<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-16861
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
- -------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 94-3028298
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1341 West Robinhood, Suite B-9, Stockton, CA 95207
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (209) 478-0140
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
------------------- ----------------------
Securities registered pursuant to Section 12(g) of the Act:
Depository Units of Limited Partnership Interests
-------------------------------------------------
(Title of class)
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. Yes _CK_ No__
Indicate by check CK if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ CK ]
<PAGE>
TABLE OF CONTENTS
Part I
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Part II
Item 5. Market for the Partnership's Depository Units of Limited
Partnership Interest and Related Security Holder Matters 8
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 13
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 30
Part III
Item 10. Directors and Executive Officers of the Registrant 31
Item 11. Executive Compensation 34
Item 12. Security Ownership of Certain Beneficial Owners and
Management 35
Item 13. Certain Relationships and Related Transactions 35
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 38
2
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PART I
Item 1. Business
The Registrant, Prudential-Bache/A.G. Spanos Genesis Income Partners L.P.,
I (the "Partnership"), is a limited partnership formed on January 14, 1987
under Delaware law. The business of the Partnership is managed and
controlled by its general partners (the "General Partners"), A.G. Spanos
Residential Partners-86, a California Limited Partnership (the "Spanos
General Partner") and Prudential-Bache Properties, Inc. (the "Bache General
Partner"). The primary purpose of the Partnership is to acquire from
affiliates of the Spanos General Partner, invest in, hold, manage, sell,
dispose of, and otherwise act with respect to properties on which
multi-family residential developments have been constructed. The
Partnership originally invested in eight apartment properties ("Apartment
Projects") and five land parcels, upon which apartment properties had been
constructed, which were leased back to the seller ("Land/Leases"). The
Apartment Projects and Land/Leases are collectively referred to as the
"Properties." Through 1998, the Partnership had sold one Apartment Project
and three Land/Leases. The remaining Properties are located in six
metropolitan areas: Atlanta (two Properties), Louisville (one Property),
Dallas/Fort Worth (two Properties), Kansas City (two Properties),
Albuquerque (one Property) and San Diego (one Property).
In July 1998, a majority in interest of the limited partners approved a
proposal to sell the remaining Properties at a public auction and then
distribute the sale proceeds in liquidation of the Partnership. The
proposed auction and liquidation are part of an overall settlement of
certain litigation which had been pending in the United States District
Court for the Southern District of New York under the caption In re
Prudential Securities Incorporated Limited Partnerships Litigation (MDL
Docket 1005). In July 1998, the settlement, including the auction and
liquidation, was approved by the court. In March 1999, the Partnership
entered into a contract to sell the Properties. However, no assurance can
be given that the sale will take place as provided in the contract. See
note G to the financial statements at Item 8.
Occupancy information is set forth in Item 2. The Properties are subject
to competition from other apartment properties located in close proximity,
including properties owned by affiliates of the Spanos General Partner. The
Properties compete for a variety of tenant groups, including young
professionals, retail, service and trade employees, students and retirees.
Competition for tenants is principally on the basis of location, physical
condition, amenities, and rental rates. The location and condition of the
Properties is considered to be good to above-average. The Properties
3
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feature amenities fairly typical for properties built in the 1980's,
including swimming pools, tennis courts, fitness facilities, microwave
ovens and guarded entrances, and are generally able to compete adequately
with similar projects in their respective markets.
Many areas, including Albuquerque, Kansas City, Dallas/Fort Worth and
Atlanta have seen construction of new apartment properties increase since
1992. This has led to the emergence of market segmentation between 1980's
vintage properties (such as the Partnership's) and the newer generation of
apartment properties completed recently. The newer properties have a
competitive advantage not only because they are new, but because many are
designed with larger unit sizes, have floor plans and finishes similar to
those found in single family homes, and feature more extensive amenities
than do the properties built in the 1980's. To date, these newer
properties generally command higher rents and have competed with each other
for tenants able to pay premium rents, leaving the 1980's vintage
properties to compete with each other for the next tier of apartment
renters. There is a risk, however, that if overbuilding in the upper
segment of the market results in lower rents, the new properties with more
extensive amenities could be highly competitive with the 1980's vintage
apartment product. To date, only Del Rio (a Land/Lease property located in
Albuquerque) has been adversely affected by the level of new competition.
Revenue there declined 7.4% from 1995 to 1996 and 7.5% from 1996 to 1997,
and was flat from 1997 to 1998.
Within the greater housing market, the apartment sector competes with
single-family homes. Thus, apartment demand can be affected by the
affordability of owner-occupied housing, which can increase and decrease
with changes in mortgage interest rates.
The Partnership does not segregate revenues or assets by geographic
regions. Two Apartment Projects accounted for 15% or more of annual
Apartment Project rental revenue in each of the prior three years: Chelsea
Park (17% to 18%) and Cypress Pointe (19%). No single tenant accounted for
10% or more of the revenue for any of the three years ended December 31,
1998. The Partnership is engaged in only one reportable segment, which is
real estate investment; therefore, presentation of industry segment
information is not applicable. The General Partners believe the Properties
are adequately insured. For more information regarding the Properties, see
Item 2, Properties. For more information regarding the Partnership's
operations, see Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Partnership has no employees. The officers and employees of the
General Partners and their affiliates perform services for the Partnership
pursuant to the Partnership Agreement.
4
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Item 2. Properties
<TABLE>
<CAPTION>
The Partnership owned the eight Properties described below at March 1, 1999:
<S> <C> <C> <C>
Purchase
Location Date Mortgage Holder
Apartment Projects (1):
Le Parc Apartments: Marietta, Georgia 06/03/87 Great Western Bank (3)
a 188-unit, midrise apartment complex (suburb of Atlanta)
located on approximately 8 acres.
Casa de Fuentes Apartments: Overland Park, Kansas 07/02/87 Wells Fargo Bank (4)
a 288-unit, garden apartment complex (suburb of Kansas (successor to Great
located on approximately 30 acres. City) American First Savings)
MacArthur Park Apartments: Las Colinas, Texas 10/01/87 Mellon Mortgage
a 276-unit, garden apartment complex (suburb of Irving/ (successor to American
located on approximately 13 acres. Dallas) Savings Bank)
Cypress Pointe Apartments: Louisville, Kentucky 10/01/87 GE Capital
a 444-unit, garden apartment complex
located on approximately 33 acres.
Comanche Place Apartments: Overland Park, Kansas 12/04/87 Wells Fargo Bank (4)
a 306-unit, garden apartment complex (suburb of Kansas (successor to Great
located on approximately 29 acres. City) American First Savings)
Chelsea Park Apartments: Norcross, Georgia 03/25/88 Great Western Bank (3)
a 376-unit, garden apartment complex (suburb of Atlanta)
located on approximately 31 acres.
Mission Trails Apartments: San Diego, California 08/12/88 Union Bank (4)
a 208-unit, garden apartment complex
located on approximately 5 acres.
Land Leases (2):
Cameron Creek Apartments: Fort Worth, Texas 10/01/87 Great Western Bank (3)
a land parcel of approximately 20 acres
upon which a 446-unit, garden
apartment complex has been constructed.
Del Rio Apartments: Albuquerque, New 12/21/87 Gibraltar Savings Bank
a land parcel of approximately 13 acres Mexico
upon which a 248-unit, garden
apartment complex has been constructed.
</TABLE>
5
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Item 2. Properties (continued)
<TABLE>
<CAPTION>
Average Annual Occupancy Average Annual Revenue Per Apt. Unit (5) 1998 Realty Tax Data
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994 Amount Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apartment Projects:
Le Parc 95.5% 93.8% 93.1% 96.1% 95.9% $8,832 $8,728 $8,567 $8,381 $8,061 $106,543 1.2680%
Casa de Fuentes 96.6% 94.5% 94.8% 92.5% 91.8% $7,211 $6,762 $6,683 $6,389 $6,295 $161,461 1.3768%
MacArthur Park 97.1% 96.0% 95.5% 95.8% 95.8% $8,387 $7,850 $7,468 $7,152 $6,867 $296,886 2.4637%
Cypress Pointe 96.4% 95.4% 94.7% 92.0% 94.9% $6,846 $6,566 $6,520 $5,944 $5,954 $152,573 0.9945%
Comanche Place 93.7% 94.8% 95.0% 94.5% 94.8% $7,160 $6,947 $6,760 $6,474 $6,217 $131,173 1.0800%
Chelsea Park 95.3% 91.2% 93.9% 94.8% 95.4% $7,525 $7,214 $7,391 $7,201 $6,457 $201,877 1.3780%
Mission Trails 96.9% 96.9% 95.6% 92.3% 92.5% $10,865 $10,266 $9,467 $9,044 $9,145 $173,058 1.1143%
Land Leases:
Cameron Creek 95.2% 94.4% 93.2% 93.8% 94.4% (6) (6) (6) (6) (6) (8) (8)
Del Rio 90.5% 90.7% 92.0% 93.2% 94.6% (7) (7) (7) (7) (7) (8) (8)
<CAPTION>
(1) The Partnership has a 100% fee simple ownership interest in each Property subject
to a first mortgage lien in favor of the indicated holder. Each mortgage is secured only by the Property to
which it relates and is without recourse to either of the General Partners or the Partnership. (See Note C to
the Financial Statements.)
(2) The Partnership has a 100% fee simple interest in the land with respect to the
Land/Leases. The lessees, who are affiliates of the Spanos General Partner, own the apartment complexes constructed
thereon which are encumbered by first mortgage liens in favor of the indicated holder. Each lienholder has
recourse only to the apartment complex owned by the lessee and the land owned by the Partnership to which the lien
relates, and each such lien is without recourse to either of the General Partners or the Partnership. (See Note E to the
Financial Statements.)
(3) Loan may be prepaid upon payment of a 2% prepayment charge. The lender may waive
the prepayment charge for principal prepayments during the calendar year which do not exceed 20% of the
original loan balance and for prepayments made within 90 days of a notice of installment adjustment. The lender
will also waive the prepayment charge so long as A.G. Spanos Construction, Inc. or any entity owned and
controlled by A.G. Spanos Construction or by Alex G. Spanos remains liable on the loan.
(4) Loan may be prepaid without charge at any time unless the Partnership has elected
for interest to be computed based on a LIBOR fixing, in which case prepayment must be accompanied by a yield
maintenance prepayment charge.
(5) Average annual revenue per apartment unit is determined by dividing total
operating revenues for the Property by the number of apartment units.
(6) Ground lease requires payments of $350,000 per year through October 1992, and
$420,000 per year thereafter.
(7) Ground lease requires payments of $200,000 per year through December 1992, and
$240,000 per year thereafter.
(8) The ground leases are triple-net, with the tenant responsible for payment of all
property taxes. Property taxes and tax rate for 1998 for Cameron Creek were $445,484 and 3.4%, respectively, and
for Del Rio, $102,980 and 1.2334%, respectively.
</TABLE>
6
<PAGE>
Item 3. Legal Proceedings
This information is incorporated by reference to Note F to the financial
statements in Item 8, Financial Statements and Supplementary Data.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Unitholders during the fourth
quarter of the fiscal year covered by this report through the solicitation
of proxies or otherwise.
7
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PART II
Item 5. Market for Partnership's Depository Units of Limited Partnership
Interest and Related Security Holder Matters
The Partnership had four limited partners as of March 4, 1999: Residential
Portfolio Depository Corp. (the "Assignor Limited Partner"), a wholly owned
subsidiary of AGS Financial Corporation, and three affiliates of the Spanos
General Partner which are holders of Special Limited Partnership Interests
("Special Interests"). The Assignor Limited Partner has transferred and
assigned to the Unitholders all of the Assignor Limited Partner's rights
and interest in and to the assigned Limited Partnership Interests, except
for record ownership and the right to vote directly on matters submitted to
the Limited Partners and Unitholders for a vote. There were 3,129
Unitholders as of March 4, 1999.
A significant secondary market for the Units has not developed, and it is
not expected that one will develop in the future. There are also certain
restrictions set forth in the Partnership Agreement limiting the ability of
a Unitholder to transfer Units. Consequently, Unitholders may not be able
to liquidate their investments in the event of an emergency or any other
reason.
Distributions of cash from operations were paid to Unitholders
approximately 45 days after the end of the specified quarter.
Distributions per Unit in 1997 and 1998 were as follows:
Quarter Ended Distribution
March 31, 1997 $6.25
June 30, 1997 $6.25
September 30, 1997 $6.25
December 31, 1997 $6.25
March 31, 1998 $6.25
June 30, 1998 $6.25
September 30, 1998 $6.25
December 31, 1998 $6.25
Approximately $668,000 and $1,334,000 of the distributions paid to
Unitholders for 1998 and 1997, respectively, represent a return of capital
on a generally accepted accounting principle ("GAAP") basis. The return of
capital on a GAAP basis is calculated as Unitholder distributions less net
income, if any, allocated to Unitholders.
8
<PAGE>
There are no material legal restrictions on the Partnership's present or
future ability to make distributions in accordance with the provisions of
the Partnership Agreement. As a result of the Properties being under
contract for sale, future distributions will be dependent upon the timing
of the closing of the sale and the ultimate liquidation of the Partnership.
9
<PAGE>
Item 6. Selected Financial Data (a)
<TABLE>
<CAPTION>
For the year ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Total revenues (excluding gain $17,261,060 $16,507,383 $16,129,902 $14,988,762 $15,534,333
on disposition of property)
Gain (loss) on disposition of
property -- -- -- -- $3,874,238
Interest expense $4,782,635 $4,867,527 $4,960,498 $4,767,362 $4,999,648
Net income (loss) $967,352 $288,649 $247,518 ($799,735) $3,282,153
Net income (loss) per Unit $14.66 $4.37 $3.75 ($12.12) $49.74
Net income (loss) per Special
Interest -- -- -- -- --
Cash distributions per
Unit (b) $25.00 $25.00 $25.00 $25.00 $111.78
Cash distributions per
Special Interest -- -- -- -- $86.78
Total assets $72,243,083 $73,894,386 $76,298,063 $78,463,093 $81,851,130
Mortgage loans payable $56,917,509 $57,927,235 $58,897,267 $59,764,780 $60,877,063
<CAPTION>
(a) The above selected financial data should be read in conjunction with the financial
statements and the related notes (see Item 8).
(b) The cash distributions did not result in taxable income to the Unitholders. Each
Unitholder's taxable income or loss from the Partnership is equal to his allocable share of the
taxable income or loss of the Partnership, without regard to the cash generated or
distributed by the Partnership.
</TABLE>
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Capital Resources and Liquidity
The Partnership had cash of $6,386,000 at December 31, 1998. There are no
proposed programs for renovation, improvement or development of the
Properties other than maintenance and repairs (including major repairs) in
the ordinary course which will be paid from operations, and the
Partnership's liquidity position is considered satisfactory.
In July 1998, a majority in interest of the limited partners approved a
proposal to sell the remaining Properties at a public auction and then
distribute the sale proceeds in liquidation of the Partnership. The
proposed auction and liquidation are part of an overall settlement of
certain litigation which had been pending in the United States District
Court for the Southern District of New York under the caption In re
Prudential Securities Incorporated Limited Partnerships Litigation (MDL
Docket 1005). In July 1998, the settlement, including the auction and
liquidation, was approved by the court. In March 1999, the Partnership
entered into a contract to sell the Properties. Based on the contract
sales price, the Partnership is expected to make liquidating distributions
of approximately $600 per Unit in 1999, consisting of initial distributions
of the majority of the proceeds as soon as practicable after the closings
and the remainder by year end. However, no assurance can be given that the
sale will take place as provided in the contract.
The Partnership's operating activities provided cash of $3,722,000 in 1998,
of which $1,010,000 was applied to scheduled principal amortization on the
Partnership's mortgage debt, $1,649,000 was paid in cash distributions, and
$1,063,000 was retained. Cash provided by operating activities increased
$777,000 in 1998 compared to 1997, principally because of improved
operations of the Apartment Projects as described below. Reported cash
provided by operating activities declined $419,000 in 1997 compared to
1996; however, the decrease related primarily to changes in timing
differences between the two years. Cash flows from 1996 financing
activities includes the payment of the $8,943,000 balance of the matured
Mission Trails mortgage with the proceeds from a new $9,000,000 mortgage
from another lender.
The Partnership's long term debt, which consists of seven real estate
mortgages with respect to the remaining Apartment Projects, was $56,918,000
at December 31, 1998. This debt requires monthly installments of principal
and interest of $484,000. The Apartment Projects are currently generating
aggregate revenue to cover operating expenses and monthly debt service.
Five of the mortgage loans require balloon payments: Casa de Fuentes,
Comanche Place and Cypress Pointe in 1999; Mission Trails in 2000; and
MacArthur Park in 2001. The General Partners anticipate that the balloon
payments will be satisfied from the proceeds of the pending sale. If not,
the Partnership would be required to refinance them when the balloon
payments become due subject to then existing conditions in the real estate
and mortgage financing markets or to sell the properties under terms which
11
<PAGE>
may not be the most favorable to the Partnership. If the Partnership were
unable to complete sales or refinancings, then the lenders could institute
foreclosure proceedings against the Properties.
Results of Operations
1998 Compared to 1997. Rental revenue was $16,372,000 in 1998, an increase
of 4.6% compared to 1997. Revenue increased at all seven Apartment
Projects, principally as a result of increased effective rental rates.
Overall, the average occupancy of the Apartment Projects was 95.9% in 1998
compared to 94.5% in 1997.
Property operating expenses were $5,936,000 in 1998 compared to $6,097,000
for 1997. Major repairs (i.e., exterior painting, asphalt work and other
expensive repairs that do not recur on an annual basis) declined to
$442,000 in 1998 compared to $718,000 for 1997. Furnished unit expense was
down $68,000 compared to 1997, reflecting fewer furnished unit rentals in
1998. Operating expenses excluding major repairs and furnished unit
expense increased $182,000 or approximately 3.6% over 1996. Expense
categories showing the greatest increases were insurance, up $52,000 or
37.1%; maintenance, up $50,000 or 3%, reflecting the generally higher costs
of operating an aging property portfolio; and on-site salaries, up $46,000
or 3.2%, reflecting higher personnel costs. Property management fees,
which are 3% of property revenue, increased with the increase in revenue.
Interest expense declined $85,000, primarily because of lower outstanding
principal on the mortgage loans. Interest income increased because average
cash balances were higher in 1998.
1997 Compared to 1996. Rental revenue was $15,658,000 in 1997, an increase
of 2.3% compared to 1996. Revenue increased at five Apartment Projects (Le
Parc, Casa de Fuentes, MacArthur Park, Comanche Place and Mission Trails)
principally as a result of increased effective rental rates. Revenue was
down 2.4% at Chelsea Park, principally because of lower occupancy. Revenue
at Cypress Pointe was generally unchanged from 1996. Overall, the average
occupancy of the Apartment Projects was 94.5% in 1997 compared to 94.7% in
1996.
Property operating expenses were $6,097,000 in 1997 compared to $5,707,000
for 1996. Major repairs (i.e., exterior painting, asphalt work and other
expensive repairs that do not recur on an annual basis) increased to
$718,000 in 1997 compared to $596,000 for 1996. Furnished unit expense was
down $38,000 compared to 1996, reflecting fewer furnished unit rentals in
1997. Operating expenses excluding major repairs and furnished unit
expense increased $305,000 or approximately 6.3% over 1996. Expense
categories showing the greatest increases were maintenance, up $131,000 or
8.6%, reflecting the generally higher costs of operating an aging property
portfolio; on-site salaries, up $114,000 or 8.5%, reflecting higher
personnel costs; and utilities, up $82,000 or 7.4%. Property management
fees, which are 3% of property revenue, increased with the increase in
revenue. Interest expense declined $93,000, primarily because of lower
outstanding principal on the mortgage loans. Interest income increased
because average cash balances and money market interest rates were higher
in 1997.
12
<PAGE>
Year 2000.
Given the pending property sale and liquidation, the General Partners have
undertaken only a limited review of how the Partnership's operations may be
affected by the Year 2000 problem. Assuming the liquidation begins in
April or May 1999 as planned, the Partnership is not expected to incur any
significant year 2000 compliance costs. If the sale does not occur, the
Partnership would be faced with the possibility of continuing to operate
after year end, and the General Partners would have to complete a more
thorough year 2000 review.
The currently expected worst case scenarios involve malfunctions in
computer systems and/or in mechanical operations, such as HVAC systems,
elevators and electronic entry systems. The Partnership has converted the
on-site resident management software at some of the Properties to a year
2000 compliant version, and could readily convert the others if the need
arises. The Spanos General Partner believes that problems with mechanical
systems could be temporarily corrected manually, and repaired permanently
in a reasonable period of time.
Should the sale not occur, the General Partners would also have to develop
contingency plans to deal with possible year 2000 disruptions. Such plans
would likely include preparing hard copies of all significant reports at
the end of 1999; developing manual procedures for any period of disruption
of services or communication; and inventorying larger than usual supplies
in case replacements are required as a result of any year 2000 casualty.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk disclosures are not being presented due to immateriality.
13
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Item 8. Financial Statements and Supplementary Data
Page
Independent Auditors' Report 15
Balance sheets at December 31, 1998 and 1997 16
Statements of operations for the years ended
December 31, 1998, 1997 and 1996 17
Statements of changes in partners' equity (deficit) for the
years ended December 31, 1998, 1997 and 1996 18
Statements of cash flows for the years ended
December 31, 1998, 1997 and 1996 19
Notes to financial statements 20-29
Schedule to financial statements 44
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
General and Limited Partners
Prudential-Bache/A.G. Spanos
Genesis Income Partners, L.P., I:
We have audited the accompanying balance sheets of Prudential-Bache/A.G.
Spanos Genesis Income Partners L.P., I (a limited partnership) (the
"Partnership") as of December 31, 1998 and 1997, and the related statements
of operations, changes in partners' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 1998. Our audits
also included the financial statement schedule of the Partnership listed at
Item 14(a)(2). These financial statements and financial statement schedule
are the responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Prudential-Bache/A.G. Spanos Genesis
Income Partners L.P., I as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in Note G to the financial statements, on March 11, 1999, the
Partnership entered into an agreement to sell all the Properties. No
assurance can be given that the sale will take place as provided in the
agreement.
/s/ Deloitte & Touche LLP
San Francisco, California
March 12, 1999
15
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Property, net $65,344,609 $68,176,821
Cash and cash equivalents 6,386,116 5,323,329
Accounts receivable, affiliate 163,476 163,476
Other assets 348,882 230,760
---------- ----------
$72,243,083 $73,894,386
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Mortgage loans payable $56,917,509 $57,927,235
Accounts payable 512,015 449,811
Accounts payable, affiliate 205,900 203,626
Distributions payable 412,373 412,373
Accrued interest 402,819 409,443
Accrued property taxes 442,283 453,016
Unearned rent and tenant deposits 513,654 520,212
---------- ----------
59,406,553 60,375,716
---------- ----------
Partners' equity (deficit):
Limited partners' equity (64,660 units
authorized and outstanding) 6,996,693 7,665,188
Special limited partners' equity (7,749.5 units
authorized and outstanding) 6,862,188 6,862,188
General partners' deficit (1,022,351) (1,008,706)
---------- ----------
12,836,530 13,518,670
---------- ----------
$72,243,083 $73,894,386
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
16
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental $16,372,293 $15,657,774 $15,307,834
Land/Lease rentals from affiliates 660,000 660,000 660,000
Interest 228,767 189,609 162,068
---------- ---------- ----------
17,261,060 16,507,383 16,129,902
---------- ---------- ----------
Expenses:
Property operating expenses 5,935,351 6,097,461 5,707,050
Property taxes 1,216,884 1,235,151 1,221,069
Property management fees to affiliates 489,823 469,310 457,754
General and administrative expense 103,417 90,763 91,487
Proxy costs 278,494 -0- -0-
Interest expense 4,782,635 4,867,527 4,960,498
Management fees to affiliates 654,892 626,310 612,314
Depreciation 2,832,212 2,832,212 2,832,212
---------- ---------- ----------
16,293,708 16,218,734 15,882,384
---------- ---------- ----------
Net income $ 967,352 $ 288,649 $ 247,518
---------- ---------- ----------
---------- ---------- ----------
Net income allocated to General Partners $ 19,347 $ 5,773 $ 4,950
---------- ---------- ----------
---------- ---------- ----------
Net income allocated to Limited Partners $ 948,005 $ 282,876 $ 242,568
---------- ---------- ----------
---------- ---------- ----------
Net income allocated to Special
Limited Partners $ -0- $ -0- $ -0-
---------- ---------- ----------
---------- ---------- ----------
Net income per unit of limited
partnership interest $ 14.66 $ 4.37 $ 3.75
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to financial statements.
17
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Special
Limited Limited General
Total Partners Partners Partners
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Partners' equity
(deficit)-
December 31, 1995 $16,281,487 $10,372,744 $ 6,862,188 $ (953,445)
Net income 247,518 242,568 -0- 4,950
Distributions (1,649,492) (1,616,500) -0- (32,992)
---------- ---------- ---------- ----------
Partners' equity
(deficit)-
December 31, 1996 14,879,513 8,998,812 6,862,188 (981,487)
Net income 288,649 282,876 -0- 5,773
Distributions (1,649,492) (1,616,500) -0- (32,992)
---------- ---------- ---------- ----------
Partners' equity
(deficit)-
December 31, 1997 13,518,670 7,665,188 6,862,188 (1,008,706)
Net income 967,352 948,005 -0- 19,347
Distributions (1,649,492) (1,616,500) -0- (32,992)
---------- ---------- ---------- ----------
Partners' equity
(deficit)-
December 31, 1998 $12,836,530 $ 6,996,693 $ 6,862,188 $(1,022,351)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements.
18
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 967,352 $ 288,649 $ 247,518
---------- ---------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,832,212 2,832,212 2,832,212
(Increase) decrease in other assets (118,122) (103,073) 14,638
Decrease in account receivable, affiliate -0- -0- 165,000
Increase in accounts payable, affiliate 2,274 13,712 2,585
(Decrease) increase in accounts payable 62,204 (9,254) (43,324)
(Decrease) increase in accrued interest (6,624) (162) 11,309
(Decrease) increase in accrued property taxes (10,733) (143,813) 131,001
(Decrease) increase in unearned rent and
tenant deposits (6,558) 66,715 2,886
---------- ---------- -----------
Total adjustments 2,754,653 2,656,337 3,116,307
---------- ---------- -----------
Net cash provided by operating activities 3,722,005 2,944,986 3,363,825
---------- ---------- -----------
Cash flows from financing activities:
Proceeds from mortgage loan payable -0- -0- 9,000,000
Mortgage loan principal amortization (1,009,726) (970,032) (924,033)
Other mortgage loan repayments -0- -0- (8,943,480)
Distributions to partners (1,649,492) (1,649,492) (1,649,492)
---------- ---------- -----------
Net cash used in financing activities (2,659,218) (2,619,524) (2,517,005)
---------- ---------- -----------
Net increase in cash and cash equivalents 1,062,787 325,462 846,820
Cash and cash equivalents, beginning of period 5,323,329 4,997,867 4,151,047
---------- ---------- ----------
Cash and cash equivalents, end of period $ 6,386,116 $ 5,323,329 $ 4,997,867
---------- ---------- ----------
---------- ---------- -----------
</TABLE>
See notes to financial statements.
19
<PAGE>
PRUDENTIAL-BACHE/A. G. SPANOS
GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997 and 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I (the
"Partnership") is a Delaware limited partnership organized for the purpose
of acquiring and operating thirteen specified apartment properties (the
"Properties") consisting of eight apartment projects (the "Apartment
Projects") and five land parcels, upon which apartment complexes have been
constructed, to be leased back to the sellers for up to 25 years (the
"Land/Leases"). Through December 31, 1998, the Partnership had sold three
of the Land/Leases and one of the Apartment Projects. The General Partners
of the Partnership are Prudential-Bache Properties, Inc. (the "Bache
General Partner") and A.G. Spanos Residential Partners-86, A California
Limited Partnership (the "Spanos General Partner").
The Partnership sold 64,660 depository units of limited partnership
interest ("Units") between February 1987 and August 1988 for aggregate
capital contributions (net of certain volume selling commission discounts)
of $64,641,610. The Partnership has also issued non-voting Special Limited
Partnership Interests ("Special Interests") to affiliates of the Spanos
General Partner in consideration for capital contributions, payments under
a cash flow guaranty, and certain refinancing costs paid on behalf of the
Partnership by such affiliates.
In July 1998, a majority in interest of the limited partners approved a
proposal to sell the remaining Properties at a public auction and then
distribute the sale proceeds in liquidation of the Partnership. The
proposed auction and liquidation are part of an overall settlement of the
Multidistrict Litigation described in Note F below. In July 1998, the
settlement, including the auction and liquidation, was approved by the
court overseeing the litigation. In March 1999, the Partnership entered
into a contract to sell the Properties. See Note G below.
Financial Statement Preparation
The Partnership has a fiscal year ending December 31. The books and
records of the Partnership are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles.
Certain reclassifications have been made to prior year amounts in order to
be in conformity with the current year presentation.
20
<PAGE>
Accounting Estimates
In preparing the financial statements, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities (see Note F) at the date of
the financial statements and the reported amounts of revenues and expenses
from the reporting period. Actual results could differ from those
estimates.
Cash Equivalents
Cash equivalents consist of money market funds containing money market
instruments with an original maturity date of 90 days or less whose cost
approximates market value.
Property
Property, which includes land, buildings and equipment, is carried at the
lower of depreciated cost or estimated fair value. Depreciated cost was
reduced by certain payments received under the cash flow guaranty (see
Note D). Depreciation on buildings and equipment is recorded on a
straight-line basis over their estimated useful lives, which range from 7
to 27.5 years.
Other Assets
Other assets include prepaid expenses and tenant receivables.
Income Taxes
No provision has been made for federal or state income taxes (or credits)
since such items are the responsibility of the partners. A reconciliation
of the net income (loss) in the financial statements to the net taxable
income (loss) is set forth below:
1998 1997 1996
Net income per financial statements $967,352 $288,649 $ 247,518
Loan fee amortization and interest
expense adjustment -0- (45,251) (49,365)
Unearned rent and non refundable
deposits recognized as income for
tax purposes when received (29,802) 23,352 (15,046)
Proxy costs capitalized for tax
purposes 278,494 -0- -0-
--------- --------- ---------
Net taxable income (loss) $1,216,044 $266,750 $ 183,107
--------- --------- ---------
--------- --------- ---------
The book and tax bases of partners' equity differ by the cumulative effect
of the book to tax income adjustments.
21
<PAGE>
Allocations and Distributions
Pursuant to the Partnership Agreement, operating income, losses and cash
distributions are generally allocated 98% to the Unitholders and 2% to the
General Partners. Taxable income and losses are allocated in the same
manner. Cash distributions resulting from refinancings and non-terminating
sales of the Properties are generally allocable as follows: First, 98% to
the limited partners and 2% to the General Partners until (i) the aggregate
of all such distributions equals the limited partners' aggregate capital
contributions and (ii) the aggregate of all other cash distributions
(including operating cash distributions, but excluding distributions in
repayment of capital contributions) equals the limited partners' 10% per
annum cumulative noncompounded return on their adjusted capital
contributions (the "First Level Sale or Refinance Distributions").
Thereafter, cash distributions resulting from a sale or refinancing are
generally allocable 85% to the Unitholders and 15% to the General Partners
(the "Second Level Sale or Refinance Distributions"). Income from
non-terminating sales of the Properties is generally allocable in the same
manner as cash distributions resulting from such sales, after taking into
account the depreciation expense with respect to the Properties sold.
The sale of all the Properties as approved by the limited partners
constitutes a terminating sale under the Partnership Agreement. The
Partnership Agreement provides that net income from a terminating sale is
allocated first to the general and limited partners to the extent of their
negative capital account balances, then 98% to the limited partners and 2%
to the General Partners until their capital account balances equal their
Adjusted Contributions (i.e., their original capital contribution of $1,000
per unit less any prior distributions of cash from sale or refinancings or
from working capital reserves), and then in varying percentages to the
limited and general partners. The capital account balances of the Special
Limited Partners currently equal their Adjusted Contributions. There is
not expected to be sufficient net income to restore the Unitholders'
capital account balances to the level of their Adjusted Contributions. The
Partnership Agreement provides that liquidating cash distributions are to
be paid to the partners in accordance with their positive capital account
balances after allocating the net income from the terminating transaction.
The Special Interests entitle the holders to receive First Level Sale or
Refinance Distributions and liquidating distributions in accordance with
their positive capital account balances (with corresponding allocations of
income on sales), but no allocations of operating income, losses or cash
distributions and no allocations of Second Level Sale or Refinance
Distributions.
Cash distributions to the partners are recorded in the periods to which
they relate for financial reporting purposes. The Partnership paid fourth
quarter cash distributions of $412,373 in February 1999 and 1998. These
distributions were accrued at December 31, 1998 and 1997.
22
<PAGE>
Revenue Recognition
Rental income is accrued as rents are due.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial instruments," requires the determination of fair
value for certain of the Partnership's assets and liabilities. The
following methods and assumptions were used to estimate the fair value of
those financial instruments included in the following categories:
Cash and Cash Equivalents - The carrying amount approximates fair value
based on the liquidity of the assets.
Mortgage Loans Payable (see Note C) - The carrying value approximates fair
value based on interest rates available to the Partnership on debt
instruments with similar terms.
Comprehensive Income The Partnership adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income,"
during 1998. SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income
be reported in a financial statement that is displayed with the same
prominence as other financial statements. During the three year period
ended December 31, 1998, the Partnership had no items of other
comprehensive income except for net income. Accordingly, comprehensive
income equals net income for 1998, 1997 and 1996.
NOTE B - PROPERTY
Property is comprised of the following at December 31, 1998 and 1997:
1998 1997
Apartment buildings $ 77,245,362 $ 77,245,362
Equipment 4,937,209 4,937,209
Land 17,147,732 17,147,732
Land held for lease 2,479,098 2,479,098
----------- -----------
101,809,401 101,809,401
Less: Accumulated depreciation (36,464,792) (33,632,580)
----------- -----------
$ 65,344,609 $ 68,176,821
----------- -----------
----------- -----------
The Partnership leases apartments under lease agreements with terms ranging
from one to twelve months. The ground leases for the Land/Leases are
described in Note E. In March 1999, the Partnership entered into a
contract to sell the Properties. See Note G below.
23
NOTE C - MORTGAGE LOANS PAYABLE
The mortgage loans payable are collateralized by first deeds of trust on
the respective Properties and security interests in the equipment contained
therein. Detailed information regarding the mortgage loans is set forth
below.
24
<PAGE>
<TABLE>
<CAPTION>
Final Monthly Principal Estimated
Property Pledged Obligation Obligation Interest Maturity Principal and Due During Balloon
as Collateral at 12/31/98 at 12/31/97 Rate Date Interest 1999 Payment
---------- ---------- -------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Le Parc Apartments
Marietta, Georgia $ 7,120,534 $ 7,306,943 7.97% 06/01/16 $ 64,238 $ 200,536 N/A
Casa de Fuentes Apartments
Overland Park, Kansas 6,956,608 7,058,608 8.02% 11/01/99 54,667 6,956,608 $6,872,000
MacArthur Park Apartments
Irving, Texas 6,236,386 6,363,405 8.00% 02/01/01 47,144 79,434 5,942,000
Cypress Pointe Apartments
Louisville, Kentucky 10,953,063 11,070,645 10.02% 05/31/99 101,480 10,953,063 10,861,000
Comanche Place Apartments
Overland Park, Kansas 7,569,261 7,680,261 8.02% 11/01/99 61,718 7,569,261 7,495,000
Chelsea Park Apartments
Norcross, Georgia 9,459,231 9,682,469 7.97% 06/01/17 81,744 235,701 N/A
Mission Trails Apartments
San Diego, California 8,622,426 8,764,904 8.02% 03/01/00 71,078 153,822 8,443,000
----------- ----------- -------- -----------
$56,917,509 $57,927,235 $482,069 $26,148,425
----------- ----------- -------- -----------
----------- ----------- -------- -----------
</TABLE>
The interest rate on the Casa de Fuentes, Comanche Place and Mission
Trails loans are not fixed.
Interest paid in 1998, 1997 and 1996 was $4,789,259, $4,867,689 and
$4,949,189 respectively.
25
<PAGE>
In November 1997, the Partnership and the lender entered into an agreement
to extend the maturity date of the Casa de Fuentes and Comanche Place
mortgage loans through November 1, 1999. Pursuant to the extension
agreement, the loans bear interest at the lender's prime interest rate or,
at the option of the Partnership, a rate 2.5% above the London Interbank
Offered Rate (LIBOR) based upon 3, 6, 9, or 12 month fixings. The loans
require monthly payments of interest plus fixed principal reductions of
$8,500 per month for Casa de Fuentes and $9,250 for Comanche Place.
Aggregate maturities of mortgage loans payable for each of the five years
ending December 31, 2003 and thereafter are as follows:
1999 $26,148,425
2000 9,026,925
2001 6,460,491
2002 553,597
2003 599,354
Thereafter 14,128,717
----------
$56,917,509
----------
----------
NOTE D - RELATED PARTY TRANSACTIONS
The Partnership acquired the Properties from affiliates of the Spanos
General Partner (the "Sellers"). Under the terms of the acquisitions, the
Sellers guaranteed that if the Apartment Projects as a group did not meet
certain annual net cash flow levels between their acquisition dates and
December 31, 1990, then the Sellers would make up any deficiency by
periodic cash payments ("Support Payments") to the Partnership. The first
$7,623,000 of Support Payments were non-refundable, and the Partnership
accounted for them as a reduction of the purchase price of the Apartment
Projects. The Partnership issued Special Interests in exchange for
Support Payments in excess of that amount; however, the Special Interests
were cancelable by the Partnership to the extent that the aggregate net
cash flow from any of the Apartment Projects (treated individually and not
collectively) was negative during the guaranty period. The cancellations
were also accounted for as a reduction of the purchase price of the
Apartment Projects.
26
<PAGE>
Support Payments of $10,978,307 accrued to the Partnership based upon the
operating results of the Apartment Projects from inception of the
Partnership through the conclusion of the guaranty on December 31, 1990.
The Partnership issued 3,355 Special Interests to a Seller in exchange for
$3,355,307 of Support Payments in excess of the $7,623,000 non-refundable
amount. Two properties had aggregate negative net cash flow totaling
$1,158,870; accordingly, the Partnership canceled 1,159 Special Interests.
Affiliates of the Spanos General Partner are the lessees under the
Land/Leases. Rentals accrued under the leases from such affiliates were
$660,000 in each of 1998, 1997 and 1996. Rentals of $163,476 were
receivable at December 31, 1998. The apartment complexes owned by the
lessees and the land owned by the Partnership on which the apartment
complexes are constructed have been pledged as collateral for the
borrowings used to finance the development of the Properties. At
December 31, 1998, the Del Rio complex was encumbered by $7,602,615 of
outstanding mortgage debt bearing interest at the rate of 7.161% per
annum, requiring monthly payments of principal and interest of $50,504,
and maturing November 1, 2000; and the Cameron Creek complex was
encumbered by $12,375,223 of outstanding mortgage debt bearing interest at
the rate of 7.245% per annum, requiring monthly payments of principal and
interest of $108,257, and maturing April 1, 2016.
An affiliate of the Spanos General Partner manages the Apartment Projects.
Property management fees totaled $489,823, $469,310, and $457,754,
respectively, in 1998, 1997 and 1996. Under the management agreements,
the affiliate employs property managers and other on-site personnel, and
the Partnership bears the expense for their compensation (including
employment taxes and fringe benefits). That expense was approximately
$1,506,000, $1,460,000 and $1,346,000, respectively in 1998, 1997 and
1996. Accruals of $40,914 and $42,212 for property management fees and
$134,475 and $115,264 for salary expense reimbursements were outstanding
at December 31, 1998 and 1997, respectively.
Under the Partnership Agreement, the Spanos General Partner is entitled to
a supervisory management fee and the Bache General Partner is entitled to
a special distribution. The fee and distribution are each equal to two
percent of the revenues from the Apartment Projects. The special
distribution is reduced to the extent of reimbursements to the Bache
General Partner for certain expenses incurred in the administration of the
Partnership. Amounts accrued during the past three years were as follows.
1998 1997 1996
Supervisory management fee $327,446 $313,155 $306,157
Special distribution 280,588 266,297 259,299
Administrative expense reimbursements 46,858 46,858 46,858
------- ------- -------
$654,892 $626,310 $612,314
------- ------- -------
------- ------- -------
Accruals of $164,986 and $161,414 for management fees payable to the
General Partners were outstanding at December 31, 1998 and 1997,
respectively.
27
<PAGE>
Under the Partnership Agreement, the General Partners may be entitled to
subordinated real estate commissions if the Partnership is able to provide
the limited partners with (i) aggregate distributions of sales and
refinancing proceeds equal to the limited partners' aggregate capital
contributions and (ii) aggregate distributions from all other sources
except distributions in repayment of capital contributions equal to the
limited partners' 6% per annum cumulative noncompounded return on their
adjusted capital contributions. The subordinated real estate commissions
would be the lesser of 3% of the sales price of the Properties or one-half
of the normal and competitive rate customarily charged by unaffiliated
parties. It is highly unlikely that the Partnership will achieve the
distribution threshold; accordingly, no provision for subordinated real
estate commissions has been made in the financial statements.
The General Partners' capital account deficit for financial accounting
purposes exceeds the amount the General Partners would be obligated to
restore if the Partnership were to dissolve.
In May 1998, the Spanos General Partner initiated a consent solicitation
for the limited partners to consider the proposal to auction the
Properties and then distribute the sale proceeds in liquidation of the
Partnership. The Spanos General Partner agreed to pay the costs of the
consent solicitation subject to reimbursement by the Partnership if a
majority in interest of the limited partners approved the proposal. In
June 1998, the Partnership received consent from the requisite number of
limited partners. In July 1998, the Partnership reimbursed the Spanos
General Partner for $172,667 of solicitation costs. The settlement
required an affiliate of the Spanos General Partner to open the auction
with a minimum bid for the Properties of $20,560,000 in excess of the
outstanding mortgage debt.
Prudential Securities Incorporated ("PSI"), an affiliate of the Bache
General Partner, owned 1,920 Units at December 31, 1998.
NOTE E - LAND/LEASES
The Land/Leases are leased to affiliates of the Spanos General Partner
(see Notes B and D). Under the leases, either the Partnership, as owner
of the land, or the lessees, as the owners of the buildings, have the
power to sell the entire project to any third party purchaser. As a
result, the Partnership may be required to dispose of the Land/Leases at a
time and on terms which it might not otherwise have approved. The leases
provide that upon the sale of the project, the proceeds, if any, remaining
after payment of the related mortgage indebtedness will be allocated first
to the Partnership to the extent of its purchase price for the land, then
to the lessee to the extent of its specified "tenant's equity," and then
42.5% to the Partnership and 57.5% to the lessee.
28
<PAGE>
NOTE F - CONTINGENCIES
In May 1997, the Spanos General Partner and certain of its affiliates
entered into a Stipulation of Settlement with legal counsel representing
the plaintiff class in a number of actions ("Multidistrict Litigation")
pending before a single judge of the United States District Court for the
Southern District of New York. The settlement contemplated, among other
things, the sale of all of the Properties at public auction and the
subsequent liquidation and dissolution of the Partnership. The settlement
agreement was preliminarily approved by the Court in August 1997. In July
1998, a majority in interest of the Unitholders approved the auction and
liquidation of the Partnership, and the Court entered an order and final
judgment approving the settlement, auction and liquidation. There can be
no assurance that the conditions to implementation of the settlement will
be satisfied.
In April 1994, a multiparty petition entitled Schreiber et al. v.
Prudential Securities, Inc., et al. (Cause No. 94-17696) was filed in the
189th Judicial District Court of Harris County, Texas, purportedly on
behalf of investors in the Partnership against the Partnership, the
General Partners, PSI, The Prudential Insurance Company of America and a
number of other defendants. The Petition alleged common law fraud, fraud
in the inducement and negligent misrepresentation in connection with the
offering of limited partnership interests and negligence, breach of
fiduciary duty, civil conspiracy, and violations of the federal Securities
Act of 1933 (sections 11 and 12) and of the Texas Securities and Deceptive
Trade Practices statutes. The suit sought, among other things,
compensatory and punitive damages, costs and attorney's fees. Most of the
plaintiffs released their claims against the defendants in exchange for
monetary payments by PSI at no cost to the Partnership. In February 1999,
the court entered an order dismissing all remaining claims.
NOTE G - SUBSEQUENT EVENT
On March 11, 1999, the Partnership entered into an agreement to sell all
the Properties to WXI/SPN Real Estate Limited Partnership for
$126,333,500. The agreement provides for a closing as soon as practicable
but in no event later than April 25, 1999, or such later date on or before
June 1, 1999 as may be required by the Partnership in order to prepay the
mortgage loans. Under the terms of the leases for the Land/Leases,
approximately $20,117,000 of the sales price (which includes approximately
$19,907,000 of existing mortgage debt as of March 1, 1999) will be
allocated to A.G. Spanos Construction, Inc., an affiliate of the Spanos
General Partner, as consideration for its sale of the Del Rio and Cameron
Creek buildings. No assurance can be given that the sale will take place
as provided in the agreement.
29
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
30
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership does not have directors or executive officers. The
Partnership is managed by the General Partners, which have formed, and may
continue to form, other real estate investment entities with investment
policies similar to those of the Partnership and which may compete with
the Partnership for management services. The Spanos General Partner is a
California limited partnership whose general partners are AGS Financial
Corporation and A.G. Spanos Realty, Inc. AGS Financial Corporation is the
managing general partner of the Spanos General Partner. The directors and
executive officers of AGS Financial Corporation and of the Bache General
Partner who perform services for the Partnership are listed below,
together with a brief description of their experience. All have
indefinite terms.
AGS Financial Corporation is owned by Dean A. Spanos, Michael A. Spanos,
Barry L. Ruhl, Dea Economou and a Spanos family trust. Dean A. Spanos,
Michael A. Spanos and Dea Economou are children of Alex G. Spanos,
Chairman of the Board of AGS Financial Corporation. Barry L. Ruhl is a
son-in-law of Alex G. Spanos. There are no other family relationships
among the directors and executive officers of AGS Financial Corporation or
the Bache General Partner.
The General Partners and their directors and executive officers, and any
persons holding more than ten percent of the Partnership's Units are
required to report their initial ownership of such units and any
subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Such executive officers, directors and
greater than ten percent Unitholders are required by Securities and
Exchange Commission regulations to furnish the Partnership with copies of
all Forms 3, 4 and 5 they file. All of these filing requirements were
satisfied on a timely basis. In making the disclosures, the Partnership
has relied solely on written representations of the General Partners'
directors and executive officers and greater than ten percent Unitholders
or copies of the reports that they have filed with the Securities and
Exchange Commission during and with respect to its most recent fiscal
year.
31
<PAGE>
AGS FINANCIAL CORPORATION
Name Position
Alex G. Spanos Chairman of the Board
Dean A. Spanos Vice Chairman and Director
Barry L. Ruhl Director
Michael A. Spanos Director
Arthur J. Cole President and Director
Jeremiah T. Murphy Executive Vice President and
Chief Financial Officer
ALEX G. SPANOS, age 75, has been Chairman of the Board of AGS Financial
Corporation since its founding in 1981. In addition, he serves as
Chairman of the Board or President of each of the other Spanos companies
and owns a controlling interest in the San Diego Chargers, a professional
football team. Mr. Spanos founded the combined Spanos organizations in
the early 1960's and has been the driving force behind the development of
approximately 60,000 apartments and over 3 million square feet of office
space. Mr. Spanos maintains close contact with the key executives of each
of his companies and lends his judgment and experience to all major land
acquisitions, development and property financing decisions, and the
investment activities of AGS Financial Corporation. Mr. Spanos attended
the University of the Pacific.
DEAN A. SPANOS, age 48, has been Vice Chairman and a Director of AGS
Financial Corporation since its founding in 1981. He is the chief
operating officer of the property development and management companies
within the Spanos organization, responsible for land acquisitions,
financing construction and property sales. Mr. Spanos holds a bachelor's
degree in business administration from the University of the Pacific.
MICHAEL A. SPANOS, age 39, has served as a Director of AGS Financial
Corporation since its founding in 1981. He is Executive Vice President of
A.G. Spanos Construction, Inc. He holds a bachelor's degree from the
University of the Pacific.
32
<PAGE>
BARRY L. RUHL, age 47, has been a Director of AGS Financial Corporation
since its founding in 1981. He is Executive Vice President of A.G. Spanos
Construction, Inc. He holds a D.D.S. from the University of the Pacific
Dental School.
ARTHUR J. COLE, age 44, has served as President of AGS Financial
Corporation since August 1990 and as a director since 1986. He joined AGS
Financial Corporation in 1983. He holds a bachelor's degree from Golden
Gate University.
JEREMIAH T. MURPHY, age 54, has served as an Executive Vice President of
AGS Financial Corporation and is the Chief Financial Officer for all the
A.G. Spanos Companies. He has been employed by the Spanos companies since
1983. Prior to joining the Spanos companies he was a partner with the
accounting firm, Bowman & Company, which he joined in 1970. Mr. Murphy is
a Certified Public Accountant and a graduate of Bernard Baruch College.
PRUDENTIAL-BACHE PROPERTIES, INC.
Name Position
Brian J. Martin President, Chief Executive
Officer, Director and Chairman
of the Board of Directors
Barbara J. Brooks Vice President - Finance and
Chief Financial Officer
Eugene D. Burak Vice President
Chester A. Piskorowski Senior Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
BRIAN J. MARTIN, age 48, is the President, Chief Executive Officer,
Chairman of the Board of Directors and a Director of the Bache General
Partner. He is a Senior Vice President of Prudential Securities
Incorporated ("PSI"), an affiliate of the Bache General Partner. Mr.
Martin also serves in various capacities for other affiliated companies.
Mr. Martin joined PSI in 1980. Mr. Martin is a member of the Pennsylvania
Bar.
33
<PAGE>
BARBARA J. BROOKS, age 50, is the Vice President-Finance and Chief
Financial Officer of the Bache General Partner. She is a Senior Vice
President of PSI. Ms. Brooks also serves in various capacities for other
affiliated companies. She has held several positions within PSI since
1983. Ms. Brooks is a certified public accountant.
EUGENE D. BURAK, age 53, is a Vice President of the Bache General Partner.
He is a Senior Vice President of PSI and serves in various capacities for
other affiliated companies. Prior to joining PSI in September 1995, he was
a management consultant for three years and was with Equitable Capital
Management Corporation from March 1990 to May 1992. Mr. Burak is a
certified public accountant.
CHESTER A. PISKOROWSKI, age 55, is a Senior Vice President of the Bache
General Partner. He is a Senior Vice President of PSI and is the Senior
Manager of the Specialty Finance Asset Management area. Mr. Piskorowski
has held several positions within PSI since April 1972. Mr. Piskorowski is
a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 56, is a Director of the Bache General Partner. He
is a Senior Vice President of PSI. Mr. Giordano also serves in various
capacities for other affiliated companies. He has been with PSI since July
1967.
NATHALIE P. MAIO, age 48, is a Director of the Bache General Partner. She
is a Senior Vice President and Deputy General Counsel of PSI and
supervises nonlitigation legal work for PSI. She joined PSI's Law
Department in 1983; presently, she also serves in various capacities for
other affiliated companies.
Item 11. Executive Compensation
The Partnership is not required to and did not pay remuneration to the
officers and directors of the General Partners. Certain officers and
directors of the General Partners receive compensation from the General
Partners and/or their affiliates (but not from the Partnership) for
services performed for various affiliated entities, which may include
services performed for the Partnership; however, the General Partners
believe that any compensation attributable to services performed for the
Partnership is immaterial. See Item 13 "Certain Relationships and Related
Transactions" for a discussion of compensation and fees to which the
General Partners and their affiliates are entitled.
34
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
No Unitholder is known by the Partnership to own beneficially more than 5%
of the outstanding Units. The percentage of outstanding Units held by all
directors and officers of the General Partners is less than 1%.
The Partnership has issued 7,749.5 Special Interests to affiliates of the
Spanos General Partner at March 1, 1999, all of which Interests are
beneficially owned by members of the Spanos family, certain of whom are
directors and officers of the general partners of the Spanos General
Partner.
As of March 1, 1999, the individual directors and the directors and
officers, as a group, of AGS Financial Corporation and A.G. Spanos Realty,
Inc., the general partners of the Spanos General Partner, beneficially
owned shares of the common stock of AGS Financial Corporation and A.G.
Spanos Realty, Inc. as follows:
AGS Financial A.G. Spanos
Corporation Realty, Inc.
Name Shares % of Class Shares % of Class
Alex G. Spanos -0- -0- 20 100%
Dean A. Spanos 1,000 10%
Barry L. Ruhl 1,000 10%
Michael A. Spanos 1,000 10%
All directors and officers
as a group (8 persons) 9,000(1) 90% 20 100%
(1) These amounts include shares beneficially owned by virtue of certain
beneficial interests in a Spanos family trust which owns 6,000 shares
(60%) of the shares of AGS Financial Corporation.
Item 13. Certain Relationships and Related Transactions
The General Partners and their affiliates are permitted to engage in
transactions with the Partnership as described in the Partnership
Agreement. Specific information regarding these transactions is set forth
below.
Certain affiliates of the Spanos General Partner are the lessees under the
ground leases for the Partnership's Land/Lease properties. Set forth
below is information regarding the ground leases.
35
<PAGE>
Annual
Property Lessee Termination Date(1) Rent (2)(3)
Cameron Creek A.G. Spanos
Construction, Inc. 10/01/2012 $420,000
Del Rio A.G. Spanos
Construction, Inc. 12/21/2012 $240,000
(1) Under the ground lease, the lessor and lessee each have the power to
sell the land and improvements without the consent of the other party.
Such a sale would terminate the lease before the nominal termination date.
(2) In addition to the base rental income, the Partnership is entitled to
proceeds upon the sale or refinancing of the Land/Leases and improvements.
(3) Of the total annual rent, $163,476 was receivable at December 31,
1998.
The General Partners and certain affiliates thereof have, during the
Partnership's year ended December 31, 1998 earned or received compensation
or payments for services from the Partnership as set forth below. In
addition, under the Partnership Agreement, the General Partners are
entitled to subordinated real estate commissions equal to the lesser of 3%
of the sales price of the Properties or one-half of the normal and
competitive rate customarily charged by unaffiliated parties. The
subordinated real estate commissions are not payable until the limited
partners have received certain priority distributions. See note D to the
financial statements.
Capacity in Form of Cash
Recipient Which Served Compensation Compensation
Spanos General General Partner Supervisory $327,446
Partner Management Fee(1)
Bache General General Partner Special 280,588
Partner Distribution(2)
A.G. Spanos Property Manager Property 489,823
Management Inc. Management Fees(3)
General Partners General Partners Cash from Operations(4) 32,992
Bache General General Partner Expense 46,858
Partner Reimbursements
36
<PAGE>
(1) Supervisory Property Management Fee for supervising the management of
the Properties equal to 2% of gross receipts from the Apartment Projects.
(2) Special Distribution for services in managing and administering the
Partnership equal to 2% of gross receipts from the Apartment Projects,
reduced to the extent of reimbursements, if any, for certain expenses
incurred in the administration of the Partnership.
(3) Property Management Fees for property management services equal to 3%
of gross receipts from the Apartment Projects.
(4) Cash from Operations equal to 2% of Adjusted Cash from Operations
remaining after payment of the Special Distribution.
37
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements:
See Index to Financial Statements and Schedule on page 14.
(2)Financial Statement Schedule:
III. Real Estate and Accumulated Depreciation, page 44.
All other schedules have been omitted because they are
inapplicable or not required, or the information is included in
the financial statements or notes thereto.
Exhibits
4(a) Certificate of Limited Partnership of Registrant as filed
with the Secretary of State of Delaware, incorporated by
reference to Exhibit 4(a) to Amendment No. 1 to
Registration Statement on Form S-11, File No. 33-9139,
filed with the Securities and Exchange Commission on
January 28, 1987.
4(b) Amendment to Certificate of Limited Partnership of
Registrant as filed with the Secretary of State of
Delaware, incorporated by reference to Exhibit 4(b) to
Amendment No. 2 to Registration Statement on Form S-11,
File No. 33-9139, filed with the Securities and Exchange
Commission on February 20, 1987.
4(c) Amended and Restated Agreement of Limited Partnership of
Registrant, incorporated by reference to Exhibit 4(c) to
Amendment No. 2 to Registration Statement on Form S-11,
File No. 33-9139, filed with the Securities and Exchange
Commission on February 20, 1987.
4(d) Amendments No. 1 through 6 dated June 3, July 2, August 3
and 20, September 10 and October 2, 1987, respectively, to
the Amended and Restated Agreement of Limited Partnership
of Registrant, incorporated by reference to Exhibit 4(d)
to Post-Effective Amendment No. 1 to Registration
Statement on Form S-11, File No. 33-9139, filed with the
Securities and Exchange Commission on November 12, 1987.
38
<PAGE>
4(e) Amendments No. 7 through 13 dated December 4 and 18, 1987
and February 1, March 8 and 25, April 27 and August 12,
1988, respectively, to the Amended and Restated Agreement
of Limited Partnership of Registrant, incorporated by
reference to Exhibit 4(e) of the Annual Report on Form
10-K dated December 31, 1988, File No. 33-9139.
4(f) Amendment No. 14 dated August 12, 1998, to the
Amended and Restated Agreement of Limited Partnership
of Registrant, incorporated by reference to Exhibit 4(f)
of the Quarterly Report on Form 10-Q dated September 30,
1998, File No. 33-9139.
10 Agreement for Purchase and Sale of Real Property dated
March 11, 1999 by and among the Partnership and A.G.
Spanos Construction, Inc. as Sellers and WXI/SPN Real
Estate Limited Partnership as Buyer (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the last quarter
of the period covered by this Report. On March 22, 1999 the
Partnership filed a report on Form 8-K dated March 11, 1999 to
report that the Partnership had entered into a contract to sell
the Properties.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I (Registrant)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/Brian J. Martin Date: March __, 1999
---------------------------------------
Brian J. Martin
Chairman of the Board of Directors and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities (with respect to the General Partners) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/Brian J. Martin Date: March 29, 1999
---------------------------------------
Brian J. Martin
Chairman of the Board of Directors and Director
(Principal Executive Officer)
By: /s/Barbara J. Brooks Date: March 29, 1999
---------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief Financial Officer
(Principal Financial Officer)
By: /s/Nathalie P. Maio Date: March 29, 1999
---------------------------------------
Nathalie P. Maio
Director
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I (Registrant)
By: A.G. Spanos Residential Partners-86, A California Limited
Partnership
General Partner
By: AGS Financial Corporation, a general partner
By: /s/Arthur J. Cole Date: March 29, 1999
-------------------------------
Arthur J. Cole
President
(Principal Accounting Officer)
By: A.G. Spanos Realty, Inc., a general partner
By: /s/Arthur J. Cole Date: March 29, 1999
-------------------------------
Arthur J. Cole
Vice President
RESIDENTIAL PORTFOLIO DEPOSITORY CORP. (Registrant as to the issuance of
Depository Receipts with respect to the Assigned Limited Partnership
Interests)
By: /s/Arthur J. Cole Date: March 29, 1999
-------------------------------
Arthur J. Cole
Vice President
41
_ <PAGE> SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities (with respect to the General Partners) and on
the dates indicated.
By: A.G. Spanos Residential Partners-86, A California Limited Partnership
General Partner
By: AGS Financial Corporation, a general partner
By: /s/Alex G. Spanos Date: March 29, 1999
----------------------------------
Alex G. Spanos
Chairman of the Board of Directors
By: /s/Dean A. Spanos Date: March 29, 1999
----------------------------------
Dean A. Spanos
Vice Chairman and Director
By: /s/Michael A. Spanos Date: March 29, 1999
----------------------------------
Michael A. Spanos
Director
By: /s/Barry L. Ruhl Date: March 29, 1999
----------------------------------
Barry L. Ruhl
Director
By: /s/Arthur J. Cole Date: March 29, 1999
----------------------------------
Arthur J. Cole
President and Director
(Principal Executive Officer)
By: /s/Jeremiah T. Murphy Date: March 29, 1999
----------------------------------
Jeremiah T. Murphy
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
42
<PAGE>
SIGNATURES
By: A.G. Spanos Realty, Inc., a general partner
By: /s/Alex G. Spanos Date: March 29, 1999
----------------------------------
Alex G. Spanos
President and Director (Principal Executive Officer)
By: /s/Dean A. Spanos Date: March 29, 1999
----------------------------------
Dean A. Spanos
Executive Vice President and Director
By: /s/Michael A. Spanos Date: March 29, 1999
----------------------------------
Michael A. Spanos
Executive Vice President and Director
By: /s/Barry L. Ruhl Date: March 29, 1999
----------------------------------
Barry L. Ruhl
Executive Vice President and Director
By: /s/Jeremiah T. Murphy Date: March 29, 1999
----------------------------------
Jeremiah T. Murphy
Vice President (Principal Financial and Accounting Officer)
Residential Portfolio Depository Corp.
By: /s/Alex G. Spanos Date: March 29, 1999
----------------------------------
Alex G. Spanos
Director, President and Chief Financial Officer
(Principal Executive, Financial and Accounting Officer)
By: /s/Dean A. Spanos Date: March 29, 1999
----------------------------------
Dean A. Spanos
Director
By: /s/Jeremiah T. Murphy Date: March 29, 1999
----------------------------------
Jeremiah T. Murphy
Director
43
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A LIMITED PARTNERSHIP)
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G
Costs Capitalized Gross Amount at which Carried at
Initial Cost to Subsequent to Close of Period
Partnership Acquisition Notes 1, 2 and 4
Accumulated
Bldgs & Carrying Buildings & Depr. Date of Date
Description (Note 1) Land Equip Imps Cost Land Equipment Total (Note 3) Construction Acquired
- ------------------- ---- ------ ----- ---- ---- --------- ------ ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apartment Projects:
Le Parc 1,865,589 12,069,597 -0- -0- 1,290,008 9,907,346 11,197,354 4,760,148 1986 06/03/87
Marietta, GA
Casa de Fuentes 2,320,250 11,016,653 -0- -0- 2,120,968 10,343,379 12,464,347 4,811,207 1986 07/02/87
Overland Park, KS
MacArthur Park 2,945,824 9,482,602 -0- -0- 2,249,379 9,375,318 11,624,697 4,049,896 1985 10/01/87
Irving, TX
Cypress Pointe 3,351,303 15,552,843 -0- -0- 2,315,883 15,351,195 17,667,078 6,949,596 1986 10/01/87
Louisville, KY
Comanche Place 2,298,429 12,558,324 -0- -0- 1,509,771 12,368,550 13,878,321 5,448,234 1987 12/04/87
Overland Park, KS
Chelsea Park 3,945,526 14,157,150 -0- -0- 2,991,645 14,194,635 17,186,280 6,173,173 1986 03/25/88
Chamblee, GA
Mission Trails 5,411,288 10,398,770 -0- -0- 4,670,078 10,642,148 15,312,226 4,272,538 1987 08/12/88
San Diego, CA
Land Leases:
Cameron Creek 3,508,024 -0- -0- -0- 474,513 -0- 474,513 -0- 1985 10/01/87
Fort Worth, TX
Del Rio 2,004,585 -0- -0- -0- 2,004,585 -0- 2,004,585 -0- 1985 12/21/87
Albuquerque, NM
---------- ---------- --------------------------- ---------- ---------- ----------
27,650,818 85,235,939 -0- -0- 19,626,830 82,182,571 101,809,401 36,464,792
---------- ---------- --------------------------- ---------- ---------- ----------
---------- ---------- --------------------------- ---------- ---------- ----------
</TABLE>
See notes.
44
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
( A Limited Partnership)
NOTES TO SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Note 1 - See description of mortgage notes payable in note C of the Notes
to Financial Statements. Depreciable property is depreciated over
useful lives of 7 to 27.5 years.
Note 2 - The aggregate cost of real estate for federal income tax
purposes is $103,816,029.
Note 3 - Reconciliation of
accumulated depreciation: 1998 1997 1996
Balance at beginning of period $33,632,580 $30,800,368 $27,968,156
Additions during period:
Depreciation 2,832,212 2,832,212 2,832,212
---------- ---------- ----------
36,464,792 33,632,580 30,800,368
Deductions during period:
Dispositions -0- -0- -0-
---------- ---------- ----------
Balance at close of period $36,464,792 $33,632,580 $30,800,368
---------- ---------- ----------
---------- ---------- ----------
Note 4 - The Partnership has recorded aggregate provisions for loss on
impairment of assets of $3,033,511 with respect to the Cameron Creek
Land/Lease at December 31, 1998.
45
Genesis
AGREEMENT
FOR PURCHASE AND SALE
OF REAL PROPERTY
THIS AGREEMENT is entered as of the 11th day of March,
1999, by and between the seller or sellers identified on Schedule
1 attached hereto (herein collectively called "Seller"), and
WXI/SPN Real Estate Limited Partnership, a Delaware limited
partnership (herein called "Buyer").
R E C I T A L S
A. Seller owns one or more certain parcels of land
(collectively, the "Real Property") each located in the City and
State set forth on Schedule 1, attached hereto, as each such Real
Property is more particularly described on Exhibit A, attached
hereto, together with all of the improvements (the
"Improvements") and any fixtures (the "Fixtures") presently
existing and located thereon and therein, and any personalty used
exclusively in connection with the management and operation of
the foregoing, including but not limited to the office equipment,
maintenance equipment and supplies with respect to each Real
Property described on Exhibit B attached hereto (the
"Personalty") (hereinafter said Real Property, Improvements,
Fixtures and Personalty are collectively called the "Property").
B. Buyer has participated in an auction (the
"Auction") to purchase said Property and Buyer, being the
selected bidder, has agreed to purchase such Property on the
terms and conditions set forth herein.
C. Pursuant to the terms and conditions of said
Auction and in connection with being selected as the successful
bidder thereat, Buyer has agreed to execute this Agreement.
D. The parties have agreed to the purchase and sale
of the Property as set forth below.
NOW, THEREFORE, in consideration of the foregoing, the
mutual covenants and agreement contained herein, and other good
and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Seller and Buyer hereby mutually
agree that this transaction shall be consummated upon the
following terms, conditions and agreements:
<PAGE>
1. PURCHASE PRICE. The aggregate purchase price for
the Property is One Hundred Twenty Six Million Three Hundred
Thirty Three Thousand Five Hundred and 00/100 Dollars
($126,333,500.00) (the "Purchase Price"). Buyer acknowledges and
agrees that the Purchase Price shall be in all respects net of
any and all prepayment fees, premiums, penalties or similar
charges, expenses, costs and sums (other than outstanding
principal and accrued and unpaid interest) required to be paid to
the holder of any loan (each a "Loan") secured by a mortgage and
related security agreements, liens and financing statements
encumbering a Property, as more particularly referenced on
Exhibit C attached hereto (each, collectively, a "Mortgage"),
pursuant to the related loan documents in order to fully satisfy
such Mortgage (collectively, the "Prepayment Fees"), all as set
forth on a payoff demand submitted by the holder of such Mortgage
and approved by the Seller. The Buyer shall pay the Prepayment
Fees at Closing in accordance with Section 1.2 below, provided,
however, that if the Prepayment Fees for a Property are greater
than the amount specified on Schedule 2 attached hereto, the
Purchase Price for such Property shall be reduced by an amount
equal to the excess of the actual Prepayment Fee for such
Property over the amount specified for such Property on Schedule
2. The portion of the Purchase Price which is allocated to each
Property (each, an "Allocated Purchase Price") is set forth on
Schedule 3, attached hereto. Subject to the prorations and
adjustments hereinafter defined, Seller and the Buyer mutually
agree that the Allocated Purchase Price for each Property shall
be further allocated among Personalty and the remaining Property
in accordance with the allocation set forth on Schedule 3
(collectively, the "Tax Allocations"), which Tax Allocations have
been made in accordance with Section 1060 of the Internal Revenue
Code of 1986 (as amended) and the Treasury Regulations
promulgated thereunder (the Allocated Purchase Prices and the Tax
Allocations hereinafter called, the "Allocations"). Each of the
Seller and Buyer shall: (i) be bound by the Allocations for
purposes of determining any taxes; (ii) prepare and file any tax
returns on a basis consistent with the Allocations; (iii) take no
position inconsistent with the Allocations on any applicable tax
return, in any proceeding before any taxing authority or
otherwise; and (iv) be bound by the Allocations in all other
public filings and reports, including but not limited to any
transfer tax declarations. In the event that the mutually agreed
upon Allocations are disputed by any taxing authority, the party
receiving notice of the dispute shall promptly notify the other
party hereto of the dispute. Notwithstanding the foregoing,
nothing herein shall impair Buyer's right to initiate proceedings
after the Closing in which the value of a Property is contested
by Buyer for real estate tax purposes (including ad valorem and
similar state and local taxes imposed based on the assessed value
<PAGE>
of real property) in accordance with applicable law.
The Purchase Price shall be payable by Buyer to Seller
as follows:
1.1. EARNEST MONEY. In connection with the Auction,
Buyer has delivered to the Title Insurer (as hereinafter
defined), acting as escrow agent (the "Escrow Agent") the sum of
Six Million and 00/100 Dollars ($6,000,000.00) (such sum,
together with any interest earned thereon, the "Earnest Money").
From and after the date the Earnest Money is delivered by Buyer,
the Escrow Agent shall hold the Earnest Money in accordance with
the Escrow Agreement attached hereto as Exhibit D (the "Escrow
Agreement") in an interest-bearing account for the benefit of
Buyer pending disposition as hereinafter set forth. The amount
of Earnest Money allocated to each Property is set forth on
Schedule 3 attached hereto (the "Allocated Earnest Money").
1.2. PREPAYMENT FEES. The Prepayment Fees shall be
deposited with Escrow Agent on or before the Closing Date (as
hereinafter defined), by wire transfer of immediately available
funds to Escrow Agent's account pursuant to Escrow Agent's
instructions. The Prepayment Fees and the applicable portions of
the Purchase Price shall be applied by Escrow Agent at Closing
(as hereinafter defined) to pay off the Loans.
1.3. BALANCE OF PURCHASE PRICE. The balance of the
Purchase Price shall be deposited with Escrow Agent on or before
the Closing Date (as hereinafter defined), by wire transfer of
immediately available funds to Escrow Agent's account pursuant to
Escrow Agent's instructions.
2. INSPECTION, REMEDIES AND CONTINGENCIES.
2.1. BUYER INSPECTION. Buyer acknowledges and
represents that as of the date of execution of this Agreement,
Buyer has had the opportunity to review any engineering reports
made available to potential bidders at the Auction during a due
diligence period prior to the Auction, and has been given the
opportunity to make a full and complete inspection of the
Property, at Buyer's expense, including, but not limited to,
inspection by construction experts, engineers and architects
acceptable to Buyer, examining both obvious and latent conditions
of the Property. Accordingly, except for the representations,
warranties, covenants and agreements in this Agreement or in any
of the documents (the "Closing Documents") executed and delivered
by Seller to Buyer in connection with the Closing (as hereinafter
defined), Buyer will have made its investment decision to enter
into this Agreement based exclusively upon its own investigations
<PAGE>
or inspections with respect to the Property and has not relied,
and will not have relied upon any express or implied, written or
oral, representation of Seller or Seller's general partners
(collectively, the "Selling Entity") or any of the Selling
Entity's employees, agents, representatives, broker and
attorneys, counsel for the respective plaintiffs in the
litigation captioned In re: Prudential Securities Incorporated
Limited Partnerships Litigation ("Litigation") in the United
States District Court in the Southern District of New York, MDL
Docket No. 1005, M-21-67 (MP), or any affiliates of any of them,
hereinafter designated collectively as the "Protected Group", in
entering into this Agreement. Buyer acknowledges that Seller has
cooperated with Buyer in all requests for inspection or testing,
and Seller agrees to cooperate with Buyer's reasonable requests
for additional inspections and testing (to be conducted at
Buyer's sole cost and expense) prior to the Closing Date
(hereinafter defined), provided, however, that in no event shall
facts or information which may be discovered by Buyer in so
conducting any inspections or testing, (i) be the basis of any
claim by Buyer against Seller, or any right of Buyer to terminate
this Agreement or to request an adjustment to the Purchase Price
or a cure by Seller of any condition or matter discovered by any
such additional testing or inspection unless such inspections or
tests reveal breaches of representations, warranties, covenants
or agreements of Seller herein, in which case Buyer's remedies
shall be as provided herein or (ii) otherwise affect or excuse
any of Buyer's covenants, agreements and obligations under this
Agreement unless such inspections or tests reveal breaches of
representations, warranties, covenants or agreements of Seller
herein, in which case Buyer's remedies shall be as provided
herein. Buyer agrees to promptly repair and restore the
Properties to the condition existing prior to any inspection or
testing at the sole cost of Buyer and to Seller's reasonable
satisfaction. Buyer also agrees not to interfere with any
tenants at the Properties during any inspections or testing.
2.2. ENVIRONMENTAL ASSESSMENT. Buyer acknowledges and
represents that as of the date of execution of this Agreement
Buyer has had the opportunity to review any Phase I and Phase II
environmental reports made available to potential bidders at the
Auction during a due diligence period prior to the Auction, and,
at its expense, to conduct an environmental assessment of the
Property including but not limited to hazardous substances or
waste such as asbestos, chemicals, sewage (raw or treated),
pesticides, petroleum, including crude oil or any fraction
thereof, and any substance identified in any Federal, State, or
other governmental legislation or ordinance. Buyer agrees to
accept all risks to the Property and costs of cure arising out of
the existence of any hazardous substance or waste.
<PAGE>
2.3. BUYER'S REMEDY. Except as may be otherwise
expressly provided in this Agreement or in the Closing Documents,
Buyer acknowledges that Seller has made no representations or
warranties whatsoever regarding the accuracy or completeness of
the reports referenced in this Section 2. Except as may be
otherwise expressly provided in this Agreement or in the Closing
Documents, Buyer agrees that Buyer has no legal or equitable
remedy or recourse against Seller and the Protected Group, with
respect to any inaccuracies or errors contained in any such
report or arising out of any Property defect, or other adverse
condition of the Property, whether known or unknown to or
concealed or unconcealed by them or any of them.
2.4. ASSUMPTION OF LIABILITIES. Except as expressly
provided in this Agreement or in any Closing Documents, Buyer is
not assuming any of the debts, liabilities, taxes or obligations
of, or claims against, Seller of any kind or character, whether
direct or contingent and whether known or unknown. The only
transactions contemplated by this Agreement are the sale and
purchase of the Property.
3. CLOSING.
3.1. CLOSING. This transaction shall be closed (the
"Closing") at the offices of Skadden, Arps, Slate, Meagher &
Flom, LLP 919 Third Avenue, New York, New York 10022 at such time
or other place in New York, New York as the parties shall agree
as soon as is practicable after the full execution of this
Agreement but not later than forty-five (45) days therefrom or
such later date on or before June 1, 1999 as may be required by
Seller in order to prepay the Loans in accordance with the
prepayment provisions of the Mortgages and related promissory
notes (the "Closing Deadline"). The date on which the Closing
occurs is herein called the "Closing Date". The Closing for all
of the Properties shall occur simultaneously unless otherwise
provided hereunder.
3.2. SELLER'S CLOSING DELIVERABLES. At or prior to
Closing, Seller shall deliver or cause to be delivered to Escrow
Agent, the following items for delivery or recordation upon close
of escrow with respect to each Property:
(a) Quitclaim deed (the "Deed") duly executed and
acknowledged by Seller, conveying fee simple title to the
Real Property, the Improvements and the Fixtures to Buyer,
or if a quitclaim deed is not a valid means of conveyance in
a particular jurisdiction, a deed without covenants or, if
the use of such forms of deeds results in the Title Insurer
<PAGE>
raising an exception that would not be customarily
acceptable to an institutional investor, a form of deed
subject to the Permitted Exceptions that would be insurable
by the Title Insurer without such exception;
(b) bill of sale (the "Bill of Sale") duly executed by
Seller, transferring to Buyer all of the Seller's right,
title and interest in and to the Personalty;
(c) assignment of all occupancy leases, licenses and
other occupancy agreements then in effect, if applicable,
pertaining to the Property (the "Leases"), duly executed and
acknowledged by Seller, in a form reasonably acceptable to
Buyer and Seller, assigning to Buyer the Seller's interest
therein, with Buyer expressly assuming all obligations as
landlord under such leases arising from and after the
Closing Date and with Seller responsible for such
obligations for the period prior to the Closing Date;
(d) non-recourse assignment, to the extent assignable,
of Seller's rights under the service or maintenance
contracts described on Schedule 4 ("Service Contracts")
pertaining to the Property;
(e) non-recourse assignment, to the extent possible,
of any licenses, permits, trade names and unexpired
warranties, if any, pertaining to the Property;
(f) certificates and resolutions demonstrating the
authority of the persons executing the documents at the
Closing;
(g) a rent roll, certified as accurate by the Seller,
which shall be current as of two business days prior to the
Closing and which shall also state the amounts of all tenant
security deposits (and any interest thereon required to be
held under the Leases, if any) in the possession of Seller
or required to be held by Seller (collectively, the
"Security Deposits") and shall set forth all past due and
uncollected rent and additional rent owed by tenants and all
prepayments of rent;
(h) originals of all written occupancy leases and
Service Contracts, if applicable and to the extent
available, for the Property, and if originals are not
available, copies thereof. All such leases and Service
Contracts shall be deemed delivered if they are on premises
at the Property as of the Closing Date;
<PAGE>
(i) a certificate duly executed by Seller certifying
that all of the representations and warranties set forth in
Section 7.3 are true and correct in all material respects on
the Closing Date as if made at and as of Closing Date or the
extent to which any of such representations or warranties
are no longer true and correct ("Seller's Representation
Certificate"), which shall survive Closing for ninety (90)
days;
(j) a certification as to the Seller's non-foreign
status which complies with the provisions of Section
1445(b)(2) of the Internal Revenue Code of 1986, as amended,
any regulations promulgated thereunder, and any revenue
procedures or other officially published announcements of
the Internal Revenue Service or the U.S. Department of the
Treasury in connection therewith, duly executed by Seller;
(k) general ledgers with respect to the calendar years
ending December 31, 1997 and December 31, 1998;
(l) documents, affidavits and undertakings (including
a "Gap Undertaking" in the form set forth on Exhibit H
hereto) reasonably requested by the Title Insurer to issue,
effective as of the Closing Date, the policies of title
insurance contemplated by this Agreement without any
exception for matters (other than Permitted Exceptions)
arising after the Closing Date and prior to the date the
deeds of conveyance are recorded;
(m) a notice to tenants for each Property informing
such tenants as to the sale of such Property, signed by the
current manager of such Property or if required by Buyer,
jointly by such manager and Seller, in form reasonably
acceptable to Buyer and Seller; and
(n) such other documents as may be specifically
required by this Agreement or as may reasonably be required
by Buyer or the Title Insurer to carry out the terms and
intent of this Agreement.
On the Closing Date, and continuing for thirty (30)
days after the Closing, Seller shall make available for
photocopying by Buyer at Buyer's expense, during business hours
and subject to reasonable prior notice from Buyer, any existing
books, records, (including bookkeeping and accounting records)
and currently effective agreements which are located at the
regional offices of Seller's property manager and relate to the
Property. For each Property, at Closing Seller shall provide all
rent roll information in an ASCII format and shall transfer all
<PAGE>
applicable data files and cooperate to facilitate an orderly
transfer of computer files pertaining to each Property.
3.3. BUYER'S CLOSING DELIVERABLES At or prior to
Closing, Buyer shall deliver or cause to be delivered to Escrow
Agent, the following items for delivery or recordation upon close
of escrow:
(a) assumption of the Leases and Service Contracts
with respect to each Property to the extent of the
obligations arising on and after the Closing Date in form
reasonably acceptable to Buyer and Seller;
(b) certificates and resolutions demonstrating the
authority of the persons executing the documents at the
Closing;
(c) the Prepayment Fees by wire transfer;
(d) balance of the Purchase Price by wire transfer;
and
(e) such other documents as may be specifically
required by this Agreement or as may reasonably be required
by Seller or the Title Insurer to carry out the terms and
intent of this Agreement.
3.4. CONTRACTS NOT BEING ASSIGNED. Seller shall not
assign to Buyer and shall cancel as of the close of escrow:
(a) the property management contract for each Property
set forth on Schedule 5, attached hereto; and
(b) any insurance policies, including but not limited
to hazard insurance policies, then in force affecting any
Property.
Buyer acknowledges that the management contracts shall
terminate automatically on the Closing Date in accordance with
that certain side letter agreement dated October 13, 1998, a copy
of which is attached hereto as Exhibit E and agrees that Seller
has no obligation to deliver any further termination agreement or
notice at Closing (but the foregoing acknowledgment and agreement
shall not relieve Seller of its obligation under this Section 3.4
to terminate all property management agreements as of the Closing
Date, at no cost or expense to Buyer, if such agreements are not
terminable or have not been effectively terminated in accordance
with such letter).
<PAGE>
3.5. PRORATIONS. The following shall be apportioned on
a per diem basis as of 12:01 a.m. of the Closing Date
("Adjustment Date") and adjusted between the parties on the basis
of the number of days in the month of the Closing with respect to
each Property for items that are payable on a monthly basis and,
for items that are not paid on a monthly basis, such items shall
be adjusted on the basis of the number of days applicable to such
period, with Seller receiving a credit for all amounts prepaid by
Seller for any period from and after the Closing Date and Seller
charged with any unpaid charges for the period prior to the
Closing Date:
(a) Real estate and other taxes, assessments and
charges, and other municipal and State charges, license and
permit fees, water and sewer rents and charges, if any, on
the basis of the fiscal period for which assessed or
charged;
(b) Water, electric, gas, steam and other utility
charges for service furnished to the Property;
(c) Fuel, if any, and all taxes thereon, on the basis
of a reading taken as close as possible to the Adjustment
Date;
(d) Base rents and any other rental payments (the
"Rents") paid under the terms of the Leases for the month of
Closing or thereafter;
(e) Any amounts paid or payable under any Service
Contracts being assigned to Buyer;
(f) All costs associated with telephone directory
listings and any other prepaid advertising;
(g) Any other customary adjustments made in connection
with the sale of similar type buildings.
There will be no proration of insurance costs at
Closing. Except as may be otherwise provided herein, all other
expenses and liabilities which are attributable to the period
prior to the Closing Date shall be the obligation of Seller and
those which are attributable to the period from and after the
Closing Date shall be the obligation of Buyer. To the extent
there are items of prepaid income, Buyer shall receive a credit
attributable to the period from and after the Closing Date.
3.6. APPORTIONMENT FORMULA. For purposes of the
foregoing apportionments and adjustments, the following
<PAGE>
procedures shall govern with respect to each Property:
(a) Any apportionment of income and expense items
shall be apportioned to the Seller based upon the formula
(the "Apportionment Formula") wherein the numerator is the
number of days in such month that the Property was owned by
the Seller and the denominator is the total number of days
in that month for items that are payable on a monthly basis
and, for items that are not paid on a monthly basis, such
items shall be adjusted on the basis of the number of days
applicable to such period, with Seller receiving a credit
for all amounts prepaid by Seller for any period from and
after the Closing Date and Seller charged with any unpaid
charges for the period prior to the Closing Date. To the
extent there are items of prepaid income, Buyer shall
receive a credit attributable to the period from and after
the Closing Date. In addition, if there were "front-end
fees" paid to Seller under a Service Contract, the amount of
such fee shall be amortized over the term of such Service
Contract and the portion applicable to the period from and
after the Closing Date shall be a credit to Buyer.
(b) If the Closing Date shall occur before the real
estate tax rate is fixed, the apportionment of such taxes
shall be made using the real estate taxes for the
immediately preceding year, with a reapportionment in the
event the new tax rate and valuation can be ascertained
during the Adjustment Period (as hereinafter defined).
(c) If there are water meters on the Property, Seller
shall furnish meter readings to a date not more than thirty
days prior to the Adjustment Date; and the unfixed meter
charges for the intervening time to the Adjustment Date
shall be apportioned based upon estimates using such prior
meter readings, unless final readings therefor as of the
Closing shall have been obtained, in which case such final
readings shall be used for the apportionment. As soon as
the expenses for the period shall be known, Seller and Buyer
shall recalculate the adjustment with the result that Seller
shall pay for those expenses attributable to the period
prior to the Closing Date and Buyer shall pay for those
expenses attributable to the period commencing with the
Closing Date.
(d) The apportionment of utility charges shall be made
upon the basis of charges shown on the latest available
bills for such utilities, unless final meter readings
therefor as of the Closing shall have been obtained, in
which case such final readings shall be used for the
<PAGE>
apportionment. The charges shown on such available bills
for periods prior to the Adjustment Date shall be paid by
Seller, and for the period from the date of each such last
available utility bill to the Adjustment Date an
apportionment shall be made based upon estimates using such
last available bill. As soon as the expenses for the period
shall be known, Seller and Buyer shall recalculate the
adjustment with the result that Seller shall pay for those
expenses attributable to the period prior to the Closing
Date and Buyer shall pay for those expenses attributable to
the period commencing with the Closing Date.
(e) All taxes, water and sewer charges and assessments
for public improvements which are liens upon a Property as
of the Closing Date, will be allowed to Buyer as a credit
against the Allocated Purchase Price for such Property,
subject to apportionment as herein provided, and the
existence of any such lien shall not constitute an objection
to title.
(f) If Buyer collects any non-delinquent Rents after
the Closing which are applicable to the month in which the
Closing occurs, the Seller's pro rata share of such Rents
shall be paid to the Seller promptly upon receipt.
(g) If any tenant is delinquent in the payment of
Rents on the Closing Date, Rents received from such tenant
after the Closing Date shall be applied in the following
order of priority: (a) first to current rentals and any
other amounts currently owed to Buyer; and (b) then to
delinquent rentals with respect to the period before
Closing. If Rents or any portion thereof received by Seller
or Buyer after the Closing Date are payable to the other
party by reason of this allocation, the appropriate sum
shall be promptly paid to the other party
(h) All Security Deposits (required to be held by
Seller under the Leases which have not been applied by
Seller in accordance with the terms of the Leases) shall be
transferred and delivered to Buyer on the Closing Date or,
at Seller's option, credited against the Purchase Price.
Buyer and Seller agree that the provisions of Sections
3.5 and 3.6 shall survive the Closing for a period of ninety (90)
days after the Closing Date ("Adjustment Period"), during which
period Buyer and Seller shall agree on a reconciliation of the
prorations described herein. If the parties cannot agree on a
reconciliation within such ninety (90) day period then such
matter shall be submitted to arbitration in accordance with the
<PAGE>
terms of Section 10 below.
3.7. COSTS. The fees of the Escrow Agent, transfer
taxes, recording fees, standard title insurance premiums for
owner's title policies and all other closing and recording costs
shall be borne equally by Seller and Buyer. Each party shall pay
its own professional fees including but not limited to attorneys'
and accountants' fees, and Buyer shall pay for (i) the cost of
any endorsements or affirmative coverage in connection with the
issuance of title policies, and (ii) any further updates or
modifications to the Surveys requested by Buyer or Buyer's
lender.
3.8. CONDITIONS TO SELLER'S AND BUYER'S OBLIGATION TO
CLOSE. The obligations of Seller and Buyer to close under this
Agreement as to a particular Property are subject to the
fulfillment, prior to or at Closing, of the following:
that there shall not be in effect any statute, regulation,
order, decree or judgment of any governmental entity having
jurisdiction which renders illegal or enjoins or prevents
the sale of such Property to Buyer.
In no event shall the failure of this condition as to a
particular Property be a condition to Buyer's or Seller's
obligations hereunder with respect to another Property.
3.9. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The
obligations of Seller to close under this Agreement are subject
to the fulfillment, prior to or at Closing, of each of the
following (all or either of which may be waived in writing by
Seller):
(a) The representations and warranties of Buyer herein
as set forth in Section 7.4 shall have been true and correct
in all material respects when made and shall be true and
correct in all material respects as of the Closing Date, as
if made at and as of such date except as otherwise expressly
provided herein.
(b) On and as of the Closing Date, Buyer shall have
performed and complied with, in all material respects, all
agreements and covenants required by this Agreement to be
performed or complied with prior to or on the Closing Date.
3.10. CONDITIONS TO BUYER'S OBLIGATION TO CLOSE.
The obligations of Buyer to close under this Agreement are
subject to the fulfillment, prior to or at Closing, of the
following (all or any of which may be waived in writing by
<PAGE>
Buyer):
(a) The representations and warranties of Seller, as
set forth in Section 7.3 herein, shall have been true and
correct in all material respects when made and shall be true
and correct in all material respects as of the Closing Date,
as if made at and as of such date except as otherwise
expressly provided herein.
(b) On and as of the Closing Date, Seller shall have
performed and complied with, in all material respects, all
agreements and covenants required by this Agreement to be
performed or complied with prior to or on the Closing Date.
(c) On the Closing Date, (i) the Title Insurer
(hereafter defined) shall be unconditionally obligated and
prepared, subject to the payment of the applicable title
insurance premium and other related charges, to issue to
Buyer an owner's title insurance policy for the Property in
compliance with the Title Commitments (hereafter defined),
free and clear of all mortgages (including all of the
Mortgages), liens, encumbrances, easements, leases,
conditions and other matters affecting title other than
matters created or granted by Buyer and the Permitted
Exceptions (hereafter defined), and (ii) the Seller shall
have delivered the Gap Undertaking to the Title Insurer.
(d) As of the Closing Date, Seller shall not have
commenced (within the meaning of any Bankruptcy Law) a
voluntary case, nor shall there have been commenced against
Seller an involuntary case, nor shall Seller have consented
to the appointment of a Custodian of it or for all or any
substantial part of its property, nor shall a court of
competent jurisdiction have entered an order or decree under
any Bankruptcy Law that is for relief against Seller in an
involuntary case or appointed a Custodian of Seller for all
or any substantial part of its property. The term
"Bankruptcy Law" means Title 11, U.S. Code, or any similar
state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
3.11. ESCROW FOR SURVIVING WARRANTIES AND
AGREEMENTS. On the Closing Date, the Seller shall deposit with
the Escrow Agent, pursuant to an escrow agreement in the form
attached hereto as Exhibit G executed by Buyer, Seller and the
Escrow Agent, an amount equal to One Million Six Hundred Fifty
Thousand and 00/100 Dollars ($1,650,000.00) (the "Post-Closing
Escrow") as security for the obligations of Seller arising from a
<PAGE>
breach of a surviving representation, warranty, covenant or
agreement of Seller under this Agreement. The Post-Closing
Escrow shall be reduced proportionally in the event that a
Closing does not occur with respect to a particular Property
based on the ratio that such Property bears to the Purchase Price
(prior to reduction as a result of the termination of this
Agreement as to such Property). The Buyer's right to claim all
or any portion of the Post-Closing Escrow shall terminate ninety
(90) days after the Closing, upon which termination the balance
of the Post-Closing Escrow (less any amounts in dispute), if any,
shall be returned to Seller.
4. POSSESSION AND RISK OF LOSS PRIOR TO CLOSING.
4.1. CASUALTY. In the event of physical damage to a
Property or destruction thereof due to a casualty (a "Casualty"),
affecting all or any part of a Property, without fault of Buyer,
prior to the Closing Date, Seller and Buyer agree as follows with
respect to such damage or destruction, specifically exclusive of
non-physical losses such as business losses incidental thereto:
(a) If, prior to the Closing Date, a Property is
damaged due to a Casualty and the cost of repairing such
damage, as is reasonably determined by an independent
engineer and appraiser selected by Seller (the "Repair
Cost") is less than One Million and 00/100 Dollars
($1,000,000.00), then Seller and Buyer shall proceed to
close the sale of all of the Property without any abatement
of the Purchase Price, provided however that Seller shall,
at Seller's election, either: (i) repair the Casualty to
such Property prior to Closing at Seller's expense or (ii)
assign to Buyer at Closing, without recourse or warranty of
any nature whatsoever, all of Seller's right, title and
interest in and to any casualty insurance policies covering
such Casualty with respect to the Property, and Seller shall
pay to Buyer the deductible plus any uninsured amounts plus
all payments theretofore made by such insurers as a result
of such loss after deducting therefrom the costs of
collection thereof (an "Assignment of Proceeds").
(b) If, prior to the Closing Date, any Property is
damaged due to a Casualty and the Repair Cost equals or
exceeds One Million and 00/100 Dollars ($1,000,000.00), then
Seller shall have the option to: (i) repair the Casualty to
such Property prior to Closing or (ii) terminate this
Agreement in its entirety, upon which termination, provided
that Buyer is not in default hereunder, Buyer's Earnest
Money shall be returned to Buyer. Notwithstanding anything
herein to the contrary, Seller shall have the right to
<PAGE>
adjourn the Closing Date as to such Property for such
reasonable period as shall be necessary to repair any such
Casualty, not to exceed one hundred eighty (180) days.
(c) If more than one Property is to be acquired
pursuant to this Agreement and the Repair Cost as to a
particular Property equals or exceeds One Million and 00/100
Dollars ($1,000,000.00) such damaged Property may, at
Seller's election, be removed from this Agreement and this
Agreement terminated as to such Property, upon written
notice from Seller to Buyer. In the event of such a
termination, provided that Buyer is not in default
hereunder, Buyer's Allocated Earnest Money as to such
Property shall be returned to Buyer at Closing. If Seller
elects to remove a Property from this Agreement and
terminate this Agreement as to such Property, or to
terminate this Agreement in its entirety due to a Casualty
as described in this Section 4.1, then Buyer shall have the
option, to be exercised by delivering written notice to
Seller of such election within ten days after Buyer's
receipt of written notice of Seller's election, to accept
all of the Property together with an Assignment of Proceeds
with respect to the affected Property.
4.2. CONDEMNATION. If, prior to the Closing Date, all
or any portion of the Property is condemned or taken by eminent
domain, then this Agreement shall nevertheless remain in full
force and effect without any abatement of the Purchase Price. In
such event, Seller shall convey the Property to Buyer at the
Closing in its then condition, and Buyer shall be entitled to
receive all net or condemnation awards otherwise payable to
Seller as a result of such loss or damage and, in full
satisfaction of any claims by Buyer against Seller, Seller shall
assign to Buyer at Closing, without recourse or warranty of any
nature whatsoever, all of Seller's right, title and interest in
and to any claims Seller may have to any condemnation awards, as
well as all rights or pending claims of Seller with respect to
such condemnation or taking of the Property, and Seller shall pay
to Buyer all payments theretofore made by such condemning
authorities as a result of such loss after deducting therefrom
the costs of collection thereof.
5. TITLE.
5.1. PRELIMINARY TITLE REPORT, COMMITMENT AND SURVEY.
Seller has provided or otherwise made available to Buyer with
respect to each Property: a copy of a preliminary title report
or a commitment for an ALTA (or the equivalent in the applicable
jurisdiction) policy of Owner's title insurance (each a "Title
<PAGE>
Commitment", collectively, the "Title Commitments") issued by
First American Title Insurance Company or a comparable national
title insurance company selected by Seller (the "Title Insurer")
and a copy of the current survey(s) prepared by licensed public
land surveyors according to ALTA standards (each a "Survey",
collectively, the "Surveys"). Buyer has agreed to accept each
Property subject to any and all exceptions to title insurance
coverage contained on the related Title Commitment, including,
but not limited to any exceptions to coverage based upon matters
shown on the related Survey, (collectively, the "Initial
Exceptions"). Upon Closing, each said Title Commitment shall
show fee simple title to the related Property as vested in Seller
subject to (i) all of the Initial Exceptions previously shown in
such Title Commitment at time of execution of this Agreement,
(ii) any New Title Exceptions (defined herein) which are not
identified as Title Defects by Buyer in accordance with the
provisions hereof, and (iii) any Title Defects which are waived
in writing by Buyer (clauses (i), (ii) and (iii) collectively,
the "Permitted Exceptions"). Notwithstanding the foregoing, the
Permitted Exceptions shall not include any of the Mortgages,
Voluntary Liens or mechanic's liens or the "standard" exceptions
except that (i) the standard exception for "parties in
possession" shall be a Permitted Exception if modified by the
Title Insurer to provide materially for "rights of tenants, as
tenants only, under unrecorded leases," and (ii) such standard
exceptions shall be Permitted Exceptions if the deletion is not
permitted under applicable law or will not be removed upon
delivery by the Seller of the Title Insurer's owner's affidavit
in the form attached hereto as Exhibit H and an ALTA survey
certified to the Title Insurer.
If after the date hereof and prior to the time of
Closing, Buyer receives written updates to said Title Commitments
to include any new exceptions which were not previously shown
therein, including, but not limited to, any new exceptions based
upon Survey updates, Buyer shall deliver to Seller within 10
business days of the delivery of said updated Title Commitments
written notice setting forth its objections to any new matter
encumbering any Property (each a "New Title Exception") which,
taken alone or in the aggregate with other New Title Exceptions
encumbering such Property, impairs such Property's current use or
value (each a "Title Defect"). Seller shall have the option to:
(i) cure any Title Defect prior to Closing or (ii) terminate this
Agreement in its entirety, upon which termination, provided that
Buyer is not in default hereunder, Buyer's Earnest Money shall be
returned to Buyer. Notwithstanding anything herein to the
contrary, Seller shall have the right to postpone the Closing
Date for such reasonable period as shall be necessary to cure any
Title Defect not to exceed sixty (60) days. If more than one
<PAGE>
Property is to be acquired pursuant to this Agreement and Seller
elects not to cure a Title Defect with respect to a Property,
such Property may be removed from this Agreement and this
Agreement terminated as to such Property. In the event of such a
termination, provided that Buyer is not in default hereunder,
Buyer's Allocated Earnest Money as to such Property shall be
returned to Buyer at Closing. If Seller elects to terminate this
Agreement in its entirety or with respect to a particular
Property due to a Title Defect as described in this paragraph,
then Buyer shall have the option to waive such Title Defect and
accept the Property subject to the applicable Title Defect
provided however that Buyer exercise such option in writing
within ten (10) business days of Seller's notice of said
election.
5.2. PERMITTED EXCEPTIONS. Subject to the terms and
conditions of this Agreement, Buyer agrees to accept each
Property subject to the Permitted Exceptions. Notwithstanding
anything herein to the contrary, in no event or circumstances
shall a Title Defect (except for liens and encumbrances created,
granted or assumed pursuant to one or more instruments executed
by Seller ("Voluntary Liens")) and mechanic's liens) include any
title exception or matter encumbering the Property the cost of
which to cure or reduction in value is, when aggregated with any
other Title Defect for such Property, less than or equal to Fifty
Thousand and 00/100 Dollars ($50,000.00), provided however that
should the cost to cure the New Title Exceptions (except for
Voluntary Liens and mechanic's liens) or reduction in value with
respect to a particular Property, in the aggregate ("Aggregate
Curative Cost"), be greater than Fifty Thousand and 00/100
Dollars ($50,000.00) then: Buyer may send a written notice
setting forth its objections to such exceptions or matters
pursuant to the same notice requirements provided in Section 5.1
above and if Seller elects to cure such New Title Exceptions
pursuant to Section 5.1 (i) above, Seller shall be obligated to
cure only such New Title Exceptions (except for Voluntary Liens
and mechanic's liens) such that the resulting Aggregate Curative
Cost for the uncured New Title Exceptions objected to by Buyer
with respect to a particular Property will be an amount less than
or equal to Fifty Thousand and 00/100 Dollars ($50,000.00). In
lieu of curing any New Title Exception, which Seller may elect to
eliminate under this Agreement, Seller may (subject to Buyer's
reasonable approval other than with respect to mechanics liens)
deposit with the Title Insurer such amount of money as may be
determined by the Title Insurer as being sufficient to induce the
Title Insurer, without the payment of any additional premium by
Buyer, to omit such New Title Exception from Buyer's title
insurance policy. Notwithstanding the foregoing, Seller shall
not be obligated, under any circumstances, to cure any exception
<PAGE>
or matter encumbering the Property other than Voluntary Liens or
mechanics liens.
5.3. RESOLUTION OF TITLE ISSUES. Buyer and Seller
shall make reasonable efforts to agree as to the existence of any
Title Defect. If the Seller and Buyer do not agree on the
foregoing within fifteen (15) days after Seller's receipt of
Buyer's notice described in Section 5.1 above, then the Parties
shall submit the matter to binding arbitration in accordance with
the terms of Section 10 below.
5.4. TITLE INSURANCE POLICY. Seller's obligations to
deliver title to the Property shall be satisfied by the issuance
of a extended coverage owner's title insurance policy with
respect to each Property issued by the Title Insurer, insuring
Buyer in the amount of the Allocated Purchase Price for such
Property and showing the Property to be subject to the Permitted
Exceptions.
6. BROKER. Each of the parties warrants to the other
that no broker, salesman or agent has been engaged or used in
connection with this transaction. To the fullest extent
permitted by law, each party agrees to indemnify the other party
against any and all loss, claims, liability, and expense,
including reasonable attorneys' fees, arising out of any claim
for commission or fee incurred or allegedly incurred by the
indemnifying party.
The provisions of this Section 6 shall survive the
Closing.
7. SELLER'S DISCLAIMERS; REPRESENTATIONS,
COVENANTS AND WARRANTIES.
7.1. PROPERTY SOLD "AS IS" WITHOUT WARRANTY. Except as
may be otherwise expressly provided in this Agreement or the
Closing Documents, Buyer agrees and acknowledges that Buyer is
purchasing the Property "AS IS", in its existing condition and
subject to its present defects (including, but not limited to,
the matters raised in the letter dated March 3, 1999 from The Las
Colinas Association with respect to the Property known as
MacArthur Park, Irving, Texas (the "MacArthur Estoppel")), in
reliance on Buyer's own investigation and that no other
representations or warranties of any kind whatsoever, written or
oral, express or implied, have been made by Seller or the
Protected Group, including without limitation representations
relating to zoning, site and physical conditions, toxic and
hazardous materials or waste, soils content, or any matter
affecting the ability of the Buyer to use the Property or the
<PAGE>
suitability of the Property to Buyer's purposes. Buyer further
acknowledges and agrees that as of the Closing Date, Buyer shall
have investigated, inspected, and made itself aware of all zoning
regulations, other governmental requirements, site and physical
conditions, the existence or nonexistence of toxic or hazardous
materials or waste, soil conditions, and other matters affecting
the use and condition of the Property.
Additionally and specifically, except as may be
otherwise expressly provided in this Agreement or the Closing
Documents, Seller makes no representation whatsoever, express or
implied: (a) that the Property is in good or any other
condition; (b) that the buildings and other Improvements, if any,
were built or are currently in compliance with plans and/or
specifications; (c) that the buildings and other Improvements, if
any, were built in accordance with either good or acceptable
construction and/or engineering practices; (d) that the buildings
and other Improvements, if any, were built or are currently in
compliance with applicable zoning or building code requirements
including, but not limited to applicable safety codes or laws and
the Americans with Disabilities Act or any State or local law
concerning disabled persons; (e) that the Property is free of
major or minor, latent or patent defects; (f) that the Property
has no hazards; (g) that the Property complies with Federal,
State or local laws or any other standards regarding toxic,
hazardous or unhealthful materials; (h) that the Property
complies with Federal, State and local environmental laws; (i) as
to the existence of soil instability, past soil repairs, soil
additions or conditions of soil fill, or susceptibility to
landslides; and (j) as to any other matter affecting the
stability or integrity of the land or any buildings or
improvements situated on or part of the Property.
Without limiting the generality of the foregoing, Buyer
agrees to purchase the Property subject to any and all notices of
violations of law or municipal ordinances, orders or requirements
whatsoever noted in or issued by any federal, state, municipal or
other governmental department, agency or bureau having
jurisdiction over the Property (collectively, "Violations"), or
any lien, fine or penalty imposed in connection with any of the
foregoing, or any condition or state of repair imposed in
connection with any of the foregoing, or any condition or state
of repair or disrepair or other matter or thing, whether or not
noted, which, if noted, would result in a Violation being placed
on the Property. Seller shall have no duty to remove or comply
with or repair any such Violations, liens or other conditions and
Buyer shall accept the Property subject to all such Violations
and liens, the existence of any conditions at the Property which
would give rise to such Violations or liens, if any, and any
<PAGE>
governmental claims arising from the existence of such Violations
and lien, in each case without any abatement of or credit against
the Purchase Price. Notwithstanding the foregoing, in connection
with any Violations that are issued after the date of this
Agreement, but on or prior to the Closing Date, (i) any liens,
fines and/or penalties imposed on the Property after the date of
this Agreement, but on or prior to the Closing Date, by reason of
the existence of such Violations and (ii) any cure costs
associated with such Violations with respect to a particular
Property shall be addressed in the same fashion in which New
Title Exceptions are addressed hereunder, and Seller's and
Buyer's respective rights and obligations with respect thereto
shall be governed by the provisions of Sections 5.1 and 5.2
hereof. Notwithstanding anything contained herein to the
contrary, the provisions of this Section 7.1 requiring Buyer to
acquire title to the Property subject to a Violation arising from
the non-payment of an item which is to be apportioned hereunder
shall not abrogate the provisions of Sections 3.5 and 3.6
requiring the apportionment thereof or Seller's liability for a
breach of Section 7.3 or Section 11 of this Agreement.
7.2. SELLER UNDER NO DUTY TO DISCLOSE CONDITION.
Except as provided in Section 7.3 or Section 11, Buyer
acknowledges and agrees that Seller and the Protected Group shall
have no duty to disclose to Buyer any information known to them,
or any of them, concerning the condition of the Property, defects
in the Property, failure of the Property to comply with plans,
specifications, building codes, life safety codes, safety laws,
hazardous materials, environmental laws or any other laws or
codes or construction standards affecting the Property. If any
duty to disclose exists, Buyer expressly waives that duty as to
all of the above-referenced persons and entities. Without
limiting the foregoing if any information is disclosed to Buyer,
except as provided in this Agreement, Seller makes no
representation or warranties whatsoever with respect to the
accuracy or completeness of any information provided to Buyer.
Buyer has conducted its own independent investigation.
7.3. SELLER'S REPRESENTATIONS. Seller represents,
covenants and warrants to the Buyer as of the date hereof and the
Closing Date (each of which is being relied upon by Buyer and
each of which shall survive Closing for a period of ninety (90)
days) that:
(a) Organization and Authorization. Prudential-Bache/A.G.
Spanos Genesis Income Partners L.P., I is a
limited partnership duly organized and validly existing
under the laws of the State of Delaware. A.G. Spanos
Construction, Inc. is a corporation duly organized and
<PAGE>
validly existing and in good standing under the laws of the
State of California. The execution and delivery of this
Agreement and the transactions contemplated hereby have been
authorized by all requisite corporate and limited
partnership action of Seller and the general partners of
Seller.
(b) No Conflicting Agreements. The execution and
delivery by Seller of, and the performance of and compliance
by Seller with, the terms and provisions of the this
Agreement do not (i) conflict with, or result in a breach
of, the terms, conditions or provisions of, or constitute a
default under, the organizational and governing documents or
any other agreement or instrument to which Seller is a party
or by which all or any part of the Property is bound, (ii)
violate any restriction, requirement, covenant or condition
to which all or any part of the Property is bound, (iii)
constitute a violation of any judgment, decree or order
applicable to Seller or specifically applicable to a
Property, or (iv) require the consent, waiver or approval of
any third party which has not been obtained by Seller which,
in the aggregate, would have an adverse effect on Seller's
ability to perform its obligations hereunder.
(c) Leases. As of the date(s) of the rent rolls
attached hereto as Schedule 6 (the "Rent Rolls"), there were
no written or oral leases, license agreements, occupancy
agreements or tenancies for any space in the Real Property
other than the leases set forth on the Rent Rolls. Seller
has delivered to Buyer a true, correct and complete copy of
the form of lease used for the Property and has delivered or
made available prior to the date of this Agreement, true,
correct and complete copies (including all amendments and
modifications) of each lease set forth on the Rent Rolls.
The listing of arrearages of rent payable by tenants set
forth on the Rent Rolls, as set forth in the delinquency
reports attached hereto as Schedule 6, were true and
accurate as of the date(s) of such delinquency reports.
Seller has the sole right to collect rent under each Lease
and such right has not been assigned, pledged, hypothecated
or otherwise encumbered, except for an assignment as
security for the payment of any Loan that Seller shall use a
portion of the Purchase Price to repay in full at or prior
to settlement hereunder.
(d) Service Contracts. To the actual knowledge of
Seller, all Service Contracts which will be assigned to
Buyer at Closing are set forth on Schedule 4, and a correct
copy of each Service Contract was made available to Buyer
<PAGE>
prior to the date of this Agreement.
(e) Management and Leasing Agreements. On the Closing
Date, there will be no contracts or agreements in effect
with any party for the management or leasing of the Property
which will be binding upon Buyer.
(f) Litigation. Except for the Litigation and the
matters set forth on Schedule 7, Seller has not received
written notice of any actions, suits or claims pending
against or affecting the Property or any part thereof. The
Seller has made available to Buyer a correct copy of the
Stipulation of Settlement with Spanos Defendants dated as of
May 12, 1997, and such stipulation is in full force and
effect and has not been modified in any way that would
affect the transactions contemplated by this Agreement. The
Seller has not received any notice that any such action,
suit or claim is threatened. Except as may relate to the
Litigation, the Seller is not operating under or subject to
any order, writ, injunction or decree that relates to the
Property or any part thereof.
(g) Environmental Reports. The environmental reports
referred to in Schedule 8 are all the material reports in
Seller's possession dealing with environmental matters
relating to the Property that were prepared during the past
five years. Except as disclosed in such reports, Seller has
not received from any governmental body having authority any
material written complaint, order, citation or violation
notice with regard to air emissions, water discharges, noise
emissions and hazardous or toxic materials or substances, if
any, or any other environmental matters affecting the
Property or any part thereof.
(h) FIRPTA. Seller is a "United States person" within
the meaning of Sections 1445(f)(3) and 7701(a)(30) of the
Internal Revenue Code of 1986, as amended.
(i) Personal Property. Seller has good title to all
the Personalty and the execution and delivery to Buyer of
the Bill of Sale required by Section 9(b)(ii) shall vest
good title to all of the Personalty in Buyer, free and clear
of liens, encumbrances and adverse claims (except for liens
that will be discharged as of the Closing Date).
(j) Operating Statements. The operating statements
for the Property delivered by Seller to Buyer prior to the
execution of this Agreement are not inconsistent with any
other cash basis operating statements for the Property for
<PAGE>
the operating period to which they relate that have been
prepared by or for Seller.
(k) Engineering Reports. The reports referred to in
Schedule 9 attached hereto are all of the material reports
on the physical and structural condition of the Property
prepared by a licensed engineering firm engaged by Seller
and in Seller's possession that were prepared during the
past five years.
(l) Title. Seller has good, valid and insurable title
to the Real Property together with the Improvements subject
to the Permitted Exceptions.
7.4. BUYER'S REPRESENTATIONS. In consideration of
Seller's entering into this Agreement and as an inducement to
Seller to sell the Property, Buyer makes the following covenants,
representations, and warranties, each of which is material and is
being relied upon by Seller, and each shall survive the Closing:
(a) Buyer's Authority. Buyer is a limited partnership
duly organized and validly existing and in good standing
under the laws of the State of Delaware. Buyer has the
legal power, right and authority to enter into this
Agreement and to consummate the transactions contemplated by
this Agreement;
(b) Buyer's Action. All requisite action (corporate,
partnership, trust or otherwise) has been taken by Buyer in
connection with entering into this Agreement and the
consummation of the transactions contemplated by this
Agreement;
(c) Individual Authority. The individual(s) executing
this Agreement on behalf of Buyer has the legal power,
right, and actual authority to bind Buyer to the terms and
conditions of this Agreement;
(d) Lender Authorization. Neither the execution and
delivery of this Agreement, nor the occurrence of the
obligations set forth in this Agreement, nor the
consummation of the transactions contemplated by this
Agreement, nor compliance with the terms of this Agreement
will (i) conflict with or result in a breach of any of the
terms, conditions, or provisions of, or constitute a default
under, the organizational and governing documents of Buyer,
any bond, note or other evidence of indebtedness or any
contract, indenture, mortgage, deed of trust, loan,
agreement, lease or other agreement or instrument to which
<PAGE>
Buyer is a party or by which any of Buyer's properties may
be bound, (ii) constitute a violation of any judgment,
decree or order applicable to Buyer, or (iii) require the
consent, waiver of approval of any third party which has not
been obtained by Buyer, which, in the aggregate, would have
a material adverse effect on Buyer's ability to perform its
obligations hereunder;
(e) Adequate Funds. Buyer has adequate funds or
available credit resources to pay the Purchase Price at the
Closing Date as provided hereunder;
(f) Sophisticated Buyer. Buyer is an experienced and
sophisticated real property purchaser; and
(g) Representation by Counsel. Buyer has had the
opportunity to confer with counsel of Buyer's choice for a
complete explanation of the meaning and significance of each
provision of this Agreement.
8. INDEMNIFICATION.
8.1. INDEMNIFICATION. To the fullest extent provided
by law, Buyer agrees to indemnify and hold Seller and the
Protected Group harmless from and against all claims, damages,
liabilities, obligations, costs, damages, injuries, losses and
expenses arising (i) out of the Buyer's inspection of the
Property prior to or as of the Closing Date, or (ii) after the
Closing Date as a result of the condition, operation or
management of the Property attributable to Buyer's acts or
omissions. Buyer further agrees to pay for Seller's and the
Protected Group's reasonable costs of defense, including
reasonable attorney fees and expert fees, pertaining to the
foregoing indemnification rights, to be provided by attorneys
reasonably acceptable to Seller and the Protected Group.
The provisions of this Section 8.1 shall survive the
Closing Date.
9. DEFAULT; TERMINATION; LIQUIDATED
DAMAGES AND OTHER REMEDIES.
9.1. IF BUYER FAILS TO COMPLY WITH ITS OBLIGATIONS
UNDER THIS AGREEMENT AND COMPLETE THE TRANSACTION CONTAINED IN
THIS AGREEMENT IN VIOLATION OF THE TERMS HEREOF, THE PARTIES
AGREE THAT SELLER SHALL BE PAID OR RETAIN A SUM EQUAL TO THE
EARNEST MONEY DEPOSIT REQUIRED HEREUNDER, AS LIQUIDATED AND
AGREED UPON DAMAGES AS ITS SOLE REMEDY, WHEREUPON THIS AGREEMENT
SHALL BE NULL AND VOID, AND NEITHER SELLER NOR BUYER NOR ANY OF
<PAGE>
THEIR RESPECTIVE REPRESENTATIVES SHALL HAVE ANY FURTHER RIGHTS OR
OBLIGATIONS HEREUNDER. SUCH AMOUNT IS PRESUMED TO BE THE AMOUNT
OF DAMAGES SUSTAINED BY A BREACH, AS IT WOULD BE IMPRACTICAL OR
EXTREMELY DIFFICULT TO FIX THE ACTUAL AMOUNT OF DAMAGES. IN
PLACING THEIR INITIALS AT THE PLACES PROVIDED, EACH PARTY
SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE
AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO
EXPLAINED THE CONSEQUENCES OF THIS DAMAGES PROVISION AT THE TIME
THIS AGREEMENT WAS MADE.
AUTHORIZED REPRESENTATIVE
OF SELLER'S INITIALS
BUYER'S OR AUTHORIZED REPRESENTATIVE
OF BUYER'S INITIALS
9.2. (a) IF PRIOR TO CLOSING, SELLER DEFAULTS IN ANY OF
THE COVENANTS, AGREEMENTS OR OBLIGATIONS TO BE PERFORMED BY
SELLER UNDER THIS AGREEMENT AT OR PRIOR TO CLOSING AND SUCH
DEFAULT IS NOT CURED BY THE EARLIER OF (A) THE CLOSING DATE OR
(B) THE DATE WHICH IS TEN (10) DAYS AFTER NOTICE OF SUCH DEFAULT
FROM BUYER TO SELLER, THEN, AND IN SUCH EVENT BUYER, AS ITS SOLE
REMEDY THEREFOR, MAY EITHER (1) TERMINATE THIS AGREEMENT BY
WRITTEN NOTICE TO SELLER, WHEREUPON SELLER SHALL REFUND TO BUYER
THE EARNEST MONEY DEPOSIT REQUIRED HEREUNDER, PLUS THE ACTUAL AND
REASONABLE OUT-OF-POCKET COSTS AND EXPENSES INCURRED BY BUYER ON
OR AFTER THE FINAL BID DATE (AS DEFINED HEREIN), UP TO AN
AGGREGATE MAXIMUM OF TWO HUNDRED THOUSAND AND 00/100 DOLLARS
($200,000.00) ("BUYER'S REIMBURSABLE EXPENSES"), AS LIQUIDATED
AND AGREED UPON DAMAGES, WHEREUPON THIS AGREEMENT SHALL BE NULL
AND VOID, AND NEITHER SELLER NOR BUYER NOR ANY OF THEIR
RESPECTIVE REPRESENTATIVES SHALL HAVE ANY FURTHER RIGHTS OR
OBLIGATIONS HEREUNDER AT LAW OF IN EQUITY FOR DAMAGES OR
OTHERWISE, OR (2) SEEK SPECIFIC PERFORMANCE OF SELLER'S
OBLIGATIONS HEREUNDER, WITHOUT ABATEMENT, CREDIT AGAINST OR
REDUCTION OF THE PURCHASE PRICE.
(b) IF ON OR PRIOR TO THE CLOSING DATE, (I) BUYER
SHALL BECOME AWARE OF AN INACCURACY IN ANY REPRESENTATION OR
WARRANTY MADE BY SELLER PURSUANT TO SECTION 7.3 HEREOF (AS MADE
AS OF THE DATE HEREOF) WHICH HAS A MATERIAL ADVERSE EFFECT ON
BUYER OR (II) BUYER SHALL BECOME AWARE OF AN INACCURACY IN ANY
REPRESENTATION OR WARRANTY MADE BY SELLER PURSUANT TO SELLER'S
REPRESENTATION CERTIFICATE (AS MADE AS OF THE CLOSING DATE) WHICH
HAS A MATERIAL ADVERSE EFFECT ON BUYER, THEN, AND IN ANY OF SUCH
EVENTS, BUYER MAY TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO
SELLER, WHEREUPON SELLER SHALL RETURN TO BUYER THE EARNEST MONEY
AND BUYER'S REIMBURSABLE EXPENSES AS LIQUIDATED AND AGREED UPON
DAMAGES, WHEREUPON THIS AGREEMENT SHALL BE NULL AND VOID AND
<PAGE>
NEITHER SELLER NOR BUYER NOR ANY OF THEIR RESPECTIVE
REPRESENTATIVES SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS
HEREUNDER AT LAW OR IN EQUITY FOR DAMAGES OR OTHERWISE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, SELLER SHALL
HAVE THE RIGHT UPON NOTICE TO BUYER, TO SUSPEND SUCH TERMINATION
NOTICE AND TO ADJOURN THE CLOSING FOR SUCH REASONABLE PERIOD AS
SHALL BE NECESSARY TO CURE SUCH INACCURACY TO BUYER'S REASONABLE
SATISFACTION, NOT TO EXCEED SIXTY (60) DAYS FROM THE DATE OF
BUYER'S TERMINATION NOTICE, UPON WHICH CURE BUYER'S TERMINATION
NOTICE SHALL BE DEEMED REVOKED. WITHOUT LIMITING THE GENERALITY
OF THIS SECTION, IN NO EVENT SHALL THE OCCURRENCE OF ANY OF THE
EVENTS OR CIRCUMSTANCES DESCRIBED IN THIS SECTION 9.2(b) GIVE
RISE TO ANY OBLIGATION OF SELLER TO CURE ANY INACCURACY IN ANY
REPRESENTATION OR WARRANTY OR OTHERWISE MAKE SELLER LIABLE FOR
DAMAGES ON ACCOUNT THEREOF. FOR PURPOSES OF THIS SECTION 9.2,
THE PHRASE "MATERIAL ADVERSE EFFECT ON BUYER" SHALL MEAN ONE OR
MORE INACCURACIES IN ANY OF THE REPRESENTATIONS OR WARRANTIES
MADE BY SELLER PURSUANT TO SECTION 7.3 HEREOF OR PURSUANT TO
SELLER'S REPRESENTATION CERTIFICATE WHERE BUYER CAN REASONABLY
DEMONSTRATE THAT THE LIABILITIES, LOSS, CURATIVE COST OR EXPENSE
WITH RESPECT TO A PARTICULAR PROPERTY RESULTING FROM SUCH
INACCURACIES AND FROM ANY NEW TITLE EXCEPTIONS ARE, IN THE
AGGREGATE, MORE THAN FIFTY THOUSAND AND 00/100 DOLLARS
($50,000.00). IN THE EVENT SELLER ELECTS TO CURE SUCH
INACCURACIES OR NEW TITLE EXCEPTIONS, SELLER SHALL BE OBLIGATED
TO CURE ONLY SUCH INACCURACIES AND NEW TITLE EXCEPTIONS SUCH THAT
THE RESULTING AGGREGATE LIABILITIES, LOSS, CURATIVE COST OR
EXPENSE WILL BE AN AMOUNT LESS THAN OR EQUAL TO FIFTY THOUSAND
AND 00/100 DOLLARS ($50,000.00). IF ANY SUCH INACCURACY IN ANY
REPRESENTATION OR WARRANTY UNDER SECTION 7.3 OR PURSUANT TO
SELLER'S REPRESENTATION CERTIFICATE SHALL NOT HAVE A MATERIAL
ADVERSE EFFECT ON BUYER, AS DETERMINED IN ACCORDANCE WITH THIS
SECTION, THEN BUYER SHALL NOT BE ENTITLED TO ANY RIGHT OR REMEDY
UNDER THIS AGREEMENT, AT LAW OR EQUITY, AS A RESULT OF SUCH
INACCURACY, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO TERMINATE
THIS AGREEMENT IF BUYER SHALL BECOME AWARE OF SUCH INACCURACY ON
OR BEFORE THE CLOSING.
(c) ANY DAMAGE AMOUNT TO BE PAID PURSUANT TO THIS
SECTION 9.2 IS PRESUMED TO BE THE AMOUNT OF DAMAGES SUSTAINED BY
A BREACH, AS IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO
FIX THE ACTUAL AMOUNT OF DAMAGES. NOTWITHSTANDING ANYTHING
CONTAINED HEREIN, IN NO EVENT SHALL SELLER (BEYOND ITS INTEREST
IN THE PROPERTY) OR THE PROTECTED GROUP HAVE ANY PERSONAL
LIABILITY UNDER THIS AGREEMENT WHATSOEVER AND BUYER SHALL UNDER
NO CIRCUMSTANCES INITIATE ANY ACTION IN COURT OR BY ARBITRATION
AGAINST THE PROTECTED GROUP UNLESS IT IS PROCEDURALLY REQUIRED BY
LAW TO NAME A MEMBER OF THE PROTECTED GROUP IN ORDER TO INITIATE
SUCH PROCEEDING, WHICH NAMING SHALL NOT ALTER THE ABOVE WAIVERS
<PAGE>
AND LIMITATIONS.
(d) IF SELLER DISCLOSES TO BUYER IN WRITING OR BUYER
DISCLOSES TO SELLER IN WRITING PRIOR TO CLOSING, (I) A DEFAULT IN
ANY OF THE COVENANTS, AGREEMENTS OR OBLIGATIONS TO BE PERFORMED
BY SELLER UNDER THIS AGREEMENT, AND/OR (II) A MATERIAL INACCURACY
IN ANY REPRESENTATION OR WARRANTY OF SELLER MADE IN THIS
AGREEMENT OR PURSUANT TO SELLER'S REPRESENTATION CERTIFICATE, AND
BUYER ELECTS TO PROCEED TO CLOSING, THEN UPON THE CONSUMMATION OF
THE CLOSING, BUYER SHALL BE DEEMED TO HAVE WAIVED ANY SUCH
DEFAULT AND/OR MATERIAL INACCURACY AND SHALL HAVE NO CLAIM
AGAINST SELLER ON ACCOUNT THEREOF. IN PLACING THEIR INITIALS AT
THE PLACES PROVIDED, EACH PARTY SPECIFICALLY CONFIRMS THE
ACCURACY OF THE STATEMENTS MADE IN THIS SECTION 9.2 AND THE FACT
THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE
CONSEQUENCES OF THESE DAMAGES PROVISIONS AT THE TIME THIS
AGREEMENT WAS MADE
AUTHORIZED REPRESENTATIVE
OF SELLER'S INITIALS
BUYER'S OR AUTHORIZED REPRESENTATIVE
OF BUYER'S INITIALS
9.3. TERMINATION. Notwithstanding anything contained
herein, this Agreement may be terminated as follows:
(a) By Seller, if any reductions or adjustments to the
Purchase Price result in the Purchase Price being reduced to
an amount which is less than the purchase price that would
be produced by the final bid submitted by the Spanos
Defendants, as such term is defined in the Stipulation of
Settlement with Spanos Defendants pertaining to the
Litigation;
(b) By Seller or Buyer in accordance with any rights
of termination expressly conferred under the terms of this
Agreement or if any of the applicable conditions precedent
have not been satisfied or waived by the party who is the
beneficiary of such conditions precedent; and
(c) By Seller or Buyer as to all of the Properties, if
a court of competent jurisdiction or arbitrator issues a
binding and final order permanently preventing the sale of
any Property to Buyer.
In the event this Agreement is terminated in its
entirety or as to a particular Property pursuant to any of the
foregoing provisions, this Agreement shall thereupon become null
<PAGE>
and void in its entirety or as to such Property, as applicable,
and neither Seller nor Buyer nor any of their respective
representatives shall have any further rights or obligations
hereunder, provided, however, that the Confidentiality Agreement
and the Indemnification Agreement (each as defined herein) shall
remain in full force and effect. If this Agreement is terminated
as to a particular Property pursuant to the foregoing provisions,
the Purchase Price shall be reduced by an amount equal to the
Allocated Purchase Price for such Property.
10. ARBITRATION.
10.1. ARBITRATION OF DISPUTES.
The parties agree that any controversy or claim arising
out of or related to this Agreement, whether claimed under the
law of tort or the law of contract or any other laws, shall be
submitted to the American Arbitration Association (the
"Association") (or any successor organization) for arbitration.
Notwithstanding the foregoing, the parties shall have the right
to file an action for injunctive relief with a court of competent
jurisdiction to preserve the status quo pending the final
resolution of such arbitration. All arbitration shall be finally
determined in New York City and shall be governed in accordance
with the Rules for Commercial Arbitration of the Association (or
any successor thereto) and the judgment or the award rendered may
be entered in any court having jurisdiction provided that the
judgment or award is based upon the proper interpretation and
application of New York law. Each party shall pay 50% of the
fees and expenses of the Association. If the matter in dispute
arises prior to the Closing Date, the Closing Date shall be
adjourned pending resolution of the matter in dispute. Upon
resolution of such dispute the parties shall take whatever action
is required to be taken pursuant to this Agreement or the final
determination of an arbitrator.
10.2. LIMITATION ON DISCOVERY. In a mutual effort
to expedite the arbitration and limit the cost of dispute
resolutions, the parties agree that there shall be limited
discovery as directed by the arbitrator, and if a party intends
to call its own expert witness or adduce expert testimony, then
that party must notify the other party of the name, address and
all educational background of that witness and provide a complete
(complete means no subsequent data, references or opinions may be
added, referred to or testified to) report describing all of such
expert's investigations, findings and conclusions not later than
sixty (60) days before arbitration. Each party shall, on written
demand, make its expert available for deposition not later than
twenty (20) days before the arbitration hearing. Failure to make
<PAGE>
the expert available for deposition shall permanently preclude
the arbitrator(s) from considering the expert's testimony. The
deposition may not be admitted or used as a substitute for the
live testimony of the expert at the hearing under any
circumstances. The arbitrator(s) shall not have the power to
subpoena any documents, records, reports or writings of either
party.
11. CONDUCT OF BUSINESS. During the period from
January 15, 1999 (the "Final Bid Date") to the Closing Date,
except (i) as Buyer shall otherwise agree, (ii) as necessary in
connection with the transactions contemplated herein, or (iii) as
otherwise permitted under Article 4 hereof, Seller shall operate
the Property in the ordinary and usual course, consistent with
past practice, provided, however, that Seller shall not be
obligated to take any corrective action (or to consent to any
such action by Buyer) with respect to the matters set forth on
the MacArthur Estoppel.
(a) Between Final Bid Date and the Closing Date,
Seller agrees that, without Buyer's written consent in each case,
it will not voluntarily grant, create, assume or permit to be
created any mortgage, lien, encumbrance, easement, covenant,
condition, right-of-way or restriction upon the Property or
voluntarily take or permit any action adversely affecting the
title to the Property as it exists on the date hereof.
(b) Between the date hereof and the Closing Date,
Seller agrees that, without Buyer's prior written consent, it
will not enter into any new leases except in accordance with the
leasing guidelines and credit approval guidelines attached hereto
as Schedule 10.
(c) Between the Final Bid Date and the Closing Date,
the Seller will not remove any material Personalty from the
Property except in the ordinary course of business and provided
such Personalty is replaced with items of the same or better
quality.
(d) Seller will not return any security deposits held
or required to be held by Seller which have been deposited by
tenants with respect to Leases terminating between the date
hereof and the Closing Date unless and until Seller has verified
that all equipment, fixtures and appliances located in the
subject apartment are in working order and the apartment is
otherwise in the condition required for the return of such
deposits under such Leases.
The Provisions of this Section 11 shall survive the
<PAGE>
Closing for a period of ninety (90) days.
12. REASONABLE EFFORTS; PUBLIC ANNOUNCEMENTS. Each
party hereto will use all reasonable efforts to perform all acts
required to consummate the transactions contemplated hereby as
promptly as practicable. Such acts shall include, without
limitation, the provision of any information to and submission of
any filing with any governmental entity having jurisdiction. The
foregoing notwithstanding, except as may be required to comply
with the requirements of any applicable laws or regulations or of
the court with respect to the Litigation and the rules and
regulations of each stock exchange upon which the securities of
one of the parties is listed (including, but not limited to, the
filing of Form 8-K by Seller) and except communications by Seller
to holders of limited partnership interests in Seller (copies of
which will be made available to employees of the general partners
of Seller or their affiliates who, in the case of communications
which include the Purchase Price, shall be informed of Seller's
obligations under this Section 12), no press release or similar
public announcement or communication shall, if prior to the
Closing, be made or caused to be made concerning the execution or
performance of this Agreement, unless the parties shall have
consulted in advance with respect thereto. Subject to the
provisions of Section 13.8(b), Seller's obligations under the
previous sentence shall survive the Closing. In the event Buyer
elected to inspect the Property prior to the Auction, Buyer has
agreed to indemnify and hold Seller harmless with respect matters
relating to such inspections in accordance with a certain
Inspection Indemnification Agreement dated January 7, 1999,
executed by affiliates of Buyer (the "Indemnification
Agreement"). Buyer shall keep such information confidential,
subject to the terms and conditions of the Confidentiality
Agreement dated October 28, 1998, by affiliates of Buyer (the
"Confidentiality Agreement").
13. GENERAL PROVISIONS.
13.1. TIME. Time shall be of the essence of this
Agreement. If any expiration or deadline date falls on a
Saturday, Sunday or legal holiday, it shall be extended to the
next following business day.
13.2. EFFECT OF WAIVER OF PROVISION OR REMEDY. No
waiver by a party of any provision of this Agreement shall be
considered a waiver of any other provision or any subsequent
breach of the same or any other provision, including the time for
performance of any such provision. The exercise by a party of
any remedy provided in this Agreement or at law shall not prevent
the exercise by that party of any other remedy provided in this
<PAGE>
Agreement or at law.
13.3. INTEGRATED ENTIRE AGREEMENT. This Agreement
and the attached exhibits, along with the Confidentiality
Agreement, the Escrow Agreement and the Indemnification Agreement
constitute the entire agreement between the parties relating to
the sale of the Property. Any prior agreements, promises,
negotiations, or representations not expressly set forth in this
Agreement in writing are of no force and effect and may not be
relied upon for any purpose whatsoever by any party to this
Agreement. Any amendment to this Agreement shall be of no force
and effect unless it is in writing and signed by Buyer and
Seller. Any statements or representations made by any person,
whether or not a party to the Agreement, whether or not an
employee or other representative of Seller or Buyer, shall not be
relied upon by either Seller or Buyer and shall not be of any
force and effect for any purpose whatsoever, except for the
statements and representations in this Agreement.
13.4. NO REPRESENTATION REGARDING LEGAL EFFECT OF
DOCUMENT. No representation, warranty, or recommendation is made
by Seller or the Protected Group, or their brokers, respective
agents, employees, or attorneys regarding the legal sufficiency,
legal effect, or tax consequences of this Agreement or the
transaction, and each signatory has had the opportunity to submit
this Agreement to its qualified legal and/or financial advisor
before signing it.
13.5. COUNTERPARTS. This Agreement and all
amendments and supplements to it may be executed in any number of
counterparts, at different places and times, all of which taken
together shall constitute one and the same instrument, which
shall be deemed dated as of the day and year first above written.
Buyer and Seller shall each receive one duplicate original.
13.6. BINDING ON SUCCESSORS. This Agreement inures
to the benefit of, and is binding on, the parties and, without
affecting the limitations of paragraph 9, their respective heirs,
personal representatives, successors, and assigns.
13.7. INTERPRETATION. Titles and headings of
sections of this Agreement are for convenience of reference only
and shall not affect the construction of any provision of this
Agreement. All recitals set forth at the beginning of this
Agreement are, by this reference, fully incorporated into this
Agreement. All exhibits referred to in this Agreement are deemed
fully incorporated herein. As used herein: (a) the singular
shall include the plural (and vice versa) and the masculine or
neuter gender shall include the feminine gender (and vice versa)
<PAGE>
as the context may require; (b) locative adverbs such as
"herein", "hereto", and "hereunder" shall refer to this Agreement
in its entirety and not to any specific section or paragraph; and
(c) the terms "include", "including", and similar terms shall be
construed as though followed immediately by the phrase "but not
limited to". All parties have jointly participated in the
negotiation and drafting of this Agreement, upon advice of their
own independent counsel or have had an opportunity to do so, and
this Agreement shall be construed fairly and equally as to all
parties as if drafted jointly by them.
13.8. SURVIVAL. (a) Except as otherwise expressly
provided in this Agreement, no provision of this Agreement,
(i.e., no representation warranty, covenant, certification,
indemnification, agreement or other obligation set forth in any
provision of this Agreement, in Seller's Representation
Certificate or in Seller's certification of any rent rolls) shall
survive the Closing (and, accordingly, no claim arising out of
the same may be commenced after the Closing), and the delivery
and acceptance of the conveyance deed shall be deemed to be full
performance and discharge of each such representation,
certification, indemnification, warranty, covenant, agreement or
other obligation.
(b) WITH RESPECT TO (I) AN INACCURACY IN ANY REPRESENTATION
OR WARRANTY OF SELLER MADE PURSUANT TO SECTION 7.3 HEREOF (AS
MADE AS OF THE DATE HEREOF) OR AN INACCURACY IN ANY
REPRESENTATION OR WARRANTY OF SELLER MADE PURSUANT TO SELLER'S
REPRESENTATION CERTIFICATE (AS MADE AS OF THE CLOSING DATE)
WHICH, IN ANY CASE, HAS A MATERIAL ADVERSE EFFECT ON BUYER,
EXPRESSLY SURVIVES THE CLOSING PURSUANT TO THIS AGREEMENT AND IS
NOT WAIVED HEREUNDER OR (II) A DEFAULT IN ANY OF THE COVENANTS,
AGREEMENTS OR OBLIGATIONS TO BE PERFORMED BY SELLER UNDER THIS
AGREEMENT (OTHER THAN SECTIONS 3.4, 3.5, 3.6, 6 AND 12) WHICH
EXPRESSLY SURVIVES THE CLOSING AND IS NOT WAIVED HEREUNDER, BUYER
SHALL HAVE, AS ITS SOLE REMEDY THEREFOR, A CLAIM AGAINST SELLER
TO BE SATISFIED SOLELY FROM THE POST-CLOSING ESCROW ON ACCOUNT
THEREOF; PROVIDED THAT (1) ANY SUCH CLAIM NOT BROUGHT WITHIN
NINETY (90) DAYS AFTER THE CLOSING DATE SHALL BE DEEMED WAIVED,
(2) BUYER HEREBY WAIVES THE RIGHT TO COLLECT OR SEEK TO COLLECT
PUNITIVE DAMAGES, (3) IN NO EVENT SHALL SELLER'S AGGREGATE
LIABILITY FOR ANY SUCH CLAIM EXCEED THE AMOUNT OF FUNDS IN THE
POST-CLOSING ESCROW, AND BUYER HEREBY WAIVES THE RIGHT TO COLLECT
OR SEEK ANY AMOUNTS IN EXCESS OF THE AMOUNT OF THE POST-CLOSING
ESCROW, (4) IN NO EVENT SHALL SELLER BE RESPONSIBLE FOR THE FIRST
FIFTY THOUSAND AND 00/100 DOLLARS ($50,000.00) PER PROPERTY OF
LIABILITIES, LOSS, CURATIVE COST OR EXPENSE WITH RESPECT TO ANY
INACCURACIES (IN THE AGGREGATE) DESCRIBED IN CLAUSE (I) ABOVE AND
(5) IN THE EVENT THAT BUYER'S CLAIM IS DETERMINED TO EXCEED THE
<PAGE>
AMOUNT OF THE POST-CLOSING ESCROW, BUYER AGREES TO ACCEPT THE
AMOUNT OF THE POST-CLOSING ESCROW AS LIQUIDATED AND AGREED UPON
DAMAGES, WHEREUPON NEITHER SELLER NOR ANY OF ITS REPRESENTATIVES
SHALL HAVE ANY FURTHER LIABILITIES OR OBLIGATIONS HEREUNDER AT
LAW OF IN EQUITY FOR DAMAGES OR OTHERWISE OTHER THAN SURVIVING
OBLIGATIONS, IF ANY, UNDER SECTIONS 3.4, 3.5, 3.6, 6 AND 12
HEREOF. ANY DAMAGE AMOUNT TO BE PAID PURSUANT TO CLAUSE (5)
ABOVE IS PRESUMED TO BE THE AMOUNT OF DAMAGES SUSTAINED BY A
BREACH, AS IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX
THE ACTUAL AMOUNT OF DAMAGES. BUYER HEREBY WAIVES ALL REMEDIES
WITH RESPECT TO ANY DEFAULT BY SELLER OF ITS OBLIGATIONS UNDER
SECTION 12 HEREOF AND THE CONFIDENTIALITY AGREEMENT WHICH
EXPRESSLY SURVIVE THE CLOSING AND ARE NOT WAIVED HEREUNDER
(INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR MONETARY DAMAGES),
OTHER THAN PURSUIT OF A RESTRAINING ORDER OR INJUNCTIVE RELIEF TO
PREVENT SELLER'S VIOLATION OF SUCH PROVISION TO THE EXTENT
AVAILABLE TO BUYER UNDER APPLICABLE LAW. NOTWITHSTANDING
ANYTHING CONTAINED HEREIN, IN NO EVENT SHALL SELLER (BEYOND ITS
INTEREST IN THE PROPERTY) OR THE PROTECTED GROUP HAVE ANY
PERSONAL LIABILITY UNDER THIS AGREEMENT WHATSOEVER AND BUYER
SHALL UNDER NO CIRCUMSTANCES INITIATE ANY ACTION IN COURT OR BY
ARBITRATION AGAINST THE PROTECTED GROUP UNLESS IT IS
PROCEDURALLY REQUIRED BY LAW TO NAME A MEMBER OF THE PROTECTED
GROUP IN ORDER TO INITIATE SUCH PROCEEDING, WHICH NAMING SHALL
NOT ALTER THE ABOVE WAIVERS AND LIMITATIONS. IN PLACING THEIR
INITIALS AT THE PLACES PROVIDED, EACH PARTY SPECIFICALLY CONFIRMS
THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH
PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES
OF THIS DAMAGES PROVISION AT THE TIME THIS AGREEMENT WAS MADE.
AUTHORIZED REPRESENTATIVE
OF SELLER'S INITIALS
BUYER'S OR AUTHORIZED REPRESENTATIVE
OF BUYER'S INITIALS
(c) For purposes of this Section 13.8, the phrase "material
adverse effect on Buyer" shall mean one or more inaccuracies in
any of the representations or warranties made by Seller pursuant
to Section 7.3 hereof or pursuant to Seller's Representation
Certificate where Buyer can reasonably demonstrate that the
liabilities, loss, curative cost or expense with respect to a
particular Property resulting from such inaccuracies are more
than Fifty Thousand and 00/100 Dollars ($50,000.00). If any such
inaccuracies in any representation or warranty under Section 7.3
or pursuant to Seller's Representation Certificate shall not have
a material adverse effect on Buyer, as determined in accordance
with this Section 13.8 then Buyer shall not be entitled to any
right or remedy under this Agreement, at law or equity, as a
<PAGE>
result of such inaccuracies.
(d) The provisions of this Section 13.8 shall survive
Closing or any termination of this Agreement.
13.9. NOTICES. All elections, notices and demands
required or permitted hereunder shall be given in writing and
shall be delivered either by: personal service or a national
overnight delivery service such as Federal Express. Facsimile
transmission is acceptable provided however that such
transmission shall be followed by next day delivery via one of
the foregoing means of delivery. Notices shall be addressed or
transmitted as appears below for each party; provided, that if
any party gives notice of a change of name or address, notices to
the giver of that notice shall thereafter be given as set forth
in that notice. Notice shall be deemed delivered and effective
upon actual receipt at the following addresses or such other
addresses as the parties may notify each other by similar notice:
If to Seller, to:
Prudential-Bache Properties, Inc.
One Seaport Plaza
199 Water Street - 28th Floor
New York, New York 10292-0116
Attention: Brian J. Martin
Facsimile No.: (212) 214-1422
With a copy to:
Skadden, Arps, Slate, Meagher & Flom, LLP
919 Third Avenue
New York, NY 10022
Attention: Jay Sobel, Esq.
Facsimile No.: (212) 735-2000
If to Buyer, to:
c/o Whitehall Street Real Estate Limited Partnership XI
85 Broad Street
New York, New York 10004
Attention: Mr. Stuart M. Rothenberg
Facsimile No.: (212) 357-5505
With copies to:
Archon Group, L.P.
600 East Las Colinas Blvd.
<PAGE>
Irving, Texas 75039
Attention: Mr. Ernest O. Perry III
Facsimile No.: (972) 830-7644
and
Arent Fox Kintner Plotkin & Kahn, PLLC
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attention: Mark M. Katz, Esq.
Facsimile No.: (202) 857-6395
13.10. PUNITIVE DAMAGES. Each party waives any
claims it may now have or may in the future have arising out of
this transaction for exemplary, punitive and/or penalty damages.
13.11. INSURANCE. Buyer shall be responsible for
obtaining casualty and liability insurance on the Property as of
the Closing Date.
13.12. ASSIGNMENT. Buyer may not assign this
Agreement without Seller's prior written consent except to an
entity controlling, controlled by or under common control with
Whitehall Street Real Estate Limited Partnership XI
("Whitehall"), in which Whitehall directly or indirectly holds
greater than fifty percent (50%) of the ownership interests (an
"Affiliate"). The valid assignment of this Agreement shall not
relieve Buyer of liability under this Agreement, unless to an
Affiliate which assumes all of Buyer's obligations hereunder.
Buyer shall deliver to Seller a copy of any such assignment
together with such additional information regarding the assignee
as Seller may reasonably request not less than ten (10) days
prior to Closing.
13.13. SEVERABILITY. In the event that any
provision of this Agreement, including the arbitration
provisions, is determined to be unlawful then that provision
shall be deemed stricken and the balance of the Agreement shall
be enforceable. If the stricken provision relates to the
arbitration procedure, then the stricken provision shall be
replaced by such provision as is statutorily required.
13.14. ATTORNEYS' FEES, COSTS AND PRE-JUDGMENT
INTEREST. Each party waives any right to claim attorneys' fees,
costs or pre-judgment interest in connection with any dispute or
award concerning this transaction, except as expressly provided
for herein.
13.15. GOVERNING LAW. This contract and the legal
<PAGE>
relations between the parties shall be governed by and construed
in accordance with the substantive laws of the State of New York.
13.16. FURTHER ASSURANCES. Each of the parties
hereto shall, at the request of the other party, execute,
acknowledge and deliver any further instruments, and take such
further actions, as the requesting party may reasonably request,
to carry out effectively the intent of this Agreement. The
provisions of this Section 13.16 shall survive the Closing.
13.17. CAMERON CREEK (TEXAS) AND DEL RIO PROPERTIES.
The ground lease description(s) set forth on Exhibit F, attached
hereto and the modifications and additional provisions set forth
on Schedule 11 attached hereto are incorporated herein.
13.18. THIS AGREEMENT SHALL NOT BE BINDING AND
EFFECTIVE UNTIL EXECUTED BY BOTH BUYER AND SELLER.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed by the parties on
the date first above written.
BUYER:
WXI/SPN REAL ESTATE LIMITED PARTNERSHIP
By: WXI/SPN Gen-Par, L.L.C.,
General Partner
By: /s/ Alan Kava
----------------------
SELLER(S):
PRUDENTIAL-BACHE/A.G. SPANOS
REALTY PARTNERS L.P., I
By: Prudential-Bache Properties, Inc.,
General Partner
By: /s/ Brian J. Martin
--------------------------
By: A.G. Spanos Realty Partners, L.P., a
California limited partnership,
General Partner
By: AGS Financial Corporation,
General Partner
By: /s/ Arthur J. Cole
--------------------------
By: A.G. Spanos Realty Capital, Inc.,
General Partner
By: /s/ Arthur J. Cole
--------------------------
A.G. SPANOS CONSTRUCTION, INC., a
California corporation
By: /s/ Arthur J. Cole
--------------------------
<PAGE>
SCHEDULE 1
PROPERTY NAMES AND LOCATIONS/SELLERS
Mission Trails, San Diego CA
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
Le Parc, Marietta, GA
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
Chelsea Park, Norcross, GA
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
Casa de Fuentes, Overland Park, KS
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
Comanche Place, Overland Park, KS
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
Cypress Pointe, Louisville, KY
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
Del Rio, Albuquerque, NM
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
and
A.G. Spanos Construction, Inc.
Cameron Creek, Fort Worth, TX
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
and
A.G. Spanos Construction, Inc.
MacArthur Park, Las Colinas, TX
Prudential-Bache/A.G. Spanos Genesis Income Partners L.P., I
<PAGE>
SCHEDULE 2
PREPAYMENT FEES
Mission Trails, San Diego, CA
None
Le Parc, Marietta, GA
None
Chelsea Park, Norcross, GA
None
Casa de Fuentes, Overland Park, KS
$17,710
Comanche Place, Overland Park, KS
$19,291
Cypress Pointe, Louisville, KY
None
Del Rio, Albuquerque, NM
None
Cameron Creek, Fort Worth, TX
None
MacArthur Park, Las Colinas, TX
None
<PAGE>
SCHEDULE 3
PURCHASE PRICE AND EARNEST MONEY ALLOCATIONS/
TAX ALLOCATIONS
A. The following sets forth the Allocated Purchase Price and
the Allocated Earnest Money for each of the Properties:
Mission Trails, San Diego CA
$19,177,961
$ 910,825.44
Le Parc, Marietta, GA
$ 8,333,746
$ 395,797.44
Chelsea Park, Norcross, GA
$16,014,789
$ 760,595.84
Casa de Fuentes, Overland Park, KS
$12,413,948
$ 589,579.87
Comanche Place, Overland Park, KS
$12,538,287
$ 595,485.14
Cypress Pointe, Louisville, KY
$19,710,127
$ 936,099.78
Del Rio, Albuquerque, NM
$ 8,627,097
$ 409,729.66
Cameron Creek, Fort Worth, TX
$16,014,789
$ 760,595.84
MacArthur Park, Las Colinas, TX
$13,502,756
$ 641,291.00
<PAGE>
B. The following sets forth the portion of the Allocated
Purchase Price allocated to Personalty for all of the
Properties:
Mission Trails, San Diego CA
$156,000
Le Parc, Marietta, GA
$141,000
Chelsea Park, Norcross, GA
$282,000
Casa de Fuentes, Overland Park, KS
$216,000
Comanche Place, Overland Park, KS
$229,500
Cypress Pointe, Louisville, KY
$333,000
Del Rio, Albuquerque, NM
$186,000
Cameron Creek, Fort Worth, TX
$334,500
MacArthur Park, Las Colinas, TX
$207,000
<PAGE>
SCHEDULE 4
SERVICE CONTRACTS
<PAGE>
SCHEDULE 5
PROPERTY MANAGEMENT CONTRACTS
Mission Trails, San Diego, CA
June 3, 1987
Le Parc, Marietta, GA
June 3, 1987
Chelsea Park, Norcross, GA
June 3, 1987
Casa de Fuentes, Overland Park, KS
June 3, 1987
Comanche Place, Overland Park, KS
June 3, 1987
Cypress Pointe. Louisville, KY
June 3, 1987
Del Rio, Albuquerque, NM
June 3, 1987
Cameron Creek, Fort Worth, TX
June 3, 1987
MacArthur Park, Las Colinas, TX
June 3, 1987
<PAGE>
SCHEDULE 6
(RENT ROLLS/DELINQUENCY REPORTS/
SECURITY DEPOSIT REPORTS)
<PAGE>
SCHEDULE 7
LITIGATION
<PAGE>
SCHEDULE 8
ENVIRONMENTAL REPORTS
Cameron Creek, Fort Worth, TX
10/23/1997
Phase I Environmental Assessment
Casa de Fuentes, Overland Park, KS
12/26/1997
Phase I Environmental Assessment
Chelsea Park, Norcross, GA
10/20/1997
Phase I Environmental Assessment
Comanche Place, Overland Park, KS
12/26/1997
Phase I Environmental Assessment
Cypress Pointe, St. Matthews, KY
12/26/1997
Phase I Environmental Assessment
Del Rio, Albuquerque, NM
10/16/1997
Phase I Environmental Assessment
Le Parc, Marietta, GA
10/20/1997
Phase I Environmental Assessment
MacArthur Park, Irving, TX
10/23/1997
Phase I Environmental Assessment
Mission Trails, San Diego, CA
9/18/1997
Phase I Environmental Assessment
<PAGE>
SCHEDULE 9
ENGINEERING REPORTS
Mission Trails, San Diego, CA
Property Condition Report
Eckland Consultants 9/17/1997
Seismic Report
Eckland Consultants 9/18/1997
Le Parc, Marietta, GA
Property Condition Report
Eckland Consultants 10/20/1997
Chelsea Park, Norcross, GA
Property Condition Report
Eckland Consultants 10/20/1997
Del Rio, Albuquerque, NM
Property Condition Report
Eckland Consultants 10/16/1997
Casa de Fuentes, Overland Park, KS
Property Condition Report
Eckland Consultants 12/26/1997
Comanche Place, Overland Park, KS
Property Condition Report
Eckland Consultants 12/26/1997
Cypress Pointe,St. Matthews, KY
Property Condition Report
Eckland Consultants 12/26/1997
Cameron Creek
Ft. Worth, TX
Property Condition Report
Eckland Consultants 10/23/1997
MacArthur Park
Irving, TX
Property Conditions Report
Eckland Consultants 10/23/1997
<PAGE>
SCHEDULE 10
LEASING AND CREDIT APPROVAL GUIDELINES
<PAGE>
SCHEDULE 11
MODIFICATIONS/ADDITIONAL PROVISIONS
WITH RESPECT TO CAMERON CREEK (TEXAS) AND DEL RIO PROPERTIES
1. Purchase Price Allocation. The Allocated Purchase
Price, or, if the Closing does not occur any Earnest Money
retained by Seller as liquidated damages, shall be further
allocated after the Closing between the fee simple estate and
ground leasehold tenancy in accordance with the following
formula:
a. The Seller of the fee simple interest (the
"Fee Seller") will receive a portion of the
net proceeds equal to its original purchase
price for the land ($3,500,000 for the
Cameron Creek (Texas) Property and $2,000,000
for Del Rio);
b. The Seller of the tenant's interest (the
"Leasehold Seller") under the ground lease
pertaining to the Property identified on
Exhibit F attached hereto (the "Ground
Lease") will receive the balance of the net
proceeds up to a base amount equal to the
appraised value of the land, buildings and
improvements at the time of the Fee Seller's
original public offering ($18,000,000 for
Cameron Creek (Texas) and $10,100,000 for Del
Rio); and
2. Any remaining proceeds will be allocated 42.5% to
the Fee Seller and 57.5% to the Leasehold Seller.
3. Tax Allocation. For the purpose of the Tax
Allocation, all Personalty shall be considered to be the property
of the Leasehold Seller.
4. Representations and Warranties. Under Section
7.3, each Seller represents only as to the fee simple or ground
leasehold estate, as applicable, owned by such Seller.
5. Deliveries. The Fee Seller shall be required to
make the deliveries under Section 3.2(a), (f), (i), (j), (l) and
(n). The Leasehold Seller shall be required to make the
deliveries under Section 3.2 (a) (if required by the Title
Insurer), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l),
(m) and (n). The Fee Seller and the Leasehold Seller shall be
required to make additional delivery of a termination of the
Ground Lease, duly executed and acknowledged by the Fee Seller
and the Leasehold Seller, terminating the Ground Lease as of the
Closing Date.
6. Casualty Covenants. Buyer acknowledges that, as
between Sellers, the responsibility for performance of the
covenants relating to casualty hereunder shall be governed by the
relationship of the Sellers pursuant to the Ground Lease.
7. Notices. The following notice address for the
Leasehold Seller is added to the required notice addressees for
Sellers:
A.G. Spanos Construction, Inc.
1341 West Robinhood Drive
Stockton, California 95207
Attention: Art Cole
Facsimile No.: (209) 478-3415
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache/A.G. Spanos
Genesis Income Partners L.P., I, and is
qualified entirely by reference to such
financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000803399
<NAME> Prudential-Bache/AG Spanos Genesis Income Partners LP I
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Dec-31-1998
<PERIOD-TYPE> 12-Mos
<CASH> 6386116
<SECURITIES> 0
<RECEIVABLES> 512358
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6898474
<PP&E> 101809401
<DEPRECIATION> 36464792
<TOTAL-ASSETS> 72243083
<CURRENT-LIABILITIES> 2489044
<BONDS> 56917509
0
0
<COMMON> 0
<OTHER-SE> 12836530
<TOTAL-LIABILITY-AND-EQUITY> 72243083
<SALES> 17032293
<TOTAL-REVENUES> 17261060
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11511073
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4782635
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 967352
<EPS-PRIMARY> 14.66
<EPS-DILUTED> 0
</TABLE>
