cents ($96,063.33) for Sun Strand's unused tenant improvement
allowance and the cost of the transformer, (ii) One Hundred Forty-Four Thousand
Dollars ($144,000) for CIGNA's lease non-renewal fee, and (iii) One Hundred
Fifty Thousand Dollars ($150,000) for the roof located at Tucson Tech Center.
The provisions of this Section shall survive the Closing.
SECTION 7.3 TENANT NOTICES.
At the Closing, Seller shall furnish Buyer with a signed notice to be
given to each tenant of the Property. The notice shall disclose that the
Property has been sold to Buyer, that, after the Closing, all rents should be
paid to Buyer and that Buyer shall be responsible for all the tenant's
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security deposit, provided that Buyer is given credit at Closing for such
security deposit. The form of the notice shall be otherwise reasonably
acceptable to the parties.
SECTION 7.4 OPERATION OF PROPERTY.
From the date hereof, Seller shall maintain and operate the Property
in the ordinary course of business; provided, however, that Seller shall not be
obligated to make capital expenditures except as may be necessary to maintain
the Property in the same condition it was in at the expiration of the
Contingency Period, subject to normal wear and tear and loss by casualty.
ARTICLE VIII
CLOSING AND ESCROW
SECTION 8.1 ESCROW INSTRUCTIONS.
Upon execution of this Agreement, the parties hereto shall deposit an
executed counterpart of this Agreement with the Title Company, and this
instrument shall serve as the instructions to the Title Company as the escrow
holder for consummation of the purchase and sale contemplated hereby. Seller
and Buyer agree to execute such reasonable additional and supplementary escrow
instructions as may be appropriate to enable the Title Company to comply with
the terms of this Agreement; provided, however, that in the event of any
conflict between the provisions of this Agreement and any supplementary escrow
instructions, the terms of this Agreement shall control.
SECTION 8.2 CLOSING.
The Closing hereunder shall be held and delivery of all items to be
made at the Closing under the terms of this Agreement shall be made at the
offices of the Title Company on May 6, 1998, and before 5:00 p.m. local time,
or such other earlier date and time as Buyer and Seller may mutually agree upon
in writing (the "Closing Date"). Upon ten (10) days' written notice to Buyer,
Seller shall have the right to extend the Closing Date by a period of up to
forty-five (45) days. The Closing Date and time may not otherwise be extended
without the prior written approval of both Seller and Buyer.
SECTION 8.3 DEPOSIT OF DOCUMENTS.
(a) At or before the Closing, Seller shall deposit into escrow
the following items with respect to the Property:
(1) THE DULY EXECUTED AND ACKNOWLEDGED DEEDS IN THE FORM
ATTACHED HERETO AS EXHIBIT D CONVEYING THE REAL PROPERTY TO BUYER SUBJECT TO
THE CONDITIONS OF TITLE;
(2) FOUR (4) DULY EXECUTED COUNTERPARTS OF THE BILL OF SALE
IN THE FORM ATTACHED HERETO AS EXHIBIT E (THE "BILL OF SALE");
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(3) FOUR (4) DULY EXECUTED COUNTERPARTS OF AN ASSIGNMENT
AND ASSUMPTION OF LEASES, SERVICE CONTRACTS AND WARRANTIES IN THE FORM ATTACHED
HERETO AS EXHIBIT F (THE "ASSIGNMENT OF LEASES");
(4) AN AFFIDAVIT PURSUANT TO SECTION 1445(B)(2) OF THE
FEDERAL CODE, AND ON WHICH BUYER IS ENTITLED TO RELY, THAT SELLER IS NOT A
"FOREIGN PERSON" WITHIN THE MEANING OF SECTION 1445(F)(3) OF THE FEDERAL CODE;
(5) AN AFFIDAVIT OF PROPERTY VALUE FOR THE PROPERTIES
LOCATED IN ARIZONA;
(6) A STATUTORY NOTICE TO PURCHASERS OF REAL PROPERTY FOR
THE PROPERTY LOCATED IN TEXAS;
(7)AN ASSIGNMENT AND ASSUMPTION OF DECLARANT OBLIGATIONS
FOR THE PROPERTY LOCATED IN NEW MEXICO IN THE FORM ATTACHED HERETO AS EXHIBIT
H;
(8) A REAL PROPERTY TRANSFER DECLARATION FOR THE PROPERTIES
LOCATED IN COLORADO;
(9) A DR-1083 FOR THE PROPERTIES LOCATED IN COLORADO; AND
(10) AN ASSIGNMENT AND ASSUMPTION OF DECLARANT OBLIGATION
FOR THE PROPERTY LOCATED IN TEXAS IN THE FORM ATTACHED HERETO AS EXHIBIT I.
(b) At or before Closing, Buyer shall deposit into escrow the
following items:
(1) FUNDS NECESSARY TO CLOSE THIS TRANSACTION;
(2) FOUR (4) DULY EXECUTED COUNTERPARTS OF THE BILL OF
SALE; AND
(3) FOUR (4) DULY EXECUTED COUNTERPARTS OF THE ASSIGNMENT
OF LEASES;
(4) AN AFFIDAVIT OF PROPERTY VALUE FOR THE PROPERTIES
LOCATED IN ARIZONA;
(5) A STATUTORY NOTICE TO PURCHASERS OF REAL PROPERTY FOR
THE PROPERTY LOCATED IN TEXAS;
(6)AN ASSIGNMENT AND ASSUMPTION OF DECLARANT OBLIGATIONS
FOR THE PROPERTY LOCATED IN NEW MEXICO IN THE FORM ATTACHED HERETO AS EXHIBIT
H; AND
(7)AN ASSIGNMENT AND ASSUMPTION OF DECLARANT OBLIGATION FOR
THE PROPERTY LOCATED IN TEXAS IN THE FORM ATTACHED HERETO AS EXHIBIT I.
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(c) Buyer and Seller shall each deposit such other instruments
as are reasonably required by the Title Company or otherwise required to close
the escrow and consummate the purchase and sale of the Property in accordance
with the terms hereof, including, without limitation, an agreement (the
"Designation Agreement") designating Title Company as the "Reporting Person"
for the transaction pursuant to Section 6045(e) of the Federal Code and the
regulations promulgated thereunder, and executed by Seller, Buyer and Title
Company. The Designation Agreement shall be in a form reasonably acceptable to
the parties, and, in any event, shall comply with the requirements of Section
6045(e) of the Federal Code and the regulations promulgated thereunder.
(d) Seller shall deliver to Buyer originals of the leases,
copies of the tenant correspondence files (for the three (3) most recent years
of Seller's ownership of the Property only), and originals of any other items
which Seller was required to furnish Buyer copies of or make available at the
Property pursuant to Section 2.1(e) above except for Seller's general ledger
and other internal books or records, within two (2) business days after the
Closing Date. If requested by Buyer, Seller shall provide Buyer with reasonable
access to Seller's original tenant correspondence files after Closing. Seller
shall deliver to Buyer a set of keys to the Property on the Closing Date.
SECTION 8.4 ESTOPPEL CERTIFICATES.
(a) If in accordance with Article II of this Agreement Buyer
elects to proceed with the purchase of the Property, then Seller shall use its
reasonable efforts to obtain recertifications of estoppel certificates from
each tenant of the Property in the form attached hereto as EXHIBIT G or in
another form approved by Buyer. It shall be a condition to Buyer's obligation
to close the sale and purchase of the Property that on or before the Closing,
Buyer is able to obtain a recertification of an estoppel certificate in the
form described above from all of the tenants listed on Schedule 7 attached
hereto and from tenants of the Property covering at least ninety percent (90%)
of the rentable/revenue producing square footage of the Property (which tenants
shall include those listed on Schedule 7).
(b) If the condition contained in Section 8.4(a) above is not
satisfied, then Buyer may, by written notice given to Seller before the
Closing, elect to terminate this Agreement and receive a refund of the Deposit
or waive said condition. If Buyer so elects to terminate this Agreement,
neither party shall have any further rights or obligations hereunder except as
provided in Section 6.1 above and Sections 9.3 and 9.9 below.
SECTION 8.5 PRORATIONS.
(a) Rents, including, without limitation, percentage rents, if
any, and any additional charges and expenses payable under tenant leases, all
as and when actually collected (whether such collection occurs prior to, on or
after the Closing Date); real property taxes and assessments; water, sewer and
utility charges; amounts payable under any service contracts; annual permits
and/or inspection fees (calculated on the basis of the period covered); and any
other expenses of the operation and maintenance of the Property (including,
without limitation, expenses already paid by Seller but which are being
amortized over time by Seller and with respect to which Seller shall receive a
credit at Closing in the amount of the unamortized portion
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thereof), shall all be prorated as of 12:01 a.m. on the date the Deeds are
recorded on the basis of a 365-day year. Seller shall receive a credit at
Closing for the tenant improvements and leasing commissions described in
Section 7.2. Any sums collected by Buyer from tenants after the Closing shall
be promptly paid to current rents and then to Seller to the extent of any
remaining rents and other sums which were delinquent at Closing. Buyer shall
use reasonable efforts to collect such delinquent rents but shall have no
obligation to commence a legal proceeding to collect such sums. If Buyer has
not been able to collect any delinquent rents within ninety (90) days after the
Closing, Seller may bring legal actions to collect such rents, provided Seller
shall have no right to terminate any tenant's lease. The amount of any security
deposits under tenant leases shall be credited against the Purchase Price.
Seller shall receive credits at Closing for the amount of any utility or other
deposits with respect to the Property. Seller shall use reasonable efforts to
obtain a utility reading immediately prior to the Closing Date. Buyer shall
cause all utilities to be transferred into Buyer's name and account at the time
of Closing. Seller and Buyer hereby agree that if any of the aforesaid
prorations and credits cannot be calculated accurately on the Closing Date,
then the same shall be calculated as soon as reasonably practicable after the
Closing Date and either party owing the other party a sum of money based on
such subsequent proration(s) or credits shall promptly pay said sum to the
other party.
(b) For the properties located in Arizona, Seller shall pay for
the premium for a standard coverage title policy. Buyer shall pay for (i) the
additional premium for extended coverage and (ii) the cost of all endorsements.
The escrow fees and recording costs shall be equally borne by both Buyer and
Seller.
For the property located in New Mexico, Seller shall pay
for the title insurance policy. Buyer shall pay for (i) the cost of all
endorsements and the costs of deleting the standard preprinted exceptions, (ii)
all recording costs and (iii) the environmental audit and any other
inspections. The escrow fees shall be equally borne by both Buyer and Seller.
For the property located in Texas, Seller shall pay for (i)
the title insurance premium, and (ii) the cost of recording the deed. Buyer
shall pay for the cost of all endorsements. The escrow fees shall be equally
borne by both Buyer and Seller.
For the properties located in Colorado, Buyer shall pay for
(i) all recording costs, (ii) the documentary fees and (iii) the costs of all
endorsements and extended title coverage. Seller shall pay for the premium for
basic title coverage. The escrow fees shall be equally borne by both Buyer and
Seller.
All other costs associated with the closing of the
transaction contemplated herein shall be paid in accordance with the local
custom of the county in which the Property is located.
(c) The provisions of this Section 8.5 shall survive the
Closing.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NOTICES.
Any notices required or permitted to be given hereunder shall be given
in writing and shall be delivered (a) in person, (b) by certified mail, postage
prepaid, return receipt requested, (c) by Facsimile with confirmation of
receipt, or (d) by a commercial overnight courier that guarantees next day
delivery and provides a receipt, and such notices shall be addressed as
follows:
To Buyer: American Industrial Properties REIT
6210 North Beltline, Suite 170
Irving, TX 75063-2656
Attention: Mr. Lew Friedland
Fax No.: (972) 756-0704
Phone No.: (972) 756-6000
with a copy to: Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
2001 Ross Avenue, Suite 3000
Dallas, TX 25201-8001
Att'n: Brad B. Hawley, Esq.
Fax No.: (214) 849-5599
To Seller : Spieker Properties
2180 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Att'n: Dennis E. Singleton
Fax No.: (650) 854-6594
with copies to: Spieker Properties
2180 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Att'n: Sara Reynolds
Fax No.: (650) 854-6594
Spieker Properties
590 LaPlace Court, Suite 100
Carlsbad, CA 92008
Att'n: Fred Reed
Fax No.: (760) 931-1761
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and a copy to: Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, California 94111
Att'n: Michael H. Liever, Esq.
Fax No.: (415) 773-4285
or to such other address as either party may from time to time specify in
writing to the other party. Any notice shall be effective only upon delivery.
SECTION 9.2 ENTIRE AGREEMENT.
This Agreement, together with the Exhibits hereto, contains all
representations, warranties and covenants made by Buyer and Seller and
constitutes the entire understanding between the parties hereto with respect to
the subject matter hereof. Any prior correspondence, memoranda or agreements
are replaced in total by this Agreement together with the Exhibits hereto.
SECTION 9.3 ENTRY AND INDEMNITY.
In connection with any entry by Buyer, or its agents, employees or
contractors onto the Property, Buyer shall give Seller reasonable advance
notice of such entry and shall conduct such entry and any inspections in
connection therewith so as to minimize, to the greatest extent possible,
interference with Seller's business and the business of Seller's tenants and
otherwise in a manner reasonably acceptable to Seller. Without limiting the
foregoing, prior to any entry to perform any on-site testing, Buyer shall give
Seller written notice thereof, including the identity of the company or persons
who will perform such testing and the proposed scope of the testing. Seller
shall approve or disapprove, in Seller's sole discretion, the proposed testing
within three (3) business days after receipt of such notice. If Seller fails to
respond within such three (3) business day period, Seller shall be deemed to
have disapproved the proposed testing. If Buyer or its agents, employees or
contractors take any sample from the Property in connection with any such
approved testing, Buyer shall provide to Seller a portion of such sample being
tested to allow Seller, if it so chooses, to perform its own testing. Seller or
its representative may be present to observe any testing or other inspection
performed on the Property. Upon the request of Seller, Buyer shall promptly
deliver to Seller copies of any reports relating to any testing or other
inspection of the Property performed by Buyer or its agents, employees or
contractors. Buyer shall not contact any governmental authority without first
obtaining the prior written consent of Seller thereto, and Seller, at Seller's
election, shall be entitled to have a representative on any phone or other
contact made by Buyer to a governmental authority and present at any meeting by
Buyer with a governmental authority. Buyer shall maintain, and shall assure
that its contractors maintain, public liability and property damage insurance
in amounts and in form and substance adequate to insure against all liability
of Buyer and its agents, employees or contractors, arising out of any entry or
inspections of the Property pursuant to the provisions hereof, and Buyer shall
provide Seller with evidence of such insurance coverage upon request by Seller.
Buyer shall indemnify and hold Seller harmless from and against any costs,
damages, liabilities, losses, expenses, liens or claims (including, without
limitation, reasonable attorney's fees) arising out of or relating to any entry
on the Property by Buyer, its agents, employees or contractors in the course of
performing the inspections, testings or inquiries
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provided for in this Agreement. The foregoing indemnity shall survive beyond
the Closing, or, if the sale is not consummated, beyond the termination of this
Agreement.
SECTION 9.4 TIME.
Time is of the essence in the performance of each of the parties'
respective obligations contained herein.
SECTION 9.5 ATTORNEYS' FEES.
If either party hereto fails to perform any of its obligations under
this Agreement or if any dispute arises between the parties hereto concerning
the meaning or interpretation of any provision of this Agreement, then the
defaulting party or the party not prevailing in such dispute, as the case may
be, shall pay any and all costs and expenses incurred by the other party on
account of such default and/or in enforcing or establishing its rights
hereunder, including, without limitation, court costs and reasonable attorneys'
fees and disbursements.
SECTION 9.6 ASSIGNMENT.
Buyer's rights and obligations hereunder shall not be assignable
without the prior written consent of Seller. Buyer shall in no event be
released from any of its obligations or liabilities hereunder in connection
with any assignment. In connection with any assignment pursuant to the terms
hereof, the assignee shall assume all of the rights and obligations of Buyer
hereunder pursuant to a document acceptable to Seller and delivered to Seller
prior to the assignment. Subject to that limitation, this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns.
SECTION 9.7 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
SECTION 9.8 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State in which the relevant portion of the Property is located.
SECTION 9.9 CONFIDENTIALITY AND RETURN OF DOCUMENTS.
Buyer and Seller shall each maintain as confidential any and all
material obtained about the other or, in the case of Buyer, about the Property,
this Agreement or the transactions contemplated hereby, and shall not disclose
such information to any third party except if required by law. This provision
shall survive the Closing or any termination of this Agreement.
SECTION 9.10 INTERPRETATION OF AGREEMENT.
The article, section and other headings of this Agreement are for
convenience of reference only and shall not be construed to affect the meaning
of any provision contained
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herein. Where the context so requires, the use of the singular shall include
the plural and vice versa and the use of the masculine shall include the
feminine and the neuter. The term "person" shall include any individual,
partnership, joint venture, corporation, trust, unincorporated association, any
other entity and any government or any department or agency thereof, whether
acting in an individual, fiduciary or other capacity.
SECTION 9.11 LIMITED LIABILITY.
The obligations of Seller are intended to be binding only on the
property of Seller and shall not be personally binding upon, nor shall any
resort be had to, the private properties of any of its trustees, officers,
beneficiaries, directors, members, or shareholders, the general partners,
officers, directors, members, or shareholders thereof, or any employees or
agents of Seller.
SECTION 9.12 AMENDMENTS.
This Agreement may be amended or modified only by a written instrument
signed by Buyer and Seller.
SECTION 9.13 NO RECORDING.
Neither this Agreement or any memorandum or short form thereof may be
recorded by Buyer.
SECTION 9.14 DRAFTS NOT AN OFFER TO ENTER INTO A LEGALLY BINDING
CONTRACT.
The parties hereto agree that the submission of a draft of this
Agreement by one party to another is not intended by either party to be an
offer to enter into a legally binding contract with respect to the purchase and
sale of the Property. The parties shall be legally bound with respect to the
purchase and sale of the Property pursuant to the terms of this Agreement only
if and when the parties have been able to negotiate all of the terms and
provisions of this Agreement in a manner acceptable to each of the parties in
their respective sole discretion, including, without limitation, all of the
Exhibits and Schedules hereto, and both Seller and Buyer have fully executed
and delivered to each other a counterpart of this Agreement, including, without
limitation, all Exhibits and Schedules hereto.
SECTION 9.15 NO PARTNERSHIP.
The relationship of the parties hereto is solely that of Seller and
Buyer with respect to the Property and no joint venture or other partnership
exists between the parties hereto. Neither party has any fiduciary relationship
hereunder to the other.
SECTION 9.16 NO THIRD PARTY BENEFICIARY.
The provisions of this Agreement are not intended to benefit any third
parties.
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SECTION 9.17 LIMITATION ON LIABILITY.
Notwithstanding anything to the contrary contained herein, after the
Closing the maximum aggregate liability of Seller, and the maximum aggregate
amount which may be awarded to and collected by Buyer, under this Agreement
(including, without limitation, for any breach of representation and warranty
contained herein) and any and all documents executed pursuant hereto or in
connection herewith (collectively the "Other Documents") including, without
limitation, the Deeds, the Bills of Sale and the Assignments of Leases, shall
under no circumstances whatsoever exceed Two Percent (2%) of the Purchase
Price.
SECTION 9.18 BUYER'S ACKNOWLEDGMENT OF SATISFACTION OF CONDITIONS.
Notwithstanding anything to the contrary contained herein including,
without limitation, the provisions of Article II and Section 4.1, Buyer
acknowledges and agrees that it has reviewed and approved all of the Due
Diligence Materials, conditions and other items and matters described or
referred to in Section 2.1(a) through (g) and the title matters described in
Section 4.1, and that the conditions contained in Sections 2.1(a) through (g)
and Section 4.1 have been satisfied.
SECTION 9.19 LIMITATION ON INDEMNIFICATION.
To the extent, if at all, that N.M. Stat. Ann. Section 56-7-1 is
applicable to this Agreement, or any related documents, any agreement to
indemnify any indemnitee in this Agreement or any related documents, will not
extend to liability, claims, damages, losses or expenses, including fees of
lawyers, arising out of (i) the preparation or approval of maps, drawings,
opinions, reports, surveys, change orders, designs or specifications by an
indemnitee or the agents or employees of the indemnitee or (ii) the giving of
or the failure to give directions or instructions by the indemnitee, or the
agents or employees of the indemnitee, where such giving or failure to give
directions or instructions is the primary cause of bodily injury to persons or
damage to the property.
SECTION 9.20 SPECIAL PROVISIONS REGARDING PROPERTIES LOCATED IN
THE STATE OF COLORADO.
Special taxing districts may be subject to general obligation
indebtedness that is paid by revenues produced from annual tax levies on the
taxable property within such districts. Property owners in such districts may
be placed at risk for increased mill levies and excessive tax burdens to
support the servicing of such debt where circumstances arise resulting in the
inability of such a district to discharge such indebtedness without such an
increase in mill levies. Buyer should investigate the debt financing
requirements of the authorized general obligation indebtedness of such
districts, existing mill levies of such district servicing such indebtedness,
and the potential for an increase in such mill levies.
SECTION 9.21 MANAGER LETTERS.
Buyer will have its accountants audit the operating statements and
books and records with respect to each of the real properties constituting the
Property. Buyer has requested that each manager of each such real property (a
"Manager") give the Buyer a certification letter (the
22
<PAGE> 23
"Certification Letter") with respect to such operating statements and books and
records. Seller is willing to allow each such Manager to provide such a
Certification Letter only upon the terms and conditions set forth in this
Section. Buyer hereby expressly acknowledges and agrees that Manager in giving
the Certification Letter is doing so only on its own behalf and not on behalf
of or as agent of Spieker. Buyer hereby agrees to, and shall, indemnify and
hold Seller and the Seller Related Parties harmless from and against any and
all claims, losses, liabilities, damages, causes of action, costs and expenses,
including, without limitation, attorney's fees and costs, of whatever nature,
arising out of or in connection with the Certification Letters and the reliance
thereon by Buyer or any other party. Each Manager must confirm to Spieker in a
letter acceptable to Spieker that it is giving the Certification Letter on its
own behalf and not on behalf of or as agent of Seller and that the Manager will
not look to Spieker for indemnification, compensation or any other obligations
with respect to any Certification Letter.
SECTION 9.22 LETTER OF CREDIT.
At or before Closing, Seller shall deliver into escrow (i) the
original Bank of America Irrevocable Standby Letter of Credit No. C7340430, as
amended (the "Dell LC"); (ii) a copy of the Letter to Bank of America dated
April 29, 1998 and executed by Michael Watt, Chief Operating Officer of Dell
Financial Services and any supplements thereto (the "Dell Letter"); and (iii) a
copy of the Letter to Bank of America dated April 30, 1998 and executed by Sara
H. Reynolds, Vice President and General Counsel of Seller (the "Spieker
Letter").
SECTION 9.23 METWEST, INC.'S LEASE.
Spieker Properties, L.P., a California limited partnership shall
execute a Guaranty for the benefit of Buyer in the form attached hereto as
Exhibit J and made a part hereof.
SECTION 9.24 SURVIVAL.
(a) Except as expressly set forth to the contrary herein, no
representations, warranties, covenants or agreements of the parties contained
herein shall survive the Closing.
(b) The provisions of this Article IX shall survive Closing.
23
<PAGE> 24
The parties hereto have executed this Agreement as of the respective
dates written below.
SELLER: SPIEKER NORTHWEST INC.,
a California corporation
By: /s/ CRAIG G. VOUGHT
-------------------------------------
Craig G. Vought
Its: Vice President
------------------------------------
BUYER: AMERICAN INDUSTRIAL PROPERTIES REIT
a Texas Real Estate Investment Trust
By: /s/ [ILLEGIBLE]
-------------------------------------
Its: V.P.
------------------------------------
24
<PAGE> 25
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Real Property Description Exhibit A-1 through Exhibit A-6
Exhibit B Allocation of Purchase Price
Exhibit C List of Tenant Leases
Exhibit D Special Warranty Deed
Exhibit E Bill of Sale
Exhibit F Assignment of Leases, Service Contracts and Warranties
Exhibit G Tenant Estoppel Certificate
Exhibit H Assignment and Assumption of Declarant Obligations
Exhibit I Assignment and Assumption of Declarant Obligations
Exhibit J Guaranty
SCHEDULES
Schedule 1 Personal Property List
Schedule 2 Disclosure Items
Schedule 3 Preapproved Leases
Schedule 4 List of Original Leases
Schedule 5 List of Service Contracts
Schedule 6 Pending or Threatened Litigation
Schedule 7 List of Major Tenants
</TABLE>
25
<PAGE> 26
EXHIBIT A-1
SUMMIT PARK AND LAND
AUSTIN, TEXAS
[SEE ATTACHED]
A-1
<PAGE> 27
EXHIBIT A-2
BROADBENT BUSINESS PARK AND LAND
ALBUQUERQUE, NEW MEXICO
[SEE ATTACHED]
A-2
<PAGE> 28
EXHIBIT A-3
ACADEMY POINT ATRIUM II
COLORADO SPRINGS, COLORADO
[SEE ATTACHED]
A-3
<PAGE> 29
EXHIBIT A-4
AERO TECH R&D
COLORADO SPRINGS, COLORADO
[SEE ATTACHED]
A-4
<PAGE> 30
EXHIBIT A-5
BLACK CANYON TECH CENTER
PHOENIX, ARIZONA
[SEE ATTACHED]
A-5
<PAGE> 31
EXHIBIT A-6
TUCSON TECH CENTER
TUCSON, ARIZONA
[SEE ATTACHED]
A-6
<PAGE> 32
EXHIBIT B
ALLOCATION OF PURCHASE PRICE
<TABLE>
<CAPTION>
PROPERTY PURCHASE PRICE
-------- --------------
<S> <C>
Tucson Tech Center, Arizona $4,300,000
Black Canyon Tech, Arizona $7,850,000
Aero Tech R & D, Colorado $6,600,000
Academy Pointe Atrium II, Colorado $8,650,000
Broadbent Business Park, New Mexico $5,400,000
Summit Park, Texas $8,200,000
Summit Land and Broadbent Land $2,500,000
</TABLE>
B-1
<PAGE> 33
EXHIBIT C
LIST OF TENANT LEASES
BY PROPERTY
C-1
<PAGE> 34
EXHIBIT D
SPECIAL WARRANTY DEED
[See Attached]
D-1
<PAGE> 35
EXHIBIT A
[Legal Description]
[See Attached]
<PAGE> 36
EXHIBIT B
(a) Interests of tenants in possession pursuant to the terms of their leases;
(b) Non-delinquent liens for real estate taxes and assessments
(c) Exceptions disclosed by the preliminary title reports and commitments and
amendments thereto received by Grantee, and any other exceptions to title
which would be disclosed by an inspection of the Property and/or matters
shown on the surveys of the Property [we will specify the matters].
<PAGE> 37
CUT AND PASTE GLOBAL ACKNOWLEDGMENT FORM
INSERT
<PAGE> 38
EXHIBIT E
BILL OF SALE
----------------------------------------
This Bill of Sale (the "Bill of Sale") is made and entered into ,
199__, by and between Spieker Northwest, Inc., a California corporation
("Assignor"), and AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas Real Estate
Investment Trust ("Assignee").
In consideration of the sum of Ten Dollars ($10) and other good and
valuable consideration paid by Assignee to Assignor, the receipt and
sufficiency of which are hereby acknowledged by Assignor, Assignor does hereby
assign, transfer, convey and deliver to Assignee, its successors and assigns,
free and clear of any liens or encumbrances created by, through or under
Assignor except as set forth in Exhibit C, all items of tangible personal
property, if any, which are owned by Assignor and situated upon and used
exclusively in connection with the land described on the attached Exhibit A
(the "Land") and the improvements located thereon (the "Improvements"), and
which are described on the attached Exhibit B, but specifically excluding any
and all personal property owned by tenants or otherwise considered the property
of tenants under any leases affecting the Land or Improvements (the " Personal
Property").
This Bill of Sale is made subject, subordinate and inferior to the
easements, covenants and other matters and exceptions set forth on Exhibit C,
attached hereto and made a part hereof for all purposes.
ASSIGNEEACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN
THAT CERTAIN AGREEMENT OF PURCHASE AND SALE DATED ___________, 1998, BY AND
BETWEEN ASSIGNOR AND ASSIGNEE (THE "AGREEMENT"), ASSIGNOR HAS NOT MADE, DOES
NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES,
COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER,
WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS
TO, CONCERNING OR WITH RESPECT TO (A) THE NATURE, QUALITY OR CONDITIONS OF THE
PERSONAL PROPERTY, (B) THE INCOME TO BE DERIVED FROM THE PERSONAL PROPERTY, (C)
THE SUITABILITY OF THE PERSONAL PROPERTY FOR ANY AND ALL ACTIVITIES AND USES
WHICH ASSIGNEE MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PERSONAL
PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF
ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PERSONAL PROPERTY,
OR (F) ANY OTHER MATTER WITH RESPECT TO THE PERSONAL PROPERTY. ASSIGNEE FURTHER
ACKNOWLEDGES AND AGREES THAT, HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE
PERSONAL PROPERTY, ASSIGNEE IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE
PERSONAL PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY
ASSIGNOR, EXCEPT AS SPECIFICALLY PROVIDED IN THE AGREEMENT. ASSIGNEE FURTHER
ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH
RESPECT TO THE PERSONAL PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND
THAT ASSIGNOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF
SUCH
E-1
<PAGE> 39
INFORMATION. ASSIGNEE FURTHER ACKNOWLEDGES AND AGREES THAT THE SALE OF THE
PERSONAL PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS, WHERE IS"
CONDITION AND BASIS "WITH ALL FAULTS," EXCEPT AS SPECIFICALLY PROVIDED IN THE
AGREEMENT.
The obligations of Assignor are intended to be binding only on the
property of Assignor and shall not be personally binding upon, nor shall any
resort be had to, the private properties of any of its trustees, officers,
beneficiaries, directors, members, or shareholders, or of its general partners,
officers, directors, members, or shareholders thereof, or any employees or
agents of Assignor.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Bill of
Sale to be executed on the date and year first above written.
ASSIGNOR: SPIEKER NORTHWEST INC.,
a California corporation
By:
--------------------------------------
Its:
-------------------------------------
ASSIGNEE: AMERICAN INDUSTRIAL PROPERTIES REIT,
a Texas Real Estate Investment Trust
By:
--------------------------------------
Its:
-------------------------------------
E-2
<PAGE> 40
EXHIBIT A
[LEGAL DESCRIPTION]
E-A-1
<PAGE> 41
EXHIBIT B
[PERSONAL PROPERTY
E-A-1
<PAGE> 42
EXHIBIT C
(d) Interests of tenants in possession pursuant to the terms of their leases;
(e) Non-delinquent liens for real estate taxes and assessments
(f) Exceptions disclosed by the preliminary title reports and commitments and
amendments thereto received by Grantee, and any other exceptions to title
which would be disclosed by an inspection of the Property and/or matters
shown on the surveys of the Property [we will list such matters].
E-A-1
<PAGE> 43
EXHIBIT F
ASSIGNMENT OF LEASES, SERVICE CONTRACTS
AND WARRANTIES
-------------------------------
This Assignment of Lease, Service Contracts and Warranties (this
"Assignment") is made and entered into , 199__, by and between SPIEKER
NORTHWEST, INC., a California corporation ("Assignor"), and AMERICAN INDUSTRIAL
PROPERTIES REIT, a Texas Real Estate Investment Trust ("Assignee").
For good and valuable consideration paid by Assignee to Assignor, the
receipt and sufficiency of which are hereby acknowledged by Assignor, Assignor
does hereby assign, transfer, set over and deliver unto Assignee all of
Assignor's right, title, and interest in (i) those certain leases (the
"Leases") listed on Exhibit A, attached hereto and made a part hereof for all
purposes except for Seller's right to collect delinquent rent and other
delinquent sums owing under such Leases for the period prior to the date
hereof, (ii) those certain service contracts, tenant improvement agreements and
leasing commission agreements (the "Contracts") listed on Exhibit B, if any,
attached hereto and made a part hereof for all purposes, and (iii) those
certain warranties held by Assignor (the "Warranties") listed on Exhibit C,
attached hereto and made a part hereof for all purposes.
This Assignment is made subject, subordinate and inferior to the
easements, covenants and other matters and exceptions set forth on Exhibit D,
attached hereto and made a part hereof for all purposes.
ASSIGNEE ACKNOWLEDGES AND AGREES, BY ITS ACCEPTANCE HEREOF, THAT,
EXCEPT AS EXPRESSLY PROVIDED IN THAT CERTAIN AGREEMENT OF PURCHASE AND SALE,
DATED AS OF _____________, 1998, BY AND BETWEEN ASSIGNOR AND ASSIGNEE (THE
"AGREEMENT"), THE LEASES, THE CONTRACTS AND THE WARRANTIES ARE CONVEYED "AS IS,
WHERE IS" AND IN THEIR PRESENT CONDITION WITH ALL FAULTS, AND THAT ASSIGNOR HAS
NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS,
WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR
CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST,
PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE NATURE, QUALITY
OR CONDITION OF THE LEASES, THE CONTRACTS OR THE WARRANTIES, THE INCOME TO BE
DERIVED THEREFROM, OR THE ENFORCEABILITY, MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE LEASES, THE CONTRACTS OR THE WARRANTIES.
Except as otherwise expressly provided in the Agreement, by accepting
this Assignment and by its execution hereof, Assignee assumes the payment and
performance of, and agrees to pay, perform and discharge, all the debts, duties
and obligations to be paid, performed or discharged from and after the date
hereof, by (a) the "landlord" or the "lessor" under the terms, covenants and
conditions of the Leases, including, without limitation, brokerage commissions
and compliance with the terms of the Leases relating to tenant improvements and
security
F-1
<PAGE> 44
deposits, and (b) the owner under the Contracts and/or the Warranties. Assignee
agrees to indemnify, hold harmless and defend Assignor from and against any and
all claims, losses, liabilities, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees) resulting by reason of the
failure of Assignee to pay, perform or discharge any of the debts, duties or
obligations assumed or agreed to by Assignee hereunder. Assignor agrees to
indemnify Assignee and hold harmless and defend Assignee from and against any
and all claims, damages, liabilities, losses, costs and expenses (including,
without limitation, reasonable attorneys' fees) resulting by reason of the
failure of Assignor to have paid, performed, or discharged any debts, duties or
obligations which Assignor was obligated to have paid, performed, or
discharged, and which accrued, during Assignor's ownership of the Property (as
such term is defined in the Agreement), by (a) the "landlord" or the "lessor"
under the terms, covenants and conditions of the Leases, or (b) the Owner under
the Contracts and/or Warranties, excluding with respect to clauses (a) and (b)
any such debts, duties or obligations arising out of or in any way related to
the physical condition of the Property.
The obligations of Assignor are intended to be binding only on the
property of Assignor and shall not be personally binding upon, nor shall any
resort be had to, the private properties of any of its trustees, officers,
beneficiaries, directors, members, or shareholders, or of its investment
manager, the general partners, officers, directors, members, or shareholders
thereof, or any employees or agents of Assignor or its investment manager.
All of the covenants, terms and conditions set forth herein shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment
to be executed on the day and year first above written.
ASSIGNOR: SPIEKER NORTHWEST INC.,
a California corporation
By:
--------------------------------------
Its:
-------------------------------------
ASSIGNEE: AMERICAN INDUSTRIAL PROPERTIES REIT,
a Texas Real Estate Investment Trust
By:
--------------------------------------
Its:
-------------------------------------
F-2
<PAGE> 45
EXHIBIT G
TENANT ESTOPPEL CERTIFICATE
(TENANT NAME)
Name
Address
Re: ____________
Dear _________:
You provided an estoppel certificate to Spieker Northwest, Inc.
("Spieker") in connection with its acquisition of the real property (the
"Property") of which you are a tenant. The estoppel certificate is attached
hereto and made a part hereof (the "Estoppel Certificate"). _______________
("Buyer") is in the process of negotiating with Spieker a purchase agreement
for the acquisition of the Property by Buyer. In the event Spieker and Buyer
are able to negotiate a purchase agreement, Buyer has requested that Spieker
obtain from you a recertification of your Estoppel Certificate.
We would appreciate it if you would sign the enclosed extra
counterpart of this letter and return it to
_________________________________________________________by Federal Express to
confirm that all of the information and statements contained in the Estoppel
Certificate are true and correct as of this date of the letter [EXCEPT - UPDATE
ANY INFORMATION NECESSARY] and that all rent and other sums payable under the
Lease have been paid through March 1998.
Thank you very much for your cooperation in this matter.
Very truly yours,
SPIEKER NORTHWEST, INC.,
a California corporation
By:
--------------------------------------
Its:
-------------------------------------
We agree that the information
and statements contained in the Estoppel
Certificate are true and correct as of
the date of this letter [EXCEPT-UPDATE
ANY INFORMATION OR STATEMENTS] and that
G-1
<PAGE> 46
all rent and other sums payable
under our Lease have been paid through
March 1998. Spieker, Buyer and any
successors or assigns of Buyer who may
acquire an interest in or title to the
Property, and any lender or its
successors or assigns that may make a
loan with respect to the Property, may
rely on this letter in proceeding with
the acquisition of the Property or in
proceeding with making such a loan.
- ------------------------------
By:
--------------------------------------
Its:
-------------------------------------
Dated: March __, 1998
G-2
<PAGE> 47
EXHIBIT H
ASSIGNMENT AND ASSUMPTION OF DECLARANT OBLIGATIONS
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
American Industrial Properties REIT
6210 North Beltline, Suite 170
Irving, Texas 75063-2656
Attention: Mr. Lew Friedland
- --------------------------------------------------------------------------------
(SPACE ABOVE THIS LINE FOR RECORDER'S USE)
ASSIGNMENT AND ASSUMPTION OF DECLARANT OBLIGATIONS
(Broadbent Business Park)
THIS ASSIGNMENT AND ASSUMPTION ("Assignment") dated as of April
__, 1998, is between SPIEKER NORTHWEST, INC., a California corporation
("Assignor"), and AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas Real Estate
Investment Trust ("Assignee").
A. Assignor is the declarant under that certain Declaration of
Protective Covenants dated February 29, 1980 and recorded on March 14, 1980 in
the real estate records of Bernalillo County, New Mexico as Document No.
80-15957 at Book 759 at Pages 691-713, as amended by that certain Amendment of
Declaration of Protective Covenants dated June 18, 1981 and recorded on June 19,
1981 in the real estate records of Bernalillo County in the State of New Mexico
as Document No. 81-32370 at Book 858 at Pages 932-940, and as amended by that
certain Second Amendment of Declaration of Protective Covenants dated July 18,
1986 and recorded on July 23, 1986 in the real estate records of Bernalillo
County, New Mexico as Document No. 86-67339 at Book 375-A at Pages 161-171 (the
"Declaration").
H-1
<PAGE> 48
B. Assignor is the declarant by virtue of that certain
Assignment and Assumption of Declarant Obligations dated as of November 17, 1997
and recorded on November 17, 1997 in the real estate records of Bernalillo
County, New Mexico as Document No. 97-120850.
C. Assignor has transferred to Assignee its interest of Assignor
in the real property encumbered by the Declaration.
D. Assignor desires to assign to Assignee all of the rights and
obligations of Assignor as declarant under the Declaration, and Assignee desires
to accept the assignment of the rights and obligations and to assume Assignor's
rights and obligations as declarant under the Declaration, on the terms and
conditions below.
ACCORDINGLY, Assignor and Assignee agree:
1. As of the date of this Assignment (the "Effective Date"),
Assignor assigns to Assignee all of the rights and obligations of Assignor as
declarant under the Declaration.
2. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all liabilities, losses, damages, claims, costs
or expenses, including, without limitation, reasonable attorneys' fees and costs
(collectively, the "Claims"), originating prior to the Effective Date and
relating to Assignor's rights and obligations as declarant under the
Declaration.
3. As of the Effective Date, Assignee hereby assumes all of
Assignor's rights and obligations as declarant under the Declaration and will
indemnify Assignor against and hold Assignor harmless from any and all Claims
originating on or after the Effective Date and relating to Assignor's rights and
obligations as declarant under the Declaration.
4. To the extent, if at all, Section 56-7-1 NMSA 1978 is
applicable to this Assignment, no indemnity obligation provided in this
Assignment with respect to the real property encumbered by the Declaration shall
extend to liability, claims, damages, losses or expenses, including attorney
fees, relating to the construction, installation, alteration, modification,
repair, maintenance, servicing, demolition, excavation, drilling, reworking,
grading, paving, clearing, site preparation or development of any real property
or of any improvement on, above or under real property and arising out of (a)
the preparation or approval of maps, drawings, opinions, reports, surveys,
change orders, designs or specifications by the indemnitee, or the agents or
employees of the indemnitee, or (b) the giving of or the failure to give
directions or instructions by the indemnitee, or the agents or employees of the
indemnitee, where the giving of or failure to give directions or instructions is
the primary cause of bodily injury to persons or damage to property.
5. In the event of any dispute between Assignor and Assignee
arising out of the obligations of Assignor under this Assignment or concerning
the meaning or interpretation of any provision contained in this Assignment, the
losing party shall pay the prevailing party's costs and expenses of the dispute,
including, without limitation, reasonable attorneys' fees and costs. Any such
attorneys' fees and other expenses incurred by either party in enforcing a
judgment in its favor under this Agreement shall be recoverable separately from
and in addition to any other
H-2
<PAGE> 49
amount included in the judgment, and the attorneys' fees obligation is intended
to be severable from the other provisions of this Assignment and to survive and
not be merged into any such judgment.
6. This Assignment shall be binding on and inure to the benefit
of Assignor and Assignee and their respective successors, successors-in-interest
and assigns.
7. This Assignment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
8. This Assignment shall be governed by and construed in
accordance with the laws of New Mexico.
Assignor and Assignee have executed this Assignment the day and
year first above written.
Assignor: SPIEKER NORTHWEST, INC.
a California corporation
By:
--------------------------------------
Its:
-------------------------------------
Assignee: AMERICAN INDUSTRIAL PROPERTIES REIT,
a Texas Real Estate Investment Trust
By:
--------------------------------------
Its:
-------------------------------------
H-3
<PAGE> 50
EXHIBIT I
ASSIGNMENT AND ASSUMPTION OF DECLARANT OBLIGATIONS
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
American Industrial Properties REIT
6210 North Beltline, Suite 170
Irving, Texas 75063-2656
Attention: Mr. Lew Friedland
-------------------SPACE ABOVE THIS LINE FOR RECORDER'S USE------------------
ASSIGNMENT AND ASSUMPTION
(Summit Park)
THIS ASSIGNMENT AND ASSUMPTION ("Assignment") is made and
entered into as of April __, 1998, by and between SPIEKER NORTHWEST, INC., a
California corporation ("Assignor"), and AMERICAN INDUSTRIAL PROPERTIES REIT, a
Texas Real Estate Investment Trust, with reference to the following:
A. Assignor is the successor declarant/grantor each of the
following documents (the "Declarations"):
(i) That certain Declaration of Sign and Landscaping
Easements and Maintenance Covenants dated March 31, 1988 and recorded on May 2,
1988 in the Official Records of Travis County, Texas, at BOOK 10666, PAGE 988;
(ii) That certain Declaration of Easements and Maintenance
Covenants dated March 31, 1988 in the Official Records of Travis County, Texas,
at BOOK 10667, PAGE 14;
(iii) That certain Private Access Easement and Maintenance
Agreement dated March 31, 1988 and recorded on May 2, 1988 in the Official
Records of Travis County, Texas, at BOOK 10667, PAGE 1; and
I-1
<PAGE> 51
(iv) That certain Private Access Easement and Maintenance
Agreement dated March 31, 1988 and recorded on May 2, 1988 in the Official
Records of Travis County, Texas, at BOOK 10666, PAGE 975.
B. The parties hereto desire that Assignee become the successor
declarant/grantor under the Declarations in connection with its acquisition from
Assignor of the real property (the "Property") to which the Declarations relate.
NOW, THEREFORE, in consideration of the mutual promises and
agreements hereinafter contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Assignment and Assumption. Effective upon the date of
recordation (the "Effective Date") of the deed of the Property by Assignor to
Assignee, Assignor assigns to Assignee all of Assignor's rights, powers and
reservations under the Declarations, and Assignee accepts such assignment and
assumes and agrees to perform the duties and obligations of Assignor accruing or
arising under the Declarations from and including the Effective Date.
2. Indemnification.
(a) If Assignee fails to perform any duty or obligation
accruing or arising under the Declarations from and including the Effective
Date, Assignee shall indemnify and hold harmless Assignor from and against any
and all claims, demands, losses, damages, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees) resulting therefrom.
If any litigation or other action is brought against Assignor by reason of any
such failure, Assignee shall, upon Assignor's request, defend same at Assignee's
expense by counsel reasonably satisfactory to Assignor.
(b) If Assignor fails to perform any duty or obligation
accruing or arising under the Declarations prior to the Effective Date, Assignor
shall indemnify and hold harmless Assignee from and against any and all claims,
demands, losses, damages, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' fees) resulting therefrom. If any litigation
or other action is brought against Assignee by reason of any such failure,
Assignor shall, upon Assignee's request, defend same at Assignor's expense by
counsel reasonably satisfactory to Assignee.
3. Attorneys' Fees. In any litigation, arbitration or other
action or proceeding arising from this Assignment between the parties hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred therein.
4. Successors and Assigns. This Assignment shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
5. Miscellaneous. This Assignment constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and can be modified only by a writing signed by the parties hereto. This
Assignment shall be governed by and construed in accordance with the laws of the
State of Texas. Time is of the essence. This Assignment may be
I-2
<PAGE> 52
executed in counterparts with the same effect as if the parties hereto had
executed the same document.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment and Assumption as of the date first set forth above.
AMERICAN INDUSTRIAL PROPERTIES REIT, SPIEKER NORTHWEST, INC.
a Texas Real Estate Investment Trust a California corporation
By: By:
-------------------------------- ------------------------------
Its: Its:
------------------------------- -----------------------------
I-3
<PAGE> 53
SCHEDULE 1
LIST OF PERSONAL PROPERTY
S1-1
<PAGE> 54
SCHEDULE 2
DISCLOSURE ITEMS
Tucson Tech Center, Arizona
o Some portions of the roof have leaks
o The roof needs repairs
o Avent, Inc. is currently appealing the 1998 tax valuation of the property
Black Canyon Tech, Arizona
o Metwest intends to sublease its leased space and/or vacate the leased space
before the expiration of its lease
o Sunstrand's tenant improvement allowance
o Drywells located on property may not be registered
Aerotech R&D, Colorado
o Some portions of the roof have leaks
Academy Pointe Atrium II, Colorado
o Compressor currently being replaced
o Property may not be in compliance with certain ADA requirements
o Overlook Systems and OAO Corporation have outstanding tenant improvement
allowances
Broadbent Business Park/Land, New Mexico
o Some portions of the roof have leaks
o Cigna's dispute with WCB (prior owner) over payment of building paint job
Summit Park/Land, Texas
o Radian has an outstanding tenant improvement allowance
o Dell Computer has an outstanding tenant improvement allowance
o Dell Computer one (1) Letter of Credit security deposit
S2-1
<PAGE> 55
SCHEDULE 3
PREAPPROVED LEASES AND LEASE TERMS
S3-1
<PAGE> 56
SCHEDULE 4
LIST OF EXISTING LEASES
(AS OF ______________________, 1998)
S4-1
<PAGE> 57
SCHEDULE 5
LIST OF SERVICE CONTRACTS
[SEE ATTACHED]
S4-1
<PAGE> 58
SCHEDULE 6
PENDING OR THREATENED LITIGATION
None
S6-1
<PAGE> 59
SCHEDULE 7
LIST OF MAJOR TENANTS
[See Attached]
S7-1
<PAGE> 1
EXHIBIT 10.66
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
NORTH AUSTIN OFFICE, LTD.
AND
AMERICAN INDUSTRIAL PROPERTIES REIT
<PAGE> 2
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is dated as of
February ___, 1998, (the "Effective Date") by and between NORTH AUSTIN OFFICE,
LTD., a Texas limited partnership ("Seller"), and AMERICAN INDUSTRIAL
PROPERTIES REIT, a Texas real estate investment trust ("Buyer").
IN CONSIDERATION of the respective agreements hereinafter set forth,
Seller and Buyer agree as follows:
1. Property Included in Sale. Seller hereby agrees to sell and convey
to Buyer, and Buyer hereby agrees to purchase from Seller, subject to the terms
and conditions set forth herein, the following:
(a) that certain real property located in Austin, Travis County,
Texas, and being more particularly described in Exhibit A attached
hereto and incorporated herein for all purposes (the "Land");
(b) all rights, privileges and easements appurtenant to the Land,
including, without limitation, all minerals, oil, gas and other
hydrocarbon substances on and under and that may be produced from the
Land, as well as all development rights, land use entitlements,
including without limitation building permits, licenses, permits and
certificates, utilities commitments, air rights, water, water rights,
riparian rights, and water stock relating to the Land and any
rights-of-way or other appurtenances used in connection with the
beneficial use and enjoyment of the Land and all of Seller's right,
title and interest in and to all roads, easements, rights of way and
alleys adjoining, serving or servicing the Land (collectively, the
"Appurtenances");
(c) all improvements and fixtures located on the Land and
appurtenances, including, without limitation, that certain office
building and related improvements located on the Land, and all
apparatus, and equipment used in connection with the operation or
occupancy of the Land and appurtenances, such as heating and air
conditioning systems and facilities used to provide any utility,
refrigeration, ventilation, garbage disposal or other services on the
Land and appurtenances, and along with all on-site parking facilities
(collectively, the "Improvements", and together with the Land and
Appurtenances, the "Real Property");
(d) all tangible personal property owned by Seller located on or in
or used in connection with the Real Property as of the date hereof and
as of the "Closing Date" (as defined in Paragraph 8(b) below)
including, without limitation, those items described in the Personal
Property Inventory attached hereto as Exhibit B attached hereto
(collectively, the "Tangible Personal Property"); and
(e) any intangible personal property now or hereafter owned by
Seller and used in the ownership, use or operation or development of
the Real Property and Tangible Personal Property, including, without
limitation, the right to use the name "WHITNEY JORDAN PLAZA" and any
other trade name now used in connection with the Real Property and, to
<PAGE> 3
the extent approved by Buyer pursuant to this Agreement, any contract
or lease rights (including, without limitation, the lessor's interest
in and to all tenant leases, rental agreements, subleases and
tenancies, including all amendments, modifications, agreements,
records, substantive correspondence, and other documents affecting in
any way a right to occupy any portion of the Real Property
(individually and collectively, the "Leases"), and Seller's interest
in all security deposits and prepaid rent, if any, under the Leases
and any and all guaranties of the Leases, utility contracts,
warranties or other agreements or rights relating to the ownership,
use and operation of the Real Property or Tangible Personal Property
(collectively, the "Intangible Property", and together with the
Tangible Personal Property, the "Personal Property").
All of the items referred to in Subparagraphs (a), (b), (c), (d) and
(e) above are collectively referred to as the "Property."
2. Purchase Price; Earnest Money.
(a) The purchase price of the Property is TWENTY-TWO MILLION TWO
HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($22,250,000.00), subject to
adjustments as provided in this Agreement (the "Purchase Price").
(b) The Purchase Price less any adjustments to the Purchase Price
provided this Agreement, shall be delivered in immediately available
funds at the closing of the purchase and sale contemplated hereunder
(the "Closing").
(c) Within one (1) day after the Effective Date, Buyer shall
deliver to title company (the "Escrow Holder") a copy of this
Agreement together with a certified check or wired funds in the amount
of $200,000.00; within thirty (30) days after the Effective Date,
Buyer shall deliver to Escrow Holder a certified check or wired funds
in the amount of $300,000.00, for a total of $500,000.00 (collectively
the "Earnest Money"), which Earnest Money shall be held in escrow by
the Escrow Holder and delivered to the party entitled thereto in
accordance with the provisions of this Agreement. The Earnest Money
shall be invested by the Escrow Holder in an interest-bearing escrow
account in a bank or other financial institution acceptable to Buyer.
All interest earned on the Earnest Money shall belong to Buyer and
shall be paid to Buyer on demand.
(d) A portion of the Earnest Money in the amount of One Hundred and
No/100 Dollars ($100.00) (the "Independent Contract Consideration")
shall be deemed independent consideration for Seller's execution and
delivery of this Contract. If the Closing occurs, the Independent
Contract Consideration shall be applied as a credit towards the
Purchase Price. However, if the Closing does not occur, for any
reason, the Independent Contract Consideration shall be paid by the
Escrow Holder to Seller.
(e) Subject to the Conditions Precedent to closing as set out in
paragraph 6 below but notwithstanding any other provision of this
Agreement to the contrary, thirty (30) days after the Effective Date,
$25,000.00 of the Earnest Money shall become non-refundable
(2)
<PAGE> 4
unless Buyer thereafter terminates this Agreement because of a
material default by Seller occurring thereafter, provided, however,
that in the event Seller does not provide a Preliminary Document
within the time required by subparagraph 4 (a) for the delivery to
Buyer of such Preliminary Document, the said 30-day time period shall
be extended by the number of additional days Seller takes to provide
such Preliminary Document to Buyer.
(f) Subject to the Conditions Precedent to closing as set out in
paragraph 6 below and subject to the conditions set out in section 5
(c) below, forty-five (45) days after the Effective Date, the
remainder of the Earnest Money shall become non-refundable.
3. Title to the Property.
(a) At the Closing, Seller shall convey to Buyer indefeasible and
insurable fee simple title to the Real Property and Improvements, by
duly executed and acknowledged special warranty deed substantially in
the form attached hereto as Exhibit C (the "Deed"). Evidence of
delivery of indefeasible and insurable fee simple title shall be the
issuance by Texas Professional Title, Inc. (the "Title Company") to
Buyer at the Closing of an Owner's Policy of Title Insurance in the
form promulgated by the Texas State Board of Insurance in the amount
of the Purchase Price at no more than the standard rates allowed by
the Texas Department of Insurance, insuring fee simple title to the
Real Property in Buyer, subject only to such exceptions as Buyer shall
approve pursuant to Paragraph 5, below (the "Title Policy"). The Title
Policy shall provide full coverage against mechanics' and
materialmen's liens, the printed form survey exception shall be
limited to "shortages in area" and the standard exception for taxes
shall read: "standby fees and taxes for the year 1998 and subsequent
years, and subsequent assessments for prior years due to change in
land usage or ownership" and shall contain such special endorsements
as Buyer may reasonably require, including, without limitation, any
endorsements required as a condition to Buyer's approval of any title
exceptions pursuant to Paragraph 5, below (the "Endorsements").
(b) At the Closing, Seller shall transfer title to the Tangible
Personal Property by a special warranty bill of sale in the form
attached hereto as Exhibit D (the "Bill of Sale"), such title to be
free of any liens, encumbrances or interests.
(c) At the Closing, Seller shall transfer title to the Intangible
Property, the "Assumed Contracts" (as hereinafter defined), and the
"Warranties and Guaranties" (as hereafter defined) by an assignment of
intangible property in the form attached hereto as Exhibit E (the
"Assignment of Intangible Property"), and shall assign the Leases by
an assignment of leases in the form attached hereto as Exhibit F (the
"Assignment of Leases"), such title to be free of any liens,
encumbrances or interests.
(d) Anything contained herein to the contrary notwithstanding and
notwithstanding any approval or consent given by Buyer hereunder,
Seller shall cause all monetary encumbrances, including without
limitation all mechanics' liens to be released from
(3)
<PAGE> 5
the Property on or prior to the Closing and shall cause the Title
Company to insure title to the Property as vested in Buyer without any
exception for such matters.
4. Due Diligence Documents.
(a) Within ten (10 ) days after the Effective Date, Seller shall
provide to Buyer, at Seller's expense, the Title Commitment (as
defined in subparagraph 4 (a) (i) below) and the Survey (as defined in
subparagraph 4 (a) (ii) below), and, except as specifically provided
for under subparagraph 4 (a) (xi) below, within five (5) days after
the Effective Date, Seller shall provide to Buyer, at Seller's
expense, the other documents described in this subparagraph 4 (a)
(collectively the documents described in this subparagraph 4 (a),
including but not limited to the Title Commitment and Survey, are
herein referred to as the "Preliminary Documents") to the extent in
Seller's possession and/or control. In the event Seller does not
deliver one or more of the Preliminary Documents to Buyer within the
required time period, Seller shall not be in default but shall have an
additional period of time for providing the Preliminary Document
(continuing until the end of the original Due Diligence Period as set
out in subparagraph 5 (a) below) in which to provide any and every
such Preliminary Document, in which event (i) the 30-day time period
for $25,000.00 of the Earnest Money becoming non-refundable as
provided for in subparagraph 2 (e) above, (ii) the 45-day time period
for the remainder of the Earnest Money becoming non-refundable as set
forth in subparagraph 2(f), (iii) the 45-day Due Diligence Period as
set out in subparagraph 5 (a), and (iv) the Closing Date, shall all be
extended by the number of additional days Seller takes to provide such
Preliminary Document to Buyer. The Preliminary Documents consist of
the following:
(i) Title Commitment. A current title commitment
(the "Title Commitment") for an owner's Policy of title
insurance, covering the Real Property and issued by the Title
Company, together with a legible copy of each document, map
and survey referred to in the Title Commitment;
(ii) Survey. An up-dated survey of the Property
dated within thirty (30) days of the Effective Date (the
"Survey") prepared by a registered public surveyor, in
accordance with the most recent Texas Surveyor's Association
standards for a Category A1, Condition II Survey, certified
by such surveyor to Buyer and the Title Company in the form
attached hereto as Exhibit G and acceptable to the Title
Company for the purpose of limiting the standard printed
exception for survey matters to "shortages in area" in the
Title Policy. The Survey at a minimum shall (a) set forth the
legal description and street address of the Real Property,
(b) show the location of all of the Improvements, all
recorded restrictions, easements, rights-of-way, ingress and
egress, all building restriction lines or applicable yard or
setback requirements, all curb cuts, all utility lines and
facilities, all visible restrictions, easements,
rights-of-way, possible rights of third parties, party walls
and encroachments (either onto the Land from adjacent
property or onto adjacent property from the Land) affecting
the Real Property, and (c) locate all improvements on
adjoining property which are within five feet of the property
lines of the Land;
(4)
<PAGE> 6
(iii) Agreements. Copies of written, agreements,
contracts and other documents, whether existing or proposed
as of the Effective Date, which (a) affect the Property and
(b) are not disclosed by the Title Commitment, including
without limitation any agreements relating to the service,
operation, repair, supply, advertising, promotion, sale,
leasing or management of the Property or the use of common
facilities. If no such documents exist, Seller shall furnish
its certification to that effect. Buyer shall designate,
prior to the expiration of the "Due Diligence Period"
(hereafter defined), those contracts that Seller shall assign
to Buyer and that Buyer shall assume as of the Closing Date,
which contracts to be assumed by Buyer are referred to herein
as "Assumed Contracts";
(iv) Plans. Copies of all as-built plans and
specifications for the Improvements, and as-built drawings
for all underground utilities (collectively, the "Plans");
(v) Warranties. Copies of any and all guarantees or
warranties and other rights given to Seller in connection
with the construction of the Improvements or the purchase of
any of the Personal Property, if any (collectively the
"Warranties and Guaranties");
(vi) Reports. All reports in Seller's possession or
control relating to the Property including reports relating
to the (i) environmental condition of the Property, including
without limitation, environmental reports, environmental
audits and the like (which reports are listed on Exhibit H);
and (ii) soil, seismological, geological and drainage
conditions, and the flood characteristics of the Property;
(vii) Rent Roll. A rent roll, dated no earlier than
ten (10) days prior to the Effective Date, and certified by
Seller to be accurate and complete, showing:
1) the name and address of each tenant of the
Improvements;
2) the rentable square footage for each tenant;
3) the commencement and expiration date of each
tenant's Lease;
4) the monthly rental payable by each tenant
(including the date and amount of any schedule
rent escalation's during the Lease term);
5) the amount and nature of expenses for which the
tenant is responsible;
6) the amount of any security deposit;
7) details of any extension options, any options
to terminate or lease additional space, and any
rights of first refusal;
8) any free rent, or other unexpired concessions
or inducements, or obligations of Seller; and
9) aging of current accounts receivable from
tenants, along with a listing of any prepaid
rent (all rent is assumed due on the first of
the month unless otherwise noted), (the "Rent
Roll").
(5)
<PAGE> 7
The most current Rent Roll is attached as Exhibit I.
Seller shall deliver to Buyer for its approval, ten
(10) days prior to the Closing Date, an updated Rent
Roll dated not earlier than ten (10) days prior to
the Closing Date and certified by Seller to be
accurate and complete (the "Updated Rent Roll").
(viii) Leases. Copies of all Leases with all tenants
of the Improvements, certified by Seller and access to copies
of all correspondence to or from such tenants. Seller may
comply with its obligation to deliver copies of Leases by
providing Buyer and its agents with full access to its lease
files;
(ix) Operating Statements. Copies of operating
statements for the Property certified by Seller (or audited,
if audited statements are available) to be accurate and
complete, which shall cover the past two (2) calendar years
and the monthly period of January 1998 as it becomes
available (Buyer hereby acknowledging and agreeing that the
operating statements for January 1998 is in the process of
being prepared and shall be provided to Buyer within five (5)
business days after it is prepared and finalized). Such
statements shall include itemization of income and expense,
itemization of all capital expenditures made and a report of
net cash receipts during the respective periods;
(x) Licenses, Etc. Copies of any licenses, permits
or certificates required by governmental authorities in
connection with construction or occupancy of the
Improvements, including, without limitation, building
permits, certificates of completion, certificates of
occupancy, environmental permits and licenses, and swimming
pool and sign permits;
(xi) Insurance Policies. Copies of all liability,
fire and casualty insurance policies carried by Seller and an
insurance claims history for the most recent calendar year
prior to Closing, which shall be delivered within two (2)
weeks after the Effective Date;
(xii) Commission Agreements. A complete list, and
copies, of all agreements for leasing commissions and/or
locator fees payable on prior leases, existing leases and
renewals or options affecting the Property (and, if such
agreements show a commission or locator fee which will be due
or payable after the Effective Date, an executed release from
the broker or finder releasing Buyer and its successors and
assigns from any obligation to pay such commission or locator
fee and agreeing to look solely to Seller for payment (the
"Commission Releases"));
(xiii) Other Documents. Current property tax bills,
and all data, correspondence, documents, agreements, waivers,
notices, applications and other records with respect to the
Property relating to transactions with taxing authorities,
governmental agencies, utilities, vendors, tenants and others
with whom Buyer may be dealing from and after the Closing
Date. Seller may satisfy this requirement by making its files
available to Buyer.
(6)
<PAGE> 8
(b) Independent Audit. Promptly following the execution of
this Agreement and to the extent not already provided pursuant to the
terms of Paragraph 4(a), above, Seller shall provide to Buyer's
representatives and independent accounting firm access to all
financial and other information relating to the Property which would
be sufficient to enable Buyer's representatives and independent
accounting firm to prepare audited financial statements for 1996, 1997
and 1998 year-to-date in conformity with generally accepted accounting
principles and to enable them to prepare such statements, reports or
disclosures as Buyer may deem necessary or advisable. Seller shall
reasonably cooperate with Buyer's representatives and independent
accounting firm in connection with the aforementioned financial
analysis and shall provide any additional information necessary to
allow Buyer to make disclosures required by and otherwise comply with
the financial accounting requirements of Regulation S-X promulgated by
the Securities and Exchange Commission. Seller shall provide Buyer's
independent accounting firm a signed representation letter which will
be sufficient to enable an independent public accountant to render an
opinion on the financial statements related to the Property. Seller
shall authorize any attorneys who have represented Seller in any
material litigation pertaining to or affecting the Property to
respond, at Buyer's expense, to inquiries from Buyer's representatives
and independent accounting firm. If and to the extent Seller's
financial statements pertaining to the Property for any periods during
the years 1996, 1997 or 1998 year-to-date have been audited, promptly
after the execution of this Agreement, Seller shall provide Buyer with
copies of such audited financial statements and shall cooperate with
Buyer's representatives and independent public accountants to enable
them to contact the auditors who prepared such audited financial
statements and to obtain, at Buyers expense, a reissuance of such
audited financial statements. If this Agreement terminates prior to
the Closing, other than by reason of a default of Seller, Buyer shall
deliver to Seller copies of any audited financial statements of the
Property prepared for Buyer and assign to Seller without warranty all
of Buyer's rights thereto. The provisions of this section 4 (b) shall
survive Closing.
5. Due Diligence Review.
(a) Approval of Preliminary Documents and Physical Condition.
Buyer shall review each of the Preliminary Documents, and the physical
condition of the Property, and such other items as Buyer deems
necessary and shall advise Seller in writing of any objectionable
condition revealed in its review by written notice to Seller within
twenty (20) days after Buyer's receipt of all Preliminary Documents.
Buyer shall complete its review of the Preliminary Documents and the
physical condition of the Property and all other reviews permitted or
otherwise provided for in this Agreement on or before forty-five (45)
days after the Effective Date (the "Due Diligence Period"). If Buyer
fails to so notify Seller within the Due Diligence Period as to any or
all of the Preliminary Documents, or as to the physical condition of
the Property, then such Preliminary Document(s) or physical condition
shall be deemed approved by Buyer. Subject to Paragraph 3(d) and
Paragraph 6, Seller shall have five (5) business days after the
earlier of:
(i) Delivery to Seller of specific written
disapproval of all or any Preliminary Documents, or of the
physical condition of the Property; or
(7)
<PAGE> 9
(ii) Expiration of the Due Diligence Period if any
Preliminary Document or the physical condition of the
Property is deemed disapproved, to notify Buyer in writing
that either (1) Seller shall cause the Preliminary Document
or condition disapproved to be cured, removed or terminated,
as the case may be, prior to the Closing Date, or (2) Seller
shall not cause such Preliminary Document or condition to be
cured, removed or terminated.
If Seller fails to so notify Buyer within the five
(5) day period, then Seller shall be deemed to have elected
the option in clause (a)(ii)(2) above. If Seller elects the
option in clause (a)(ii)(2) above, then, subject to the
provisions of Paragraph 7, below, Buyer shall have the right
in its sole discretion to either waive the objectionable
condition and proceed with the purchase pursuant to this
Agreement or terminate this Agreement and receive a return of
the Earnest Money. If Seller gives notice pursuant to
(a)(ii)(l), above, and fails to remove or otherwise satisfy
the objectionable condition, and Buyer is unwilling to waive
such condition, Seller shall be in default and Buyer shall
have the rights and remedies set forth in Paragraph 7, below.
(b) Termination of Agreement . Notwithstanding anything in
this Agreement to the contrary, but subject to the loss of part or all
of its Earnest Money, Buyer shall have the right to terminate this
Agreement at any time during the Due Diligence Period. In the event
this Agreement is terminated pursuant to Paragraph 5, then, subject to
the provisions of Paragraph 7, the Earnest Money shall be returned to
Buyer and all obligations of Buyer and Seller hereunder (except the
provisions of this Agreement which recite that they survive
termination) shall terminate and be of no further force or effect. The
provisions of this Subparagraph shall survive termination of this
Agreement.
(c) In the event Buyer fails to terminate this Agreement
pursuant to any provisions of this section 5 within the Due Diligence
Period, the earnest money shall become non-refundable subject only to
(i) the Conditions Precedent to Closing as set out in paragraph 6
below and (ii) a material default by Seller thereafter occurring
resulting in Buyer's termination of this Agreement.
6. Conditions Precedent to Closing. The following are conditions
precedent to Buyer's obligation to purchase the Property (the "Conditions
Precedent"). The Conditions Precedent are intended solely for the benefit of
Buyer and may be waived only by Buyer in writing. In the event any Condition
Precedent is not satisfied or waived by Buyer, Buyer may, in its sole and
absolute discretion, terminate this Agreement at which point the Earnest Money
shall be returned to Buyer and, subject to the provisions of Paragraph 7, all
obligations of Buyer and Seller hereunder (except provisions of this agreement
which recite that they survive termination) shall terminate and be of no
further force or effect; provided, however, that in the event any of the
Conditions Precedent have not been satisfied or waived, Buyer shall so inform
Seller of same and Seller shall have thirty (30) days from the date of such
notification to satisfy such Condition Precedent.
(8)
<PAGE> 10
(a) All of Seller's representations and warranties contained
in this Agreement shall have been substantially true and correct in
all material respects when made and shall be substantially true and
correct in all material respects as of the Closing Date.
(b) The physical condition of the Property shall be
substantially the same on the Closing Date as on the date of Buyer's
execution of this Agreement, except for reasonable wear and tear and
loss by casualty (subject to the provisions of Paragraph 13, below)
and repairs, replacements and improvements made with Buyer's written
approval.
(c) As of the Closing Date, there shall be no litigation or
administrative agency or other governmental proceeding of any kind
whatsoever, pending or threatened, which was not disclosed in writing
to Buyer during the Due Diligence Period and which, after Closing
would, in Buyer's reasonable opinion, materially adversely affect the
value of the Property or the ability of Buyer to operate the Property
in the manner in which it is currently being operated, and no
proceedings shall be pending or threatened which could or would cause
the redesignation or other modification of the zoning classification
of, or of any building or environmental code requirements applicable
to, any of the Property.
(d) Seller shall terminate at or prior to the Closing Date,
at no cost or expense to Buyer, any and all contracts or other
agreements affecting the Property that are not Assumed Contracts.
(e) Seller shall have substantially complied with all of
Seller's material duties and obligations contained in this Agreement.
(f) Seller shall have delivered to Buyer tenant certificates
("Tenant Certificates") dated within thirty (30) days of the Closing
Date in a form substantially similar to Exhibit "L" attached hereto
from tenants under Leases of the Property representing ninety percent
(90%) of the gross revenue of the Property; provided, that in the
event that any state agency, including but not limited to the Texas
Workforce Commission, requires the use of a different form, Buyer
shall accept such different form for such tenant.
7. Remedies.
(a) In the event the sale of the Property is not consummated
solely because of a breach or default under this Agreement on the part
of Buyer, the Earnest Money shall be paid to and retained by Seller as
liquidated damages. The parties have agreed that Seller's actual
damages, in the event of a default by Buyer, would be extremely
difficult or impracticable to determine. THEREFORE, BY PLACING THEIR
INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($500,000.00) HAS BEEN AGREED UPON, AFTER NEGOTIATION,
AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS
SELLER'S EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE
EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller __________ Buyer __________
(9)
<PAGE> 11
(b) In the event the sale of the Property is not consummated
solely because of a material default under this Agreement on the part
of Seller occurring after the expiration of the Due Diligence Period
(other than a delay by Seller in providing any of the Preliminary
Documents as provided for above, which delay shall not be deemed a
default hereunder), Buyer shall have the option of either (1)
terminating this Agreement and receiving back the Earnest Money, or
(2) continue this Agreement pending Buyer's action for specific
performance of this Agreement.
8. Closing and Escrow.
(a) Upon mutual execution of this Agreement, the parties
hereto shall deposit an executed counterpart of this Agreement with
Escrow Holder and this Agreement shall serve as instructions to Escrow
Holder for consummation of the purchase and sale contemplated hereby.
(b) The parties shall conduct an escrow Closing. The Closing
shall take place at the offices of Seller's legal counsel, Dodd &
Batla, A Professional Corporation, located at 800 Brazos, Suite 1400,
Austin, Texas 78701. D. Michael Dodd shall handle the Closing as agent
of the Title Company. The Closing shall be on or before sixty (60)
days from the Effective Date (as extended, if applicable, pursuant to
section 4 (a) and Paragraph 6), or on such other date mutually agreed
upon between Buyer and Seller in writing (the "Closing Date"). In the
event the Closing does not occur on or before the Closing Date, Escrow
Holder shall, unless it is notified by both parties to the contrary
within five (5) days after the Closing Date, return to the depositor
thereof items which were deposited hereunder; provided, however, that
in the event Escrow Holder receives conflicting notices, Escrow Holder
may place such items in the registry of the District Court of Travis
County, Texas. Any such return shall not, however, relieve either
party of any liability it may have for its wrongful failure to Close.
(c) At or before the Closing, Seller shall deliver to Escrow
Holder or Buyer the following:
(i) a duly executed and acknowledged Deed;
(ii) a duly executed Bill of Sale;
(iii) originals of all Leases and a duly executed
and acknowledged Assignment of Leases;
(iv) originals of the Assumed Contracts not
previously delivered to Buyer (to the extent originals are
available; provided if originals are not available Seller
shall provide Buyer with true, correct and complete copies);
(v) a duly executed Assignment of Intangible
Property;
(10)
<PAGE> 12
(vi) originals of the building permits and
certificates of occupancy for the Improvements and all
tenant-occupied space included within the Improvements and
all Warranties and Guaranties not previously delivered to
Buyer;
(vii) notices to the Tenants, each prepared and
completed by Seller for each Tenant, in the form attached as
Exhibit J, each duly executed by Seller;
(viii) the Tenant Certificates;
(ix) a duly executed affidavit that Seller is not a
"foreign person" within the meaning of Section 1445(e)(3) of
the Internal Revenue Code of 1986 (the "Code") in the form
attached as Exhibit K;
(x) such resolutions, authorizations, bylaws or
other corporate and/or partnership documents or agreements
relating to Seller and its partners as shall be reasonably
required by Buyer;
(xi) a full release of all monetary encumbrances
affecting the Property, including without limitation any
mechanics' liens and such bond, indemnity or other
arrangements as shall be necessary to cause the Title Company
to insure title to the Property as vested in Buyer without
any exception for such matters;
(xii) a closing statement in form and content
satisfactory to Buyer and Seller (the "Closing Statement")
duly executed by Seller;
(xiii) all keys to the Property (except for keys in
the possession of the tenants);
(xiv) evidence of termination of any contracts and
other agreements affecting the Property that are not Assumed
Contracts; and
(xv) any documents or agreements reasonably required
by the Title Company to issue the Title Policy.
Buyer may waive compliance on Seller's part under any of the foregoing items by
an instrument in writing.
(d) At or before the Closing, Buyer shall deliver to Escrow
Holder or Seller the following:
(i) a duly executed Assignment of Leases;
(ii) a duly executed Assignment of Intangible
Property;
(iii) the Closing Statement, duly executed by Buyer;
and
(11)
<PAGE> 13
(iv) the Purchase Price less any holdbacks and
proration credits provided for this Agreement.
(e) Seller and Buyer shall each deposit such other
instruments as are reasonably required by Escrow Holder or Title
Company or otherwise required to close the escrow and consummate the
purchase of the Property in accordance with the terms hereof.
(f) Prorations, Closing Costs and Adjustments.
(1) The following are to be apportioned as of 12:01
AM on the Closing Date, as follows:
(i) Rent. Rent under the Leases shall be
apportioned as of the Closing Date. With respect to
any rent arrearages arising under the Leases, after
Closing, Buyer shall pay to Seller any rent actually
collected which is applicable to the period
preceding the Closing Date; provided, however, that
all rent collected by Buyer shall be applied first
to all unpaid rent accruing after the Closing Date,
and then to unpaid rent accruing prior to the
Closing Date. Buyer shall not be obligated to take
any steps to recover any rent arrearages. Seller
shall be permitted to pursue its remedy for
collection of any rent arrearages applicable to the
period prior to the Closing Date, provided that
Buyer shall incur no cost, expense or liability in
connection therewith, but Seller shall not be
permitted to enforce any other legal or equitable
remedies specifically including commencing eviction
procedures.
(ii) Leasing Costs. Seller shall pay as of
the Closing all leasing commission and tenant
improvement costs, if any, in connection with any
Lease executed on or before the Closing that are or
will become due and payable as of or after the
Closing. Buyer shall be entitled to a credit against
the Purchase Price for any such commissions or costs
incurred in connection with any Lease executed on or
before the Closing.
(iii) Security Deposits. Buyer shall be
entitled to a credit against the Purchase Price for
the total sum of all security deposits paid to
Seller by tenants under any Leases, and any interest
earned thereon which, by law or the terms of such
Leases, is payable to such tenants.
(iv) Unexpired Concessions. Buyer shall be
entitled to a credit against the Purchase Price for
any free rent, abatements, or other unexpired
concessions under any Leases to the extent they
apply to any period after the Closing.
(v) Tenant Charges. Where the Leases contain
tenant obligations for taxes, common area expenses,
operating expenses or additional charges of any
other nature, and where Seller has collected any
portion thereof in excess
(12)
<PAGE> 14
of amounts owed by tenants for such items for the
period prior to the Closing Date, then there shall be
an adjustment and credit given to Buyer on the
Closing Date for such excess amounts collected. Buyer
shall apply all such excess amounts to the charges
owed by tenants for such items for the period after
the Closing Date and, if required by the Leases,
shall rebate or credit tenants with any remainder. If
it is determined that the amount collected during
Seller's ownership period exceeded the tenants'
obligation to pay for such expenses incurred during
the same period by more than the amount previously
credited to Buyer at Closing, then Seller shall
promptly pay to Buyer the deficiency upon demand
after the Closing.
(vi) Utility Charges. Seller shall cause all
the utility meters to be read on the Closing Date,
and will be responsible for the cost of all
utilities used prior to the Closing Date, except to
the extent such utility charges are billed to and
paid by tenants directly.
(vii) Real Estate Taxes and Special
Assessments. General real estate taxes payable for
the 1997 calendar year and all prior years shall be
paid by Seller. General real estate taxes payable
for the 1998 calendar year shall be prorated between
Seller and Buyer as of the Closing Date. Seller
shall pay on or before Closing the full amount of
any bonds or assessments against the Property
including interest payable therewith, including any
bonds or assessments that may be payable after the
Closing Date as a result of or in relation to the
construction or operation of any Improvements or any
public improvements that took place or for which any
assessment was levied prior to the Closing Date.
Buyer shall pay the full amount of any bonds or
assessments incurred after the Closing Date that are
not subject to the immediately preceding sentence.
If the amount of general real estate taxes for the
1998 calendar year cannot be determined on the
Closing Date, then a proration shall be made by the
parties based on a reasonable estimate of the real
property taxes applicable to the Property and the
parties shall adjust the proration when the actual
amount becomes known upon the written request of
either party made to the other.
(viii) Other Apportionments. Amounts payable
under the Assumed Contracts, annual or periodic
permit and/or inspection fees (calculated on the
basis of the period covered), and liability for
other Property operation and maintenance expenses
and other recurring costs shall be apportioned as of
the Closing Date.
(ix) Preliminary Closing Adjustment. Seller
and Buyer shall jointly prepare and approve a
preliminary Closing adjustment on the basis of the
Leases and other sources of income and expenses, and
shall deliver such computation to Escrow Holder
prior to Closing.
(13)
<PAGE> 15
(x) Post-Closing Reconciliation. Subject to
the provisions of Subparagraph vii above, if any of
the aforesaid prorations cannot be definitely
calculated on the Closing Date, then they shall be
estimated at the Closing and definitely calculated
as soon after the Closing Date as feasible, but in
any event within sixty (60) days after the Closing
Date. As soon as the necessary information is
available, Buyer shall conduct a post-Closing audit
to determine the accuracy of all prorations made to
the Purchase Price (the "Post-Closing Audit").
Either party owing the other party a sum of money
based on such subsequent proration(s) or the
Post-Closing Audit shall promptly pay said sum to
the other party, together with interest thereon at
the rate of two percent (2%) over the "prime rate"
(as announced from time to time in the Wall Street
Journal) per annum from the Closing Date to the date
of payment if payment is not made within ten (10)
days after delivery of a bill therefor.
(2) Closing Costs. Seller shall pay for the Survey,
the Title Commitment and the premium for the Title Policy,
the charge for the survey deletion, the cost of any
Endorsements, the chain of title search any escrow fees or
costs and sales tax (if any). Recording fees, shall be paid
fifty percent (50%) by Buyer and fifty percent (50%) by
Seller. Seller shall be responsible for all costs incurred in
connection with the prepayment or satisfaction of any loan or
bond secured by the Property including, without limitation,
any prepayment fees, penalties or charges. All other costs
and charges of the escrow for the sale not otherwise provided
for in this Agreement shall be allocated in accordance with
the closing customs for Travis County, Texas. Buyer and
Seller shall each be responsible for their respective legal
fees to negotiate and execute this Agreement. In the event
this Agreement is terminated or Closing occurs, the foregoing
allocation of costs shall survive such termination or
Closing.
(3) Survival. The provisions of this Subparagraph
(f) shall survive the Closing.
9. Representations, Warranties and Covenants of Seller. As of the date
hereof and again as of Closing, Seller represents and warrants to, and
covenants with, Buyer as follows:
(a) To Seller's knowledge, (i) there are now, and at the time
of Closing will be, no material physical or mechanical defects of the
Property, including, without limitation, the structural and
load-bearing components of the Property, the parking lots, the
plumbing, heating, air conditioning and electrical and life safety
systems, and (ii) all roofs have approximately ten (10) years of
useful life remaining (assuming the roofs are subject to a normal
maintenance program), provided, however, Buyer shall verify to its
satisfaction during the Due Diligence Period the number of years of
remaining useful life of all roofs and this representation shall not
serve as a warranty or covenant and shall not survive closing.
(b) All documents delivered by Seller to Buyer, or made
available to Buyer for review in connection with the transactions
contemplated hereunder, including without
(14)
<PAGE> 16
limitation, all documents described in Paragraph 4, above, are and at
the time of Closing will be complete copies of all such documents in
Seller's possession and/or control.
(c) To Seller's knowledge, there are no condemnation,
environmental, zoning or other land-use regulation proceedings, either
instituted or planned to be instituted, affecting the Property (other
than as set forth in the Title Commitment). Seller shall notify Buyer
promptly of any such proceedings of which Seller becomes aware.
(d) Seller has not been served with, Seller has no knowledge
of any pending, and Seller has received no written notice of any
threatened litigation against Seller or any basis therefor that arises
out of the ownership of the Property. Seller shall notify Buyer
promptly of any such litigation of which Seller becomes aware.
(e) (i) To Seller's knowledge, Seller and the Property is in
compliance in all material respects with all Environmental Laws; (ii)
Seller has not received any notice, order, directive, complaint or
other communication, written or oral, from any governmental agency or
other person or entity alleging the occurrence of any violation of any
Environmental Laws; and (iii) to Seller's knowledge, the Property does
not contain any building materials that contain Hazardous Material.
For the purposes of this subparagraph, the following words shall have
the following meanings:
(1) "Environmental Law" means federal, state and
local laws, statutes, ordinances, rules, regulations
(including without limitation the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
from time to time (42 U.S.C. Sections 9601 et seq.)
("CERCLA"), the Federal Insecticide Fungicide and Rodenticide
Act of 1976 (7 U.S.C. Sections 136, et. seq. ("FIFRA") and the
applicable provisions of the Texas Health and Safety Code, and
Texas Water Code, as amended from time to time (the "Texas
Codes") and rules and regulations promulgated thereunder),
authorizations, judgments, decrees, administrative orders,
concessions, grants, franchises, agreements and other
governmental restrictions and requirements relating to the
environment or to any Hazardous Material.
(2) "Hazardous Material" means, at any time, (a) any
substance, product, chemical, compound, material, mixture,
waste or other material of any nature whatsoever (i) which is
now or hereafter listed, defined or otherwise classified
pursuant to any Environmental Laws as a "hazardous
substance", "hazardous waste", "infectious waste", "hazardous
material", "extremely hazardous waste", "toxic substance",
"toxic pollutant" or any other formulation intended to
define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity or reproductive toxicity; (ii)
which is now or hereafter regulated or listed by any local,
state or federal governmental authority, entity or agency
pursuant to any Environmental Laws; or (iii) which may give
rise to any liability under any Environmental Laws or under
any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance or strict liability or
under any reported decisions of state or federal court; (b)
asbestos and
(15)
<PAGE> 17
asbestos-containing materials; and (c) radon; (d) PCB's,
petroleum and petroleum products or fractions thereof,
including without limitation, crude oil, and any fraction
thereof, natural gas, natural gas liquids, liquefied natural
gas or synthetic gas usable for fuel or any mixture thereof.
(f) Seller has not filed or been the subject of any filing of
a petition under the Federal Bankruptcy Law or any federal or state
insolvency laws or laws for composition of indebtedness or for the
reorganization of debtors.
(g) There are no free rent, abatements, incomplete tenant
improvements, rebates, allowances, or other unexpired concessions
(collectively referred to as "Offsets") or rights under any existing
or pending Leases that will be outstanding as of the Closing Date and
Seller has paid in full any of landlord's leasing costs or
obligations.
(h) No brokerage, finders fee or commission, locator fee or
similar fee or commission is due or unpaid by Seller with respect to
any Lease.
(i) The copies of the Leases delivered by Seller to Buyer
contain all of the information pertaining to any rights of any parties
to occupy the Property, including, without limitation, all information
regarding any rent concessions, tenant improvements, or other
inducements to lease.
(j) The Rent Roll is true, complete and accurate and, except
as disclosed by Seller to Buyer in writing, there exist no defaults or
events which, with the giving of notice or passage of time, or both,
would constitute a default by Seller as landlord under the Leases
listed thereon. To Seller's knowledge, there exist no defaults and no
events which, with the giving of notice or passage of time, or both,
would constitute a default by any tenants thereon.
(k) Seller is a limited partnership, duly organized and
validly existing and in good standing under the laws of the State of
Texas; this Agreement and all documents executed by Seller which are
to be delivered to Buyer at the Closing are and at the time of Closing
will be duly authorized, executed and delivered by Seller, are and at
the time of Closing will be legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their respective
terms, are and at the time of Closing will be sufficient to convey
title (if they purport to do so), and do not and at the time of
Closing will not violate any provision of any agreement or judicial
order to which Seller or the Property is subject. Seller has obtained
all necessary authorizations, approvals and consents to the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Code.
(m) Seller is the legal and equitable owner of the Property,
with full right to convey the same, and without limiting the
generality of the foregoing, Seller has not granted any
(16)
<PAGE> 18
option or right of first refusal or first opportunity to any party to
acquire any interest in any of the Property.
For purposes of this Agreement, whenever the phrase "to Seller's
knowledge" or words of similar import are used, they shall be deemed to refer
to the knowledge after due and diligent inquiry of Seller's files of (i) North
Austin Office, Ltd., (ii) all general partners of the entities comprising
Seller, (iii) all individuals who have acted as property managers of the
Property while it has been owned by Seller, (iv) all employees or agents of
Seller or a general partner of Seller with supervisory responsibilities
concerning the Property, and (v) such other persons at a management or
supervisory level who would, in the ordinary course of their responsibilities
as employees or agents of Seller, receive notice from other agents or employees
of Seller or from other persons or entities of any of the matters described in
the representations and warranties in this Agreement which are limited by the
knowledge of Seller.
10. Representations and Warranties of Buyer. Buyer hereby represents
and warrants to Seller that Buyer is a real estate investment trust organized
under the laws of the State of Texas; this Agreement and all documents executed
by Buyer which are to be delivered to Seller at the Closing are or at the time
of Closing will be duly authorized, executed and delivered by Buyer, and are or
at the Closing will be legal, valid and binding obligations of Buyer, and do
not and at the time of Closing will not violate any provisions of any agreement
or judicial order to which Buyer is subject.
11. Continuation and Survival. All representations, warranties and
covenants by the respective parties contained herein or made in writing
pursuant to this Agreement are intended to and shall be deemed made as of the
date of, this Agreement or such writing and again-at the Closing, shall be
deemed to be material, and unless expressly provided to the contrary shall
survive and shall survive the execution and delivery of this Agreement and the
Closing until the second (2nd) anniversary of the Closing Date and shall
terminate upon such date except as to any claim asserted by Buyer to Seller by
notice given before such date.
12. Indemnity.
(a) Seller shall hold harmless, indemnify and defend Buyer,
its successors and assigns and their respective agents, employees,
officers, trustees, members and retirants and the Property from and
against any and all obligations, liabilities, claims, liens or
encumbrances, demands, losses, damages, causes of action, judgments,
costs and expenses (including attorneys' fees), whether direct,
contingent or consequential and no matter how arising ("Losses and
Liabilities") in any way (i) related to the Property and arising or
accruing during the time prior to the Closing; (ii) related to or
arising from any act, conduct, omission, contract or commitment of
Seller with respect to the Property; or (iii) resulting from any
misrepresentation of Seller or any inaccuracy in or breach of any
representations and warranties by Seller or resulting from any breach
or default by Seller under this Agreement.
(b) Except for Losses and Liabilities arising directly or
indirectly from or out of a circumstance resulting from a breach of
any of Seller's representations or warranties, or which shall have
arisen out of any aspect of the Property, its management or operations
prior to
(17)
<PAGE> 19
Closing, Buyer shall hold harmless, indemnify and defend Seller, its
successors and assigns and their respective agents, employees, officers
and partners, from and against any and all Losses and Liabilities in
any way (i) related to the Property and arising or accruing during the
time that Buyer owns or has any interest in the Property; (ii) related
to or arising from any act, conduct, omission, contract or commitment
of Buyer at any time or times, including, without limitation, any claim
arising or occurring under any Lease or any Assumed Contract during the
time that Buyer owns or has any interest in the Property; or (iii)
resulting from any misrepresentation of Buyer or any inaccuracy in or
breach of any representation or warranty of Buyer or resulting from any
breach or default by Buyer under this Agreement.
(c) The provisions of Paragraph 12 shall survive Closing.
13. Risk of Loss. In the event any of the Property is damaged or
destroyed prior to the Closing Date, and such damage or destruction (a) is
fully covered by Seller's insurance, except for the deductible amounts and any
coinsurance contribution due from Seller thereunder, and the insurer agrees to
timely pay for the entire cost of such repair less such deductible and
coinsurance, and (b) would cost Two Hundred Thousand Dollars ($200,000.00) or
less to repair or restore, then this Agreement shall remain in full force and
effect and Buyer shall acquire the Property upon the terms and conditions set
forth herein. In such event, Buyer shall receive a credit against the Purchase
Price equal to such deductible and coinsurance amounts, and Seller shall assign
to Buyer all of Seller's right, title and interest in and to all proceeds of
insurance on account of such damage or destruction. In the event any of the
Property is damaged or destroyed prior to the Closing Date, and such damage or
destruction (c) is not fully covered by Seller's insurance, other than the
deductible and coinsurance amounts, and (d) would cost less than Two Hundred
Thousand Dollars ($200,000.00) to repair or restore, then the transaction
contemplated by this Agreement shall be consummated with Buyer receiving a
credit against the Purchase Price at the Closing in an amount reasonably
determined by Seller and Buyer (after consultation with unaffiliated experts)
to be the cost of repairing such damage or destruction, but in no event more
than Two Hundred Thousand Dollars ($200,000.00). In the event (e) any of the
Property is damaged or destroyed prior to the Closing and the cost of repair
would exceed Two Hundred Thousand Dollars ($200,000.00), or (f) if condemnation
proceedings are commenced against any of the Property, then, notwithstanding
anything to the contrary set forth in this Paragraph, Buyer shall have the
right, at its election, either to terminate this Agreement in its entirety, or
only as to that portion of the Property subject to condemnation proceedings (in
which case there shall be an equitable adjustment to the Purchase Price), or to
not terminate this Agreement and purchase the Property. Buyer shall have thirty
(30) days after Seller notifies Buyer that any portion of the Property is
subject to condemnation proceedings to make such election by delivery to Seller
of an election notice (the "Election Notice"). Buyer's failure to deliver the
Election Notice within such thirty (30) day period shall be deemed an election
to terminate this Agreement in its entirety. In the event this Agreement is
terminated in its entirety or in part pursuant to this Paragraph, by delivery
of notice of termination to Seller, Buyer and Seller shall each be released
from all obligations hereunder pertaining to that portion of the Property
affected by such termination. In the event Buyer elects not to terminate this
Agreement, Seller shall notify Buyer that Buyer shall receive a credit against
the Purchase Price at the Closing in the amount equal to the value agreed upon
by Buyer and Seller of any Property taken as a result of such proceeding, in
which case this Agreement shall otherwise remain in full force and effect, and
Seller shall be entitled to any condemnation
(18)
<PAGE> 20
awards. Any repairs elected to be made by Seller pursuant to this Paragraph
shall be made within one hundred and eighty (180) days following such damage or
destruction and the Closing shall be extended until the repairs are
substantially completed. As used in this Paragraph, the cost to repair or
restore shall include the cost of lost rental revenue.
14. Possession. Possession of the Property shall be delivered to Buyer
on the Closing Date (subject to the rights of the tenants in possession under
Leases), provided, however, that prior to the Closing Date Seller shall afford
authorized representatives of Buyer reasonable access to the Property for
purposes of satisfying Buyer with respect to the representations, warranties
and covenants of Seller contained herein and with respect to satisfaction of
any Conditions Precedent to the Closing contained herein, including, without
limitation, a Phase I environmental investigation. In the event this Agreement
is terminated, Buyer shall restore the Property to substantially the condition
in which it was found. Buyer hereby agrees to indemnify and hold Seller
harmless from any damage or injury to persons or property caused by Buyer or
its authorized representatives during their entry and investigations prior to
the Closing. The indemnity contained in the preceding sentence shall survive
the termination of this Agreement or the Closing, as applicable, provided that
Buyer shall have no liability under such indemnity unless Seller gives Buyer
written notice of any claim it may have against Buyer under such indemnity
within twelve (12) months of such termination or the Closing Date, as
applicable.
15. Maintenance of the Property and Property Personnel. Between
Seller's execution of this Agreement and the Closing, Seller shall maintain the
Property in good order, condition and repair, reasonable wear and tear
excepted, shall perform all work required to be performed by the landlord under
the terms of any Lease, and shall make all repairs, maintenance and
replacements of the Improvements and any Tangible Personal Property and
otherwise operate the Property in the same manner as before the making of this
Agreement, as if Seller were retaining the Property. After full execution of
this Agreement and until the Closing, Seller shall maintain all existing
personnel on the Property, if any, in their current employment positions at
their current (or an increased) rate of compensation. Any changes in such
personnel, other than in the ordinary course of business which would not result
in a reduction in the level of management attention or service to the Property,
shall be subject to Buyer's reasonable approval.
16. Leasing; Buyer's Consent to New Contracts Affecting the Property;
Termination of Existing Contracts. Seller shall use commercially reasonable
efforts until Closing to lease any vacant space in the Improvements to tenants
pursuant to Space Leases in form and content acceptable to Buyer. Seller shall
not, after the date of Seller's execution of this Agreement, enter into any
Lease or contract affecting the Property, or any amendment thereof, or permit
any tenant to enter into any sublease, assignment or agreement pertaining to
the Property, or waive, compromise or settle any rights of Seller under any
contract or Lease, or agree to return any security deposit, or modify, amend,
or terminate any Assumed Contract, without in each case obtaining Buyer's prior
written consent thereto, which consent shall not be unreasonably withheld or
delayed (unless Seller's permission or consent is otherwise required in such
lease or related agreement or such lease or related agreement provides that
Seller is not to unreasonably withhold consent to such action, it being hereby
specifically agreed that Seller need not obtain Buyer's prior written consent
to any matter in which the lease or agreement provides that Seller's permission
or consent is not to be unreasonably
(19)
<PAGE> 21
withheld, but Seller will provide prior written notice of any such required
action). Buyer shall be deemed to have disapproved any request for consent made
by Seller pursuant to this paragraph if Buyer fails to respond to Seller with
Buyer's approval or disapproval within five (5) business days of Seller's
request for Buyer's approval. Seller shall terminate prior to the Closing, at
no cost or expense to Buyer, any and all management agreements or contracts
affecting the Property that Purchaser requests be terminated.
17. Insurance. Through the Closing Date, Seller shall maintain or
cause to be maintained, at Seller's sole cost and expense:
(a) a policy or policies of insurance in amounts equal to the
full replacement value of the Improvements and the Tangible Personal
Property, insuring against all insurable risks, including, without
limitation, fire, vandalism, malicious mischief, lightning, windstorm,
water, earthquake and other perils customarily covered by casualty
insurance and the costs of demolition and debris removal; and
(b) a policy or policies of workers' compensation an
employers' liability insurance, commercial general liability
insurance, and automobile liability insurance, each in the amount and
form maintained by Seller prior to the date of this Agreement.
18. Cooperation with Buyer. Seller shall cooperate and do all acts
as may be reasonably required or requested by Buyer with regard to the
fulfillment of any Condition Precedent but Seller's representations and
warranties to Buyer shall not be affected or released by Buyer's waiver or
fulfillment of any Condition Precedent. Seller hereby irrevocably authorizes
Buyer and its agents to make all reasonable inquiries with and applications to
any third party, including any governmental authority, as Buyer may reasonably
require to complete its due diligence.
19. Brokers and Finders. Pursuant to separate agreement, Seller
shall pay CB Commercial Real Estate Group, Inc., Capital Leasing, Management &
Sales, and Wes Kirkham Properties, a brokerage commission for their services in
this transaction. Except as provided in the foregoing sentence, neither party
has had any contact or dealings regarding the Property, or any communication in
connection with the subject matter of this transaction, through any real estate
broker or other person who can claim a right to a commission or finder's fee in
connection with the sale contemplated herein. In the event that any other
broker or finder claims a commission or finder's fee based upon any contact,
dealings or communication, the party through whom the broker or finder makes
its claim shall be responsible for said commission or fee and all costs and
expenses (including reasonable attorneys' fees) incurred by the other party in
defending against the same. The party through whom any other broker or finder
makes a claim shall hold harmless, indemnify and defend the other party hereto,
its successors and assigns, agents, employees, officers, trustees, members and
retirants and the Property from and against any and all obligations,
liabilities, claims, demands, liens, encumbrances and losses (including
attorneys' fees), whether direct, contingent or consequential, arising out of,
based on, or incurred as a result of such claim. The provisions of this
Paragraph shall survive the Closing or termination of this Agreement.
(20)
<PAGE> 22
20. INTENTIONALLY OMITTED.
21. Publicity and Confidentiality. The parties shall at all times
keep this transaction and any documents received from each other confidential,
except to the extent necessary to (a) comply with applicable law and
regulations, or (b) carry out the obligations set forth in this Agreement. Any
such disclosure to third parties shall indicate that the information is
confidential and should be so treated by the third party. No press release or
other public disclosure may be made by Seller or any of its agents concerning
this transaction without the prior written consent of Buyer.
22. Miscellaneous.
(a) Notices. Any notice, consent or approval required or
permitted to be given under this Agreement shall be in writing and
shall be deemed to have been given upon (i) hand delivery, (ii) one
(1) business day after being deposited with Federal Express or another
reliable overnight courier service or next day delivery, (iii) being
transmitted by facsimile telecopy, or (iv) two (2) business days after
being deposited in the United States mail, registered or certified
mail, postage prepaid, return receipt required, and addressed as
follows:
If to Seller: North Austin Office, Ltd.
------------
580 5th Avenue, Room 617
New York, New York 10036
Attn: Morris Friedman
Fax No.: 212-221-1834
Telephone No.: 800 225-5844
And a copy to: Dodd & Batla, A Professional Corporation
--------------
800 Brazos, Suite 1400
Austin, Texas 78701
Attn: D. Michael Dodd
Fax No.: 512-472-1522
Telephone No.: 512-472-1520
If to Seller: American Industrial Properties REIT
------------
6210 North Beltline, Suite 170
Irving, Texas 75063-2656
Attn: Mr. Lewis D. Friedland
Fax No.: (972) 550-6037
Telephone No.: (972) 550-6053
And a copy to: Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P.
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201-8001
Attn: Brad B. Hawley
Fax No.: (214) 849-5599
Telephone No.: (214) 849-5588
or such other address as either party may from time to time specify in
writing to the other.
(21)
<PAGE> 23
(b) Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their
respective successors, heirs, administrators and assigns. Neither
Buyer nor Seller shall assign its right, title and interest in and to
this Agreement without the other party's prior written consent unless
any such assignment is to an affiliate of Buyer or Seller, as the case
may be, in which event no such consent shall be required.
(c) Amendments. Except as otherwise provided herein, this
Agreement may be amended or modified only by a written instrument
executed by Seller and Buyer.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
(e) Merger of Prior Agreements. This Agreement and the
exhibits hereto constitute the entire agreement between the parties
and supersede all prior agreements and understandings between the
parties relating to the subject matter hereof, as the same may have
been amended, which shall be of no further force or effect upon
execution of this Agreement by Buyer and Seller.
(f) Enforcement. In the event a dispute arises concerning the
performance, meaning or interpretation of any provision of this
Agreement, the defaulting party or the party not prevailing in such
dispute shall pay any and all costs and expenses incurred by the other
party in enforcing or establishing its rights hereunder, including,
without limitation, court costs and attorneys' fees. In addition to
the foregoing award of attorneys' fees to the prevailing party, the
prevailing party in any lawsuit on this Agreement shall be entitled to
its attorneys' fees incurred in any post judgment proceedings to
collect or enforce the judgment. This provision is separate and
several and shall survive the merger of this Agreement into any
judgment on this Agreement.
(g) Time of the Essence. Time is of the essence of this
Agreement.
(h) Severability. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be
held by a court of competent jurisdiction to be invalid, unenforceable
or void, the remainder of this Agreement and such provisions as
applied to other persons, places and circumstances shall remain in
full force and effect.
(i) Exhibits. All exhibits attached hereto are incorporated
herein as though fully set forth herein.
(22)
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Buyer:
AMERICAN INDUSTRIAL PROPERTIES REIT
A Texas real estate investment trust
By: /s/ LEWIS D. FRIEDLAND
------------------------------------
Name: Lewis D. Friedland
----------------------------------
Title: Vice President
---------------------------------
Seller:
NORTH AUSTIN OFFICE, LTD.,
A Texas limited partnership
By: 9001 IH35, Inc.
A Texas corporation
Its General Partner
By: /s/ MORRIS FRIEDMAN
------------------------------------
Morris Friedman, President
Texas Professional Title, Inc. agrees to act as Escrow Holder and disburse
and/or apply the Earnest Money in accordance with the terms of this Agreement
and to comply with the terms and provisions of Paragraph 21 of this Agreement.
Texas Professional Title, Inc. agrees to comply with all reporting requirements
of Section 6045 of the United States Internal Revenue Code and the regulations
promulgated thereunder.
TEXAS PROFESSIONAL TITLE, INC.
By: /s/ JEANINE M. WEST
------------------------------------
Its: Sr. Vice President
-----------------------------------
Dated: February 19, 1998
---------------------------------
(23)
<PAGE> 25
LIST OF EXHIBITS
Exhibit A - Description of Land
Exhibit B - Inventory of Tangible Personal
Property
Exhibit C - Deed
Exhibit D - Bill of Sale
Exhibit E - Assignment and Assumption of
Intangible Property
Exhibit F - Assignment of Leases
Exhibit G - Surveyor's Certificate
Exhibit H - Environmental Reports
Exhibit I - Rent Roll
Exhibit J - Notice of Lease Assignment
Exhibit K - Transferor's Certification of
Non-Foreign Status
Exhibit L - Tenant Certificate
(24)
<PAGE> 26
EXHIBIT A
REAL PROPERTY
Lot One (1), RESUBDIVISION OF LOT 1, GREENWAY PLAZA SECTION ONE, a
subdivision in Travis County, Texas, according to the map or plat
thereof, recorded in Volume 93, Page 300, Plat Records of Travis
County, Texas
<PAGE> 27
EXHIBIT B
PERSONAL PROPERTY INVENTORY
<PAGE> 28
EXHIBIT C
SPECIAL WARRANTY DEED
RECORDING REQUESTED BY:
WHEN RECORDED MAIL TO:
- -----------------------------
- -----------------------------
- -----------------------------
- -----------------------------
- -----------------------------
MAIL TAX STATEMENT TO:
American Industrial Properties REIT
6210 North Beltline Road
Suite 170
Irving, Texas 75063-2656
Attn: Mr. Marc Simpson
- ------------------------------------------------------------------------------
(Space Above Line for Reorder's Use Only)
SPECIAL WARRANTY DEED
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF TRAVIS )
NORTH AUSTIN OFFICE, LTD., a Texas limited partnership ("Grantor"),
and for and in consideration of the sum of Ten Dollars ($10.00) and other good
and valuable consideration to it in hand paid by AMERICAN INDUSTRIAL PROPERTIES
REIT, a Texas real estate investment trust ("Grantee"), whose address is 6210
North Beltline Road, Suite 170, Irving, Texas 75063-2656 the receipt and
sufficiency of which is hereby acknowledged and confessed, has GRANTED,
BARGAINED, SOLD, ASSIGNED and CONVEYED, and by these presents does GRANT,
BARGAIN, SELL, ASSIGN and CONVEY, unto Grantee:
(A) that certain real property located in Austin, Travis County,
Texas, and being more particularly described in Exhibit A
attached hereto and incorporated herein for all purposes (the
"Land");
(B) all rights, privileges and easements appurtenant to the Land,
including, without limitation, all minerals, oil, gas and
other hydrocarbon substances on and under and
<PAGE> 29
that may be produced from the Land, as well as all
development rights, land use entitlements, including without
limitation building permits, licenses, permits and
certificates, utilities commitments, air rights, water, water
rights, riparian rights, and water stock relating to the Land
and any rights-of-way or other appurtenances used in
connection with the beneficial use and enjoyment of the Land
and all of Seller's right, title and interest in and to all
roads, easements, rights of way and alleys adjoining, serving
or servicing the Land (collectively, the "Appurtenances");
(C) All improvements and fixtures located on the Land and
Appurtenances, including, without limitation, that certain
office building and related improvements located on the Land,
and all apparatus, and equipment used in connection with the
operation or occupancy of the Land and appurtenances, such as
heating and air conditioning systems and facilities used to
provide any utility, refrigeration, ventilation, garbage
disposal or other services on the Land and appurtenances, and
along with all on-site parking facilities (collectively the
"Improvements") (the Land, Appurtenances and Improvements
being herein collectively called the "Property").
TO HAVE AND TO HOLD the Property, together with all and singular any
other rights and appurtenances thereto in anywise belonging, unto Grantee, its
legal representatives, successors and assigns, FOREVER, subject to those
restrictions and encumbrances listed on Exhibit B, attached hereto and
incorporated herein by reference for all purposes, to the extent (but no
further) that same are valid and subsisting as of the date hereof and affect
title to the Property (collectively, the "Encumbrances"); and Grantor does
hereby bind itself, its legal representatives, successors and assigns, to
WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee, its
legal representatives, successors and assigns, against every person whomsoever
lawfully claiming or to claim the same or any part thereof subject, however, to
the Encumbrances, when the claim is by, through or under Grantor but not
otherwise.
Ad valorem taxes and assessments and maintenance fees, if any, for the
year 1998 have been prorated between Grantor and Grantee as of the date hereof,
and Grantee assumes the obligations to pay same as they become due and payable
subsequent to the date hereof. Grantor warrants and represents that all ad
valorem taxes and assessments and all maintenance fees for the Conveyed
Property for 1997 and all prior years have been fully paid and all such taxes
and assessments have been assessed and paid on the full assessed value without
any abatement, exemption, or credit for special uses, agricultural use, or
other land use which would create an additional tax obligation upon the
conveyance to Grantee or upon the lapse of time. All such taxes and assessments
for each year prior to the current year and for the current year to the date
hereof shall be paid by Grantor. If the proration as of the date hereof is
based upon an estimate of ad valorem taxes and assessments and maintenance fees
for the current year, then upon demand by either party hereto, the parties
shall, if necessary, promptly and equitably adjust all such ad valorem taxes
and assessments and maintenance fees as soon as reasonably practical after the
date actual figures for such items for the current year are available.
<PAGE> 30
IN TESTIMONY WHEREOF, this instrument is executed effective as of the
____ day of ___________________, 199__.
NORTH AUSTIN OFFICE, LTD.,
A Texas limited partnership
By: 9001 IH35, Inc.
A Texas corporation
Its General Partner
By:
----------------------------
Morris Friedman, President
Exhibit A - Land
Exhibit B - Encumbrances
STATE OF ___________ )
)
COUNTY OF _________ )
This instrument was acknowledged before me on , 199__, by MORRIS
FRIEDMAN, President of 9001 IH35, INC., a Texas Corporation, on behalf of said
corporation as General Partner of NORTH AUSTIN OFFICE, LTD., a Texas limited
partnership, on behalf of said limited partnership.
---------------------------------------
Notary Public in and for
the State of __________
My Commission Expires:
---------------------------------------
Exhibit A - Land
Exhibit B - Existing Encumbrances
<PAGE> 31
EXHIBIT A to Exhibit C
LEGAL DESCRIPTION
<PAGE> 32
EXHIBIT B to EXHIBIT C
ENCUMBRANCES
<PAGE> 33
EXHIBIT D
BILL OF SALE
FOR VALUE RECEIVED, the undersigned ("Seller") hereby sells, conveys
and assigns to AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas real estate
investment trust ("Buyer"), all of the undersigned's right, title and interest
in and to all equipment, fixtures, inventory and other tangible personal
property of any kind and nature owned by Grantor and attached to or located on
the real property described on Exhibit A attached hereto ("Real Property"),
including without limitation all furniture, furnishings, floor coverings;
office equipment and supplies; heating, lighting, refrigeration, plumbing,
ventilating, incinerating, cooking, laundry, communication, electrical, air
conditioning fixtures, systems and equipment; disposals; window screens; storm
windows; sprinklers; hoses; tools; lawn equipment; elevators and escalators;
compressors; engines; boilers, and all other related machinery, equipment,
fixtures, supplies, replacement parts and other tangible personal property
whatsoever, including, without limitation, the personal property described in
Schedule 1 which is attached hereto and incorporated herein.
TO HAVE AND TO HOLD the foregoing personal property unto Buyer and its
successors and assigns forever.
The undersigned warrants that it owns good and marketable title to the
foregoing personal property and will defend title to said personal property
against all persons claiming a prior right thereto to the extent that such
prior right is alleged to exist on or before the date of this Bill of Sale.
Said personal property is used in connection with that certain office
building commonly known as WHITNEY JORDAN PLAZA in Austin, Travis County,
Texas.
IN WITNESS WHEREOF, the undersigned has executed this Bill of Sale on
this ____ day of ________________, 19__, in .
NORTH AUSTIN OFFICE, LTD.,
A Texas limited partnership
By: 9001 IH35, Inc.
A Texas corporation
Its General Partner
By:
---------------------------
Morris Friedman, President
<PAGE> 34
Schedule 1
PERSONAL PROPERTY
<PAGE> 35
EXHIBIT E
ASSIGNMENT AND ASSUMPTION OF
SERVICE CONTRACTS, WARRANTIES,
GUARANTIES, PERMITS AND OTHER INTANGIBLE PROPERTY
THIS ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS,
WARRANTIES, GUARANTIES AND OTHER INTANGIBLE PROPERTY (this "Assignment")
is made and entered into as of the ____ day of , 199__, by NORTH AUSTIN OFFICE,
LTD., a Texas limited partnership ("Assignor"), to AMERICAN INDUSTRIAL
PROPERTIES REIT, a Texas real estate investment trust ("Assignee").
WITNESSETH:
WHEREAS, Assignor is contemporaneously herewith selling
pursuant to that certain Purchase and Sale Agreement dated , 1998, by and
between Assignor and Assignee (the "Purchase Agreement") that certain real
property and improvements thereon located in the City of Austin, County of
Travis, State of Texas, the real property which is more particularly described
on Schedule 1 attached hereto and incorporated herein by this reference ("Real
Property"). Terms used in this Agreement and not otherwise defined shall be
given the meanings defined in the Purchase Agreement.
WHEREAS, except for the Names and Marks as hereafter provided for,
Assignor desires to assign its interest in and to the following to Assignee as
of the date on which title to the Real Property is vested in Assignee (the
"Transfer Date"), and Assignee desires to accept the assignment thereof and
assume Assignor's obligations thereunder from and after the Transfer Date:
(a) All service contracts described in Schedule 2 attached
hereto and incorporated herein by this reference (the "Contracts");
(b) All Warranties and Guaranties (the "Warranties and
Guaranties", hereafter defined);
(c) All Names and Marks (the "Names and Marks", hereafter
defined);
(d) All Intangible Property (the "Intangible Property",
hereafter defined); and
(e) All Permits (the "Permits", hereafter defined).
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
<PAGE> 36
1. As of the Transfer Date, Assignor hereby assigns and transfers
unto Assignee all of its right, title, claim and interest in, to and under the
(a) Contracts; (b) Warranties and Guarantees; (c) Names and Marks; (d)
Intangible Property and (e) Permits (collectively the "Assigned Interests").
Assignor hereby agrees to indemnify, defend and hold harmless Assignee from and
against any and all cost, liability, loss, damage or expense, including,
without limitation, reasonable attorneys' fees and expenses (collectively,
"Losses and Liabilities"), which arise out of or are in any way related to the
Assigned Interests after the Transfer Date caused by a material default
thereunder by Assignor occurring or existing on or prior to the Transfer Date.
2. Assignee, as of the Transfer Date, hereby accepts the
foregoing assignment and assumes all of the Assignor's obligations under the
Assigned Interests which arise or relate to the period after the Transfer Date.
Assignee hereby agrees to indemnify, defend and hold harmless Assignor from and
against any and all Losses and Liabilities arising out of or in any way related
to the Assigned Interests after the Transfer Date, except for Losses and
Liabilities which arise out of or are in any way related to the Assigned
Interests after the Transfer Date caused by a material default thereunder by
Assignor occurring or existing on or prior to the Transfer Date.
3. The following terms shall have the following meanings:
(a) The term "Warranties and Guaranties" as used herein shall
mean and include all warranties and guarantees to the extent
assignable, whether or not written, for all or any portion of the
Property, including, without limitation, the Improvements and the
tangible Personal Property, including, without limitation,
construction warranties from contractors and subcontractors.
(b) The term "Names and Marks" as used herein shall mean the
name "Whitney Jordan Plaza." Notwithstanding anything herein or in any
other agreement to the contrary, Assignee is acquiring merely the
right to continue to use the name "Whitney Jordan Plaza" as the name
of the office building now located at 9001 IH35, Austin, Travis
County, Texas. In the event Assignee ever ceases using the name
"Whitney Jordan Plaza" for such purpose, Assignee's right to use said
name shall terminate. In this regard, Assignee acknowledges and agrees
that the name "Whitney Jordan" is a name used by Assignor in its
businesses and Assignor is not selling, assigning, granting or
conveying ownership of said name.
(c) The term "Intangible Property" as used herein shall mean
and include all intangible property owned by Asssignor and used in
connection with the Property, including without limitation, all of the
Real Property which is held or deemed to constitute intangible
personal property; to the extent assignable, all plans and
specifications, working drawings, site elevation and as-built surveys,
soil and substrata studies, architectural plans, engineering plans and
studies, floor plans, landscape plans, appraisals, and other technical
reports of any kind, character or description; to the extent
assignable, all promotional material, market studies, tenant data and
other related material of any kind; all claims, demands or causes of
action, including without limitation, any arising out of or relating
to or caused by any defects in design or construction; all rights
under any restrictive or protective covenants or declarations or other
matters affecting title to any of the property herein conveyed.
<PAGE> 37
(d) The term "Permits" as used herein shall mean and include
all environmental, air pollution control, waste water, building,
occupancy, governmental permits and approvals of every kind and nature
relating to the construction, operation, use or occupancy of the
Property.
4. In the event of any litigation between Assignor and Assignee
arising out of the obligations of the parties under this Assignment or
concerning the meaning or interpretation of any provision contained herein, the
losing party shall pay the prevailing party's costs and expenses of such
litigation, including, without limitation, reasonable attorneys' fees and
expenses. In addition to the foregoing award of attorneys' fees to the
prevailing party, the prevailing party in any lawsuit on this Agreement shall
be entitled to its reasonable attorneys' fees incurred in any post judgment
proceedings to collect or enforce the judgment. This provision is separate and
several and shall survive the merger of this Assignment into any judgment on
this Assignment.
5. This Assignment shall be binding on and inure to the benefit
of the parties herein, their heirs, executors, administrators,
successors-in-interest and assigns.
6. This Assignment shall be governed by and construed in
accordance with the laws of the State of Texas.
7. This Assignment may be executed in any number of counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute one and the same agreement.
8. Nothing contained herein shall be deemed or construed as
relieving the Assignor or Assignee of their respective duties and obligations
under the Purchase Agreement.
ASSIGNOR: NORTH AUSTIN OFFICE, LTD.,
A Texas limited partnership
By: 9001 IH35, Inc.
A Texas corporation
Its General Partner
By:
---------------------------
Morris Friedman, President
ASSIGNEE: AMERICAN INDUSTRIAL PROPERTIES REIT
A Texas real estate investment trust
By:
---------------------------
---------------------------
(Print Name and Title)
<PAGE> 38
Schedule 1
LEGAL DESCRIPTION OF REAL PROPERTY
<PAGE> 39
Schedule 2
DESCRIPTION OF THE CONTRACTS
<PAGE> 40
EXHIBIT F
ASSIGNMENT AND ASSUMPTION OF LEASES
THIS ASSIGNMENT AND ASSUMPTION OF LEASES (this "Assignment") dated as
of the day of ___________________, 199__, is made and entered into by and
between NORTH AUSTIN OFFICE, LTD., a Texas limited partnership ("Assignor"),
and AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas real estate investment trust
("Assignee").
WITNESSETH:
WHEREAS, Assignor is the lessor under certain leases executed with
respect to that certain real property located in the City of Austin, County of
Travis, State of Texas, incorporated herein by this reference (the "Property")
more particularly described on Schedule 1, attached hereto and incorporated
herein by this reference, which leases are described in Schedule 2 attached
hereto and incorporated herein by this reference (the "Leases").
WHEREAS, Assignor is contemporaneously herewith selling the Property
to Assignee pursuant to that certain Purchase and Sale Agreement dated
______________, 199__, by and between Assignor and Assignee (the "Purchase
Agreement").
WHEREAS, Assignor desires to assign its interest in and to the Leases
to Assignee as of the date on which title to the Property is vested in Assignee
(the "Transfer Date"), and Assignee desires to accept the assignment thereof
and assume Assignor's obligations thereunder from and after the Transfer Date.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereby agree as follows:
1. As of the Transfer Date, Assignor hereby assigns to Assignee all of
its right, title and interest in and to the Leases. On the Transfer Date,
Assignor has transferred those security deposits in the amounts and under the
Leases listed on Schedule 3 attached hereto to Assignee (the "Transferred
Security Deposits").
2. Assignor warrants and represents that as of the Transfer Date, the
attached Schedule 2 includes all of the Leases affecting the Property and there
are no assignments of or agreements to assign the Leases to any other party.
3. Assignor hereby agrees to indemnify, defend and hold harmless
Assignee from and against any and all cost, liability, loss, damage or expense,
including, without limitation, reasonable attorneys' fees and expenses
(collectively, "Losses and Liabilities"), caused by a material default by
Assignor under the Leases described in Schedule 2 occurring prior to or on the
Transfer Date.
4. Assignee, as of the Transfer Date, hereby accepts the foregoing
assignment and assumes all of the lessor's obligations under the Leases
described in Schedule 2 relating to the period from and after the Transfer
Date, including the obligation to return the Transferred Security Deposits
<PAGE> 41
in accordance with the terms of the Leases. Assignee hereby agrees to
indemnify, defend and hold harmless Assignor from and against any and all
Losses and Liabilities arising out of Lessor's obligations under the Leases
described in Schedule 2 and related to the period after the Transfer Date,
except for Losses and Liabilities caused by a material default by Assignor
under the Leases described in Schedule 2 occurring prior to or on the Transfer
Date.
5. In the event of any litigation between Assignor and Assignee
arising out of the obligations of the parties under this Assignment or
concerning the meaning or interpretation of any provision contained herein, the
losing party shall pay the prevailing party's costs and expenses in such
litigation, including, without limitation, reasonable attorneys' fees and
expenses. In addition to the foregoing award of attorneys' fees to the
prevailing party, the prevailing party in any lawsuit on this Agreement shall
be entitled to its reasonable attorneys' fees incurred in any post judgment
proceedings to collect or enforce the judgment. This provision is separate and
several and shall survive the merger of this Assignment into any judgment on
this Assignment.
6. This Assignment shall be binding on and inure to the benefit of the
parties herein, their heirs, executors, administrators, successors-in-interest
and assigns.
7. This Assignment may be executed in any number of counterparts, each
of which shall be deemed an original and all of which taken together shall
constitute one and the same agreement.
8. Nothing contained herein shall be deemed or construed as relieving
the Assignor or Assignee of their respective duties and obligations under the
Purchase Agreement.
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment the date and year first above written.
ASSIGNOR: NORTH AUSTIN OFFICE. LTD.
A Texas limited partnership
By: 9001 IH35, Inc.
A Texas corporation
Its General Partner
By:
-----------------------
Morris Friedman, President
ASSIGNEE: AMERICAN INDUSTRIAL PROPERTIES REIT
A Texas real estate investment trust
By:
--------------------------------
Name:
------------------------------
Title:
----------------------------
<PAGE> 42
Schedule 1
LEGAL DESCRIPTION OF REAL PROPERTY
<PAGE> 43
Schedule 2
DESCRIPTION OF THE LEASES
<PAGE> 44
Schedule 3
TRANSFERRED SECURITY DEPOSITS
<PAGE> 45
EXHIBIT G
SURVEYOR'S CERTIFICATE
I hereby certify that on the ____ day of ________________, 199__:
(a) this survey was made on the ground as per the field notes
shown on this survey and correctly shows (i) the boundaries and areas
of the subject property and the size, location and type of buildings
and improvements thereon (if any) and the distance therefrom to the
nearest facing exterior property lines of the subject property (ii)
the location of all rights-of-way, easements and any other matters of
record (or of which are visible or of which I have knowledge or have
been advised, whether or not of record) affecting the subject property
including, without limitation, those described on the Commitment);
(iii) the location of the parking areas on the subject property
showing the number of parking spaces provided thereby; (iv) all
abutting dedicated public streets providing access to the subject
property together with the width and name thereof; and (v) all other
significant items on the subject property;
(b) except as shown on the survey, there are no (i)
encroachments upon the subject property by improvements on adjacent
property; (ii) encroachments on adjacent property, streets or alleys
by any improvements on the subject property; (iii) party walls, or
(iv) conflicts or protrusions;
(c) adequate ingress to and egress from the subject property
is provided by (name of street), the same being paved, dedicated
public right(s)-of-way maintained by (name of maintaining authority);
(d) all required building setback lines on the subject
property are located as shown hereon;
(e) no part of the subject property lies within a flood plain
or flood prone area or flood way of any body of water;
(f) this survey conforms to the current Texas Society of
Professional Surveyors Standards and Specifications for a Category 1
A, Condition II Survey;
(g) I have reviewed the latest available maps of geological
faults in the Austin metropolitan area prepared by the U.S. Department
of the Interior, U.S. Geological Survey, and have located the subject
property on the map titled " " and dated ___________________. None of
the geological fault lines shown on that map affects the subject
property, and I saw no evidence of any displacement of the surface or
other evidence of the existence of an active geological fault on or
affecting the property.
(h) The description of the property shown hereon corresponds
to the boundaries of the property shown on the Title Commitment, and
such description closes by engineering calculation.
<PAGE> 46
(i) No covenants, restriction or easements that are of
records, discoverable upon visual inspection, or otherwise known to
me, appear to me to have been violated in any respect except as
follows: ___________________________ (if none, so state).
------------------------------------------
(Signature of Surveyor)
Registered Public Surveyor
Registration No.
--------------------------
(Name, address, telephone number and job
number of Surveyor)
<PAGE> 47
EXHIBIT H
ENVIRONMENTAL REPORTS
1. Phase I (MBA) Environmental Study for 9001 IH 35, Austin,
Texas dated April 8, 1993, prepared by Maxwell Envirotech,
Inc.
2. Reports referenced in that certain correspondence (including
Statement of Certification) dated November 15, 1994
pertaining to Project No. 093-01 regarding asbestos
abatement, from Maxwell Envirotech, Inc., which reports
include the following:
a. ACBM (Asbestos Containing Building Material)
inspection reports prepared by Hall-Kimbrell, Inc.
and Maxwell Envirotech, Inc.
b. The Final Inspection and Final Clearance Air
Monitoring (Building interior 9/14/94, exterior
soffits 10/7/94)
<PAGE> 48
EXHIBIT I
RENT ROLL
<PAGE> 49
EXHIBIT J
NOTICE OF LEASE ASSIGNMENT
________________, 199___
To: [Tenant]
---------------------------
---------------------------
---------------------------
---------------------------
Re: [Property name][Property address]
Gentlemen:
Please be advised that the undersigned Seller, as Landlord under your
Lease at the above location (as said Lease may have been amended, the "Lease")
has transferred and conveyed all of its interest in the lease to American
Industrial Properties REIT ("Buyer") effective as of the date hereof, and Buyer
has assumed the obligations of the Landlord under the Lease. Therefore,
effective immediately, all correspondence, communications and rent and/or other
charges due under the Lease (including past rent due, if any) should be
directed as follows:
American Industrial Properties REIT
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Attn:
------------------------------
Phone:
-----------------------------
Your security deposit in connection with the Lease in the amount of
$____________ has been transferred to the Buyer. Buyer acknowledges receipt of
the deposit and responsibility for the return of any such security deposit
subject to the terms of the Lease.
SELLER: BUYER:
- ---------------------------- AMERICAN INDUSTRIAL PROPERTIES
a REIT
---------------------------
By:
-----------------------------
By: Name:
------------------------------- ---------------------------
Name: Title:
----------------------------- --------------------------
Title:
----------------------------
<PAGE> 50
EXHIBIT K
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
To inform _____________________________________, a ___________________
("Transferee"), that withholding of tax under Section 1445 of the Internal
Revenue Code of 1954, as amended ("Code"), will not be required upon the
transfer of certain real property to the Transferee by
__________________________________________, a _____________________
("Transferor"), the undersigned hereby certifies the following on behalf of the
Transferor:
1. The Transferor is not a foreign corporation, foreign partnership, foreign
trust, foreign estate or foreign person (as those terms are defined in the Code
and the Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer or tax (social security)
identification number is
------------------------------;
3. The Transferor understands that this Certification may be disclosed
to the Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
4. The Transferor understands that the Transferee is relying on this
Certification in determining whether withholding is required upon said
transfer.
5. The Transferor hereby agrees to indemnify, defend and hold the
Transferee harmless from and against any and all obligations, liabilities,
claims, losses, actions, causes of action, rights, demands, damages, costs and
expenses of every kind, nature or character whatsoever (including, without
limitation, reasonable attorneys' fees and court costs) incurred by the
Transferee as a result of: (i) the Transferor's failure to pay U.S. Federal
income tax which the Transferor is required to pay under applicable U.S. law;
or (ii) any false or misleading statement contained herein.
6. Under penalty of perjury I declare that I have examined this
Certification and to the best of my knowledge and belief it is true and correct
and complete, and I further declare that I have authority to sign this document
on behalf of the Transferor.
Date: , 199
----------- ---
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 51
EXHIBIT L
TENANT CERTIFICATE
American Industrial Properties REIT
6210 North Beltline, Suite 170
Irving, Texas 75063-2656
"Buyer"
- ------------------------------
- ------------------------------
- ------------------------------
- ------------------------------
"Landlord"
Ladies and Gentlemen:
Landlord, as owner of the property (the "Property") of which the
leased premises are a part, intends to sell the Property to American Industrial
Properties REIT or an affiliate thereof ("Buyer") who, as a condition to the
purchase of the Property and to satisfy the requirements of Lender, has
required this Tenant Certificate.
Buyer is about to make, execute and deliver its Promissory Note
("Note") to a financial institution ("Lender") which Note shall be secured by,
among other security, a lien encumbering the Property pursuant to a Deed of
Trust, Security Agreement and Assignment of Leases and Rents (as thereafter
amended and modified, the "Mortgage"). The Mortgage and all other instruments
securing the Note are herein collectively called the "Security Documents".
In consideration of Buyer's agreement to purchase the Property, Tenant
agrees and certifies to Landlord, Buyer and Lender as follows:
ACKNOWLEDGMENT OF LEASE
1. Tenant is the tenant under that certain lease dated (the "Lease"),
the undersigned ("Tenant") has leased from Landlord, or its predecessors in
interest the leased premises consisting of _______ net rentable square feet
located at as more particularly described in the Lease. A true and correct copy
of the Lease together with all amendments, modifications and/or renewals is
attached as Exhibit "A".
2. The leased premises and possession thereof are accepted and Tenant
is in actual occupancy of the leased
premises; the lease is in full force and effect; the term of the Lease commenced
as of _____________________________ and ______________________________________
the expiration date of the Lease is _______________________________________.
3. Rental at the rate provided by the Lease is payable in accordance
with its terms, all minimum rent and additional rent have been paid through and
is not paid and will not be paid more than one month in advance of the due date
set forth in the Lease. Minimum monthly base rent of $ plus monthly estimated
operating expenses of $__________ (with the tenant responsible for taxes,
insurance and common area operating expenses in excess of $__________) are due
on the of each month.
4. Landlord is holding a security deposit in the amount of $_________
as of the date hereof. Tenant is not entitled to any interest on the security
deposit except as follows:__________________________________________.
5. Tenant claims no present charge, lien or claim of offset against
rent.
6. Tenant has no option to extend the lease except as follows: _______
______________________________________________________________________________.
<PAGE> 52
7. Tenant has not subleased nor assigned all or any portion of the
Leased premises, except as follows: ________________________________________.
8. Tenant is not in default in the performance of any covenant,
agreement or condition contained in the Lease and no circumstances exist which,
with the passage of time, would result in Tenant being in default in the
performance of any covenant, agreement or condition contained in the Lease.
9. To the best of Tenant's knowledge, its use, maintenance and
operation of the leased premises complies with, and will at all times comply
with, all applicable federal, state, county or local statutes, laws, rules and
regulations of any governmental authorities relating to environmental, health
or safety matters. Except for de minimis quantities that are used in connection
with the ordinary course of Tenant's business, and then only in strict
compliance with all applicable laws, rules and regulations, Tenant does not and
will not engage in any activity, which would involve the use of the leased
premises for the storage, generation, use, treatment, transportation or
disposal of any chemical, material or substance which is regulated as toxic or
hazardous or exposure to which is prohibited, limited or regulated by any
federal, state, county, regional, local or other governmental authority or
which, even if not so regulated, may or could pose a hazard to the health and
safety of the other tenants and occupants of Landlord's property.
10. Tenant does not have any rights or options to purchase the
Property.
11. Tenant's interest in the Lease is not subject to any mortgage,
liens or other encumbrances except as follows: _______________________________.
12. There are no existing defaults under the Lease by reason of any
act or omission of the Landlord and no circumstances exist which, with the
passage of time, would place Landlord in default under the Lease, except as
follows: ____________________________________________________________________.
13. There are no outstanding unsatisfied obligations of Landlord under
the Lease except as follows: _________________________________________________.
14. The following is (are) guarantor(s) or Tenant's obligations under
the lease: __________________________________________________________________,
and [its] [his] [her] [their] current address(es) [is] [are] as follows: ______
_______________________________________________________________________________
_______________________________________________________________________________
SUBORDINATION
The Lease and all right, title and interest in the Property created
thereby (including without limitation any purchase options, rights of first
refusal, lease renewal rights, etc.) are, shall be and shall at all times
remain and continue to be subject and subordinate in all respects to the liens,
terms, covenants, provisions and conditions of the Security Documents.
NON-DISTURBANCE
So long as the Lease is in full force and effect and Tenant is not in
default under the Lease (beyond any period given to Tenant in the Lease to cure
such default) or under this Agreement:
(a) Tenant's possession of the Property and Tenant's rights
and privileges under the Lease shall not be diminished or interfered
with by Lender, and Tenant's occupancy of the Premises shall not be
disturbed by Lender for any reason whatsoever during the term of the
Lease or any extensions or renewals thereof; and
(b) Lender will not join Tenant as a party defendant in any
action or proceeding to foreclose the Mortgage or to enforce any
rights or remedies of Lender under the Mortgage which would cut-off,
destroy, terminate or extinguish the Lease or Tenant's interest and
estate under the Lease.
Notwithstanding the foregoing provisions of the paragraph, if it would be
procedurally disadvantageous for Lender not to name or join Tenant as a party
in a foreclosure proceeding with respect to the Mortgage, Lender may so name or
join Tenant without in any way diminishing or otherwise affecting the rights
and privileges granted to, or inuring to the benefits of, Tenant under this
Agreement.
<PAGE> 53
ATTORNMENT
(a) After notice is given by Lender that a default has
occurred under the Mortgage and that the rentals and all other
payments to be made by Tenant under the Lease should be paid to
Lender, Tenant will attorn to Lender and pay to Lender, or in
accordance with the directions of Lender, all rentals and other monies
due and to become due to Current Landlord (as hereinafter defined)
under the Lease or otherwise in respect to the Property, such payments
will be made regardless of any right of set-off, counterclaim or other
defense which Tenant may have against Current Landlord, whether as
tenant under the Lease or otherwise; and
(b) in addition, if Lender (or its nominee or designee) shall
succeed to the rights of Current Landlord under the Lease through
possession or foreclosure action, delivery of a deed or otherwise or
another person purchases the Property upon or following foreclosure of
the Mortgage, then at the request of Lender (or its nominee or
designee) or such purchaser (Lender, its nominees and designees, and
such purchaser, each being a "Successor-Landlord"), Tenant shall
attorn to and recognize Successor-Landlord as Tenant's landlord under
the Lease and shall promptly execute and deliver any instrument that
Successor-Landlord may reasonably request to evidence such attornment.
Upon such attornment, the lease shall continue in full force and
effect as, or as if it were, a direct lease between Successor-Landlord
and Tenant upon all terms, conditions and covenants as are set forth
in the Lease, except that Successor-Landlord shall not:
i) be liable for any previous act or omission of
Current Landlord under the Lease;
ii) be subject to any off-set, defense or
counterclaim which shall have previously accrued to Tenant
against Current Landlord;
iii) be bound by any modification of the Lease or by
any previous prepayment of rent or additional rent for more
than one month which Tenant might have paid to Current
Landlord, unless such modification or prepayment shall have
been expressly approved in writing by Lender; or
iv) be liable for any security deposited under the
Lease unless such security has been physically delivered to
Lender.
LEASE MODIFICATION
Tenant agrees that without the prior written consent of Lender, it
shall not: (a) amend, modify, terminate or cancel the Lease or any extensions
or renewals thereof; (b) tender a surrender of the Lease or make a prepayment
of any rent or additional rent in excess of one (1) month; or (c) subordinate
or permit the subordination of the Lease to any lien subordinate to the
Mortgage. Any such purported action without such consent shall be void as
against the holder of the Mortgage.
NOTICE OF DEFAULT; OPPORTUNITY TO CURE
a) Any notice required or permitted to be given by Tenant to
Current Landlord shall be simultaneously given also to Lender, and any right of
Tenant dependent upon notice shall take effect only after such notice to Lender
is so given. Performance by Lender shall satisfy any conditions of the Lease
requiring performance by Current Landlord, and Lender shall have a reasonable
time to complete such performance as provided in section (b) below.
b) Without limiting the generality of the foregoing, Tenant
shall promptly notify Lender of any default, act or omission of Current
Landlord which would give Tenant the right, immediately or after the lapse of a
period of time, to cancel or terminate the Lease or to claim a partial or total
eviction (a "Landlord Default"). In the event of a Landlord Default, Tenant
shall not exercise any rights available to it: (i) until it has given written
notice of such Landlord Default to Lender; and (ii) unless Lender has failed,
within thirty (30) days after Lender receives such notice, to cure or remedy
the Landlord Default or, if the same is not reasonably capable of being
remedied by Lender within such thirty (30) day period, until a reasonable
period for remedying such Landlord Default has elapsed following the giving of
such notice and following the time when Lender shall have become entitled under
the Security Documents to remedy the same (which reasonable period shall in no
event be less than the period to which Current Landlord would be entitled under
the Lease or otherwise, after similar notice, to effect such remedy); provided
that Lender shall with due diligence commence and prosecute a remedy for such
Landlord Default. If Lender cannot reasonably remedy a Landlord Default until
after Lender obtains possession of the Property, Tenant may not terminate or
cancel the Lease or claim a partial or total eviction by reason of such
Landlord Default until the expiration of a reasonable period necessary for the
remedy after Lender institutes proceedings to obtain possession of the Property
through a foreclosure or otherwise, or for the appointment of a receiver for
the Property,
<PAGE> 54
provided that Lender institutes and prosecutes such proceedings with due
diligence. Lender shall have no obligation hereunder to remedy any Landlord
Default.
NOTICE OF LIEN
To the extent that the Lease entitles Tenant to notice of the
existence of any mortgage and the identity of any lender, this Agreement shall
constitute such notice to Tenant with respect to the Mortgage.
REMEDIES
Upon and after the occurrence of a default under the Mortgage, Lender
shall be entitled, but not obligated, to exercise the claims, rights, powers,
privileges and remedies of Current Landlord under the Lease and shall be
further entitled to the benefits of, and to receive and enforce performance of,
all of the covenants to be performed by Tenant under the Lease as though Lender
were named therein as Current Landlord.
LIMITATION OF LIABILITY
Except as specifically provided in this Agreement, Lender shall not,
by virtue of this Agreement, the Mortgage or any other instrument to which
Lender may be a party, be or become subject to any liability or obligation to
Tenant under the Lease or otherwise.
PRIORITY
(a) Tenant acknowledges and agrees that this Agreement
supersedes (but only to the extent inconsistent with) any provisions of the
Lease relating to the priority or subordination of the Lease and the interests
or estates created thereby to the Mortgage.
(b) Tenant agrees to enter into a subordination,
non-disturbance and attornment agreement with any entity which shall succeed
Lender with respect to the Property, or any portion thereof, provided such
agreement is substantially similar to this Agreement.
NOTICES
Any notice, consent, request or other communication required or
permitted to be given hereunder shall be in writing and shall be: (a)
personally delivered; (b) delivered by Federal Express or other comparable
overnight delivery service; or (c) transmitted by postage prepaid registered or
certified mail, return receipt requested. All such notices, consents, requests
or other communications shall be addressed to Tenant or Lender at the address
for such party previously set forth in this Agreement, or to such other address
as Tenant or Lender shall in like manner designate in writing. All notices and
other communications shall be deemed to have been duly given on the first to
occur of actual receipt of the same or; (i) the date of delivery if personally
delivered; (ii) one (1) business day after depositing the same with the
delivery service if by overnight delivery service; and (iii) three (3) days
following posting if transmitted by mail. Any party may change its address for
purposes hereof by notice to the other parties given in accordance with the
provisions hereof.
GENERAL
This Agreement may not be modified or terminated orally. This
Agreement shall inure to the benefit of and be binding upon the parties hereto,
their successors and assigns. The term "Lender" shall include the then holder
of any interest in the Mortgage. The term "Current Landlord" shall mean the
then holder of the lessor's interest in the Lease. The term "person" shall mean
any individual, joint venture, corporation, partnership, trust, unincorporated
association or other entity. All references herein to the Lease shall mean the
Lease as modified by this Agreement and any amendments or modifications to the
Lease which are consented to in writing by the Lender. Any inconsistency
between the Lease and the provisions of this Agreement shall be resolved in
favor of this Agreement.
This Tenant Certificate is being executed and delivered by Tenant to
induce Lender to make the Loan which is to be secured in part by an assignment
to Lender of Landlord's interest in the Lease and with the intent and
understanding that the above statements will be relied upon by Lender. This
Tenant Certificate shall inure to the benefit of and be binding upon the
parties hereto, their successors and permitted assigns, and any purchaser or
purchasers at foreclosure of the Property, and their respective heirs, personal
representatives, successors and assigns.
<PAGE> 55
WAIVERS
Both Tenant and Lender hereby irrevocably waive all right to trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Agreement.
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State in which the Property is located.
IN WITNESS WHEREOF, the parties hereto have executed this Tenant
Certificate to be effective as of the day and year first stated above.
"LENDER"
-------------------------------------------
a
-----------------------------------------
By:
----------------------------------------
Printed Name:
------------------------------
Title:
-------------------------------------
"TENANT"
-------------------------------------------
a
-----------------------------------------
By:
----------------------------------------
Printed Name:
------------------------------
Title:
------------------------------------
AGREED AND CONSENTED TO:
"BUYER"
American Industrial Properties REIT,
a Texas real estate investment trust,
By:
----------------------------------
Printed Name:
------------------------
Title:
-------------------------------
Date:
--------------------------
<PAGE> 56
ACKNOWLEDGMENTS
STATE OF __________________ )
)
COUNTY OF ________________ )
BEFORE ME, the undersigned authority on this day personally appeared
________________________, the ______________ of
____________________________________, a ________________, known to me to be the
person whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and consideration therein
expressed, and as the act and deed of said _______________________, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, in this ____ day of
__________, 199__.
--------------------------------------------
NOTARY PUBLIC, State of
--------------------
<PAGE> 57
ACKNOWLEDGMENTS
STATE OF __________________ )
)
COUNTY OF ________________ )
BEFORE ME, the undersigned authority on this day personally appeared
________________________, the ______________ of
____________________________________, a ________________, known to me to be the
person whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and consideration therein
expressed, and as the act and deed of said _______________________, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, in this ____ day of
__________, 199__.
--------------------------------------------
NOTARY PUBLIC, State of Texas
<PAGE> 58
ACKNOWLEDGMENTS
STATE OF TEXAS )
)
COUNTY OF )
BEFORE ME, the undersigned authority on this day personally appeared
________________________, the ______________ of American Industrial Properties
REIT, a Texas real estate investment trust, known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that he
executed the same for the purposes and consideration therein expressed, and as
the act and deed of said real estate investment trust [and
______________________], and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, in this ____ day of
__________, 199__.
--------------------------------------------
NOTARY PUBLIC, State of
---------------------
<PAGE> 59
EXHIBIT "A"
Leases
<PAGE> 1
EXHIBIT 21.1
ENTITY: AMERICAN INDUSTRIAL PROPERTIES REIT, A TEXAS REAL ESTATE INVESTMENT
TRUST
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE SUBSIDIARY/PARTNER
---------- ------------------
<S> <C>
100% American Industrial Properties REIT, Inc., a Maryland corporation
100% AIP Tamarac, Inc., a Texas corporation
99% Limited Partner AIP Properties #1, L.P., a Delaware limited partnership
100% AIP Properties #3, GP, Inc., a Texas corporation
99% Limited Partner AIP Properties #3, L.P., a Delaware limited partnership
100% AIP-SWAG GP, Inc., a Texas corporation
98% Limited Partner AIP-SWAG Operating Partnership, L.P., a Delaware limited partnership
99% AIP Operating, L.P., a Delaware limited partnership
100% DDR Office Flex I, LLC, an Ohio Limited Liability Company
100% DDR Office Flex II, LLC, an Ohio Limited Liability Company
100% AIP/Battlefield GP, Inc., a Texas corporation
100% AIP/Greenbrier GP, Inc., a Texas corporation
100% AIP/Post Office GP, Inc., a Delaware corporation
49% Limited Partner DDR/Post Office L.P., a Delaware corporation
85.5% Limited Partner DDR/Tech 29 Limited Partnership
55.84% Joint Venture USAA Chelmsford Associates Joint Venture
</TABLE>
ENTITY: AIP TAMARAC, INC., A TEXAS CORPORATION
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE PARTNER
---------- -------
<S> <C>
1% General Partner AIP Properties #1, L.P., a Delaware limited partnership
</TABLE>
ENTITY: AIP PROPERTIES #3 GP, INC., A TEXAS CORPORATION
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE PARTNER
---------- -------
<S> <C>
1% General Partner AIP Properties #3, L.P., a Delaware limited partnership
</TABLE>
<PAGE> 2
ENTITY: AIP SWAG GP, INC., A TEXAS CORPORATION
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE PARTNER
---------- -------
<S> <C>
98% General Partner AIP-SWAG Operating Partnership, L.P., a Delaware limited partnership
</TABLE>
ENTITY: AIP/POST OFFICE GP, INC., A DELAWARE CORPORATION
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE PARTNER
---------- -------
<S> <C>
1% General Partner DDR/Post Office L.P., a Delaware corporation
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-3 (No. 333-46699), the Registration Statement on Form S-3 (No.
333-48555), the Registration Statement on Form S-3 (No. 333-52879), and the
Registration Statement on Form S-8 (No. 333-69625) of American Industrial
Properties REIT of our report dated February 10, 1999, except for Note 19, as to
which the date is March 26, 1999 with respect to the consolidated financial
statements and schedule of the American Industrial Properties REIT included in
its Annual Report on Form 10-K for the year ended December 31, 1998.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,567
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 505,132
<DEPRECIATION> (33,449)
<TOTAL-ASSETS> 500,330
<CURRENT-LIABILITIES> 287,805
<BONDS> 0
0
0
<COMMON> 1,721
<OTHER-SE> 203,858
<TOTAL-LIABILITY-AND-EQUITY> 500,330
<SALES> 0
<TOTAL-REVENUES> 49,062
<CGS> 0
<TOTAL-COSTS> 28,158
<OTHER-EXPENSES> (28)
<LOSS-PROVISION> 10,060
<INTEREST-EXPENSE> 15,139
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,267)
<DISCONTINUED> 0
<EXTRAORDINARY> (5,803)
<CHANGES> 0
<NET-INCOME> (10,070)
<EPS-PRIMARY> (.082)
<EPS-DILUTED> (.082)
</TABLE>
