SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-15528
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BALCOR PENSION INVESTORS-VII
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(Exact name of registrant as specified in its charter)
Illinois 36-3390487
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR PENSION INVESTORS - VII
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
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Cash and cash equivalents $ 6,610,447 $ 17,297,262
Accounts and accrued interest receivable 601,334 411,712
Prepaid expenses 20,230 61,204
Deferred expenses, net of accumulated
amortization of $182,038 in 1997 and
$177,082 in 1996 210,706 70,174
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7,442,717 17,840,352
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Real estate held for sale (net of allowance
of $3,935,000 in 1997 and 1996) 25,986,259 25,986,259
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$ 33,428,976 $ 43,826,611
============== ==============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable $ 224,282 $ 251,125
Due to affiliates 86,224 88,416
Accrued real estate taxes 231,658 106,465
Security deposits 70,823 70,823
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Total liabilities 612,987 516,829
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Commitments and contingencies
Affiliates' participation in joint venture 3,608,971 3,584,170
Limited Partners' capital (461,470
Interests issued and outstanding) 31,074,315 41,621,252
General Partner's deficit (1,867,297) (1,895,640)
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Total partners' capital 29,207,018 39,725,612
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$ 33,428,976 $ 43,826,611
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS - VII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Income:
Income from operations of real estate
held for sale $ 837,434 $ 2,203,981
Interest on short-term investments 114,949 111,678
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Total income 952,383 2,315,659
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Expenses:
Administrative 191,704 138,713
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Total expenses 191,704 138,713
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Income before affiliates' participation
in income of joint ventures 760,679 2,176,946
Affiliates' participation in income of
joint ventures (92,699) (564,019)
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Net income $ 667,980 $ 1,612,927
============== ==============
Net income allocated to General Partner $ 66,798 $ 161,293
============== ==============
Net income allocated to Limited Partners $ 601,182 $ 1,451,634
============== ==============
Net income per Limited Partnership Interest
(461,470 issued and outstanding) $ 1.30 $ 3.15
============== ==============
Distribution to General Partner $ 153,823 $ 153,823
============== ==============
Settlement Distribution to Limited Partners $ 72,839 None
============== ==============
Distribution to Limited Partners $ 11,075,280 $ 1,384,410
============== ==============
Distribution per Limited Partnership
Interest (461,470 issued and outstanding) $ 24.00 $ 3.00
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS - VII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Operating activities:
Net income $ 667,980 $ 1,612,927
Adjustments to reconcile net income to
net cash provided by operating
activities:
Affiliates' participation in income
of joint ventures 92,699 564,019
Amortization of deferred expenses 4,956 6,712
Payment of leasing commissions (145,488)
Net change in:
Escrow deposits (91,909)
Accounts and accrued interest
receivable (189,622) (41,427)
Prepaid expenses 40,974 91,332
Accounts payable (26,843) (13,115)
Due to affiliates (2,192) 20,009
Accrued real estate taxes 125,193 257,847
Security deposits 14,705
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Net cash provided by operating activities 567,657 2,421,100
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Financing activities:
Distribution to Limited Partners (11,148,119) (1,384,410)
Distribution to General Partner (153,823) (153,823)
Contribution by General Partner 115,368
Distribution to joint venture partners -
affiliates (67,898) (236,194)
Principal payments on mortgage note
payable (14,111)
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Net cash used in financing activities (11,254,472) (1,788,538)
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Net change in cash and cash equivalents (10,686,815) 632,562
Cash and cash equivalents at beginning of
year 17,297,262 8,595,511
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Cash and cash equivalents at end of period $ 6,610,447 $ 9,228,073
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1997, and all such adjustments are of a normal and recurring nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold four properties. During April
1997, the Partnership sold the U.S. West Direct Center Office Building.
Currently, the Partnership has entered into contracts for the sales of the
Butler Plaza Shopping Center and the loan collateralized by the Whispering
Hills Apartments, which is accounted for as real estate held for sale. The
timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to, the lawsuit discussed in Note 4 of Notes to Financial Statements. In the
absence of any contingency, the reserves will be paid within twelve months of
the last property being sold. In the event a contingency exists, reserves may
be held by the Partnership for a longer period of time.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the
quarter ended March 31, 1997 are:
Paid Payable
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Mortgage servicing fees $7,359 $2,453
Reimbursement of expenses to
the General Partner, at cost 20,219 83,771
The General Partner made a contribution of $115,368 in connection with the
settlement of certain litigation as further discussed in Note 5 of Notes to
Financial Statements.
4. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
<PAGE>
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the financial position, operations and
liquidity of the Partnership. The Partnership believes that it has meritorious
defenses to contest the claims.
5. Settlement of Litigation:
A settlement received final approval by the court in November 1996 in the class
action, Paul Williams and Beverly Kennedy et. al. v. Balcor Pension Investors,
et. al. upon the terms described in the notice to class members in September
1996. The General Partner made a contribution of $115,368 to the Partnership,
of which the plaintiff's counsel received $11,537 pursuant to the settlement
agreement. In February 1997, the General Partner made a settlement payment of
$103,831 ($0.22 per Interest) to members of the class pursuant to the
settlement. Of the total settlement amount, $72,839 was paid to original
investors who held their Limited Partnership Interests at the date of the
settlement and was recorded as a distribution to Limited Partners in the
Financial Statements. The remaining portion of the settlement of $30,992 was
paid to original investors who previously sold their Interests in the
Partnership. This amount was recorded as an administrative expense in the
Financial Statements. The settlement had no material impact on the
Partnership.
6. Subsequent Events:
(a) In April 1997, the Partnership paid $4,568,553 ($9.90 per Interest) to the
holders of Limited Partnership Interests. This amount includes the regular
distribution from Cash Flow of $1.00 per Interest for the first quarter of
1997, and a special distribution of $8.90 per Interest from remaining available
net proceeds from the 1996 property sales.
(b) In April 1997, the Partnership sold the U.S. West Direct Center Office
Building in an all cash sale for $14,250,000. From the proceeds of the sale,
the Partnership paid $324,819 in selling costs. The basis of the property was
$6,442,615. For financial statement purposes, the Partnership will recognize a
gain of approximately $7,483,000 from the sale of the property during the
second quarter of 1997.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors - VII (the "Partnership") is a limited partnership
formed in 1985 to invest principally in first mortgage loans. The Partnership
raised $115,367,500 from sales of Limited Partnership Interests and utilized
these proceeds to fund eight loans. The Partnership sold four properties during
1996. As of March 31, 1997, one loan, the Whispering Hills loan which is
accounted for as real estate held for sale, remained outstanding in the
Partnership's portfolio, and the Partnership owned two additional properties.
The Partnership sold the U.S. West Direct Center Office Building in April 1997.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1996 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership sold the Hickory Creek - Phases I and II, Sand Pebble Village -
Phases I and II and Jonathan's Landing apartment complexes in 1996, which were
generating income from operations prior to their sales. As a result, net income
decreased during the quarter ended March 31, 1997 as compared to the same
period in 1996. Further discussion of the Partnership's operations is
summarized below.
1997 Compared to 1996
- ---------------------
Discussions of fluctuations between 1997 and 1996 refer to the quarters ended
March 31, 1997 and 1996.
Income from operations of real estate held for sale represents the net
operations of the properties acquired by the Partnership through foreclosure.
At March 31, 1997, the Partnership was operating three properties. Original
funds advanced by the Partnership total approximately $37,775,000 for these
properties. The Partnership sold four properties during 1996, which were
generating income from operations prior to their sales. As a result, income
from operations of real estate held for sale decreased during 1997 as compared
to 1996.
<PAGE>
During February 1997, the General Partner made a payment relating to the
settlement of certain litigation to original investors who previously sold
their Interests in the Partnership, as well as related legal costs, which were
accounted for as administrative expenses. See Note 5 of Notes to Financial
Statements for additional information. The Partnership also incurred increased
printing and postage costs in connection with its responses to tender offers
during the first quarter of 1997. As a result, administrative expenses
increased during 1997 as compared to 1996.
The Jonathan's Landing and Sand Pebble Village Phases I and II apartment
complexes were both owned by joint ventures with affiliates. As a result of
the sales of these properties during 1996, affiliate's participation in
income of joint ventures related to these properties ceased during 1996.
Affiliates' participation in income from joint venture during 1997 represents
the operations of the Whispering Hills Apartments, which remained relatively
unchanged compared to 1996 operations.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $10,687,000 as
of March 31, 1997, when compared to December 31, 1996 primarily due to the
special distribution in January 1997 from the Partnership's share of net
proceeds received in connection with the sale of the Jonathan's Landing
Apartments. Cash flow of approximately $568,000 was provided by operating
activities consisting of cash flow from the operations of the Partnership's
properties and interest income earned on short-term investments, net of the
payment of administrative expenses. Financing activities consisted primarily
of the payment of a distribution to Limited Partners of approximately
$11,148,000. In addition, in April 1997 the Partnership made a distribution of
$4,568,553 to Limited Partners primarily from remaining available net proceeds
from the 1996 property sales.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures,
which include debt service payments. During 1997 and 1996, the Whispering
Hills Apartments, U.S. West Direct Center Office Building and Butler Plaza
Shopping Center generated positive cash flow. Sand Pebble Village Apartments -
Phase II was the only property that had underlying debt prior to its sale in
1996. The Hickory Creek - Phase I and II, Sand Pebble Village - Phase I and II
and Jonathan's Landing apartment complexes generated positive cash flow prior
to their sales in 1996. As of March 31, 1997, the occupancy rate of the
Partnership's remaining residential property, Whispering Hills Apartments, was
98%. The occupancy rates at the U.S. West Direct Center Office Building and the
Butler Plaza Shopping Center were 99% and 71%, respectively.
The Partnership sold four properties in 1996. During April 1997, the
Partnership sold the U.S. West Direct Center Office Building. Currently, the
Partnership has entered into a contract for the sale of the Butler Plaza
Shopping Center for a sale price of $5,500,000. The Partnership and the
<PAGE>
affiliated joint venture partner entered into a contract for the sale of the
loan collateralized by the Whispering Hills Apartments for a sale price of
$17,200,000. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees stemming from litigation involving the Partnership including,
but not limited to, the lawsuit as discussed in Note 4 of Notes to Financial
Statements. In the absence of any contingency, the reserves will be paid within
twelve months of the last property being sold. In the event a contingency
exists, reserves may be held by the Partnership for a longer period of time.
In April 1997, the Partnership sold the U.S. West Direct Center Office Building
in an all cash sale for $14,250,000. From the proceeds of the sale, the
Partnership paid $324,819 in selling costs. Pursuant to the terms of the sale,
$1,100,000 of the proceeds is held in escrow and is expected to be returned to
the Partnership prior to November 1997. The remainder of the proceeds is
expected to be distributed to the Limited Partners in 1997. See Note 6 of Notes
to the Financial Statements for additional information.
Pursuant to the sale agreement for the Hickory Creek Apartments, $250,000 of
the proceeds was retained by the Partnership and was unavailable for
distribution until March 1997, at which time the funds were released in full to
the Partnership.
In February 1997, the General Partner made a settlement payment of $103,831
($0.22 per $250 Interest) to members of the class pursuant to the settlement
approved by the court in November 1996 in the Paul Williams and Beverly
Kennedy, et al, v. Balcor Pension Investors, et al class action lawsuit. The
General Partner made a contribution of $115,368 to the Partnership from which
the plaintiff's counsel received $11,537 pursuant to the settlement agreement.
Of the total settlement amount, $72,839 was paid to original investors who held
their Limited Partnership Interests at the date of the settlement and was
recorded as a distribution to Limited Partners in the Financial Statements.
The remaining portion of the settlement of $30,992 was paid to original
investors who previously had sold their Interests in the Partnership. This
amount was recorded as an administrative expense in the Financial Statements.
In April 1997, the Partnership paid $4,568,553 ($9.90 per Interest) to the
holders of Limited Partnership Interests. This amount includes the regular
quarterly distribution from Cash Flow of $1.00 per Interest for the first
quarter of 1997, and a special distribution of Mortgage Reductions of $8.90 per
Interest from remaining available proceeds from the 1996 property sales. The
level of the regular quarterly distribution from Cash Flow was lower than the
amount distributed for the fourth quarter of 1996 due to the 1996 property
sales. The Partnership will distribute available proceeds from the sale of the
remaining properties; however, it is not expected that regular quarterly
distributions from Cash Flow will be made. In April 1997, the Partnership also
paid $38,456 to the General Partner as its share of the Cash Flow distributed
for the first quarter of 1997 and $12,819 as its contribution to the Early
Investment Incentive Fund. Including the April 1997 distribution, Limited
Partners have received $120.56 of Cash Flow from operations and a return of
Original Capital of $124.39, totaling $244.95 per $250 Interest.
<PAGE>
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices
depending on general or local economic conditions. In the long-term, inflation
will increase operating costs and replacement costs and may lead to increased
rental revenues and real estate values.
<PAGE>
BALCOR PENSION INVESTORS-VII
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
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U.S. West Office Building
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As previously reported, on January 14, 1997, the Partnership contracted to sell
the U.S. West Office Building, Murray, Utah to an unaffiliated party, Office
Opportunity Fund III, L.P., a California limited partnership. The purchaser
assigned its right under the agreement of sale to an affiliate, 5300 South
Associates, LLC, and the sale closed on April 15, 1997. The sale price was
$14,250,000. From the proceeds of the sale, the Partnership paid closing costs
of $39,819, and a brokerage commission of $285,000 to an affiliate of the
third party which managed the property. The Partnership received approximately
$13,925,181 representing the remaining proceeds. Of such proceeds, $1,100,000
is held in escrow and is expected to be returned to the Partnership prior to
November 1997.
Butler Plaza Shopping Center
- ----------------------------
As previously reported, on March 25, 1997, the Partnership contracted to sell
the Butler Plaza Shopping Center, Casselberry, Florida to an unaffiliated
party, Sterling Investment Co., Inc. a Florida corporation, for a sale price of
$5,500,000. The closing of the sale was extended from April 30, 1997 to May 14,
1997. In addition, the purchaser will receive a $300,000 credit in connection
with a condemnation at the property.
Whispering Hills Apartments
- --------------------------
In 1987, the Partnership and an affiliate (together, the "Participants"),
funded a $15,700,000 first mortgage loan (the "Loan") collateralized by a first
mortgage on the Whispering Hills Apartments, Overland Park, Kansas. The
Partnership funded $11,775,000 (75%) of the Loan. The Participants subsequently
funded an additional $4,889,508 towards the Loan, of which $3,786,800 was
contributed by the Partnership. In 1994, pursuant to the settlement of a
lawsuit relating to the property, the Participants received from the borrower a
$1,125,000 payment, which was applied to the outstanding principal amount of
the loan, $843,750 of which was the Partnership's share.
Pursuant to an agreement (the "Agreement") dated March 15, 1989, the
Participants have the right to negotiate a sale of the property to a third
party. Unless the borrower purchases the Loan for a sale price equal to the
proposed sale price of the property, the borrower is obligated to agree to any
such sale provided further that the proposed sale price exceeds the then
appraised value of the property.
<PAGE>
The Participants have marketed the property for sale and the best offer
received was for $17,200,000. The borrower has exercised its option and on May
6, 1997 the Participants entered into a contract (the "Loan Contract") to sell
the Loan to the current owners of the property for a sale price of $17,200,000
plus the property's net cash flow for the period May 1 through the closing
date, as defined below. Pursuant to the terms of the Loan Contract, the
Participants have written down the outstanding principal balance of the Loan to
$17,200,000, representing a write-off of $2,264,508. The owner has deposited
$350,000 into an escrow account as earnest money. The remainder of the sale
price is payable in cash at closing, scheduled for May 30, 1997. From the
proceeds of the sale, the Participants will pay a sale commission to an
unaffiliated party which provided property management services for other
properties owned by the Partnership of $344,000. The Participants will receive
the remaining sale proceeds of $16,856,000, less closing costs, of which the
Partnership's share is expected to be $12,642,000. Neither the General Partner
nor any affiliate will receive a brokerage commission in connection with the
sale of the Loan. The General Partner will be reimbursed by the Partnership for
actual expenses incurred in connection with the sale.
It is possible that the owners may fail to complete the purchase of the Loan.
In such event, the Participants intend to proceed with a sale of the property
to the third party. The Participants also have the option to proceed with a
foreclosure of the property.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated March 6,
1986 (Registration No. 33-01630) and Form of Confirmation regarding Interests
in the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form
10-Q for the quarter ended September 30, 1992 (Commission File No. 0-15528) are
incorporated herein by reference.
(10) Material Contracts:
(a)(i) Agreement of Sale and attachment thereto relating to the sale of the
U.S. West Office Building, Murray, Utah, previously filed as Exhibit (99) to
the Registrant's Current Report on Form 8-K dated January 14, 1997, is
incorporated herein by reference.
(a)(ii) First Amendment to Agreement of Sale relating to the sale of the
U.S. West Office Building, Murray, Utah, previously filed as Exhibit
(10)(a)(ii) to the Registrant's Form 10-K dated December 31, 1996, is
incorporated herein by reference.
(a)(iii) Second Amendment to Agreement of Sale relating to the sale of
the U.S. West Office Building, Murray, Utah, previously filed as Exhibit
(10)(a)(iii) to the Registrant's Form 10-K dated December 31, 1996, is
incorporated herein by reference.
<PAGE>
(a)(iv) Third Amendment to Agreement of Sale relating to the sale of the U.S.
West Office Building, Murray, Utah, previously filed as Exhibit (10)(a)(iv) to
the Registrant's Form 10-K dated December 31, 1996, is incorporated herein by
reference.
(b) Agreement of Sale and attachments thereto relating to the sale of Sand
Pebble Village Apartments - Phase I previously filed as Exhibit (2)(a) to the
Registrant's Current Report on Form 8-K dated June 28, 1996, is incorporated
herein by reference.
(c) Agreement of Sale and attachments thereto relating to the sale of Sand
Pebble Village Apartments - Phase II previously filed as Exhibit (2)(b) to the
Registrant's Current Report on Form 8-K dated June 28, 1996, is incorporated
herein by reference.
(d)(i) Agreement of Sale and attachments thereto relating to the sale of
Hickory Creek Apartments previously filed as Exhibit (10)(i) to the
Registrant's Form 10-Q dated June 30, 1996, is incorporated herein by
reference.
(d)(ii) Letter Agreement dated August 14, 1996, relating to the sale of Hickory
Creek Apartments previously filed as Exhibit (10)(c)(ii) to the Registrant's
Form 10-Q dated September 30, 1996 is incorporated herein by reference.
(e)(i) Agreement of Sale and attachment thereto relating to the sale of
Jonathan's Landing Apartments previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated August 30, 1996, is incorporated
herein by reference.
(e)(ii) First Amendment to the Agreement of Sale relating to the sale of
Jonathan's Landing Apartments previously filed as Exhibit (10)(d)(ii) to the
Registrant's Form 10-Q dated September 30, 1996 is incorporated herein by
reference.
(f)(i) Agreement of Sale and attachment thereto relating to the sale of Butler
Plaza Shopping Center, Orlando, Florida, previously filed as Exhibit (10)(f) to
the Registrant's Form 10-K dated December 31, 1996, is incorporated herein by
reference.
(f)(ii) First Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of Butler Plaza Shopping Center, Orlando, Florida, is attached hereto.
(g) Agreement to Purchase Loan Documents relating to the sale of the loan
collateralized by the Whispering Hills Apartments, Overland Park, Kansas, is
attached hereto.
(27) Financial Data Schedule of the Registrant for the three months ended March
31, 1997 is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended March 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-VII
By: /s/ Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-VII, the General Partner
By: /s/ Jayne A. Kosik
-----------------------------
Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Mortgage Advisors-VII, the General
Partner
Date: May 13, 1997
---------------
<PAGE>
FIRST AMENDMENT TO
AGREEMENT OF SALE AND ESCROW AGREEMENT
THIS FIRST AMENDMENT TO AGREEMENT OF SALE AND ESCROW AGREEMENT (this
"Amendment") is made and entered into as of this 4th day of April, 1997, by and
between BUTLER LIMITED PARTNERSHIP, an Illinois limited partnership ("Seller"),
STERLING INVESTMENT CO., INC., a Florida corporation ("Purchaser"), and CHARTER
TITLE COMPANY ("Escrow Agent").
RECITALS:
A. Seller and Purchaser are parties to that certain Agreement of Sale,
dated March 25, 1997 (the "Agreement"), pursuant to which Purchaser has agreed
to purchase and Seller has agreed to sell certain Property (as defined in the
Agreement) legally described and depicted on Exhibit A attached to the
Agreement.
B. Seller, Purchaser and Escrow Agent are parties to that certain Escrow
Agreement, dated March 25, 1997 (the "Escrow Agreement"), pursuant to which
Purchaser has deposited funds in escrow to be held by Escrow Agent in
accordance with the terms of the Escrow Agreement.
C. Seller and Purchaser desire to amend the Agreement and the Escrow
Agreement in accordance with the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. All terms not otherwise defined herein shall have the meanings ascribed to
each in the Agreement.
2. The following Paragraph 6.5 shall be inserted into Page 4 of the
Agreement:
" 6.5 Notwithstanding the foregoing Paragraph 6.4, Seller hereby
agrees to give Purchaser a credit at Closing in the amount of $300,000.00 as
compensation for the Previous Condemnation. Said condemnation shall not have a
deleterious affect against the remaining property."
3. Notwithstanding the terms of Paragraph 7.1 of the Agreement, if the Phase
II Environmental Site Assessment currently being prepared for the Property
discloses any material environmental defect on the Property other than as set
forth in the Existing Report, then Purchaser shall have the right to terminate
the Agreement by giving written notice of such termination to Seller on or
before April 18, 1997. If written notice is not received by Seller on or
<PAGE>
before April 18, 1997, then the right of Purchaser to terminate the Agreement
pursuant to this Paragraph 3 of the Amendment shall be waived. If Purchaser
terminates the Agreement by written notice to Seller on or before April 18,
1997: (i) Purchaser shall promptly deliver to Seller copies of all studies,
reports and other investigations obtained by Purchaser in connection with its
due diligence during the Inspection Period; and (ii) the Earnest Money
deposited by Purchaser shall be immediately paid to Purchaser, together with
any interest earned thereon, and neither Purchaser nor Seller shall have any
right, obligation or liability under the Agreement, except for Purchaser's
obligation to indemnify Seller and restore the Property, as more fully set
forth in Paragraph 7.1 of the Agreement. Notwithstanding anything contained
herein to the contrary, the terms of this Paragraph 3 of the Amendment, shall
survive the Closing and the delivery of the Deed and termination of this
Agreement.
4. The first grammatical sentence of Paragraph 8 of the Agreement is deleted
in its entirety and replaced with the following:
"The closing of this transaction (the "Closing") shall be on or before May
14, 1997 (the "Closing Date"), at the office of Title Insurer, Orlando,
Florida, at which time Seller shall deliver possession of the Property to
Purchaser."
5. The first grammatical sentence of Paragraph 27.4 of the Agreement is
deleted in its entirety and replaced with the following:
"It shall be a condition to Purchaser's obligations hereunder (the
"Estoppel Condition") that Seller deliver to Purchaser, at or prior to 5:00
p.m. Chicago time on May 7, 1997 (i) a Tenant Certificate from Publix, Eckards,
Ross Dress for Less, Bealls Outlet, Fashion Bug, Clicks Billiards and
Kimsworth, Inc. and (ii) a Tenant Certificate or Seller Tenant Certificate from
tenants occupying the remainder of the occupied leasable area of the Property."
6. The first grammatical sentence of Paragraph 27.5 of the Agreement is
deleted in its entirety and replaced with the following:
"If Seller has not satisfied the Estoppel Condition on or before 5:00 p.m.
Chicago time on May 7, 1997, then Purchaser shall have the right to terminate
this Agreement by delivering written notice to Seller on or before 5:00 p.m.
Chicago time on May 9, 1997."
7. The reference in Paragraph 27.6 of the Agreement to the date "April 16,
1997" is hereby deleted and replaced with the date "May 12, 1997".
8. Except as amended hereby, the Agreement shall be and remain unchanged and
in full force and effect in accordance with its terms.
9. This Amendment may be executed in counterparts each of which shall be
deemed an original, but all of which, when taken together shall constitute one
and the same instrument. To facilitate the execution of this Amendment,
Seller, Purchaser and Escrow Agent may execute and exchange by telephone
facsimile counterparts of the signature pages, with each facsimile being deemed
an "original" for all purposes.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
PURCHASER:
STERLING INVESTMENT CO., INC., a Florida
corporation
By: /s/ D. Kosoy
---------------------------------
Name: D. Kosoy
---------------------------------
Its: Pres.
---------------------------------
SELLER:
BUTLER LIMITED PARTNERSHIP, an Illinois
limited partnership
By: Butler Partners, Inc., an Illinois
corporation, its general partner
By: /s/ John K. Powell, Jr.
--------------------------------
Name: John K. Powell, Jr.
--------------------------------
Its: Senior Vice President
--------------------------------
ESCROW AGENT:
Charter Title Company, as agent
for Lawyers Title Insurance Corporation
By:
-------------------------------
Its: Authorized Agent
<PAGE>
AGREEMENT TO PURCHASE LOAN DOCUMENTS
THIS AGREEMENT TO PURCHASE LOAN DOCUMENTS (this "Agreement") is made as of
the 23rd day of April, 1997, by and between BALCOR MORTGAGE ADVISORS, INC.
("Balcor") and MICHAEL P. HARRIS, ARNOLD L. PORATH, JOHN P. LOWNEY, JR. and KAY
S. LOWNEY, AS TRUSTEES OF THE JKL TRUST and STEPHEN D. MOSES (in their capacity
as the makers of the Note and the other Loan Documents defined below,
collectively, the "Borrower" and in their capacity as purchaser of the Note
and the other Loan Documents, collectively, "Purchaser").
R E C I T A L S
A. Balcor is the owner and holder of that certain Secured Promissory Note
Secured By Mortgage and Security Agreement made by Messrs Harris, Porath and
Moses and payable to the order of Balcor (as amended, the "Note").
B. The Note is secured, inter alia, by a Mortgage and Security Agreement
(as amended, the "Mortgage") executed by Borrower in favor of Balcor with
respect to real property and improvements commonly known as Whispering Hills
Apartments in Overland Park, Kansas (the "Property"). The Note, the Mortgage
and the other documents, agreements and instruments which evidence and/or
secure the loans evidenced by the Note, including, without limitation, the
documents, agreements and instruments set forth on Exhibit C, are hereinafter
referred to collectively as the "Loan Documents".
C. Borrower is the owner of the Property.
D. Pursuant to the terms of the Agreement dated as of March 15, 1989,
among Balcor, Borrower and Balcor Property Management, Inc., as amended (the
"March 15, 1989 Agreement"), Balcor has proposed to Borrower that Borrower sell
the Property to Equity Residential Properties Trust ("Equity") for a purchase
price of Seventeen Million Two Hundred Thousand and No/100 Dollars
($17,200,000.00).
E. Pursuant to the terms of the March 15, 1989 Agreement, Borrower has
the right to purchase the Loan Documents from Balcor for the same amount as the
purchase price to be paid by Equity (i.e. Seventeen Million Two Hundred
Thousand and No/100 Dollars [$17,200,000.00]).
F. Borrower has elected to purchase the Loan Documents from Balcor for a
purchase price of $17,200,000.
G. Borrower anticipates entering into an Agreement of Contribution and
Sale (the "Sale Agreement") pursuant to which Borrower will sell and contribute
the Property to Whispering Hills Apartments, L.L.C., a Kansas limited liability
company ("Whispering Hills"). Except in the limited circumstances set forth in
Section 5B of this Agreement, the sale and contribution of the Property by
Borrower to Whispering Hills pursuant to the Sale Agreement is not a condition
precedent to Borrower's obligation to perform hereunder and, except in the
limited circumstances set forth in Section 5B of this Agreement, Borrower's
obligation to perform hereunder is not contingent upon the performance by
Whispering Hills of its obligations under the Sale Agreement.
<PAGE>
H. Borrower and Balcor desire to enter into this Agreement to set forth,
among other things, the terms and provisions pursuant to which Balcor shall
sell to Purchaser and Purchaser shall purchase from Balcor the Loan Documents.
NOW, THEREFORE, for and in consideration of the foregoing recitals, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. RECITALS. The foregoing recitals are deemed part of this Agreement
and are incorporated herein by this reference.
2. PURCHASE AND SALE. Purchaser agrees to purchase from Balcor and
Balcor agrees to sell to Purchaser the Loan Documents at the price of
$17,200,000 (the "Purchase Price"). In addition, at "Closing" (as hereinafter
defined), Purchaser shall pay to Seller an amount equal to the "Positive Cash
Flow" (as defined in the March 15, 1989 Agreement) for the period April 1, 1997
through and including April 20, 1997.
3. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as
follows:
a. On or before April 14, 1997, the sum of Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) (said sum together with any interest
earned thereon if and when deposited, and together with the additional $100,000
"Closing Extension Fee" described in Section 4 hereof if and when deposited
shall hereinafter be referred to as the "Earnest Money") to be held in escrow
by and in accordance with the provisions of the Escrow Agreement ("Escrow
Agreement") attached hereto as Exhibit A;
b. On the "Closing Date" (hereinafter defined), the Purchase Price,
by federally wired "immediately available" funds, on or before 2:00 p.m Chicago
time. Balcor will distribute the Purchase Price in accordance with the terms
of the March 15, 1989 Agreement.
4. CLOSING. The closing (the "Closing") of the sale and delivery of the
Loan Documents from Balcor to Purchaser shall take place at such place as may
be mutually agreed upon by the parties hereto, on April 30, 1997 (the "Closing
Date"). Notwithstanding anything to the contrary contained within this
Paragraph 4, Purchaser shall have the right to extend the Closing Date until
May 30, 1997 (the "Alternate Closing Date") by the payment of One Hundred
Thousand and No/100 Dollars ($100,000.00) to Escrow Agent prior to the Closing
Date (the "Closing Extension Fee"). The Closing Extension Fee shall be held by
Escrow Agent but shall be credited against the Purchase Price at Closing, so
long as Purchaser has not defaulted in its obligations hereunder. This
transaction shall be closed through an escrow with the Escrow Agent set forth
on Exhibit A in accordance with the general provisions of the usual and
customary form of escrow for similar transactions in Kansas.
<PAGE>
5. PURCHASER DEFAULT.
A. All Earnest Money deposited into the escrow is to secure the
timely performance by Purchaser of its obligations and undertakings under this
Agreement. In the event of a default by Purchaser under the provisions of this
Agreement, Balcor shall retain all of the theretofore deposited Earnest Money
as Seller's sole right to damages (provided, however, such default by Borrower
hereunder shall also cause an immediate default by Borrower under the Loan
Documents [without any grace or cure periods], unless: (i) Borrower enters
into the Sale Agreement; (ii) such default by Borrower hereunder is as a result
of a default by Whispering Hills under the Sale Agreement; and (iii) Purchaser
is diligently and in good faith exercising its remedies against Whispering
Hills as a consequence of such default). The parties have agreed that Balcor's
actual damages, in the event of a default by Purchaser, would be extremely
difficult or impractical to determine. The parties acknowledge that the
Earnest Money (to the extent deposited) has been agreed upon, after
negotiation, as the parties' reasonable estimate of Balcor's damages. Except
as set forth in Sections 5B and 5C hereof, the theretofore deposited Earnest
Money is non-refundable but shall be applied by Balcor against the Purchase
Price at Closing, so long as Purchaser has not defaulted hereunder.
B. Notwithstanding anything contained herein to the contrary, if
Whispering Hills terminates (but does not default under) the Sale Agreement
pursuant to Sections 4, 7A, 7B or 24A, 24B or 24C (but solely with respect to
the representations or warranties contained in Sections 19B(1),(3)(7) and(10))
thereof then, notwithstanding anything in the Sale Agreement to the contrary,
so long as: (i) such termination is solely as a result of an event or condition
first discovered, arising or notice of which was received from and after the
date of the Sale Agreement (except with respect to a termination pursuant to
Section 4 of the Sale Agreement, in which case the applicable date shall be
April 1, 1997 rather the date of the Sale Agreement); and (ii) the election to
terminate by Whispering Hills is neither as a consequence of default by
Borrower under the Sale Agreement nor the result of any willful, intentional or
grossly negligent act (or failure to act) of Borrower, and as a consequence of
such termination by Whispering Hills, Purchaser is unable to perform hereunder,
Purchaser shall not be in "default" hereunder and Purchaser shall have the
right to terminate this Agreement by promptly giving written notice of such
election to terminate to Balcor (and in all events on or before three (3)
business days following the termination of the Sale Agreement). If written
notice is not received by Balcor pursuant to this Section 5B on or before such
date, then the right of Purchaser to terminate this Agreement pursuant to this
Section 5B shall be forever waived. If Purchaser terminates this Agreement by
written notice to Balcor on or before the required date, the Earnest Money and
Closing Extension Fee, if applicable, paid by Purchaser shall be immediately
returned to Purchaser and, except as set forth in Sections 5C and 6 below,
neither Purchaser nor Balcor shall have any right, obligation or liability
under this Agreement.
<PAGE>
C. If Purchaser terminates this Agreement pursuant to Section 5B
above, or otherwise (including, without limitation, a termination as a
consequence of a failure by Purchaser to deposit the Earnest Money on or before
April 14, 1997), Purchaser shall proceed diligently and in good faith to
finalize a purchase agreement to sell the Property to Equity and shall
thereafter diligently and in good faith perform its obligations under such
purchase agreement.
6. BALCOR'S REMEDIES. Notwithstanding anything to the contrary in this
Agreement, in the event Purchaser commits a default hereunder or defaults under
the purchase agreement with Equity, if applicable, which default is not cured
within any applicable grace or cure period, if any, or in the event of the
occurrence of any default or event of default under any of the Loan Documents
prior to the Closing Date, which is not cured within any applicable cure period
therefor as set forth under the provisions of the Loan Documents, Balcor may,
at its election, in its sole discretion, commence to exercise and enforce all
of its rights and remedies under such Loan Documents, including, without
limitation, the foreclosure of Balcor's interest in the property encumbered by
such Loan Documents and/or terminating this Agreement. In addition, Balcor
shall have the remedies provided for in Section 5A hereof. In no event shall
Balcor's exercise and enforcement of its rights and remedies as aforesaid
extend the Closing Date. In the event of such exercise, Purchaser agrees that
it shall not submit, contend, allege or otherwise rely on the existence of this
Agreement and/or Purchaser's rights hereunder as an affirmative defense in any
foreclosure action brought by Balcor in connection with the Loan Documents.
Notwithstanding the foregoing to the contrary, if: (i) Purchaser is in default
hereunder as a result of a default by Whispering Hills under the Sale Agreement
(if entered into); and (ii) Purchaser is diligently and in good faith
exercising its remedies against Whispering Hills as a consequence of such
default, then the default by Purchaser hereunder shall not constitute a default
by Purchaser under the Loan Documents (but shall constitute a default hereunder
allowing Balcor to retain the Earnest Money and the Closing Extension Fee, if
applicable).
7. WIRE INSTRUCTIONS. The Purchase Price shall be payable
contemporaneously with the Closing. Purchaser shall pay the Purchase Price to
Balcor, by federal wire funds transfer no later than 2:00 p.m. Chicago time on
the Closing Date. Such wire transfer shall be made to:
The Northern Trust Company of Chicago
ABA #: 071 000 152
Account Name: Balcor Pension Investors VII
Account #: 85030
With a telephone notification of same to John Johnsen (847-317-4341).
8. BALCOR DELIVERIES. At the Closing, upon Purchaser's payment of the
Purchase Price as aforesaid and in exchange therefor, Balcor shall execute and
deliver to Purchaser, at Purchaser's election, either (i) an Assignment of Loan
Documents substantially in the form annexed hereto as Exhibit B and all other
documents necessary to transfer Balcor's ownership in the Note and the other
<PAGE>
Loan Documents to Purchaser including, without limitation, the original note
endorsed without recourse or warranty; or (ii) a satisfaction of mortgage, the
Note marked "paid" and all other documents necessary to cancel the indebtedness
evidenced by the Loan Documents and release or terminate all liens in favor of
Balcor with respect to the Property. In addition, at Closing Balcor will
deliver to Purchaser originals or certified copies of each of the Loan
Documents listed on Exhibit A to the Assignment of Loan Documents attached
hereto as Exhibit B. To the extent not delivered at Closing, following the
Closing, Balcor shall use good faith efforts to deliver to Purchaser all other
material Loan Documents in Balcor's possession.
9. PURCHASER'S DELIVERIES. At the Closing, Purchaser shall deliver to
Lender the Purchase Price. In addition, at the Closing, Purchaser shall pay to
Balcor the portion of the Positive Cash Flow which Purchaser is required to pay
to Balcor as described in Section 2 above.
10. REPRESENTATIONS AND WARRANTIES. The parties hereto hereby represent
and warrant to the other as follows.
A. Each Purchaser represents and warrants to Balcor as of the date
hereof and the Closing Date that it has the legal right to execute, deliver,
perform, enter into and consummate all transactions contemplated by this
Agreement, and (ii) Purchaser or its agents has reviewed the Note and other
Loan Documents to its full satisfaction.
B. Balcor represents and warrants to Purchaser as of the date hereof and
the Closing Date that:
(i) Balcor is a validly existing Illinois corporation in good
standing under the laws of the State of Illinois.
(ii) Balcor has the full power, authority and legal right to execute,
deliver, perform, enter into and consummate all transactions contemplated by
this Agreement.
(iii) Balcor is the owner of record of the Note and other Loan
Documents which Note and other Loan Documents are unencumbered and lien free.
(iv) Balcor is currently in possession of the mortgage file, if any,
for the Note, as such files exist.
(v) To the best of Balcor's knowledge, the Note and other Loan
Documents are in full force and effect and neither Balcor nor Borrower is
currently in default in the performance of its obligations under the Note and
other Loan Documents and there is no uncured breach presently existing by
Balcor under the Note and other Loan Documents.
<PAGE>
11. WAIVER.
A. Borrower hereby represents and warrants to, and covenants with,
Balcor that as of the date hereof and as of the Closing Date, or the Alternate
Closing Date, if applicable, (a) Borrower has no defenses, offsets or
counterclaims of any kind or nature whatsoever against Balcor with respect to
the Loan Documents or the transactions contemplated therein, or any action
previously taken or not taken by Balcor with respect thereto or with respect to
any security interest, encumbrance, lien or collateral in connection therewith
to secure the liabilities of Borrower thereunder and (b) Balcor has fully
performed all obligations to Borrower which it may have had or has on and as of
the date hereof. Without limiting the generality of the foregoing, Borrower,
on its own behalf and on the behalf of its past, present and future
representatives, partners, agents, employees, servants, affiliates and related
companies, successors and assigns (hereinafter referred to as the "Borrowing
Group"), effective upon the Closing, hereby waives, releases and forever
discharges Balcor and its past, present and future officers, directors,
subsidiary and affiliated entities or companies, agents, servants, employees,
shareholders, representatives, successors, assigns, attorneys, accountants,
assets and properties, as the case may be (hereinafter referred to as the
"Lender Group") from and against all manner of actions, cause and causes of
action, suits, debts, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
obligations, liabilities, costs, expenses, losses, damages, judgments,
executions, claims and demands, of whatever kind and nature, in law or in
equity, whether known or unknown, whether or not concealed or hidden, arising
out of or relating to any matter, cause or thing whatsoever, that any of the
Borrowing Group, jointly or severally, may have had, or now have or that may
subsequently accrue against the Lender Group by reason of any matter or thing
whatsoever, arising out of or in any way connected to the loan contemplated by
or through the Loan Documents. Borrower acknowledges and agrees that Balcor is
specifically relying upon the representations, warranties, covenants and
agreements contained herein and that such representations, warranties,
covenants, and agreements constitute a material inducement to enter into the
transactions contemplated in this Agreement.
B. Effective upon the Closing, Balcor on behalf of itself and the Lender
Group, shall waive, releases and forever discharge the Borrowing Group from and
against all manner of actions, cause and causes of action, suits, debts, sums
of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, obligations, liabilities,
costs, expenses, losses, damages, judgments, executions, claims and demands, of
whatever kind and nature, in law or in equity, whether known or unknown,
whether or not concealed or hidden, arising out of or relating to any matter,
cause or thing whatsoever, that any of the Lender Group, jointly or severally,
may have had, or now have or that may subsequently accrue against the Borrowing
Group by reason of any matter or thing whatsoever, arising out of or in any way
connected to the loan contemplated by or through the Loan Documents other than
the obligations of Borrower contained in Sections 27 and 30 hereof which shall
survive the Closing. Balcor acknowledges and agrees that Borrower is
specifically relying upon the representations, warranties, covenants and
<PAGE>
agreements contained herein and that such representations, warranties,
covenants, and agreements constitute a material inducement to enter into the
transactions contemplated in this Agreement. Nothing in this Section 11.B. is
intended, nor shall it be construed, to release the Borrower's obligations to
pay the Loan, or to perform from and after the date hereof its covenants under
the Loan Documents, which Loan and Loan Documents, as modified herein and in
the Second Modification of Loan Documents attached hereto, remain in full force
and effect.
12. ENVIRONMENTAL. Purchaser acknowledges and agrees that, except as may
hereinafter be specifically set forth in this Agreement, it will be purchasing
the Loan Documents based upon the condition of the Property as of the date of
this Agreement "AS IS" and "WITH ALL FAULTS" subject to reasonable wear and
tear and loss by fire or other casualty or condemnation from the date of this
Agreement until the Closing Date or, if applicable, the Alternate Closing Date.
Without limiting the foregoing, Purchaser acknowledges that, except as may
otherwise be specifically set forth elsewhere in this Agreement, neither Balcor
nor its consultants, brokers or agents have made any other representations or
warranties of any kind upon which Purchaser is relying as to any matters
concerning the Property, including, but not limited to, the condition of the
land or any improvements, the existence or nonexistence of asbestos, lead in
water, lead in paint, radon, underground or above ground storage tanks,
petroleum, toxic waste or any "Hazardous Materials" or "Hazardous Substances"
(as such terms are defined below), the tenants of the Property or the leases
affecting the Property, economic projections or market studies concerning the
Property, any development rights, taxes, bonds, covenants, conditions and
restrictions affecting the Property, water or water rights, topography,
drainage, soil, subsoil of the Property, the utilities serving the Property or
any zoning, environmental or building laws, rules or regulations affecting the
Property. Balcor makes no representation that the Property complies with Title
III of the Americans With Disabilities Act and, except as may hereinafter be
specifically set forth in this Agreement, Balcor makes no representation that
the Property complies with any fire codes or building codes. Purchaser hereby
releases Balcor from any and all liability in connection with any claims which
Purchaser may have against Balcor, and Purchaser hereby agrees not to assert
any claims, for damage, loss, compensation, contribution, cost recovery or
otherwise, against Balcor, whether in tort, contract, or otherwise, relating
directly or indirectly to the existence of asbestos or Hazardous Materials or
Hazardous Substances on, or environmental conditions of, the Property, or
arising under the "Environmental Laws" (as such term is hereinafter defined),
or relating in any way to the quality of the indoor or outdoor environment at
the Property. This release shall survive the Closing. As used herein, the
term "Hazardous Materials" or "Hazardous Substances" means (i) hazardous
wastes, hazardous materials, hazardous substances, hazardous constituents,
toxic substances or related materials, whether solids, liquids or gases,
including but not limited to substances defined as "hazardous wastes,"
"hazardous materials," "hazardous substances," "toxic substances,"
"pollutants," "contaminants," "radioactive materials," or other similar
designations in, or otherwise subject to regulation under, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
<PAGE>
("CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substance Control Act
("TSCA"), 15 U.S.C. Section 2601 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1802; the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section 9601, et seq.; the Clean Water Act
("CWA"), 33 U.S.C. Section 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et
seq.; and in any permits, licenses, approvals, plans, rules, regulations or
ordinances adopted, or other criteria and guidelines promulgated pursuant to
the preceding laws or other similar federal, state or local laws, regulations,
rules or ordinance now or hereafter in effect relating to environmental matters
(collectively the "Environmental Laws"); and (ii) any other substances,
constituents or wastes subject to any applicable federal, state or local law,
regulation or ordinance, including any Environmental Law, now or hereafter in
effect, including but not limited to (A) petroleum, (B) refined petroleum
products, (C) waste oil, (D) waste aviation or motor vehicle fuel, (E)
asbestos, (F) lead in water, paint or elsewhere, (G) radon, (H) Polychlorinated
Biphenyls (PCB's) and (I) ureaformaldehyde. The Borrowing Group hereby waives,
releases and forever discharges the Lender Group from and against all manner of
actions, cause and causes of action, suits, debts, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, obligations, liabilities, costs, expenses, losses,
damages, judgments, executions, claims and demands, of whatever kind and
nature, in law or in equity, whether known or unknown, whether or not concealed
or hidden, arising out of or relating to the environmental condition of the
Property, or any Hazardous Materials, Hazardous Substances or Environmental
Laws affecting the Property. The terms of this Paragraph shall survive the
Closing.
13. NO RECOURSE OR WARRANTY. The sale of the Loan Documents shall be
irrevocable and without representation, warranty or recourse to Balcor, except
as expressly set forth in this Agreement. No officer, partner, affiliate,
shareholder, director, agent or employee of Balcor shall have any personal
liability of any kind or nature for or by reason of any matter or thing
whatsoever under or in connection with, arising out of, or in any way related
to this Agreement or the transactions provided for herein and Purchaser, its
affiliates and all persons claiming by, through or under Purchaser or its
affiliates, hereby waive any and all right to sue or recover on account of any
such personal liability, whether real or claimed.
14. ACKNOWLEDGEMENT. Except as expressly set forth in this Agreement,
Balcor makes no representations concerning the Loan Documents and hereby
disclaims all warranties of any kind or nature whatsoever whether expressed or
implied. Purchaser acknowledges that this is an arms-length transaction and
that Purchaser is not relying upon any representation of any kind or nature
made by Balcor (or any other person or entity on behalf of Balcor) in entering
into and consummating the transactions contemplated under this Agreement other
than those set forth above (provided, however, Purchaser's reliance on said
representations set forth hereinabove shall be subject to the limitations on
recourse set forth in Paragraph 10 above).
<PAGE>
15. BROKER. The parties hereto hereby each represent and warrant to the
other that neither has retained the services of a broker in connection with
this transaction except for Insignia Mortgage and Investment Company ("Balcor's
Broker") retained by Balcor and whose commission will be paid by Balcor.
Purchaser and Balcor each will indemnify and hold harmless the other from all
broker's commissions, finder's fees or consultant's fees due on account of the
transactions herein contemplated to any broker, finder or consultant claiming
to have acted on its behalf other than Balcor's Broker. The indemnification
hereunder shall survive the Closing. Balcor represents to Purchaser that no
portion of the commission being paid to Balcor's Broker is being paid to
Balcor.
16. NOTICE. All notices or other communications ("Notices") given under
this Agreement shall be in writing and shall be sent by either (a) registered
or certified mail, return receipt requested, postage prepaid, or (b) overnight
courier service (with receipt requested), postage prepaid, addressed as follows
(or at such other address as a party may have previously specified by Notice to
the other parties):
(a) if to Purchaser, to:
Michael P. Harris, Arnold L. Porath
John P. Lowney, Jr. and Kay S. Lowney,
as Trustees of the JKL Trust and Stephen D. Moses
c/o ALP Associates
12400 Wilshire Boulevard, Suite 1450
Los Angeles, California 90025
(310) 826-9504 (FAX)
with a copy to:
Spencer, Fane, Britt & Browne
500/40 Corporate Woods
Overland Park, Kansas 66225
Attn: Nick Badgerow and Richard H. Hertel
(913) 345-0736 (FAX)
(b) if to Balcor, to:
Balcor Mortgage Advisors, Inc.
Bannockburn Lake Office Plaza
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
Attn: Teri Thompson
(847) 317-4452 (FAX)
and
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attn: Andrew D. Small, Esq.
(312) 902-1061 (FAX)
<PAGE>
Notice given as provided above shall be deemed given (1) five business
days after the date mailed as aforesaid, or (2) the day delivered by overnight
courier. In addition, a notice of termination of this Agreement pursuant to
Section 5B above may also be delivered by fax so long as such notice of
termination is simultaneously sent by overnight courier in accordance with the
provisions set forth above. A notice given by fax shall be effective as of the
day delivered so long as a notice is simultaneously sent by overnight courier
in accordance with the provisions set forth above.
17. ENTIRE AGREEMENT. This Agreement, together with the exhibits,
contains the entire agreement between the parties respecting the matters herein
set forth and supersedes all prior agreements between the parties hereto about
such matters. Nothing in this Agreement shall be deemed to constitute an
amendment or modification of, and this Agreement shall not in any way amend or
modify, any of the Loan Documents.
18. SUCCESSORS AND ASSIGNS. This Agreement and the terms and provisions
hereof shall inure to the benefit of and be binding on the parties hereto and
their respective successors and assigns, as permitted. This Agreement may be
assigned or transferred at any time by Purchaser or Balcor only with the prior
written consent of the other party, which may be withheld for any reason;
provided, however, Balcor shall be permitted to assign this Agreement at any
time to any person or entity controlled by, controlling or under common control
with, directly or indirectly, Balcor or any successor in interest to the
Balcor, without the prior consent of Purchaser, provided that the Loan
Documents are concurrently therewith assigned to said assignee. Balcor hereby
consents to an assignment by Purchaser of its right to purchase the Loan
Documents for the Purchase Price, and to receive credit at Closing against the
Purchase Price for the Earnest Money (and Closing Extension Fee, if applicable)
deposited hereunder, and for the closing adjustments and closing costs
described in Section 27 hereof, to: (i) Whispering Hills; (ii) Mark Twain
Kansas City Bank; or (iii) Green Park Financial Limited Partnership; provided,
however, that no such assignment shall relieve Purchaser from its obligations
hereunder, including but not limited to its obligations to pay the "Positive
Cash Flow" amount described in Section 2 hereof. Notwithstanding any such
limited assignment, such assignee shall have no liability under this Agreement
to Balcor or Purchaser for any matter or thing whatsoever. Purchaser shall
deliver notice of any such assignment to Balcor immediately following such
assignment.
19. SURVIVAL. Except as otherwise provided in this Agreement to the
contrary, the representations, covenants and agreements of the parties under
this Agreement shall not survive the Closing but shall be merged therein.
20. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced under the laws of the State of Illinois.
21. MODIFICATION. Except as otherwise provided, this Agreement shall not
be modified or amended except by written agreement signed on behalf of both
Balcor and Purchaser by their respective authorized officer.
<PAGE>
22. ARM'S LENGTH. This Agreement has been negotiated at arm's length and
between persons sophisticated and knowledgeable in the matters dealt with in
this Agreement.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Execution and delivery
of this Agreement by exchange of facsimile copies bearing the facsimile
signature of a party shall constitute a valid and binding execution and
delivery of this Agreement by such party. Such facsimile copies shall
constitute enforceable original documents.
24. HEADINGS. The headings and titles set forth herein are provided for
convenience and reference only and shall not be considered binding with respect
to the intent or content of any section hereof.
25. TIME OF THE ESSENCE. The parties hereto agree and acknowledge that
time is of the essence of this Agreement and the transactions contemplated
herein.
26. MARCH 15, 1989 AGREEMENT/WAIVER OF RIGHT OF FIRST REFUSAL. Except if
this Agreement is terminated pursuant to Section 5B hereof, Borrower does
hereby forever waive its right, as set forth in section 9(g) of the March 15,
1989 Agreement; provided, however, even if this Agreement is terminated
pursuant to Section 5B hereof, Borrower shall forever waive its rights in
Section 9(g) of the March 15, 1989 Agreement with respect to a sale of the
Property to Equity for a purchase price of not less than $17,200,000. In
addition, the March 15, 1989 Agreement shall automatically terminate and be of
no further force and effect immediately following the adjustment to the
estimate of Positive Cash flow required by paragraph 27 below and the
distribution by Balcor of the proceeds of the sale of the Loan Documents
pursuant to the March 15, 1989 Agreement. However, from and after the
Closing, the March 15, 1989 Agreement shall have no effect or impact on: (a)
the Property; (b) any assignee purchasing the Loan Documents as contemplated by
Section 18 hereof; or (c) the Loan Documents
27. PRORATION. Balcor acknowledges that the proceeds to be paid to
Balcor at Closing may be used to pay customary and reasonable title insurance
(commitment and policy), survey and closing and escrow costs, if any, (but
excluding any attorneys' fees) solely to the extent Purchaser is obligated to
pay such items under the Sale Agreement (if executed) as well as a customary
and appropriate proration of real estate taxes and the amount of security
deposits delivered by Purchaser to Balcor.
28. SECOND MODIFICATION. Immediately preceding the Closing, Balcor and
Borrower will execute and deliver a Second Modification of Loan Documents in
the form of Exhibit D hereto.
<PAGE>
29. NO MERGER. It is the intent of the parties hereto that, in the event
title to the property vests in the same person or entity which is also the
holder of the Note, Mortgage and the other Loan Documents, the Note, Mortgage
and the other Loan Documents shall remain in full force and effect and the
interest of such person or entity as the holder of the Note, Mortgage and Loan
Documents shall not merge with the interests of such person or entity as the
owner of the Property.
30. CONDITION SUBSEQUENT. Notwithstanding anything contained herein to
the contrary, if Purchaser fails to deposit the Earnest Money with the Escrow
Agent on or before April 14, 1997, then, subject to Section 5C hereof, this
Agreement shall terminate and be of no force and effect.
31. POSITIVE CASH FLOW. Attached hereto as Exhibit E is a letter (the
"Positive Cash Flow Letter") from Balcor to Borrower establishing the terms and
conditions pursuant to which the Positive Cash Flow shall be paid to Balcor.
Borrower hereby agrees to comply with those terms of the Positive Cash Flow
Letter applicable to the Borrower. The terms of the Positive Cash Flow Letter
applicable to the period following the Closing Date shall survive the Closing
and the delivery of the assignment of the Loan Documents.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Executed By Balcor BALCOR MORTGAGE ADVISORS, INC.,
May 6, 1997 an Illinois corporation
By: /s/ Terri Thompson
---------------------------------
Name: Terri Thompson
---------------------------------
Its: Authorized Representative
---------------------------------
/s/ Michael P. Harris
---------------------------------
Michael P. Harris
/s/ Arnold L. Porath
---------------------------------
Arnold L. Porath
/s/ John P. Lowney
---------------------------------
John P. Lowney, Trustee
/s/ Kay S. Lowney
---------------------------------
Kay S. Lowney, Trustee
/s/ Stephen D. Moses
---------------------------------
Stephen D. Moses
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6610
<SECURITIES> 0
<RECEIVABLES> 601
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7232
<PP&E> 25986
<DEPRECIATION> 0
<TOTAL-ASSETS> 33429
<CURRENT-LIABILITIES> 613
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29207
<TOTAL-LIABILITY-AND-EQUITY> 33429
<SALES> 0
<TOTAL-REVENUES> 860
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 192
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 668
<INCOME-TAX> 0
<INCOME-CONTINUING> 668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 668
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
</TABLE>
