UNITED STATES 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
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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: 0-15463
MENDIK REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
New York 11-2774249
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY
Attention: Andre Anderson 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(Registrant's telephone number, including area code)
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
Consolidated Balance Sheets
June 30, December 31,
Assets 1995 1994
Real estate investments:
Land $ 27,137,084 $ 27,137,084
Buildings and improvements 211,464,605 209,035,698
238,601,689 236,172,782
Less-accumulated depreciation (53,848,938) (49,536,517)
184,752,751 186,636,265
Cash and cash equivalents 6,910,243 8,347,080
Restricted cash 1,015,173 2,111,117
Rents and other receivables (net of
allowance for doubtful
accounts of $119,095 in 1995 and
$618,832 in 1994) 409,935 774,028
Deferred rent receivable 14,544,868 14,508,937
Other assets, net of accumulated
amortization of $5,701,259 in 1995
and $5,038,398 in 1994 7,995,273 8,090,275
Total Assets $ 215,628,243 $ 220,467,702
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and
accrued expenses $ 683,205 $ 2,781,817
Due to affiliates 1,887,700 2,263,552
Security deposits payable 1,015,362 1,168,590
Accrued interest payable 625,466 2,985,200
Mortgage and notes payable 80,044,524 94,680,836
Note payable due to affiliate 1,750,000 --
Total Liabilities 86,006,257 103,879,995
Minority interest 40,961,248 41,535,027
Partners' Capital (Deficit):
General Partners -- (1,487,096)
Special Limited Partner -- (471,998)
Limited Partners 88,660,738 77,011,774
Total Partners' Capital 88,660,738 75,052,680
Total Liabilities and
Partners' Capital $ 215,628,243 $ 220,467,702
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1995
Special
Limited General Limited
Partners Partners Partner Total
Balance at
December 31, 1994 $ 77,011,774 $ (1,487,096) $ (471,998) $ 75,052,680
Net income 11,648,964 1,487,096 471,998 13,608,058
Balance at
June 30, 1995 $ 88,660,738 $ -- $ -- $ 88,660,738
Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Rent $ 8,452,972 $ 7,935,400 $ 16,107,377 $ 16,290,566
Interest 65,440 41,078 83,237 109,201
Total Income 8,518,412 7,976,478 16,190,614 16,399,767
Expenses
Property operating 4,654,612 4,977,725 9,454,792 10,346,828
Depreciation and
amortization 2,445,132 2,685,677 5,033,016 5,352,400
Interest 2,383,604 2,830,964 4,722,145 5,249,309
General and
administrative 95,009 78,357 194,116 173,160
Total Expenses 9,578,357 10,572,723 19,404,069 21,121,697
Loss before
minority interest
and extraordinary
item (1,059,945) (2,596,245) (3,213,455) (4,721,930)
Minority interest in
loss of consolidated
venture 169,494 458,388 573,779 885,532
Loss before
extraordinary
item (890,451) (2,137,857) (2,639,676) (3,836,398)
Extraordinary Item
Gain on retirement
of debt 16,247,734 -- 16,247,734 --
Net Income (Loss) $ 15,357,283 $ (2,137,857) $ 13,608,058 $ (3,836,398)
Net Income (Loss) Allocated:
To the General
Partners $ 1,504,588 $ (21,379) $ 1,487,096 $ (38,364)
To the Limited Partners 13,380,697 (2,116,478) 11,648,964 (3,798,034)
To the Special
Limited Partner 471,998 -- 471,998 --
$ 15,357,283 $ (2,137,857) $ 13,608,058 $ (3,836,398)
Per limited partnership
unit (395,169)
outstanding:
Net loss before
extraordinary item $ (2.23) $ (5.35) $ (6.61) $ (9.61)
Net Income (Loss) $ 33.86 $ (5.35) $ 29.48 $ (9.61)
Consolidated Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $ 13,608,058 $ (3,836,398)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,033,016 5,352,400
Minority interest in loss of
consolidated venture (573,779) (885,532)
Gain on retirement of debt (16,247,734) --
Increase (decrease) in cash
arising from changes
in operating assets and liabilities:
Restricted cash 1,095,944 556,990
Rent and other receivables 364,093 341,182
Deferred rent receivable (35,931) 43,595
Other assets (625,593) (746,615)
Accounts payable and accrued
expenses (539,527) 29,840
Due to affiliates (375,852) (204,463)
Security deposits payable (153,228) (6,963)
Accrued interest payable 638,000 1,192,139
Net cash provided by operating activities 2,187,467 1,836,175
Cash Flows from Investing Activities:
Additions to real estate assets (2,428,907) (1,399,984)
Accounts payable - real estate assets (1,559,085) (102,372)
Net cash used for investing activities (3,987,992) (1,502,356)
Cash Flows from Financing Activities:
Proceeds from notes payable 2,113,688 138,159
Payments of principal on notes payable (1,750,000) --
Net cash provided by financing activities 363,688 138,159
Net increase (decrease) in cash and
cash equivalents (1,436,837) 471,978
Cash and cash equivalents at
beginning of period 8,347,080 10,346,684
Cash and cash equivalents at end of period $ 6,910,243 $ 10,818,662
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 4,084,145 $ 4,057,170
Supplemental Disclosure of Non Cash Financing Activities:
On June 26, 1995 the Partnership completed the buy out of the nonrecourse first
mortgage secured by the Partnership's leasehold interest in the 34th Street
property for $1.75 million. As of that date, there was $15 million of
principal outstanding and accrued interest of $2,997,734. To complete the buy
out the Partnership received a loan from an affiliate of the NY Real Estate
Services 1 Inc. general partner in the amount of $1.75 million.
Notes to the Consolidated Financial Statements
The unaudited financial statements presented should be read in conjunction with
the Partnership's annual 1994 audited financial statements within Form 10-K.
The unaudited interim financial statements include all adjustments consisting
of only normal recurring accruals which are, in the opinion of management,
necessary to fairly present the statement of financial position as of June 30,
1995, the results of operations for the three and six months ended June 30,
1995 and 1994, cash flows for the six months ended June 30, 1995 and 1994 and
the statement of changes in partners' capital (deficit) for the six months
ended June 30, 1995. Results of operations for the period are not necessarily
indicative of the results to be expected for the full year.
The following significant events have occurred, subsequent to fiscal year 1994,
or the following material contingencies exist, and require disclosure in this
interim report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
34th Street Property -- In May 1995, the Partnership successfully negotiated an
agreement with The First National Bank of Chicago ("FNBC"), the property's
lender, to reduce the amount needed to pay off the nonrecourse first mortgage
secured by the Partnership's leasehold interest in the 34th Street Property
(the "34th Street Line of Credit") to $1.75 million compared to the property's
outstanding debt balance of approximately $18 million including accrued
interest. Concurrently, since the Partnership was not able to obtain financing
from a third party, an agreement was entered into with an affiliate of NY Real
Estate Services 1 Inc. to lend the Partnership the $1.75 million needed to
complete the buy out of the 34th Street Line of Credit prior to June 30, 1995
(the "NYRES1 Loan"). FNBC's agreement to accept only $1.75 million in full
satisfaction of the 34th Street Line of Credit effectively meant that
substantially all of the outstanding principal balance of the loan was for NBC.
On June 26, 1995, the Partnership completed the buy out of the 34th Street Line
of Credit. As a result of the successful buy out, the Partnership will be able
to retain its interest in the property and will have the opportunity to benefit
from any improvement in the market.
The NYRES1 Loan bears interest at the prime rate less one and one-quarter
percent. Payments of accrued interest and principal will be payable on a
current basis to the extent there is net cash flow available from the 34th
Street Property. To the extent that interest has not been paid on a current
basis from the property's cash flow, any net proceeds realized from the
conveyance or refinancing of the 34th Street Property or any of the
Partnership's other properties will be used to pay accrued interest and
principal on the loan. The NYRES1 Loan matures upon the earlier of December
31, 2025 or the termination of the Partnership and is not secured by a mortgage
on the property, but remains an unsecured obligation of the Partnership. In
connection with the NYRES1 Loan, Mendik Realty Company, Inc., an affiliate of
Mendik Corporation, agreed to continue to defer its management fees and leasing
commissions associated with any additional leasing activity that would
otherwise have been payable with respect to the property.
Reclassifications -- Certain 1994 amounts have been reclassified to conform
with the financial statement presentation used in 1995.
Part I., Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The commercial real estate market in the Greater New York Metropolitan Area has
shown some limited signs of improvement. However, the significant cost of
tenant improvements required to be funded under both new and renewal leases and
the resulting demand for capital by landlords, including the Partnership, has
remained high. Expenditures for tenant improvements have contributed to the
Partnership's reduced liquidity. In order to conserve its limited resources,
the Partnership has pursued a strategy intended to position each of the
Partnership's Properties, to the extent possible, to meet its operating and
other expenses as they come due using only the operating income generated by
that Property, and, if necessary, proceeds from borrowings secured by such
Property.
During the six months ended June 30, 1995, the Partnership funded operating
costs, the cost of tenant improvements, leasing commissions, and building
capital improvements from four sources: (i) cash flow generated by the
property located at Two Park Avenue, New York, New York (the "Park Avenue
Property"), the Partnership's leasehold interest in 550/600 Mamaroneck Avenue,
Harrison, New York (the "Saxon Woods Corporate Center") and the Partnership's
leasehold interest in the property located at 330 West 34th Street, New York,
New York (the "34th Street Property"), (ii) Partnership reserves, (iii) the
deferral of property management fees and leasing commissions by certain
affiliates of the General Partners with respect to certain of the Properties,
and (iv) proceeds from the non-recourse line of credit secured by a first
leasehold mortgage on the Partnership's leasehold interest in the Saxon Woods
Corporate Center (the "Saxon Woods Line of Credit"). It is expected that funds
from each o f these sources may be reduced or unavailable in the future.
Park Avenue Property - Since January 1, 1995, the Partnership has signed new
and renewal leases for approximately 40,000 square feet or approximately 4% of
the leasable area in the property. The Partnership is currently negotiating
several new and renewal leasing transactions which, in aggregate, total
approximately 97,700 square feet. If these leases are completed, the
property's leased rate would increase to 98%. Although the Partnership
continues to lease space at the property, new and renewal leases generally have
been signed at rental rates significantly less than the rental rates received
on leases signed in the mid-1980s, due to the continuing softness in the real
estate market. The property's cash flow, however, is expected to remain stable
over the near term because rental rate increases negotiated in leases signed in
earlier years have offset the lower market rental rates reflected in the leases
recently signed by the Partnership. The costs of leasing space at the proper
ty are being funded with existing property cash flow and reserves maintained by
the joint venture that owns the Park Avenue Property. In order to fund tenant
improvements and leasing commissions for the new leases as well as certain
other leases currently under negotiation, the Partnership utilized or committed
to utilize substantially all of the property's cash reserves which at June 30,
1995 were approximately $4.6 million. However, it is expected that these
leases will increase the property's cash flow, which cash flow will be
available to re-establish reserves.
One of the major tenants in the Park Avenue Property is Times Mirror Magazines
Inc. and its affiliate Newsday Inc. which, in aggregate, lease approximately
259,000 square feet or 27% of the property's total leasable area. Their leases
expire on June 30, 2004. Newsday Inc. occupies approximately 79,000 square
feet and although Newsday recently discontinued its New York City publication,
the Partnership expects that Newsday Inc. will continue to honor its lease
obligations.
The Park Avenue Property currently generates, and is expected to generate over
the near term, sufficient cash flow to cover operating expenses and current
debt service charges. The indebtedness secured by the Park Avenue Property
currently matures in December 1998 (or December 1996 at the option of the
lender and with 180 days written notice). The Partnership expects, as the
maturity of the loan approaches, to commence negotiations to extend the
existing loan, to seek refinancing or sell the property. However, as a result
of the current lack of liquidity in the financial marketplace, no assurances
can be made that the Partnership will be able to obtain an extension with the
existing lender or refinance with a new lender, on terms acceptable to the
Partnership or at all. Additionally, the lack of liquidity may hamper the
Partnership's ability to secure a buyer for the property at a price acceptable
to the Partnership.
Saxon Woods Corporate Center - Occupancy at the property has remained
relatively stable over the past six months. However, as a result of various
lease expirations and defaults by tenants, occupancy is expected to decline in
the third quarter. Nevertheless, the Partnership expects that cash flow from
the Saxon Woods Corporate Center will cover operating expenses and debt service
obligations for the foreseeable future. Although the Saxon Woods Line of
Credit is in the amount of up to $6.5 million, as a result of Section 13(d)
(xviii) of the Partnership Agreement, which prohibits the Partnership from
incurring indebtedness secured by a property in excess of 40% of the
then-appraised value of such property (or 40% of the value of such property as
determined by the lender as of the date of financing or refinancing, if such
value is lower) (the "Borrowing Limitation"), the Partnership is permitted to
borrow only $6 million based on the most recent appraisal of the Saxon Woods
Corporate C enter which was $15 million as of December 31, 1994. The loan
agreement provides that all available cash flow from the property will be used
for expenses incurred at the property prior to borrowing any additional funds
under the Saxon Woods Line of Credit. The General Partners expect that
additional leasing activity, the costs of which will be funded in part by
borrowing amounts remaining available under the Saxon Woods Line of Credit, may
result in an increase in the appraised value of the property thereby enabling
the Partnership to borrow the additional amounts available under the Saxon
Woods Line of Credit up to the full amount of $6.5 million. However, there can
be no assurance that the property's appraised value will increase in the
future. As of June 30, 1995, the Partnership had borrowed $5,044,524 under the
Saxon Woods Line of Credit.
The indebtedness secured by the Saxon Woods Corporate Center currently matures
in September 1996. The Partnership expects, as the maturity of the loan
approaches, to commence negotiations to extend the existing loan, seek
refinancing, or sell the Property. However, as a result of the current lack of
liquidity in the financial marketplace, no assurances can be made that the
Partnership will be able to sell the property, obtain an extension with the
existing lender, or refinance with a new lender, on terms acceptable to the
Partnership or at all.
34th Street Property - On February 17, 1993, the Partnership signed a long-term
lease with the City of New York (the "City") effective August 1, 1992 for
approximately 300,000 square feet (48% of the property's total leasable space)
in the 34th Street Property. The City has the right to terminate the lease on
a floor by floor basis, provided the City gives the Partnership one year's
prior notice. However, should it terminate the lease with respect to one or
more floors, the City would be required to pay the Partnership for certain
improvement costs as defined in the lease. The terms of the lease call for the
City to make annual base rental payments of approximately $5.4 million and pay
its proportionate share of increases in real estate taxes and operating
expenses. Subsequent to the end of the second quarter, the tenant occupying
the entire 16th floor or approximately 3% of the building abandoned its space
in the 34th Street Property in default of its lease. The Partnership is cu
rrently negotiating leases for approximately 185,000 square feet in the
property on a substantially "as is" basis which, if executed, would increase
the property's leased rate to approximately 90%.
On August 12, 1993, the Partnership entered into a forbearance agreement with
The First National Bank of Chicago ("FNBC"), the Property's lender, which
modified the 34th Street Line of Credit (the "Forbearance Agreement").
Pursuant to the Forbearance Agreement, FNBC agreed to forbear from exercising
its remedies under the loan agreement as a result of the Partnership's failure
to pay interest. In addition, the Forbearance Agreement provided the
Partnership with an opportunity to pay off the 34th Street Line of Credit at a
substantial discount to the 34th Street Line of Credit's outstanding balance.
In May 1995, the Partnership successfully negotiated an agreement with FNBC to
reduce the amount needed to pay off the 34th Street Line of Credit to $1.75
million, compared to the property's outstanding debt balance of approximately
$18 million, including accrued interest. Concurrently, since the Partnership
was not able to obtain financing from a third party, an agreement was entered
into with an affiliate of NY Real Estate Services 1 Inc. to lend the
Partnership the $1.75 million needed to complete the buy out of the 34th Street
Line of Credit prior to June 30, 1995. FNBC's agreement to accept only $1.75
million in full satisfaction of the 34th Street Line of Credit effectively
meant that substantially all of the outstanding principal balance was forgiven
by FNBC. On June 26, 1995, the Partnership completed the buy out of the 34th
Street Line of Credit. As a result of the successful buy out, the Partnership
will be able to retain its interest in the property and have the opportunity
to benefit from any improvement in the market.
The NYRES 1 Loan bears interest at the prime rate less one and one-quarter
percent. Payments of accrued interest and principal will be payable on a
current basis to the extent there is net cash flow available from the 34th
Street Property. To the extent that interest has not been paid on a current
basis from the property's cash flow, any net proceeds realized from the
conveyance or refinancing of the 34th Street Property or any of the
Partnership's other properties will be used to pay accrued interest and
principal on the loan. The NYRES 1 Loan matures upon the earlier of December
31, 2025 or the termination of the Partnership and is not secured by a mortgage
on the property, but remains an unsecured obligation of the Partnership. In
connection with the NYRES 1 Loan, Mendik Realty Company, Inc., an affiliate of
Mendik Corporation, agreed to continue to defer its management fees and leasing
commissions associated with any additional leasing activity that would
otherwise have been pa yable with respect to the property.
The Forbearance Agreement required the Partnership to deposit all receipts from
the Property into a lockbox at FNBC. As a result of the successful buy out of
the 34th Street Line of Credit, funds maintained in the lockbox totalling
approximately $943,000, and reflected under restricted cash, were released to
the Partnership and added to reserves.
During the latter part of 1992, the General Partners concluded that the
Partnership may be unable to hold the 34th Street Property on a long-term
basis. As a result, the Partnership accounted for the property as held for
disposition. Accordingly, the carrying value of the property was reduced to
the lower of its depreciated cost or estimated market value. Now that the
Partnership has replaced the first mortgage debt on the property with the NYRES
1 Loan, the property will again be accounted for as a real estate investment.
Cash Reserves - The Partnership's consolidated cash reserves decreased by
$1,436,837 to $6,910,243 at June 30, 1995 from $8,347,080 at December 31, 1994
primarily as a result of the payment of real estate taxes in January and
significant reductions in accounts payable at the Park Avenue Property. During
the six months ended June 30, 1995, approximately $2.4 million was expended for
property improvements at the Park Avenue Property and Saxon Woods Corporate
Center in connection with leasing activity and other building improvements.
These expenditures were funded by cash flow from operations generated during
the six months ended June 30, 1995, proceeds from the Saxon Woods Line of
Credit and Partnership cash reserves.
Accounts payable and accrued expenses decreased $2,098,612 to $683,205 at June
30, 1995 from $2,781,817 at December 31, 1994 primarily due to payments made
related to building and tenant improvement work at the Park Avenue Property.
Accrued interest payable and mortgage and notes payable decreased primarily due
to the buy out of the 34th Street Line of Credit.
Results of Operations
For the six months ended June 30, 1995, the Partnership generated net cash from
operating activities of $2,187,467 compared to $1,836,175 during the
corresponding period in 1994. The increase is primarily attributable to
reductions in property operating expenses and FNBC's release of the funds
maintained in the lockbox partially offset by the decrease in accounts payable.
The Partnership generated net income of $15,357,283 and $13,608,058,
respectively, for the three and six months ended June 30, 1995 as compared to
net losses of $2,137,857 and $3,836,398, respectively, for the three and six
months ended June 30, 1994. The change from net loss to net income is
attributable to a $16,247,734 extraordinary gain recognized on the retirement
of the 34th Street Line of Credit. Without the extraordinary gain, the
Partnership generated net losses of $890,451 and $2,639,676 for the three and
six months ended June 30, 1995. The lower net losses in the 1995 periods
excluding the gain are pri marily attributable to decreases in property
operating expenses, depreciation and amortization, and interest expense. In
the three month period, increased rental income also contributed to the lower
net loss.
Rental income for the three and six months ended June 30, 1995 was $8,452,972
and $16,107,377, respectively, compared to $7,935,400 and $16,290,566 for the
three and six months ended June 30, 1994. Rental income was relatively
unchanged as the absence of rental income from the property located at 1351
Washington Boulevard, Stamford, Connecticut (the "Stamford Property"),
resulting from the Partnership's transferring title to the property to the
lender on December 29, 1994 in lieu of foreclosure, was offset by increased
income at the Park Avenue Property and Saxon Woods Corporate Center resulting
from new leases executed over the past year. Further reducing rental income in
the 1995 six-month period was the Partnership's write-off of deferred rent
receivable for a tenant that prematurely abandoned its space in the 34th Street
Property during the first quarter of 1995.
Property operating expenses, depreciation and amortization, and interest
expense for the three and six months ended June 30, 1995 declined from the
corresponding periods in 1994 primarily due to the transfer of the Stamford
Property. Also contributing to the decline in property operating expenses was
a reduction in utilities expense and real estate taxes at the Park Avenue
Property.
Leased space at each of the properties as of June 30, 1995 and 1994 was as
follows: Park Avenue Property - 95% vs. 89%; Saxon Woods Corporate Center, 550
Mamaroneck Avenue - 99% vs. 94%, 600 Mamaroneck Avenue - 71% vs. 56%; 34th
Street Property - 65% vs. 64%.
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits:
10 a. Reimbursement Agreement among Mendik Real
Estate Limited Partnership, Mendik Realty
Company, Inc., Mendik Corporation and DAG
Lending Corp.
10 b. Letter Agreement among the Partnership and the
First National Bank of Chicago.
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 1995
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.
MENDIK REAL ESTATE LIMITED PARTNERSHIP
BY: NY REAL ESTATE SERVICES 1 INC.
General Partner
Date: August 14, 1995 BY: s/Kenneth L. Zakin/
Name: Kenneth L. Zakin
Title: President and Director
Date: August 14, 1995 BY: s/Mark Sawicki/
Name: Mark Sawicki
Title: Vice President and Chief Financial
Officer
EXHIBIT 10a.
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT, dated as of the 30th day of May, 1995, among
Mendik Real Estate Limited Partnership ("RELP"), Mendik Realty Company, Inc.
("MRC"), Mendik Corporation ("Mendik"), each having an office at 330 Madison
Avenue, New York, New York, and DAG Lending Corp. ("DAG") (as successor to SLH
Lending Corp. ("SLH")), having an office at 200 Vesey Street, 29th Floor, New
York, New York 10285, Attention: Kenneth L. Zakin.
W I T N E S S E T H:
WHEREAS, RELP is the owner of certain property located at 330 West 34th
Street, New York, New York (the "Property") and of various other properties
(the "Other Properties"); and
WHEREAS, simultaneously herewith RELP and The First National Bank of
Chicago ("FNBC") are entering into an agreement (the "FNBC Agreement") pursuant
to which RELP would agree to satisfy the loan previously made to RELP by FNBC
with respect to the Property, by payment to FNBC of an amount equal to One
Million Seven Hundred Fifty Thousand Dollars ($1,750,000) (the "Satisfaction
Amount"); and
WHEREAS, in connection with the FNBC Agreement, DAG has agreed to loan
to RELP, an amount equal to the Satisfaction Amount (the "DAG Loan"); and
WHEREAS, MRC agreed to defer the management fees and leasing
commissions payable by RELP to MRC with respect to the Property (the amounts
being deferred hereunder being collectively referred to herein as the
"Management Fees") in accordance with the provisions of the Agreement (the "MRC
Agreement"), dated as of January 1, 1992, among RELP, MRC, Mendik and SLH; and
WHEREAS, pursuant to the Reimbursement Agreement (the "1351
Reimbursement Agreement"), dated as of January 1, 1991, among RELP, MRC, Mendik
and SLH, the parties thereto agreed to the terms and conditions upon which RELP
would repay (i) to Mendik the Mendik Loans (as such term is defined in the 1351
Reimbursement Agreement) and to SLH the Shearson Loans (as such term is defined
in the 1351 Reimbursement Agreement) in connection with the property then owned
by RELP known as 1351 Washington Boulevard, Stamford, Connecticut ("1351") and
(ii) to MRC certain deferred management fees with respect to 1351 for calendar
years 1991, 1992 and 1993 (such deferred management fees, together with
management fees deferred by MRC with respect to 1351 for calendar year 1994,
being collectively referred to herein as the "1351 Management Fees"; the Mendik
Loans, the Shearson Loans and the 1351 Management Fees, together with interest
accrued thereon in accordance herewith, being hereinafter referred to
collectively as the "1351 Loans"); and
WHEREAS, the parties hereto desire (i) to amend and restate the MRC
Agreement to provide, inter alia, for the continued deferral of the Management
Fees (hereinafter defined), (ii) to set forth the terms and conditions upon
which the DAG Loan shall be repaid and upon which the Management Fees shall be
paid, and (iii) to amend and restate the 1351 Reimbursement Agreement in order
to set forth the terms and conditions upon which the 1351 Loans shall be
repaid.
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. For the purposes of this Agreement, the following terms shall have the
following meanings:
"Interest Rate" shall mean simple interest at the rate publicly
announced from time to time by Morgan Guaranty Trust Company of New York or its
successor as its prime rate (or such other term as may be used by Morgan
Guaranty Trust Company of New York, from time to time, for the rate presently
referred to as its prime rate), less one and one-quarter percent (1.25%) per
annum.
"Maturity Date" shall mean December 31, 2025 or such earlier date as
the existence of RELP shall terminate pursuant to the terms and provisions of
the Amended and Restated Certificate and Agreement of Limited Partnership of
RELP (the "Partnership Agreement"), as the same may be amended from time to
time, or otherwise as provided by law.
"Net Cash Flow" shall mean Net Cash from Operations (as such term is
defined in the Partnership Agreement), except that for purposes of this
Agreement, Net Cash from Operations shall be determined (i) with reference only
to the Property, and (ii) excluding any payments to be made with respect to the
DAG Loan and the Management Fees, or any interest payable thereon in accordance
with this Agreement.
"Net Proceeds" shall mean, with respect to the Property or any Other
Property, RELP's share of the proceeds, if any, remaining from the conveyance,
casualty, condemnation or refinancing (to the extent permitted by the
applicable loan documents) of the Property or such Other Property after RELP
has paid, all outstanding indebtedness secured by such Property or Other
Property, as the case may be, or in the event of a refinancing, all outstanding
indebtedness under the loan then being refinanced pursuant to such transaction,
all accrued and unpaid expenses in connection with the operation and leasing of
the Property or such Other Property, as the case may be, (excluding Management
Fees payable to MRC or any affiliate and any interest payable thereon in
accordance with this Agreement), and all expenses incurred by RELP in
connection with the conveyance or refinancing of the Property or such Other
Property, as the case may be. Net Proceeds shall also include any cash
remaining from operations of the Property or any Other Property upon liquidation
of RELP after payment of outstanding creditors (excluding Management Fees
payable to MRC or any affiliate and any interest payable thereon in accordance
with this Agreement) and the establishment of appropriate reserves in accordance
with the provisions of the Partnership Agreement.
2. A. MRC hereby agrees that, provided the DAG Loan is made,(i) MRC shall
continue to defer Management Fees until the earlier to occur of (a) payment in
full of the DAG Loan, and (b) the Maturity Date, and (ii) MRC shall fully
subordinate the payment of such Management Fees, the Mendik Loans and any 1351
Management Fees, and any interest accrued thereon, to the full payment of the
DAG Loan and any interest accrued thereon.
B. DAG hereby agrees that, provided the DAG Loan is made, DAG shall
fully subordinate the payment of the Shearson Loans, and any interest accrued
thereon, to the full payment of the DAG Loan and any interest accrued thereon.
3. DAG agrees that it will make the DAG Loan provided that (i) FNBC and
RELP shall each execute and unconditionally deliver to the other the FNBC
Agreement, and (ii) DAG shall have delivered to RELP written confirmation that
the granting of the DAG Loan has been approved by all necessary corporate
authority of DAG.
4. A. RELP hereby agrees that the DAG Loan, the Management Fees and
the 1351 Loans shall each accrue interest at the Interest Rate on the unpaid
principal amount of the DAG Loan, the Management Fees and the 1351 Loans. RELP,
DAG, MRC and Mendik agree that the DAG Loan shall be repaid, and the Management
Fees shall be paid, out of Net Cash Flow, in the following order of priority:
(i) first, to DAG, an amount equal to all accrued
and unpaid interest on the DAG Loan to the date of such
repayment;
(ii) second, to DAG, an amount equal to the
outstanding principal balance of the DAG Loan;
(iii) third, to MRC, an amount equal to all accrued
and unpaid interest on the Management Fees; and
(iv) then, to MRC, an amount equal to the
outstanding principal balance of the Management Fees.
B. RELP, DAG, MRC and Mendik further agree that (a) upon the
conveyance or refinancing of the Property or any Other Property, or (b)
within twenty (20) days following the receipt of any condemnation award
or insurance proceeds which are not used or intended to be used to
restore the Property or Other Property, as applicable, RELP shall apply
any Net Proceeds realized from such event in the following order of
priority:
(i) first, to DAG, an amount equal to all accrued
and unpaid interest on the DAG Loan to the date of such
repayment;
(ii) second, to DAG, an amount equal to the
outstanding principal balance of the DAG Loan;
(iii) third, to MRC, an amount equal to all accrued
and unpaid interest on the Management Fees;
(iv) then, to MRC, an amount equal to the
outstanding principal balance of the Management Fees;
(v) then, to each of Mendik, DAG and MRC, an amount
equal to all accrued and unpaid interest on the Mendik
Loans, the Shearson Loans and the 1351 Management Fees,
respectively, pari passu in accordance with the
respective principal amounts outstanding;
(vi) then, to each of Mendik, DAG and MRC, pari
passu, an amount equal to the outstanding principal
balance of the Mendik Loans, the Shearson Loans and
1351 Management Fees, respectively.
C. Interest shall accrue on the DAG Loan, the Mendik Loans and the
Shearson Loans on the principal amounts from time to time outstanding,
commencing on the date such loans were made. Interest shall accrue on the
Management Fees and the 1351 Management Fees, commencing on the date such
Management Fees and 1351 Management Fees would have been paid (but for MRC's
agreement to defer such Management Fees and 1351 Management Fees).
5. If on the Maturity Date, any principal balance, together with
accrued interest, remains outstanding with respect to the DAG Loan, the 1351
Loans and/or the Management Fees, then RELP shall, to the extent of funds
available to RELP after the establishment of appropriate reserves in RELP's
sole discretion, repay the DAG Loan and the 1351 Loans and pay the Management
Fees, together with all interest thereon, in accordance with the priorities for
such payments set forth in Paragraph 4(B) of this Agreement, and except as set
forth in the next sentence hereof, RELP shall have no liability for any
deficiency and RELP shall have no further obligations hereunder. If the
reserves, if any, retained by RELP for any contingent or unforeseen liabilities
of RELP are determined by RELP to be no longer required, (i) RELP shall apply
such reserves to the repayment of the DAG Loan and the 1351 Loans and the
payment of the Management Fees, together with all interest thereon, in
accordance with the priorities for such payments set forth in Paragraph 4(B)
hereof, (ii) RELP shall have no liability for any deficiency and (iii) RELP
shall have no further obligations hereunder.
6. The parties hereto acknowledge that attached hereto as Schedule
I is a schedule of (i) the outstanding principal amounts of the Management
Fees, the accrued interest thereon and the dates upon which each portion of the
Management Fees were deferred, (ii) the outstanding principal balance of the
Mendik Loans, the accrued interest thereon and the dates upon which the Mendik
Loans were made, (iii) the outstanding principal balance of the Shearson Loans,
accrued interest thereon, and the dates upon which the Shearson Loans were
made, and (iv) the outstanding principal amount of the 1351 Management Fees,
the accrued interest thereon and the dates upon which each portion of the 1351
Management Fees were deferred.
7. Promptly following January 1 of each calendar year after the
date hereof, MRC shall notify RELP, Mendik and DAG of the amount of the
Management Fees deferred for the immediately preceding calendar year, which
notice shall show the calculation of the amount of such deferred Management
Fees. Any failure by MRC to so notify RELP, Mendik and DAG shall not be deemed
a waiver of RELP's obligation to pay such Management Fees, together with
interest thereon, in accordance herewith.
8. All notices, requests, approvals or consents, statements or
other communications required or permitted to be given or furnished hereunder
to any party (collectively, a "notice") shall be in writing and shall be
personally delivered, sent by the United States registered or certified mail,
postage prepaid, or sent by Federal Express or express mail to the other party
at its respective address set forth at the beginning of this Reimbursement
Agreement, or at such other address as a party from time to time designate by
notice to the other party. All notices shall be deemed to have been duly given
on the date of receipt.
9. This Reimbursement Agreement and any of the rights and
obligations hereunder shall not be assigned without the prior consent of all
the parties hereto.
10. In satisfaction of RELP's obligations hereunder and subject to
the priorities for payment provided herein, (i) DAG (with respect to the DAG
Loan) and MRC (with respect to the Management Fees) each shall look solely to
Net Cash Flow and Net Proceeds, and (ii) MRC (with respect to the 1351
Management Fees), Mendik (with respect to the Mendik Loan) and DAG (with
respect to the Shearson Loans) each shall look solely to the Net Proceeds. In
addition, MRC, Mendik and DAG shall not seek any damages against any of the
partners comprising RELP or the shareholder (or any of the partners comprising
RELP or the shareholders (or any of the partners comprising same), partners,
directors or officers of any of the foregoing for any liability of RELP
hereunder.
11. This Reimbursement Agreement: (a) restates in its entirety the
1351 Reimbursement Agreement, (b) restates in its entirety the payment
provisions of the MRC Agreement, (c) contains the entire agreement among the
parties; (d) may not be amended, and any rights hereunder may not be waived,
except by an instrument in writing signed by the party sought to be charged
with such amendment or waiver; (e) shall be construed in accordance with, and
governed by, the laws of the State of New York; (f) shall be binding upon and
shall inure to the benefit of the parties and their respective personal
representatives and permitted assigns, except as set forth above; and (g) may
be executed in any number of counterparts of the signature page, each of which
shall be considered an original.
IN WITNESS WHEREOF, the parties hereto have executed this Reimbursement
Agreement as of the date first above written.
MENDIK REAL ESTATE LIMITED
PARTNERSHIP
By: Mendik Corporation
By: /s/ David R. Greenbaum
David R. Greenbaum, Pres.
By: NY Real Estate Services 1 Inc.
By: /s/ Kenneth L. Zakin
Kenneth L. Zakin, Pres.
DAG LENDING CORP.
By: /s/ Steven J. Gorey
Steven J. Gorey, Vice Pres.
MENDIK CORPORATION
By: /s/ David R. Greenbaum
David R. Greenbaum, Pres.
MENDIK REALTY COMPANY, INC.
By: /s/ David R. Greenbaum
David R. Greenbaum, Pres.
SCHEDULE I
DEFERRED MANAGEMENT FEES
330 West 34th Street 1351 Washinton Boulevard
Management Accrued Management Accrued
Fee Interest Total Fee Interest Total
1991 0.00 0.00 0.00 1991 62,691.00 2,291.40 64,982.40
1992 176,535.00 4,486.93 181,021.93 1992 62,458.85 4,774.29 67,233.14
1993 166,891.80 12,520.61 179,412.41 1993 64,280.73 7,575.05 71,855.78
1994 176,072.56 25,766.14 201,838.70 1994 56,557.00 13,001.16 69,558.16
1Q1995 46,703.32 10,287.03 56,990.35 1Q1995 0.00 4,661.46 4,661.46
Total 566,202.68 53,060.71 619,263.39 Total 245,987.58 32,303.36 278,290.94
Total Deferred Management Fees: $897,554.33
DEFERRED LEASING COMMISSIONS
330 West 34th Street
1993 1994 Total
Total Operating Revenue 5,932,046.11 6,009,960.37 11,942,006.48
Total Commissions Allowable (3%) 177,961.38 180,298.81 358,260.19
Commissions Paid to Unaffiliated Brokers 113,997.00 134,224.00 248,221.00
Max. Comm. Allowed to be Paid to Mendik 63,964.38 46,074.81 110,039.19
Total Deferred Leasing Commissions $110,039.19
MENDIK/SHEARSON LOANS
1351 Washington Boulevard
Mendik Loans Shearson Loans
Accrued Accrued
Loan Interest Total Loan Interest Total
1991 50,000.00 2,213.37 52,213.37 1991 110,000.00 4,869.42 114,869.42
1992 50,000.00 4,102.00 54,102.00 1992 110,000.00 9,024.40 119,024.40
1993 50,000.00 6,326.74 56,326.74 1993 110,000.00 13,918.81 123,918.81
1994 0.00 8,966.67 8,966.67 1994 0.00 19,726.67 19,726.67
1Q1995 0.00 2,841.67 2,841.67 1Q1995 0.00 6,251.67 6,251.67
Total 150,000.00 24,450.45 174,450.45 Total 330,000.00 53,790.97 383,790.97
Total Mendik/Shearson Loans: $558,241.42
Total Deferred Management Fees: 897,554.33 Total Shearson Loans: 383,790.97
Total Deferred Leasing Commissions: 110,039.19
Total Mendik Loans: 174,450.45
Total Due to Mendik 1,182,043.97 Total Due to Shearson 383,790.97
EXHIBIT 10b.
MENDIK REAL ESTATE LIMITED PARTNERSHIP
c/o Mendik Corporation
330 Madison Avenue
New York, New York 10017
As of May 1, 1995
The First National Bank of Chicago
Real Estate Enhancement Division
One First National Plaza, Mail Suite 0630
Chicago, Illinois 60670-0630
330 West 34th Street
New York, New York
Gentlemen:
Reference is made to the Purchase Agreement, dated as of December 12,
1989 (as thereafter amended, the "Purchase Agreement"). Pursuant to the
Purchase Agreement, The First National Bank of Chicago ("FNBC") acquired a loan
(the "Loan") in the original principal sum of $15,000,000, which Loan is
evidenced by a Restated Assigned Note (as defined in the Purchase Agreement)
and is secured by a mortgage (the "Mortgage") encumbering the undersigned's
leasehold interest in the improvements and the premises located at 330 West
34th Street, New York, New York.
This letter is to confirm that the undersigned has agreed to purchase,
and FNBC has agreed to sell, the Loan and the Documents (as such term is
defined in the Purchase Agreement) for a purchase price (the "Buy-Out Price")
equal to $1,750,000, which amount will be payable in immediately available
funds at the closing of such sale and purchase. The closing of such sale and
purchase will occur on a date to be selected by the undersigned upon not less
than five (5) days written notice to FNBC, which date shall not be later than
June 30, 1995. The undersigned will pay all reasonable attorneys' fees
incurred by FNBC in connection with such sale and purchase.
Upon payment in full of the Buy-Out Price, FNBC will satisfy and
release the Mortgage and the Documents, without representation or recourse,
except for a representation that FNBC has full right, power and authority to
make such satisfaction and FNBC and the undersigned would each execute and
deliver to the other a release of any and all liabilities and obligation each
may have to the other in connection with the Documents and the Loan.
If the undersigned shall fail to tender the Buy-Out Price in accordance
herewith, the undersigned's sole liability hereunder, as and for liquidated
damages and not as a penalty, will be an amount equal to $175,000. FNBC will
look solely to the assets of the undersigned to enforce the undersigned's
obligations hereunder. The partners, shareholders, directors, officers and
principals, direct or indirect, comprising the undersigned (the "Parties") will
not be liable for the performance of the undersigned's obligation hereunder and
FNBC will not seek to enforce either the undersigned's obligations hereunder or
any damages against any of the Parties.
If the foregoing accurately sets forth your understanding, please
execute the enclosed copy of this letter and return the same to the
undersigned.
Very truly yours,
MENDIK REAL ESTATE LIMITED PARTNERSHIP
By: Mendik Corporation
By: /s/ David R. Greenbaum
David R. Greenbaum, President
By: NY Real Estate Services 1 Inc.
By: /s/ Kenneth L. Zakin
Kenneth L. Zakin, President
ACKNOWLEDGED AND AGREED TO
as of this 1st day of May, 1995:
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Steven D. Franklin
Steven D. Franklin
Vice President
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