SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-15648
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BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3447130
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR EQUITY PENSION INVESTORS - IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
-------------- --------------
Cash and cash equivalents $ 3,606,899 $ 3,389,826
Accounts and accrued interest receivable 89,590 87,630
Prepaid expenses 92,280 35,931
Deferred expenses, net of accumulated
amortization of $12,573 in 1996 and
$9,779 in 1995 43,311 46,105
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3,832,080 3,559,492
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Investment in real estate:
Land 6,958,341 6,958,341
Buildings and improvements 24,248,600 24,248,600
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31,206,941 31,206,941
Less accumulated depreciation 9,576,013 9,171,989
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Investment in real estate, net of
accumulated depreciation 21,630,928 22,034,952
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Investment in joint venture
with affiliates 1,129,269 1,139,513
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$ 26,592,277 $ 26,733,957
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 58,379 $ 105,783
Due to affiliates 29,367 16,286
Accrued real estate taxes 1,165,649 1,034,351
Security deposits 75,773 88,176
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Total liabilities 1,329,168 1,244,596
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Limited Partners' capital (185,486
Interests issued and outstanding) 25,365,673 25,605,915
General Partner's deficit (102,564) (116,554)
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Total partners' capital 25,263,109 25,489,361
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$ 26,592,277 $ 26,733,957
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Income:
Rental $ 1,973,101 $ 1,829,540
Service 600,163 630,850
Interest on short-term investments 82,511 103,547
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Total income 2,655,775 2,563,937
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Expenses:
Depreciation 404,024 404,024
Property operating 567,971 630,506
Real estate taxes 648,474 607,208
Property management fees 124,440 126,404
Administrative 239,389 181,043
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Total expenses 1,984,298 1,949,185
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Income before participation in income
(loss) of joint venture with affiliates 671,477 614,752
Participation in income (loss) of joint
venture with affiliates 35,010 (25,054)
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Net income $ 706,487 $ 589,698
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Net income allocated to General Partner $ 107,263 $ 95,584
============== ==============
Net income allocated to Limited Partners $ 599,224 $ 494,114
============== ==============
Net income per Limited Partnership Interest
(185,486 issued and outstanding) $ 3.23 $ 2.66
============== ==============
Distributions to General Partner $ 93,273 $ 105,454
============== ==============
Distributions to Limited Partners $ 839,466 $ 949,162
============== ==============
Distributions per Limited Partnership
Interest:
Taxable $ 4.58 $ 6.22
============== ==============
Tax-exempt $ 4.52 $ 5.00
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Income:
Rental $ 964,581 $ 909,321
Service 445,651 430,246
Interest on short-term investments 40,156 51,991
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Total income 1,450,388 1,391,558
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Expenses:
Depreciation 202,012 202,012
Property operating 290,999 410,173
Real estate taxes 324,237 299,834
Property management fees 68,026 66,078
Administrative 185,319 99,361
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Total expenses 1,070,593 1,077,458
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Income before participation in income
(loss) of joint venture with affiliates 379,795 314,100
Participation in income (loss) of joint
venture with affiliates 22,620 (9,070)
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Net income $ 402,415 $ 305,030
============== ==============
Net income allocated to General Partner $ 58,549 $ 48,810
============== ==============
Net income allocated to Limited Partners $ 343,866 $ 256,220
============== ==============
Net income per Limited Partnership Interest
(185,486 issued and outstanding) $ 1.85 $ 1.38
============== ==============
Distribution to General Partner $ 46,636 $ 52,467
============== ==============
Distribution to Limited Partners $ 419,733 $ 472,265
============== ==============
Distribution per Limited Partnership
Interest:
Taxable $ 2.29 $ 2.98
============== ==============
Tax-exempt $ 2.26 $ 2.50
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Operating activities:
Net income $ 706,487 $ 589,698
Adjustments to reconcile net income
to net cash provided by
operating activities:
Participation in (income) loss of
joint venture with affiliates (35,010) 25,054
Depreciation of properties 404,024 404,024
Amortization of deferred expenses 2,794 2,794
Net change in:
Accounts and accrued interest
receivable (1,960) (9,150)
Prepaid expenses (56,349) (89,828)
Accounts payable (47,404) (17,370)
Due to affiliates 13,081 (47,867)
Accrued liabilities 131,298 20,775
Security deposits (12,403) 851
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Net cash provided by operating activities 1,104,558 878,981
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Investing activities:
Capital contribution to joint
venture - affiliates (15,934) (38,919)
Distribution from joint
venture - affiliates 61,188 17,790
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Cash provided by (used in)
investing activities 45,254 (21,129)
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Financing activities:
Distributions to Limited Partners (839,466) (949,162)
Distributions to General Partner (93,273) (105,454)
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Cash used in financing activities (932,739) (1,054,616)
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Net change in cash and cash equivalents 217,073 (196,764)
Cash and cash equivalents at beginning
of period 3,389,826 3,612,180
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Cash and cash equivalents at end of period $ 3,606,899 $ 3,415,416
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the six months and quarter
ended June 30, 1996, and all such adjustments are of a normal and recurring
nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1996 are:
Paid
-----------------------
Six Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $42,357 $30,702 $29,367
3. Subsequent Event:
In July 1996, the Partnership made a distribution of $419,733 ($2.29 per
Taxable Interest and $2.26 per Tax-exempt Interest) to the holders of Limited
Partnership Interests, representing the regular quarterly distribution for the
second quarter of 1996.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Equity Pension Investors-IV A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1986 to make first mortgage
loans and to invest in and operate income-producing real property. The
Partnership raised $46,371,500 through the sale of Limited Partnership
Interests and utilized these proceeds to fund one acquisition loan and acquire
two real property investments. As of June 30, 1996, the Partnership owns two
properties and holds a minority interest in a joint venture with affiliates.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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Net income increased for the six months and quarter ended June 30, 1996 as
compared to the same periods in 1995 due to improved operations at the
Partnership's two properties. Further discussion of the Partnership's
operations is summarized below.
1996 Compared to 1995
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to both the six months and quarters ended June 30, 1996 and 1995.
Primarily due to higher rental rates at Gleneagles Apartments, rental income
increased during 1996 as compared to 1995.
As a result of lower interest rates earned on short-term investments, interest
income on short-term investments decreased during 1996 as compared to 1995.
As a result of lower tenant related expenditures at the Evanston Plaza Shopping
Center property operating expenses decreased during 1996 as compared to 1995.
The Partnership incurred higher consulting, postage and printing costs in
connection with its response to a tender offer during the second quarter of
1996. As a result, administrative expenses increased during 1996 as compared
to 1995.
Participation in income (loss) of joint venture with affiliates represents the
partnership's share of the operations of the 45 West 45th Street Office
Building. The Partnership recognized participation in income of joint venture
with affiliates during 1996 as compared to a loss during 1995 due to lower
interior maintenance and repairs and legal expenses incurred during 1996.
<PAGE>
Liquidity and Capital Resources
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The cash position of the Partnership increased by approximately $217,000 as of
June 30, 1996 as compared to December 31, 1995. Cash flow of approximately
$1,105,000 was provided by operating activities during 1996 consisting of cash
flow from the operations of properties and interest income on short-term
investments, which were partially offset by the payment of administrative
expenses. Cash provided by investing activities of approximately $45,000
consisted of the net distribution received from the joint venture with
affiliates. Financing activities consisted of distributions to the Partners of
approximately $933,000.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit, or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered significant if it exceeds $250,000 annually or 20% of the property's
rental and service income. The Partnership defines cash flow generated from its
properties as an amount equal to the property's revenue receipts less property
related expenditures. For the six months ended June 30, 1996 and 1995, the
Gleneagles Apartments and Evanston Plaza Shopping Center generated positive
cash flow. The 45 West 45th Street Office Building, in which the Partnership
holds a minority joint venture interest with affiliates, generated positive
cash flow during 1996 and a significant cash flow deficit during 1995. The
improvement in the cash flow of this property was due to lower interior
maintenance and repairs and legal expenses incurred during 1996. In addition,
significant leasing costs were incurred in 1995 at the 45 West 45th Street
Office Building to lease vacant space and renew existing tenant leases which
were scheduled to expire. These nonrecurring expenditures were not included in
classifying the cash flow performance of the property.
As of June 30, 1996, the Gleneagles Apartments and Evanston Plaza Shopping
Center had occupancy rates of 98% and 85%, respectively, while the 45 West 45th
Street Office Building had an occupancy rate of 86%. Many rental markets
continue to remain extremely competitive; therefore, the General Partner's
goals are to maintain high occupancy levels while increasing rents where
possible and to monitor and control operating expenses and capital improvement
requirements at the properties.
The General Partner believes that the market for multifamily housing properties
is favorable to sellers of these properties. Currently, the Partnership has
entered into a contract to sell the 45 West 45th Street Office Building in
which the Partnership holds a minority joint venture interest for a sales price
of $10,500,000. The Partnership is marketing its residential property for sale.
In addition, the General Partner is exploring the sale of the Partnership's
remaining commercial property. The General Partner examines each property
individually by property type and market in determining the optimal time to
sell each property.
In June 1996, Heitman/JMB Advisory Corporation, an unaffiliated third party,
initiated discussions with the General Partner for a potential sale of all of
the properties of the Partnership. These discussions did not result in any
agreement of terms between the parties, and it is unlikely at this time that a
sale of the Partnership's assets to them will be consummated. This will not
affect the Partnership's strategy as described in the preceding paragraph.
<PAGE>
In July 1996, the Partnership paid a distribution of $419,733 ($2.29 per
Taxable Interest and $2.26 per Tax-exempt Interest) to the holders of Limited
Partnership Interests representing the regular quarterly distribution of Cash
Flow for the second quarter of 1996. Including the July 1996 distribution,
Limited Partners have received cumulative distributions of $88.80 per $250
Taxable Interest, of which $88.55 represents Cash Flow from operations and $.25
represents a return of Original Capital, and $86.74 per $250 Tax-exempt
Interest, of which $86.49 represents Cash Flow from operations and $.25
represents a return of Original Capital. In July 1996, the Partnership also
paid $34,978 to the General Partner as its distributive share of the second
quarter of 1996 distribution, and made a contribution to the Repurchase Fund of
$11,659.
It should be noted that distributions to Taxable Limited Partners and
Tax-exempt Limited Partners are computed by different formulas as set forth in
the Prospectus; therefore, the amount of distributions to Taxable Limited
Partners when compared to the amount of distributions to Tax-exempt Limited
Partners will fluctuate from quarter to quarter. The General Partner expects
that the cash flow from property operations should enable the Partnership to
continue making quarterly distributions to Limited Partners. However, the level
of future distributions will be dependent on the amount of cash flow generated
from property operations, as to which there can be no assurances.
During the six months ended June 30, 1996, the General Partner on behalf of the
Partnership used amounts placed in the Repurchase Fund to repurchase 190
Interests from Limited Partners at a total cost of $32,493.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-IV
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Proposed Class and Derivative Action Lawsuits
- -----------------------------------------------
On May 22, 1996, a proposed class and derivative action complaint was filed,
Chipain vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 05299) (the "Chipain Case"), naming the General Partner and the
general partners (together, the "Balcor Defendants") of nine other limited
partnerships sponsored by The Balcor Company (together, with the Partnership,
the "Affiliated Partnerships") as defendants. Additional defendants were
Insignia Management Group ("Insignia") and Walton Street Capital Acquisition
II, LLC ("Walton") and certain of their affiliates and principals
(collectively, the "Walton and Insignia Defendants"). The complaint alleged,
among other things, that the tender offers for the purchase of limited
partnership interests in the Affiliated Partnerships made by a joint venture
consisting of affiliates of Insignia and Walton were coercive and unfair.
The Walton and Insignia Defendants filed motions to dismiss the complaint,
which were granted on June 5, 1996. The plaintiffs filed an amended complaint,
which all defendants then moved to dismiss. On June 18, 1996, the court
dismissed the complaint in its entirety as to the Walton and Insignia
Defendants and as to the Balcor Defendants on all counts on which dismissal was
sought.
On June 14, 1996, a second proposed class and derivative action complaint was
filed in Chancery Court, Dee vs. Walton Street Capital Acquisition II, LLC
(Case No. 96 CH 06283) (the "Dee Case"). On July 1, 1996, a proposed class
action complaint was filed in the same court, Anderson vs. Balcor Mortgage
Advisors (Case No. 96 CH 06884) (the "Anderson Case"). An amended complaint
consolidating the Dee and Anderson Cases (the "Dee/Anderson Case") was filed on
July 25, 1996. The same day, the plaintiffs in the Chipain Case withdrew their
complaint. The Dee/Anderson Case names the Balcor Defendants, the Affiliated
Partnerships, and the Walton and Insignia Defendants, as defendants. The
complaint seeks to assert class and derivative claims against the Walton and
Insignia Defendants and alleges that, in connection with the tender offers, the
Walton and Insignia Defendants misused the General Partner's and Insignia's
fiduciary positions and knowledge in breach of the Walton and Insignia
Defendants' fiduciary duty and in violation of the Illinois Securities and
Consumer Fraud Acts. The plaintiffs request certification as a class and
derivative action, unspecified compensatory damages and rescission of the
tender offers.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. Management of each of the Balcor Defendants
believes they have meritorious defenses to contest the claims. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the Partnership.
<PAGE>
ITEM 5. Other Information
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45 West 45th Street
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In 1988 and 1989, the Partnership and three affiliates (the "Participants")
funded a $23,000,000 loan collateralized by the 45 West 45th Street Office
Building, New York City, New York. The Partnership's participation in the loan
was $3,500,000, for a participating percentage of approximately 15%. In 1993,
the Participants cashed a letter of credit in the amount of $483,000 previously
received from the borrower as partial collateral for the loan which was applied
to the principal amount of the loan. The Partnership's share of the proceeds
was $73,500. In 1995, a limited partnership (the "Limited Partnership") in
which each of the Participants holds an interest equal to its participating
percentage in the loan obtained title to the property pursuant to an
uncontested foreclosure.
On July 29, 1996, the Limited Partnership contracted to sell the property for a
sale price of $10,300,000 to an unaffiliated party, Olmstead Properties, Inc.,
a New York corporation. The purchaser has deposited $100,000 into an escrow
account as earnest money. The remainder of the sale price will be payable in
cash no later than the closing, scheduled for October 25, 1996. From the
proceeds of the sale, the Limited Partnership will pay $257,500 to a third
party as a brokerage commission. The Limited Partnership will receive the
remaining proceeds of $10,042,500, less closing costs. Of such proceeds, an
amount not to exceed $500,000 will be retained by the Limited Partnership and
will not be available for use or distribution by the Limited Partnership until
150 days after the closing. The Partnership's share of total net proceeds is
expected to be approximately $1,528,000, less the Partnership's share of
closing costs. Neither the General Partner nor any affiliate will receive a
brokerage commission in connection with the sale of the property. The General
Partner will be reimbursed by the Limited Partnership for actual expenses
incurred in connection with the sale.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
to Registrant's Registration Statement on Form S-11 dated November 28, 1986
(Registration No. 33-7133) and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No. 0-15648) are incorporated
herein by reference.
<PAGE>
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1996 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 1996.
(99)(a) Agreement of Sale dated July 29, 1996 relating to the contract to sell
the 45th Street Office Building in New York City, New York is attached hereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR EQUITY PENSION INVESTORS-IV
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/ Thomas E. Meador
------------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Equity Partners-IV the General Partner
By: /s/ Brian Parker
------------------------------
Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Equity Partners-IV the
General Partner
Date: August 14, 1996
-----------------------
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), entered into as of the 29th day
of July, 1996, by and between OLMSTEAD PROPERTIES, INC., a New York corporation
("Purchaser"), and 45 W. 45TH STREET LIMITED PARTNERSHIP, an Illinois limited
partnership ("Seller").
WITNESSETH:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to
sell at the price of Ten Million Three Hundred Thousand And No/100 Dollars
($10,300,000.00) (the "Purchase Price"), that certain property commonly known
as 45 W. 45th Street, New York, New York legally described on Exhibit A
attached hereto (the "Property"). Included in the Purchase Price is all of the
personal property set forth in Exhibit B (the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as
follows:
(a) Upon the execution of this Agreement, the sum of One Hundred
Thousand And No/100 Dollars ($100,000.00) (the "Earnest Money") to be held
in escrow by and in accordance with the provisions of the Escrow Agreement
("Escrow Agreement") attached hereto as Exhibit C; and
(b) On or before the expiration of the "Due Diligence Period" (as
hereinafter defined), the sum of Four Hundred Fifteen Thousand and No/100
Dollars ($415,000.00) (the "Additional Earnest Money") to be held in
accordance with the provisions of the Escrow Agreement (all references in
the Agreement to the Earnest Money shall mean the Earnest Money as same
may have been increased by the deposit of the Additional Earnest Money).
(c) On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally
wired "immediately available" funds, on or before 11:00 a.m Chicago time.
3. TITLE COMMITMENT AND SURVEY.
A. Attached hereto as Exhibit D is a copy of a title commitment for
an owner's standard title insurance policy issued by First American Title
Insurance Company of New York (hereinafter referred to as "Title Insurer"),
dated June 7, 1996 for the Property (the "Title Commitment"). For purposes of
this Agreement, "Permitted Exceptions" shall mean: (a) the general printed
exclusions contained in the standard title policy to be issued by Title Insurer
based on the Title Commitment; (b) general real estate taxes, water rates,
sewer rents and assessments, in each case, subject to the provisions of
Paragraph 12, not yet due and payable; (c) matters shown on the "Existing
Survey" (hereinafter defined); (d) matters caused by the actions of Purchaser;
and (e) the title exceptions set forth in Schedule B of the Title Commitment as
Numbers 1 (as modified by adding the phrase "as tenants only"), 3 (as modified
by a survey reading), 4, 5 and 12. All the other exceptions to title shall be
referred to as "Unpermitted Exceptions". The Title Commitment shall be
conclusive evidence of good title as therein shown as to all matters to be
insured by the title policy, subject only to the exceptions therein stated.
<PAGE>
On the Closing Date, Title Insurer shall deliver to Purchaser a standard title
policy in conformance with the previously delivered Title Commitment, subject
only to Permitted Exceptions and Unpermitted Exceptions waived by Purchaser
(the "Title Policy"). Purchaser shall pay for the costs of the Title
Commitment and Title Policy and the costs of any endorsements to, or extended
coverage on, the Title Policy.
B. Purchaser has received (or will receive prior to the expiration
of the Due Diligence Period) a survey of the Property prepared by Earl B.
Lovell - S.P. Belcher, Inc. last revised July, 1996 (the "Existing Survey").
To the extent Purchaser requires an updated survey, Purchaser shall be
responsible for obtaining, and Purchaser shall pay for the costs of, the
updated survey (the "Updated Survey"). Unless otherwise agreed by Purchaser
and Seller, in the event Purchaser does not terminate this Agreement pursuant
to Paragraph 27, Purchaser shall be deemed to have accepted all matters
disclosed by the Existing Survey and such matters shall be Permitted
Exceptions.
4. PAYMENT OF CLOSING COSTS.
A. In addition to the costs set forth in Paragraphs 3A and B,
Purchaser shall pay for the costs of the documentary or transfer stamps to be
paid with reference to the "Deed" (hereinafter defined), including City of New
York and State of New York Real Property Transfer Tax, State of New York Real
Property Transfer Gains Tax (to the extent applicable) and all other stamps,
intangible, transfer, documentary, recording, sales tax and surtax imposed by
law with reference to any other sale documents delivered in connection with the
sale of the Property and Personal Property to Purchaser and all other charges
of the Title Insurer in connection with this transaction.
5. CONDITION OF TITLE.
A. If, prior to Closing, a date-down to the Title Commitment or the
Updated Survey disclose an Unpermitted Exception, Seller shall have thirty (30)
days from the date of the date-down to the Title Commitment or the Updated
Survey, as applicable, to (i) bond over, cure and/or have any Unpermitted
Exceptions which, in the aggregate, do not exceed $50,000.00, or, without
limitation, (a) those which have arisen by reason of the affirmative
intentional acts of Seller or (b) which are monetary judgments against the
Property (such encumbrances in (a) and (b) being referred to as "Intentional
Acts") removed from the Title Commitment or to have the Title Insurer commit to
insure against loss or damage that may be occasioned by such Unpermitted
Exceptions, provided that such Unpermitted Exceptions are removed from any
lender's title commitment, or (ii) have the right, but not the obligation, to
bond over, cure and/or have any Unpermitted Exceptions which, in the aggregate,
equals or exceeds $50,000.00 (and which are not Intentional Acts), removed from
the Title Commitment or to have the Title Insurer commit to insure against loss
or damage that may be occasioned by such Unpermitted Exceptions, provided that
such Unpermitted Exceptions are removed from any lender's title commitment.
The time of Closing shall be delayed, if necessary, to give effect to said
aforementioned time periods. If Seller fails to cure or have said Unpermitted
Exception removed or have the Title Insurer commit to insure as specified above
within said thirty (30) day period or if Seller elects not to exercise its
<PAGE>
rights under (ii) in the preceding sentence, Seller shall deliver written
notice to Purchaser on or before the expiration of said thirty (30) day period
("Seller's Title Notice") and Purchaser may elect to either accept title to the
Property subject to any Unpermitted Exception or terminate this Agreement upon
notice to Seller within ten (10) days after receipt of Seller's Title Notice.
Absent notice from Purchaser to Seller within ten (10) days after receipt of
Seller's Title Notice, Purchaser shall be deemed to have elected to take title
subject to said Unpermitted Exception. If Purchaser terminates this Agreement
in accordance with the terms of this Paragraph 5A, this Agreement shall become
null and void without further action of the parties and all Earnest Money
theretofore deposited into the escrow by Purchaser together with any interest
accrued thereon, shall be returned to Purchaser, and neither party shall have
any further liability to the other, except for Purchaser's obligation to
indemnify Seller and restore the Property, as more fully set forth in Paragraph
7 and Seller's obligation to pay for any expenses resulting from the issuance
of the Title Commitment and Purchaser's obligation to pay any expenses
resulting from the Updated Survey.
B. Seller agrees to convey fee simple title to the Property to
Purchaser by bargain and sale deed with covenants against grantor's acts
("Deed") in recordable form subject only to the Permitted Exceptions and any
Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
A. Except as provided in any indemnity provisions of this
Agreement, Seller shall bear all risk of loss with respect to the Property up
to the earlier of the dates upon which either possession or title is
transferred to Purchaser in accordance with this Agreement. Notwithstanding
the foregoing, in the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as determined by Seller in good faith) Purchaser shall not have
the right to terminate its obligations under this Agreement by reason thereof,
but Seller shall have the right to elect to either repair and restore the
Property (in which case the Closing Date shall be extended until completion of
such restoration) or to assign and transfer to Purchaser on the Closing Date
all of Seller's right, title and interest in and to all insurance proceeds paid
or payable to Seller on account of such fire or casualty (provided there is no
co-insurance factor), including remitting (or crediting) to Purchaser the
amount of any applicable insurance deductible, and Seller assigns Purchaser any
right Seller has to adjust any claims under any applicable insurance policies.
Seller shall promptly notify Purchaser in writing of any such fire or other
casualty and Seller's determination of the cost to repair the damage caused
thereby. In the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost in excess of $100,000.00
(as determined by Seller in good faith), then this Agreement may be terminated
at the option of Purchaser, which option shall be exercised, if at all, by
Purchaser's written notice thereof to Seller within fifteen (15) business days
after Purchaser receives written notice of such fire or other casualty and
Seller's determination of the amount of such damages, and upon the exercise of
such option by Purchaser this Agreement shall become null and void, the Earnest
Money deposited by Purchaser shall be returned to Purchaser together with
interest thereon, and neither party shall have any further liability or
<PAGE>
obligations hereunder except for Purchaser's obligations to indemnify Seller
and restore the Property, as set forth more fully in Paragraph 7 and Seller's
obligation to pay for any expenses resulting from the issuance of the Title
Commitment and Purchaser's obligation to pay for any expenses resulting from
the Updated Survey. In the event that Purchaser does not exercise the option
set forth in the preceding sentence, the Closing shall take place on the
Closing Date and Seller shall assign and transfer to Purchaser on the Closing
Date all of Seller's right, title and interest in and to (i) all insurance
proceeds paid or payable to Seller on account of the fire or casualty,
including remitting (or crediting) to Purchaser the amount of any applicable
insurance deductible, and (ii) rights to adjust any claims under any applicable
insurance policies.
B. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately notify Purchaser of such
occurrence. In the event that the taking of any part of the Property shall:
(i) materially impair access to the Property; (ii) cause any material
non-compliance with any applicable law, ordinance, rule or regulation of any
federal, state or local authority or governmental agencies having jurisdiction
over the Property or any portion thereof; (iii) materially and adversely
impairs the use of the Property as it is currently being operated, or (iv)
result in damages in excess of $100,000.00 (hereinafter collectively referred
to as a "Material Event"), Purchaser may:
(a) terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease,
except for Purchaser's obligations to indemnify Seller and restore the
Property, as set forth more fully in Paragraph 7 and Seller's obligation to pay
for any expenses resulting from the issuance of the Title Commitment and
Purchaser's obligation to pay for any expenses resulting from the Updated
Survey; or
(b) proceed with the Closing, in which event Seller shall
assign to Purchaser all of Seller's right, title and interest in and to (i)
Seller's right to pursue any claim against the condemning authorities (with
Seller's reasonable cooperation, at no additional cost or expense to Seller, in
pursuing such claim); and (ii) any award made in connection with such
condemnation or eminent domain proceedings.
Purchaser shall then notify Seller, within fifteen (15) business days
after Purchaser's receipt of Seller's notice, whether Purchaser elects to
exercise its rights under subparagraph (a) or subparagraph (b) of this
Paragraph 6B. Closing shall be delayed, if necessary, until Purchaser makes
such election. If Purchaser fails to make an election within such fifteen (15)
business day period, Purchaser shall be deemed to have elected to exercise its
rights under subparagraph (b).
<PAGE>
If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which do not
constitute a Material Event, Purchaser shall be required to proceed with the
Closing, in which event Seller shall assign to Purchaser all of Seller's right,
title and interest in and to any award made in connection with such
condemnation or eminent domain proceedings.
7. AS-IS CONDITION.
A. Although Purchaser has completed its review of the Property and has
no contingencies for inspection of the same except as expressly set forth in
Paragraph 27 hereof, Purchaser shall have the right to enter upon the Property
in the presence of Seller or its employees, agents or designees at reasonable
times upon reasonable prior notice to Seller. The current rent roll for the
Property is attached hereto as Exhibit E. The most recent tax and casualty
insurance bills and utility account numbers are attached hereto as Exhibit F.
A list of the service contracts is attached hereto as Exhibit G. A portion of
unaudited 1995 operating statements are attached hereto as Exhibit H.
Purchaser shall defend, indemnify and hold Seller and any affiliate, parent of
Seller, and all shareholders, employees, officers and directors of Seller or
Seller's affiliate or parent (hereinafter collectively referred to as
"Affiliate of Seller") harmless from any and all liability, cost and expense
(including without limitation, reasonable attorney's fees, court costs and
costs of appeal) suffered or incurred by Seller or Affiliates of Seller for
injury to persons or property caused by Purchaser, and the employees, agents,
contractors and surveyors employed by Purchaser, while on the Property.
Purchaser shall undertake its obligation to defend set forth in the preceding
sentence using attorneys selected by Purchaser and reasonably approved by
Seller.
B. Except for the representations and warranties made herein, Purchaser
acknowledges and agrees that it will be purchasing the Property and Personal
Property based solely upon its inspections and investigations of the Property
and Personal Property, and that Purchaser will be purchasing the Property and
Personal Property "AS IS" and "WITH ALL FAULTS", based upon the condition of
the Property and Personal Property as of the date of this Agreement, wear and
tear and loss by fire or other casualty or condemnation excepted. Without
limiting the foregoing, Purchaser acknowledges that, except as may otherwise be
specifically set forth elsewhere in this Agreement, neither Seller nor its
consultants, brokers or agents have made any other representations or
warranties of any kind upon which Purchaser is relying as to any matters
concerning the Property or the Personal Property, including, but not limited
to, the condition of the land or any improvements comprising the Property, the
existence or non-existence of "Hazardous Materials" (as hereinafter defined),
economic projections or market studies concerning the Property, any development
rights, taxes, bonds, covenants, conditions and restrictions affecting the
Property, water or water rights, topography, drainage, soil, subsoil of the
Property, the utilities serving the Property or any zoning or building laws,
rules or regulations or "Environmental Laws" (as hereinafter defined) affecting
the Property. Seller makes no representation or warranty that the Property
complies with Title III of the Americans with Disabilities Act or any fire code
or building code. Purchaser hereby releases Seller and the Affiliates of
<PAGE>
Seller from any and all liability in connection with any claims which Purchaser
may have against Seller or the Affiliates of Seller, and Purchaser hereby
agrees not to assert any claims for contribution, cost recovery or otherwise,
against Seller or the Affiliates of Seller, relating directly or indirectly to
the existence of asbestos or Hazardous Materials on, or environmental
conditions of, the Property, whether known or unknown other than for such
claims relating to the environmental condition of the Property which pertain to
Seller's period of ownership of the Property (the "Seller's Ownership
Environmental Claims") and Seller agrees that Purchaser may name Seller as a
third party defendant as a result of Seller's Ownership Environmental Claims.
As used herein, "Environmental Laws" means all federal, state and local
statutes, codes, regulations, rules, ordinances, orders, standards, permits,
licenses, policies and requirements (including consent decrees, judicial
decisions and administrative orders) relating to the protection, preservation,
remediation or conservation of the environment or worker health or safety, all
as amended or reauthorized, or as hereafter amended or reauthorized, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances
Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1802; the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section 6901. et seq.; the Emergency Planning
and Community Right-to-know Act ("Right-to-know Act"), 42 U.S.C. Section 11001
et seq., the Atomic Energy Act ("AEA"), 42 U.S.C. Section 2011 et seq., the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 651 et seq., the Federal
Water Pollution Control Act ("Clear Water Act"), 33 U.S.C. Section 1251 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Clean
Air Act ("CAA"), 42 U.S.C. Section 7401 et seq. As used herein, the term
"Hazardous Materials" means (i) "hazardous substances" as defined by CERCLA;
(ii) "hazardous wastes," as defined by RCRA; (iii) any radioactive material
including, without limitation, any source, special nuclear or bi-product
material, as defined by AEA; (iv) asbestos in any form or condition; (v)
polychlorinated biphenyls; and (vi) any other material, substance or waste to
which liability or standards of conduct may be imposed under any Environmental
Laws. Notwithstanding anything contained herein to the contrary, the terms of
this Paragraph 7.B shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
C. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Seller makes no representation or
warranty that such material is complete or accurate or that Purchaser will
achieve similar financial or other results with respect to the operations of
the Property, it being acknowledged by Purchaser that Seller's operation of the
Property and allocations of revenues or expenses may be vastly different than
Purchaser may be able to attain. Purchaser acknowledges that it is a
sophisticated and experienced purchaser of real estate and further that
Purchaser has relied upon its own investigation and inquiry with respect to the
operation of the Property and releases Seller from any liability with respect
to such historical information. Notwithstanding anything contained herein to
the contrary, the terms of this Paragraph 7.C shall survive the closing and
delivery of the Deed and termination of this Agreement.
<PAGE>
D. Seller has provided to Purchaser the following existing report: Phase
I Environmental Site Assessment Report prepared by HGCL, dated November 14,
1991 ("Existing Report"). Seller makes no representation or warranty
concerning the accuracy or completeness of the Existing Report. Purchaser
hereby releases Seller and Affiliates of Seller from any liability whatsoever
with respect to the Existing Report, or, including, without limitation, the
matters set forth in the Existing Report, the accuracy and/or completeness of
the Existing Report. Furthermore, Purchaser acknowledges that it will be
purchasing the Property with all faults disclosed in the Existing Report.
Notwithstanding anything contained herein to the contrary, the terms of this
Paragraph 7.D shall survive the closing and delivery of the Deed and
termination of this Agreement.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
October 25, 1996 (the "Closing Date"), at the office of the Title Insurer,
Purchaser's lender's office in New York City or such other place as Purchaser
and Seller may mutually agree, at which time Seller shall deliver possession of
the Property to Purchaser. Notwithstanding the foregoing, Purchaser shall have
the right to accelerate the Closing Date at anytime after the date hereof upon
ten (10) days prior written notice to Seller. The Closing shall be a "New York
style" closing, in accordance with the customs of the Real Estate Board of New
York, at which the Purchaser shall wire the Purchase Price to Title Insurer on
the Closing Date and prior to the release of the Purchase Price to Seller,
Purchaser shall receive the Title Policy or marked up commitment dated the date
of the Closing Date. Seller shall deliver to Title Insurer any customary
affidavit in connection with a New York style closing.
9. CLOSING DOCUMENTS.
A. On the Closing Date, Purchaser and Seller shall each execute and
deliver to the other a closing statement. On the Closing Date, Purchaser shall
deliver to Seller the balance of the Purchase Price, and such other documents
as may be reasonably required by the Title Insurer in order to consummate the
transaction as set forth in this Agreement.
B. On the Closing Date, Seller shall deliver to Purchaser the following:
(i) the Deed (in the form of Exhibit I attached hereto), subject to
Permitted Exceptions and those Unpermitted Exceptions waived by
Purchaser;
(ii) a quit claim bill of sale conveying the Personal Property (in
the form of Exhibit J attached hereto);
(iii) assignment and assumption of intangible property (in the form
attached hereto as Exhibit K);
(iv) an assignment and assumption of leases and security deposits (in
the form attached hereto as Exhibit L), as well as all security
deposits and interest thereon, if any, referred to in the leases
to the Property which have not been applied to the tenant's
obligations thereunder. Security deposits shall not be applied
to the tenant's obligations under any of the leases unless such
tenant vacates the Property;
<PAGE>
(v) non-foreign affidavit (in the form of Exhibit M attached
hereto);
(vi) original and/or copies (to the extent originals are not
available) of leases affecting the Property for all tenants of
the Property (which shall be delivered at the Property);
(vii) all documents and instruments reasonably required by the Title
Insurer to issue the Title Policy;
(viii) possession of the Property to Purchaser;
(ix) evidence of the termination of the management agreement;
(x) notice to the tenants of the Property of the transfer of title
and assumption by Purchaser of the landlord's obligation under
the leases and the obligation to refund the security deposits
(in the form of Exhibit N); and
(xi) an updated rent roll.
10. DEFAULT BY PURCHASER. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW
IS TO SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND
UNDERTAKINGS UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER
UNDER THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND THE
INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY, EXCEPT
FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER PURSUANT TO PARAGRAPH 7A HEREOF
AND PURCHASER'S OBLIGATIONS TO PAY FOR ANY EXPENSES RESULTING FROM THE ISSUANCE
OF THE TITLE COMMITMENT AND UPDATED SURVEY. THE PARTIES HAVE AGREED THAT
SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE
EXTREMELY DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, BY PLACING THEIR
INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED
UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S
DAMAGES.
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF
SELLER'S DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST
MONEY TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7 AND SELLER'S OBLIGATIONS TO PAY FOR ANY EXPENSES RESULTING FROM THE
ISSUANCE OF THE TITLE COMMITMENT AND PURCHASER'S OBLIGATIONS TO PAY FOR ANY
EXPENSES RESULTING FROM THE UPDATED SURVEY. NOTWITHSTANDING ANYTHING CONTAINED
HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT IS ITS REFUSAL OR FAILURE TO
DELIVER THE DEED AS REQUIRED UNDER THIS AGREEMENT, THEN PURCHASER WILL BE
ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
<PAGE>
12. PRORATIONS.
A. Rents (exclusive of delinquent rents, but including prepaid
rents); refundable security deposits (which will be assigned to and assumed by
Purchaser and credited to Purchaser at Closing); prepaid operating expenses
incurred in the operation of the Property in a commercially reasonable manner;
sewer rents; real property taxes; all costs arising under service contracts,
real estate tax contributions, water and utility charges, fuel and other
additional charges which are reimbursable by the tenants for the period prior
to the Proration Date less any amount previously paid by the Tenants shall be
paid to Seller as and when collected; and other similar items shall be adjusted
ratably as of 11:59 p.m. on the actual date of the closing of this transaction
("Proration Date"), and credited to the balance of the cash due at Closing.
Assessments payable in installments which are due subsequent to the Closing
Date shall be paid by Purchaser. Seller shall obtain a water meter reading
within thirty (30) days before the Closing and the parties agree to prorate the
costs of the remaining obligations for water based on the most recent meter
reading. Seller shall instruct the utility company providing the electricity
and steam to the Property to terminate billing Seller as of the Closing Date
and Seller shall be responsible for said charges incurred prior to the Closing
Date. If the amount of any of the items to be prorated is not then
ascertainable, the adjustments thereof shall be on the basis of the most recent
ascertainable data. All prorations shall be subject to correction due to any
error within thirty (30) days after the date of the Closing of the transaction.
B. All sums paid following the Closing Date by any tenant of the
Property who is indebted under a lease for any period prior to and including
the Closing Date in excess of all sums required for said tenant to be current
shall be deemed a "Post-Closing Receipt" until such time as all such
indebtedness is paid in full. Within ten (10) days following each receipt by
Purchaser of a Post-Closing Receipt, Purchaser shall pay such Post-Closing
Receipt to Seller. Purchaser shall use commercially reasonable efforts to
collect all amounts which, upon collection, would constitute Post-Closing
Receipts hereunder; provided that nothing herein shall require Purchaser to
institute any judicial action to collect Post-Closing Receipts. Within 120
days after the Closing Date, Purchaser shall deliver to Seller a reconciliation
statement of Post-Closing Receipts through the first 90 days after the Closing
Date. Upon the delivery of the Post-Closing Receipts reconciliation, Purchaser
shall deliver to Seller any Post-Closing Receipts owing to Seller and not
previously delivered to Seller in accordance with the terms hereof. Seller
retains the right to conduct an audit, at reasonable times and upon reasonable
notice, of Purchaser's books and records to verify the accuracy of the
Post-Closing Receipts reconciliation statement and upon the verification of
additional funds owing to Seller, Purchaser shall pay to Seller said additional
Post-Closing Receipts and the cost of performing Seller's audit. Paragraph 12B
of this Agreement shall survive the Closing and the delivery and recording of
the deed.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall
be recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10.
<PAGE>
14. ASSIGNMENT. The Purchaser shall not have the right to assign its
interest in this Agreement without the prior written consent of the Seller.
Any assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement shall be an act of default hereunder by Purchaser
and subject to the provisions of Paragraph 10. Notwithstanding the foregoing,
Purchaser may assign its interest in this Agreement without the consent of, but
with prior notice to, Seller to any entity affiliated with Purchaser, or the
principals of Purchaser, provided that Purchaser remains liable for and the
assignee assumes the obligations of Purchaser hereunder. If any assignee of
Purchaser under this Agreement petitions or applies for relief in bankruptcy or
assignee is adjudicated as a bankrupt or insolvent, or assignee files any
petition, application for relief or answer-seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future federal,
state or other statute, law, code or regulation relating to bankruptcy,
insolvency, or other relief for debtors (collectively, a "Bankruptcy Filing")
on or before the Closing Date, said Bankruptcy Filing shall be a default under
this Agreement and Purchaser shall indemnify Seller for all costs, attorney's
fees and expenses of Seller resulting from Seller's efforts to obtain the
Earnest Money as liquidated damages and to clear title to the Property from any
encumbrance resulting from the Bankruptcy Filing.
15. BROKER. The parties hereto represent and warrant that they have
dealt with no broker in connection with this transaction other than Edward S.
Gordon Company, Inc. (to be paid by Seller). Seller's commission to Edward S.
Gordon Company, Inc. shall only be payable out of the proceeds of the sale of
the Property in the event the transaction set forth herein closes. Purchaser
shall indemnify, defend and hold Seller and Affiliates of Seller harmless from
any proven claim (including without limitation, reasonable attorney's fees,
court costs and costs of appeal) from anyone claiming by or through Purchaser
any fee, commission or compensation on account of this Agreement, its
negotiation or the sale hereby contemplated other than to Edward S. Gordon
Company, Inc. Purchaser shall undertake its obligations set forth in the
preceding sentence using attorneys selected by Purchaser and reasonably
approved by Seller. The provisions of this Paragraph 15 will survive the
Closing and delivery of the Deed.
16. SELLER'S REPRESENTATIONS AND WARRANTIES.
A. Any reference herein to Seller's knowledge, representation,
warranty or notice of any matter or thing shall only mean such knowledge or
notice that has actually been received by Seller or any employee of Seller.
Any knowledge or notice given, had or received by any of Seller's agents shall
not be imputed to Seller, the general partner or limited partners of Seller,
the subpartners of the general partner or limited partners of Seller.
B. Subject to the limitations set forth in Paragraph A of this
Paragraph 16, Seller hereby makes the following representations and warranties,
which representations and warranties are made to Seller's knowledge: (i)
Seller has no knowledge of any pending or threatened litigation, claim, cause
of action or administrative proceeding concerning the Property except as set
forth in the Title Commitment; (ii) Seller has the power to execute this
Agreement and consummate the transactions contemplated herein; (iii) the rent
roll attached hereto as Exhibit E, and updated as of the Closing Date, is
<PAGE>
accurate as of the date set forth therein; (iv) there are no other leases
affecting the Property other than as set forth in the rent roll attached hereto
as Exhibit E and updated as of the Closing Date and subject to Paragraph 17
herein; (v) no lease contains any option to purchase the Property or any right
of first offer or right of first refusal to purchase the Property; (vi) Seller
has not entered into any contract with any labor organization for the provision
of services at the Property provided certain of Seller's contractors and agents
may have union employees and may have entered into contracts with labor
organizations; (vii) the schedule of service contracts attached hereto as
Exhibit G and updated as of the Closing Date are accurate and there are no
other service contracts or union contracts entered into by Seller affecting the
Property; (viii) Seller shall retain and shall not distribute to the partners
in Seller $500,000.00 from the proceeds of the sale of the Property for a
period of one hundred fifty (150) days from the date of Closing; (ix) the
Property is not subject to a contract with Consolidated Edison for the
providing of steam to the Property at rates which exceed those customarily
charged to office buildings of this nature in New York, New York and (x) no
commissions are owed to any leasing brokers as a result of any existing leases
affecting the Property (excluding any commissions arising under Paragraph 17
herein).
C. The Balcor Company ("Balcor") represents and warrants that there
are no other leases affecting the Property other than those set forth in the
Rent Roll attached hereto and updated as of the Closing Date and subject to
Paragraph 17 herein. Balcor agrees to execute this Agreement for the purposes
of evidencing its obligation under this Paragraph 16C.
D. Notwithstanding anything contained herein to the contrary, (i)
any claim by Purchaser against Seller for a breach of a representation or
warranty hereunder or for a claim arising out of a "Tenant Certificate" (as
hereinafter defined) executed by Seller must be made, if at all, within one
hundred fifty (150) days after the Closing Date, and (ii) any claim by
Purchaser against Balcor for a breach of a representation or warranty by Balcor
hereunder must be made, if at all, within one (1) year after the Closing Date.
17. FUTURE LEASES.
A. Seller shall not enter into any other new lease of space at the
Property, modify, terminate or renew (other than pursuant to the exercise by
tenant of an option to extend contained in such tenant's lease) any existing
leases of the Property unless Purchaser shall have granted its approval of such
lease, modification, termination or renewal.
B. Purchaser shall be responsible for any and all lease commissions
and obligations for tenant improvements pursuant to any new leases and/or
renewals, extensions or options to expand entered into or effective between the
date hereof and the Closing Date which have been entered into pursuant to
subparagraph 17.A.
C. In the event Purchaser's consent is required pursuant to the
terms of this Paragraph 17, such consent shall not be unreasonably withheld or
delayed.
<PAGE>
18. ESTOPPEL CERTIFICATES. Seller agrees to deliver a certificate
addressed to Purchaser and, provided Purchaser provides to Seller the name of
Purchaser's lender prior to expiration of the Due Diligence Period, Purchaser's
lender in the form of Exhibit O attached hereto (the "Tenant Certificate") or
the form required by said tenant's lease, and containing the applicable
information set forth in the Rent Roll attached hereto as Exhibit E, to the
tenants set forth on the Rent Roll attached hereto as Exhibit E. Purchaser's
obligation to close the transaction contemplated herein shall be contingent
upon Seller delivering within three days prior to the Closing Date a Tenant
Certificate addressed to Purchaser and, subject to the foregoing, Purchaser's
lender, from tenants occupying in excess of 2,000 square feet. In the event
Tenant Certificates delivered to Purchaser reveal tenant offsets or delinquent
obligations (excluding physical defects of the Property) of Seller as landlord
under said leases aggregating an amount not to exceed $50,000.00, Seller shall
be deemed to have satisfied the contingency set forth in this Paragraph 18 and
Seller shall have no liability for said adverse conditions raised in the Tenant
Certificate provided Seller credits Purchaser with such delinquent obligations
at Closing. In the event Seller has not satisfied the contingency set forth in
this Paragraph 18 on or before three days prior to the Closing Date, Purchaser
shall have the right to terminate this Agreement by delivering written notice
to Seller at any time prior to the Closing Date. In the event Purchaser does
not so terminate this Agreement in accordance with the terms hereof,
Purchaser's contingency set forth in this Paragraph shall be deemed satisfied
provided Seller delivers to Purchaser at Closing a Tenant Certificate executed
by Seller for any undelivered Tenant Certificate. Any Tenant Certificate
executed by Seller shall be subject to limitations contained in Paragraphs 16A,
16D and 20 and Seller's liability under said Certificate shall be extinguished
upon the presentation of a Tenant Certificate by said Tenant showing no matters
other than as disclosed under the Tenant Certificate executed by Seller. In
the event Purchaser exercises its right to terminate in accordance with the
terms of this Agreement, this Agreement shall be null and void, and the Earnest
Money, together with interest thereon, shall be returned to Purchaser, and
neither party shall have any liability to the other hereunder except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7A, and Seller's obligations to pay expenses
resulting from the issuance of the Title Commitment and Purchaser's obligations
to pay expenses resulting from the Updated Survey.
19. INTENTIONALLY OMITTED.
20. LIMITATION OF LIABILITY. None of Seller's beneficiaries,
shareholders, partners, officers, directors, agents or employees, heirs,
successors or assigns shall have any personal liability of any kind or nature
for or by reason of any matter or thing whatsoever under, in connection with,
arising out of or in any way related to this Agreement and the transactions
contemplated herein, and Purchaser hereby waives for itself and anyone who may
claim by, through or under Purchaser any and all rights to sue or recover on
account of any such alleged personal liability. Seller shall likewise have no
personal liability hereunder except if the transaction contemplated by this
Agreement closes, Seller may be personally liable for any such claim arising
out of a breach of (i) a representation or warranty contained herein or (ii) a
Tenant Certificate(s) executed by Seller up to an aggregate amount not to
<PAGE>
exceed $500,000, and Balcor may be personally liable for any such claim arising
out of a breach of a representation or warranty contained in subparagraph 16.C.
up to an aggregate amount not to exceed $500,000. Notwithstanding anything
contained herein to the contrary, Balcor's and Seller's liability hereunder
when aggregated together shall not exceed $750,000.00.
21. TIME OF ESSENCE. Time is of the essence of this Agreement.
22. NOTICES. Any notice or demand which either party hereto is required
or may desire to give or deliver to or make upon the other party shall be in
writing and may be (i) personally delivered, (ii) given or made by overnight
courier such as Federal Express, (iii) given or made by United States
registered or certified mail addressed, or (iv) given or made by telecopy, as
follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Alan Lieberman
(847) 317-4360
(847) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Olmstead Properties, Inc.
575 Eighth Avenue, Suite 2400
New York, New York 10018
Attention: Samuel Rosenblatt
(212) 564-6662
(212) 564-6667 (FAX)
with a copy to: Goldberg Weprin & Ustin
1501 Broadway
New York, New York 10036
Attention: Andrew W. Albstein, Esq.
(212) 221-5700
(212) 730-4518 (FAX)
<PAGE>
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, on the 4th business day after the same is deposited in the United
States Mail as registered or certified mail, addressed as above provided, with
postage thereon fully prepaid, or, if given by telecopy, on the date of
transmission if transmitted on a business day before 5:00 p.m. (Chicago time)
(and, if not so transmitted, on the first business day thereafter). Any such
notice, demand or document not given, delivered or made by registered or
certified mail or by overnight courier as aforesaid shall be deemed to be
given, delivered or made upon receipt of the same by the party to whom the same
is to be given, delivered or made. Copies of all notices shall be served upon
the Escrow Agent.
22. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute
three (3) copies of this Agreement and four (4) copies of the Escrow Agreement
and forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward
the following to the Escrow Agent:
(1) Earnest Money;
(2) One (1) fully executed copy of this Agreement; and
(3) Three (3) copies of the Escrow Agreement signed by the parties
with a direction to execute two (2) copies of the Escrow Agreement and deliver
a fully executed copy to each of the Purchaser and the Seller.
23. GOVERNING LAW. The provisions of this Agreement shall be governed by
the laws of the State of New York.
24. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
25. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
26. CAPTIONS. Paragraph titles or captions contained herein are inserted
as a matter of convenience and for reference, and in no way define, limit,
extend or describe the scope of this Agreement or any provision hereof.
27. DUE DILIGENCE. Purchaser shall have fourteen (14) days from the date
this Agreement has been executed by Seller and Purchaser and delivered to the
other to conduct due diligence investigations and activities in respect of the
Property as Purchaser deems necessary (said 14 day period shall be referred to
herein as the "Due Diligence Period"). In this connection, Purchaser and its
representatives shall have the right to enter upon the Property from time to
time for the purposes of examining, investigating and making physical
inspection(s) thereof. In addition, Purchaser and its representatives shall
<PAGE>
have access during the Due Diligence Period, to all documents and records
relating to the Property and the operation thereof, including, without
limitation, financial statements and related financial records. Seller agrees
to cooperate in good faith with Purchaser in respect of such due diligence
activities and investigations and shall make available to Purchaser and its
representatives at the Property or the offices of Edward S. Gordon Company
during the normal business hours, all such documents and records with respect
to the Property. Notwithstanding anything to the contrary contained in this
Agreement, Purchaser shall have the right to terminate this Agreement if, in
its sole and exclusive judgment, it is dissatisfied with the results of its due
diligence activities (including, without limitation, any matters disclosed by
the Existing Survey), by written notice given to Seller on or before the
expiration of the Due Diligence Period. In the event Purchaser elects to
terminate this Agreement in the manner provided herein, the Earnest Money, plus
any interest accrued thereon, shall be returned to Purchaser and this Agreement
shall be null and void and the parties hereto shall have no further rights or
liabilities, each to the other, under this Agreement. Purchaser shall defend,
indemnify and hold Seller and any affiliate, parent of Seller and all
shareholders, employees, officers and directors of Seller or Seller's affiliate
or parent (hereinafter collectively referred to as "Affiliate of Seller")
harmless from any and all liability, cost and expense (including, without
limitation, reasonable attorneys' fees, court costs and cost of appeal)
suffered or incurred by Seller or Affiliates of Seller for injury to person or
property or any mechanic's liens caused by Purchaser's investigations and
inspections of the Property. Prior to commencing any physical tests, physical
studies and physical investigations, Purchaser shall furnish to Seller a
certificate of insurance evidencing comprehensive general public liability
insurance insuring the person, firm or entity performing such tasks, studies
and investigations and listing Seller and Purchaser as additional insureds
thereunder. If Purchaser terminates this Agreement by written notice to Seller
prior to the expiration of the Due Diligence Period, Purchaser shall promptly
deliver or cause to be delivered to Seller, copies of all documents,
instruments, agreements and other materials provided by or on behalf of Seller
to Purchaser.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the day of July, 1996.
PURCHASER:
OLMSTEAD PROPERTIES, INC., a New York corporation
By: /s/ Samuel Rosenblatt
--------------------------------
Name: Samuel Rosenblatt
--------------------------------
Its: President
--------------------------------
SELLER:
45 W. 45TH STREET LIMITED PARTNERSHIP,
an Illinois limited partnership
By: 45 W. 45TH Street Partners, Inc., an
Illinois corporation, its general partner
By: /s/ Alan G. Lieberman
--------------------------------
Name: Alan G. Lieberman
--------------------------------
Its: Senior Vice President
-------------------------------
BALCOR:
THE BALCOR COMPANY
By: /s/ Alan G. Lieberman
---------------------------------
Name: Alan G. Lieberman
---------------------------------
Its: Senior Vice President
---------------------------------
<PAGE>
of Edward S. Gordon Company, Inc. ("Seller's Broker")
executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated , 199 between Seller and Seller's Broker (the "Listing
Agreement"). Seller's Broker also acknowledges that payment of the aforesaid
fee or commission is conditioned upon the Closing and the receipt of the
Purchase Price by the Seller. Seller's Broker agrees to deliver a receipt to
the Seller at the Closing for the fee or commission due Seller's Broker and a
release stating that no other fees or commissions are due to it from Seller or
Purchaser.
Edward S. Gordon Company, Inc.
By:
-------------------------------------
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Rent Roll
F - Tax and Insurance Bills and Utility Account Numbers
G - Service Contracts
H - 1995 Operating Statements
I - Deed
J - Bill of Sale
K - Assignment and Assumption of Intangible Property
L - Assignment and Assumption of Leases and Security Deposits
M - Non-Foreign Affidavit
N - Notice to Tenants
O - Tenant Certificate
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3607
<SECURITIES> 0
<RECEIVABLES> 90
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3789
<PP&E> 31207
<DEPRECIATION> 9576
<TOTAL-ASSETS> 26592
<CURRENT-LIABILITIES> 1329
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25263
<TOTAL-LIABILITY-AND-EQUITY> 26592
<SALES> 0
<TOTAL-REVENUES> 2656
<CGS> 0
<TOTAL-COSTS> 1306
<OTHER-EXPENSES> 643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 707
<INCOME-TAX> 0
<INCOME-CONTINUING> 707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 707
<EPS-PRIMARY> 3.23
<EPS-DILUTED> 3.23
</TABLE>
