<PAGE>
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 September 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: 1-9373
SUMMIT TAX EXEMPT BOND FUND, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3323104
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
625 Madison Ave., New York, N.Y. 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check CK 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 _CK_ No __
<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
ASSETS
Participating first mortgage bonds, net $ 128,036,019 $127,938,510
Temporary investments 2,031,408 1,915,874
Cash 213,793 173,689
Promissory notes receivable, net 6,880,857 7,071,156
Deferred bond selection fees, net 1,745,731 1,858,273
Interest receivable, net 849,065 944,367
Deferred financing fees, net 292,945 388,816
Other assets 24,055 13,628
------------- ------------
Total assets $ 140,073,873 $140,304,313
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Loan payable $ 13,680,866 $ 13,680,866
Deferred income 1,213,183 1,469,174
Due to affiliates 330,691 46,422
Accrued expenses 102,663 120,685
------------- ------------
Total liabilities 15,327,403 15,317,147
------------- ------------
Contingencies
Partners' capital
BUC$holders (7,906,234 BUC$ issued and outstanding) 125,110,970 125,346,852
General partners (364,500) (359,686)
------------- ------------
Total partners' capital 124,746,470 124,987,166
------------- ------------
Total liabilities and partners' capital $ 140,073,873 $140,304,313
------------- ------------
------------- ------------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
REVENUES
Interest income from participating first
mortgage bonds, net $6,955,280 $6,961,095 $2,274,988 $2,148,302
Interest income from promissory notes 437,222 475,155 130,018 160,741
Interest income from temporary investments 59,716 27,090 16,707 10,077
---------- ---------- ---------- ----------
7,452,218 7,463,340 2,421,713 2,319,120
---------- ---------- ---------- ----------
EXPENSES
Interest expense 1,045,355 832,203 349,075 302,104
Management fees 503,907 503,907 167,969 167,969
Legal expense 323,199 46,500 66,528 16,500
General and administrative 278,848 242,035 94,070 84,162
Loan servicing fees 250,613 251,263 84,456 84,675
Amortization of deferred bond selection
fees 112,542 112,542 37,513 37,513
Amortization of deferred financing fees 95,871 95,871 31,957 31,957
---------- ---------- ---------- ----------
2,610,335 2,084,321 831,568 724,880
---------- ---------- ---------- ----------
Net income $4,841,883 $5,379,019 $1,590,145 $1,594,240
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ALLOCATION OF NET INCOME
BUC$holders $4,745,045 $5,271,439 $1,558,342 $1,562,356
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
General partners $ 96,838 $ 107,580 $ 31,803 $ 31,884
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per BUC $ .60 $ .67 $ .20 $ .20
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
- -----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
GENERAL
BUC$HOLDERS PARTNERS TOTAL
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Partners' capital (deficit)--December 31, 1994 $125,346,852 $(359,686) $124,987,166
Net income 4,745,045 96,838 4,841,883
Distributions (4,980,927) (101,652) (5,082,579)
------------ --------- ------------
Partners' capital (deficit)--September 30, 1995 $125,110,970 $(364,500) $124,746,470
------------ --------- ------------
------------ --------- ------------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------------
1995 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received, net $ 8,072,366 $ 7,284,783
Loan made to property affiliate (721,266) --
Fees and expenses paid (1,100,747) (980,333)
Interest paid (1,045,355) (917,024)
----------- -----------
Net cash provided by operating activities 5,204,998 5,387,426
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Income deferred upon assumption of FMB by new debtor -- 105,477
Net purchase of temporary investments (115,534) (825,473)
----------- -----------
Net cash used in investing activities (115,534) (719,996)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on promissory note 33,219 --
Principal payment received on FMB -- 347,577
Distributions paid (5,082,579) (5,082,579)
----------- -----------
Net cash used in financing activities (5,049,360) (4,735,002)
----------- -----------
Net increase (decrease) in cash 40,104 (67,572)
Cash at beginning of period 173,689 200,227
----------- -----------
Cash at end of period $ 213,793 $ 132,655
----------- -----------
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SCHEDULE RECONCILING NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 4,841,883 $ 5,379,019
----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of valuation allowance (97,509) (97,509)
Amortization of deferred income (98,911) (97,272)
Amortization of deferred bond selection fees 112,542 112,542
Amortization of deferred financing fees 95,871 95,871
Changes in:
Promissory notes receivable, net 190,299 139,523
Interest receivable, net 95,302 16,223
Other assets (10,427) (14,451)
Deferred income (190,299) (139,523)
Accrued expenses (18,022) (186,844)
Accrued interest payable -- (84,821)
Due to affiliates 284,269 264,668
----------- -----------
Total adjustments 363,115 8,407
----------- -----------
Net cash provided by operating activities $ 5,204,998 $ 5,387,426
----------- -----------
----------- -----------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of Summit Tax Exempt Bond Fund, L.P. (the ``Partnership'') as of
September 30, 1995, the results of its operations for the nine and three months
ended September 30, 1995 and 1994 and its cash flows for the nine months ended
September 30, 1995 and 1994. However, the operating results for the interim
periods may not be indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1994.
B. Participating First Mortgage Bonds
Effective January 1, 1995, the Partnership adopted Statement of Financial
Accounting Standards (``SFAS'') No. 114, Accounting by Creditors for Impairment
of a Loan. The initial adoption of SFAS No. 114 had no effect on the net income
of the Partnership for the nine months ended September 30, 1995.
SFAS No. 114 requires creditors to evaluate the collectibility of both
interest and principal of a participating first mortgage bond (``FMB'') when
determining whether it is impaired. An FMB is considered to be impaired when,
based on current information and events, it is probable the creditor will be
unable to collect all amounts due according to the contractual terms. When an
FMB is considered to be impaired, the amount of the loss accrual is determined
by discounting the expected future cash flows of the FMB at its effective
interest rate or, when practical, utilizing the estimated fair value of the
collateral. To the extent that the owners of properties underlying the FMBs may
require modifications to their forbearance agreements or the FMBs may otherwise
become impaired in subsequent periods, the Partnership may be required to record
additional valuation allowances which could have a material effect on the
Partnership's financial statements.
Prior to January 1, 1995, the original owners of the underlying properties
and obligors of certain FMBs had been replaced by affiliates of Related Tax
Exempt Bond Associates, Inc. (the ``Related General Partner'') who had not made
equity investments in the underlying properties. These FMBs and related income,
which were classified as Assets Held for Sale in prior years, have been
reclassified to FMBs in 1995 for all periods presented.
5
<PAGE>
<PAGE>
Descriptions of the FMBs owned by the Partnership at September 30, 1995 are
as follows:
<TABLE>
<CAPTION>
Annualized
Interest
Rate Paid
for the
nine
months
ended Minimum
September Pay Rate Stated
30, September Interest Call Maturity Face Carrying
Property Location 1995* 1995 Rate* Date Date Amount Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
The Mansion Independence,
MO 5.56%(B)(D) 5.23% 5.23% Dec. 2004 May 2010 $ 19,450,000 $ 17,800,000
Martin's Creek Summerville, SC 7.45 7.25 8.25 Mar. 2000 May 2010 7,300,000 7,025,802
East Ridge Mt. Pleasant,
SC 7.23 7.25 8.25 Mar. 2000 May 2010 8,700,000 8,389,239
High Pointe
Club Harrisburg, PA 6.08 (D) (A) 8.50 June 1998 June 2006 8,900,000 8,900,000
Cypress Run Tampa, FL 6.95 (D) (A) 8.50 Aug. 1998 Aug. 2006 15,402,428 15,402,428
Thomas Lake Eagan, MN 8.62 (C)(D) 8.00 8.50 Aug. 1998 Aug. 2006 12,975,000 12,975,000
North Glen Atlanta, GA 6.02 6.00 8.50 Aug. 1998 Aug. 2008 12,400,000 12,400,000
Greenway Manor St. Louis, MO 8.53 (A) 8.50 Oct. 1998 Sept. 2006 12,850,000 12,850,000
Clarendon Hills Hayward, CA 5.54 5.52 5.52 Dec. 2003 Dec. 2003 17,600,000 17,600,000
Cedar Creek McKinney, TX 6.62 (A) 8.50 Dec. 1998 Dec. 2006 8,100,000 7,798,550
Sunset Terrace Lancaster, CA 5.91 (D) (A) 8.00 Feb. 1999 Feb. 2007 10,350,000 10,350,000
------------ ------------
$134,027,428 131,491,019
------------
------------
Less: Allowance for loss on impairment of assets (3,455,000)
------------
Carrying Amount $128,036,019
------------
------------
</TABLE>
* The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB.
(A) Pay rate is based on the net cash flow generated by the property.
(B) Includes contingent interest paid during the nine months ended September 30,
1995.
(C) Includes receipt of deferred base interest related to prior periods.
(D) See discussion below.
On April 1, 1994, Mansion Apartment Project Investors, Inc., an affiliate of
the Related General Partner who replaced the original developer of The Mansion
property, sold the ownership interest in the property to an unrelated third
party for $700,000 in cash and the assumption of the obligations under the
Partnership's $19,450,000 FMB as well as a $400,000 second mortgage note to a
lender affiliated with the Related General Partner taken by assignment from the
seller.
The net cash proceeds from the sale of approximately $105,000 paid to the
Partnership to reduce accrued and unpaid interest, was recorded by the
Partnership as deferred income and is being accreted as interest income from
first mortgage bonds over the remaining life of The Mansion FMB. The balance of
the deferred income relating to The Mansion FMB was approximately $96,000 at
September 30, 1995 and $101,000 at December 31, 1994.
On March 31, 1995, pursuant to a Court Order, ownership of the Cypress Run
property was transferred to an affiliate of the Related General Partner. The
affiliate has not made an equity investment in the underlying property; however,
it has assumed the day-to-day responsibilities and obligations of operating the
property.
Effective with the May 1, 1995 payment date, the Sunset Terrace FMB has made
payments based on the monthly net cash flow generated by the operations of the
underlying property in accordance with the agreement outlined below. Effective
as of August 1, 1995, the obligor of the Sunset Terrace FMB entered into a
forbearance agreement. In accordance with the terms of this agreement, the
obligor of the FMB is paying debt service on the FMB to the extent of cash flow
generated by the underlying property. The difference between the pay rate and
the stated rate of this FMB is deferred and payable out of available future cash
flow. In addition, pursuant to the agreement, the obligor has replaced the
present property manager and leasing agent with a new property manager who is an
affiliate of the Related General Partner. Other terms of the agreement call for
the deed to be transferred to the Partnership or its designee no later than
January 30, 1997 should the obligor be unable to bring the FMB fully current on
all interest due and payable (including deferred base interest) on or before
that date. These and other obligations are secured by a guarantee from an
affiliate of the obligor. No additional allowance for loss on impairment was
required as a result of this transaction.
In November 1989, a $600,000 settlement was reached between the previous
developer of High Pointe Club Apartments (the ``Property'') and USF&G, the
construction performance bonding company for the Property. Prior to this
settlement, the previous developer agreed to place the settlement proceeds in
escrow later to be shared with the subsequent developer (``Greenhill Project
Investors, Inc.'') or its successors and assigns pursuant to an arbitration
proceeding. On April 23, 1993, the previous developer agreed to release
6
<PAGE>
<PAGE>
the escrowed funds to RHA Inv., Inc. (``RHA''), the successor to Greenhill
Project Investors, Inc. In April 1995, RHA paid to the Partnership approximately
$721,000 consisting of the settlement proceeds plus accrued interest. These
funds were applied as partial payment toward accrued and unpaid interest due
under the High Pointe Club FMB.
During April 1995, the Partnership made a loan in the amount of approximately
$721,000 to the new owner of the Cypress Run property toward payment of
delinquent 1992 and 1993 property taxes. This loan is self-amortizing over three
years and carries an 8.5% annual interest rate. This loan was recorded in
operating income as a reduction of interest income from participating first
mortgage bonds because the Cypress Run FMB is paying interest on a cash flow
basis.
The Thomas Lake promissory note in the principal amount of $220,000, which is
secured by a second mortgage on the property, matured in April 1995 and was
modified and extended. The modified loan is self-amortizing over thirty months
at an 8.5% interest rate.
With respect to the FMBs which are subject to forbearance agreements with the
respective obligors, the difference between the stated interest rates and the
rates paid (whether deferred and payable out of available future cash flow or,
ultimately, from sale or refinancing proceeds) on FMBs is not accrued for
financial statement purposes. The accrual of interest at the stated interest
rate will resume once a property's ability to pay the stated rate has been
adequately demonstrated. Unrecorded contractual interest income was
approximately $1,049,000 and $971,000 for the nine months ended September 30,
1995 and 1994, respectively.
C. Related Parties
Prudential-Bache Properties, Inc. (``PBP'') and the Related General Partner
(collectively, the ``General Partners'') and their affiliates perform services
for the Partnership which include, but are not limited to: accounting and
financial management; registrar, transfer and assignment functions; asset
management; investor communications; printing and other administrative services.
The General Partners and their affiliates receive reimbursements for costs
incurred in connection with these services, the amount of which is limited by
the provisions of the Agreement of Limited Partnership (the ``Partnership
Agreement''). The costs and expenses were:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
--------------------- ---------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
PBP and affiliates:
General and administrative $ 89,073 $ 68,984 $ 32,280 $ 24,015
Management fee 251,954 251,954 83,985 83,985
-------- -------- -------- --------
341,027 320,938 116,265 108,000
-------- -------- -------- --------
Related General Partner and affiliates:
General and administrative 35,384 20,694 11,292 7,291
Loan servicing fees 250,613 251,263 84,456 84,675
Management fee 251,953 251,953 83,984 83,984
-------- -------- -------- --------
537,950 523,910 179,732 175,950
-------- -------- -------- --------
$878,977 $844,848 $295,997 $283,950
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
An affiliate of the Related General Partner receives loan servicing fees (see
above) in the amount of .25% per annum of the principal amount outstanding on
FMBs serviced by the affiliate.
The General Partners are paid, in the aggregate, an annual management fee
equal to .5% of the original amount invested in FMBs.
A division of Prudential Securities Incorporated (``PSI''), an affiliate of
PBP, is responsible for the purchase, sale, and safekeeping of the Partnership's
temporary investments. This account is maintained in accordance with the
Partnership Agreement.
Several executive officers and directors of the Related General Partner own
less than 1% of the outstanding BUC$.
7
<PAGE>
<PAGE>
D. Contingencies
On October 18, 1993, a putative class action, captioned Kinnes et al. v.
Prudential Securities Group Inc. et al. (93 Civ. 654) was filed in the United
States District Court for the District of Arizona, purportedly on behalf of
investors in the Partnership against the Partnership, PBP, PSI and a number of
other defendants. On November 16, 1993, a putative class action captioned
Connelly et al. v. Prudential-Bache Securities Inc. et al. (93 Civ. 713), was
filed in the United States District Court for the District of Arizona,
purportedly on behalf of investors in the Partnership against the Partnership,
PBP, PSI and a number of other defendants. On January 3, 1992, a putative class
action, captioned Levine v. Prudential-Bache Properties Inc. et al. (92 Civ.
52), was filed in the United States District Court for the Northern District of
Illinois purportedly on behalf of investors in the Partnership against the
General Partners, PSI and a number of other defendants. Subsequently the Related
General Partner exited the litigation by way of settlement. On April 14, 1994,
the Judicial Panel on Multidistrict Litigation (the ``Panel'') deferred transfer
of the case to the Southern District of New York (discussed more fully below)
until after the Illinois court decided a pending motion to dismiss the
complaint. On June 3, 1994, that court granted the motion of PBP and PSI and
dismissed the first amended complaint without prejudice. On June 30, 1994,
plaintiffs filed a second amended complaint. The Panel subsequently reaffirmed
the April 14, 1994 transfer. By order dated July 13, 1994, the Panel
unconditionally transferred the Levine case for inclusion in the consolidated
proceedings in the Southern District of New York described below.
By its April 14, 1994 order, the Panel transferred (in addition to Levine as
discussed above) the Kinnes case, and by order dated June 8, 1994, the Connelly
case, together with a number of other actions, on each occasion not involving
the Partnership, to a single judge of the United States District Court for the
Southern District of New York and consolidated them for pretrial proceedings
under the caption In re Prudential Securities Incorporated Limited Partnerships
Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in the transferred
cases filed a complaint that consolidated the previously filed complaints and
named as defendants, among others, PSI, certain of its present and former
employees and the General Partners. The Partnership is not named a defendant in
the consolidated complaint, but the name of the Partnership is listed as being
among the limited partnerships at issue in the case. The consolidated complaint
alleges violations of the federal and New Jersey Racketeer Influenced and
Corrupt Organizations Act (``RICO'') statutes, fraud, negligent
misrepresentation, breach of fiduciary duties, breach of third-party beneficiary
contracts and breach of implied covenants in connection with the marketing and
sales of limited partnership interests. Plaintiffs request relief in the nature
of rescission of the purchase of securities and recovery of all consideration
and expenses in connection therewith, as well as compensation for lost use of
money invested less cash distributions; compensatory damages; consequential
damages; treble damages for defendants' RICO violations (both federal and New
Jersey); general damages for all injuries resulting from negligence, fraud,
breaches of contract, and breaches of duty in an amount to be determined at
trial; disgorgement and restitution of all earnings, profits, benefits and
compensation received by defendants as a result of their unlawful acts; costs
and disbursements of the action; reasonable attorneys' fees; and such other and
further relief as the court deems just and proper.
On November 28, 1994, the transferee court deemed each of the complaints in
the constituent actions (including Kinnes) amended to conform to the allegations
of the consolidated complaint. PSI and PBP, along with various other defendants,
filed a motion to dismiss the consolidated complaint on December 20, 1994. By
order dated August 29, 1995, the transferee court granted plaintiffs' motion for
temporary class certification, preliminarily approved a settlement entered into
between plaintiffs and PBP and PSI, scheduled a fairness hearing for November
17, 1995, approved the form and content of the notice to class members and
directed that it be provided to class members. The full amount due under the
settlement agreement has been paid by PSI. The case as against the Related
General Partner is still pending.
E. Subsequent Event
In November 1995, a distribution of approximately $1,660,000 and $34,000 was
paid to the BUC$holders and General Partners, respectively, for the quarter
ended September 30, 1995.
8
<PAGE>
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Unaudited)
Liquidity and Capital Resources
Summit Tax Exempt Bond Fund, L.P. (``the Partnership'') has invested in
eleven tax-exempt participating first mortgage bonds (``FMBs'') issued by
various state or local governments or their agencies or authorities. The FMBs
are secured by participating first mortgage loans on multi-family residential
apartment projects.
The third quarter distribution of $1,660,000 ($.21 per BUC) was paid to
BUC$holders in November 1995 from current and previously undistributed adjusted
cash flow from operations. As further discussed in Note B to the financial
statements, the Sunset Terrace FMB was restructured effective July 31, 1995.
This restructuring may negatively impact the amount of interest paid from this
FMB in future quarters. Interest payments from FMBs are anticipated to provide
sufficient liquidity to meet the operating expenditures of the Partnership in
future years and to fund distributions.
In July 1994, the owner of the Cypress Run property filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code in response to the
Partnership's acceleration of its loan. On March 31, 1995, the ownership of the
Cypress Run property was transferred to an affiliate of the Related General
Partner pursuant to a Court Order.
In April 1995, the Partnership received a payment of $721,000 from High
Pointe Club which was applied as accrued and unpaid interest due under the High
Pointe Club FMB. The Partnership made a $721,000 loan to the new owner of the
property underlying the Cypress Run FMB toward payment of delinquent 1992 and
1993 property taxes. See Note B to the financial statements for further
information regarding this loan. The new owner of Cypress Run is currently
escrowing cash toward the payment of 1994 and 1995 real estate taxes which may
impact the amount of interest paid on the Cypress Run FMB to the Partnership.
The Partnership's loan payable has a variable interest rate; therefore,
future levels of interest expense will fluctuate in correlation to movements in
the 30-day commercial paper interest rate.
Results of Operations
Net income decreased by $537,000 and $4,000 for the nine and three months
ended September 30, 1995, respectively, as compared to 1994 for the reasons
discussed below.
Interest income from FMBs decreased by $6,000 for the nine months ended
September 30, 1995, but increased by $127,000 for the three months ended
September 30, 1995 as compared to the same periods in 1994. The nine month
decrease is primarily the result of reduced debt service payments received from
the Sunset Terrace (see Note B to the financial statements) and Cedar Creek
FMBs, partially offset by increased interest (including deferred interest)
received from the Cypress Run, Thomas Lake and Greenway FMBs. The three month
increase relates primarily to the fact that the owner of the Cypress Run
property filed for bankruptcy in the third quarter of 1994, greatly reducing the
debt service payments to the Partnership in that quarter.
Interest income from temporary investments increased by $33,000 and $7,000
for the nine and three months ended September 30, 1995, respectively, as
compared to 1994 primarily due to higher interest rates and invested balances.
Interest expense increased by $213,000 and $47,000 for the nine and three
months ended September 30, 1995, respectively, as compared to 1994 due to
interest rate increases on the Partnership's loan.
General and administrative expenses increased by $37,000 and $10,000 for the
nine and three months ended September 30, 1995 as compared to 1994. The variance
is primarily due to the timing of certain accruals recorded in the respective
periods.
Legal expense increased $277,000 and $50,000 for the nine and three months
ended September 30, 1995, respectively, as compared to 1994. These increases
were primarily due to legal costs incurred with respect to the Cypress Run
bankruptcy proceedings and the Kinnes litigation discussed in Note D to the
financial statements.
9
<PAGE>
<PAGE>
Property Information
The following table lists the FMBs that the Partnership owns, together with
occupancy rates of the underlying properties, as of October 15, 1995:
<TABLE>
<CAPTION>
Annualized
Interest
Rate Paid
for the nine Minimum
months ended Pay Rate
Stated September 30, September
Property Location Face Amount Occupancy Interest Rate* 1995* 1995
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
The Mansion Independence, MO $ 19,450,000 98.2% 5.23% 5.56%(B)(D) 5.23%
Martin's Creek Summerville, SC 7,300,000 93.4 8.25 7.45 7.25
East Ridge Mt. Pleasant, SC 8,700,000 98.5 8.25 7.23 7.25
High Pointe Club Harrisburg, PA 8,900,000 98.3 8.50 6.08(D) (A)
Cypress Run Tampa, FL 15,402,428 85.4 8.50 6.95(D) (A)
Thomas Lake Eagan, MN 12,975,000 100.0 8.50 8.62(C)(D) 8.00
North Glen Atlanta, GA 12,400,000 98.2 8.50 6.02 6.00
Greenway Manor St. Louis, MO 12,850,000 96.8 8.50 8.53 (A)
Clarendon Hills Hayward, CA 17,600,000 97.8 5.52 5.54 5.52
Cedar Creek McKinney, TX 8,100,000 98.4 8.50 6.62 (A)
Sunset Terrace Lancaster, CA 10,350,000 78.7 8.00 5.91(D) (A)
------------
$134,027,428
------------
------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB.
(A) Pay rate is based on the net cash flow generated by the property.
(B) Includes contingent interest paid during the nine months ended September 30,
1995.
(C) Includes receipt of deferred base interest relating to prior periods.
(D) See Note B to the financial statements.
General
The determination as to whether it is in the best interest of the Partnership
to enter into forbearance agreements on the FMBs or, alternatively, to pursue
its remedies under the loan documents, including foreclosure, is based upon
several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs.
Certain property owners have, at times, supplemented the cash flow generated
by the properties to meet the required FMB interest payments. There can be no
assurance that in the future any property owner will continue to elect to
supplement property cash flow to satisfy FMB interest requirements, if
necessary. The owner of the Sunset Terrace property supplemented the cash flow
generated by the property to meet the interest payments made during the first
five months of 1995.
10
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--Incorporated by reference to Note D to the financial
statements filed herewith in Item 1 of Part I of the Registrant's
Quarterly Report.
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
4(a)--Partnership Agreement, incorporated by reference to Exhibit A
to the Prospectus of Registrant, dated February 19, 1986, filed
pursuant to Rule 424(b) under the Securities Act of 1933, File No.
33-2421.
4(b)--Amended and Restated Certificate of Limited Partnership,
incorporated by reference to Exhibit 4 to Registration Statement on
Form S-11, File No. 33-2421.
10(af)--Settlement and Forbearance Agreement for the Sunset Terrace
First Mortgage Bond dated July 31, 1995 (filed herewith).
27--Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K--No reports on Form 8-K were filed during the
quarter.
11
<PAGE>
<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.
Summit Tax Exempt Bond Fund, L.P.
<TABLE>
<S> <C>
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Eugene D. Burak Date: November 14, 1995
----------------------------------------
Eugene D. Burak
Vice President
Chief Accounting Officer for the
Registrant
By: Related Tax Exempt Bond Associates, Inc.
A Delaware corporation, General Partner
By: /s/ Alan P. Hirmes Date: November 14, 1995
----------------------------------------
Alan P. Hirmes
Vice President
</TABLE>
12
<PAGE>
<PAGE>
[Desert Terrace]
SETTLEMENT AND FORBEARANCE AGREEMENT
THIS SETTLEMENT AND FORBEARANCE AGREEMENT (this
"Agreement") is made as of the 31st day of July, 1995, by and
among DESERT TERRACE--184, LTD., an Oregon limited partnership
having an office c/o Randall Realty Corp., 9500 SW Barbur
Boulevard, Suite 300, Portland, Oregon 97219 ("Borrower"), SUMMIT
TAX EXEMPT BOND FUND L.P., a Delaware limited partnership having
an office c/o Related Capital Company, 625 Madison Avenue, New
York, New York 10022-1801 ("Summit"), RANDALL REALTY CORP., an
Oregon corporation having an office at 9500 SW Barbur Boulevard,
Suite 300, Portland, Oregon 97219 (the "Corporation"), ROBERT D.
RANDALL, an individual having an office c/o Randall Realty Corp.,
9500 SW Barbur Boulevard, Suite 300, Portland, Oregon 97219
("Randall") and CTL MANAGEMENT, INC., an Oregon corporation
having an office at 9498 SW Barbur Boulevard, Suite 200,
Portland, Oregon 97219 ("CTL Management"). Borrower and Desert
Hills (defined below) may hereinafter be referred to, individual-
ly, as a "Borrower" and, collectively, as the "Borrowers".
RECITALS:
A. Borrower is the owner and holder of fee title in
certain premises located in the City of Lancaster, County of Los
Angeles, State of California, which premises are commonly known
as Sunset Terrace Apartments and are more particularly described
in Exhibit A attached hereto (such premises, together with the
improvements located thereon, are hereinafter referred to as the
"Property").
B. Pursuant to a certain Indenture of Trust (the
"Indenture") dated as of February 1, 1987 from the Lancaster
Redevelopment Agency ("Issuer") to The Bank of California, N.A.,
predecessor in interest to First Trust California, as trustee
("Trustee"), Issuer issued certain Multifamily Housing Revenue
Refunding Bonds (Sunset Terrace Project) 1987 Series B (the
"Bonds") in the aggregate principal amount of $10,350,000, the
proceeds of which were used to fund a certain mortgage loan (the
"Loan"), in the original principal amount of $10,350,000, made by
Issuer as of February 12, 1987 to Borrower.
C. The Loan was made pursuant to a certain Loan
Agreement dated as of February 1, 1987 among Borrower, Issuer and
Trustee (the "Loan Agreement"), is evidenced by a promissory note
(the "Note") executed by Borrower, and is secured by a
Construction Trust Deed, Security Agreement, Assignment of Rents
and Fixture Filing dated as of February 1, 1987 (the "Deed of
Trust") covering the Property, and various other loan documents
described in the Loan Agreement (collectively, the "Loan
Documents"). Reference is also made to a certain letter
<PAGE>
agreement dated July 10, 1992 between Borrower and Summit, which
letter agreement hereby constitutes one of the Loan Documents.
D. Pursuant to the Indenture, and with the consent of
Borrower, the Loan Agreement, the Note, the Deed of Trust,
certain other documents and property and all payments to be made
by Borrower under the Loan Agreement (except certain specified
payments) were assigned by Issuer to the Trustee as security for
the Bonds.
E. All of the Bonds issued pursuant to the Indenture
are owned and held by Summit.
F. In accordance with Section 7.02(a) of the
Indenture, as the single owner of the Bonds, Summit is the
"Acting Party", and has the sole authority to take actions in
respect of any "Event of Default" under the Indenture and has the
right to exercise certain remedies under the Loan Agreement.
G. By letter dated as of May 18, 1995, Borrower
acknowledged and agreed that an "Event of Default" (as defined in
the Loan Documents) has occurred under the Loan Documents by
reason of the failure of Borrower to pay the full amount of Base
Interest (as defined in the Loan Documents) when due.
H. As a result of the default under the Loan
Documents, Summit is entitled to declare the obligations of
Borrower under the Loan Documents to be immediately due and
payable.
I. Borrower has requested that Summit forbear from
exercising its right (i) to declare the obligations of Borrower
under the Loan Documents immediately due and payable and (ii) to
commence an action to foreclose the Deed of Trust.
J. Summit is willing to forbear from exercising its
rights (i) to declare the obligations of Borrower under the Loan
Documents immediately due and payable and (ii) to commence an
action to foreclose the Deed of Trust only if Borrower and the
Corporation enter into a settlement with Summit with respect to
the Property on the terms and conditions hereinafter set forth,
including, without limitation, the delivery by the Corporation of
a certain guaranty of payment, a copy of which is annexed hereto
as Exhibit B (the "Vanishing Guaranty").
K. Desert Hills--264, Ltd., an Oregon limited
partnership ("Desert Hills"), is the owner and holder of fee
title in certain premises located in the City of Lancaster,
County of Los Angeles, State of California, which premises are
commonly known as Sunset Downs Apartments and are more
particularly described in Exhibit A-1 attached hereto (such
-2-
<PAGE>
premises, together with the improvements located thereon, are
hereinafter referred to as the "Desert Hills Property").
NOW, THEREFORE, in light of the foregoing facts and in
consideration of the respective undertakings of the parties
hereto, it is hereby agreed as follows:
1. Acknowledgments of Borrower, Corporation and
Randall. Each of Borrower, the Corporation and Randall
acknowledges that:
(i) the Loan Documents are in full force and effect
and are valid and enforceable in accordance with their terms
against Borrower;
(ii) pursuant to the Loan Documents, Summit has a
valid and perfected first lien and security interest in and
to the Property and the other property secured under the
Deed of Trust, the Indenture and the other Loan Documents;
(iii) pursuant to the Loan Documents, Summit has a first
priority, fully perfected security interest in all rents,
issues, profits, rent equivalent income, receipts, insurance
proceeds, tax refunds, security deposits and any other
revenues, income or proceeds of any nature whatsoever
generated by, arising from or otherwise related to the
Property and any other payments covered by any assignment of
rents that has been or will be executed and delivered by
Borrower to Summit and/or Issuer as security for its
obligations under the Loan Documents (collectively,
"Rents");
(iv) an event of default has occurred under the terms
of the Loan Documents;
(v) each of Summit and Issuer has fully complied with
its obligations under the Loan Documents, and Borrower does
not have any defenses, offsets or claims of any kind or
nature with respect to Borrower's obligations under the Loan
Documents which would in any manner limit, diminish or
eliminate any of the rights or remedies of Summit or Issuer
under the Loan Documents and that to the extent that any
such defenses, claims or offsets exist as of the date these
acknowledgments are made, they are hereby waived and
released; and
(vi) the existing accrued and unpaid base interest
under the Loan as of July 31, 1995 is $436,297.03 (and
continues to accrue in accordance with the terms of the Note
and the other Loan Documents) and the existing principal
balance of the Loan as of the date hereof is $10,350,000
(exclusive of any deferred or other interest of any nature
-3-
<PAGE>
thereon and all fees, costs and expenses of Summit and
Issuer with respect to the Loan).
2. Agreement by Summit to Forbear. Notwithstanding
the existing events of default under the Loan Documents, Summit
shall, until the occurrence of a Forbearance Termination Event,
forbear from declaring the obligations of Borrower under the Loan
Documents immediately due and payable and from demanding payment
thereof, and from foreclosing or commencing a foreclosure action
as a result of such existing defaults. For purposes of this
Agreement, a "Forbearance Termination Event" shall mean the
occurrence of any one or more of the following events which is
not cured within applicable notice and cure periods, if any:
(a) if Borrower, Randall, the Corporation or any of
their respective affiliates shall commit a material default or
otherwise materially breach any of their material
representations, warranties or covenants under the terms of this
Agreement, the Management Agreement (defined below), the
Vanishing Guarantee or any of the other material documents and
material agreements executed in connection with the Loan or the
transactions contemplated hereby (collectively, the "Forbearance
Documents");
(b) if on or before 3:00 p.m. New York, New York time
on January 30, 1997, time being of the essence, Summit shall not
have received all principal, all accrued and unpaid base
interest, accrued interest, deferred interest, contingent
interest and other interest of any nature whatsoever, and sums
other than principal and interest (including, without limitation,
all fees, costs, and expenses of Summit) due under the Loan
Documents, and any other amounts of any nature whatsoever due
under the Loan Documents (it being expressly agreed that there
shall be no grace, notice or cure period with respect to the
obligations under this sub-paragraph (b);
(c) if at any time during the term of this Agreement:
(i) Randall or his heirs, executors or personal representatives
shall cease to be the sole general partner of Borrower; (ii)
without the prior written consent of Summit, which shall not be
unreasonably withheld, one hundred (100%) percent of the
ownership interest in Borrower and in the profits and losses of
Borrower shall cease to be owned and controlled on an
unencumbered basis (A) one (1%) percent by Randall, (B) twenty-
four (24%) percent by Pacific Frontier Wood Markets, Inc., (C)
fifteen (15%) percent by Kenneth A. Randall and (D) sixty (60%)
percent by CSL Properties, Inc.; or (iii) Randall shall sell,
transfer of otherwise dispose of all or any portion of his
interest in Borrower;
(d) if a voluntary case, or an involuntary case which
is not dismissed within 90 days, is commenced under title 11 of
-4-
<PAGE>
the United States Code (the "Bankruptcy Code") or under any other
federal or state bankruptcy or insolvency statute by or against
any one or more of Borrower, Randall or the Corporation;
(e) if the Certificate and Agreement of Limited
Partnership Agreement, dated as of October 10, 1984, with respect
to Borrower, or any other or similar agreement or instrument
governing Borrower (it being acknowledged and agreed that Summit
shall be deemed to be and hereby is a third party beneficiary of
such documents, agreements and instruments, collectively,
"Organizational Documents") shall not be modified or amended (x)
in any material respect without the prior written approval of
Summit or (y) in a non-material respect without notice to Summit;
(f) if any of Borrower's Organizational Documents
shall be violated or breached in any way that material adversely
affects the interests of Summit;
(g) if any one or more of Borrower, Randall, the
Corporation, or any person, party or entity acting by, for or
under the control (either directly or indirectly) of Borrower,
Randall or the Corporation shall take any step or action which
has the effect of materially interfering with or preventing the
implementation of any one or more of the material terms,
provisions or conditions of this Agreement, or which has the
effect of materially interfering with or preventing in any manner
whatsoever the collection or application of the Rents (as set
forth herein;
(h) (i) the termination or dissolution of any one or
more of Borrower or the Corporation, or (ii) the failure of any
one or more of Borrower or the Corporation to maintain its
corporate/partnership existence; provided, however, any of such
acts by the Corporation shall not be a Forbearance Termination
Event if the Corporation shall have been replaced as a guarantor
under the Vanishing Guaranty in accordance with the terms
thereof;
(i) the occurrence of a Forbearance Termination Event
under that certain settlement and forbearance agreement dated as
of the date hereof among Randall, CTL, the Corporation, Summit
Tax Exempt L.P. II ("Summit II") and Desert Hills (the "Other
Forbearance Agreement");
(j) the failure by any of Borrower's Affiliates,
including, without limitation, CTL, Randall and the Corporation
to fulfill any of its material covenants or other material
obligations under that certain Settlement Agreement dated as of
July 31, 1995 among Desert Valley--204, Desert Sands Apts.--148
Ltd., Loveridge--148, Ltd., the Corporation, Randall, CTL
Management, Summit II and Summit Tax Exempt L.P. III (the
"Settlement Agreement"); and
-5-
<PAGE>
(k) if that certain property and cash management
agreement dated as of the date hereof among Summit, Related
Management Company ("New Manager") and Borrower (the "Management
Agreement") is modified, amended or terminated by an act of
Borrower without Summit's prior written consent;
provided, however, the occurrence of any one or more of
the events set forth in clauses (a), (c), (e), (f), (g), (h), (j)
and (k) above shall not constitute a "Forbearance Termination
Event" if any such event is fully cured (including indefeasible
payment to Summit of any loss, cost or expense resulting from
such breaches, default or act) as of the tenth (10th) day after
receipt of written notice by Summit to Borrower of such event or
default; provided, further, that such ten (10) day cure period
shall be extended to forty-five (45) days if and to the extent
that Borrower has commenced curing such default and is diligently
prosecuting the completion of same.
3. Post-Forbearance Transfer of the Property.
(a) Upon the occurrence of a Forbearance Termination
Event, and without the necessity of any other or further notice
to Borrower, Randall, the Corporation, any limited partner in
Borrower or any other person, party or entity (i) all obligations
of Borrower under the Loan Documents shall automatically, and
without the necessity of any other or further act or instrument,
become immediately due and payable in full, (ii) the Property
shall be transferred pursuant to a Post-Forbearance Transfer of
the Property, as hereinafter described, and (iii) only if the
Transfer Documents shall not be unconditionally delivered
pursuant to a Post-Forbearance Transfer of the Property within
five (5) days after written demand by Summit, Summit shall have
the absolute and unconditional right to pursue all rights and
remedies available to Summit under the Loan Documents including,
without limitation, commencing a foreclosure action with respect
to the Property; provided that Seller shall not be required to
grant Borrower such five (5) day period prior to pursuing any
right or remedy including, without limitation, commencing a
foreclosure action, and shall be entitled to immediately exercise
its remedies under the Loan Documents, if the Forbearance
Termination Event occurred under Section 2(b) hereof. However,
notwithstanding the foregoing, in the event that the Borrower
unconditionally delivers the Transfer Documents prior to a
Forbearance Termination Event, and the Desert Terrace Property is
not subject to any liens, judgments, encumbrances or tenancies
other than those permitted by the Loan Documents, then Summit
shall have no right to commence a Foreclosure (defined below)
against Borrower, Corporation or Randall in respect of the Loan
Documents prior to or after recording the Desert Terrace Deed
(defined below).
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<PAGE>
(b) For purposes of this Agreement, a "Post-
Forbearance Transfer of the Property" shall mean a transfer of
the Property that occurs at the election of Summit, which
election shall be made by Summit in the exercise of its sole and
absolute discretion (i) by unconditional execution, acknowledg-
ment and delivery by Borrower of the Transfer Documents (defined
below), in which event the Property will be transferred subject
to the Deed of Trust and the other Loan Documents, without any
offsets or counterclaims of any kind or nature (a "Title
Transfer") or (ii) if the Transfer Documents shall not be
unconditionally delivered within five (5) days after demand and
after the occurrence of a Forbearance Termination Event by Summit
(as to which date time shall be of the essence) pursuant to a
consensual non-judicial foreclosure (or judicial foreclosure, if
Summit elects) of the Deed of Trust under applicable California
law (a "Foreclosure"). In connection with such foreclosure
action, Summit shall have all rights against its collateral
available to a mortgagee or a trust deed beneficiary under the
applicable California law. Borrower hereby agrees not to
contest, impede or in any way interfere with such foreclosure by
Summit of the Deed of Trust, including, without limitation,
filing any documents or papers (such as answers, motions, claims
or counterclaims).
(c) The term "Transfer Documents" means, collectively,
a certain grant deed (the "Desert Terrace Deed"), substantially
in the form of Exhibit C annexed hereto, the transfer documents
listed on Exhibit C-1 and such further documents or instruments
that Summit may reasonably request for the purpose of
transferring title to the Property to Summit or its nominee,
assignee or designee (such person or entity acquiring title to
the Property is defined as the "Transferee"), including, without
limitation, such other customary and reasonable affidavits,
documents or instruments as the Transferee's Title Company may
require in order to issue its fee title policy, which may include
affidavits of title and other affidavits regarding the payment of
franchise or other similar taxes with respect to matters not
subject to accurate disclosure by public records at de minimis
cost.
In connection with a Post-Forbearance Transfer of the Property,
whether by means of a Title Transfer or a Foreclosure, Borrower
hereby agrees to cooperate fully with Summit and the Transferee
and hereby agrees to take any and all steps or actions reasonably
requested by Summit and the Transferee to effectuate any such
transfer, including, without limitation, supplying information
regarding the Property, providing all appropriate consents
required under applicable California law and otherwise assisting
Summit in any reasonable manner to effectuate such transfer of
the Property. Notwithstanding the foregoing, Borrower shall not
be required to incur any material costs or expenses in connection
with a transfer of the Property; provided, however, it is the
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<PAGE>
intent and agreement of the parties that (A) Borrower shall be
obligated to effectuate transfer of the Property as and when
required under the terms of this Agreement even if such transfer
results in cost, expense or liability to such Borrowers and any
provision herein with respect to actions being taken "at no
material cost or expense" is limited to an alternative action (an
"Alternative Action") requested by Summit which could be
accomplished in a less costly manner by Borrower while still
accomplishing the intent and requirements of this Agreement and
(B) Borrower shall be required to perform such Alternative Action
if and to the extent the costs and expenses thereof are
reimbursed by cash flow from the Property and not by Randall, the
Corporation or any of their respective affiliates.
(d) The parties hereto agree that, notwithstanding
Transferee's acquisition of the Property, the indebtedness
evidenced by the Loan Documents shall not be cancelled and all of
the Loan Documents shall remain in full force and effect after
the transaction contemplated by this Agreement has been consum-
mated but Borrower shall have no further liability therefor. The
parties hereto further agree that the Transferee's interest in
the Property after its acquisition thereof shall not merge with
the interest of Summit in the Property under the Loan Documents.
It is the express intention of each of the parties hereto (and
all of the conveyances provided for in this Agreement shall so
recite) that such interest of Summit in the Property shall not
merge, but be and remain at all times separate and distinct,
notwithstanding any union of said interest in Summit at any time
by purchase, termination or otherwise and that the respective
liens of the Loan Documents on the Property shall be and remains
at all times a valid and continuous liens on the Property.
(e) The agreements by Summit to forbear from declaring
the obligations of Borrower under the Loan Documents to be
immediately due and payable and from demanding payment thereof in
the manner set forth herein shall in no event or under any
circumstance be construed as a waiver by Summit, in whole or in
part, of the existing events of default under the Loan Documents.
(f) Notwithstanding anything contained herein to the
contrary, Borrower shall have and shall retain, through and
including the date of any transfer of the Property by means of a
Foreclosure or a Title Transfer, the right to bring current the
Property by paying to Summit the full amount of all principal,
interest (including, without limitation, Base Interest (as
defined in the Loan Documents), accrued interest, deferred
interest, contingent interest and any other type or kind of
interest payable under the Loan Documents), fees, costs and
expenses of Summit and any other amounts payable under the Loan
Documents, which principal, interest, fees, costs and expenses of
Summit and other amounts shall be deemed to be due and payable in
-8-
<PAGE>
full, without any offsets or counterclaims of any kind, at such
time.
4. Management of the Property.
(a) Simultaneously with the execution of this
Agreement, (i) CTL Management shall be terminated as the property
manager and leasing agent for the Property, and (ii) New Manager
shall replace CTL Management as the sole managing and leasing
agent for the Property pursuant to the Management Agreement; it
hereby being understood and agreed that CTL Management has and
shall have no claim or recourse of any nature against Summit (or
any nominees, assignees or designees of Summit) or Property
arising from or resulting from the termination of CTL Management
as managing and leasing agent for Property or for any other
reason, and CTL Management is a signatory to this Agreement for
the purpose of effectuating this understanding. Borrower agrees
not to terminate, replace or attempt to replace New Manager as
the sole managing and leasing agent of the Property without the
prior written consent of Summit.
(b) Borrower and New Manager shall each procure and
maintain the casualty and liability insurance required to be
procured and maintained under the Loan Documents and the
Management Agreement, as the case may be, and each party shall
cause the other party to be a named additional insured on such
insurance policy, it being the intent of the parties that all
parties be fully protected from liability with respect to the
Property to the extent of such insurance coverage. The costs of
such insurance to be procured and maintained by Borrower and New
Manager hereunder shall be paid from funds in the Cash Collateral
Disbursement Account (as such term is defined in the Management
Agreement).
5. Intentionally Deleted.
6. Forbearance. During the period (the "Forbearance
Period") commencing with the date of execution of this Agreement
through and including the earlier of January 30, 1997 and the
date a Forbearance Termination Event occurs, Base Interest (as
defined in the Indenture) and all other interest accrued and
payable shall continue to accrue on the outstanding principal
balance of the Loan in accordance with the Loan Documents. In
lieu of making the payments required under the Loan Documents,
all Excess Cash Collateral (as such term is defined in the
Management Agreement) shall be applied on a monthly basis first
to the payment of Base Interest for that month, and the balance,
if any, shall thereafter be applied in accordance with the
provisions of the Indenture, the Note, the Loan Agreement and the
other Loan Documents. Any amounts of unpaid interest outstanding
on the principal balance of the Loan at any time and from time to
time shall themselves bear interest and be payable at the rates
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<PAGE>
and in the manner set forth in Section 3.06 of the Indenture and
Section 3.2 of the Loan Agreement.
7. Conditions to Effectiveness of Agreement. The
provisions of this Agreement shall not become effective unless
and until each and every one of the conditions set forth below
shall have been satisfied:
(a) The Corporation shall have executed,
acknowledged and delivered the Vanishing Guaranty to
Summit;
(b) The general partner and each limited partner
in Borrower shall have given and delivered,
irrevocably, its written consent to this Agreement and
the transactions contemplated hereunder and in
connection herewith;
(c) Borrower shall have delivered to Summit (i) all
cash in its various accounts and (ii) the agreed upon amount
representing a portion of all security deposits;
(d) The Corporation's counsel shall have delivered an
opinion of counsel with respect to power and authority, due
authorization, due execution, and due authority, with
respect to the Guaranty and the grantor thereunder in form
and substance acceptable to Summit;
(e) The Management Agreement and the Initial Release
(defined below) shall have been executed, acknowledged and
delivered by all parties thereto; and
(f) All material conditions precedent to the
effectiveness of the Other Forbearance Agreement and the
Settlement Agreement shall have been satisfied or waived in
writing.
8. Releases.
Concurrently with the execution and delivery of this
Agreement, Borrower shall deliver to Summit the initial release
in a form satisfactory to Summit (the "Initial Release").
Immediately following the closing of a transfer of the Property
pursuant to this Agreement, (i) Borrower shall execute and
deliver to Summit the Summit Final Release in the form of Exhibit
E-1; and (ii) provided a Forbearance Termination Event resulting
in actual damage to Summit or its affiliates shall not have
occurred and not cured, Summit shall execute and deliver to
Borrower the Desert Terrace Release in the form of Exhibit E-2
annexed hereto.
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<PAGE>
9. Borrowers' Professional Fees. Borrower and
Randall personally shall each be jointly and severally
responsible for and liable for the payment of all professional
fees, costs, and expenses (including, without limitation,
attorneys' fees) incurred by or otherwise accrued against
Borrower in connection with this Agreement and the transactions
contemplated herein or relating thereto; provided, however, that
Randall shall not be personally responsible for the payment of
the professional fees, costs and expenses of Summit.
Notwithstanding the foregoing, (i) Summit shall be entitled to
reimburse itself out of the Desert Terrace Lockbox Account for
all costs, including attorneys fees and expenses, and other
professional fees, costs and expenses incurred by Summit in
connection with the transactions contemplated by this Agreement
out of any amounts disbursed to Summit in accordance with the
provisions of the Cash Management Agreement and (ii) a portion of
Borrower's legal fees and other costs and expenses in connection
with the transactions contemplated hereby in the amount of $5,000
have been paid from the cash flow of the Property; and any fees
and expenses in excess of such amount shall be paid by Randall
from a source other than the cash flow of the Property.
10. Assignment. Upon prior (or simultaneous) written
notice to Borrower, Summit may sell or assign, in whole or in
part, its interest in the Loan, subject to the terms and
provisions of this Agreement.
11. Notices. Any notice, request or demand given or
made under this Agreement shall be in writing and shall be hand
delivered or sent by Federal Express or other reputable courier
service, and shall be deemed given when received at the following
addresses whether hand delivered or sent by Federal Express or
other reputable national overnight courier service:
If to Summit:
Summit Tax Exempt Bond Fund, L.P.
c/o Related Capital Company
625 Madison Avenue
New York, New York 10022-1801
Attention: Mr. Bruce Brown
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Eric R. Landau, Esq.
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<PAGE>
If to Borrower:
Desert Terrace--184, Ltd.
c/o Randall Realty Corp.
9500 SW Barbur Boulevard
Suite 300
Portland, Oregon 97219
Attention: Mr. Ron Koos
With a copy to:
O'Melveny & Myers
275 Battery Street
San Francisco, California 94111-3305
Attention: Stephen A. Cowan, Esq.
If to Randall:
Mr. Robert D. Randall
c/o Randall Realty Corp.
9500 SW Barbur Boulevard
Suite 300
Portland, Oregon 97219
If to the Corporation:
Randall Realty Corp.
9500 SW Barbur Boulevard
Suite 300
Portland, Oregon 97219
If to CTL Management
CTL Management, Inc.
9498 SW Barbur Boulevard
Suite 200
Portland, Oregon 97219
Each party to this Agreement may designate a change of address by
notice given to the other party fifteen (15) days prior to the
date such change of address is to become effective.
12. Loan Documents Remain Binding. Borrower
acknowledges that all of the obligations to be performed by
Borrower under the Loan Documents are valid and shall continue in
full force and effect notwithstanding the execution of this
Agreement, except to the extent expressly stated herein to the
contrary. Borrower acknowledges that the Loan Documents are and
shall at all times continue to be absolute and unconditional in
all respects, and shall at all times be valid and enforceable
-12-
<PAGE>
irrespective of any other agreements or circumstances of any
nature whatsoever which might otherwise constitute a defense to
the Loan Documents, the obligations of Borrower under the Loan
Documents, the obligations of any other person or party relating
to the Loan Documents, or the obligations of Borrower hereunder
or otherwise with respect to the Loan Documents. The agreement
by Summit to forbear from exercising any of its rights and
remedies under the Loan Documents in accordance with the
provisions of this Agreement shall in no event or under any
circumstance be construed as a waiver by Summit in whole or in
part of any existing default with respect to the Loan Documents,
or of the absolute and unconditional right of Summit, from and
after the occurrence of a Forbearance Termination Event (and
expiration of all applicable grace, cure and notice periods)
hereunder or under the Other Forbearance Agreement, to seek to
enforce its rights and remedies with respect to the Loan in
accordance with the Loan Documents; provided, however, Summit
agrees that it shall not commence a foreclosure action against
Borrower, Corporation or Randall with respect to the Desert
Terrace Property prior to or after recording the Desert Terrace
Deed if the Transfer Documents are unconditionally delivered to
Summit, or its nominee, designee or affiliate, within fifteen
(15) days of demand after the occurrence of a Forbearance
Termination Event therefrom by Summit. Borrower absolutely,
unconditionally and irrevocably waives any and all right to
assert any setoff, counterclaim (except for a compulsory
counterclaim in a court of federal jurisdiction) or crossclaim of
any nature whatsoever (i) with respect to the Loan Documents and
the documents contemplated hereby and executed and delivered in
connection herewith, or (ii) with respect to the obligations of
Borrower under the Loan Documents and the documents contemplated
hereby and executed and delivered in connection herewith, or
(iii) with respect to the obligations of any other person or
party relating to the Loan Documents and the documents
contemplated hereby and executed and delivered in connection
herewith, or (iv) otherwise with respect to the Loan or (v) in
any action or proceeding brought by Summit to collect the sums
due under the Loan Documents and the documents contemplated
hereby and executed and delivered in connection herewith, or any
portion thereof, or to enforce, foreclose and realize upon the
liens and security interests created by the Deed of Trust, the
other Loan Documents and the documents contemplated hereby and
executed and delivered in connection herewith. Borrower
acknowledges that no oral or other agreements, understandings,
representations or warranties exist with respect to the Loan
Documents or with respect to the obligations of Borrower under
the Loan Documents, except those specifically set forth in the
documents contemplated hereby and executed and delivered in
connection herewith; provided, however, that where the terms and
conditions of the Loan Documents conflict with the terms and
conditions of this Agreement and the Forbearance Documents, then
-13-
<PAGE>
the terms and conditions of the Forbearance Documents shall
control.
13. Not a Novation. This Agreement, together with the
other Forbearance Documents is not intended to and shall not
terminate or extinguish any of the indebtedness or obligations
under the Loan Documents in such a manner as would constitute a
novation of the original indebtedness or obligations under the
Loan Documents, nor shall this Agreement affect or impair the
priority of any liens created thereby, it being the intention of
the parties hereto to carry forward all liens and security
interests securing payment of the Note.
14. Further Assurances. Borrower shall execute and
deliver or cause to be executed and delivered such assignments,
agreements, partnership authorization and other documentation as
Summit shall require to create, evidence and assure the
agreements herein contained and the rights conferred upon the
parties hereby, at no additional cost to any of them and without
the incurrence of any additional obligations or liabilities by
any of them.
15. Time of the Essence. Time shall be of the essence
with respect to the payment and performance of the obligations of
each of the Borrowers to be paid and performed hereunder and with
respect to all dates and deadlines set forth herein (whether or
not specifically so indicated) including, without limitation, the
dates specified in the defined term "Forbearance Termination
Event".
16. WAIVER OF TRIAL BY JURY. EACH BORROWER
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THE LOAN
DOCUMENTS, THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT NOW
OR HEREAFTER EXECUTED AND DELIVERED IN CONNECTION THEREWITH.
17. Agreement Binding. This Agreement and all the
covenants and agreements herein contained, shall be and are
binding upon and shall inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, legal
representatives, successors and assigns except as expressly set
forth herein.
18. Construction of Agreement. The titles and
headings of the paragraphs of this Agreement have been inserted
for convenience of reference only and are not intended to
summarize or otherwise describe the subject matter of such
paragraphs and shall not be given any consideration in the
construction of this Agreement.
-14-
<PAGE>
19. Waivers. Summit may at any time and from time to
time waive any one or more of the conditions contained herein,
but any such waiver shall be deemed to be made in pursuance
hereof and not in modification thereof, and any such waiver in
any instance or under any particular circumstance shall not be
considered a waiver of such condition in any other instance or
any other circumstance.
20. Severability. If any term, covenant or provision
of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be construed
without such term, covenant or provision.
21. No Beneficiary. No person, party or entity other
than Summit II shall under any circumstances have the right to
assert that it is a third party beneficiary of this Agreement.
22. Counterparts. It is understood and agreed that
this Agreement may be executed in telecopied or original
counterparts, each of which shall, for all purposes, be deemed an
original and all of such counterparts, taken together, shall
constitute one and the same Agreement, event though all of the
parties hereto may not have executed the same counterpart of this
Agreement.
23. Entire Agreement. The Loan Documents and the
documents contemplated hereby and executed and delivered in
connection herewith set forth the entire agreement and
understanding of Borrower, Randall, the Corporation, CTL
Management and Summit with respect to the matters set forth
herein.
24. Modifications. This Agreement may only be
modified, amended, changed, discharged or terminated by an
agreement in writing signed by all of the parties to this
Agreement.
25. Full Authority. Each of the parties to this
Agreement (and the undersigned representatives of such parties,
if any) has the full power and authority and legal right to
execute this Agreement and to keep and observe all of the terms,
covenants and provisions of this Agreement on the respective
parts of such parties to be performed or observed.
26. No Third Party Liability. Borrower acknowledges
and agrees that the mechanism established in this Agreement for
the transfer of the Property, and the participation of Summit in
the process, is a legitimate and reasonable exercise of Summit's
rights and remedies as the principal secured creditor of
Borrower. Summit's participation in this process (and pursuant
to this Agreement) is as a secured creditor, and not as a co-
owner, partner, joint venturer, operator, insider, control
-15-
<PAGE>
entity, employer in fact or law, or any other equity participant
with Borrower. As such, Summit shall have no liability to any
third party as co-owner, partner, joint venturer, operator,
insider, control entity, employer in fact or law, or any other
equity participant for exercising its rights under this Agreement
as regards any of the Properties.
27. Choice of Law. This Agreement shall be governed
and construed in accordance with the internal laws of the State
of California.
28. Advice of Counsel. Each of Borrower, Randall, the
Corporation, CTL Management and Summit acknowledges that it (i)
has had the opportunity to obtain advice of counsel of its own
choosing in the negotiations for and preparation of this
Agreement; (ii) has read the Agreement and has had the Agreement
fully explained by such counsel, and is fully aware of its
contents and legal effects; (iii) has entered into this Agreement
of its own free will and accord and without threats, coercion,
fraud or duress of any kind and (iv) is not relying on any
representation, statement or warranty of any party regarding this
Agreement or the transactions contemplated hereby, except as set
forth in this Agreement.
29. Conveyance. Borrower agrees that the conveyance
of the Property to Summit or its assignee, designee or nominee
according to the terms of this Agreement is and shall be an
absolute conveyance of all of its right, title and interest in
and to the Property in fact as well as form and was not and is
not now and shall not be intended as a mortgage, trust convey-
ance, deed of trust or security instrument of any kind, and that
the consideration for such conveyance is as exactly as recited
herein and that, following delivery of the Transfer Documents,
Borrower shall have no further interest (including right of
redemption) or claims in and to the Property or to the proceeds
and profits which may be derived thereof, of any kind whatsoever.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
THE SIGNATURE PAGE FOLLOWS
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above
written.
DESERT TERRACE--184, LTD.,
an Oregon limited partnership,
By: /s/ Robert D. Randall
----------------------------------
Robert D. Randall
General Partner
/s/ Robert D. Randall
--------------------------------------
Robert D. Randall
Randall Realty Corp.
By: /s/ Robert D. Randall
----------------------------------
Name: Robert D. Randall
Title: President
CTL MANAGEMENT
By: /s/ Darll K Johnson
----------------------------------
Name: Darll K Johnson
Title: President
SUMMIT TAX EXEMPT BOND FUND, L.P.
Delaware limited partnership
By: Related Tax Exempt Bond
Associates, Inc., a general
partner
By: /s/ Stuart Boesky
----------------------------------
Name: Stuart Boesky
Title: Vice President
By: Prudential-Bache Properties,
Inc., a general partner
By: /s/ Thomas F. Lynch III
----------------------------------
Name: Thomas F. Lynch III
Title: President<PAGE>
-17-
<PAGE>
The undersigned, being all of the limited partners of
Desert Terrace --184, Ltd., an Oregon limited partnership (the
"Partnership") hereby consent to the execution by the Partnership
of this Agreement and the completion of the transactions contem-
plated hereby.
PACIFIC FRONTIER WOOD MARKETS, INC.
By: /s/ Robert D. Randall
----------------------------------
Name: Robert D. Randall
Title: President
/s/ Kenneth A. Randall
---------------------------------------
Kenneth A. Randall
CSL PROPERTIES, INC.
By: /s/ Robert D. Randall
----------------------------------
Name: Robert D. Randall
Title: President
-18-
PAGE
<PAGE>
Acknowledgments
(To Be Attached)
-1-
PAGE
<PAGE>
EXHIBIT A
(Description of Property)
(To Be Attached)<PAGE>
-2-
<PAGE>
EXHIBIT A-1
(Description of Desert Hills Property)
(To Be Attached)
<PAGE>
-3-
<PAGE>
EXHIBIT B
(Vanishing Guaranty)
(To Be Attached)<PAGE>
-4-
<PAGE>
EXHIBIT C
(Form of Desert Terrace Deed)
(grant deed)
-5-
PAGE
<PAGE>
EXHIBIT D
(Management Agreement)<PAGE>
-5-
<PAGE>
EXHIBIT E
(Form of Summit Final Release)
PAGE
<PAGE>
EXHIBIT E-1
(Form of Desert Terrace Release)<PAGE>
<PAGE>
------------------------------------------------------
SETTLEMENT AND FORBEARANCE AGREEMENT
among
DESERT TERRACE - 184, LTD.,
RANDALL REALTY CORP.,
ROBERT D. RANDALL,
CTL MANAGEMENT
and
SUMMIT TAX EXEMPT BOND FUND L.P.
Dated as of July 31, 1995
Premises:
SUNSET TERRACE APARTMENTS
LOS ANGELES COUNTY, CALIFORNIA
------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Summit Tax Exempt Bond Fund LP
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000786156
<NAME> Summit Tax Exempt Bond Fund LP
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-1-1995
<PERIOD-END> Sep-30-1995
<PERIOD-TYPE> 9-Mos
<CASH> 213,793
<SECURITIES> 130,067,427
<RECEIVABLES> 9,792,653
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 140,073,873
<CURRENT-LIABILITIES> 1,646,537
<BONDS> 13,680,866
0
0
<COMMON> 0
<OTHER-SE> 124,746,470
<TOTAL-LIABILITY-AND-EQUITY> 140,073,873
<SALES> 0
<TOTAL-REVENUES> 7,452,218
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,564,980
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,045,335
<INCOME-PRETAX> 4,841,883
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,841,883
<EPS-PRIMARY> .60
<EPS-DILUTED> 0
</TABLE>
