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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number 1-9524
BURNHAM PACIFIC PROPERTIES, INC.
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(Exact name of Registrant as specified in its Charter)
MARYLAND 33-0204162
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
110 WEST A STREET, SAN DIEGO, CALIFORNIA 92101
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(Address of principal executive offices) (Zip Code)
(619) 652-4700
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Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.01 Par Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
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Indicated by check mark 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. X
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At March 29, 2000 the aggregate market value of the Registrant's shares of
common stock, $.01 par value, held by non-affiliates of the Registrant was
$212,421,048
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There were 32,313,546 shares of common stock outstanding at March 29, 2000.
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Part III of this Form 10-K incorporates certain provisions of the Registrant's
Proxy Statement for its 2000 Annual Meeting to be filed subsequently.
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FORWARD LOOKING STATEMENTS AND CERTAIN RISK FACTORS
Certain statements made in this Report are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements include,
without limitation, statements relating to our efforts to pursue strategic
alternatives and property sales, future capital expenditures, financing sources
and availability and the effects of environmental and other regulations, as well
as the costs, timing and effectiveness of addressing year 2000 issues. The words
"anticipate," "assume," "believe," "estimate," "expect," "intend" and other
similar expressions are generally used in the context of forward-looking
statements. Readers should exercise caution in interpreting and relying on
forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond the Company's
control and could materially affect the Company's actual results, performance or
achievements. Factors that could cause actual results, performance or
achievements to differ materially from those expressed or implied by
forward-looking statements include, but are not limited to, the following:
RISK FACTORS RELATING TO AN UNSOLICITED ACQUISITION PROPOSAL AND
OUR PURSUIT OF STRATEGIC ALTERNATIVES
OUR DECISION TO ACTIVELY PURSUE STRATEGIC ALTERNATIVES, AN UNSOLICITED
ACQUISITION PROPOSAL AND OTHER POSSIBLE ACTIONS BY ONE OR MORE OF OUR
STOCKHOLDERS MAY AFFECT OUR ABILITY TO EXECUTE OUR BUSINESS PLAN, RESULT IN
UNANTICIPATED COSTS AND DISTRACT MANAGEMENT.
On June 7, 1999, we received an unsolicited and contingent proposal from
Schottenstein Stores Corporation to negotiate a business combination in which
Burnham would be merged into an acquisition affiliate of Schottenstein Stores
Corporation, and Burnham's common stockholders would receive $13 per share. On
July 12, 1999, Schottenstein Stores Corporation increased the proposed price to
$13.50. On July 23, 1999, after detailed consideration of the proposal by the
Company's Board of Directors, we notified Schottenstein Stores Corporation that
we were not interested in pursuing discussions concerning its unsolicited and
contingent proposal.
On November 19, 1999, we announced that our Board of Directors had instructed
management and Goldman Sachs & Co., Inc. to actively pursue a full range of
strategic alternatives and that we were pursuing all of our opportunities to
maximize stockholder value. We also stated that we had begun to actively
market some of our properties to provide us with additional liquidity and
financial flexibility. As of the date of this report, we continue to pursue
strategic alternatives.
On February 9, 2000, the Board of Directors of the Company held a meeting to
discuss the status of the process being conducted with the assistance of
Goldman, Sachs & Co., Inc. pursuant to which the Company is actively pursuing
all of its strategic alternatives. Goldman Sachs informed the Board that various
entities have submitted preliminary proposals in writing relating to proposed
business combinations with the Company and that some of these entities have
requested more time in which to conduct additional due diligence with respect to
the Company. Goldman Sachs also reviewed with the Board the proposed timetable
and the next steps to be taken in the process. After these discussions, the
Board of Directors decided that it was appropriate to amend the Company's Bylaws
to, among other things, change the date on which the Company is scheduled to
hold its annual meeting of stockholders.
As a result our pursuit of strategic alternatives and the statements made by
some stockholders that they may propose a slate of directors at the next annual
stockholders' meeting, we and others outside the Company face considerable
uncertainty about our ability to implement an ongoing
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business plan and about our future generally. This uncertainty may harm our
business and may result in the loss of business opportunities we would otherwise
pursue. Our management team may be distracted from the day-to-day operations of
our business as a result of this uncertainty and some members of management may
decide to leave their employment with us. This distraction or loss of services
could harm our operations. In addition, the threat of a proxy contest by some
stockholders, or other actions by stockholders, may disrupt our efforts to
pursue strategic alternatives by deterring potential bidders. Finally, we have
incurred and expect to continue to incur significant costs for financial,
advisory, legal and other consulting services expended in pursuing strategic
alternatives.
RISK FACTORS RELATING TO OUR BUSINESS AS A REAL ESTATE INVESTMENT TRUST ("REIT")
AS A REAL ESTATE COMPANY, OUR ABILITY TO GENERATE REVENUES AND PAY DISTRIBUTIONS
TO OUR STOCKHOLDERS IS AFFECTED BY THE RISKS INHERENT IN OWNING REAL PROPERTY
INVESTMENTS.
We derive most of our revenue from investments in real property. Real property
investments are subject to different types and degrees of risk that may reduce
the value of our assets and our ability to generate revenues. The factors that
may reduce our revenues, net income and cash available for distributions to
stockholders include the following:
- local conditions, such as an oversupply of space or a reduction in
demand for real estate in an area;
- competition from other available space;
- the ability of the owner to provide adequate maintenance;
- insurance and variable operating costs;
- government regulations;
- changes in interest rate levels;
- the availability of financing;
- potential liability due to changes in environmental and other laws;
- changes in the general economic climate; and
- potential effects of e-commerce.
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IF BURNHAM'S OPERATING PARTNERSHIP FAILS TO MAKE DISTRIBUTIONS, BURNHAM MAY NOT
BE ABLE TO PAY DIVIDENDS ON ITS STOCK.
Burnham Pacific Operating Partnership, the Company's operating partnership, owns
substantially all of our properties and conducts substantially all of our
business. Accordingly, we pay all of our dividends from distributions we receive
from the operating partnership. We receive distributions as both general partner
and a limited partner owning preferred units and common units of the operating
partnership. Although Burnham, as sole general partner of the operating
partnership, intends to cause the operating partnership to make distributions in
amounts sufficient to enable Burnham to pay dividends to the holders of its
capital stock, if the operating partnership fails to make distributions at any
time, Burnham's ability to pay dividends would be impaired.
WE MAY NOT BE ABLE TO SELL OUR ASSETS IF WE NEED TO DO SO.
Real estate investments are relatively illiquid, and therefore we may not be
able to sell one or more of our properties in order to respond promptly to
changes in economic or other conditions. In addition, the Internal Revenue Code
limits a REIT's ability to earn a gain of the sale of properties held for fewer
than four years. Our inability to sell one or more of our properties could have
a material adverse effect on our performance and may restrict our ability to
make distributions to our stockholders.
WE COULD HAVE FINANCIAL DIFFICULTIES AS A RESULT OF REGIONAL ECONOMIC PROBLEMS.
Our properties presently are primarily located in the western United States,
with the substantial majority in the State of California, primarily in the San
Diego County, greater Los Angeles and San Francisco Bay areas. Economic problems
in these specific areas would harm us more than if our properties were in
diverse locations. The performance of the economy in each locality affects
occupancy, market rental rates and expenses and could lower our revenues and the
underlying values of our properties. Moreover, the financial conditions of major
local employers may have an impact on our revenues and the value of some of our
properties. If there is a downturn in the economy of the western region in
general or in any of these local economies, our results of operations could
suffer and we could be unable to make distributions to our stockholders. In that
regard, we have properties in areas that have been in the past and could be in
the future harmed by the following:
- conditions in the high technology industries; and
- natural disasters, including earthquakes and floods. See "--Our
insurance coverage is limited."
WE COULD HAVE FINANCIAL DIFFICULTIES AS A RESULT OF A DOWNTURN OR OTHER TRENDS
IN THE RETAIL SEGMENT OF THE REAL ESTATE INDUSTRY.
Our strategy has been and continues to be to acquire interests only in retail
shopping centers and other properties that are related to retail shopping
centers. If there is a downturn in the retail industry, or if our tenants are
otherwise harmed by trends in the retail industry we will be in a worse position
to make distributions to our stockholders than if we diversified our portfolio
by investing in other types of properties.
Our performance is linked to economic conditions in the market for retail space
generally. The market for retail space has been and could in the future be
harmed by:
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- the volatile nature of the retail business;
- ongoing consolidation among retailing companies;
- over-expansion of chains in a general market area resulting in
competition among a tenant's own stores;
- weak financial condition of large major retailers;
- excess amount of retail space in some markets;
- increasing consumer purchases through catalogues or the internet; and
- changes in consumer preferences.
These conditions and similar ones may result in tenant failures or changes in
physical requirements, which we may have to accommodate to retain or attract
tenants. Moreover, because many anchor tenants have negotiating power to demand
the exclusive right to sell some types of products in a shopping center, they
could impair our ability to lease space to retailers of potentially competing
products. To the extent that these conditions impact the market rents for retail
space, we could experience a reduction of revenues, and resulting value, of our
properties.
WE COULD LOSE TENANTS OR INVESTMENT OPPORTUNITIES TO OUR COMPETITORS.
Many retail properties compete with our properties in attracting tenants to
lease space. Some of these properties are newer and better located or designed
and may offer lower expenses or be better capitalized than our properties. We
may find it difficult to lease space at our properties or at newly developed or
acquired properties and at rents currently charged as a result of competitive
commercial properties in a particular area. Additionally, we compete for
investment opportunities with entities that have greater financial resources
than ours. These entities may be able to accept more risk than we can prudently
manage. Competition may generally reduce the number of suitable investment
opportunities offered to us and increase the bargaining power of property owners
seeking to sell.
WE COULD HAVE FINANCIAL PROBLEMS AS A RESULT OF OUR TENANTS' FINANCIAL
DIFFICULTY.
At any time, any of our tenants may seek the protection of the bankruptcy laws.
Under the bankruptcy laws, that tenant's lease could be rejected and terminated,
which would cause us to lose rental income. In addition, a tenant from time to
time may experience a downturn in its business which may weaken its financial
condition and result in its failure to make rental payments when due. A tenant's
failure to affirm its lease following bankruptcy or a weakening of its financial
condition could impair our results of operations and ability to make
distributions to our stockholders.
OUR ACQUISITION AND DEVELOPMENT OF REAL ESTATE COULD COST MORE THAN WE
ANTICIPATE.
We have acquired existing retail commercial properties to the extent that we
could acquire those properties on acceptable terms and may continue to do so in
the future. As a result, we could incur higher than anticipated costs for
improvements to these properties to conform them to
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standards established for the intended market position. Once improved, the
properties may not perform as expected.
We have pursued and may continue to pursue commercial property development
projects. Developing properties generally carries more risk than acquiring
existing properties. For example, development projects usually require
governmental and other approvals, which we may not be able to obtain.
Furthermore, approvals frequently require the improvement of public
infrastructure or other activities to mitigate the effects of the proposed
development, which may cost more than we anticipate. Our development activities
will also entail other risks, including the risks:
- that we will devote financial and management resources to projects which
may not come to fruition;
- that we will not complete a development project as scheduled;
- that we will incur higher construction costs than anticipated;
- that occupancy rates and rents at a completed project will be less than
anticipated; and
- that expenses at a completed development will be higher than
anticipated.
The happening of these events could harm our results of operations and impair
our ability to make distributions to our stockholders.
Our failure to integrate newly acquired or developed properties into our
operations efficiently could cause us financial harm and impair our ability to
make distributions to our stockholders.
OUR OPERATIONS WOULD BE AFFECTED IF WE LOST KEY PERSONNEL.
We depend on the efforts of our management team, particularly executive
officers, J. David Martin, our President and Chief Executive Officer, Joseph Wm.
Byrne, our Executive Vice President and Chief Operating Officer, Daniel B.
Platt, our Executive Vice President, Chief Financial Officer and Chief
Administrative Officer, James W. Gaube, our Executive Vice President and Chief
Investment Officer, and Scott C. Verges, our Secretary and General Counsel. Loss
of their services could harm our operations. We have an employment agreement
with Mr. Martin, but that agreement may be terminated by either party at will.
Moreover, in the event that Burnham sought to enforce the terms of that
agreement in the future, a court may determine that it is unenforceable in whole
or in part. As discussed under "Risk factors relating to an unsolicited
acquisition proposal and our pursuit of strategic alternatives", our pursuit of
strategic alternatives may result in members of our management team leaving the
Company.
OUR DEVELOPMENT OF PROPERTIES ACQUIRED FROM J. DAVID MARTIN, OUR CHIEF EXECUTIVE
OFFICER, COULD CREATE CONFLICTS OF INTEREST.
We are currently developing one property and are in the process of leasing two
prior development properties, which we acquired from entities directly or
indirectly controlled by Mr. Martin concurrently with his appointment as
President and Chief Executive Officer in 1995. Mr. Martin personally has an
interest in these development projects, and there could be a conflict between
his duty to act on behalf of Burnham and his personal interest.
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Mr. Martin continues to own an equity interest in each of the partnerships that
own those properties. Burnham is the general partner of those partnerships. Mr.
Martin may receive additional equity in each partnership when each of the
development projects is completed and begins to generate rental income. The
amount of additional equity which Mr. Martin may receive will depend upon
factors that we cannot predict, including the actual cost of each project.
We have adopted procedures to avoid conflicts of interest such as Mr. Martin's
absence from discussions of our Board of Directors that relate to the relevant
properties. However, conflicts of interest could arise despite our efforts to
avoid them.
WE COULD INCUR UNANTICIPATED EXPENSES IF WE FAIL TO QUALIFY AS A REIT.
Burnham has elected to qualify as a real estate investment trust under the
Internal Revenue Code. We believe that since 1987 we have satisfied the REIT
qualification requirements. However, the IRS could challenge our REIT
qualification for taxable years still subject to audit. Moreover, we may fail to
qualify as a REIT in future years. Qualification as a REIT involves the
application of highly technical and complex Internal Revenue Code provisions for
which there are only limited judicial or administrative interpretations. For
example, in order to qualify as a REIT, we must derive at least 95% of our gross
income in any year from qualifying sources, and we must distribute annually to
stockholders 95% of our REIT taxable income, excluding net capital gains. In
addition, REIT qualification involves the determination of factual matters and
circumstances not entirely within our control.
Under its partnership agreement, the operating partnership is obligated to make
available to Burnham funds needed to pay Burnham's tax liabilities. If we were
to operate in a manner that prevented Burnham from qualifying as a REIT, or if
Burnham were to fail to qualify for any reason, a number of adverse consequences
would result. If in any taxable year we fail to qualify as a REIT, we would not
be allowed to deduct distributions to stockholders in computing our taxable
income. Furthermore, we would be subject to federal income tax on our taxable
income at regular corporate rates. Unless entitled to statutory relief, we would
also be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification was lost. As a result, the funds
available for distribution to our stockholders would be reduced for each of the
years involved. Although we currently intend to operate as a qualified REIT,
future economic, market, legal, tax or other considerations may impair our REIT
qualification or may cause our Board of Directors to revoke the REIT election.
See "Federal Income Tax Considerations."
WE COULD INCUR COSTS FROM ENVIRONMENTAL PROBLEMS EVEN THOUGH WE DID NOT CAUSE,
CONTRIBUTE TO OR KNOW ABOUT THEM.
Because we own, operate, develop and supervise the management of real estate,
for liability purposes we may be considered under the law to be an owner or
operator of those properties or as having arranged for the disposal or treatment
of hazardous or toxic substances. As a result, we could have to pay removal or
remediation costs. Federal, state and local laws often impose liability
regardless of whether the owner or operator knew of, or was responsible for, the
presence of the hazardous or toxic substances. The presence of those substances,
or the failure to properly remediate them, may impair the owner's or operator's
ability to sell or rent the property or to borrow using the property as
collateral. A person who arranges for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removing or remediating the
substances at a disposal or treatment facility, whether or not that person owns
or operates the facility. Furthermore, environmental laws impose liability for
release of asbestos-containing materials into the air. If we were ever held
responsible for releasing asbestos-containing
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materials, third parties could seek recovery from us for personal injuries.
Thus, we might have to pay other costs, including governmental fines and costs
related to personal injuries and property damage, resulting from the
environmental condition of our properties, regardless of whether we actually had
knowledge of or contributed to those conditions.
WE COULD ENCOUNTER PROBLEMS AS A RESULT OF USING DEBT TO FINANCE ACQUISITIONS.
We borrow money to pay for the acquisition, development and operation of
properties and for other general corporate purposes. By borrowing money, we
expose ourselves to several problems, including the following:
- inability to repay debt when due;
- reduced access to additional debt; and
- loss of our property securing any defaulted debt.
The Company currently maintains a credit facility with CMF Capital Company, LLC
(a subsidiary of General Electric Capital Corporation) in the maximum amount of
$176,263,000, which is secured by various mortgages. At December 31, 1999,
borrowings of approximately $138,420,000 were outstanding. Borrowings under this
facility bear interest at the London Interbank Offer Rate ("LIBOR") plus 2.50%
per annum. The facility is scheduled to mature in November 2000, and is subject
to various loan covenants. The Company intends to refinance the facility with
either CMF Capital Company or another lender prior to the maturity date. The
Company also maintains a $5,000,000 unsecured revolving credit facility with a
bank. At December 31, 1999, there was no outstanding indebtedness under this
facility. The facility bears interest at a rate of LIBOR plus 2.00% per annum
and is scheduled to mature in September 2000.
Our credit facilities require that we comply with covenants relating to our
financial condition. In addition, we have pledged a substantial portion of our
properties as collateral to secure loans, including borrowings made under the
credit facility with CMF Capital Company. We may not be able to meet our debt
service obligations, including as a result of higher interest rates affecting
our variable rate debt, or to comply with the terms of our debt instruments. As
a result, our lenders may be entitled to demand immediate repayment of the
related indebtedness and to commence foreclosure proceedings against the
property securing the indebtedness.
Some of our debt is cross-collateralized and subject to cross-default
provisions. If we default on a cross-collateralized loan, the holder of the debt
may be able to foreclose not only on the properties which secure that loan but
on other properties as well. A default on a cross-defaulted loan will be
automatically deemed a default under other loans. Defaults on
cross-collateralized and cross-defaulted loans could cause us to lose some or
all of our assets and limit our ability to generate revenues and pay
distributions to our stockholders. Cross-collateralization and cross-default
provisions create the possibility that our inability to make payments on one
loan may affect other loans, including loans for which we are meeting our
payment obligation.
Furthermore, a downturn in the economy could make it difficult for us to borrow
money on favorable terms. If we were unable to borrow, we might need to sell
some of our assets at unfavorable prices to enable us to repay some of our
loans. We could encounter several problems, including:
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- insufficient cash flow necessary to meet required payments of principal
and interest;
- an increase of variable interest rates on indebtedness; and
- the inability to refinance existing indebtedness on favorable terms or
at all.
Other than indebtedness under our credit facilities, our mortgage indebtedness
is generally nonrecourse to us. However, even with respect to nonrecourse
mortgage indebtedness, we could be obligated to pay our lenders for deficiencies
resulting from, among other things, fraud, misapplication of funds and
environmental liabilities.
WE COULD SUFFER FINANCIAL LOSSES AND PHYSICAL HARM TO OUR PROPERTIES IF OUR
OUTSIDE PROPERTY MANAGERS PERFORM INADEQUATELY.
We have decided to expand our use of third party property managers and reduce
our internal property management resources. As a result, we have recently
retained property management firms in the markets where our properties are
located. If those third party managers perform inadequately, we could suffer
financial harm resulting from unsatisfactory maintenance of our properties,
dissatisfied tenants, and the expenditure of financial and management resources
to remedy any problems and to locate and transition to new property managers.
BANKRUPTCY REMOTE ENTITIES MAY LIMIT OUR ABILITY TO AVAIL OURSELVES OF THE
PROTECTION OF BANKRUPTCY AND INSOLVENCY LAWS.
Many of our properties are held in subsidiaries that are bankruptcy remote
entities. When we refer to "bankruptcy remote entities," we mean that these
subsidiaries have governance provisions that prohibit or restrict Burnham's
ability to cause them to file proceedings under bankruptcy and insolvency laws.
In the event of a default by a bankruptcy remote subsidiary of the subsidiary's
obligations to its creditors, Burnham may not be able to use the protection of
bankruptcy or insolvency laws to keep creditors from realizing on collateral or
collecting the obligations owed by the subsidiary to the creditors.
OUR INSURANCE COVERAGE IS LIMITED AND MAY NOT COVER LOSSES THAT WE SUFFER.
We have comprehensive general liability coverage and umbrella liability coverage
on all of our properties. We believe that our properties are adequately insured
against liability claims and the cost of defending those claims. Our coverage is
subject to deductibles and to the limitations described below regarding
insurance for losses caused by earthquakes or floods. Similarly, we believe that
our properties are adequately insured on a replacement cost basis, subject to
deductibles, against direct physical damage for costs incurred to repair or
rebuild each property, including loss of rental income during the reconstruction
period. Some types of extraordinary losses, however, either are not insurable or
are not economically insurable. Should any uninsured loss occur, we could lose
our investment in, and anticipated revenues from, a property. An uninsured loss
could harm our business and operations and our ability to make distributions to
our stockholders. We also currently insure some of our properties for loss
caused by earthquake in the aggregate amount of $50 million, subject to
deductibles, and six of our properties for loss caused by flood. Because of the
high cost of this type of insurance coverage and the wide fluctuations in price
and availability, we have determined that the risk of loss due to earthquakes
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and floods does not justify the cost to increase this coverage under current
market conditions. However, we could suffer material harm if an earthquake,
flood or other natural disaster occurs.
ALTHOUGH WE HAVE NOT EXPERIENCED ANY MATERIAL PROBLEMS RELATED TO YEAR 2000
ISSUES, WE MAY EXPERIENCE DELAYED EFFECTS OF YEAR 2000 ISSUES, WHICH MAY DISRUPT
OUR OPERATIONS
Year 2000 computer issues concern the inability of computer systems to
accurately calculate, store or use data after December 31, 1999. These computer
issues may cause our computer systems, or those of our business partners, to
process financial and operational information incorrectly. We have taken action
over the past year to identify and correct these problems.
We believe that our internal systems were Year 2000 compliant as of December 31,
1999 and, to date, we have not experienced any problems related to Year 2000
issues. It is possible, however, that we may experience delayed effects of Year
2000 issues in the next several months. We cannot assure you that our operations
have been, or will be, free from Year 2000 issues in a manner that has not
become apparent to us or that may arise in the future. If our efforts or the
efforts of our business partners failed to adequately address Year 2000 issues,
we could incur costs to correct affected systems. While our Year 2000 compliance
efforts may involve additional costs, we believe that these costs would not have
a material impact on our financial results.
PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS MAY DISCOURAGE
ACQUISITION PROPOSALS.
CHARTER AND BYLAWS. Provisions contained in our charter and bylaws may
discourage third parties from making proposals to acquire us, even if some of
our stockholders consider the proposal to be in their best interest.
These provisions include the following:
- Our bylaws provide that a special meeting of stockholders may be called
by stockholders only when called by stockholders who hold shares
representing a majority of votes entitled to be cast at the meeting.
This provision could make it difficult for a stockholder to call a
meeting for the purpose of approving a change of control without the
support of the Board of Directors.
- Our charter authorizes the Board of Directors to reclassify Burnham's
authorized capital stock without approval of the common stockholders
generally. This may allow the directors to increase the number of shares
of preferred stock presently authorized by a large amount and to
establish the preferences and rights of any class or series issued. As a
result, the Board of Directors could issue a class or series of
preferred stock that would discourage or delay a tender offer or change
in control.
- Our charter generally limits any holder from acquiring more than 9.8% of
the value of our capital stock or number of shares of our outstanding
common stock. This may limit the opportunity for stockholders to receive
a premium for their shares of common stock that might otherwise exist if
an investor were attempting to assemble a block of shares in excess of
9.8% of the outstanding shares of common stock or otherwise effect a
change in control.
- Our Articles Supplementary to our charter prohibit us from taking some
actions, including the merger or consolidation of Burnham or the
operating partnership,
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without the approval of the holders of our preferred stock if the value
of our common stock after those actions would be $15.375 per share or
lower.
OPERATING PARTNERSHIP AGREEMENT. We conduct most of our business through Burnham
Pacific Operating Partnership, L.P., our operating partnership. We are the sole
general partner of the operating partnership and generally have exclusive
management power over its business and affairs. Furthermore, we may not be
removed as general partner of the operating partnership, with or without cause,
by the holders of limited partnership units. As a result of this structure, a
third party may be deterred from making an acquisition proposal that it might
otherwise make.
OUR SHAREHOLDERS RIGHTS AGREEMENT MAY DELAY OR DISCOURAGE ACQUISITION PROPOSALS
PROVIDED THAT PENDING LITIGATION DOES NOT RENDER IT INEFFECTIVE.
On June 19, 1999, following the unsolicited offer by Schottenstein Stores
Corporation to acquire all of our outstanding common stock, we adopted a
shareholder rights agreement. That agreement may discourage Schottenstein Stores
Corporation from pursuing its offer and may discourage other acquisition
proposals in the future, even if some of our stockholders consider the proposals
to be in their best interests. Under the terms of the shareholders rights
agreement, our Board of Directors can in effect delay or prevent a person or
group from acquiring more than 10% of the outstanding shares of our common
stock. This is because, unless our board approves of that person's purchase,
after that person acquires more than 10% of our outstanding common stock, all
other stockholders will have the right to purchase securities from us at a price
that is less than their then fair market value. These purchases by the other
stockholders would substantially reduce the value and influence of the shares of
our common stock owned by the acquiring person. Our Board of Directors, however,
can prevent the shareholder rights agreement from operating in this manner.
Thus, our board has significant discretion to approve or disapprove a person's
efforts to acquire a large interest in us.
On June 23, 1999 (and subsequently amended on September 17, 1999 and January 14,
2000), a class action lawsuit was filed in the Superior Court of the State of
California, County of San Diego, against the Company and its board of directors.
The complaint was purportedly filed on behalf of the public stockholders of the
Company and alleges that the Board of Directors violated their fiduciary duties
to the Company's stockholders by adopting a shareholder rights agreement,
failing to respond to the Schottenstein proposal and adopting severance and
other compensatory arrangements. The plaintiffs seek, among other relief, to
enjoin the adoption of the shareholder rights agreement, but they are not
seeking money damages. The Company believes the complaint is without merit and
has been vigorously defending against the lawsuit. On November 17, 1999, the
Court denied the plaintiffs' request for preliminary injunctive relief. However,
there can be no assurance as to the ultimate outcome of the suit. If the Company
does not prevail, the suit could render the shareholder rights agreement
ineffective, thereby making the Company more vulnerable to unsolicited
acquisition proposals and increasing the possibility that the Company will have
to allocate material amounts of financial and management resources to protect
the Company from unwanted takeover attempts that may not maximize stockholder
value.
RISK FACTORS RELATING TO THE PREFERENTIAL AND OTHER RIGHTS OF THE HOLDERS
OF PREFERRED STOCK TO WHICH THE HOLDERS OF COMMON STOCK ARE SUBJECT
ANTI-DILUTION PROVISIONS OF THE PREFERRED STOCK MAY LEAD TO SUBSTANTIAL DILUTION
OF THE HOLDERS OF COMMON STOCK.
11
<PAGE>
Each share of Burnham's Series 1997-A Convertible Preferred Stock (the "Series A
Preferred Stock") is convertible, at the option of the holder, into a number of
shares of common stock determined by applying a formula set forth in Burnham's
Articles Supplementary that set forth the rights, powers and preferences of the
Series A Preferred Stock. This formula may be adjusted in order to protect
holders of Series A Preferred Stock against dilution of their ownership interest
in Burnham. Any adjustment of the conversion formula entitling holders of Series
A Preferred Stock to more common stock than they otherwise would have received
would dilute the proportionate ownership, voting power and earnings per share of
the holders of common stock.
HOLDERS OF THE SERIES A PREFERRED STOCK MAY CAUSE BURNHAM TO TAKE ACTION
DETRIMENTAL TO THE HOLDERS OF COMMON STOCK OR PREVENT BURNHAM FROM TAKING ACTION
THAT IS BENEFICIAL TO THE HOLDERS OF COMMON STOCK.
The holders of shares of Series A Preferred Stock have the right to vote on all
matters submitted to a vote of the holders of common stock. For purposes of
determining voting results, their shares of preferred stock will be treated as
if they had been converted into common stock and as though part of the same
class of common stock. Upon conversion of all of the Series A Preferred Stock
outstanding as of December 31, 1999 or which may be issued upon redemption of
all of the Series 1997-A Preferred Units of our operating partnership
outstanding as of December 31, 1999 into shares of common stock, the holders of
Series A Preferred Stock would hold approximately 19% of all outstanding shares
of common stock. This concentration of voting control may enable the Series A
stockholders to significantly influence stockholder actions, including the
election of directors.
In addition, the holders of shares of Series A Preferred Stock have specific
rights to prevent Burnham from taking certain actions, including a merger or
consolidation of Burnham or the operating partnership, without their approval if
the value of our common stock after those actions would be $15.375 per share or
less. The holders of shares of Series A Preferred Stock also have the right to
prevent Burnham from amending specified provisions of the Charter, Bylaws or
operating partnership Agreement under specified conditions.
You should note that interests of the holders of the Series A Preferred Stock do
not necessarily coincide with those of the holders of the common stock.
Therefore, actions by the holders of the Series A Preferred Stock may conflict
with and will not necessarily be in the best interests of the holders of common
stock.
THE REGISTRATION AND OTHER RIGHTS OF THE CAPITAL STOCK MAY LOWER THE MARKET
PRICE OF THE SHARES.
The holders of Series A Preferred Stock have registration rights with respect to
the preferred stock and the common stock that may be issued in exchange for
their preferred stock. In addition, the operating partnership has invested in
other real estate partnerships and limited liability companies and has issued
common units of limited partnership interest of our Operating Partnership to a
contributor of another property. Partners in those other limited partnerships
and limited liability companies and the holder of those common units have the
right to have their interests in the partnerships and limited liability
companies redeemed for cash or, at our option, for shares of our common stock.
These partners also have registration rights with respect to the shares of our
common stock that may be issued in exchange for their limited partnership,
limited liability company or operating partnership interests. All of the
registration rights discussed above could lower the market price for our common
stock.
12
<PAGE>
Holders of Series A Preferred Stock also have rights of first offer to purchase
shares of our capital stock which we may offer in the future. These rights of
first offer could lower the market price for our capital stock.
13
<PAGE>
ITEM 1. BUSINESS
GENERAL
Burnham Pacific Properties, Inc. (the "Company") is a real estate operating
company which acquires, rehabilitates, develops and manages retail properties
nationwide. The Company began operations through a predecessor in 1963 and
became a real estate investment trust ("REIT") in 1987. The Company's properties
(the "Properties") are primarily neighborhood and community shopping centers
located in major metropolitan areas. The Company focuses its investments on
shopping centers in mature trade areas with a limited supply of vacant land and
with established consumer shopping patterns.
The Company owns its properties and conducts substantially all of its business
through Burnham Pacific Operating Partnership, L.P., a Delaware limited
partnership (the "Operating Partnership"), of which the Company is the sole
general partner and, as the holder of preferred and common limited partnership
units, the owner of a substantial majority of the economic interests. Other
limited partners of the Operating Partnership are persons who have contributed
interest in properties to the Operating Partnership in exchange for limited
partnership units of the Operating Partnership. On January 1, 1998, the
Operating Partnership became the paymaster and employer of all Company
employees. At December 31, 1999, the Operating Partnership had 114 employees.
Historically, the Company has emphasized investments in properties located
primarily in California. In late 1997, the Company expanded into the Pacific
Northwest. In 1999, through its activities in the CalPERS joint venture, the
Company acquired properties in other regions of the United States, primarily in
Colorado, Texas, and Illinois. However, in December 1999, the Company and
CalPERS entered into a modification of the Joint Venture as a result of which
the Company owns only a nominal equity interest in the Joint Venture.
The Company is incorporated under the laws of the State of Maryland. The
Company's headquarters are located at 110 West A Street, Suite 900, San Diego,
California 92101 and its phone number is (619) 652-4700.
RETAIL PROPERTIES
As of December 31, 1999, the Company owned, either directly or through its
interest in joint ventures, 61 operating retail properties comprising
approximately 7.8 million square feet of Company-owned gross leasable area
("GLA") and one retail project currently under development. These properties
were located primarily in California, including 4 in the San Diego region, 23 in
the Los Angeles region, and 20 in the San Francisco/Sacramento region. In
addition to the California Properties, the Company has 3 retail Properties in
Oregon, 9 in Washington, 2 in New Mexico, and 1 in Utah.
These properties consisted of 48 market/drug centers, 10 promotional centers, 3
entertainment centers, and one factory outlet center, and ranged in size from
approximately 9,000 to approximately 516,000 square feet of Company-owned GLA.
The properties are designed to attract local and regional area customers and are
typically anchored by one or more nationally or regionally known retailers.
Depending on the market focus of a specific property, major retailers at a
property may include supermarkets, drug stores, value-oriented discount stores,
membership warehouses, multi-screen theatre complexes, shops or well-known
specialty retailers.
14
<PAGE>
The Company (primarily through the Operating Partnership and subsidiaries)
owns 55 of these retail properties in fee and holds seven of them under
long-term ground leases with expiration dates ranging from 2005 to 2089. The
Company leases these properties to approximately 998 different tenants and
overall occupancy at December 31, 1999 was approximately 90.8%. No individual
Property or single tenant accounted for as much as 10% of the Company's
revenues in 1999. No Property accounted for 10% or more of the total assets
of the Company at December 31, 1999.
OFFICE/INDUSTRIAL PROPERTIES
As of December 31, 1999, the Company also owned 2 office/industrial Properties
located in Southern California. These Properties contain approximately 338,000
square feet and 49,000 square feet, respectively. At December 31, 1999, these
Properties were 100% leased.
ACQUISITIONS
During 1999, all of the Company's acquisition activity took place in the joint
venture with CalPERS.
DEVELOPMENT & REDEVELOPMENT
During 1999, the Company substantially completed the construction of a market
and promotional anchored shopping center located in Pleasant Hill, California.
The project contains approximately 356,000 square feet of Company-owned GLA and
has a projected net cost at completion of approximately $82,000,000. During
1999, the Company began the renovation of the Fremont Hub, an existing market
and promotional anchored shopping center located in Fremont, California. Total
cost of the renovation is estimated to be approximately $22,000,000. During
1999, the Company began the renovation of the Cameron Park Shopping Center, an
existing market anchored shopping center located in Cameron Park, California.
Total net cost of the renovation is estimated to be approximately $17,000,000.
DISPOSITIONS
It is the Company's policy to dispose of non-core properties when
satisfactory sales proceeds are available. Consistent with these policies,
the Company sold five shopping centers and two office properties during 1999.
In July 1999, the Company sold the Wiegand Plaza, Mesa, Independence Square,
and Poway Village shopping centers for aggregate sale proceeds of
approximately $44,400,000, resulting in a gain of approximately $8,620,000.
In August 1999, the Company disposed of the Ruffin Village shopping center
for approximately $3,500,000, resulting in a gain of approximately
$1,149,000. In October 1999, the Company sold the Bergen Brunswig office
building for approximately $19,250,000, resulting in a gain of approximately
$71,000. In anticipation of this sale, the Company recorded an impairment
write-down of $1,200,000 in the second quarter of 1999. In December 1999, the
Company sold the Marcoa Publishing office building for approximately
$2,800,000, resulting in a net loss of approximately $78,000. In anticipation
of this sale, the Company recorded an impairment write-down of $1,000,000 in
the third quarter of 1999.
The Company through a subsidiary entered into a Purchase and Sale Agreement with
Holliday Development, L.P. ("Holliday"), whereby the Company would be reimbursed
by Holliday for all of the Company's costs and expenses (the "Reimbursable
Costs") incurred at the direction of Holliday, in connection with the
acquisition and construction of the residential portion of 1000 Van Ness (one of
the Martin Properties, see Note 2). The agreement stipulated that the
15
<PAGE>
Reimbursable Costs were to be paid to the Company in several successive
transactions which coincided with the sale of the residential units to third
parties. During 1999, the Company was paid the remainder of the Reimbursable
Costs, approximately $7,450,000. Upon receipt of the final payment of the
Reimbursable Costs (which totaled approximately $18,200,000) the Company
conveyed all of the unsold residential units. The Company's president and chief
executive officer has approximately a 35% interest in Holliday. In addition, the
Company's former director of development owned approximately a 14% interest in
Holliday.
16
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth the completed operating properties owned or
partially owned by the Company at December 31, 1999:
<TABLE>
<CAPTION>
YEAR PERCENT COMPANY-OWNED TOTAL PRINCIPAL TENANTS
PROPERTY ACQUIRED OWNED GLA (SQUARE FEET) OCCUPANCY (LEASE EXPIRATION DATE)
- -------- -------- ------- ----------------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
SAN DIEGO REGION
SD Factory Outlet Center 1992 100% 158,179 93.5% Nike (5/31/04)
SAN YSIDRO, CA Levi's/Dockers (1/31/01)
Guess (11/30/01)
Mikasa (12/31/03)
SD Factory Outlet - K-Mart 1993 100% 98,194 100.0% K-Mart (1/2/03)
SAN YSIDRO, CA
Santee Village Square 1985 100% 81,785 82.5% Al's Sports Shop (7/31/01)
SANTEE, CA Godfather's Pizza (6/30/00)
Jimmy's Family Restaurant (4/14/10)
San Marcos Lucky Plaza 1997 100% 36,153 100.0% Blockbuster Video (5/31/02)
SAN MARCOS, CA Kinko's (8/31/02)
Starbucks (2/28/09)
---------- ---------
SAN DIEGO REGION TOTALS 374,311 93.4%
---------- ----------
LOS ANGELES REGION
Plaza at Puente Hills 1993 100% 516,538 92.0% IKEA (10/31/07)
CITY OF INDUSTRY, CA Circuit City (1/31/08)
Smart & Final (11/30/11)
Office Depot (8/31/12)
Miller's Outpost (1/31/08)
Gateway 2000 (9/30/03)
Valley Central 1997 99% 480,092 97.1% Wal-Mart (7/27/10)
LANCASTER, CA Staples (3/31/03)
HomeBase (8/31/08)
Michael's (2/28/00)
Circuit City (1/31/11)
Marshall's (1/31/01)
Cinemark Theaters (10/31/17)
99 Cents Only Stores (2/28/03)
Westminster Center 1997 100% 401,217 92.0% Lucky's (5/31/17)
WESTMINSTER, CA Rite-Aid (5/31/16)
Home Depot (1/31/12)
Edwards Theatres (2/28/12)
Hollytron (1/31/12)
OfficeMax (7/12/07)
Mountaingate Plaza 1997 100% 280,900 84.8% Rite-Aid (5/31/04)
SIMI VALLEY, CA Edwards Theaters (5/31/11)
TJ Maxx (11/30/02)
Bally's Fitness (6/28/08)
Big 5 Sporting Goods (1/31/05)
Heilig Meyers Furniture (12/31/00)
Lake Arrowhead Village 1998 100% 228,975 88.2% Stater Brothers (10/1/00)
LAKE ARROWHEAD, CA Bass Shoes (4/30/00)
McDonald's (8/20/01)
Bank of America (3/31/05)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENT COMPANY-OWNED TOTAL PRINCIPAL TENANTS
PROPERTY ACQUIRED OWNED GLA (SQUARE FEET) OCCUPANCY (LEASE EXPIRATION DATE)
- -------- -------- ------- ----------------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
Simi Valley Plaza 1997 100% 222,065 85.6% Edwards Theatres (6/30/19)
SIMI VALLEY, CA HomeBase (1/31/11)
Ladera Center 1997 25% 186,770 79.6% Ralph's Grocery Store (12/31/03)
LOS ANGELES, CA Ross Dress for Less (1/31/02)
Sav-on Drugs (3/31/04)
Warehouse Music (11/30/04)
Santa Fe Springs 1997 100% 164,730 95.9% Ralph's (9/30/07)
SANTA FE SPRINGS, CA Bank of America (8/31/04)
Blockbuster Video (12/31/04)
Bell Gardens Marketplace 1997 100% 159,831 100.0% Food-4-Less (8/01/15)
BELL GARDENS, CA Rite-Aid (5/31/10)
Big 5 Sporting Goods (3/31/11)
Kragen Auto (9/30/00)
Crenshaw Imperial 1997 100% 158,378 80.4% Ralph's (4/30/06)
INGLEWOOD, CA Rite-Aid (5/31/09)
Kragen Auto (1/31/04)
Hollywood Video (4/01/10)
La Mancha Shopping Center 1988 100% 103,920 77.7% Ralph's (4/30/04)
FULLERTON, CA Ballard Wimer Brockett (4/30/04)
Buena Vista Marketplace 1997 100% 90,805 88.9% Ralph's (7/31/05)
DUARTE, CA
Menifee Town Center 1997 100% 79,134 100.0% Ralph's (3/31/07)
MENIFEE, CA Chief Auto Parts (5/31/07)
Fashion Bug (10/31/04)
Margarita Plaza 1997 25% 76,744 91.6% Food-4-Less (8/01/15)
HUNTINGTON PARK, CA Radio Shack (11/30/00)
Chief Auto Parts (3/31/00)
Mission Plaza 1998 100% 72,955 93.4% Lucky's (11/30/10)
CATHEDRAL CITY, CA
Centerwood Plaza 1997 100% 70,992 100.0% 32nd Street Market (5/31/08)
BELLFLOWER, CA Basically-A-Buck (5/31/08)
Ralph's Center 1997 100% 66,700 100.0% Ralph's (12/31/07)
REDONDO BEACH, CA
Central Shopping Center 1997 100% 62,314 76.4% Ralph's (8/31/02)
VENTURA, CA
Olympiad Plaza 1997 100% 45,600 100.0% Sav-On Drugs (9/30/00)
MISSION VIEJO, CA First Nationwide Bank (9/30/00)
Palms to Pines 1998 100% 43,011 100.0% Metropolitan Theatres (6/30/01)
PALM DESERT, CA Blue Coyote Grill (12/31/06)
McDonalds (7/23/01)
Ontario Village 1997 99% 39,954 95.2% Men's Fashion (5/31/02)
ONTARIO, CA Payless Shoes (3/31/04)
Plaza de Monterey 1998 100% 37,482 98.1% Hargate T.V. (4/14/01)
PALM DESERT, CA
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENT COMPANY-OWNED TOTAL PRINCIPAL TENANTS
PROPERTY ACQUIRED OWNED GLA (SQUARE FEET) OCCUPANCY (LEASE EXPIRATION DATE)
- -------- -------- ------- ----------------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
West Lancaster Plaza 1997 99% 29,318 74.9% Blockbuster Video (6/30/03)
LANCASTER, CA T & C Grill (4/30/03)
--------- --------
LOS ANGELES REGION TOTALS 3,618,425 90.3%
--------- ----------
SAN FRANCISCO REGION
Fremont Hub 1997 100% 493,575 81.6% Safeway (10/31/04)
FREMONT, CA Bed, Bath & Beyond (1/31/12)
Ross Dress for Less (1/31/05)
Michael's (2/28/04)
OfficeMax (12/14/01)
Longs Drugs (2/28/03)
Old Navy (1/31/00)
Jo-Ann Fabrics (4/30/01)
Marie Callenders (9/30/07)
Prospector's Plaza 1997 100% 219,112 96.9% Lucky's (11/30/06)
PLACERVILLE, CA Longs Drugs (2/28/07)
K-Mart (10/31/06)
Stony Point Plaza 1997 100% 198,528 97.0% Food-4-Less (8/31/05)
SANTA ROSA, CA Rite-Aid (5/31/09)
(formerly Santa Rosa Value HomeBase (2/29/08)
Center)
Fremont Gateway Plaza 1997 100% 195,092 96.1% Raley's (12/31/20)
FREMONT, CA 24 Hour Fitness (7/31/13)
Silver Cinemas (8/30/12)
Hilltop Plaza 1996 100% 191,451 92.8% Circuit City (1/31/17)
RICHMOND, CA Barnes & Noble (5/20/07)
PetsMart (3/15/12)
Ross Dress for Less (1/31/08)
OfficeMax (11/30/11)
Gateway Center 1997 100% 182,054 80.2% Best Buy (1/31/19)
MARIN CITY, CA Ross Dress for Less (1/31/07)
PetsMart (12/31/12)
Longs Drugs (2/28/22)
Outback Steakhouse (10/31/08)
Southampton Center 1997 100% 162,390 98.9% Raley's (11/30/13)
BENECIA, CA Ace Hardware (5/31/11)
Silver Creek Plaza 1997 100% 134,018 94.8% Safeway (12/21/03)
SAN JOSE, CA Walgreens (12/31/11)
Summerhills Shopping Center 1997 100% 133,614 90.6% Raley's (11/30/05)
SACRAMENTO, CA Blockbuster Video (8/31/09)
1000 Van Ness 1996 100% 122,646 83.3% AMC Theaters (6/30/18)
SAN FRANCISCO, CA Crunch Fitness (12/7/08)
Shasta Crossroads 1997 100% 121,334 96.5% Food-4-Less (2/28/10)
REDDING, CA Hometown Buffet (2/14/09)
Blockbuster Video (7/31/01)
Creekside Shopping Center 1997 100% 116,229 87.8% Raley's (11/30/13)
VACAVILLE, CA Blockbuster Video (1/31/02)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENT COMPANY-OWNED TOTAL PRINCIPAL TENANTS
PROPERTY ACQUIRED OWNED GLA (SQUARE FEET) OCCUPANCY (LEASE EXPIRATION DATE)
- -------- -------- ------- ----------------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
580 Marketplace 1997 100% 100,165 100.0% PW Foods (6/30/05)
CASTRO VALLEY, CA 24 Hour Fitness (12/31/02)
Cameron Park 1997 99% 97,434 54.0% Safeway (11/30/00)
CAMERON PARK, CA
Discovery Plaza 1997 100% 93,398 88.4% Bel Air Market (3/31/14)
SACRAMENTO, CA
Sunset Center 1997 100% 85,238 90.6% Lucky's (5/31/06)
SUISUN CITY, CA Rite-Aid (5/31/05)
Hallmark Town Center 1997 100% 85,066 89.7% Food-4-Less (8/6/06)
MADERA, CA Bally Total Fitness (1/31/07)
Grocery Outlet (6/1/04)
Richmond Shopping Center 1995 98% 76,692 100.0% Food-4-Less (9/30/13)
RICHMOND, CA Walgreens (11/30/33)
Arcade Square 1997 100% 76,497 97.5% Hollywood Video (3/31/05)
SACRAMENTO, CA Nation Craft (12/14/03)
--------- ---------
SAN FRANCISCO REGION TOTALS 2,884,533 89.8%
--------- ----------
PACIFIC NORTHWEST REGION
Meridian Village 1997 100% 208,422 96.9% Home Depot (3/31/13)
BELLINGHAM, WA Circuit City (1/31/15)
Rite-Aid (7/31/04)
Village East 1998 100% 135,926 98.7% Ross Dress for Less (1/31/02)
SALEM, OR Borders Books (4/30/12)
Big 5 Sporting Goods (1/31/07)
Shoe Pavilion (12/31/03)
Design Market 1997 100% 88,487 100.0% Schoenfeld Interiors (9/30/04)
BELLEVUE, WA Arnolds Appliances (8/31/04)
Bellevue Art & Frame (4/30/08)
Greentree Plaza 1998 100% 79,006 88.8% GART Sports (1/31/14)
EVERETT, WA
Keizer Creekside 1998 100% 61,943 100.0% Payless Drugs (8/1/12)
SALEM, OR
Chambers Creek 1997 100% 58,179 100.0% Albertson's (6/15/18)
TACOMA, WA
James Village 1998 100% 52,850 100.0% G.I. Joe's (4/10/11)
LYNNWOOD, WA
Puget Park 1997 100% 40,988 92.0% Craft Outlet (2/28/00)
SOUTH EVERETT, WA Day-Star Centers (10/31/04)
Bear Creek Village 1997 100% 36,324 100.0% Linens 'n' Things (3/26/13)
REDMOND, WA
Fairwood Square 1997 100% 32,910 89.7% Coldwell Banker (11/30/08)
RENTON, WA Al's Auto (12/31/03)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENT COMPANY-OWNED TOTAL PRINCIPAL TENANTS
PROPERTY ACQUIRED OWNED GLA (SQUARE FEET) OCCUPANCY (LEASE EXPIRATION DATE)
- -------- -------- ------- ----------------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
Farmington Village 1998 100% 32,740 75.4% Shari's Restaurant (1/31/11)
ALOHA, OR Farmington Village Laundromat
(6/30/03)
Park Manor 1998 100% 28,454 75.8% Blockbuster Video (6/30/01)
BELLINGHAM, WA Little Caesars (10/31/02)
------- --------
PACIFIC NORTHWEST REGION
TOTALS 856,229 95.5%
------- ----------
MOUNTAIN REGION
Brickyard Plaza 1998 100% 37,383 100.0% Media Play (7/28/05)
SALT LAKE CITY, UT
--------- --------
MOUNTAIN REGION TOTALS 37,383 100.0%
--------- --------
SOUTHWEST REGION
Cruces Norte 1998 100% 24,730 71.6% Checker Auto Parts (7/31/04)
LAS CRUCES, NM Radio Shack (5/31/00)
Silver Plaza 1997 100% 8,545 86.0% The Video Stop (6/30/01)
SILVER CITY, NM Radio Shack (8/31/03)
--------- --------
SOUTHWEST REGION TOTALS 33,275 75.3%
--------- --------
TOTAL OPERATING RETAIL PROPERTIES 7,804,156 90.8%
------------ ----------
OFFICE PROPERTIES
Anacomp Building 1992 100% 338,485 100.0% Anacomp (12/31/07)
POWAY, CA
Scripps Ranch Buildings 1987 100% 49,284 100.0% Edge Semiconductor (3/31/04)
SAN DIEGO (SCRIPPS RANCH), CA 1988 ---------- --------- World X Change Comm. (7/30/02)
TOTAL OFFICE PROPERTIES 387,769 100.0%
--------- --------
TOTAL 8,191,925 91.2%
============ ==========
</TABLE>
21
<PAGE>
PORTFOLIO COMPOSITION
The information in the following table indicates the composition of the
operating properties owned or partially owned by the Company as of December 31,
1999:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF COMPANY-
PROPERTIES OWNED GLA
---------- -------------------
<S> <C> <C>
Retail 61 95.3%
Office/Industrial 2 4.7
--- -------
Total 63 100.0%
=== =======
</TABLE>
The information in the following table indicates the composition of the
operating properties by retail property type owned or partially owned by the
Company as of December 31, 1999:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF COMPANY-
PROPERTIES OWNED GLA
---------- -------------------
<S> <C> <C>
Market/Drug (1) 47 59.6%
Promotional (2) 10 30.7
Other 4 5.0
--- -------
Total Retail 61 95.3
Total Office 2 4.7
--- -------
Total Portfolio 63 100.0%
=== =======
</TABLE>
(1) The Company defines Market/Drug centers as those centers that
serve a fairly localized trade area and that offer an assortment
of goods and services designed to meet the daily needs of
consumers.
(2) The Company defines Promotional Centers as those centers with
multiple promotional retailers as anchor tenants. The Company
defines promotional retailers as retailers which typically offer
convenience, a broad selection and low pricing on a fairly
discrete category of retail merchandise.
GEOGRAPHIC DISTRIBUTION
The Company's operating retail properties are located in 21 metropolitan
statistical areas in 5 states. The table below demonstrates the geographic
distribution of Properties owned or partially owned by the Company as of
December 31, 1999:
22
<PAGE>
GEOGRAPHIC DISTRIBUTION BY MSA
<TABLE>
<CAPTION>
NUMBER OF OWNED PERCENTAGE OF TOTAL
PROPERTIES GLA RETAIL PROPERTIES, GLA
---------- ----- ----------------------
<S> <C> <C> <C>
Fresno, CA 1 85,066 1.1 %
Los Angeles, CA 12 1,828,915 23.4
Las Cruces, NM 2 33,275 0.4
Napa, CA 3 363,857 4.7
Oakland, CA 5 1,056,975 13.5
Orange County, CA 3 550,737 7.1
Portland, OR 1 32,740 0.4
Redding, CA 1 121,334 1.6
Riverside/San Bernardino, CA 5 673,494 8.6
Sacramento, CA 4 400,943 5.1
Salem, OR 2 197,869 2.5
San Diego, CA 4 374,311 4.8
Seattle, WA 8 567,441 7.3
San Francisco, CA 2 304,700 3.9
San Jose, CA 2 353,130 4.5
Salt Lake City, UT 1 37,383 0.5
Santa Rosa, CA 1 198,528 2.5
Tacoma, WA 1 58,179 0.7
Ventura, CA 3 565,279 7.2
-- ---------- -----
TOTAL 61 7,804,156 100.0%
== ========== =====
</TABLE>
TENANT CONCENTRATION--Top Ten Anchor Tenants
RANKED BY ANNUALIZED BASE RENT
(as of December 31, 1999)
<TABLE>
<CAPTION>
NUMBER OF ANNUALIZED ANNUALIZED PERCENTAGE OF MOODY'S
TENANT BASE BASE LEASED COMPANY'S TOTAL CREDIT
TENANT LOCATIONS RENT RENT GLA RETAIL LEASED GLA RATING (1)
------ --------- ---- ---- --- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ralph's/Kroger 11 $ 4,170,861 4.8% 473,770 6.7% Baa3
AMC Theaters 2 3,657,644 4.2 100,878 1.4 B2
Home Depot 2 2,528,278 2.9 209,014 2.9 A1
Home Base 3 2,314,127 2.7 311,521 4.4 B1
Raley's/Bel Air 5 2,000,287 2.3 277,317 3.9 NR
Edwards Theatres 3 1,548,090 1.8 101,695 1.4 NR
Circuit City 4 1,336,993 1.5 138,851 2.0 NR
Albertson's/Lucky 5 1,279,090 1.5 193,247 2.7 A2
IKEA 1 1,181,004 1.4 150,000 2.1 NR
OfficeMax 3 963,335 1.1 73,041 1.0 NR
--- ----------- ----- --------- ---
TOTAL 39 $ 20,979,709 24.2% 2,029,334 28.5%
=== ============ ===== ========= ======
TOTAL RETAIL PORTFOLIO $ 86,973,675 100.0% 7,085,792 100.0%
============ ===== ========= ======
</TABLE>
- ---------
(1) Moody's credit ratings are as of November 1999.
(NR) Rating Not Available
23
<PAGE>
LEASE EXPIRATIONS OF THE COMPANY'S PORTFOLIO
The following table sets forth scheduled lease expirations for leases in effect
as of December 31, 1999, for each of the next ten years for all of the Company's
Properties. The tables assume that none of the tenants exercises renewal options
or termination rights.
<TABLE>
<CAPTION>
TOTAL
NUMBER OF LEASES ANNUALIZED BASE RENT (1)
LEASING EXPIRING IN: EXPIRING GLA (SQ. FT.) AMOUNT PERCENT OF TOTAL
-------------------- -------- ------------- ------ ----------------
<S> <C> <C> <C> <C>
2000 297 749,913 $10,733,919 12.0%
2001 237 572,591 8,517,743 9.5
2002 233 643,940 9,812,297 10.9
2003 163 662,972 8,227,275 9.2
2004 150 655,251 7,603,772 8.5
2005 41 388,878 3,865,450 4.3
2006 28 291,532 2,232,299 2.5
2007 36 901,415 8,224,361 9.2
2008 29 468,609 4,785,484 5.3
2009 26 128,081 1,703,341 1.9
Thereafter 83 2,010,379 23,998,181 26.8
-- --------- ---------- ----
1,323 7,473,561 $89,704,122 100.0%
===== ========= =========== ======
</TABLE>
- ---------
(1) Annualized base rent is rent calculated by multiplying base rent for
December 1999 by twelve.
BANKRUPTCY REMOTE PROPERTIES
Twenty-eight of the Company's Properties, having a net book value of
approximately $515,952,000 at December 31, 1999 (collectively, the "Bankruptcy
Remote Properties" and, each a "Bankruptcy Remote Property"), are wholly-owned
by various "Bankruptcy Remote Entities" which are indirect subsidiaries of the
Company. The assets of each Bankruptcy Remote Entity, including the respective
Bankruptcy Remote Property or Properties owned by each, are owned by that
Bankruptcy Remote Entity alone and are not available to satisfy claims that any
creditor may have against the Company, its other affiliates, or any other person
or entity. No Bankruptcy Remote Entity has agreed to pay or make its assets
available to pay creditors of the Company, any of its other affiliates or any
other person or entity. Neither the Company nor any of its other affiliates has
agreed to pay or make its assets available to pay creditors of any Bankruptcy
Remote Entity (other than any agreement by a Bankruptcy Remote Entity to pay its
own creditors). No affiliate of any Bankruptcy Remote Entity has agreed to pay
or make its assets available to pay creditors of any Bankruptcy Remote Entity.
The Bankruptcy Remote Properties and the Bankruptcy Remote Entities are listed
below:
24
<PAGE>
<TABLE>
<CAPTION>
OWNER PROPERTY
- ----- --------
<S> <C>
BPP/Valley Central, L.P. Valley Central Shopping Center, Lancaster, CA
BPP/Puente Hills, L.L.C. The Plaza at Puente Hills, Industry, CA
BPP/Crenshaw-Imperial, L.P. Crenshaw-Imperial Shopping Center, Inglewood, CA
BPP/Mountaingate, L.P. Mountaingate Plaza, Simi Valley, CA
BPP/Simi Valley, L.P. Simi Valley Plaza, Simi Valley, CA
BPP/Northwest Acquisitions, L.L.C. Design Market, Bellevue, WA
Fairwood Square, Renton, WA
Village East Shopping Center, Salem, OR
BPP/Golden State Acquisitions, L.L.C. Creekside Shopping Center, Vacaville, CA
Sunset Center, Suisun City, CA
Discovery Plaza, Sacramento, CA
Summer Hills Shopping Center, Sacramento, CA
Arcade Square, Sacramento, CA
Prospector's Plaza, Placerville, CA
Stony Point Plaza (formerly Santa Rosa Value Center) Santa Rosa, CA
580 Marketplace, Castro Valley, CA
Gateway Plaza, Fremont, CA
Southampton Shopping Center, Benicia, CA
Silver Creek Plaza, San Jose, CA
Shasta Crossroads, Redding, CA
Centerwood Plaza, Bellflower, CA
Ralph's Center, Redondo Beach, CA
Westminster Center, Westminster, CA
Buena Vista Shopping Center, Duarte, CA
San Marcos Plaza, San Marcos, CA
Hallmark Town Center, Madera, CA
Menifee Town Center, Menifee, CA
BPP/Arrowhead, L.P. Lake Arrowhead Plaza, Lake Arrowhead, CA
</TABLE>
25
<PAGE>
INDEBTEDNESS
The Company's total indebtedness at December 31, 1999, in the amount of
approximately $538,830,000 is comprised of consolidated mortgage debt secured by
interest in certain properties of $337,122,917, borrowings under secured and
unsecured credit facilities of approximately $138,420,000, borrowings under
construction facilities of approximately $48,220,000 and approximately
$15,067,000 of obligations under various leases.
Mortgage Debt
The following table sets forth certain information regarding the Company's
mortgage debt as of December 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------- ----------------- ------------------------- ------------ ------------------
PRINCIPAL
BALANCE
OUTSTANDING INTEREST ANNUAL
PROPERTY 12/31/99 MATURITY DATE RATE PAYMENT
- --------------------------------------------- ----------------- ------------------------- ------------ ------------------
<S> <C> <C> <C> <C>
Golden State Prop. (19 properties)(1) $145,927,661 January 2008(2) 6.76% $12,265,377
Plaza at Puente Hills (1) 31,937,911 March 2004(2) 7.98 3,060,656
Valley Central Shopping Center(1) 24,508,246 March 2004(2) 7.98 2,348,661
Mountaingate Plaza (1) 22,784,274 March 2006(2) 8.05 2,241,680
Lake Arrowhead Plaza(1) 19,423,122 September 2011(2) 9.20 1,946,074
Gateway Center (previously Marin City) 16,486,563 October 2008(2) 7.39 1,492,976
Simi Valley Plaza (1) 16,029,223 June 2026 8.98 1,579,268
Northwest Acquisitions (3 properties) (1) 15,861,069 December 2007(2) 7.45 1,348,345
City of Pleasant Hill Bonds 14,085,000 August 2028 5.35 753,095
Richmond 6,746,052 January 2005(2) 9.50 755,280
Olympiad 6,009,118 October 2007(2) 7.49 549,326
Crenshaw Imperial(1) 5,071,551 July 2010 8.80 534,952
Plaza de Monterey 3,913,380 September 2000(2) 10.13 447,360
Puget Park 2,451,572 July 2007(2) 8.38 267,384
San Diego Factory Outlet Center 2,309,315 September 2006 8.67 453,138
Chambers Creek 1,527,944 February 2017(2) 8.00(3) 163,397
Pleasant Hill Redevelopment Agency 1,550,916 November 2004(2) 10.00 155 092
Silver Plaza 300,000 September 2001(2) 4.28 0
Powell Note 200,000 November 2000(2) 0.00 200,000
------------ ----------
TOTAL $337,122,917 $30,562,061
============ ==========
</TABLE>
- ------------------
(1) "Bankruptcy Remote Property."
(2) Balloon payment at maturity.
(3) Adjusted annually at February 1.
Credit Facilities
At December 31, 1999, the Company had approximately $138,420,000 and $0
outstanding under credit facilities with CMF Capital Company, LLC (a subsidiary
of General Electric Capital Corporation) and Union Bank, respectively. The
following properties have been provided as collateral for the facility with CMF
Capital Company, LLC: Fremont Hub, San Diego Factory Outlet Center, Hilltop
Plaza, Santa Fe Springs, Meridian Village, Anacomp, Greentree Plaza, La Mancha
Shopping Center, Santee Village Square, Keizer Creekside, Ontario Village
Shopping Center, Scripps Ranch, Farmington Village, Mission Plaza, Central
Shopping Center, Palms to Pines, Bear Creek Village, Park Manor, Cruces Norte,
West Lancaster Plaza, James Village, Brickyard Plaza, and Bell Gardens. For a
discussion concerning the Company's credit facilities,
26
<PAGE>
see Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Financing Activities."
Construction Facilities
At December 31, 1999, the Company had three construction loans outstanding with
various banks. The Company had approximately $7,816,000 outstanding secured by
the 1000 Van Ness property in downtown San Francisco. Borrowings under this loan
bear interest at LIBOR plus 1.90% per annum, and it is scheduled to mature in
December 2000. The Company also had approximately $35,188,000 outstanding
secured by the Downtown Pleasant Hill shopping center. Borrowings under this
loan bear interest at LIBOR plus 1.75% per annum, and it is scheduled to mature
in November 2000. Finally, the Company had approximately $5,216,000 outstanding
secured by the Cameron Park shopping center. Borrowings under this loan bear
interest at LIBOR plus 2.25% per annum, and it is scheduled to mature in
December 2000.
Lease Obligations
In addition, the Company is obligated under three leases in connection with the
1000 Van Ness property. At December 31, 1999, the present value of the related
minimum lease payments is approximately $15,067,000. The net annual payment
under these leases in 2000 is approximately $1,238,000.
For additional information concerning debt secured by the Company's Properties,
reference is made to Notes 4 and 5 to the Consolidated Financial Statements.
ITEM 2. PROPERTIES
The Properties of the Company owned at December 31, 1999 are described under
Item 1 "Business" and in Notes 2 and 3 to the Consolidated Financial Statements.
The Company has entered into leases with third party landlords for the office
space that it occupies for its regional offices (see Notes 11 and 15 to the
Consolidated Financial Statements). Such leases are generally on commercially
standard terms and do not involve any commitments which management believes are
material to its operations or financial condition.
ITEM 3. LEGAL PROCEEDINGS
On June 23, 1999, a class action lawsuit was filed in the Superior Court of the
State of California, County of San Diego, against the Company and its Board of
Directors. The complaint was purportedly filed on behalf of the public
shareholders of the Company and alleged that the Board of Directors and the
Company violated their fiduciary duties by adopting a shareholder rights
agreement, responding to Schottenstein's proposal inappropriately, and adopting
severance and other compensatory arrangements.
On September 9, 1999, plaintiffs moved for a preliminary injunction, asking the
court to void the shareholder rights plan and rescind the severance agreements.
Defendants opposed this motion. On November 22, 1999, the court denied
plaintiffs' motion. On January 14, 2000, plaintiffs filed a notice of appeal
from the court's ruling. The same day, plaintiffs also filed a Consolidated
Amended Complaint, consolidating their complaint with a similar class action
complaint that was filed against the same defendants on October 12, 1999. The
Company believes the complaint is without merit and intends to vigorously defend
against the lawsuit. However, there can be no assurance that such defense will
be successful. If the Company does not prevail, the suit could render the
shareholder rights plan ineffective, thereby making the Company more
27
<PAGE>
vulnerable to unsolicited acquisition proposals and increasing the possibility
that the Company will have to allocate material amounts of financial and
management resources to protect the Company from unwanted takeover attempts that
may not maximize shareholder value.
On February 7, 2000, a derivative lawsuit was filed in the Superior Court of
California, County of San Diego, by a purported shareholder, asserting claims on
behalf of the Company. The complaint contains claims similar to those asserted
in the pending class action lawsuit described above. It names as defendants the
Company's Board of Directors and four of its officers.
In 1999, a lawsuit was filed against the Company by a tenant of a Company owned
property. The complaint alleges, among other things, misrepresentation regarding
the use of the property. The tenant is seeking to recover funds that it claims
to have invested in the property of $1,000,000 to $2,000,000. The Company
believes this case is without merit and is vigorously defending itself against
the allegations. Accordingly, the Company has not recorded any loss provision
relative to damages sought by the tenant. Although the outcome of this lawsuit
cannot be predicted with certainty, it is the opinion of the Company's
management that the outcome of this case will not have a materially adverse
effect on the Company's financial statements or its business.
The Company is also subject to other legal proceedings and claims that arise in
the ordinary course of its business. It is the opinion of the Company's
management that the outcome of such matters will not have a material adverse
effect on the Company's financial statements or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.
28
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET DATA
Common Stock of the Company is listed on the New York Stock Exchange under the
symbol "BPP". The following table sets forth the high and low sale prices of the
Common Stock, as reported by the New York Stock Exchange and the per share
common dividends paid by the Company for each calendar quarter during 1999 and
1998.
<TABLE>
<CAPTION>
COMMON
DIVIDENDS
QUARTER ENDED HIGH LOW PAID
- ------------- ---- --- ----
<S> <C> <C> <C>
March 31, 1999 $12.63 $9.81 $.2625
June 30, 1999 12.88 9.50 .2625
September 30, 1999 12.94 10.56 .2625
December 31, 1999 11.06 8.69 .2625
March 31, 1998 $15.63 $14.13 $.2625
June 30, 1998 14.75 13.69 .2625
September 30, 1998 14.81 12.69 .2625
December 31, 1998 13.75 11.63 .2625
</TABLE>
At December 31, 1999, there were approximately 2,156 holders of record of the
Company's Common Stock.
The Company expects to continue its policy of paying regular quarterly cash
dividends. However, dividend distributions are declared at the discretion of the
Board of Directors and depend on actual Funds from Operations of the Company,
its financial condition, capital requirements, the REIT provisions of the
Internal Revenue Code and other factors that the Board of Directors deem
relevant. The Board of Directors may modify the Company's dividend policy from
time to time.
RECENT ISSUES OF UNREGISTERED SECURITIES
During the three months ended December 31, 1999, 7,250 units of the Operating
Partnership, of which the Company is the general partner, were tendered for
redemption by the holders thereof and the Company issued 7,250 shares of Common
Stock in exchange therefore. No registration statement was necessary as the
issuance did not involve a public offering.
29
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read with Management's
Discussion and Analysis of Financial Conditions and Results of Operations, which
is included elsewhere in this Annual Report.
(in thousands except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
OPERATING STATEMENT DATA 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 132,810 $ 131,723 $ 68,174 $ 47,314 $ 48,669
========== ========== ======== ======== ========
Income (Loss) From Operations $ 14,606 $ 25,434 $ 12,899 $ 9,892 $(14,951)
Gain (Loss) on Sales of Real Estate 10,371 (1,814) 5,896 2,298 2,233
Minority Interest (5,024) (4,864) (45) (35) -
---------- ---------- -------- -------- --------
Net Income (Loss) Before Extraordinary
Item and Cumulative Effect of a Change
In Accounting Principle $ 19,953 $ 18,756 $ 18,750 $ 12,155 $(12,718)
Loss from Early Extinguishment of Debt - - (52) (884) -
Cumulative Effect of a Change in Accounting
Principle (1,866) - - - -
---------- ---------- -------- -------- --------
Net Income (Loss) $ 18,087 $ 18,756 $ 18,698 $ 11,271 $(12,718)
Dividends Paid to Preferred Stockholders (5,600) (5,600) - - -
---------- ---------- -------- -------- --------
Income (Loss) Available to Common Stockholders $ 12,487 $ 13,156 $ 18,698 $ 11,271 $(12,718)
========== ========== ======== ======== ========
Earnings Per Share (Basic):
Income (Loss) Before Extraordinary Item And
Cumulative Effect of a Change in Accounting
Principle $ 0.45 $ 0.44 $ 0.88 $ 0.71 $ (0.75)
Extraordinary Item - - - (0.05) -
Cumulative Effect of a Change in Accounting
Principle (0.06) - - - -
---------- ---------- -------- -------- --------
Income (Loss) Available to Common Stockholders $ 0.39 $ 0.44 $ 0.88 $ 0.66 $ (0.75)
========== ========== ======== ======== ========
Earnings Per Share (Diluted):
Income (Loss) Before Extraordinary Item And
Cumulative Effect of a Change in Accounting
Principle $ 0.45 $ 0.44 $ 0.87 $ 0.71 $ (0.75)
Extraordinary Item - - - (0.05) -
Cumulative Effect of a Change in Accounting
Principle (0.06) - - - -
---------- ---------- -------- -------- --------
Income (Loss) Available to Common Stockholders $ 0.39 $ 0.44 $ 0.87 $ 0.66 $ (0.75)
========== ========== ======== ======== ========
DIVIDENDS PAID-COMMON $ 33,717 $ 31,310 $ 21,856 $ 17,113 $ 22,564
========== ========== ======== ======== ========
DIVIDENDS PAID PER SHARE - COMMON $ 1.05 $ 1.05 $ 1.00 $ 1.00 $ 1.33
========== ========== ======== ======== ========
TAXABLE INCOME PER SHARE - ORDINARY $ 0.65 $ 0.65 $ 0.93 $ - $ 0.59
========== ========== ======== ======== ========
TAXABLE INCOME PER SHARE - CAPITAL GAIN $ 0.05 $ - $ - $ - $ 0.17
========== ========== ======== ======== ========
BALANCE SHEET DATA
Total Assets $1,035,015 $1,114,176 $943,795 $356,195 $327,770
Total Notes Payable $ 400,410 $ 394,029 $369,511 $105,552 $ 92,173
Line of Credit Advances $ 138,420 $ 180,999 $180,869 $ 72,900 $ 24,933
Convertible Subordinated Debentures $ - $ - $ - $ - $ 25,700
Number of Common Shares
Outstanding at Year End 32,274 31,954 23,449 17,096 17,082
Weighted Average Number of Shares-
Basic 32,062 29,864 21,335 17,085 17,016
Weighted Average Number of Shares-
Diluted 32,062 30,001 21,521 17,129 17,020
</TABLE>
30
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Annual
Report. Historical results and percentage relationships set forth in the
consolidated statements of income contained in the consolidated financial
statements, including trends which might appear, should not be taken as
indicative of future operations. Unless the context otherwise requires,
references herein to the Company include Burnham Pacific Operating Partnership,
L.P. (the "Operating Partnership") and the other directly and indirectly owned
subsidiaries of the Company. Effective in the fourth quarter of 1997, the
Company formed the Operating Partnership and transferred the fee or beneficial
interest in substantially all of its assets to the Operating Partnership or
subsidiaries of the Operating Partnership, thereby becoming what is commonly
referred to as an "UPREIT."
The Company's strategic focus is the acquisition, rehabilitation, development,
and operation of retail shopping centers nationwide. At December 31, 1999, the
Company owned interests in 62 retail shopping centers, 61 of which were fully
operational, and one of which is being developed. Forty-seven of the properties
are located in California, nine in Washington, three in Oregon, two in New
Mexico, and one in Utah. At December 31, 1999, the Company also owned two
office/industrial properties located in Southern California, which are
considered non-strategic.
RESULTS OF OPERATIONS
COMPARISON OF 1999 TO 1998. NET INCOME available to common stockholders for 1999
totaled $12,487,000 compared with $13,156,000 in 1998. Net income for 1999
included a net gain on sales of real estate of $10,371,000, while net income for
1998 included a net loss on sales of real estate of $1,814,000. Net income for
1999 was unfavorably impacted by a $1,353,000 restructuring charge related to
the Company's decision to outsource its property management function to
third-party providers, $748,000 in costs associated with the abandonment of
certain prospective acquisition transactions, $4,548,000 of costs associated
with the unsolicited proposal from Schottenstein Stores Corporation
("Schottenstein") and certain of its affiliates, $2,200,000 in impairment
write-offs related to the sales of two office building properties, and
$1,866,000 recognized as the cumulative effect of a change in accounting
principle. If these one-time charges were excluded, income before gain (loss) on
sales of real estate, extraordinary item and before income allocated to minority
interest was $23,455,000 compared with $25,434,000 in 1998. Distributions on the
Series 1997-A Convertible Preferred Stock (the "Series A Preferred Stock")
amounted to $5,600,000 in 1999 and 1998, while income allocated to minority
interest increased to $5,024,000 compared with $4,864,000 in 1998.
TOTAL REVENUES increased $1,087,000 to $132,810,000 from $131,723,000 in 1998.
This increase is primarily attributable to an increase in fee income of
approximately $4,409,000 related to the activity in BPP Retail, LLC ("BPP
Retail"), the Company's joint venture with the State of California Public
Employees' Retirement System ("CalPERS"), and the acquisition of 14 shopping
centers, most of which were acquired in the third and fourth quarters of 1998.
These increases were partially offset by a decrease in lease termination fees of
approximately $2,200,000 and a decrease in rental revenues due to the 1999
disposition activity and the contribution of properties to the CalPERS joint
venture. Total revenues were also impacted by delays in new store openings and
flat year-to-year same store performance. In December 1999,
31
<PAGE>
SEC Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements" was issued. SAB 101 provides the SEC staff's views in applying
generally accepted accounting principles to selected revenue recognition issues,
including contingent rental income. Contingent rental revenue from tenants
should be recognized as revenue only after the tenants exceed their sales
breakpoint. The Company will be required to adopt SAB 101 in the first quarter
of 2000. Revenues for the year ended December 31, 1999 would have been reduced
by approximately $236,000 if the Company reversed the percentage rent for the
tenants which had not exceeded their sales breakpoint at December 31, 1999.
RENTAL OPERATING EXPENSES increased $758,000 to $36,607,000 from $35,849,000 in
1998. This increase is primarily attributable to the 1998 acquisition activity,
partially offset by the 1999 disposition activity and the contribution of
properties to the CalPERS joint venture.
PROVISION FOR BAD DEBT increased $537,000 to $1,231,000 from $694,000 in 1998.
INTEREST EXPENSE increased $761,000 to $36,391,000 from $35,630,000 in 1998. The
increase in interest expense is primarily attributable to an increase in
interest rates during 1999. Average debt outstanding in 1999 was approximately
$571,616,000, as compared to approximately $545,863,000 in 1998. Total debt
outstanding (exclusive of $14,605,000 of fixed rate mortgage debt in
unconsolidated subsidiaries) on December 31, 1999 and the related weighted
average interest rate were $538,830,000 and 7.73%, respectively, compared with
$575,028,000 and 7.49%, respectively, on December 31, 1998. Interest capitalized
in conjunction with development and expansion projects was $6,156,000 in 1999,
compared with $6,518,000 in 1998.
DEPRECIATION AND AMORTIZATION EXPENSES decreased $425,000 to $28,182,000 in 1999
from $28,607,000 in 1998. This decrease is primarily attributable to the
disposition activity in 1999 and the contribution of properties to the CalPERS
joint venture, partially offset by the acquisition activity in 1998.
GENERAL AND ADMINISTRATIVE EXPENSES increased $2,298,000 to $8,021,000 in 1999
from $5,723,000 in 1998. This increase is primarily attributable to costs
associated with the increased level of activity in the CalPERS joint venture.
The increase in these costs is offset by the aforementioned fee income derived
from the CalPERS joint venture.
INCOME FROM UNCONSOLIDATED SUBSIDIARIES increased $863,000 to $1,077,000 from
$214,000 in 1998. This increase is attributable to the growth in the CalPERS
joint venture.
GAIN ON SALES OF REAL ESTATE. During 1999, the Company sold five shopping
centers, two office buildings, and its interest in the CalPERS joint venture at
a net gain of $10,371,000, compared with the sale of two non-core properties in
1998 at a net loss of $1,814,000.
Income allocated to MINORITY INTEREST increased $160,000 to $5,024,000 in 1999
from $4,864,000 in 1998. This increase reflects the issuance of common operating
partnership units as a portion of the consideration for certain acquisitions in
1998.
COMPARISON OF 1998 TO 1997. NET INCOME available to common stockholders for 1998
totaled $13,156,000 compared with $18,698,000 in 1997. Net income for 1998
included a loss of $1,814,000 on the sale of two non-core properties, while net
income for 1997 included a net gain of $5,896,000 on the sale of three non-core
properties. Income before gain (loss) on the sales of real estate, extraordinary
item and before income allocated to minority interest increased from $12,899,000
to $25,434,000. Distributions on the Series A Preferred Stock amounted to
32
<PAGE>
$5,600,000, while income allocated to minority interest increased to $4,864,000
from $45,000 in 1997.
TOTAL REVENUES increased $63,549,000 to $131,723,000 in 1998 from $68,174,000 in
1997. This increase is primarily attributable to the acquisition of 28 shopping
centers in the fourth quarter of 1997 and an additional 14 centers during 1998.
The increase also included a one-time lease termination fee of $3,875,000
received in 1998.
RENTAL OPERATING EXPENSES increased $17,827,000 to $36,543,000 in 1998 from
$18,716,000 in 1997. This increase is primarily attributable to the
aforementioned acquisition activity.
INTEREST EXPENSE increased $17,158,000 to $35,630,000 in 1998 from $18,472,000
in 1997. The increase in interest expense is primarily attributable to an
increase in both notes payable and average borrowings under the Company's lines
of credit related to the aforementioned acquisition activity. Total debt
outstanding (exclusive of $14,828,000 of fixed rate mortgage debt in
unconsolidated subsidiaries) on December 31, 1998 and related weighted average
interest rate were $575,028,000 and 7.49%, respectively, compared with
$550,380,000 and 7.56%, respectively on December 31, 1997. Interest capitalized
in conjunction with development and expansion projects was $6,518,000 for 1998,
compared with $3,242,000 for 1997.
DEPRECIATION AND AMORTIZATION EXPENSES increased $13,332,000 to $28,607,000 in
1998 from $15,275,000 in 1997. This increase is primarily related to the
aforementioned acquisition activity.
GENERAL AND ADMINISTRATIVE EXPENSES increased $2,688,000 to $5,723,000 in 1998
from $3,035,000 in 1997. This increase represents the costs associated with the
increased level of operations in the Company, including preparation for
administering the new CalPERS joint venture arrangement.
LOSS ON SALE OF REAL ESTATE. Consistent with its policy of disposing of non-core
properties when reasonable sales proceeds are available, the Company sold its
remaining portion of Plaza Rancho Carmel Shopping Center in 1998 at a loss of
$1,814,000, compared with the sale of the original portion of that center and
two other non-core properties in 1997 at a net gain of $5,896,000. Also in 1998,
the Company sold the parking garage at its 1000 Van Ness property for
$13,125,000. No gain or loss resulted from this sale.
Income allocated to MINORITY INTEREST increased $4,819,000 to $4,864,000 in 1998
from $45,000 in 1997. This increase reflects the issuance of preferred and
common operating partnership units as a portion of the consideration for various
acquisitions in late 1997 and 1998.
ACQUISITIONS AND DEVELOPMENTS
During 1999, all of the Company's acquisition activity took place in the joint
venture with CalPERS. During 1998, the Company acquired interests in 14 shopping
centers aggregating 1,017,000 square feet of Company-owned GLA (gross leasable
area) for an aggregate purchase price of approximately $98,343,000.
During 1999, the Company substantially completed the construction of a market
and promotional anchored shopping center located in Pleasant Hill, California.
The project contains approximately 355,000 square feet of Company-owned GLA and
has a projected net cost at completion of approximately $82,000,000 (including
land acquisition costs). During 1999, the Company began the renovation of the
Fremont Hub, an existing market and promotional
33
<PAGE>
anchored shopping center located in Fremont, California. Total cost of the
renovation is estimated to be approximately $22,000,000. During 1999, the
Company began the renovation of the Cameron Park Shopping Center, an existing
market anchored shopping center located in Cameron Park, California. Total net
cost of the renovation is estimated to be approximately $11,400,000.
DISPOSITIONS
It is the Company's policy to dispose of non-strategic properties when
satisfactory sales proceeds are available. Consistent with these policies, the
Company sold five shopping centers and two office properties during 1999. In
July 1999, the Company sold Wiegand Plaza, Mesa Shopping Center, Independence
Square, and Poway Village Shopping Center for aggregate sale proceeds of
approximately $44,400,000, resulting in a gain of approximately $8,620,000. In
August 1999, the Company disposed of the Ruffin Village shopping center for
approximately $3,500,000, resulting in a gain of approximately $1,149,000. In
October 1999, the Company sold the Bergen Brunswig office building for
approximately $19,250,000, resulting in a gain of approximately $71,000. In
anticipation of this sale, the Company recorded an impairment write-down of
$1,200,000 in the second quarter of 1999. In December 1999, the Company sold the
Marcoa Publishing office building for approximately $2,800,000, resulting in a
net loss of approximately $78,000. In anticipation of this sale, the Company
recorded an impairment write-down of $1,000,000 in the third quarter of 1999.
The Company, through a subsidiary, entered into a Purchase and Sale Agreement
with Holliday Development, L.P. ("Holliday"), whereby the Company would be
reimbursed by Holliday for all of the Company's costs and expenses (the
"Reimbursable Costs") incurred at the direction of Holliday, in connection with
the acquisition and construction of the residential portion of 1000 Van Ness
(one of the Martin Properties, see Note 2 to the Consolidated Financial
Statements). The agreement stipulated that the Reimbursable Costs were to be
paid to the Company in several successive transactions which coincided with the
sale of the residential units to third parties. During 1999, the Company was
paid the remainder of the Reimbursable Costs, approximately $7,450,000. Upon
receipt of the final payment of the Reimbursable Costs (which totaled
approximately $18,200,000) the Company conveyed all of the unsold residential
units. The Company's president and chief executive officer owned approximately
35% of the outstanding equity of Holliday. In addition, the Company's former
director of development owned approximately a 14% interest in Holliday.
In August 1998, the Company sold the parking garage of its 1000 Van Ness project
for approximately $13,125,000. No gain or loss resulted from this sale. In
December 1998, the Company disposed of the remaining portion of the Plaza Rancho
Carmel shopping center for approximately $2,420,000, resulting in a loss of
approximately $1,814,000.
INVESTMENTS IN JOINT VENTURE
During 1998, the Operating Partnership and CalPERS formed BPP Retail for the
purpose of entering into a joint venture to acquire neighborhood, community,
promotional, and specialty shopping centers. At December 31, 1998, the Company
had not yet contributed equity to the joint venture.
During 1999, the joint venture acquired interests in 26 shopping centers for an
aggregate purchase price of approximately $577,300,000. These acquisitions were
funded through
34
<PAGE>
approximately $360,600,000 of unsecured indebtedness, and approximately
$216,700,000 of capital contributed by CalPERS.
During 1999, the Operating Partnership contributed five shopping centers to the
joint venture valued at approximately $51,600,000.
In December 1999, the Company and CalPERS made certain modifications to the BPP
Retail arrangement. As part of the modifications, the Company exchanged
substantially all of its equity interest in BPP Retail for consideration having
a total value of approximately $39,400,000. In addition, as part of the
modifications, the Company contributed two properties to the joint venture at a
value of approximately $18,900,000.
Concurrently with these contributions, the Company withdrew approximately
$12,800,000 in cash from the joint venture, and the joint venture assumed
approximately $6,100,000 in existing mortgage debt associated with one of the
two contributed properties. The Company recognized a net gain of $609,000 as a
result of the modifications, and cash proceeds were used to reduce outstanding
indebtedness and for general working capital purposes. The Company will continue
to serve as the manager of BPP Retail's assets and is entitled to receive fees
for asset management, leasing, acquisition, and disposition activities, but will
no longer be eligible for the incentive fee attributable to increases in asset
values. In addition, if the Company proposes to acquire ownership of a
non-regional mall retail center (e.g., grocery store/drug store, neighborhood
shopping center) that satisfies certain specified investment objectives of
CalPERS, it must first be offered to BPP Retail and presented to CalPERS' staff
for consideration and then rejected before the Company may undertake such
opportunity.
Because the amount of potential fee income that the Company may earn through its
arrangement with CalPERS could approach or exceed 5% of its gross revenues for
calendar year 2000, to maintain its status as a REIT it was necessary for the
Company to assign to BPP Services, Inc., a Maryland corporation, its rights and
obligations to perform asset management services and leasing services on behalf
of BPP Retail and its right to receive fees for the performance of such
services. This assignment became effective as of March 1, 2000. In order to
satisfy the REIT provisions of the Internal Revenue Code, in calendar year 2000
the Company may not, directly or indirectly, own more than 10% of the voting
stock of BPP Services, Inc. Accordingly, the Operating Partnership owns 1% of
the outstanding voting stock of BPP Services, Inc. and the remaining 99% is
owned equally by the Company's five senior executive officers. However,
including the shares of non-voting stock, the Operating Partnership owns 95% of
the outstanding equity and economic interest of BPP Services, Inc. and the
executive officers own a 5% interest. In accordance with recently enacted
legislation, the Company anticipates that, on or after January 1, 2001, it will
cause BPP Services, Inc. to elect to become a "taxable REIT subsidiary" in which
case the Operating Partnership will have the option to acquire the remaining 5%
of the equity that it does not currently own.
FUNDS FROM OPERATIONS
The Company considers FUNDS FROM OPERATIONS ("FFO") to be a relevant
supplemental measure of the performance of an equity REIT since such measure
does not recognize depreciation and certain amortization expenses as operating
expenses. Management believes that reductions for these charges are not
meaningful in evaluating income-producing real estate, which historically has
not depreciated. Consistent with the standards established in the White Paper on
FFO approved by the Board of Governors of the National Association of Real
Estate Investment Trusts in March 1995, the Company defines FFO as net income
(loss) (computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring, sales of property and
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<PAGE>
non-recurring items, plus real estate related depreciation and amortization
and after adjustments for unconsolidated partnerships and joint ventures.
Management believes FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flows from operating
activities, financing activities, and investing activities, it provides
investors with an understanding of the ability of the Company to incur and
service debt and make capital expenditures. The Company computes FFO in
accordance with standards established by the White Paper, which may differ
from the methodology for calculating FFO utilized by other equity REITs, and
it therefore may not be comparable to FFO as calculated by such other REITs.
FFO should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance
or to cash flows from operating activities (determined in accordance with
GAAP) as a measure of the Company's liquidity, nor is it indicative of funds
available to fund the Company's cash needs, including its ability to make
distributions, needed capital replacements or expansions, debt service
obligations, or other commitments and uncertainties. The Company believes
that in order to facilitate a clear understanding of the combined historical
operating results of the Company, FFO should be examined in conjunction with
net income as presented in the consolidated financial statements and
information included elsewhere in this report.
In 1999, diluted FFO decreased approximately $1,015,000 to $51,007,000 as
compared with $52,022,000 in 1998. This decrease was net of several effects, but
was primarily attributable to asset dispositions in 1999, delays in new store
openings, delays in the completion of development and rehabilitation projects, a
decrease in lease termination fees, a slight decrease in same-store performance,
and an increase in general and administrative expense, offset by an increase in
fee income earned from BPP Retail. In 1998, diluted FFO increased $24,968,000 to
$52,022,000, compared with $27,054,000 in 1997. This increase was net of several
effects, but was primarily attributable to the acquisition activity during the
last quarter of 1997 and 1998. The Company's calculation of basic and diluted
FFO is as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income Available to Common Stockholders $12,487 $13,156 $18,698
Adjustments:
(Gain) Loss on Sales of Real Estate (10,371) 1,814 (5,896)
Depreciation and Amortization of Real Estate and
Tenant Improvements 27,552 26,588 14,155
Restructuring Charge 1,353 - -
Cumulative Effect of a Change in Accounting Principle 1,866 - -
Abandoned Acquisition Costs 748 - -
Costs Associated with Unsolicited Proposal and Pursuit of Strategic
Alternatives 4,548 - -
Impairment Write-Off 2,200 - -
Early Extinguishment of Debt - - 52
------- ------- -------
Funds from Operations - Basic 40,383 41,558 27,009
------- ------- -------
Adjustments:
Dividends Paid to Preferred Stockholders 5,600 5,600 -
Minority Interest 5,024 4,864 45
------- ------- -------
Funds from Operations - Diluted $51,007 $52,022 $27,054
======= ======= =======
</TABLE>
36
<PAGE>
CASH FLOWS
COMPARISON OF 1999 TO 1998. Cash and cash equivalents were $11,119,000 and
$20,873,000 at December 31, 1999 and 1998, respectively. Cash and cash
equivalents decreased $9,754,000 during 1999 compared with an increase of
$14,032,000 in 1998. The decrease is due to a $5,983,000 decrease in net cash
provided by operating activities from $51,119,000 to $45,136,000 and a
$135,520,000 decrease in net cash provided by financial activities, offset by a
$117,717,000 increase in net cash provided by investing activities. The
principal reasons for the decrease in net cash provided by operating activities
of $5,983,000 are the disposition of assets, the costs associated with the
unsolicited proposal, and the restructuring charge as discussed in the "Results
of Operations" above. The decrease in net cash provided by financial activities
of $135,520,000 is primarily attributable to a decrease of $20,906,000 in net
borrowings, resulting from a decrease in acquisition activity and repayment of
debt from asset sales, and a decrease in proceeds from the issuance of common
stock of $112,941,000. The increase in net cash provided by investing activities
of $117,717,000 is primarily attributable to a decrease in acquisitions of real
estate and capital improvements of $47,800,000, an increase in proceeds from
sale of real estate of $69,787,000, and an net increase in advances/capital
distributions from unconsolidated subsidiaries of $7,157,000.
COMPARISON OF 1998 TO 1997. Cash and cash equivalents were $20,873,000 and
$6,841,000 at December 31, 1998 and 1997, respectively. Cash and cash
equivalents increased $14,032,000 during 1998 compared with an increase of
$2,746,000 in 1997. The increase is due to a $22,147,000 increase in net cash
provided by operating activities from $28,972,000 to $51,119,000 and a
$284,467,000 decrease in net cash used by investing activities from $388,440,000
to $103,973,000, offset by a $295,328,000 decrease in net cash provided by
financing activities from $362,214,000 to $66,886,000. The principal reasons for
the increase in cash provided by operating activities of $22,147,000 are
discussed in "Results of Operations" above. The decrease in net cash used in
investing activities of $284,467,000 is primarily attributable to a decrease in
acquisitions of real estate and capital improvements of $297,761,000,
reimbursements of development costs of $11,362,000, and an advance from joint
venture partner of $22,195,000, offset by a decrease in proceeds from sales of
real estate of $49,923,000. The decrease in net cash provided by financing
activities of $295,328,000 is primarily attributable to a decrease of
$316,681,000 in net borrowings resulting from the decrease in acquisition
activity, an increase in dividends paid of $15,054,000, and an increase in
distributions to minority interests of $5,373,000, offset by an increase in
proceeds from the issuance of common stock of $39,807,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that the combination of cash flows from operating
activities and borrowings under its credit facilities will continue to provide
adequate capital for all required payments on the Company's notes payable,
binding capital expenditure obligations and tenant improvements, distributions
to minority interest holders, and Series A Preferred Stock dividends, as well as
Common Stock dividend payments in amounts sufficient to maintain the Company's
qualification as a REIT through the end of 2000. However, in order to maintain
appropriate levels of indebtedness and to provide the Company with additional
liquidity and financial flexibility, the Company intends to fund certain of
these commitments with the proceeds from the sales of assets if appropriate
opportunities arise. The Company cannot provide assurance that it will be able
to complete the sale of any assets or that such assets can be sold on terms that
are satisfactory. In addition, the Company would require additional sources of
capital to finance the acquisition and development of additional properties.
Sources of this additional capital may include available cash, borrowings under
credit facilities and mortgage indebtedness, proceeds
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<PAGE>
from sales of assets, the sale of interests in certain properties to third
parties, the issuance of Operating Partnership units to contributors of
properties and, to the extent market conditions permit, the issuance of debt or
equity securities. However, there can be no assurances that capital necessary to
finance future acquisitions or developments of properties will be available on
acceptable terms or at all. See "Financing Activities" below. The Company
satisfied its REIT requirement under the Internal Revenue Code by distributing
at least 95% of ordinary taxable income with distributions to stockholders of
$39,317,000 in 1999, of which $5,600,000 was to holders of Series A Preferred
Stock and $33,717,000 to holders of Common Stock. Accordingly, federal income
taxes were not incurred at the corporate level.
FINANCING ACTIVITIES
The acquisitions and developments described above were financed through cash
provided from operating activities, borrowings under revolving credit
facilities, new mortgages, mortgages assumed, construction loans, issuances of
Operating Partnership units, and issuances of Series A Preferred Stock and
Common Stock of the Company. Total debt outstanding at December 31, 1999 was
$538,830,000, compared with $575,028,000 at December 31, 1998.
The Company currently maintains a credit facility (the "GE Facility") with CMF
Capital Company, LLC (a subsidiary of General Electric Capital Corporation) in
the amount of $176,263,000, which is secured by various mortgages. At December
31, 1999, borrowings of approximately $138,420,000 were outstanding. Borrowings
under the GE Facility bear interest at a rate equal to the London Interbank
Offered Rate ("LIBOR") plus 2.50% per annum. The GE Facility is scheduled to
mature in November 2000, and is subject to various loan covenants. The Company
intends to either refinance the GE Facility with CMF Capital Company, LLC or
replace the facility with another lender prior to the maturity date. The Company
also maintains a $5,000,000 unsecured revolving credit facility with a lender
(the "Union Bank Facility"). At December 31, 1999, there was nothing borrowed on
this facility. The Union Bank Facility bears interest at a rate of LIBOR plus
2.00% per annum and is scheduled to mature in September 2000.
At December 31, 1999, the Company had three construction loans outstanding with
various lenders (the "Construction Facilities"). The Company had approximately
$7,816,000 of outstanding indebtedness secured by the 1000 Van Ness property in
downtown San Francisco. Borrowings under this loan bear interest at LIBOR plus
1.90% per annum, and it is scheduled to mature in December 2000. The Company
also had approximately $35,188,000 of outstanding indebtedness secured by the
Downtown Pleasant Hill shopping center. Borrowings under this loan bear interest
at LIBOR plus 1.75% per annum, and it is scheduled to mature in November 2000.
Finally, the Company had approximately $5,216,000 of outstanding indebtedness
secured by the Cameron Park shopping center. Borrowings under this loan bear
interest at LIBOR plus 2.25% per annum, and it is scheduled to mature in
December 2000. The Company believes that the funds provided from these
Construction Facilities will be materially sufficient to complete these
projects. Prior to the maturity of these loans, the Company intends to either
refinance or replace them with traditional mortgage financing.
In March 1998, the Company issued 8,440,500 shares of Common Stock and received
net proceeds of approximately $112,471,000, which was used primarily to reduce
debt.
Portions of the consideration for seven shopping centers acquired during 1998
consisted of 1,195,007 Common Units of the Operating Partnership. Subject to the
satisfaction of certain conditions, each Common Unit is exchangeable on a
1-for-1 basis for a share of Common Stock of the Company.
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<PAGE>
At December 31, 1999, the Company's capitalization consisted of $538,830,000 of
debt (excluding the Company's proportionate share of unconsolidated subsidiary
mortgage debt of $14,605,000), $120,000,000 stated value of Series A Preferred
Stock and Series 1997-A Preferred Units of the Operating Partnership, and
$317,659,000 of market equity (market equity is defined as (a) the sum of (i)
outstanding shares of Common Stock of the Company and (ii) outstanding Common
Units of the Operating Partnership, held by partners of the Operating
Partnership other than the Company, multiplied by (b) the closing price of the
shares of Common Stock on the New York Stock Exchange at December 31, 1999 of
$9.38), resulting in total debt plus equity capitalization of $976,489,000 and a
ratio of debt to total capitalization of 0.55 to 1.0. Comparable ratios at
December 31, 1998 and 1997 were 0.52 to 1.0 and 0.53 to 1.0, respectively. At
December 31, 1999, the Company's total debt consisted of $350,662,000 of fixed
rate debt and $188,168,000 of variable rate debt.
It is management's intention that the Company have access to the capital
resources necessary to expand and develop its business. Accordingly, the Company
may seek to obtain funds through additional borrowings and public offerings and
private placements of debt and equity securities. At December 31, 1999, the
Company had effective shelf registration statements on file with the Securities
and Exchange Commission relating to the possible sale of up to an aggregate of
$202,144,000 of equity securities.
COSTS ASSOCIATED WITH UNSOLICITED PROPOSAL AND PURSUIT OF STRATEGIC ALTERNATIVES
On June 7, 1999, the Company received an unsolicited proposal from Schottenstein
and certain of its affiliates to negotiate a business combination in which the
Company would be merged into an acquisition affiliate of Schottenstein and the
holders of the Company's Common Stock would receive $13 per share. The proposal
was subject to a number of conditions, including completion of due diligence
satisfactory to Schottenstein, obtaining new senior debt financing, and the
assumption of certain outstanding indebtedness of the Company. The proposed
transaction was also made conditional upon approval of the Company's
stockholders and the holders of units in the Company's Operating Partnership. On
July 12, 1999, Schottenstein increased its contingent proposal to $13.50 per
share.
On July 23, 1999, after an extensive evaluation of the Schottenstein proposal
and after receiving advice from Goldman, Sachs & Co., Inc., the Company's Board
of Directors concluded that it would not be in the best interest of the
Company's Common Stockholders to accept the proposal and unanimously voted to
reject Schottenstein's proposal.
On November 12, 1999, the Company announced that its Board of Directors had
instructed management and Goldman, Sachs & Co., Inc. to actively pursue a full
range of strategic alternatives in order to maximize stockholder value. The
Company also announced that it had commenced the active marketing of certain
properties to provide additional liquidity and financial flexibility.
On February 15, 2000, the Company announced that it had completed the initial
phase of this process. In this regard, the Company has entered into numerous
confidentiality agreements with potential bidders and the Company is exchanging
additional information with certain parties that submitted preliminary proposals
to engage in business combinations.
In connection with the evaluation of the Schottenstein proposal, the Company's
pursuit of all of its strategic alternatives and the Company's defending against
certain litigation incidental to the foregoing described herein under "Part I,
Item 2 - Legal Proceedings," the Company has
39
<PAGE>
incurred, and expects that it will continue to incur, significant costs for
financial, advisory, legal, and other services. Through December 31, 1999, the
Company had incurred approximately $4,548,000 of these related costs.
RESTRUCTURING
On March 18, 1999, the Board of Directors of the Company approved the Company's
plan to restructure its internal operations to outsource its property management
function to third-party providers. The Company estimated and recorded in the
first quarter of 1999 a restructuring charge of $1,500,000. This outsourcing is
expected to benefit the Company in several ways. First, it enables the Company
to more efficiently enter and exit selected markets and assets as opportunities
present themselves. This ability is key to the Company's focus on maximizing the
return on invested capital. Second, it allows the Company to establish strategic
relationships with national property management companies as well as local
providers. These relationships should benefit the Company with increased
opportunities and improved services. Third, it allows the management team to
focus more time on value-added activities that should help to improve the
Company's financial position. The outsourcing resulted in an approximately 26%
reduction in the Company's workforce and the closure of three of its property
management offices. The anticipated monthly recurring costs of outsourcing to
third-party providers are estimated to be approximately the same as the current
recurring internal costs ($250,000).
The restructuring charge is primarily attributable to personnel related costs
for the employees subject to the restructuring and the costs associated with
reducing and eliminating offices, furniture and equipment. The personnel related
costs include severance benefits, the Company's portion of related payroll
taxes, insurance and 401(k) plan contributions. During the week of March 22,
1999, all 37 employees in the Company's property management department were
notified of the terms of their benefits package. The personnel costs comprised
approximately one-half ($750,000) of the total reserve.
The costs attributable to reducing and eliminating offices include lease
termination fees, rental losses for vacated office spaces (offset by sub-leases)
and tenant improvements, and design fees attributable to abandoned office space.
The costs attributable to reducing and eliminating offices comprised
approximately one-third ($500,000) of the total reserve. The costs associated
with reducing and eliminating furniture and equipment included the write-off of
the net book value of the furniture and equipment for terminated employees to
the extent that these assets could not be redeployed in other functional areas
of the Company. The costs attributable to eliminating the furniture and
equipment were approximately one-sixth ($250,000) of the total reserve.
During the quarter ended September 30, 1999, the Company completed the hiring of
its third-party providers, its planned reduction in workforce, and the process
of closing its property management offices. It was determined during the third
quarter of 1999 that $120,000 of the reserve estimated for personnel related
costs was not necessary due to certain personnel leaving prior to earning
severance benefits and that $127,000 of the reserve estimated for the write-off
of furniture and equipment was not necessary due to the redeployment of certain
computers to other offices of the Company. In addition, it was determined that
$100,000 of additional reserve was needed for office closures due to a change in
the future value of sub-lease payments. As a result of these changes in
estimates, the Company reallocated $100,000 of reserves from personnel related
costs to office closures and reversed $147,000 of reserve during the quarter
ended September 30, 1999. At December 31, 1999, the remaining reserve for
personnel related costs ($10,000) represented funds needed for consultants hired
to assist with the transition to third-party managers. At December 31, 1999,
remaining reserve for office closures ($317,000) represented future obligated
lease payments for corporate offices which were closed, offset by
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future receipts for sub-leases entered into with the Company for the related
closed office spaces (See Note 15). The following table reflects the composition
of the Company's restructuring reserve, the expenditures applied against it, and
the portion of the reserve that was reversed at December 31, 1999:
<TABLE>
<CAPTION>
RESTRUCTURING
ORIGINAL RESERVE
RESTRUCTURING EXPENDITURES DECEMBER 31,
RESERVE APPLIED RESERVE REVERSED 1999
---------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Personnel Related Costs $ 750,000 $ (620,000) $ (120,000) $ 10,000
Office Closures 500,000 (283,000) 100,000 317,000
Write-off of Furniture and Equipment 250,000 (123,000) (127,000) -
------------ ------------ ------------ ---------
Total $ 1,500,000 $ (1,026,000) $ (147,000) $ 327,000
============ ============ ============ =========
</TABLE>
YEAR 2000 ISSUES
Although we have not experienced any material problems related to Year 2000
issues, we may experience delayed effects of Year 2000 issues, which may disrupt
our operations.
Year 2000 computer issues concern the inability of computer systems to
accurately calculate, store, or use data after December 31, 1999. These computer
issues may cause our computer systems, or those of our business partners, to
process financial and operational information incorrectly. We have taken action
over the past year to identify and correct these problems.
We believe that our internal systems were Year 2000 compliant at December 31,
1999 and, to date, we have not experienced any problems related to Year 2000
issues. It is possible, however, that we may experience delayed effects of Year
2000 issues in the next several months. We cannot assure that our operations
have not been, or will not be affected by Year 2000 issues in a manner that has
not become apparent to us or that may arise in the future. If our efforts or the
efforts of our business partners failed to adequately address Year 2000 issues,
we could incur costs to correct affected systems. While our Year 2000 compliance
efforts may involve additional costs, we believe that these costs would not have
a material impact on our financial results. The Company incurred third-party
costs of approximately $50,000 related to Year 2000 issues.
EFFECTS OF INFLATION
Substantially all of the Company's leases contain provisions designed to
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. Such escalation
clauses are often related to increases in the consumer price index or similar
inflation indices. Most of the Company's leases require the tenant to pay its
share of operating expenses, including common area maintenance, real estate
taxes, and insurance, thereby reducing the Company's exposure to increases in
these operating expenses resulting from inflation to the extent that its
properties are occupied. The Company periodically evaluates its exposure to
short-term interest rates and may, from time to time, enter into interest rate
protection agreements which mitigate, but do not eliminate, the effect of
changes in interest rates on its floating-rate loans.
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<PAGE>
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Annual Report may be deemed to be "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results of the Company to be materially different
from historical results or from any results expressed or implied by such
forward-looking statements. Such risks, uncertainties and other factors include,
but are not limited to, the competitive environment in the retail industry,
national and local economic conditions, changes in prevailing interest rates and
in the availability of debt and equity capital, the illiquidity of real estate
investments in general, bankruptcy and financial condition of tenants, and
environmental risks. Reference is made to FORWARD-LOOKING STATEMENTS AND CERTAIN
RISK FACTORS contained elsewhere in this 1999 Annual Report on Form 10-K for a
further discussion of these and other factors that might cause actual results to
differ materially from those set forth in the forward-looking statements.
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<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
The Company is exposed to interest rate changes primarily as a result of the GE
and Union Bank Facilities used to maintain liquidity and fund capital
expenditures and expansion of the Company's real estate investment portfolio.
From time to time, the Company replaces borrowings under its credit facilities
with proceeds from the sale of Common Stock, the sale of assets, or proceeds
from long-term fixed rate mortgages secured by the Company's real estate. The
Company's interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows and to lower its overall
borrowing costs. To achieve its objectives the Company borrows primarily at
fixed rates and may in the future enter into derivative financial instruments
such as interest rate swaps, caps, and treasury locks in order to mitigate its
interest rate risk on a related financial instrument. The definitive extent of
the Company's interest rate risk is not quantifiable or predictable because of
the variability of future interest rates and financing requirements. The Company
does not enter into derivative or interest rate transactions for speculative
purposes.
The Company's interest rate risk is monitored using a variety of techniques. At
December 31, 1999, the Company's long-term debt primarily consisted of fixed
rate secured mortgage indebtedness, variable rate Construction Facilities,
variable rate secured mortgage indebtedness, fixed rate lease obligations, and
two variable rate credit facilities. The average interest rate on the
$335,596,000 of secured mortgage indebtedness outstanding at December 31, 1999
was approximately 7.48%, with maturities at various dates through 2028. The
fixed rate lease obligations are in connection with the historic portion of the
Company's 1000 Van Ness project, and at December 31, 1999, the present value of
the related minimum lease payments was approximately $15,067,000. The weighted
average interest rate on the $48,220,000 of borrowings under the Construction
Facilities at December 31, 1999 was approximately 7.69%, with maturities at
various dates throughout 2000. The balance outstanding and interest rate on the
variable secured indebtedness at December 31, 1999 were approximately $1,528,000
and 8.00%, respectively, and is scheduled to mature in 2017. The weighted
average interest rate on the GE Facility at December 31, 1999 was approximately
8.30%. The GE Facility, with an outstanding balance at December 31, 1999 of
approximately $138,420,000, matures in November 2000. There was no outstanding
indebtedness under the Union Bank Facility at December 31, 1999. The carrying
value of the GE and Union Bank Facilities, Construction Facilities, and variable
rate secured mortgage loan at December 31, 1999 approximate their fair values.
The table below presents principal amounts and related weighted average rates by
year of maturity for the Company's debt at December 31, 1999 (dollars in
thousands):
<TABLE>
<CAPTION>
FIXED RATE VARIABLE RATE
---------------------------------------------- --------------------------------------------
DOLLARS AVERAGE RATE DOLLARS AVERAGE RATE
----------------------- ---------------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
2000 $ 9,074 8.47% $186,685 8.14%
2001 5,719 7.34 47 8.00
2002 5,854 7.52 51 8.00
2003 6,323 7.52 55 8.00
2004 70,724 7.82 60 8.00
Thereafter 252,968 7.37 1,270 8.00
-------- ---- -------- ----
Total $350,662 7.49% $188,168 8.14%
======== ==== ======== ====
Fair Value $340,546
========
</TABLE>
43
<PAGE>
As the table incorporates only those exposures that exist at December 31, 1999,
it does not consider those exposures or positions that could arise after that
date. Moreover, because future commitments are not presented in the table above,
the information presented has limited predictive value. As a result, the
Company's ultimate economic impact with respect to interest rate fluctuations
will depend on the exposures that arise during the period, the Company's hedging
strategies at that time, and interest rates. The Company does not utilize
financial instruments for trading or other speculative purposes, nor does it
utilize leveraged financial statements. As noted in the table above, the Company
had approximately $188,168,000 in variable rate debt outstanding at December 31,
1999. Based on these year-end debt levels, a hypothetical 1.0% increase in
interest rates would increase the Company's interest expense by approximately
$1,882,000 on an annual basis, and likewise decrease earnings and cash flows.
The Company cannot predict market fluctuations in interest rates and their
impact on its variable rate debt, nor can there be any assurance that fixed rate
long-term debt will be available to the Company at favorable rates, if at all.
Consequently, future results may differ materially from the estimated changes
discussed above.
44
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Burnham
Pacific Properties, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. Our audits
also included the financial statement schedule listed in Item 14(a). These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
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 consolidated financial statements present fairly, in all
material respects, the financial position of Burnham Pacific Properties, Inc. as
of December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1999 Burnham
Pacific Properties, Inc. adopted the provisions of Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities", and reported it as a cumulative
effect of a change in accounting principle in the 1999 consolidated financial
statements.
//Deloitte & Touche LLP//
San Diego, California
March 1, 2000
45
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(in thousands, except share amounts)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Real Estate $1,036,294 $1,137,779
Less Accumulated Depreciation (65,494) (79,837)
---------- ----------
Real Estate-Net 970,800 1,057,942
Real Estate Held for Sale 8,737 -
Cash and Cash Equivalents 11,119 20,873
Restricted Cash 9,827 7,737
Receivables-Net 8,413 7,697
Investment in Unconsolidated Subsidiaries 3,650 3,438
Other Assets 22,469 16,489
---------- ----------
Total $1,035,015 $1,114,176
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable and Other Liabilities $ 29,224 $ 50,572
Tenant Security Deposits 2,606 2,982
Notes Payable 400,410 394,029
Line of Credit Advances 138,420 180,999
---------- ----------
Total Liabilities 570,660 628,582
---------- ----------
Commitments and Contingencies
Minority Interest 66,350 70,217
---------- ----------
Stockholders' Equity:
Preferred Stock, Par Value $.01/share, 5,000,000 Shares Authorized,
4,800,000 Shares Designated as Series 1997-A Convertible Preferred,
2,800,000 Shares Outstanding at December 31, 1999 and December 31, 1998 28 28
Common Stock, Par Value $.01/share, 95,000,000 Shares Authorized,
32,273,546 and 31,954,008 Shares Outstanding at December 31, 1999 and
December 31, 1998, respectively 323 319
Paid in Capital in Excess of Par 528,811 524,957
Dividends Paid in Excess of Net Income (131,157) (109,927)
---------- ----------
Total Stockholders' Equity 398,005 415,377
---------- ----------
Total $1,035,015 $1,114,176
========== ==========
</TABLE>
See the Accompanying Notes
46
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Rents $126,091 $130,236 $ 67,413
Fee Income 5,078 669 -
Interest 1,641 818 761
-------- -------- --------
Total Revenues 132,810 131,723 68,174
-------- -------- --------
COSTS AND EXPENSES
Interest 36,391 35,630 18,472
Rental Operating 36,607 35,849 18,220
Provision for Bad Debt 1,231 694 496
General and Administrative 8,021 5,723 3,035
Restructuring Charge 1,353 - -
Abandoned Acquisition Costs 748 - -
Costs Associated with Unsolicited Proposal and
Pursuit of Strategic Alternatives 4,548 - -
Impairment Write-Off 2,200 - -
Depreciation and Amortization 28,182 28,607 15,275
-------- -------- --------
Total Costs and Expenses 119,281 106,503 55,498
-------- -------- --------
Income from Operations Before Income from
Unconsolidated Subsidiaries, Minority Interest,
Gain (Loss) on Sales of Real Estate, Extraordinary
Item and Cumulative Effect of a Change in
Accounting Principle 13,529 25,220 12,676
Income from Unconsolidated Subsidiaries 1,077 214 223
Minority Interest (5,024) (4,864) (45)
Gain (Loss) on Sales of Real Estate 10,371 (1,814) 5,896
-------- -------- --------
Income Before Extraordinary Item and Cumulative
Effect of a Change in Accounting Principle 19,953 18,756 18,750
Extraordinary Loss From Early
Extinguishment of Debt - - (52)
Cumulative Effect of a Change in Accounting
Principle (1,866) - -
-------- -------- --------
Net Income $ 18,087 $ 18,756 $ 18,698
Dividends Paid to Preferred Stockholders (5,600) (5,600) -
-------- -------- --------
Income Available to Common Stockholders $ 12,487 $ 13,156 $ 18,698
======== ======== ========
Basic Earnings Per Common Share:
Income Before Extraordinary Item and Cumulative
Effect of a Change in Accounting Principle $ 0.45 $ 0.44 $ 0.88
Extraordinary Item - - -
Cumulative Effect of a Change in Accounting
Principle (0.06) - -
-------- -------- --------
Income Available to Common Stockholders $ 0.39 $ 0.44 $ 0.88
======== ======== ========
Diluted Earnings Per Common Share:
Income Before Extraordinary Item and Cumulative
Effect of a Change in Accounting Principle $ 0.45 $ 0.44 $ 0.87
Extraordinary Item - - -
Cumulative Effect of a Change in Accounting
Principle (0.06) - -
-------- -------- --------
Income Available to Common Stockholders $ 0.39 $ 0.44 $ 0.87
======== ======== ========
Proforma Amounts Assuming the Change in
Accounting Principle is Applied Retroactively:
Net Income $ 14,353 $ 12,537 $ 18,761
Net Income Per Share - Basic $ 0.45 $ 0.42 $ 0.88
Net Income Per Share - Diluted $ 0.45 $ 0.42 $ 0.87
</TABLE>
See the Accompanying Notes
47
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1999, 1998 AND 1997
(in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 18,087 $ 18,756 $ 18,698
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 28,182 28,607 15,275
Impairment Loss 2,200 - -
(Gain) Loss on Sales of Assets (10,371) 1,814 (5,896)
Cumulative Effect of a Change in Accounting Principle 1,866 - -
Extinguishment of Debt - - 52
Abandoned Acquisitions Costs 748 - -
Restructuring Charge 1,353 - -
Provision for Bad Debt 1,231 694 496
Compensation Expense - Directors' Fees 237 329 328
Compensation Expense - Stock Options 268 275 -
Minority Interest 5,024 4,864 45
Operating Distributions from Joint Venture 2,456 - -
Equity in Income from Unconsolidated Subsidiaries (1,077) - -
Changes in Other Assets and Liabilities:
Receivables and Other Assets (10,355) (7,893) (7,338)
Accounts Payable and Other Liabilities 5,663 3,087 5,845
Tenant Security Deposits (376) 586 1,467
--------- --------- ---------
Net Cash Provided by Operating Activities 45,136 51,119 28,972
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Acquisitions of Real Estate and Capital Expenditures (108,418) (156,218) (453,979)
Proceeds from Sales of Real Estate 85,360 15,573 65,496
Reimbursements of Development Costs from Related Party 7,450 11,362 -
Advance from Joint Venture - 22,195 -
Capital Distribution from Joint Venture 29,352 - -
Principal Payments on Notes Receivable - 3,115 43
--------- --------- ---------
Net Cash Provided (Used) by Investing Activities 13,744 (103,973) (388,440)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Line of Credit Agreements 195,607 83,130 254,320
Repayments Under Line of Credit Agreements (238,186) (83,000) (146,351)
Principal Payments of Notes Payable (36,028) (46,946) (37,540)
Proceeds from Issuance of Notes Payable 57,203 46,317 245,753
Restricted Cash (2,090) (2,495) (5,242)
Dividends Paid (39,317) (36,910) (21,856)
Issuance of Stock, Net 41 112,982 73,175
Distributions Made to Minority Interest Holders (5,864) (5,418) (45)
Payment for Minority Interest - (774) -
--------- --------- ---------
Net Cash (Used) Provided by Financing Activities (68,634) 66,886 362,214
--------- --------- ---------
Net (Decrease) Increase in Cash and Cash Equivalents (9,754) 14,032 2,746
Cash and Cash Equivalents at Beginning of Year 20,873 6,841 4,095
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 11,119 $ 20,873 $ 6,841
========= ========= =========
</TABLE>
Continued
48
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)
(continued)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash Paid During the Year for Interest,
Net of Capitalized Amounts $ 37,447 $ 34,240 $ 17,803
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Assets Contributed to Investment in
Unconsolidated Subsidiaries $ (65,442) $ - $ -
========= ========= =========
Notes Payable and Obligations Assumed $ - $ 25,147 $ 61,008
Operating Partnership Units Issued
in Connection with Real Estate Acquisitions - 18,313 58,325
Proceeds from Notes Payable - - 176,900
Liability Due to Seller - 9,912 -
Cash Paid for Real Estate - 22,887 104,533
Issuance of Convertible Preferred Stock - - 70,000
Other - - 3,107
--------- --------- ---------
Fair Value of Real Estate Acquired $ - $ 76,259 $ 473,873
========= ========= =========
</TABLE>
See the Accompanying Notes
49
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1999, 1998 and 1997
(in thousands, except share amounts)
<TABLE>
<CAPTION>
SERIES
1997-A
CONVERTIBLE PAID IN DIVIDENDS
PREFERRED STOCK COMMON STOCK CAPITAL PAID IN
----------------- ------------------ IN EXCESS EXCESS OF
SHARES AMOUNT SHARES AMOUNT OF PAR NET INCOME TOTAL
- -------------------------------------- ---------- --------- ----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 17,096,452 $262,340 $(88,615) $173,725
Issuance of Common Stock:
Public Offering - Net 6,325,000 73,125 73,125
Directors' Fees 23,400 76 $252 328
Exercised Options 4,000 50 50
Change in Common Stock Par Value (335,307) 335,307 -
Issuance of 2,800,000 Shares, Series
1997-A Convertible Preferred Stock 2,800,000 $17 40,717 40,734
Net Income 18,698 18,698
Dividends Paid - Common (21,856) (21,856)
--------- -- ---------- ------- --------- --------- ---------
Balance, December 31, 1997 2,800,000 17 23,448,852 234 376,326 (91,773) 284,804
Issuance of Common Stock:
Public Offering- Net 8,440,518 85 112,386 112,471
Directors' Fees 24,000 329 329
Exercised Options 40,638 511 511
Stock Options - Compensation Expense 275 275
Preferred Stock Reclass 11 28,149 28,160
Adjustment to reflect minority
interest on a pro-rata basis
according to year-end ownership
percentage of Operating
Partnership 6,981 6,981
Net Income 18,756 18,756
Dividends Paid - Common (31,310) (31,310)
Dividends Paid - Preferred (5,600) (5,600)
--------- -- ---------- ------- --------- --------- ---------
Balance, December 31, 1998 2,800,000 28 31,954,008 319 524,957 (109,927) 415,377
Issuance of Common Stock:
Public Offering- Net 41 41
Directors' Fees 22,092 237 237
Stock Options - Compensation Expense 268 268
Stock Options - Legal Fee Expense 42 42
Stock Options - Issued to CalPERS 234 234
Adjustment to reflect minority
interest on a pro-rata basis
according to year-end ownership
percentage of Operating Partnership (1,355) (1,355)
Operating Partnership Units
converted into Common Stock 297,446 4 4,387 4,391
Net Income 18,087 18,087
Dividends Paid - Common (33,717) (33,717)
Dividends Paid - Preferred (5,600) (5,600)
--------- -- ---------- ------- --------- --------- ---------
Balance, December 31, 1999 2,800,000 28 32,273,546 $ 323 $ 528,811 $(131,157) $ 398,005
========= == ========== ======= ========= ========= =========
</TABLE>
See the Accompanying Notes
50
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Burnham Pacific Properties, Inc. (the "Company") is a real estate operating
company which acquires, rehabilitates, develops and manages retail properties
nationwide. On November 14, 1997, the Company formed Burnham Pacific Operating
Partnership, L.P. (the "Operating Partnership") under the Delaware Revised
Uniform Limited Partnership Act, and subsequently transferred to the Operating
Partnership legal or beneficial ownership of substantially all of the real
property and related personal property owned by the Company and its subsidiaries
and of the beneficial interest owned by the Company and its subsidiaries in any
partnership or limited liability company that owns a direct or indirect interest
in real property and related personal property. The Operating Partnership is the
vehicle through which the Company owns its current properties, will make its
future acquisitions, and generally conducts its business.
At December 31, 1999, the Company owns an approximately 86.9% economic interest
in the Operating Partnership and is its sole general partner.
The Company, primarily through the Operating Partnership and subsidiaries of the
Operating Partnership, owns interests in 62 retail shopping centers, 61 of which
were fully operational, and one of which is being developed. Forty-seven of the
properties are located in California, nine in Washington, three in Oregon, two
in New Mexico, and one in Utah. At December 31, 1999, the Company also owned two
office/industrial properties located in Southern California. The Company has
elected to qualify as a real estate investment trust ("REIT") for federal income
tax purposes.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and the Operating Partnership and their direct and indirect
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
The 13.1% limited partner interest in the Operating Partnership not owned by the
Company is reflected in these financial statements as minority interest.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INCOME TAXES
Income taxes have not been provided because the Company believes that it has met
all requirements in 1999, 1998, and 1997 to qualify as a REIT under Sections
856-860 of the Internal Revenue Code, including the distribution of at least 95%
51
<PAGE>
of ordinary taxable income to stockholders. Taxable income differs from net
income for financial reporting purposes principally because of differences in
the timing of recognition of interest, depreciation, rental revenue, and
sales of assets. The reported amount of the Company's net assets at December
31, 1999 was greater than its tax basis for federal income tax purposes by
approximately $86,000,000.
REAL ESTATE
Real estate is stated at cost or, in the case of real estate which management
believes is impaired, at the lower fair value of such properties. Additions,
renovations, and improvements are capitalized. The Company reviews real estate
for impairment whenever events or changes in circumstances indicate that an
asset's book value exceeds the undiscounted expected future cash flows to be
derived from that asset. Whenever undiscounted expected future cash flows are
less than the book value, the asset will be reduced to a value equal to the net
present value of the expected future cash flows and an impairment loss will be
recognized. Maintenance and repairs which do not extend asset lives are expensed
as incurred. Depreciation is computed using the straight-line method over
estimated useful lives ranging from 14 to 30 years for buildings, 2 to 17 years
for improvements, and 3 to 10 years for furniture, fixtures and equipment.
REAL ESTATE HELD FOR SALE
Real estate classified as held for sale is stated at the lower of its carrying
amount or estimated fair value less disposal costs. Depreciation is not recorded
on assets classified as held for sale.
In the normal course of business, the Company will receive offers for sale of
its properties, either solicited or unsolicited. For those offers that are
accepted, the prospective buyer will usually require a due diligence period
before consummation of the transaction. It is not unusual for matters to arise
which result in the withdrawal or rejection of the offer during this process. As
a result, real estate is not classified as "held for sale" until it is likely,
in the opinion of management, that a property will be disposed of in the near
term, even if sales negotiations for such property are currently under way.
There was approximately $8,737,000 of real estate considered "held for sale" for
this purpose at December 31, 1999.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash and
certificates of deposit with original maturities of less than 90 days.
RESTRICTED CASH
Restricted cash is required to be held in escrow accounts as specified by the
terms of certain of the Company's notes payable at December 31, 1999 and 1998.
The restricted cash is to be used to pay for insurance, taxes, and capital
expenditures pertaining to the related real estate that collateralizes the notes
payable.
ACCOUNTS RECEIVABLE
Accounts receivable is net of an allowance for doubtful accounts of
approximately $3,311,000 and $1,778,000 at December 31, 1999 and 1998,
respectively.
52
<PAGE>
AMORTIZATION
Deferred loan fees, direct lease costs, and certain other costs are amortized
using the straight-line method over the related estimated life.
FINANCIAL INSTRUMENTS
The carrying values reflected in the consolidated balance sheets at December 31,
1999 and 1998 reasonably approximate the fair values for cash and cash
equivalents, receivables, accounts payable, and line of credit advances. In
making such assessment, the Company has utilized discounted cash flow analyses,
estimates, and quoted market prices as deemed appropriate. At December 31, 1999,
the Company estimated that the fair value of notes payable was less than their
carrying value by approximately $10,116,000. At December 31, 1998, the Company
estimated that the fair value of notes payable was greater than their carrying
value by approximately $2,620,000.
REDEEMABLE SECURITIES
At December 31, 1997, the Company had a contingent obligation to redeem
1,126,386 shares of its 2,800,000 outstanding shares of Series 1997-A
Convertible Preferred Stock ("Series A Preferred Stock") outstanding; therefore,
the value of such potentially redeemable shares of approximately $28,160,000 was
not included in Stockholders' Equity at December 31, 1997. During 1998, this
contingent obligation was relieved and, as a result, $28,160,000 was
reclassified into Stockholders' Equity.
REVENUE RECOGNITION
Rental revenue is generally recognized on a straight-line basis over the life of
the lease. Revenue from tenant reimbursements of taxes, maintenance expenses,
and insurance is recognized in the period the related expense is recorded.
Revenue based on a percentage of tenants' sales is estimated and accrued ratably
over the year. In December 1999, SEC Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements" was issued. SAB 101 provides the
SEC staff's views in applying generally accepted accounting principles to
selected revenue recognition issues, including contingent rental income.
Contingent rental revenue from tenants should be recognized as revenue only
after the tenants exceed their sales breakpoint. The Company will be required to
adopt SAB 101 in the first quarter of 2000. Revenues for the year ended December
31, 1999 would have been reduced by approximately $236,000 if the Company
reversed the percentage rent for the tenants which had not exceeded their sales
breakpoint at December 31, 1999.
STRAIGHT-LINE RENT
At December 31, 1999 and 1998, approximately $6,901,000 and $5,566,000,
respectively, of straight-line rent is included in other assets.
NET INCOME PER SHARE
Net income per share is calculated using the weighted average number of shares
outstanding during each year. At December 31, 1997, the Company adopted the
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings Per Share (EPS). This statement requires the
presentation of earnings per share to reflect both "Basic EPS" and "Diluted EPS"
on the face of the income statement.
53
<PAGE>
Basic earnings per share is calculated on the weighted average shares of Common
Stock outstanding during the period. Diluted earnings per share includes the
effect of all potential common shares.
The following table is the reconciliation from the basic to the diluted EPS
computations for "net income" for 1999, 1998, and 1997 (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Numerator:
Net Income $18,087 $18,756 $18,698
Less:
Dividends Paid to Preferred Stockholders (5,600) (5,600) -
------- ------- -------
Income Available to Common Stockholders for
Basic Earnings Per Share $12,487 $13,156 $18,698
Effect of Dilutive Securities:
Operating Partnership Units - - 45
Convertible Preferred Stock - - 15
------- ------- -------
Income Available to Common Stockholders for
Diluted Earnings Per Share $12,487 $13,156 $18,758
======= ======= =======
Denominator:
Shares for Basic Earnings Per Share -
Weighted Average Shares Outstanding 32,062 29,864 21,335
Effect of Dilutive Securities:
Operating Partnership Units - - 55
Convertible Preferred Stock - - 12
Stock Options 137 119
------- ------- -------
Shares for Diluted Earnings Per Share 32,062 30,001 21,521
======= ======= =======
Basic Earnings Per Share $ 0.39 $ 0.44 $ 0.88
======= ======= =======
Diluted Earnings Per Share $ 0.39 $ 0.44 $ 0.87
======= ======= =======
</TABLE>
In 1999 and 1998, dividends and shares from conversion of Series A Preferred
Stock and minority interest and shares from the conversion of Operating
Partnership units were excluded from the diluted earnings per share calculations
because they were anti-dilutive.
Options to purchase 3,371,750 shares of Common Stock at exercise prices ranging
from $11.31 to $18.88 per share were outstanding at December 31, 1999, but were
not included in the computation of diluted EPS because the options' exercise
price was greater than the market price of the Common Stock of the Company.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-up
Activities". This SOP requires that entities expense the costs of start-up
activities and organization costs as incurred. The Company was required to adopt
the SOP in the first quarter of 1999 as a cumulative effect of a change in
accounting principle. The implementation of this SOP caused the Company to
write-off unamortized organization costs of approximately $1,866,000.
RECLASSIFICATIONS
Certain of the 1998 and 1997 amounts have been reclassified to conform to the
1999 presentation.
54
<PAGE>
2. REAL ESTATE
SUMMARY: Real Estate is summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
---- ----
<S> <C> <C>
Retail Centers $ 912,543 $1,038,978
Office/Industrial Buildings 29,333 57,876
Retail Centers Under Development 87,397 34,814
Other 7,021 6,111
---------- ----------
Total Real Estate 1,036,294 1,137,779
Accumulated Depreciation (65,494) (79,837)
---------- ----------
Real Estate - Net $ 970,800 $1,057,942
========== ==========
</TABLE>
The Company's real estate is leased to tenants under leases expiring at various
dates through 2047. Certain of these leases contain provisions for rent
increases based on cost-of-living indices and certain leases contain renewal
options of up to 55 years. Future minimum rental income to be received by the
Company under the terms of these operating leases is as follows at December 31,
1999 (in thousands):
<TABLE>
<S> <C>
Year Ending December 31,
2000 $ 88,314
2001 80,500
2002 71,758
2003 63,232
2004 54,805
Later Years 312,664
--------
Total $671,273
========
</TABLE>
Fifty-nine properties, including the twenty-eight Bankruptcy Remote Properties
described in the following paragraph, having a net book value of approximately
$966,715,000 at December 31, 1999, are pledged as collateral for notes payable
described in Notes 4 and 5. In addition, the notes are secured by assignments of
rents on such real estate. Certain real estate is located on land which is
subject to noncancelable ground leases expiring at various dates through 2089
with minimum annual lease payments of approximately $2,063,000.
BANKRUPTCY REMOTE PROPERTIES: Twenty-eight properties having a net book value of
approximately $515,952,000 at December 31, 1999 (collectively the "Bankruptcy
Remote Properties", and each a "Bankruptcy Remote Property") are wholly-owned by
various "Bankruptcy Remote Entities". Each Bankruptcy Remote Entity is an
indirect subsidiary of the Company. The assets of each Bankruptcy Remote Entity,
including the respective Bankruptcy Remote Property or Properties owned by each,
are owned by that Bankruptcy Remote Entity alone and are not available to
satisfy claims that any creditor may have against the Company, its affiliates,
or any other person or entity. No Bankruptcy Remote Entity has agreed to pay or
make its assets available to pay creditors of the Company, any of its
affiliates, or any other person or entity. Neither the Company nor any of its
affiliates has agreed to pay or make its assets available to pay creditors of
any Bankruptcy Remote Entity (other than any agreement by a Bankruptcy Remote
Entity to pay its own creditors). No affiliate of any Bankruptcy Remote Entity
has agreed to pay or make its assets available to pay creditors of any
Bankruptcy Remote Entity.
DEVELOPMENT PROPERTIES: During 1995, the Company and various persons affiliated
with The Martin Group of Companies, Inc., a San Francisco-based real estate
development firm owned by J. David Martin, president and chief executive officer
of the Company, executed
55
<PAGE>
definitive documents relating to the Company's acquisition of interests in
certain retail properties in the San Francisco Bay area (the "Martin
Properties"). Each of the Martin Properties is currently owned by a separate
limited partnership, of which the Company is general partner, and Mr. Martin and
various other persons affiliated with The Martin Group (collectively, including
Mr. Martin, the "Martin Group Affiliates") are the limited partners. Each of the
partnership agreements contemplates that the Company will acquire or develop a
specified Martin Property through the relevant partnership and that upon
completion and stabilization of rental revenues from the property, the limited
partners will receive a number of limited partnership units determined as
follows: (i) the annualized net operating income of the Martin Property will be
multiplied by 10 in order to arrive at a hypothetical value of the completed
property, (ii) the cost of construction and other project costs will be deducted
from such hypothetical value in order to "value" the equity interests of the
limited partners in the Martin Property, and (iii) such equity interest will be
stated as a number of limited partnership units determined by dividing such
limited partners' equity by $16. Each holder of limited partnership units will
have the right to "put" such units to the partnership at a price equal to the
then market value of an equivalent number of shares of the Company's Common
Stock. As a result, the actual value which a holder of limited partnership units
would be entitled to receive upon exercise of such "put" option will depend upon
the market value of the Common Stock at the time, which may be more or less than
$16 per limited partnership unit. If such "put" is exercised, the Company has
the option of either purchasing the limited partnership units for cash or
issuing one share of Common Stock for each limited partnership unit.
Each partnership agreement specifies the maximum number of limited partnership
units that may be issued to the limited partners of that partnership. If the
hypothetical equity value of any such partnership is determined to be less than
originally estimated (either because project costs are higher than estimated or
because stabilized net operating income is less than estimated or both), then
the number of limited partnership units and the corresponding number of shares
of Common Stock of the Company which may be exchanged for such units will be
reduced. Other than to reflect a stock split or other capital adjustment of the
shares of Common Stock, under no circumstances can the number of units be
increased above the number specified in the applicable partnership agreement.
Limited partnership units exchangeable for 118,403 shares of Common Stock have
been issued to the Martin Group Affiliates at December 31, 1999. At December 31,
1999 and 1998, these partnership units had a cost basis of approximately
$1,742,000 and are reflected as minority interest in the accompanying
consolidated financial statements. A maximum of 1,000,000 shares of Common Stock
have been reserved for issuance upon exchange of the maximum number of 1,000,000
limited partnership units that may be issued with respect to the remaining
Martin Properties. In connection with each of the Martin Properties, the Company
entered into a registration rights agreement with the limited partners of each
limited partnership pursuant to which such limited partners will have the right
to require the Company to register under the Securities Act the shares of Common
Stock which are issued upon the exchange of limited partnership units for offer
and sale to the public and to join in certain registrations of securities of the
Company. The total remaining project costs (exclusive of partnership units
representing the equity interest of the limited partners) for the Martin
Properties are estimated at approximately $19,900,000 at December 31, 1999 (see
Note 11).
On November 30, 1998, the Company, through a subsidiary, entered into a purchase
and sale agreement (the "Agreement") whereby the Company sold, at its cost, a
portion of the improvements made by the Company to the historic commercial
portion of its development project known as 1000 Van Ness (the "Project") to
Historic Van Ness, LLC ("Historic Van Ness"). The purchase price of $15,118,000
was paid by Historic Van Ness by its assuming the same amount of the Company's
construction loan on the Project and may be adjusted within sixty days after the
completion of all improvements to the historic commercial portion of the
56
<PAGE>
Project. This transaction was accounted for by the Company as a financing
transaction. The improvements purchased by Historic Van Ness are considered
to be Qualified Rehabilitation Expenditures ("QRE") for federal income tax
purposes (as defined in the Internal Revenue Code of 1986), which generates a
rehabilitation tax credit (the "Historic Tax Credit"). The construction loan
assumed by Historic Van Ness matures in December 2000. In this regard, the
Company has committed to make a loan to Historic Van Ness to refinance the
construction loan of up to $15,150,000 less the amount of any permanent loan
(not to exceed $7,000,000) allocable to the historic commercial portion of
the Project. The term of the loan by the Company would be for ten years, plus
three ten year options. The rate of interest on the Company's commitment will
be determined when the loan is finalized. This commitment expires on December
31, 2000.
The Company has an option (the "Option") during the period from January 1, 2005
to December 31, 2006 to purchase the interest of the investor member of Historic
Van Ness for an amount equal to the then fair market value (as defined in the
Option Agreement) of such interest.
Simultaneously with the Agreement, the Company through two subsidiaries entered
into a Master Lease Agreement and Master Sublease Agreement (the "Master
Leases") with Historic Van Ness, whereby one of the subsidiaries leased the
remaining historic commercial portion of the Project to Historic Van Ness and
the other subsidiary subleased from Historic Van Ness certain retail space
contained within the remaining historic commercial portion of the Project. The
Master Leases commenced on December 1, 1998 and have a term of forty-five years
and forty years for the Master Lease and Master Sublease, respectively. Both
leases will terminate should the Company exercise the Option to buy the interest
of the investor member of Historic Van Ness. The Agreement also stipulates that
the Company's subsidiary pay Historic Van Ness $320,000 for each calendar year
that the Master Lease is in effect for the use of the common area of the
historic commercial portion of the Project (the "Common Area Lease").
Future net minimum lease payments to be made by the Company's subsidiaries under
the terms of the Master Leases and Common Area Lease are as follows at December
31, 1999:
<TABLE>
<S> <C>
Year Ending December 31,
2000 $ 1,237,500
2001 1,237,500
2002 1,237,500
2003 1,237,668
2004 1,241,438
Later Years 43,170,388
----------
Total Future Minimum Lease Payments 49,361,994
Less Amount Representing Interest 34,295,388
----------
Present Value of the Minimum Lease Payments $15,066,606
===========
</TABLE>
The present value of the minimum lease payments is reflected in notes payable in
the accompanying consolidated balance sheet (see Note 4).
In connection with the above agreements, the Company has guaranteed completion
of the historic commercial portion of the Project which is estimated to be
approximately $1,547,000 at December 31, 1999. In addition, the Company has
guaranteed, within certain circumstances and limits, the Historic Tax Credits of
the investor member in Historic Van Ness, which maximum amount, depending on
those certain circumstances and limits, is estimated to be between $3,300,000
and $4,400,000.
57
<PAGE>
3. INVESTMENTS
During 1998, the Operating Partnership and the State of California Public
Employees' Retirement System ("CalPERS") formed BPP Retail, LLC ("BPP Retail")
for the purpose of entering into a joint venture to acquire neighborhood,
community, promotional, and specialty shopping centers in the western United
States. At December 31, 1998, the Company had not yet contributed equity to the
joint venture.
At October 1, 1998, CalPERS made an initial contribution to BPP Retail of five
retail properties in Colorado, Texas, and Oregon, valued at approximately
$80,000,000, of which it had previously been the sole owner under arrangements
with previous advisors. During the fourth quarter of 1998, BPP Retail completed
the acquisition of interests in five additional retail shopping centers for an
aggregate purchase price of approximately $38,261,000 (see Note 11). In December
1998, the Operating Partnership and CalPERS entered into an Agreement Regarding
Contribution of Certain Properties and Put Options, related to certain of the
Operating Partnership's retail properties. The purpose of this option agreement
was to permit the Operating Partnership to contribute certain properties into
BPP Retail even though CalPERS had not received all the required information
(such as appraisals) to approve or disapprove the contribution. As a condition
of permitting this contribution, CalPERS was granted an option (the "Put
Option") to require that BPP Retail rescind all or a portion of the contribution
as CalPERS may have elected in its sole discretion, after receiving and
reviewing all the information as required in the operating agreement of BPP
Retail. Upon the signing of this option agreement, BPP Retail provided the
Operating Partnership approximately $22,195,000 (the "Net Asset Value") in
exchange for the economic interests in certain properties and the Put Option.
Due to the Put Option, the consolidated balance sheet of the Company at December
31, 1998 included the net book value of the contributed properties, and the
monies received for the Net Asset Value were included in accounts payable and
other liabilities. Concurrent with the expiration of the Put Option during the
second quarter of 1999, the Company contributed five retail properties to BPP
Retail valued at approximately $51,600,000.
In June 1999, the joint venture agreement was amended to expand the permitted
geographic scope of the joint venture from the western United States to
nationwide. During 1999, the joint venture acquired interests in 26 shopping
centers for an aggregate purchase price of approximately $577,300,000. These
acquisitions were funded through approximately $360,600,000 of unsecured
indebtedness and approximately $216,700,000 of CalPERS contributed capital. As
part of this amendment, the Company granted CalPERS an option expiring June 30,
2000 to purchase 1,000,000 shares of Common Stock of the Company at an exercise
price of $15.375 per share.
In December 1999, the Company and CalPERS made certain modifications to the BPP
Retail arrangement. As part of the modifications, the Company exchanged
substantially all of its equity interest in BPP Retail for a consideration
having a total value of approximately $39,400,000. In addition, as part of the
modification, the Company contributed two properties to the joint venture at a
value of approximately $18,900,000.
Concurrently with these contributions, the Company withdrew approximately
$12,800,000 in cash from the joint venture, and the joint venture assumed
approximately $6,100,000 in existing mortgage debt associated with one of the
two contributed properties. The Company recognized a net gain of $609,000 as a
result of the modifications, and cash proceeds were used to reduce outstanding
indebtedness and for general working capital purposes. The Company will continue
to serve as the manager of BPP Retail's assets and is entitled to receive fees
for asset management, leasing, acquisitions, and dispositions activities, but
will no longer be eligible for
58
<PAGE>
the incentive fee attributable to increases in asset values. In addition, if the
Company proposes to acquire ownership of a non-regional mall retail center
(e.g., grocery store/drug store, neighborhood shopping center) that satisfies
certain specified investment objectives of CalPERS, it must first be offered to
BPP Retail and presented to CalPERS' staff for consideration and then rejected
before the Company may undertake such opportunity.
Because the amount of potential fee receipts that the Company may earn through
its arrangement with CalPERS could approach or exceed 5% of its gross revenues
for calendar year 2000, to maintain its status as a REIT it was necessary for
the Company to assign to BPP Services, Inc., a Maryland corporation, its rights
and obligations to perform asset management services and leasing services on
behalf of BPP Retail and its right to receive fees for the performance of such
services. This assignment became effective as of March 1, 2000. In order to
satisfy the REIT provisions of the Internal Revenue Code, in calendar year 2000
the Company may not, directly or indirectly, own more than 10% of the voting
stock of BPP Services, Inc. Accordingly, the Operating Partnership owns 1% of
the outstanding voting stock of BPP Services, Inc. and the remaining 99% is
owned equally by the Company's five senior executive officers. However,
including the shares of non-voting stock, the Operating Partnership owns 95% of
the outstanding equity and economic interest of the BPP Services, Inc. and the
executive officers own a 5% interest. In accordance with recently enacted
legislation, the Company anticipates that , on or after January 1, 2001, it will
cause BPP Services, Inc. to elect to become a "taxable REIT subsidiary" in which
case the Operating Partnership will have the option to acquire the remaining 5%
of the equity that it does not currently own.
During 1999, all of the Company's acquisition activity took place in the joint
venture with CalPERS. During 1998, the Company acquired interests in 14 shopping
centers aggregating 1,017,000 square feet of Company-owned gross leasable area
("GLA") for an aggregate purchase price of approximately $98,343,000. During the
years ended December 31, 1999 and 1998, the Operating Partnership earned asset
and property management, leasing, and acquisition fees from BPP Retail totaling
approximately $4,900,000 and $624,000, respectively.
During the year ended December 31, 1997, the Company and certain of its
subsidiaries completed the acquisition of 42 retail shopping centers totaling
approximately 5.6 million square feet of Company-owned GLA for an aggregate
purchase price of approximately $598,100,000. Included in this acquisition
activity was the acquisition on December 31, 1997, of a portfolio of twenty
shopping centers (the "Golden State Properties") containing approximately 2.6
million square feet of gross leasable area, all of which are located in
California, and the related financing thereof. Pursuant to the terms of the
agreement to contribute dated at December 5, 1997 (the "Contribution Agreement")
by and among the Company and certain investment funds (the "Contributors"), on
December 31, 1997, the Contributors contributed the Golden State Properties to
the Company's Operating Partnership in exchange for initial consideration of
approximately $302,400,000. Of this consideration $50,000,000 was in the form of
2,000,000 preferred limited partner units of the Operating Partnership ("Series
A Preferred Units") (see Note 8). The Company financed the cash portion of the
acquisition price of the Golden State Properties through the privately
negotiated sale of $70,000,000 of the Company's newly-designated and issued
Series A Preferred Stock (see Note 8), the borrowing of first mortgage debt
collateralized by nineteen of the Golden State Properties (see Note 4) and
additional borrowings under its existing credit facility. The Contributors were
given the right to receive additional consideration of up to $41,600,000 for
additional value resulting from the lease-up of certain specified portions of
the Golden State Properties and construction and lease-up of certain additional
space through June 30, 1999. During 1999 and 1998, additional consideration of
approximately $12,991,000 and $9,356,000, respectively, was paid out in cash to
the Contributors. At December 31, 1999,
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<PAGE>
approximately $716,000 is recorded under the caption accounts payable and other
liabilities for additional consideration earned but not paid.
4. NOTES PAYABLE
Notes payable are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
Collateralized Mortgage-Backed Securities - principal and interest
paid monthly at rates ranging from 6.76% to 9.20%; maturing at
dates from 2004 to 2026. $281,543 $285,362
Bank Construction Loan - interest only paid monthly; variable rate
at LIBOR plus 1.75% or at prime (approximately 7.92% at
December 31, 1999); maturing 2000. 35,188 -
Bank Construction Loan - interest only paid monthly; variable rate
at LIBOR plus 2.25% or at prime (approximately 8.37% at
December 31, 1999); maturing 2000. 5,216 -
Bank Construction Loan - interest only paid monthly; variable rate
at LIBOR plus 1.90% or at prime plus .50% (approximately 6.17%
at December 31, 1999); maturing 2000. 7,816 5,427
Insurance Companies - principal and interest paid monthly at rates
ranging from 7.49% to 10.13%; maturing at dates from 2000
to 2017. 16,211 47,160
Pension Fund - principal and interest paid monthly at 9.50%,
maturing in 2005. 6,746 21,545
Other - principal and interest paid monthly at rates up to 10.0%;
maturing at dates from 2000 to 2043. 47,690 34,535
-------- --------
Total Notes Payable $400,410 $394,029
======== ========
</TABLE>
Interest expense for the years ended December 31, 1999, 1998, and 1997 is
reported net of capitalized interest totaling approximately $6,156,000,
$6,518,000, and $3,242,000, respectively.
Principal maturities on the notes payable are summarized as follows (in
thousands):
<TABLE>
<S> <C>
Year Ending December 31,
2000 $ 57,338
2001 5,766
2002 5,905
2003 6,379
2004 70,784
Later Years 254,238
--------
Total $400,410
========
</TABLE>
During February 1997, the Company paid off mortgage loans secured by one of its
shopping centers with borrowings under the Company's credit facilities. In
addition, the Company refinanced a variable rate mortgage loan secured by
another property with a fixed rate mortgage loan. In connection with these
extinguishments of debt, the Company recorded an extraordinary loss of $52,000.
On December 31, 1997, the Company, through a Bankruptcy Remote Entity (see Note
2), sold to Nomura Asset Capital Corporation an 8.33%, $135,040,000 mortgage
promissory note due December 31, 2007 for $150,000,000, being the equivalent of
a 6.76%, $150,000,000 mortgage
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<PAGE>
promissory note with the same maturity. The Company has accounted for the sale
of the mortgage note and the payment of principal and interest thereon as if the
note were a 6.76%, $150,000,000 mortgage promissory note. The first mortgage
debt is collateralized by nineteen of the twenty Golden State Properties. The
proceeds of this mortgage financing were used to finance, in part, the
acquisitions of the Golden State Properties pursuant to the Contribution
Agreement (see Note 3).
5. LINE OF CREDIT ADVANCES
In November 1999, the Company obtained a $202,800,000 credit facility from CMF
Capital Company, LLC (a subsidiary of General Electric Capital Corporation)
which is secured by various mortgages. Proceeds from this facility were used to
repay an existing $205,000,000 credit facility. In December 1999, the Company
repaid approximately $35,187,000 of the outstanding indebtedness, which reduced
the commitment amount to $176,263,000. Borrowings under this facility bear
interest at a rate of LIBOR plus 2.50%. At December 31, 1999, the weighted
average rate of interest on the advances under the line of credit was 8.30%, as
compared to 7.07% on December 31, 1998, under the prior facility. At December
31, 1999, borrowings of approximately $138,420,000 were outstanding. The
facility is scheduled to mature in November 2000 and is subject to various loan
covenants. The Company intends to refinance the facility with either CMF Capital
Company, LLC or replace the facility with another lender prior to the maturity
date. In addition, the Company has a $5,000,000 revolving credit agreement with
a lender. At December 31, 1999, there was no outstanding indebtedness under this
facility. The facility bears interest at a rate of LIBOR plus 2.00% or prime and
is scheduled to mature in September 2000.
6. SALES OF REAL ESTATE
In July 1999, the Company sold Wiegand Plaza, Mesa Shopping Center, Independence
Square, and Poway Shopping Center for aggregate sales proceeds of approximately
$44,400,000, resulting in an aggregate gain of approximately $8,620,000. In
August 1999, the Company disposed of the Ruffin Village shopping center for
approximately $3,500,000, resulting in a gain of approximately $1,149,000. In
October 1999, the Company sold the Bergen Brunswig office building for
approximately $19,250,000, resulting in a gain of approximately $71,000. In
anticipation of this sale, the Company recorded an impairment write-down of
$1,200,000 in the second quarter of 1999. In December 1999, the Company sold the
Marcoa Publishing office building for approximately $2,800,000, resulting in a
net loss of approximately $78,000. In anticipation of this sale, the Company
recorded an impairment write-down of $1,000,000 in the third quarter of 1999.
In August 1998, the Company sold the parking garage of its 1000 Van Ness project
for approximately $13,125,000. No gain or loss resulted from this sale. In
December 1998, the Company disposed of the remaining portion of the Plaza Rancho
Carmel shopping center for approximately $2,420,000, resulting in a loss of
approximately $1,814,000.
In December 1997, the Company sold the Pacific West Outlet Center for
approximately $38,500,000, resulting in a gain of approximately $5,896,000. Two
other properties were disposed of without realization of gain or loss during
1997.
7. DIVIDEND DISTRIBUTIONS
The status of the Common Stock dividends distributed for 1999, 1998, and 1997
for federal income tax purposes is as follows:
61
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Taxable Portion:
Ordinary 62.2% 64.8% 93.3%
Capital Gain 4.5 - -
----- ----- -----
Total Taxable 66.7 64.8 93.3
Return of Capital 33.3 35.2 6.7
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
8. ISSUANCE OF SECURITIES
SERIES 1997-A CONVERTIBLE PREFERRED STOCK: On December 31, 1997, the Company
issued 2,800,000 shares of Series A Preferred Stock, par value $.01 per share,
in a privately-negotiated sale at a price of $25.00 per share. The Series A
Preferred Stock has a cumulative dividend yield of 8% per annum. Each holder of
shares of Series A Preferred Stock currently has the right to convert all of the
shares of Series A Preferred Stock held of record by the holder into a number of
shares of Common Stock equal to (i) the stated value plus the amount, if any, of
the per share amount of outstanding dividends as of the effective time of the
conversion, divided by (ii) the conversion price, initially equal to $15.375. At
December 31, 1999, no shares of Series A Preferred Stock had been converted into
Common Stock. After the fifth anniversary of the date of the first issuance of
shares of Series A Preferred Stock, the Company may give notice of mandatory
conversion of all of the outstanding Series A Preferred Stock if the value of
the Common Stock (both on the day prior to the notice of conversion and on a
value weighted basis over a period of time prior to such date) is greater than
the initial conversion price; and after such notice all such outstanding shares
shall be mandatorily converted into Common Stock, except that each holder of
Series A Preferred Stock shall have the right, prior to the date established for
such mandatory conversion, instead to cause the Company to redeem such holder's
Series A Preferred Stock at its stated value plus accrued dividends to the
redemption date multiplied by a percentage equal to 105%, if the redemption date
is prior to December 31, 2003, decreasing by 1% each year thereafter (but not
less than 100% after December 31, 2007). The Company used the proceeds of the
sale to finance, in part, the acquisition of the Golden State Properties (see
Note 3).
COMMON STOCK: On March 30, 1998, the Company issued 7,475,000 shares of Common
Stock at a public offering price of $14.125 per share. In addition, on March 30,
1998, the Company issued 965,518 shares of Common Stock to a Unit Investment
Trust at a price based upon the March 25, 1998 market value of $14.50 per share.
The combined shares were sold pursuant to the Company's shelf registration
statements. The net proceeds from the combined offerings of approximately
$112,471,000 were used to reduce borrowings under the Company's credit facility,
pay off the balance outstanding under a construction loan agreement secured by
one of the Company's development properties, and for general working capital
purposes. On May 2, 1997, the Company issued 6,325,000 shares of Common Stock at
a public offering price of $12.375 per share. The shares were sold pursuant to a
previously filed $200,000,000 shelf registration statement. The net proceeds of
the offering of approximately $73,125,000 were used to reduce borrowings under
the Company's credit facilities.
PREFERRED OPERATING PARTNERSHIP UNITS: On December 31, 1997, 2,000,000 Preferred
Units of the Operating Partnership were issued at a price of $25.00 per unit.
After approximately one year and subject to certain conditions, Preferred Units
are exchangeable at the option of the holder for Series A Preferred Stock on a
1-for-1 basis. Each Preferred Unit has substantially identical distribution and
liquidation rights as each share of Series A Preferred Stock. Such Preferred
Units are classified as minority interest at December 31, 1999 and 1998.
62
<PAGE>
The Company used the proceeds of the sale to finance, in part, the acquisition
of the Golden State Properties (see Note 3). At December 31, 1999 and 1998,
2,000,000 shares of preferred stock were reserved for issuance upon the
potential redemption of 2,000,000 Preferred Units.
ISSUANCE OF PARTNERSHIP UNITS; "PUT" RIGHTS OF COMMON UNITS: Under the
partnership agreement of the Operating Partnership, whenever the Company issues
any shares of Common Stock or Preferred Stock, the Company must contribute the
proceeds of such issuance to the Operating Partnership and the Operating
Partnership will issue the same number of Common Units or Preferred Units to the
Company, so that the Company will at all times own the same number of Common
Units (including units held by the Company as general partner as well as limited
partner units owned by the Company) and Preferred Units as there are outstanding
shares of Common Stock and Preferred Stock, respectively, of the Company.
Distributions by the Operating Partnership with respect to Preferred Units and
Common Units provide the funds to enable the Company to make distributions to
the holders of its Series A Preferred Stock and Common Stock. The partnership
agreement also provides that, after the June 30 or December 31 next succeeding
the first anniversary of any issuance of Common Units (or earlier in the event
of certain extraordinary transactions), each holder of Common Units other than
the Company will have the right to require the Operating Partnership to redeem
its Common Units at a per unit redemption price equal to the then market value
of a share of Common Stock. Such redemption will be in cash, except that the
Company may assume the redemption obligation and pay the redemption in form of
shares of its Common Stock. During 1999, approximately 297,000 Operating
Partnership Common Units were exchanged for approximately 297,000 shares of
Common Stock of the Company. During 1998, approximately 41,000 Operating
Partnership Common Units were exchanged for approximately $596,000. At December
31, 1999 and 1998, approximately 1,610,000 and 1,906,000 shares of common stock,
respectively, were reserved for issuance upon the potential redemption of
approximately 1,610,000 and 1,906,000 partnership units, respectively.
UNISSUED REGISTERED SECURITIES: At December 31, 1999, the Company had registered
for issuance an aggregate of $202,144,000 of unissued securities under various
shelf registration statements.
63
<PAGE>
9. PRICE RANGE OF COMMON STOCK
MARKET QUOTATIONS
<TABLE>
<CAPTION>
COMMON
QUARTER ENDED HIGH LOW DIVIDENDS
PAID
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
March 31, 1997 $15.50 $12.75 $.2500
June 30, 1997 13.88 11.75 .2500
September 30, 1997 14.81 13.50 .2500
December 31, 1997 15.56 12.75 .2500
March 31, 1998 15.63 14.13 .2625
June 30, 1998 14.75 13.69 .2625
September 30, 1998 14.81 12.69 .2625
December 31, 1998 13.75 11.63 .2625
March 31, 1999 12.63 9.81 .2625
June 30, 1999 12.88 9.50 .2625
September 30, 1999 12.94 10.56 .2625
December 31, 1999 11.06 8.69 .2625
</TABLE>
Market quotations are from the New York Stock Exchange. At December 31, 1999,
there were 2,156 holders of record of the Company's shares.
10. STOCK OPTIONS
The Company has a stock option and incentive plan which expires in 2006 and is
administered by the Compensation Committee of the Board of Directors. A maximum
of 2,950,000 shares of Common Stock are reserved for issuance upon the exercise
of options or other stock-based awards that may be granted under the plan.
Options granted expire 10 years from the date of grant. The plan as revised in
1996 also provides for grants from such reserved shares to each non-employee
director of the Company of restricted shares of the Company's Common Stock in
lieu of cash compensation. Restricted stock vests evenly over a three year
period or earlier upon such person's termination of service as director. At
December 31, 1999, 265,251 shares had been purchased pursuant to the exercise of
options under the plan, unexercised options for 2,371,750 shares are outstanding
(of which 991,667 are subject to future vesting requirements), and options or
other awards for 335,091 shares are available for future awards under the plan.
64
<PAGE>
Activity under the stock option plan is summarized below:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
------ ---------
<S> <C> <C>
Outstanding, January 1, 1997 1,522,187 $12.09-$18.88
Expired (19,250) $16.19
Repurchased (135,560) $16.19-$18.88
Exercised (4,000) $12.50
Canceled (2,000) $12.50
--------- ------ ------
Outstanding, December 31, 1997 1,361,377 $12.09-$18.88
Granted 679,500 $12.50-$14.50
Expired (53,004) $18.25-$18.59
Exercised (44,500) $12.50-$12.88
Canceled (23,000) $12.50-$14.50
--------- ------ ------
Outstanding, December 31, 1998 1,920,373 $12.09-$18.88
Granted 575,000 $11.31-$11.63
Expired (39,123) $18.56-$18.63
Canceled (84,500) $12.50-$14.50
--------- ------ ------
Outstanding, December 31, 1999 2,371,750 $11.31-$18.88
========= ====== ======
</TABLE>
The above disclosure does not include an option the Company granted to CalPERS
to purchase 1,000,000 shares of the Company's Common Stock. The option has an
exercise price of $15.375 per share and expires on June 30, 2000. The value of
the options as of the date of grant was estimated to be approximately $234,000.
During 1997, the Company repurchased 135,560 options for an average price of
approximately $0.49 per option.
The following table summarizes information concerning options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- --------------------------------
REMAINING
CONTRACTUAL EXERCISE EXERCISE
LIFE- PRICE - PRICE-
RANGE OF OUTSTANDING AT WEIGHTED WEIGHTED NUMBER AT WEIGHTED
EXERCISE PRICES DECEMBER 31, 1999 AVERAGE AVERAGE DECEMBER 31, 1999 AVERAGE
--------------- ----------------- ------- ------- ----------------- -------
<S> <C> <C> <C> <C> <C>
$11.31 - $12.88 2,103,000 7.37 years $12.25 1,198,000 $12.62
$14.50 - $16.97 180,250 6.27 years $14.93 93,583 $15.33
$17.59 - $18.88 88,500 3.76 years $18.43 88,500 $18.43
--------- ---------
2,371,750 1,380,083
========= =========
</TABLE>
Financial Accounting Standards Number 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123"), requires either the recording or disclosure of
compensation cost for stock-based employee compensation plans at fair value. The
Company has adopted the disclosure-only provisions of FAS No. 123. Accordingly,
no compensation costs have been recognized in 1999, 1998, or 1997. Had
compensation cost for the Company's Stock Option Plan been recognized based on
the fair value at the grant date for awards consistent with the provisions of
FAS No. 123, the Company's income available to common stockholders and basic
earnings per share would have been reflected as the pro forma amounts below (in
thousands, except per share amounts):
65
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income Available to Common Stockholders - pro
forma $12,057 $12,926 $18,468
Basic Earnings Per Share - pro forma .38 .43 .87
</TABLE>
The pro forma effect on net income for 1999, 1998, and 1997 is not
representative of the pro forma effect on net income in future years because it
does not take into consideration pro forma compensation expense related to
grants made prior to 1995. No options were granted during 1997. The estimated
fair value of options granted under the Company's stock option plan during 1999
and 1998 were approximately $809,000 and $1,425,000, respectively, on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: 8.0% dividend yield, volatility of 25%, risk free
rate of return of 6.00%, and expected lives of 5 years. The estimated fair value
of options granted are subject to the assumptions made and if the assumptions
changed, the estimated fair value amounts could be significantly different. The
above weighted-average assumptions are an approximation of historical
information and are not intended to represent future events or trends.
11. TRANSACTIONS WITH RELATED PARTIES
The Company, through a subsidiary, entered into a Purchase and Sale Agreement
with Holliday Development, L.P. ("Holliday"), whereby the Company would be
reimbursed by Holliday for all of the Company's costs and expenses (the
"Reimburseable Costs") incurred at the direction of Holliday, in connection with
the acquisition and construction of the residential portion of 1000 Van Ness
(one of the Martin Properties, see Note 2). The agreement stipulated that the
Reimbursable Costs were to be paid to the Company in several successive
transactions which coincided with the sale of the residential units to third
parties. During 1999, the Company was paid the remainder of the Reimbursable
Costs, approximately $7,450,000. Upon receipt of the final payment of the
Reimbursable Costs (which totaled approximately $18,200,000) the Company
conveyed all of the unsold residential units. The Company's president and chief
executive officer owned approximately 35% of the outstanding equity of Holliday.
In addition, the Company's former director of development owned approximately a
14% interest in Holliday.
Included in accounts receivable at December 31, 1999 is approximately $94,000
due from a partnership in which the Company's president and chief executive
officer has an interest.
In December 1998, the Company entered into an operating lease for a corporate
office in Emeryville, California. The landlord is a partnership in which the
Company's president and chief executive officer has an economic interest. The
lease commenced on January 1, 1999 with a five-year term. Monthly lease payments
are approximately $11,460, with a three percent annual increase. During 1999, as
part of its restructuring plan (see Note 12), the Company sub-leased this space
to a third party. The sub-lease commenced on August 1, 1999, with a four-year
term and monthly payments of approximately $12,500.
During 1998 and 1997, the Company acquired three leasehold interests in 126,557
square-feet of former Ernst Home Improvement Stores ("Ernst Stores") for
approximately $6,520,000 in cash. In addition, during 1998 BPP Retail (see Note
3) acquired a leasehold interest in a 44,875 square-foot former Ernst Store for
approximately $2,000,000. The Company and BPP Retail acquired the Ernst Stores
from the purchaser of the leasehold interest in bankruptcy proceedings involving
the Ernst Home Improvement chain. One of the principals of such purchaser is a
brother of the chief investment officer of the Company. The chief investment
officer of the Company disclaims any personal interest in his brother's interest
in the purchaser and has no
66
<PAGE>
personal interest in any proceeds that the purchaser received in connection with
the leasehold interests.
12. RESTRUCTURING
On March 18, 1999, the Board of Directors of the Company approved the Company's
plan to restructure its internal operations to outsource its property management
function to third-party providers. The Company estimated and recorded in the
first quarter of 1999 a restructuring charge of $1,500,000. This outsourcing is
expected to benefit the Company in several ways. First, it enables the Company
to more efficiently enter and exit selected markets and assets as opportunities
present themselves. This ability is key to the Company's focus on maximizing the
return on invested capital. Second, it allows the Company to establish strategic
relationships with national property management companies as well as local
providers. These relationships should benefit the Company with increased
opportunities and improved services. Third, it allows the management team to
focus more time on value-added activities that should help to improve the
Company's financial position. The outsourcing resulted in an approximately 26%
reduction in the Company's workforce and the closure of three of its property
management offices. The anticipated monthly recurring costs of outsourcing to
third-party providers are estimated to be approximately the same as the current
recurring internal costs ($250,000).
The restructuring charge is primarily attributable to personnel related costs
for the employees subject to the restructuring and the costs associated with
reducing and eliminating offices, furniture and equipment. The personnel related
costs include severance benefits, the Company's portion of related payroll
taxes, insurance and 401(k) plan contributions. During the week of March 22,
1999, all 37 employees in the Company's property management department were
notified of the terms of their benefits package. The personnel costs comprised
approximately one-half ($750,000) of the total reserve.
The costs attributable to reducing and eliminating offices include lease
termination fees, rental losses for vacated office spaces (offset by sub-leases)
and tenant improvements, and design fees attributable to abandoned office space.
The costs attributable to reducing and eliminating offices comprised
approximately one-third ($500,000) of the total reserve. The costs associated
with reducing and eliminating furniture and equipment included the write-off of
the net book value of the furniture and equipment for terminated employees to
the extent that these assets could not be redeployed in other functional areas
of the Company. The costs attributable to eliminating the furniture and
equipment were approximately one-sixth ($250,000) of the total reserve.
During the quarter ended September 30, 1999, the Company completed the hiring of
its third-party providers, its planned reduction in workforce, and the process
of closing its property management offices. It was determined during the third
quarter of 1999 that $120,000 of the reserve estimated for personnel related
costs was not necessary due to certain personnel leaving prior to earning
severance benefits and that $127,000 of the reserve estimated for the write-off
of furniture and equipment was not necessary due to the redeployment of certain
computers to other offices of the Company. In addition, it was determined that
$100,000 of additional reserve was needed for office closures due to a change in
the future value of sub-lease payments. As a result of these changes in
estimates, the Company reallocated $100,000 of reserves from personnel related
costs to office closures and reversed $147,000 of reserve during the quarter
ended September 30, 1999. At December 31, 1999, the remaining reserve for
personnel related costs ($10,000) represented funds needed for consultants hired
to assist with the transition to third-party managers. At December 31, 1999,
remaining reserve for office closures ($317,000) represented future obligated
lease payments for corporate offices which were closed, offset by future
receipts for sub-leases entered into with the Company for the related closed
office spaces
67
<PAGE>
(See Note 15). The following table reflects the composition of the Company's
restructuring reserve, the expenditures applied against it, and the portion of
the reserve that was reversed at December 31, 1999:
<TABLE>
<CAPTION>
ORIGINAL RESTRUCTURING
RESTRUCTURING EXPENDITURES RESERVE DECEMBER
RESERVE APPLIED RESERVE REVERSED 31, 1999
---------------- --------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Personnel Related Costs $ 750,000 $ (620,000) $ (120,000) $ 10,000
Office Closures 500,000 (283,000) 100,000 317,000
Write-off of Furniture and Equipment 250,000 (123,000) (127,000) -
------------- ------------ ------------ ---------
Total $ 1,500,000 $ (1,026,000) $ (147,000) $ 327,000
============= ============ ============ =========
</TABLE>
13. COSTS ASSOCIATED WITH UNSOLICITED PROPOSAL AND PURSUIT OF STRATEGIC
ALTERNATIVES
On June 7, 1999, the Company received an unsolicited proposal from Schottenstein
Stores Corporation ("Schottenstein") and certain of its affiliates to negotiate
a business combination in which the Company would be merged into an acquisition
affiliate of Schottenstein and the holders of the Company's Common Stock would
receive $13 per share. The proposal was subject to a number of conditions,
including completion of due diligence satisfactory to Schottenstein, obtaining
new senior debt financing, and the assumption of certain outstanding
indebtedness of the Company. The proposed transaction was also made conditional
upon approval of the Company's stockholders and the holders of units in the
Company's Operating Partnership. On July 12, 1999, Schottenstein increased its
contingent proposal to $13.50 per share.
On July 23, 1999, after an extensive evaluation of the Schottenstein proposal
and after receiving advice from Goldman, Sachs & Co., Inc., the Company's Board
of Directors concluded that it would not be in the best interest of the
Company's Common Stockholders to accept the proposal and unanimously voted to
reject Schottenstein's proposal.
On November 12, 1999, the Company announced that its Board of Directors had
instructed management and Goldman, Sachs & Co., Inc. to actively pursue a full
range of strategic alternatives in order to maximize stockholder value. The
Company also announced that it had commenced the active marketing of certain
properties to provide additional liquidity and financial flexibility.
On February 15, 2000, the Company announced that it had completed the initial
phase of this process. In this regard, the Company has entered into numerous
confidentiality agreements with potential bidders and the Company is exchanging
additional information with certain parties that submitted preliminary proposals
to engage in business combinations.
In connection with the evaluation of the Schottenstein proposal, the Company's
pursuit of all of its strategic alternatives, and the Company's defending
against certain litigation incidental to the foregoing, the Company has
incurred, and expects that it will continue to incur, significant costs for
financial, advisory, legal, and other services. Through December 31, 1999, the
Company had incurred approximately $4,548,000 of these related costs.
68
<PAGE>
14. RETIREMENT SAVINGS PLAN
The Company has a contributory Retirement Savings Plan. The maximum contribution
is 15% of annual salaries of which up to 3% is matched by the Company up to 75%
of employee contributions, subject to limitations imposed by the Internal
Revenue Service. The Company's contributions to this plan for 1999, 1998, and
1997 were approximately $124,000, $77,000, and $48,000, respectively.
15. OPERATING LEASES
The Company leases office space under various operating leases that expire at
various times through 2007. Rental expense under these operating leases for the
years ended December 31, 1999, 1998, and 1997 was approximately $985,000,
$326,000, and $202,000, respectively. During 1999, in connection with its
restructuring plan (see Note 12), the Company closed three of its corporate
offices. Subsequent to the closing of these offices the Company sub-leased the
spaces to third parties. These sub-leases expire at various dates through 2003.
Approximate minimum future lease payments, net of the related sub-lease
payments, under these operating leases at December 31, 1999, are as follows (in
thousands):
<TABLE>
<S> <C>
For Year Ending December 31,
2000 $1,197
2001 1,299
2002 1,264
2003 1,125
2004 673
Later Years 1,576
-------
Total $7,134
======
</TABLE>
16. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1999 and 1998 is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
INCOME (LOSS) AVAILABLE
TO COMMON
INCOME (LOSS) AVAILABLE STOCKHOLDERS PER SHARE
TO COMMON ----------------------
TOTAL REVENUES STOCKHOLDERS BASIC DILUTED
-------------- ------------ ----- -------
<S> <C> <C> <C> <C>
1999:
First $ 35,135 $ 311 $0.01 $ 0.01
Second 34,369 2,401 0.08 0.08
Third 31,551 9,122 0.28 0.28
Fourth 31,755 653 0.02 0.02
-------- ------- ----- ------
Total $132,810 $12,487 $0.39 $ 0.39
======== ======= ===== ======
1998:
First $ 29,867 $ 2,136 $0.09 $ 0.09
Second 32,125 5,112 0.16 0.16
Third 34,539 4,294 0.14 0.14
Fourth 35,192 1,614 0.05 0.05
-------- ------- ----- ------
Total $131,723 $13,156 $0.44 $ 0.44
======== ======= ===== ======
</TABLE>
17. SEGMENT INFORMATION
The Company has two reportable segments: Retail Operating properties and
Office/Industrial
69
<PAGE>
properties. The Company focuses its investments on retail shopping centers
located in major metropolitan areas. As discussed in Note 1, the Company owns
interests in 62 retail operating properties, 61 of which were fully operational,
and one being developed.
The Company also owns interests in two office and industrial properties which it
considers non-strategic and therefore does not allocate a material amount of
Company resources to this segment. For the years ended December 31, 1999, 1998,
and 1997 there was no tenant of the Company that accounted for ten percent of
the total revenues of the Company.
The Company's accounting policies for these segments are the same as those
described in the summary of significant accounting policies in Note 1. The
Company evaluates the performance of its assets within these segments based on
the net operating income of the respective property. Net operating income is
calculated as rental revenues of the property less its rental expenses (such as
common area expenses, property taxes, insurance, and other owner's expenses).
The summary of the Company's operations by segment is as follows (in thousands):
<TABLE>
<CAPTION>
1999
- --------------------------------------------- -------------- -------------- --------------
Retail Office Total
<S> <C> <C> <C>
Rental Revenues $ 123,236 $ 2,855 $ 126,091
========= ======== =========
Net Operating Income $ 85,510 $ 2,743 $ 88,253
========= ========= ========
Real Estate at December 31 $ 999,941 $ 29,332 $1,029,273
========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1998
- --------------------------------------------- -------------- -------------- --------------
Retail Office Total
<S> <C> <C> <C>
Rental Revenues $ 123,381 $7,524 $ 130,905
========= ====== =========
Net Operating Income $ 87,672 $6,690 $ 94,362
======== ====== ========
Real Estate at December 31 $1,073,792 $57,876 $1,131,668
========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
1997
- --------------------------------------------- -------------- -------------- --------------
Retail Office Total
<S> <C> <C> <C>
Rental Revenues $59,535 $7,878 $67,413
======= ====== =======
Net Operating Income $42,105 $6,592 $48,697
======= ====== =======
Real Estate at December 31 $901,979 $57,846 $959,825
======== ======= ========
</TABLE>
The following table reconciles the Company's reportable segments' rental
revenues and net operating income to consolidated net income of the Company for
the years ended December 31, 1999, 1998, and 1997 (in thousands):
70
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Total Rental Revenues for Reportable Segments $126,091 $130,905 $ 67,413
Fee Income 5,078 - -
Interest Revenue 1,641 818 761
-------- -------- --------
TOTAL CONSOLIDATED REVENUES $132,810 $131,723 $ 68,174
======== ======== ========
NET OPERATING INCOME:
Total Net Operating Income for Reportable Segments $ 88,253 $ 94,362 $ 48,697
-------- -------- --------
Additions:
Fee Income 5,078 - -
Interest Revenue 1,641 818 761
Income from Unconsolidated Subsidiaries 1,077 214 223
Gain on Sales of Real Estate 10,371 - 5,896
-------- -------- --------
Total Additions 18,167 1,032 6,880
-------- -------- --------
Less:
Interest Expense 36,391 35,630 18,472
General and Administrative Expenses 8,021 5,723 3,035
Restructuring Charge 1,353 - -
Abandoned Acquisition Costs 748 - -
Cost Associated with Unsolicited Proposal and Pursuit of
Strategic Alternatives 4,548 - -
Impairment Write-offs 2,200 - -
Depreciation and Amortization 28,182 28,607 15,275
Minority Interest 5,024 4,864 45
Loss on Sales of Real Estate - 1,814 -
-------- -------- --------
Total Deductions 86,467 76,638 36,827
-------- -------- --------
Net Income Before Extraordinary Item 19,953 18,756 18,750
Extraordinary Item - - (52)
Cumulative Effect of a Change in Accounting Principle (1,866) - -
-------- -------- --------
Net Income $ 18,087 $ 18,756 $ 18,698
======== ======== ========
</TABLE>
The following table reconciles the total real estate for the reportable segments
to consolidated assets for the Company at December 31, 1999, 1998, and 1997 (in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Total Real Estate for Reportable Segments $1,029,273 $1,131,668 $959,825
Other Real Estate 7,021 6,111 4,930
---------- ---------- --------
Total Real Estate $1,036,294 $1,137,779 $964,755
Accumulated Depreciation (65,494) (79,837) (55,823)
---------- ---------- --------
Real Estate, Net 970,800 1,057,942 908,932
Other Assets 64,215 56,234 34,863
---------- ---------- --------
Consolidated Assets $1,035,015 $1,114,176 $943,795
========== ========== ========
</TABLE>
Other Real Estate includes assets related to the corporate offices of the
Company, which are not included in segment information.
18. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
As discussed in Notes 3 and 6, the Company and certain of its subsidiaries
acquired and disposed of interests in certain properties during 1998. The
acquisitions have been accounted for as a purchase. The operating results of the
acquisitions and disposals have been included in the consolidated statements of
income from the date of acquisition and disposal.
The following unaudited supplemental pro forma operating data is presented for
the year ended December 31, 1998 as if each of the following transactions had
occurred as of the beginning of the respective period: (i) the acquisitions and
dispositions by the Company of properties in 1998
71
<PAGE>
and (ii) the completion of the sale by the Company of 8,440,518 shares of Common
Stock in March 1998 (see Note 8).
The unaudited pro forma financial information is presented for informational
purposes only and may not be indicative of what actual results of operations
would have been had the transaction occurred as of January 1, 1998, nor does it
purport to represent the results of future operations (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1998
------------------
<S> <C>
Revenues from Rental Property $136,636
Net Income Before Extraordinary Item 20,955
Net Income 20,955
Income Available to Common Stockholders 15,355
Net Income Before Extraordinary
Item Per Common Share-Basic 0.48
Income Available to Common
Stockholders Per Common Share-Basic 0.48
Net Income Before Extraordinary
Item Per Common Share-Diluted 0.48
Income Available to Common
Stockholders Per Common Share-Diluted 0.48
</TABLE>
19. CONTINGENCIES
LEGAL PROCEEDINGS: In 1999, a lawsuit was filed against the Company by a tenant
of a Company owned property. The complaint alleges, among other things,
misrepresentation regarding the use of the property. The tenant is seeking to
recover funds that it claims to have invested in the property of $1,000,000 to
$2,000,000. The Company believes this case is without merit and is vigorously
defending itself against the allegations. Accordingly, the Company has not
recorded any loss provision relative to damages sought by the tenant. Although
the outcome of this lawsuit cannot be predicted with certainty, the Company does
not believe that the outcome of this case will have a materially adverse effect
on the Company's financial statements or its business.
Also in 1999, a class action lawsuit was filed against the Company and its Board
of Directors. The complaint alleged that the Board of Directors and the Company
violated their fiduciary duties by adopting a shareholder rights agreement,
responding to Schottenstein's proposal inappropriately (see Note 13), and
adopting various severance arrangements. In February 2000, a derivative class
action lawsuit was also filed asserting claims against the Company. The claims
contained in this complaint are similar to the pending class action lawsuit
described above. It names as defendants the Company's Board of Directors and
four of its officers. The Company believes that both of these class action
lawsuits are without merit and intends to vigorously defend against them.
The Company is also subject to other legal proceedings and claims that arise in
the ordinary course of its business. It is the opinion of the Company's
management that the outcome of such matters will not have a material adverse
effect on the Company's financial statements or its business.
72
<PAGE>
PART III
ITEMS 10 THROUGH 13.
Incorporated by reference to the following sections of the Company's Proxy
Statement for its 2000 Annual Meeting: "Nominees for Directors," "Executive
Officers," "Beneficial Ownership of Management," "Beneficial Ownership of
Non-Management," and "Executive Compensation" under "PROPOSAL I-ELECTION OF
DIRECTORS" and "CERTAIN TRANSACTIONS WITH MANAGEMENT."
73
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements and Independent Auditors'
Report are included under Item 8.
Independent Auditors' Report.
Consolidated Balance sheets as of December 31, 1999 and 1998.
Consolidated Statements of Income for each of the three years in
the period ended December 31, 1999.
Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended December 31, 1999.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1999.
Notes to Consolidated Financial Statements, December 31, 1999,
1998, and 1997.
The following Supplemental Financial Schedules are included
herein:
III - Real Estate and Accumulated Depreciation.
All other schedules are omitted because of the absence of the
conditions under which they are required or because the required
information is included in the financial statements and notes.
(b) REPORTS ON FORM 8-K
None.
(c) EXHIBITS
3.1.1 Charter of the Company, as Amended and Restated May 6,
1997, incorporated by reference to pages B-1 through B-13
of the Company's Proxy Statement for its 1997 Annual
Meeting, filed March 31, 1997.
3.1.2 Articles Supplementary relating to Series 1997-A
Convertible Preferred Stock, incorporated by reference to
Exhibit 3.1.2 of the Company's Form 8-K Report, filed
January 14, 1998 (the "January 14, 1998 Form 8-K").
3.1.3 Articles Supplementary to the Articles of Amendment and
Restatement of Burnham Pacific Properties, Inc.,
classifying and designating the Series B Junior
Participating Cumulative Preferred Stock, incorporated by
reference to Exhibit 3.1 of the Company's Form 8-K Report,
filed June 24, 1999 (the "June 24, 1999 Form 8-K").
74
<PAGE>
3.2 Bylaws of the Company, as amended dated November 19, 1997,
incorporated by reference to the Exhibit 3.2 of the
Company's report on Form 8-K, filed December 16, 1997 (the
"December 16, 1997 Form 8-K Report").
4.1.1 Form of stock certificate for Common Stock of the Company,
incorporated by reference to Exhibit 4.0 to Registration
Statement No. 33-20489 and subsequently overprinted to
state "THE CORPORATION IS NOW INCORPORATED IN THE STATE OF
MARYLAND WITH $0.01 PAR VALUE PER SHARE."
4.1.2 Form of stock certificate for Series 1997-A Convertible
Preferred Stock, incorporated by reference to Exhibit
4.4.2 filed with the Company's registration statement (No.
333-69957) on December 30, 1998.
4.2 Stock Purchase Agreement dated as of December 5, 1997 by
and among Burnham Pacific Properties, Inc., Burnham
Pacific Operating Partnership, L.P., Westbrook Burnham
Holdings, L.L.C. and Westbrook Burnham Co-Holdings,
L.L.C., incorporated by reference to Exhibit 4.1 of the
January 14, 1998 Form 10-K.
4.3 Registration Rights Agreement dated as of December 31,
1997 by and among Burnham Pacific Properties, Inc.,
Westbrook Burnham Holdings, L.L.C. and Westbrook Burnham
Co-Holdings, L.L.C., incorporated by reference to Exhibit
4.2.1 of the January 14, 1998 Form 8-K.
4.4 Registration Rights Agreement dated as of December 31,
1997 by and among Burnham Pacific Properties, Inc. and the
Existing Partners (of Golden State Properties) listed on
Exhibit A-1 thereto, incorporated by reference to Exhibit
4.2.2 of the January 14, 1998 Form 8-K.
4.5 Shareholder Rights Agreement, dated as of June 19, 1999,
between Burnham Pacific Properties, Inc. and First Chicago
Trust Company of New York, as Rights Agent, incorporated
by reference to Exhibit 4.1 of the June 24, 1999 Form 8-K.
10.1.1 Agreement of Limited Partnership of Burnham Pacific
Operating Partnership, L.P. dated as of November 14, 1997,
incorporated by reference to Exhibit 10.1.1 of the
December 16, 1997 Form 8-K.
10.1.2 First Amendment to Agreement of Limited Partnership of
Burnham Pacific Operating Partnership, L.P., dated as of
December 31, 1997 (the "First Amendment"), incorporated by
reference to Exhibit 10.1 of the January 14, 1998 Form
8-K.
10.1.3 Third Amendment to Agreement of Limited Partnership of
Burnham Pacific Operating Partnership, L.P., dated as of
December 31, 1997, incorporated by reference to Exhibit
10.1 of the Company's report on Form 8-K dated June 1,
1998.
10.1.4 Exhibit C to the First Amendment (defining the rights of
Preferred Units and Common Units of Burnham Pacific
Operating Partnership, L.P.),
75
<PAGE>
incorporated by reference to Exhibit 10.1.3 to the
Company's Form 10-K Report for 1997.
10.2 Agreement to Contribute among Burnham Pacific Properties,
Inc., and Burnham Pacific Operating Partnership, L.P. and
the Contributors and Existing Partners of the Golden State
Properties party thereto, dated as of December 5, 1997,
incorporated by reference to Exhibit 10.2 to the December
16, 1997 Form 8-K.
10.3 Loan Agreement dated as of December 31, 1997 between
BPP/Golden State Acquisitions, Inc., L.L.C. and Nomura
Asset Capital Corporation, incorporated by reference to
Exhibit 10.2 of the January 14, 1998 Form 8-K.
10.4 Amended and Restated Revolving Loan Agreement dated as of
December 31, 1997 by and between Burnham Pacific Operating
Partnership, L.P. and Nomura Asset Capital Corporation,
incorporated by reference to Exhibit 10.3 of the January
14, 1998 Form 8-K.
10.5 Stock Option and Incentive Plan of the Company as amended
and restated as of May 6, 1997, incorporated by reference
to Appendix D to the Company's Proxy Statement for its
1997 Annual Meeting.
10.6 Employment Agreement between the Company and J. David
Martin dated as of October 1, 1995, incorporated by
reference to Exhibit 10.1 to the Company's report on Form
10-Q for the quarter ended September 30, 1995.
10.7 Form of Indemnification Agreement among Burnham Pacific
Properties, Inc. and Burnham Pacific Operating
Partnership, L.P. as indemnitors and their Officers and
Directors as indemnitees, incorporated by reference to
Exhibit 10.4 filed with the Company's registration
statement (no. 333-69957) on December 30, 1998.
10.8 Operating Agreement of BPP Retail, LLC dated August 31,
1998, incorporated by reference to Exhibit 10.1 to the
Company's report on Form 10-Q for the quarter ended
September 30, 1998. This document constitutes the joint
venture agreement between the State of California Public
Employees' Retirement System and Burnham Pacific Operating
Partnership, L.P.
10.9 Burnham Pacific Properties, Inc. Executive Severance Plan,
dated as of June 19, 1999 (the "Executive Severance
Plan"), incorporated by reference to Exhibit 10.1 to the
Company's Form 8-K Report, filed August 9, 1999 (the
"August 9, 1999 Form 8-K").
10.10 First Amendment to the Executive Severance Plan, dated as
of July 23, 1999, incorporated by reference to Exhibit
10.2 of the August 9, 1999 Form 8-K.
10.11 Burnham Pacific Properties, Inc. Management Severance
Plan, dated as of June 19, 1999 (the "Management Severance
Plan"), incorporated by reference to Exhibit 10.3 of the
August 9, 1999 Form 10-K.
76
<PAGE>
10.12 First Amendment to the Management Severance Plan, dated as
of July 23, 1999, incorporated by reference to Exhibit
10.4 of the August 9, 1999 Form 8-K.
10.13 Burnham Pacific Properties, Inc. Rank and File Severance
Plan, dated as of June 19, 1999 (the "Rank and File
Severance Plan"), incorporated by reference to Exhibit
10.5 of the August 9, 1999 Form 8-K.
10.14 First Amendment to the Rank and File Severance Plan, dated
as of July 23, 1999, incorporated by reference to Exhibit
10.6 of the August 9, 1999 Form 8-K.
10.15 Senior Executive Severance Agreement, dated as of June 30,
1999, between Burnham Pacific Properties, Inc. and J.
David Martin, incorporated by reference to Exhibit 10.7 of
the August 9, 1999 Form 8-K.
10.16 Senior Executive Severance agreement, dated as of June 30,
1999 between Burnham Pacific Properties, Inc. and Joseph
William Byrne, incorporated by reference to Exhibit 10.8
of the August 9, 1999 Form 8-K.
10.17 Senior Executive Severance Agreement, dated as of June 30,
1999, between Burnham Pacific Properties, Inc. and James
W. Gaube, incorporated by reference to Exhibit 10.9 of the
August 9, 1999 Form 8-K.
10.18 Senior Executive Severance Agreement, dated as of June 30,
1999, between Burnham Pacific Properties, Inc. and Daniel
B. Platt, incorporated by reference to Exhibit 10.10 of
the August 9, 1999 Form 8-K.
10.19 Senior Executive Severance Agreement, dated as of June 30,
1999, between Burnham Pacific Properties, Inc. and Scott
C. Verges, incorporated by reference to Exhibit 10.11 of
the August 9, 1999 Form 8-K.
10.20 Phantom Shares Agreement, dated as of August 1, 1999,
between Burnham Pacific Properties, Inc. and J. David
Martin, incorporated by reference to Exhibit 10.12 of the
August 9, 1999 Form 8-K.
10.21 Phantom Shares Agreement, dated as of August 1, 1999,
between Burnham Pacific Properties, Inc. and J. David
Martin, incorporated by reference to Exhibit 10.13 of the
August 9, 1999 Form 8-K.
10.22 Phantom Shares Agreement, dated as of August 1, 1999,
between Burnham Pacific Properties, Inc. and J. David
Martin, incorporated by reference to Exhibit 10.14 of the
August 9, 1999 Form 8-K.
10.23 Phantom Shares Agreement, dated as of August 1, 1999,
between Burnham Pacific Properties, Inc. and Joseph
William Byrne, incorporated by reference to Exhibit 10.15
of the August 9, 1999 Form 8-K.
10.24 Phantom Shares Agreement, dated as of August 1, 1999,
between Burnham Pacific Properties, Inc. and James W.
Gaube, incorporated by reference to Exhibit 10.16 of the
August 9, 1999 Form 8-K.
77
<PAGE>
10.25 Phantom Shares Agreement, dated as of August 1, 1999,
between Burnham Pacific Properties, Inc. and Daniel B.
Platt, incorporated by reference to Exhibit 10.17 of the
August 9, 1999 Form 8-K.
10.26 Phantom Shares Agreement, dated as of August 1, 1999,
between Burnham Pacific Properties, Inc. and Scott C.
Verges, incorporated by reference to Exhibit 10.18 of the
August 9, 1999 Form 8-K.
10.27 First Amendment to Phantom Shares Agreement, dated as of
November 11, 1999, between Burnham Pacific Properties,
Inc. and J. David Martin, incorporated by reference to
Exhibit 10.19 to the Company's report on Form 10-Q for the
quarter ended September 30, 1999 (the "September 30, 1999
Form 10-Q").
10.28 First Amendment to Phantom Shares Agreement, dated as of
November 11, 1999, between Burnham Pacific Properties,
Inc. and J. David Martin, incorporated by reference to
Exhibit 10.20 of the September 30, 1999 Form 10-Q.
10.29 Phantom Shares Rescission Agreement, dated as of November
11, 1999, between Burnham Pacific Properties, Inc. and J.
David Martin, incorporated by reference to Exhibit 10.21
of the September 30, 1999 Form 10-Q.
10.30 First Amendment to Phantom Shares Agreement, dated as of
November 11, 1999, between Burnham Pacific Properties,
Inc. and Daniel B. Platt, incorporated by reference to
Exhibit 10.22 of the September 30, 1999 Form 10-Q.
10.31 First Amendment to Phantom Shares Agreement, dated as of
November 11, 1999, between Burnham Pacific Properties,
Inc. and Joseph William Byrne, incorporated by reference
to Exhibit 10.23 of the September 30, 1999 Form 10-Q.
10.32 First Amendment to Phantom Shares Agreement, dated as of
November 11, 1999, between Burnham Pacific Properties,
Inc. and James W. Gaube, incorporated by reference to
Exhibit 10.24 of the September 30, 1999 Form 10-Q.
10.33 First Amendment to Phantom Shares Agreement, dated as of
November 11, 1999, between Burnham Pacific Properties,
Inc. and Scott C. Verges, incorporated by reference to
Exhibit 10.25 of the September 30, 1999 Form 10-Q.
*10.34 Loan Agreement, dated as of November 19, 1999, between
Burnham Pacific Operating Partnership, L.P., BPP Cameron
Park, L.P., and BPP/Riley, L.P., as Borrowers, the lenders
party thereto, as Lenders, and General Electric Capital
Corporation, as Administrative Agent.
*10.35 Modification to Loan Agreement, dated as of
December 20, 1999, between Burnham Pacific Operating
Partnership, L.P., BPP Cameron Park, L.P., and
BPP/Riley, L.P., as Borrowers, the lenders party
thereto, as Lenders, and General Electric Capital
Corporation, as Administrative Agent.
*10.36 Second Amendment to Operating Agreement of BPP Retail,
LLC, dated as of December 15, 1999, between Burnham
Pacific Employees, LLC and CalPERS, incorporated by
reference to Exhibit 10.1 of the Company's report
78
<PAGE>
on Form 8-K, filed January 14, 2000 (the "January 14, 2000
Form 8-K Report").
10.37 Contribution Agreement, dated as of November 30, 1999,
between Burnham Pacific Employees, LLC and CalPERS,
incorporated by reference to Exhibit 10.2 of the January
14, 2000 Form 8-K Report.
10.38 Bell Gardens Ownership Agreement, dated as of December 15,
1999, by and among Burnham Pacific Operating Partnership,
L.P., Burnham Pacific Employees, LLC, BPP Retail, LLC and
CalPERS, incorporated by reference to Exhibit 10.3 of the
January 14, 2000 Form 8-K Report.
10.39 Waiver, Amendment and First Consent, dated as of December
15, 1999, by and among BPP Retail, LLC, the Lenders named
therein, The Chase Manhattan Bank, as Administrative
Agent, Burnham Pacific Employees, LLC, Burnham Pacific
Operating Partnership, L.P. and CalPERS, incorporated by
reference to Exhibit 10.4 of the January 14, 2000 Form 8-K
Report.
10.40 Waiver, Amendment and Second Consent to Credit Agreement,
dated as of December 15, 1999, by and among BPP Retail,
LLC, BPAC Texas, L.P., the Lenders named therein and The
Chase Manhattan Bank, as Administrative Agent,
incorporated by reference to Exhibit 10.5 of the January
14, 2000 Form 8-K Report.
*21.1 List of subsidiaries of the Company.
*23.1 Consent of Deloitte & Touche LLP.
*27.1 Financial Data Schedule
*Filed herewith.
79
<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.
Burnham Pacific Properties, Inc.
By: /s/ J. David Martin
----------------------------
J. David Martin, President
Dated: MARCH 29, 2000
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 and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Malin Burnham Chairman of the Board MARCH 29, 2000
- ----------------------------
Malin Burnham
/s/ J. David Martin President, Director MARCH 29, 2000
- ----------------------------
J. David Martin
/s/ Daniel B. Platt Chief Financial Officer MARCH 29, 2000
- ----------------------------
Daniel B. Platt
/s/ Donne P. Moen Director MARCH 29, 2000
- ----------------------------
Donne P. Moen
/s/ Nina Matis Director MARCH 29, 2000
- ----------------------------
Nina Matis
/s/ James D. Harper, Jr. Director MARCH 29, 2000
- ----------------------------
James D. Harper, Jr.
/s/ Phillip S. Schlein Director MARCH 29, 2000
- ----------------------------
Phillip S. Schlein
/s/ James D. Klingbeil Director MARCH 29, 2000
- ----------------------------
James D. Klingbeil
/s/ Robin Wolaner Director MARCH 29, 2000
- ----------------------------
Robin Wolaner
</TABLE>
80
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III
DECEMBER 31, 1999
- -----------------
<TABLE>
<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO COMPANY: TO ACQUISITION:
PROPERTY NAME BUILDINGS & BUILDINGS &
ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
<S> <C> <C> <C> <C> <C>
SAN DIEGO REGION
SAN DIEGO FACTORY OUTLET $ - $ 4,533,576 $ 9,067,910 $ 2,285,747 $ 7,170,851
San Ysidro, California
SDFOC-KMART 2,309,315 1,933,333 3,866,667 - -
San Ysidro, California
SAN MARCOS LUCKY PLAZA - 2,457,807 4,915,613 268,331 604,554
San Marcos, California
ANACOMP BUILDING - 7,467,253 14,934,506 6,747 63,977
Poway, California
SCRIPPS RANCH BUILDING - 2,085,891 2,081,981 - 2,692,429
San Diego (Scripps Ranch), CA _________ _________ __________ ________ _________
SUBTOTAL 2,309,315 18,477,860 34,866,677 2,560,825 10,531,811
--------- ---------- ---------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
AMOUNTS CARRIED AT END OF PERIOD:
PROPERTY NAME BUILDINGS & CARRYING ACCUMULATED DATE
LAND IMPROVEMENTS COSTS DEPRECIATION ACQUIRED LIFE
<S> <C> <C> <C> <C> <C> <C>
SAN DIEGO REGION
SAN DIEGO FACTORY OUTLET $ 6,819,323 $ 16,238,761 $ 23,058,084 $ 4,437,152 Jan-92 30
San Ysidro, California
SDFOC-KMART 1,933,333 3,866,667 5,800,000 832,406 Oct-93 30
San Ysidro, California
SAN MARCOS LUCKY PLAZA 2,726,138 5,520,167 8,246,305 354,722 Dec-97 30
San Marcos, California
ANACOMP BUILDING 7,474,000 14,998,483 22,472,483 3,492,035 Dec-92 30
Poway, California
SCRIPPS RANCH BUILDING 2,085,891 4,774,410 6,860,301 1,928,247 May-87 30
San Diego (Scripps Ranch), CA _________ __________ __________ _________
SUBTOTAL 21,038,685 45,398,488 66,437,173 11,044,562
---------- ---------- ---------- ----------
</TABLE>
81
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III
DECEMBER 31, 1999
- -----------------
<TABLE>
<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO COMPANY: TO ACQUISITION:
PROPERTY NAME BUILDINGS & BUILDINGS &
ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
<S> <C> <C> <C> <C> <C>
LOS ANGELES REGION
LA MANCHA PARTNERS - 2,202,830 5,981,355 168,770 1,101,811
Fullerton, California
PLAZA AT PUENTE HILLS 31,937,911 19,333,333 38,666,667 48,744 1,988,600
City of Industry, California
WEST LANCASTER - 635,257 1,274,663 - 59,827
Lancaster, California
ONTARIO VILLAGE - 1,582,802 3,195,733 - 207,792
Ontario, California
VALLEY CENTRAL 24,508,246 13,291,904 26,680,586 - 393,417
Lancaster, California
CRENSHAW-IMPERIAL 5,071,551 3,019,923 6,159,881 8,685 747,851
Inglewood, California
SANTA FE SPRINGS PLAZA - 5,682,205 11,403,070 - 341,036
Santa Fe Springs, California
CENTRAL SHOPPING CENTER - 1,886,518 3,795,868 1,500 26,942
Ventura, California
MOUNTAINGATE PLAZA 22,784,274 9,568,089 19,419,490 - 188,938
Simi Valley, California
SIMI VALLEY PLAZA 16,029,223 8,219,957 16,439,914 78,894 343,896
Simi Valley, California
WESTMINSTER CENTER - 18,604,973 37,209,946 1,757,125 3,750,196
Westminster, California
BELL GARDEN MARKETPLACE - - 11,854,933 - 1,224,865
Bell Gardens, California
BUENA VISTA MARKETPLACE - 4,216,270 8,432,541 400,912 942,681
Duarte, California
RALPH'S CENTER - 3,686,051 7,372,102 9,798 43,089
Redondo Beach, California
CENTERWOOD PLAZA - 2,108,031 4,216,062 150,276 606,148
Bellflower, California
LAKE ARROWHEAD 19,423,122 10,606,587 21,695,708 - 453,322
Lake Arrowhead, California
PLAZA DE MONTEREY 3,913,380 1,999,305 4,071,522 - 6,174
Palm Desert, California
PALMS TO PINES - 1,013,724 2,119,429 - 15,534
Palm Desert, California
MISSION PLAZA - 1,517,422 3,106,356 - 18,374
Cathedral City, California
MENIFEE TOWN CENTER - 3,952,698 7,905,397 10,329 363,592
Menifee, California
OLYMPIAD PLAZA 6,009,118 3,413,703 6,871,283 9,974 133,232
Mission Viejo, California __________ __________ __________ ________ ________
SUBTOTAL 129,676,825 116,541,582 247,872,506 2,645,007 12,957,317
----------- ----------- ----------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
AMOUNTS CARRIED AT END OF PERIOD:
PROPERTY NAME BUILDINGS & CARRYING ACCUMULATED DATE
LAND IMPROVEMENTS COSTS DEPRECIATION ACQUIRED LIFE
<S> <C> <C> <C> <C> <C> <C>
LOS ANGELES REGION
LA MANCHA PARTNERS 2,371,600 7,083,166 9,454,766 4,612,113 Dec-88 30
Fullerton, California
PLAZA AT PUENTE HILLS 19,382,077 40,655,267 60,037,344 8,818,489 Oct-93 30
City of Industry, California
WEST LANCASTER 635,257 1,334,490 1,969,747 137,885 Jan-97 30
Lancaster, California
ONTARIO VILLAGE 1,582,802 3,403,525 4,986,327 333,295 Jan-97 30
Ontario, California
VALLEY CENTRAL 13,291,904 27,074,003 40,365,907 2,674,781 Jan-97 30
Lancaster, California
CRENSHAW-IMPERIAL 3,028,608 6,907,732 9,936,340 587,361 Apr-97 30
Inglewood, California
SANTA FE SPRINGS PLAZA 5,682,205 11,744,106 17,426,311 1,092,836 Apr-97 30
Santa Fe Springs, California
CENTRAL SHOPPING CENTER 1,888,018 3,822,810 5,710,828 349,605 Apr-97 30
Ventura, California
MOUNTAINGATE PLAZA 9,568,089 19,608,428 29,176,517 1,481,691 Oct-97 30
Simi Valley, California
SIMI VALLEY PLAZA 8,298,851 16,783,810 25,082,661 1,122,128 Dec-97 30
Simi Valley, California
WESTMINSTER CENTER 20,362,098 40,960,142 61,322,240 2,577,978 Dec-97 30
Westminster, California
BELL GARDEN MARKETPLACE - 13,079,798 13,079,798 - Dec-97 30
Bell Gardens, California
BUENA VISTA MARKETPLACE 4,617,182 9,375,222 13,992,404 600,825 Dec-97 30
Duarte, California
RALPH'S CENTER 3,695,849 7,415,191 11,111,040 504,842 Dec-97 30
Redondo Beach, California
CENTERWOOD PLAZA 2,258,307 4,822,210 7,080,517 294,655 Dec-97 30
Bellflower, California
LAKE ARROWHEAD 10,606,587 22,149,030 32,755,617 1,306,510 May-98 30
Lake Arrowhead, California
PLAZA DE MONTEREY 1,999,305 4,077,696 6,077,001 203,505 Jun-98 30
Palm Desert, California
PALMS TO PINES 1,013,724 2,134,963 3,148,687 110,693 Jun-98 30
Palm Desert, California
MISSION PLAZA 1,517,422 3,124,730 4,642,152 157,027 Jun-98 30
Cathedral City, California
MENIFEE TOWN CENTER 3,963,027 8,268,989 12,232,016 537,557 Dec-97 30
Menifee, California
OLYMPIAD PLAZA 3,423,677 7,004,515 10,428,192 585,703 Jun-97 30
Mission Viejo, California __________ __________ __________ _________
SUBTOTAL 119,186,589 260,829,823 380,016,412 28,089,479
----------- ----------- ----------- ----------
</TABLE>
82
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III
DECEMBER 31, 1999
- -----------------
<TABLE>
<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO COMPANY: TO ACQUISITION:
PROPERTY NAME BUILDINGS & BUILDINGS &
ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
<S> <C> <C> <C> <C> <C>
SAN FRANCISCO REGION
RICHMOND SHOPPING CENTER 6,746,052 3,139,965 6,264,175 71,473 433,438
Richmond, California
HILLTOP PLAZA - 1,923,807 3,847,815 3,798,993 22,762,063
Richmond, California
GATEWAY CENTER 16,486,563 - 23,041,102 - 2,662,951
Marin City, California
CAMERON PARK 5,216,166 1,898,032 3,810,110 - 8,456,312
Cameron Park, California
FREMONT HUB SHOPPING CENTER - 15,750,424 33,274,814 18,920 18,918,896
Fremont, California
PROSPECTOR'S PLAZA - 6,762,001 13,524,001 527,651 1,351,301
Placerville, California
STONY POINT PLAZA - 5,964,704 11,929,409 15,858 135,256
Santa Rosa, California
FREMONT GATEWAY PLAZA - 9,898,097 19,796,193 398,376 900,228
Fremont, California
SOUTHAMPTON CENTER - 6,964,868 13,929,736 577,989 1,317,249
Benicia, California
SILVER CREEK PLAZA - 5,793,858 11,587,715 407,162 1,277,990
San Jose, California
SUMMERHILLS SHOPPING CENTER - 3,463,199 6,926,397 96,345 360,449
Sacramento, California
SHASTA CROSSROADS - 4,554,787 9,109,575 465,353 966,316
Redding, California
CREEKSIDE SHOPPING CENTER - 2,883,083 5,766,165 500,162 1,032,407
Vacaville, California
580 MARKETPLACE - 5,575,805 11,151,611 374,641 790,800
Castro Valley, California
DISCOVERY PLAZA - - 9,216,732 415,576 983,289
Sacramento, California
SUNSET CENTER - 2,396,340 4,792,681 130,594 293,874
Suisun City, California
HALLMARK TOWN CENTER - 2,797,702 5,595,405 284,839 592,706
Madera, California
ARCADE SQUARE - 2,779,626 5,559,253 278,206 910,620
Sacramento, California
VAN NESS 22,882,385 2,271,199 50,231,739 180,000 (3,750,689)
San Francisco, California _________ _________ __________ _________ _________
SUBTOTAL 51,331,166 84,817,497 249,354,628 8,542,138 60,395,456
---------- ---------- ----------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
AMOUNTS CARRIED AT END OF PERIOD:
PROPERTY BUILDINGS & CARRYING ACCUMULATED DATE
LAND IMPROVEMENTS COSTS DEPRECIATION ACQUIRED LIFE
<S> <C> <C> <C> <C> <C> <C>
SAN FRANCISCO REGION
RICHMOND SHOPPING CENTER 3,211,438 6,697,613 9,909,051 999,144 Dec-95 30
Richmond, California
HILLTOP PLAZA 5,722,800 26,609,878 32,332,678 1,131,134 Dec-96 30
Richmond, California
GATEWAY CENTER - 25,704,053 25,704,053 2,032,299 Aug-97 30
Marin City, California
CAMERON PARK 1,898,032 12,266,422 14,164,454 322,464 Jan-97 30
Cameron Park, California
FREMONT HUB SHOPPING CENTER 15,769,344 52,193,710 67,963,054 2,815,994 Apr-97 30
Fremont, California
PROSPECTOR'S PLAZA 7,289,652 14,875,302 22,164,954 952,106 Dec-97 30
Placerville, California
STONY POINT PLAZA 5,980,562 12,064,665 18,045,227 805,400 Dec-97 30
Santa Rosa, California
FREMONT GATEWAY PLAZA 10,296,473 20,696,421 30,992,894 1,367,789 Dec-97 30
Fremont, California
SOUTHAMPTON CENTER 7,542,857 15,246,985 22,789,842 993,274 Dec-97 30
Benicia, California
SILVER CREEK PLAZA 6,201,020 12,865,705 19,066,725 814,068 Dec-97 30
San Jose, California
SUMMERHILLS SHOPPING CENTER 3,559,544 7,286,846 10,846,390 477,979 Dec-97 30
Sacramento, California
SHASTA CROSSROADS 5,020,140 10,075,891 15,096,031 665,351 Dec-97 30
Redding, California
CREEKSIDE SHOPPING CENTER 3,383,245 6,798,572 10,181,817 430,144 Dec-97 30
Vacaville, California
580 MARKETPLACE 5,950,446 11,942,411 17,892,857 782,370 Dec-97 30
Castro Valley, California
DISCOVERY PLAZA 415,576 10,200,021 10,615,597 669,901 Dec-97 30
Sacramento, California
SUNSET CENTER 2,526,934 5,086,555 7,613,489 338,168 Dec-97 30
Suisun City, California
HALLMARK TOWN CENTER 3,082,541 6,188,111 9,270,652 411,381 Dec-97 30
Madera, California
ARCADE SQUARE 3,057,832 6,469,873 9,527,705 427,874 Dec-97 30
Sacramento, California
VAN NESS 2,451,199 46,481,050 48,932,249 2,149,683 July-98 30
San Francisco, California __________ __________ __________ _________
SUBTOTAL 93,359,635 309,750,084 403,109,719 18,586,523
---------- ---------- ---------- ---------
</TABLE>
83
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III
DECEMBER 31, 1999
- -----------------
<TABLE>
<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO COMPANY: TO ACQUISITION:
PROPERTY NAME BUILDINGS & BUILDINGS &
ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
<S> <C> <C> <C> <C> <C>
PACIFIC NORTHWEST REGION
DESIGN MARKET - 3,765,179 7,892,149 - 158,129
Bellevue, Washington
FAIRWOOD SQUARE - 1,684,060 3,568,011 - 157,944
Renton, Washington
PUGET PARK 2,451,572 1,477,327 3,103,651 - 202,306
Everett, Washington
MERIDIAN VILLAGE SHOPPING - 7,001,009 14,002,019 29,513 141,416
CENTER
Bellingham, Washington
BEAR CREEK VILLAGE - - 3,474,379 - 723,509
Redmond, Washington
VILLAGE EAST SHOPPING CENTER - 4,916,305 9,912,687 - -
Salem, Oregon
KEIZER CREEKSIDE - 1,831,640 3,746,464 72,874 155,005
Salem, Oregon
PARK MANOR - 973,248 2,010,606 72,874 159,186
Bellingham, Washington
FARMINGTON VILLAGE - 1,400,223 2,811,045 - 9,651
Aloha, Oregon
GREENTREE PLAZA - 3,266,219 6,598,434 - 31,392
Everett, Washington
JAMES VILLAGE - - 2,141,260 - 16,418
Lynnwood, Washington ________ _________ _________ ______ _______
SUBTOTAL 2,451,572 26,315,210 59,260,705 175,261 1,754,956
--------- ---------- ---------- ------- ---------
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
AMOUNTS CARRIED AT END OF PERIOD:
PROPERTY NAME BUILDINGS & CARRYING ACCUMULATED DATE
LAND IMPROVEMENTS COSTS DEPRECIATION ACQUIRED LIFE
<S> <C> <C> <C> <C> <C> <C>
PACIFIC NORTHWEST REGION
DESIGN MARKET 3,765,179 8,050,278 11,815,457 599,728 Oct-97 30
Bellevue, Washington
FAIRWOOD SQUARE 1,684,060 3,725,955 5,410,015 293,279 Oct-97 30
Renton, Washington
PUGET PARK 1,477,327 3,305,957 4,783,284 251,642 Oct-97 30
Everett, Washington
MERIDIAN VILLAGE SHOPPING 7,030,522 14,143,435 21,173,957 948,743 Dec-97 30
CENTER
Bellingham, Washington
BEAR CREEK VILLAGE - 4,197,888 4,197,888 727,298 Dec-97 30
Redmond, Washington
VILLAGE EAST SHOPPING CENTER 4,916,305 9,912,687 14,828,992 654,707 Feb-98 30
Salem, Oregon
KEIZER CREEKSIDE 1,904,514 3,901,469 5,805,983 218,231 Jun-98 30
Salem, Oregon
PARK MANOR 1,046,122 2,169,792 3,215,914 116,873 Jun-98 30
Bellingham, Washington
FARMINGTON VILLAGE 1,400,223 2,820,696 4,220,919 134,803 Jul-98 30
Aloha, Oregon
GREENTREE PLAZA 3,266,219 6,629,826 9,896,045 312,485 Jul-98 30
Everett, Washington
JAMES VILLAGE - 2,157,678 2,157,678 202,482 Oct-98 30
Lynnwood, Washington _________ _________ __________ _________
SUBTOTAL 26,490,471 61,015,661 87,506,132 4,460,271
--------- --------- ---------- ---------
</TABLE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III
DECEMBER 31, 1999
- -----------------
<TABLE>
<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO COMPANY: TO ACQUISITION:
PROPERTY NAME BUILDINGS & BUILDINGS &
ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
<S> <C> <C> <C> <C> <C>
MOUNTAIN REGION
----------- ----------- ----------- ---------- ----------
BRICKYARD PLAZA - - 1,047,007 - 1,581
Salt Lake City, Utah ___________ ___________ ___________ __________ __________
SOUTHWEST REGION
SILVER PLAZA 300,000 318,364 675,644 - 3,669
Silver City, New Mexico
CRUCES NORTE - 827,222 1,701,026 72,874 157,478
Las Cruces, New Mexico ___________ ___________ ___________ __________ __________
SUBTOTAL 300,000 1,145,586 2,376,670 72,874 161,147
---------- ----------- ----------- --------- ---------
BURNHAM PACIFIC GRAND TOTAL $186,068,878 $247,297,735 $594,778,193 $13,996,105 $85,802,268
============ =========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AMOUNTS CARRIED AT END OF PERIOD:
PROPERTY NAME BUILDINGS & CARRYING ACCUMULATED DATE
LAND IMPROVEMENTS COSTS DEPRECIATION ACQUIRED LIFE
<S> <C> <C> <C> <C> <C> <C>
MOUNTAIN REGION
----------- ----------- ------------- ----------
BRICKYARD PLAZA - 1,048,588 1,048,588 201,924 Sep-98 30
Salt Lake City, Utah
----------- ----------- ------------ ----------
SOUTHWEST REGION
SILVER PLAZA 318,364 679,313 997,677 50,541 Oct-97 30
Silver City, New Mexico
CRUCES NORTE 900,096 1,858,504 2,758,600 99,392 Jun-98 30
Las Cruces, New Mexico
----------- ----------- ------------ ----------
SUBTOTAL 1,218,460 2,537,817 3,756,277 149,933
----------- ----------- ------------ ----------
BURNHAM PACIFIC GRAND TOTAL $261,293,840 $680,580,461 $941,874,301 $62,532,692
============ ============ ============ ==========
</TABLE>
85
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III NOTES
DECEMBER 31, 1999
- -----------------
NOTE 1
Fremont Hub, San Diego Factory Outlet Center, Hilltop Plaza, Santa Fe Springs,
Meridian Village, Anacomp, Greentree Plaza, La Mancha Shopping Center, Santee
Village Square, Keizer Creekside, Ontario Village Shopping Center, Scripps
Ranch, Farmington Village, Mission Plaza, Central Shopping Center, Palms to
Pines, Bear Creek Village, Park Manor, Cruces Norte, West Lancaster Plaza, James
Village, Brickyard Plaza, and Bell Garden are jointly encumbered under the
Company's secured line of credit, under which $138,419,702 was outstanding at
December 31, 1999, which was not included in the above.
NOTE 2 Menifee Town Center, San Marcos Lucky Plaza, Westminster Center, Buena
Vista Marketplace, Ralph's Center, Centerwood Plaza, Prospector's Plaza,
Stony Point Plaza, Fremont Gateway Plaza, Southampton Center, Silver Creek
Plaza, Summerhills Shopping Center, Shasta Crossroads, Creekside Shopping
Center, 580 Marketplace, Discovery Plaza, Sunset Center, Hallmark Town
Center, and Arcade Square are jointly encumbered under a $145,927,661
mortgage loan at December 31, 1999, which was not included in the above.
NOTE 3
Design Market, Fairwood Square, and Village East are jointly encumbered under a
$15,861,069 mortgage loan at December 31, 1999, which was not included in the
above.
NOTE 4 The amounts above do not include approximately $7,021,000 of
furniture, fixtures and equipment and acquisitions in progress and $2,961,000
of related accumulated depreciation, and $87,374,000 of costs incurred to
date on development of a retail center which is also classified with property
in the consolidated financial statements of the Company.
NOTE 5
The aggregate cost for federal income tax purposes for buildings and
improvements at December 31, 1999 was approximately $659,000,000.
(Continued)
86
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III NOTES
DECEMBER 31, 1999 (CONTINUED)
- -----------------------------
<TABLE>
<CAPTION>
LAND, BUILDINGS & ACCUMULATED
IMPROVEMENTS DEPRECIATION
----------------- ------------
<S> <C> <C>
Balance at January 1, 1998 $ 915,078,306 $ 54,799,394
Additions During Period 187,460,623 24,302,044
Cost of Real Estate Sold (5,685,318) (1,384,529)
--------------------- -------------------
Balance at December 31, 1998 1,096,853,611 77,716,909
Additions During Period 18,976,333 21,666,188
Cost of Real Estate Sold (162,196,776) (33,828,342)
--------------------- -------------------
Balance at December 31, 1999 $941,874,301 $ 62,532,692
===================== ===================
</TABLE>
A) Additions during the period are broken down as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------- -------------------
<S> <C> <C>
Cash Expenditures $ 18,976,333 $ 144,000,716
Assumption of Debt - 25,147,110
Operating Partnership Units Issued - 18,312,797
--------------------- -------------------
$ 18,976,333 $ 187,460,623
===================== ===================
</TABLE>
(Concluded)
87
<PAGE>
Exhibit 10.34
================================================================================
LOAN AGREEMENT
BETWEEN
BURNHAM PACIFIC OPERATING PARTNERSHIP, L.P.,
BPP/CAMERON PARK, L.P., AND BPP/RILEY, L.P.,
AS BORROWERS
THE LENDERS PARTY HERETO,
AS LENDERS
AND
GENERAL ELECTRIC CAPITAL CORPORATION,
AS ADMINISTRATIVE AGENT
DATED AS OF: NOVEMBER 19, 1999
================================================================================
<PAGE>
LOAN AGREEMENT
This Loan Agreement (this "AGREEMENT") is entered into as of November
19, 1999, among BURNHAM PACIFIC OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership, and BPP/ CAMERON PARK, L.P. and BPP RILEY, L.P., each a California
limited partnership (each, a "BORROWER" and collectively, the "BORROWERS"); each
of the lenders that is a signatory hereto identified under the caption "LENDERS"
on the signature pages hereof and each lender that becomes a "Lender" after the
dates hereof pursuant to Section 11.24(2) (individually, a "LENDER" and,
collectively, the "LENDERS"); and General Electric Capital Corporation,
("GECC"), a New York corporation, as administrative agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"ADMINISTRATIVE AGENT").
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.01 CERTAIN DEFINITIONS. As used herein, the following terms
have the meanings indicated:
(1) "ACCOUNT PLEDGE" means that certain pledge and security
agreement to be executed by the Borrowers in favor of the Administrative Agent
(on behalf of the Lenders) with respect to certain deposit accounts more
particularly described therein.
(2) "ACT" means the United States Securities Act of 1933 as
amended.
(3) "ADDITIONAL ADVANCE" means, subject to the terms and
provisions of this Agreement, a Loan advance from the Lenders to the Borrowers
to provide funding for the Fremont Additional Advance, the La Mancha Lease
Acquisition and/or general working capital for the operation of the Projects.
(4) "ADDITIONAL COSTS" has the meaning set forth in SECTION
2.08(1) hereof.
(5) "ADJUSTED DEBT" means, for any Person, without duplication,
all Debt of such Person PLUS all unfunded amounts under a loan agreement, letter
of credit, or other credit facility for which for which such Person would be
liable, if such amounts were advanced under the credit facility.
(6) "ADJUSTED DEBT SERVICE" means the aggregate interest, fixed
principal (excluding balloon payments at maturity), and other payments due under
the Loan (excluding any payments for real estate taxes and any other revenues or
funds that are escrowed with the Administrative Agent) and on any other
permitted Adjusted Debt relating to the Projects approved by the Administrative
Agent for the period of time for which calculated.
(7) "ADJUSTED LIBOR RATE" means, for any Interest Period for any
Eurodollar Loan, a rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) determined by the Administrative Agent to be equal to the Libor Base
Rate for such Interest Period DIVIDED by 1 minus the Reserve Requirement (if
any) for such Interest Period.
<PAGE>
(8) "ADJUSTED LOAN AMOUNT" has the meaning set forth in SECTION
2.04 hereof.
(9) "ADJUSTED OPERATING EXPENSES" means, with respect to any
period, all Operating Expenses for such period, as determined and adjusted by
the Administrative Agent in accordance with its then current audit policies and
procedures (but such policies and procedures shall be consistent with, and
similar in substance to, the policies and procedures used in connection with the
Initial Advance) including, without limitation, adjustments to reflect (a) the
greater of (i) actual management fees or (ii) 4% of Operating Revenues and (b) a
replacement or capital repair reserve equal to $0.20 per gross square foot per
annum.
(10) "ADJUSTED OPERATING REVENUES" means, with respect to any
period, all Operating Revenues for such period, as determined and adjusted by
the Administrative Agent in accordance with its then current audit policies and
procedures (but such policies and procedures shall be consistent with, and
similar in substance to, the policies and procedures used in connection with the
Initial Advance), including, without limitation, adjustments to reflect
occupancy based on the lesser of (a) actual occupancy and (b) the greater of (i)
90% and (ii) market occupancy.
(11) "ADVANCE" means each advance of the Loan made by the
Lenders to the Borrowers pursuant to, and in accordance with, the terms and
conditions of this Agreement, including, the Initial Advance and each Additional
Advance, PROVIDED, THAT, in no event shall the aggregate amount of all Advances
outstanding at any time exceed the Maximum Loan Amount.
(12) "ADVANCE DATE" has the meaning set forth in SECTION 2.07(3)
hereof.
(13) "AFFILIATE" means, with respect to any Person (a) any
corporation in which such Person or any partner, shareholder, director, officer,
member, or manager of such Person directly or indirectly owns or controls more
than ten percent (10%) of the beneficial interest, (b) any partnership, joint
venture or limited liability company in which such Person or any partner,
shareholder, director, officer, member, or manager of such Person is a partner,
joint venturer or member, (c) any trust in which such Person or any partner,
shareholder, director, officer, member or manager of such Person is a trustee or
beneficiary, (d) any entity of any type which is directly or indirectly owned or
controlled by such Person or any partner, shareholder, director, officer, member
or manager of such Person, (e) any partner, shareholder, director, officer,
member, manager or employee of such Person or (f) any Person related by birth,
adoption or marriage to any partner, shareholder, director, officer, member,
manager, or employee of such Person.
(14) "AGREEMENT" means this Loan Agreement and all exhibits,
schedules and joinders, if any, attached thereto, as the same may be amended
from time to time.
(15) "ALLOCATED LOAN AMOUNT" means, with respect to each Project
listed on SCHEDULE 3 annexed hereto, the Loan amount set forth in such schedule
as being the "ALLOCATED LOAN AMOUNT" for such Project.
2
<PAGE>
(16) "ALTERNATE BASE RATE" means, for any day, a rate per annum
equal to the Prime Rate in effect for such day.
(17) "ALTERNATE BASE RATE LOANS" means Loans that bear interest
at rates based upon the Alternate Base Rate.
(18) "APPLICABLE LENDING OFFICE" means, for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of
such Lender) designated for such Type of Loan on the respective signature pages
hereof or such other office of such Lender (or of an affiliate of such Lender)
as such Lender may from time to time specify to the Administrative Agent and the
Borrowers as the office by which its Loans of such Type are to be made and
maintained.
(19) "APPRAISAL" means an appraisal of the Project or Projects,
as the case may be, prepared by an MAI appraiser satisfactory to the
Administrative Agent, which appraisal must also (a) satisfy the requirements of
Title XI of the Federal Institutional Reform, Recovery and Enforcement Act of
1989 and the regulations promulgated thereunder (including the appraiser with
respect thereto) and (b) be otherwise in form and substance satisfactory to the
Administrative Agent.
(20) "ASSIGNMENT AND ACCEPTANCE" means an Assignment and
Acceptance, duly executed by the parties thereto, in substantially the form of
EXHIBIT D hereto and consented to by the Administrative Agent in accordance with
SECTION 11.24(2).
(21) "ASSIGNMENTS OF CONTRACTS" means, collectively, the
Assignments of Contracts, Licenses, Permits, Agreements, Warranties and
Approvals now or hereafter executed by the Borrowers for the benefit of the
Administrative Agent on behalf of the Lenders, and pertaining to an assignment
of all of such Person's rights, title and benefits under and otherwise
pertaining to the Management Agreement, the Interest Rate Protection Agreement,
the P&V Sale Agreements (if any), and all other agreements, license agreements,
permits (including, license building and occupancy permits), approvals,
operating contracts, trade names, signage agreements and all service, supply and
maintenance contracts relating to any Project, unless prohibited by law,
together with all amendments, modifications or supplements thereto.
(22) "ASSIGNMENTS OF RENTS AND LEASES" means, collectively, the
Assignments of Rents and Leases, executed by each applicable Borrower for the
benefit of the Administrative Agent on behalf of the Lenders, and pertaining to
leases and subleases of space in each Project, together with all amendments,
modifications or supplements thereto.
(23) "BANKRUPTCY PARTY" has the meaning set forth in SECTION
9.08 hereof.
(24) "BASLE ACCORD" means the proposals for risk-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
3
<PAGE>
(25) "BORROWER NET WORTH" means, with respect to the Borrowers,
as of any date of determination, the sum, as of such date, of (a) the value of
all real property assets owned, directly or indirectly, by the Borrowers
(including the Borrowers' interests in BPE and any other Persons which own real
property assets, directly or indirectly) other than the value represented in the
costs described in clause (c) below, where such value shall be determined by
capitalizing GAAP Net Operating Income using a rate of 9.5%, (b) all Cash and
Cash Equivalents held by the Borrowers, (c) the aggregate amount of all costs
actually incurred by the Borrowers for all construction work or capital repairs
made at any of the Projects and Non-Mortgaged Properties (excluding however, any
fees or payments made to any Affiliates of the Borrowers) and (d) the value of
the equity interests in BPP Retail, LLC indirectly owned by the Key Personnel;
LESS, the total outstanding Debt of the Borrowers and its Subsidiaries, in each
case as determined according to GAAP.
(26) "BORROWER PARTY" means any Joinder Party, any Guarantor,
BPE, the P&V Owners, any general partner in Borrower, and any general partner in
any partnership that is a general partner in Borrower, at any level.
(27) "BORROWERS' ACCOUNT" has the meaning set forth in SECTION
2.06 hereof.
(28) "BORROWERS VALUE" means, as of any date of determination,
the sum, as of such date, of (a) the value of all real property assets owned,
directly or indirectly, by the Borrowers (including the Borrowers' interests in
BPE and any other Persons which own real property assets, directly or
indirectly) other than the value represented in the costs described in clause
(c) below, where such value shall be determined by capitalizing property GAAP
Net Operating Income using a rate of 9.5%, (b) all Cash and Cash Equivalents
held by the Borrowers, (c) the aggregate amount of all costs actually incurred
by the Borrowers for all construction work or capital repairs made at any of the
Projects and Non-Mortgaged Properties (excluding however, any fees or payments
made to any Affiliates of the Borrowers) and (d) the value of the equity
interests in BPP Retail, LLC indirectly owned by the Key Personnel.
(29) "BPE" means Burnham Pacific Employees LLC, a Delaware
limited liability company.
(30) "BPOP" means Burnham Pacific Operating Partnership, L.P., a
Delaware limited partnership.
(31) "BPP RETAIL" means BPP Retail, LLC, a Delaware limited
liability company.
(32) "BPPI" means Burnham Pacific Properties, Inc., a Maryland
corporation.
(33) "BUDGET" has the meaning set forth in SCHEDULE 2.1 annexed
hereto.
(34) "BUSINESS DAY" means (a) any day other than a Saturday, a
Sunday, or other day on which commercial banks located in the New York City are
authorized or required by law to remain closed and (b) in connection with a
borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or
4
<PAGE>
a notice by the Borrowers with respect to any such borrowing, payment,
prepayment or Conversion, the term "Business Day" shall also exclude a day on
which banks are not open for dealings in Dollar deposits in the London interbank
market.
(35) "CAMERON" means BPP/Cameron Park, L.P., a California
Limited Partnership.
(36) "CAPITAL IMPROVEMENT COSTS" means all costs incurred and
paid for by Borrowers in connection with replacements, renovations, capital
repairs, expansions made to and other capital expenditures incurred in
connection with any Project (including, without limitation, repairs to the
structural components, roofs, building systems, parking lots, lobby and common
area renovations, tenant improvement costs and allowances).
(37) "CASH AND CASH EQUIVALENTS" means (a) cash, (b) marketable
direct obligations issued or unconditionally guaranteed by the United States
government and backed by the full faith and credit of the United States
government; and (c) domestic and Eurodollar certificates of deposit and time
deposits, bankers' acceptances and floating rate certificates of deposit issued
by any commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or agencies
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Group, Inc. or P-1
(or better) by Moody's Investor Services, Inc.; PROVIDED, THAT, the maturities
of such Cash and Cash Equivalents shall not exceed one year.
(38) "CASH ON CASH RETURN" means, as of the date of any
calculation, the ratio, expressed as a percentage, of (a) annualized Net
Operating Income, to (b) the outstanding principal balance of the Loans.
(39) "CHASE LOAN FACILITY" means, collectively, that certain (a)
unsecured credit facility in the original maximum principal amount of
$270,000,000 made available to the JV Entities pursuant to that certain Credit
Agreement, dated as of June 14, 1999, among the JV Entities, as borrowers, The
Chase Manhattan Bank, as administrative agent for itself and on behalf of
certain financial institutions party thereto, The First National Bank of
Chicago, as syndication agent and Chase Securities Inc., as book manager and
sole arranger, and (b) secured credit facility in the original maximum principal
amount of $171,000,000 made available to BPP Retail pursuant to that certain
Credit Agreement, dated as of June 14, 1999, among BPP Retail, as borrower, The
Chase Manhattan Bank, as administrative agent for itself and on behalf of
certain financial institutions party thereto and Chase Securities Inc., as book
manager and sole arranger.
(40) "CLOSING DATE" means the date hereof.
(41) "CODE" means the Internal Revenue Code of 1986, as amended,
and any successor thereto, including all of the rules and regulations
promulgated thereunder.
(42) "COMMITMENTS" means collectively, the Revolving Loan
Commitments and the Term Loan Commitments.
5
<PAGE>
(43) "CONSOLIDATED EBITDA" means, with respect to the Borrowers
for any fiscal period, (a) the consolidated net income determined in accordance
with GAAP (excluding extraordinary or unusual and non-recurring items) of such
Person and its Subsidiaries for the applicable period PLUS (b) all Consolidated
Interest Expense, consolidated income tax expense, consolidated depreciation and
amortization (including amortization of any goodwill or other intangibles) for
the period, PLUS, to the extent deducted from income to determine consolidated
net income, BPPI preferred stock dividends and distributions paid by BPOP to its
limited partners. "Consolidated EBITDA" shall be measured as to the last four
(4) completed quarters on a trailing four (4) quarters basis.
(44) "CONSOLIDATED FIXED CHARGES" means, with respect to the
Borrowers and its Subsidiaries, for any fiscal period, the sum of (a)
Consolidated Interest Expense, (b) the aggregate of all required scheduled
principal payments (other than balloon payments due at maturity) of the
Borrowers and its Subsidiaries with respect to the Debt of any of them for such
period determined on a consolidated basis in accordance with GAAP, and shown on
the Borrowers' quarterly financial statements, and (c) the aggregate of all
scheduled payments on the Borrowers' or any of its Subsidiaries' preferred stock
or any other type of preferred equity issued by such Person (including, without
limitation, any preferred distributions or dividends issued by BPOP), as
applicable.
(45) "CONSOLIDATED INTEREST EXPENSE" means, for any fiscal
period, the total interest expense of the Borrowers for such period and shown on
the Borrowers' quarterly financial statements determined on a consolidated basis
in accordance with GAAP (excluding amortization of paid deferred costs,
discounts or premiums, if any, and including interest expense attributable to
capital leases in accordance with GAAP and all interest payments made by the
Borrowers under the Loan based on the Contract Rate).
(46) "CONSOLIDATED LOAN TO VALUE RATIO" means with respect to
the Borrowers and its Subsidiaries, as of any date of determination, the ratio
expressed as a percentage of (a) the total Debt of the Borrowers and its
Subsidiaries (including all amounts outstanding under the Loans) to (b) the
Borrowers Value.
(47) "CONTINUE" "CONTINUATION" and "CONTINUED" refer to the
continuation pursuant to SECTION 2.02 of a Eurodollar Loan from one Interest
Period to the next Interest Period for such Loan.
(48) "CONTRACT RATE" has the meaning set forth in SECTION 2.02
hereof.
(49) "CONTROL" means having (either directly or indirectly)
primary responsibility to make or veto all material decisions and day-to-day
management decisions with respect to the operation, management and disposition
of another Person's assets (including decisions regarding sales, acquisitions
and financings) rather than a beneficial ownership requirement, and without
being compromised by the fact that responsibility for day-to-day operating and
management functions or leasing activities as are ordinarily handled by a
property manager has been delegated by such controlling Person to a property
manager pursuant to an agreement in writing.
6
<PAGE>
(50) "CONVERT" "CONVERSION" and "CONVERTED" refer to a
conversion pursuant to the terms of this Agreement of one Type of Loans into
another Type of Loans, which may be accompanied by the transfer by a Lender (at
its sole discretion) of a Loan from one Applicable Lending Office to another.
(51) "DEBT" means, for any Person, without duplication: (a) all
indebtedness of such Person for borrowed money, for amounts drawn under a letter
of credit, or for the deferred purchase price of property for which such Person
or its assets is liable, (b) all amounts required to be paid by such Person as a
guaranteed payment to partners, members (or other equity holders) or a preferred
or special dividend, including any mandatory redemption of shares or interests
(except for any obligation owing to any partner or member of any Borrower
provided (i) such obligation is not secured by any of the Projects or any other
property or interests (other than partnership or membership interests held by
any partner or member of any Borrower) pledged to the Administrative Agent (on
behalf of the Lenders), (ii) such obligation is fully subordinated to payment of
the debt service and other payments due under the Loans, (iii) no payment shall
be made to such partner or member in respect of such obligation during the
occurrence and continuation of an Event of Default and (iv) such partner or
member shall be prohibited from exercising any remedial action against any
Borrower in connection with such obligation until the Loans have been paid in
full), (c) all indebtedness guaranteed by such Person, directly or indirectly,
(d) all obligations under leases that constitute capital leases for which such
Person is liable, and (e) all obligations of such Person under interest rate
swaps, caps, floors, collars and other interest hedge agreements, in each case
whether such Person is liable contingently or otherwise, as obligor, guarantor
or otherwise, or in respect of which obligations such Person otherwise assures a
creditor against loss.
(52) "DEBT SERVICE" means the aggregate interest, fixed
principal (excluding balloon payments at maturity), and other payments due under
the Loan (excluding any payments for real estate taxes and any other revenues or
funds that are escrowed with the Administrative Agent) and on any other
outstanding permitted Debt relating to the Projects approved by the
Administrative Agent for the period of time for which calculated.
(53) "DEBT SERVICE COVERAGE" means, for the period of time for
which calculation is being made, the ratio of Net Operating Income to Adjusted
Debt Service.
(54) "DEFAULT RATE" means the lesser of (a) the maximum rate of
interest allowed by applicable law, and (b) five percent (5%) per annum in
excess of (i) with respect to Alternate Base Rate Loans, the Alternate Base Rate
as in effect from time to time or (ii) with respect to Eurodollar Loans, the
respective Contract Rate, for such Eurodollar Loan.
(55) "DOLLARS" and "$" means lawful money of the United States
of America.
(56) "ENVIRONMENTAL LAWS" has the meaning assigned in ARTICLE 4.
(57) "EQUITY OFFERINGS" means any direct or indirect public
offering, private placement, issuance or sale of (a) any debt or equity
securities of BPPI, or any of its Subsidiaries or Affiliates, (b) any securities
convertible for or exchangeable into any debt or equity securities
7
<PAGE>
of BPPI, or any of its Subsidiaries or Affiliates or (c) any derivatives or
equivalents of debt or equity securities of BPPI, or any of its Subsidiaries or
Affiliates.
(58) "EURODOLLAR LOANS" means Loans that bear interest at rates
based on rates referred to in the definition of "Libor Base Rate".
(59) "EVENT OF DEFAULT" has the meaning assigned in ARTICLE 9
hereof.
(60) "EXCHANGE ACT" means the United States Securities Exchange
Act of 1934, as amended.
(61) "FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, PROVIDED that (a) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Bankers Trust Company on such Business Day
on such transactions as determined by the Administrative Agent, or such other
commercial bank as selected by the Administrative Agent.
(62) "FIXED CHARGE COVERAGE RATIO" means, as of the date of any
calculation, the ratio of (a) Consolidated EBITDA to (b) Consolidated Fixed
Charges for the corresponding period.
(63) "FREMONT ADDITIONAL ADVANCE" means, subject to the terms
and provisions of this Agreement, an Additional Advance of the Term Loan to be
used to pay or reimburse the Borrowers for the costs of making certain
replacements, renovations, capital repairs, expansions made to and other capital
expenditures incurred in connection with the Fremont Project, as more
particularly described on SCHEDULE 5 annexed hereto.
(64) "FREMONT CONSTRUCTION WORK" has the meaning set forth in
SECTION 2.01(6) hereof.
(65) "FREMONT PROJECT" means the Project commonly known as the
Fremont Hub Shopping Center located at 39005-39400 Argonaut Way, Fremont,
California.
(66) "FUNDING BORROWER" has the meaning set forth in SECTION
14.01 hereof.
(67) "GAAP" means generally accepted accounting principles in
the United States of America, consistently applied.
(68) "GAAP NET OPERATING INCOME" means with respect to any
period, the amount by which GAAP Operating Revenues exceed GAAP Operating
Expenses. "GAAP Net
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Operating Income" shall be measured as to the last four (4) completed quarters
on a trailing four (4) quarter basis.
(69) "GAAP OPERATING EXPENSES" means, with respect to any
period, all Operating Expenses for such period, as determined in accordance with
GAAP.
(70) "GAAP OPERATING REVENUES" means, with respect to any
period, all Operating Revenues for such period, as determined in accordance with
GAAP.
(71) "GECC" means General Electric Capital Corporation, a New
York corporation or its successor and/or assign.
(72) "GUARANTOR" and "GUARANTORS" means individually, or
collectively, BPPI, BPE and BPAC Texas, Inc.
(73) "GUARANTY" means the instruments of guaranty, if any, now
or hereafter in effect from a Guarantor to the Administrative Agent (on behalf
of the Lenders) guaranteeing the obligations of the Borrowers under the Loans
and the Loan Documents.
(74) "HAZARDOUS MATERIALS" has the meaning set forth in ARTICLE
4 hereof.
(75) "HAZARDOUS MATERIALS INDEMNITY" means that certain
Hazardous Materials Indemnity Agreement, executed by BPPI and the Borrowers in
favor of the Administrative Agent and the Lenders in form and substance
satisfactory to the Administrative Agent.
(76) "IMMEDIATE REPAIRS" has the meaning set forth in SECTION
2.09 hereof.
(77) "IMMEDIATE REPAIRS RESERVE" has the meaning set forth in
SECTION 2.09 hereof.
(78) "INITIAL ADVANCE" has the meaning set forth in SECTION
2.01(2) hereof.
(79) "INITIAL ADVANCE AMOUNT" means $169,000,000.
(80) "INTEREST COVERAGE RATIO" means, as of the date of any
calculation, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest
Expense for the corresponding period.
(81) "INTEREST PERIOD" means, for any Eurodollar Loan, each
period commencing on the date such Eurodollar Loan is made or Converted from a
Loan of another Type or (in the event of a Continuation) the last day of the
next preceding Interest Period for such Loan, and ending on the first Business
Day of the next calendar month; PROVIDED that, if any Interest Period would
otherwise end after the Maturity Date, such Loan shall not be Continued as, or
Converted into, a Eurodollar Loan and shall bear interest at the Alternate Base
Rate until Converted or repaid in accordance with this Agreement. In no event
may any Borrower have more than one Interest Period in respect of Eurodollar
Loans from all Lenders outstanding at any
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one time and to the extent any Loan does not qualify for such Interest Period,
such Loan shall bear interest at the Alternative Base Rate.
(82) "INTEREST RATE PROTECTION AGREEMENT" means an interest rate
swap agreement or agreements or other interest rate protection product or
products entered into on or prior to the date hereof, between the Borrowers
and/or BPPI and a counterparty or counterparties reasonably acceptable to the
Administrative Agent (on behalf of the Lenders) with respect to the Loans, in
form and content satisfactory to the Administrative Agent (on behalf of the
Lenders) in all respects, together with all amendments, modifications or
supplements thereto.
(83) "INVESTMENT" means, with respect to any Person, (a) any
direct or indirect purchase or other acquisition by that Person of stock or
securities, or any beneficial interest in stock or other securities, of any
other Person, any partnership interest (whether general or limited) in any other
Person, or all or any substantial part of the business or assets of any other
Person, and (b) any direct or indirect loan, advance or capital contribution by
that Person to any other Person, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business. The amount
of any Investment shall be the original cost of such Investment, plus the cost
of all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
(84) "JOINDER PARTY" means the Persons, if any, now or hereafter
executing the Joinder hereto.
(85) "JV BOOK VALUE" means, the sum of (a) the value of all real
property assets owned directly by BPP Retail, (b) all Cash and Cash Equivalents
held by BPP Retail, (c) the aggregate amount of all costs actually incurred by
BPP Retail for all construction work or capital repairs made at any of the JV
Properties owned by it, and (d) the value of the equity interests in any Person
owned by BPP Retail, in each case, as determined by the Administrative Agent in
its sole discretion provided, however, that such determination shall be
consistent with, and similar in substance to, the determination of JV Book Value
as of the date of this Agreement.
(86) "JV ENTITIES" means, collectively, BPP Retail and BPAC
Texas, L.P.
(87) "JV PLEDGE AGREEMENT" means, collectively, (a) the pledge
and security agreement, executed by BPE and BPAC Texas, Inc. in favor of the
Administrative Agent (on behalf of the Lenders) with respect to its right to
receive certain distributions and assets made by the JV Entities and (b) the
pledge and security agreement, executed by BPOP and the Key Personnel in favor
of the Administrative Agent (on behalf of the Lenders) with respect to their
respective membership interests in BPE and the right to receive certain
distributions made by BPE, each, in form and substance satisfactory to the
Administrative Agent in its sole discretion.
(88) "JV PROPERTIES" means, collectively, all of the shopping
center or community center properties owned by the JV Entities as more
particularly described on EXHIBIT A-2 annexed hereto.
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(89) "KEY PERSONNEL" means, collectively, J. David Martin,
Daniel B. Platt, Joseph W. Byrne, James W. Gaube and Scott C. Verges.
(90) "LA MANCHA LEASE ACQUISITION" means, subject to the terms
and conditions of this Agreement, the acquisition by BPOP (or, an Affiliate of
BPOP provided that such Affiliate becomes a Joinder Party) of the leasehold
estate currently held by Ballard, Wimer, Brockett & Edwards under that certain
Lease Agreement, dated May 5, 1974, covering the Project known as the La Mancha
Shopping Center located in Fullerton, California (or, the termination of such
lease agreement and the execution of direct leases between BPOP (or, an
Affiliate of BPOP provided that such Affiliate becomes a Joinder Party), and the
current subtenants at such Project) in each case, subject to the review and
approval of the Administrative Agent (on behalf of the Lenders) in its sole
discretion.
(91) "LEASEHOLD PROPERTY LEASE IMPAIRMENT" means any of the
following actions caused, suffered or permitted to occur by any Borrower with
respect to a Leasehold Property Lease, unless such actions are approved by the
Administrative Agent (or behalf of the Lenders) in its sole discretion: (i) any
termination, cancellation or surrender (in each case in whole or in part and
whether or not pursuant to an express right contained in the Leasehold Property
Lease); (ii) any modification, amendment, supplementation, or other change
materially and adversely affecting such Leasehold Property Lease; (iii) any
subordination, or consent to the subordination of, such Leasehold Property Lease
to any mortgage or other Lien encumbering (or that may in the future encumber)
the estate of the lessor under the Leasehold Property Lease in any premise(s)
demised to such Borrower under a Leasehold Property Lease (other than a
subordination or consent to subordination expressly required by the terms of the
Leasehold Property Lease); or (iv) such Borrower's delivery of any notice to any
lessor under a Leasehold Property Lease that impairs or may impair, or purports
to limit the exercise of, the Administrative Agent's (on behalf of the Lenders)
rights and remedies under the related Mortgage or the applicable Leasehold
Property Lease, whether caused by such Borrower or suffered or permitted to
occur by such Borrower.
(92) "LEASEHOLD PROPERTY LEASES" means each of the leases
described on EXHIBIT F between the lessor described therein and one of the
Borrowers, as lessee, as the same may be supplemented, amended, modified,
renewed or extended.
(93) "LEASEHOLD PROPERTY RENT" means any and all payments
required of a Borrower under a Leasehold Property Lease, including base rent,
fixed rent, additional rent, and any other payments, sums or charges payable or
required to be paid, whether to the lessor or to a third party, under a
Leasehold Property Lease.
(94) "LEASES" means all written rights to use or occupy any
portion of any Project in which any Borrower (or any Subsidiary of a Borrower)
is the lessor or sublessor.
(95) "LEVERAGE RATIO" means, as of the date of any calculation,
the ratio of (a) total Debt of the Borrowers to (b) Consolidated EBITDA.
(96) "LIBOR BASE RATE" means, for any Interest Period for any
Eurodollar Loan, the rate per annum appearing on Page 3750 of the Dow Jones
Markets (Telerate) Service
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(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to Dollar deposits in the London interbank market) at
approximately 11:00 a.m. London time on the date two Business Days prior to the
first day of such Interest Period as the rate for the offering of Dollar
deposits having a term comparable to such Interest Period, PROVIDED that if such
rate does not appear on such page, or if such page shall cease to be publicly
available, or if the information contained on such page, in the reasonable
judgment of the Administrative Agent shall cease accurately to reflect the rate
offered by leading banks in the London interbank market as reported by any
publicly available source of similar market data selected by the Administrative
Agent, the Libor Base Rate for such Interest Period shall be determined from
such substitute financial reporting service as the Administrative Agent in its
discretion shall determine.
(97) "LIEN" means any interest, or claim thereof, in the
Project(s) securing an obligation owed to, or a claim by, any Person other than
the owner of such Project(s), whether such interest is based on common law,
statute or contract, including the lien or security interest arising from a deed
of trust, mortgage, assignment, encumbrance, pledge, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting any Project.
(98) "LOAN" or "LOANS" means the loan or loans, as the context
requires, to be made by the Lenders to the Borrowers under this Agreement as
evidenced by the Term Loan Notes and the Revolving Loan Notes and all other
amounts secured by the Loan Documents.
(99) "LOAN DOCUMENTS" means: (a) this Agreement, (b) the Notes,
(c) the Assignment of Contracts, (d) the Mortgages, (e) the Assignments of Rents
and Leases, (f) Uniform Commercial Code financing statements, (g) the Manager
Subordination Agreement, (h) the Account Pledge, (i) the JV Pledge Agreement,
(j) the P&V Property Pledge Agreement, (k) the Hazardous Materials Indemnity,
(l) the Lockbox Agreement and (m) all other documents evidencing, securing,
governing or otherwise pertaining to the Loans now or hereafter executed by any
Borrower or any of its Affiliates (excluding, however, any Guaranty) and (n) all
amendments, modifications, renewals, substitutions and replacements of any of
the foregoing.
(100) "LOCKBOX" has the meaning set forth in SECTION 2.06
hereof.
(101) "LOCKBOX ACCOUNT" has the meaning set forth in SECTION
2.06 hereof.
(102) "LOCKBOX AGREEMENT" means that certain Lockbox Agreement,
dated of even date herewith executed by the Borrowers, the Administrative Agent
(on behalf of the Lenders) and Lockbox Bank, together with all amendments,
modifications or supplements thereto.
(103) "LOCKBOX BANK" means a bank or other financial institution
which shall have a long term unsecured debt rating of at least "AA-" from
Standard & Poor's Ratings Group,
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a division of McGraw-Hill, Inc., or "Aa3" from Moody's Investors Services, Inc.,
or shall otherwise be approved by the Administrative Agent (on behalf of the
Lenders), PROVIDED, HOWEVER, that the Administrative Agent agrees that Bank of
America, National Association and Union Bank of California, N.A., may serve as
the Lockbox Bank.
(104) "MAJORITY LENDERS" means Lenders holding a certain
percentage of the aggregate outstanding principal amount of the Term Loans or,
if the Term Loans shall not have been made, a certain percentage of all the
Commitments.
(105) "MANAGEMENT AGREEMENT" means, collectively, those certain
management agreements executed between any Borrower and the applicable Manager
relating to the day-to-day operation and management of the Projects, together
with any management agreements entered into with future Managers in accordance
with the terms of this Agreement.
(106) "MANAGER" means, collectively, the property managers
listed on SCHEDULE 4 annexed hereto, or their successors and/or assigns as may
be permitted hereunder or as may be approved by the Administrative Agent (on
behalf of the Lenders), such approval not to be unreasonably withheld, delayed
or conditioned.
(107) "MANAGER SUBORDINATION AGREEMENT" means collectively, the
Property Manager's Consent and Subordination of Management Agreements, dated as
of the date hereof, among any Borrower, the relevant Manager and the
Administrative Agent (on behalf of the Lenders), together with all amendments,
modifications and supplements thereto.
(108) "MATURITY DATE" means the earlier of (a) December 1, 2000,
or (b) any earlier date on which all of the Loans are required to be paid in
full, by acceleration or otherwise, under this Agreement or any of the other
Loan Documents.
(109) "MAXIMUM LOAN AMOUNT" means $202,800,000.
(110) "MINIMUM RELEASE PRICE" means, with respect to any Project
that is the subject of a Partial Release, the greater of (a) one hundred
twenty-five percent (125%) of the Allocated Loan Amount for such Project and (b)
90% of the Net Sales Proceeds thereof.
(111) "MORTGAGES" means, collectively, the Deeds of Trust,
Leasehold Deeds of Trust, Security Agreement and Fixture Filing, Security
Agreement and Fixture Filing, or Mortgages, Security Agreement and Fixture
Filing, or Leasehold Mortgages, Security Agreement and Fixture Filing, executed
by the applicable Borrower in favor of the Administrative Agent (on behalf of
the Lenders), and constituting Lien encumbering such Borrower's fee or leasehold
estate, as the case may be, in one or more Projects, together with all
amendments, modifications and supplements thereto.
(112) "NET OPERATING INCOME" means with respect to any period,
the amount by which Adjusted Operating Revenues exceed Adjusted Operating
Expenses. "Net Operating Income" shall be measured as to the last four (4)
completed quarters on a trailing four (4) quarter basis.
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(113) "NET SALES PROCEEDS" means the sum of the proceeds of any
arms-length bona fide sale of any Project to any third party plus the value of
any management services or other agreement retained by the Borrowers or any of
their Affiliates (but only to the extent the consideration payable to the
Borrowers or their Affiliates under such agreements exceeds market rates) as
determined and approved by the Administrative Agent (on behalf of the Lenders),
LESS, any reasonable normal and customary third-party costs and expenses related
to such sale (including, any customary sales commissions, brokerage fees and
closing costs) as approved by the Administrative Agent in its reasonable
discretion. Any capital gains tax related to the sale of a Project shall not be
deducted in calculating Net Sales Proceeds.
(114) "NEW LEASEHOLD PROPERTY LEASE" means, after the
termination or expiration of any Leasehold Property Lease, any new, replacement
or substitute Leasehold Property Lease issued to or obtained by the
Administrative Agent (on behalf of the Lenders) or its designee with respect to
or in place of the terminated Leasehold Property Lease, whether pursuant to any
provision of the terminated Leasehold Property Lease or otherwise.
(115) "NON-MORTGAGED PROPERTIES" means, collectively, all of the
shopping center or community centers owned by the Borrowers which are not
subject to any Mortgages.
(116) "NON-MORTGAGED PROPERTIES NET SALES PROCEEDS" means, the
sum of the proceeds of any arms-length bona fide sale of any of the
Non-Mortgaged Properties to any third party, LESS, the sum of (a) any reasonable
normal and customary third-party costs and expenses related to such sale
(including, any customary sales commissions, brokerage fees and closing costs)
as approved by the Administrative Agent in its reasonable discretion, and (b)
any outstanding Debt encumbering such Non-Mortgaged Properties.
(117) "NOTES" means collectively, the Revolving Loan Notes and
the Term Loan Notes, as the same may hereafter be consolidated, severed,
modified, amended or extended from time to time.
(118) "NOTICE OF ADDITIONAL ADVANCE" means a notice,
substantially in the form of EXHIBIT E attached hereto, which Borrowers shall
deliver to the Administrative Agent in connection with each requested Additional
Advance and which shall specify the requested date, type and amount of such
Additional Advance.
(119) "OPERATING EXPENSES" means, for any period of calculation,
all reasonable and necessary expenses of operating a Project in the ordinary
course of business which are paid in cash by Borrower and which are directly
associated with and fairly allocable to such Project for the applicable period,
including, without limitation, ad valorem real estate taxes and assessments,
insurance premiums, regularly scheduled tax impounds paid to the Administrative
Agent (if applicable), maintenance costs, rent under any ground leases,
management fees and costs not to exceed four percent (4%) of Operating Revenues,
accounting, legal, and other professional fees, fees relating to environmental
and Net Operating Income audits, and other expenses incurred by the
Administrative Agent and reimbursed by any Borrower under this Agreement and the
other Loan Documents, deposits to any capital replacement reserves required by
the Administrative Agent, wages, salaries, and personnel expenses, but excluding
Debt Service, capital expenditures (determined in accordance with
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GAAP), any of the foregoing expenses which are paid from deposits to cash
reserves previously included as Operating Expenses, any payment or expense for
which any Borrower was or is to be reimbursed from proceeds of the Loan or
insurance or by any third party, and any non-cash charges such as depreciation
and amortization. Any management fee or other expense payable to any Borrower or
to an Affiliate of any Borrower shall be included as an Operating Expense only
with the Administrative Agent's prior approval. Operating Expenses shall not
include federal, state or local income taxes or legal and other professional
fees unrelated to the operation of any of the Projects.
(120) "OPERATING REVENUES" means, for any period of calculation,
all cash receipts of a Borrower from the operation of a Project or otherwise
arising in respect of a Project after the date hereof which are properly
allocable to such Project for the applicable period, including receipts from
leases and parking agreements, concession fees and charges and other
miscellaneous operating revenues, proceeds from rental or business interruption
insurance, proceeds of any loans (other than the Loans and any refinancing of
the Loans) obtained by any Borrower after the date hereof which are secured by
any Project (less only reasonable and customary expenses incurred in procuring
and closing such loan and actually paid in cash to individuals or entities other
than any Borrower or any Affiliate of any Borrower and without implying any
consent of the Administrative Agent or any Lender to the granting of any
security for such loans), withdrawals from cash reserves (except to the extent
any operating expenses paid therewith are excluded from Operating Expenses), but
excluding security deposits and earnest money deposits until they are forfeited
by the depositor, advance rentals until they are earned, and proceeds from a
sale or other disposition of any Project or other assets of any Borrower. The
term "Operating Revenues" shall also not include any casualty or condemnation
proceeds or awards nor any amounts funded from the Loans and any reimbursements
from third parties for items which are not included or includible in the
definition of "Operating Expenses".
(121) "P&V NET SALES PROCEEDS" means the sum of BPOP's and
BPPI's, direct or indirect interest in the proceeds of any arms-length bona fide
sale of the P&V Sale Properties to any third party plus the value of any
management services or other agreement retained by Borrowers or their Affiliates
(but only to the extent the consolidation payable to the Borrowers or their
Affiliates under such agreements exceeds market rates) as determined and
approved by the Administrative Agent (on behalf of the Lenders) in its
reasonable discretion, LESS, the sum of (a) of any reasonable normal and
customary third-party costs and expenses related to such sale (including, any
customary sales commissions, brokerage fees and closing costs) as approved by
the Administrative Agent and (b) any outstanding Debt encumbering such P&V Sale
Properties in an amount not to exceed the principal amount of Debt outstanding
as of the Closing Date.
(122) "P&V OWNERS" means the owners of the P&V Sale Properties.
(123) "P&V PROPERTY PLEDGE AGREEMENT" means that certain pledge
and security agreement in the form attached hereto as EXHIBIT G to be executed
by BPOP and BPPI in favor of the Administrative Agent (on behalf of the Lenders)
with respect to (a) their direct or indirect, as the case may be, ownership
interest in BPP/Puente Hills, L.L.C., and BPP/Valley Central, L.P. (or, to the
extent the encumbering of such ownership interests is prohibited, the
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right to receive, directly or indirectly, distributions payable on account of
such ownership interests) and (b) the right to receive the P&V Net Sales
Proceeds.
(124) "P&V SALE PROPERTIES" means, collectively, the shopping
center properties owned by Affiliates of the Borrowers commonly known as (a) the
Plaza at Puente Hills and located in Puente Hills, California and (b) the Valley
Central Shopping Center and located in Lancaster, California.
(125) "PARTIAL RELEASE" has the meaning set forth in SECTION
2.04(A) hereof.
(126) "PARTIAL RELEASE NOTICE" has the meaning set forth in
SECTION 2.04(A)(3) hereof.
(127) "PARTICIPANT" has the meaning assigned in SECTION
11.24(3).
(128) "PAYMENT DATE" has the meaning set forth in SECTION
2.03(1) hereof.
(129) "PAYOR" has the meaning assigned in SECTION 2.07(3).
(130) "PERSON" means any individual, corporation, partnership,
joint venture, association, joint stock company, trust, trustee, estate, limited
liability company, unincorporated organization, real estate investment trust,
government or any agency or political subdivision thereof, or any other form of
entity.
(131) "PORTFOLIO LTV" means, as of any date of determination,
the ratio, expressed as a percentage, of (a) the outstanding principal balance
of the Loans as of such date to (b) the value of the Projects as of such date,
as determined by the Administrative Agent (on behalf of the Lenders) in
accordance with the Administrative Agent's customary underwriting practices in
effect at the time of such determination for assets of a similar nature to the
Projects.
(132) "POTENTIAL DEFAULT" means the occurrence of any event or
condition which, with the giving of notice, the passage of time, or both, would
constitute an Event of Default.
(133) "PRIME RATE" means the highest prime rate (or base rate)
reported in the Money Rates column or section of THE WALL STREET JOURNAL as the
rate in effect for corporate loans at large U.S. money center commercial banks
(whether or not such rate has actually been charged by any such bank) from time
to time. If THE WALL STREET JOURNAL ceases publication of the Prime Rate, the
"Prime Rate" shall mean the prime rate (or base rate) announced by Bankers Trust
Company, New York, New York (whether or not such rate has actually been charged
by such bank). If such bank discontinues the practice of announcing the Prime
Rate, the "Prime Rate" shall mean the prime or base rate charged by a large
United States commercial bank selected by the Administrative Agent to its most
creditworthy large corporate borrowers.
(134) "PROJECTS" means, collectively, all shopping center or
community center properties and all related facilities, amenities, fixtures and
personal property owned by each Borrower and any improvements now or hereafter
located on the real property described on
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EXHIBIT A-1 annexed hereto. To the extent that the Administrative Agent (on
behalf of the Lenders) releases any Project(s) from the Lien of the applicable
Mortgage, the term "Projects" shall be deemed redefined to exclude the
Project(s) so released.
(135) "PROPOSED LENDER" has the meaning assigned in SECTION
2.08(7).
(136) "REGULATION D" means Regulation D of the Board of
Governors of the Federal Reserve System of the United States of America (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
(137) "REGULATORY CHANGE" means, with respect to any Lender, any
change after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
(138) "REIT" means a real estate investment trust within the
meaning of Section 856 of the Code.
(139) "REIT NET CASH FLOW TEST" means, a test which shall be
satisfied if, as of the date of this Agreement, the excess net cash flow (i.e.,
net cash flow in excess of debt service and operating expenses during such
period) received by BPPI from the real properties owned, directly or indirectly
and in whole or in part, by it (other than the Projects) and from direct or
indirect distributions from BPP Retail (including BPPI's share of undistributed
amounts which are available for distribution and within the sole discretion of
BPE to distribute) is at least equal to $30,000,000, as calculated and
determined by the Administrative Agent in its sole discretion.
(140) "REIT NET WORTH TEST" means, a test which shall be
satisfied if the consolidated tangible net worth of BPPI determined in
accordance with GAAP is at least equal to $400,000,000.
(141) "RELEASE AMOUNT" has the meaning set forth in SECTION
2.04(A)(5) hereof.
(142) "REQUESTING LENDER" has the meaning assigned in SECTION
2.08(7) hereof.
(143) "REQUIRED PAYMENT" has the meaning assigned in SECTION
2.07(3) hereof.
(144) "REQUIRED RELEASE PAYDOWN AMOUNT" means the portion of the
Minimum Release Price in excess of the initial Allocated Loan Amount for a
Project that is the subject of a Partial Release.
(145) "RESERVE REQUIREMENT" means, for any Interest Period for
any Eurodollar Loan, the average maximum rate at which reserves (including,
without limitation, any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period
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under Regulation D by member banks of the Federal Reserve System in New York
City with deposits exceeding $1,000,000,000 against "Eurocurrency liabilities"
(as such term is used in Regulation D). Without limiting the effect of the
foregoing, the Reserve Requirement shall include any other reserves required to
be maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by reference
to which the Eurodollar Base Rate for any Interest Period for any Eurodollar
Loans is to be determined as provided in the definition of "Libor Base Rate" or
(ii) any category of extensions of credit or other assets that includes
Eurodollar Loans.
(146) "REVOLVING LOAN" means a revolving loan made by the
Lenders to the Borrowers pursuant to SECTION 2.01 hereof.
(147) "REVOLVING LOAN COMMITMENT" means, as to each Lender
listed on SCHEDULE 1 annex hereto, the obligation of such Lender to make a
Revolving Loan in a principal amount up to but not exceeding the amount set
opposite the name of such Lender on SCHEDULE 1 under the caption "Revolving Loan
Commitment" or, in the case of a Person that becomes a Lender pursuant to an
assignment permitted under SECTION 11.24(2), as specified in the respective
instrument of assignment pursuant to which such assignment is effected. The
initial aggregate amount of the Revolving Loan Commitments is $20,000,000.
(148) "REVOLVING LOAN NOTE" means the promissory note(s), of
even date herewith as provided for in SECTION 2.01(5) evidencing the Revolving
Loan and all promissory notes delivered in substitution or exchange therefor, in
each case, as the same may be consolidated, severed, modified, amended or
extended from time to time.
(149) "RILEY" means BPP/Riley, L.P., a California limited
partnership.
(150) "SETTLEMENT STATEMENT" means the settlement statement
attached as EXHIBIT B showing total costs relating to the subject transaction
and use of the Initial Advance of the Loan (including, any escrows required to
be funded hereunder, third party costs and expenses and interest for any "stub"
period).
(151) "SINGLE PURPOSE ENTITY" shall mean a Person (other than an
individual, a government, or any agency or political subdivision thereof), which
exists solely for the purpose of owning a Project (or group of Projects) and
matters relating thereto, conducts business only in its own name, does not
engage in any business or have any assets unrelated to such Project (or group of
Projects), does not have any indebtedness other than as permitted by this
Agreement (including, trade payables in the ordinary course of business) has its
own separate books, records, and accounts (with no commingling of assets), holds
itself out as being a Person separate and apart from any other Person, and
observes corporate and partnership formalities independent of any other entity
provided, however, that any such Person which is a Borrower shall not be
required to be a Single Purpose Entity with respect to and separate and apart
from any other Borrower, and may be consolidated with any other Borrower for all
purposes, including, without limitation, accounting and financial reporting
purposes.
(152) "SITE ASSESSMENT" means, collectively, those an
environmental engineering reports for each of the Projects prepared by an
engineer engaged by the
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Administrative Agent at Borrowers' expense, and in a manner satisfactory to the
Administrative Agent, based upon an investigation relating to and making
appropriate inquiries concerning the existence of Hazardous Materials on or
about any of the Projects, and the past or present discharge, disposal, release
or escape of any such substances, all consistent with good customary and
commercial practice.
(153) "STATE" means the State of New York.
(154) "SUBSIDIARIES" of a Person means any corporations,
partnerships, limited liability companies or other entities (a) in which that
Person directly or indirectly owns or controls shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other governing body of any such entity or (b) of which
that Person is a general partner or a managing member or which that Person
otherwise controls, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise provided, in the case of clauses (a)
and (b), that such person would be consolidated with such corporation,
partnership, limited liability company or other entity according to GAAP.
(155) "SURVEY" means, with respect to each Project, an ALTA
Survey of such Project prepared by a registered independent surveyor and
otherwise in form and content satisfactory to the Administrative Agent and the
Title Company and in accordance with the provisions of SCHEDULE 2.1 hereof.
(156) "TENANTS" has the meaning set forth in SECTION 2.06
hereof.
(157) "TERM" has the meaning set forth in SECTION 2.01(6)
hereof.
(158) "TERM LOAN" means a term loan made by the Lenders to the
Borrowers pursuant to SECTION 2.01 hereof.
(159) "TERM LOAN COMMITMENT" means, as to each Lender, listed on
SCHEDULE 1 annex hereto, the obligation of such Lender to make a Term Loan in a
principal amount up to but not exceeding the amount set opposite the name of
such Lender on SCHEDULE 1 under the caption "Term Loan Commitment" or, in the
case of a Person that becomes a Lender pursuant to an assignment permitted under
SECTION 11.24(2), as specified in the respective instrument of assignment
pursuant to which such assignment is effected. The initial aggregate principal
amount of the Term Loan Commitments is $182,800,000.
(160) "TERM LOAN NOTE" means the promissory note(s) of even date
herewith as provided for in SECTION 2.01(5) evidencing the Term Loan and all
promissory notes delivered in substitution or exchange therefor, in each case,
as the same may be consolidated, severed, modified, amended or extended from
time to time.
(161) "TITLE COMPANY" means Chicago Title Insurance Company or
such other title insurance companies as are acceptable to the Administrative
Agent (on behalf of the Lenders).
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(162) "TITLE POLICY" means with respect to each Project, an ALTA
mortgagee's title insurance policy as more particularly described in Part A of
SCHEDULE 2.1 attached hereto.
(163) "TOTAL LIABILITIES" means with respect to any Person, all
Debt of such Person.
(164) "TYPE" has the meaning set forth in SECTION 1.02 hereof.
(165) "UNUSED LINE FEE" has the meaning set forth in SECTION
2.01(6) hereof.
(166) "YEAR 2000 PROBLEM" has the meaning set forth in SECTION
6.15 hereof.
Section 1.02 TYPES OF LOANS. Loans hereunder are distinguished by
"Type." The "Type" of a Loan refers to whether such Loan is an Alternate Base
Rate Loan or a Eurodollar Loan, each of which constitutes a Type.
ARTICLE 2
LOAN TERMS
Section 2.01 THE COMMITMENTS, LOANS AND NOTES.
(1) THE LOANS. Each Lender severally agrees, on the terms and
conditions of this Agreement, to make a Term Loan to the Borrowers in Dollars in
a principal amount up to but not exceeding the amount of the Term Loan
Commitment of such Lender. The Term Loans in the maximum aggregate principal
amount of One Hundred Eighty-Two Million Eight Hundred Thousand and No/100
Dollars ($182,800,000) shall be funded in one or more advances and repaid in
accordance with this Agreement. Subject to the terms and provisions of this
Agreement, the proceeds of the Term Loans shall be used by the Borrowers to (a)
pay amounts outstanding under the existing credit facility held by Nomura Asset
Capital Corporation, Inc. encumbering the Projects (which amounts to be paid on
such facility shall not exceed $160,000,000 of the amounts payable thereunder),
(b) reimburse the Borrowers for Capital Improvement Costs incurred to date with
respect to the Fremont Project in an amount not to exceed $9,000,000 in the
aggregate, (c) fund the Fremont Additional Advance, and (c) fund the La Mancha
Lease Acquisition. No amounts borrowed under the Term Loan may be reborrowed by
the Borrowers once repaid. In addition, each Lender severally agrees, on the
terms and conditions of this Agreement, to make a Revolving Loan to the
Borrowers in Dollars in a principal outstanding amount, from time to time, up to
but not exceeding the amount of the Revolving Loan Commitment of such Lenders.
The Revolving Loans in the maximum aggregate outstanding principal amount of
Twenty Million and No/100 Dollars ($20,000,000) shall be funded in one or more
Advances and repaid in accordance with this Agreement, subject to Part E of
Schedule 2.1. The proceeds of the Revolving Loans may only be used by the
Borrowers for general working capital purposes. The Borrowers may, from time to
time, borrow, repay and reborrow Revolving Loans. All Advances of the Loans
shall be made only upon the Borrowers' satisfaction of its obligations
hereunder, including, without limitation, the conditions for Advances described
in SCHEDULE 2.1.
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(2) INITIAL ADVANCE. Provided the Borrowers have satisfied all
of the terms and conditions described in Part A of SCHEDULE 2.1 annexed hereto,
the Lenders shall disburse the Initial Advance (the "INITIAL ADVANCE") of the
Term Loan in the amount of the Initial Advance Amount on the Closing Date as
follows:
(a) An amount equal to interest to accrue at the Contract Rate
from the Closing Date to the first Business Day of the next succeeding month,
plus all other sums owing to the Lenders and Administrative Agent described in
Part A of SCHEDULE 2.1 attached hereto, shall be disbursed to the Lenders and
the Administrative Agent in payment of such sums.
(b) The amount specified in Administrative Agent's escrow and
recording instructions shall be disbursed by wire transfer to the Title Company
for credit to the escrow(s) (including, the Immediate Repair Reserve)
established to consummate the Initial Advance closing.
(c) The balance of the Initial Advance, if any, shall be
disbursed by wire transfer to the Borrowers (or as otherwise directed by the
Borrowers).
(3) LENDING OFFICES. The Loans of each Lender shall be made and
maintained at such Lender's Applicable Lending Office for Loans of such Type.
(4) SEVERAL OBLIGATIONS OF THE LENDERS. The failure of any
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan, but neither any
Lender nor the Administrative Agent shall be responsible for the failure of any
other Lender to make a Loan to be made by such other Lender.
(5) NOTES.
(a) LOAN NOTES. The Term Loans made by each Lender shall be
evidenced by a single promissory note of the Borrowers substantially in the form
of EXHIBIT C-1, payable to such Lender in a principal amount equal to the amount
of its Term Loan Commitment as originally in effect and otherwise duly
completed. The Revolving Loan made by each Lender shall be evidenced by a single
promissory note of the Borrowers substantially in the form of EXHIBIT C-2,
payable to such Lender in a principal amount equal to the amount of its
Revolving Loan Commitment as originally in effect and otherwise duly completed.
(b) ENDORSEMENTS ON NOTES. The date, amount, Type, interest rate
and duration of Interest Period (if applicable) of each Loan made by each Lender
to the Borrowers, and each payment made on account of the principal thereof,
shall be recorded by such Lender on its books and, prior to any transfer of the
Note held by it, endorsed by such Lender on the schedule attached to such Note
or any continuation thereof; PROVIDED that the failure of such Lender to make
any such recordation or endorsement shall not affect the obligations of the
Borrowers to make a payment when due of any amount owing hereunder or under such
Note in respect of such Loans.
(c) SUBSTITUTION, EXCHANGE AND SUBDIVISION OF NOTES. No Lender
shall be entitled to have its Note substituted or exchanged for any reason, or
subdivided for promissory
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notes of lesser denominations, except in connection with a permitted assignment
of all or any portion of such Lender's Commitment, Loans and Note pursuant to
SECTION 11.24 (and, if requested by any Lender, the Borrowers agree to so
substitute or exchange any Note and enter into note splitter agreements in
connection therewith).
(d) LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTES. In the
event of the loss, theft or destruction of any Note, upon the Borrowers' receipt
of a reasonably satisfactory indemnification agreement executed in favor of the
Borrowers by the holder of such Note, or in the event of the mutilation of any
Note, upon the surrender of such mutilated Note by the holder thereof to the
Borrowers, the Borrowers shall execute and deliver to such holder a new
replacement Note in lieu of the lost, stolen, destroyed or mutilated Note.
(6) ADDITIONAL ADVANCES. The Lenders shall make one or more
Additional Advances to the Borrowers, subject to and in accordance with the
following terms and conditions:
(a) The Borrowers shall have satisfied the terms and conditions
set forth in Part B, and (i) with respect to the Fremont Additional Advance,
Part C and (ii) with respect to the La Mancha Lease Acquisition, Part D, of
SCHEDULE 2.1 attached hereto.
(b) Each Additional Advance shall be in an amount not less than
(i) with respect to the Fremont Additional Advances, One Million Dollars
($1,000,000) and (ii) with respect to Additional Advances to be used for working
capital purposes, Five Hundred Thousand Dollars ($500,000). The Lenders shall
only make one (1) Additional Advance for the La Mancha Lease Acquisition, which
Additional Advance shall be made as a Term Loan and shall not exceed $800,000,
and shall be subject to the satisfaction of the terms and conditions set forth
in part D of SCHEDULE 2.1.
(c) The Borrowers shall have submitted its Notice of Additional
Advance (i) with respect to any Fremont Additional Advance and the La Mancha
Lease Acquisition Additional Advance, at least fourteen (14) Business Days prior
to the date such Advance is requested to be disbursed and (ii) with respect to
any Additional Advances of Revolving Loans, at least five (5) Business Days
prior to the date such Advance is requested to be disbursed.
(d) The calculation of the amount of any Additional Advance,
shall be made as of the date the Borrowers submit its Notice of Additional
Advance for such Advance. The Borrowers acknowledge and agree that once the
amount of any Advance is calculated as of such date, such amount shall be fixed
and such request for an Additional Advance shall be deemed irrevocable.
(e) The Administrative Agent (on behalf of the Lenders) shall
have determined to its satisfaction (provided, however, that such determination
shall be consistent with, and similar in substance to, the determination of such
funding criteria calculations as of the date of this Agreement) based on
information and documentation provided by the Borrowers to the Administrative
Agent (on behalf of the Lenders) at least five (5) Business Days prior to the
proposed date of the funding of the requested Additional Advance that after
giving effect to such Additional Advance, the Projects will generate an
annualized Net Operating Income sufficient to
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produce (i) an aggregate Cash on Cash Return of at least 11%, (ii) an aggregate
Debt Service Coverage of at least 1.30 to 1.00 and (iii) a Portfolio LTV equal
to, or less than, 85%, in each case, calculated based on the assumption that (x)
with respect to any Advance made prior to the occurrence of any Partial Release
pursuant to SECTION 2.04 hereof, the full amount of the Loans have been
disbursed and are outstanding, less any undisbursed amounts allocated to phase
II of the Fremont Additional Advance (as more particularly described on the
Budget) and/or Schedule 5 annexed hereto, and (y) with respect to any Advance
made after the occurrence of a Partial Release pursuant to SECTION 2.04 hereof,
the Required Release Paydown Amount has not been paid and is outstanding;
provided, however, that for the purposes of determining satisfaction of this
condition, but not for the purposes of determining satisfaction of the condition
set forth in Paragraph C.4 of Schedule 2.1, the parties shall use the annualized
Net Operating Income determined as of the end of the most recently ended fiscal
quarter.
(f) The REIT Net Worth Test shall have been satisfied.
(g) During the term of the Loan (the "TERM"), the Borrowers
shall pay to the Administrative Agent (on behalf of the Lenders) a unused line
fee (the "UNUSED LINE FEE") in an amount equal to the product of (i) twenty-five
hundredths of one percent (0.25%) per annum and (ii) the aggregate positive
difference, if any, between (x) the Maximum Loan Amount and (y) the aggregate
amount of all Advances made to date for each day during the applicable calendar
quarter, divided by the number of days in such calendar quarter. The Unused Line
Fee shall be payable, in arrears, on the first day of each calendar quarter
during the Term.
(h) Additional Advances of the Term Loans shall not be made more
frequently than once per calendar month during the Term. Additional Advances of
the Revolving Loan shall not be made more frequently than twice per calendar
month during the Term.
(i) Additional Advances of Term Loans may only be made to fund
the La Mancha Lease Acquisition and the payment of construction and Capital
Improvement Costs with respect to the Fremont Project as more particularly
described on SCHEDULE 5 attached hereto (the "FREMONT CONSTRUCTION WORK").
Section 2.02 INTEREST RATE; LATE CHARGE. The outstanding principal
balance of the Loans (including any amounts added to principal under the Loan
Documents) shall bear interest at a rate of interest equal to two and one-half
percent (2.5%) per annum in excess of the Adjusted Libor Rate (the "CONTRACT
RATE"), subject however to the provisions of this Agreement which, in certain
instances, requires payment of interest at the Alternate Base Rate. Such
Eurodollar Loans shall Continue as Eurodollar Loans from one Interest Period to
the next Interest Period. Interest shall be computed on the basis of a fraction,
the denominator of which is three hundred sixty (360) and the numerator of which
is the actual number of days elapsed from the date of the Initial Advance or the
date on which the immediately preceding payment was due. If the Borrowers fail
to pay any installment of interest or principal (if applicable) within five (5)
days after the date on which the same is due (other than principal due on the
Maturity Date or upon acceleration thereof), the Borrowers shall pay to the
Administrative Agent (on behalf of the Lenders) a late charge on such past-due
amount, as liquidated damages and not as a penalty, equal to the greater of (a)
interest at the Default Rate on such amount from the date when due until paid,
or (b) five percent (5%) of such amount, but not in excess of the maximum amount
of interest allowed by
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applicable law. While any Event of Default exists, the Loans shall bear interest
at the Default Rate; provided, however, that interest shall not be calculated at
the Default Rate on any amount of accelerated principal, but shall be charged on
any amount of the principal not paid on the Maturity Date; provided, further,
that during the continuance of an Event of Default the Administrative Agent may
suspend the right of the Borrowers to Continue any Loan as a Eurodollar Loan, in
which event all Loans shall be Converted (on the last day(s) of the respective
Interest Periods therefor) into Alternate Base Rate Loans and, thereafter, the
Default Rate shall be computed using the Alternate Base Rate.
Section 2.03 TERMS OF PAYMENT. The Loans shall be payable as follows:
(1) INTEREST. Commencing on January 1, 2000, Borrowers shall pay
interest in arrears on the first Business Day of each calendar month during the
Term (the "PAYMENT DATE") until all amounts due under the Loan Documents are
paid in full.
(2) PRINCIPAL AMORTIZATION. The Loan shall be an interest-only
loan and accordingly, the Borrowers shall not be required to make any regularly
scheduled principal amortization payments during the Term. Notwithstanding
anything to the contrary contained in the preceding sentence, in the event that
the P&V Sale Properties (individually or collectively) are sold or transferred
to any other Person, the Borrowers shall pay to the Administrative Agent (on
behalf of the Lenders) an amount equal to (a) a minimum of sixty-five percent
(65%) of the P&V Net Sales Proceeds to be applied by the Administrative Agent
(on behalf of the Lenders) to repay a portion of the outstanding principal
balance of the Term Loans, and (b) the remainder, up to thirty-five percent
(35%), of the P&V Net Sales Proceeds to be applied by the Administrative Agent
(on behalf of the Lenders) to repay the outstanding principal balance of the
Revolving Loans. To the extent that after application of the P&V Net Sales
Proceeds as provided in the preceding sentence, the outstanding Revolving Loans
are repaid in full, such excess P&V Net Sales Proceeds shall be applied to
further reduce the outstanding principal amount of the Term Loans except that
the Borrowers shall be entitled to keep any excess P&V Net Sales Proceeds so
long as there exists no Potential Default or Event of Default and PROVIDED,
THAT, the Borrowers use such excess P&V Net Sales Proceeds for working capital
prior to requesting any Additional Advances of the Revolving Loan. In all cases,
all P&V Net Sales Proceeds received by any Borrower or its Affiliates shall
first be paid to the Administrative Agent to be applied as provided in this
paragraph.
(3) MATURITY. On the Maturity Date, the Borrowers shall pay to
the Administrative Agent (on behalf of the Lenders) all outstanding principal,
accrued and unpaid interest, and any other amounts due under the Loan Documents.
(4) PREPAYMENT. The Loans may be prepaid in whole only and not
in part by the Borrowers on any Payment Date prior to the Maturity Date,
PROVIDED THAT, partial prepayments shall be permitted in connection with a
Partial Release, the application of P&V Net Sales Proceeds in accordance with
SECTION 2.03(2) above, a repayment of a Revolving Loan, the application of any
Non-Mortgaged Properties Net Sales Proceeds, or a repayment from the proceeds of
the sale to the California Public Employees Retirement System of any beneficial
interest of BPE in BPP Retail (without implying such a sale is permissible
without the approval of Administrative Agent). The Borrowers shall give the
Administrative Agent thirty (30) days
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prior written notice before any prepayment. If the Loans are accelerated for any
reason other than a casualty or condemnation, the Borrowers shall pay to the
Administrative Agent (on behalf of the Lenders), in addition to all other
amounts due under the Loan Documents and pursuant to this paragraph, a
prepayment premium equal to six-tenths of one percent (.6%) of the outstanding
principal balance of the Loans. All prepayments of the Loans made by the
Borrowers pursuant to this SECTION 2.03(4) on a day other than a Payment Date
shall be accompanied by an amount sufficient to pay (A) any and all amounts
payable to a Lender pursuant to the provisions of SECTION 2.08(5) as a result of
such prepayment while a Eurodollar Loan is in effect and (B) all costs, expenses
and fees required to be paid under the Interest Rate Protection Agreement. In
addition, all prepayments of the Loans made by the Borrowers pursuant to this
SECTION 2.03(4) shall also be subject to the payment of the applicable Unused
Line Fee for the portion of the calendar quarter in which such prepayment
occurs.
(5) APPLICATION OF PAYMENTS. All payments received by the
Administrative Agent under the Loan Documents shall be applied: FIRST, to any
fees and expenses due to the Administrative Agent and the Lenders under the Loan
Documents; SECOND, to any Default Rate interest or late charges; THIRD, to
accrued and unpaid interest; and FOURTH, to the principal sum and other amounts
due under the Loan Documents; PROVIDED, HOWEVER, THAT, if an Event of Default
exists, the Administrative Agent shall apply such payments in any order or
manner as the Administrative Agent shall determine in its sole discretion.
Section 2.04 PARTIAL RELEASES. (a) Lenders agree that the
Administrative Agent (on behalf of the Lenders) will release (each a "PARTIAL
RELEASE") one or more Projects from the Liens, assignments and security
interests of the Mortgages and the other Loan Documents, if requested to do so
by the Borrowers, provided each of the following conditions is satisfied:
(1) There exists no Event of Default or Potential Default on the
date the Partial Release Notice (hereafter defined) is given and on the date of
the proposed Partial Release;
(2) The Borrowers' request for a Partial Release arises in
connection with a proposed sale of the Project pursuant to a bona fide
arms-length transaction with an unaffiliated third party purchaser;
(3) The Borrowers provide the Administrative Agent with thirty
(30) days prior written notice (the "PARTIAL RELEASE NOTICE") of the proposed
Partial Release together with copies of any documents which Borrowers request
that the Administrative Agent (on behalf of the Lenders) execute in connection
with the proposed Partial Release, provided, however, that Borrowers may deliver
such documents after delivery of the Partial Release Notice, but not less than
ten (10) Business Days prior to the proposed Partial Release;
(4) The Administrative Agent shall have determined to its
satisfaction (provided, however, that such determination shall be consistent
with, and similar in substance to, the determination of such calculations as of
the date of this Agreement) that after giving effect to such Partial Release,
the Projects will generate an annualized Net Operating Income sufficient to
produce (a) an aggregate Cash on Cash Return of at least 11%, (b) an aggregate
Debt Service Coverage of at least 1.30 to 1.00 and (c) a Portfolio LTV equal to,
or less than, eighty-five
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percent (85%), in each case, calculated based on the assumption that, (i) with
respect to the first Partial Release made pursuant to this SECTION 2.04, the
full amount of the Loans have been disbursed (less any amounts allocated to
phase II of the Fremont Additional Advance) and (ii) with respect to all other
Partial Releases, the Required Release Paydown Amount with respect to such
Partial Release has not been paid and is outstanding;
(5) The Borrowers shall pay to the Administrative Agent (on
behalf of the Lenders), in reduction of the principal balance of the Loans, an
amount (the "RELEASE AMOUNT") equal to the sum of (a) the Minimum Release Price,
PLUS, (b) any additional amount which may be required to be paid in accordance
with the provisions hereof and the other Loan Documents including, any LIBOR
breakage costs, if applicable;
(6) The Borrowers shall pay all reasonable costs and expenses of
the Administrative Agent and the Lender arising in connection with such Partial
Release, including, but not limited to, title insurance fees and charges and
reasonable legal fees and expenses of Lender's counsel, and all other costs
arising in connection with the execution and delivery of such release;
(7) The Projects(s) that is(are) the subject of the Partial
Release shall be transferred and conveyed to an entity other than a Borrower or
its Affiliates;
(8) The Borrowers shall deliver to the Administrative Agent (on
behalf of the Lenders) such endorsements to the Title Policy, amendments to the
Loan Documents, estoppel certificates and other documents as the Administrative
Agent shall reasonably request to protect its interests or to confirm the
validity and priority of the Mortgages and any other Liens or collateral granted
to the Administrative Agent (on behalf of the Lenders) in connection with the
Loans; and
(9) The Borrowers shall deliver to the Administrative Agent (on
behalf of the Lenders) evidence reasonably satisfactory to the Administrative
Agent that all amounts owing to any parties as a result of the sale of any of
the Projects have been paid in full, or are simultaneously being paid in full or
otherwise satisfied (or if any such amounts are not then payable, that Borrowers
have made adequate provision for the subsequent payment of such amounts to the
reasonable satisfaction of the Administrative Agent (on behalf of the Lenders))
at the closing of the sale of such Project(s).
(b) During the Term, the Allocated Loan Amount for each Project
shall be increased by an amount equal to aggregate amount of Additional
Advances, if any, made by the Lenders with respect to such Project. After
application of the Release Amount to the Adjusted Loan Basis of the Project
being released, the Allocated Loan Amount for each of the remaining Projects
shall be decreased by an amount equal to the product of (i) the excess, if any,
remaining after such application to the Project being released multiplied by
(ii) a fraction, expressed as a percentage, the denominator of which is the
outstanding principal balance of the Loans (as reduced by an amount equal to the
Release Amount), and the numerator of which is the Allocated Loan Amount for
such Project. In the event that the Borrowers make a prepayment of the Loans
without effectuating a Partial Release pursuant to this SECTION 2.04, the
Administrative Agent (on behalf of the Lenders) shall have the right to apply
the amount of any such prepayment to adjust
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the Allocated Loan Amount for any Project as the Administrative Agent may
determine in its sole discretion. As used in this Agreement, the term "ADJUSTED
LOAN AMOUNT" shall mean, with respect to any Project, the Allocated Loan Amount
for such Project, as adjusted pursuant to this paragraph.
Section 2.05 SECURITY. The Loans shall be secured by (a) the Mortgages,
(b) the JV Pledge Agreement, (c) the P&V Property Pledge Agreement, (d) the
Assignments of Rents and Leases, (e) any funds deposited in the Lockbox Account,
and (f) the other Loan Documents. As a condition to the making of the Loans, the
Borrowers covenanted and agreed that the Borrowers execute and deliver an
Interest Rate Protection Agreement in a notional amount equal to the Maximum
Loan Amount. As of the date hereof, the Lenders are making the Initial Advance
and, accordingly, the notional amount of the Interest Rate Protection Agreement
is in a notional amount equal to the Initial Advance Amount. Therefore, with
respect to any Additional Advance that occurs after the date hereof, the
Borrowers agree to execute and deliver such additional Interest Rate Protection
Agreements (or a modification, amendment or supplement to any outstanding
Interest Rate Protection Agreement, by confirmation or otherwise) on (i) the
date of the making of an Additional Advance if such Additional Advance is
greater than Five Million Dollars ($5,000,000), or (ii) the date of the making
of an Additional Advance if the amount of such Additional Advance (or any
portion thereof) when added together with all Additional Advances previously
made (to the extent that such Additional Advances are not already subject to an
Interest Rate Protection Agreement), exceeds Five Million Dollars ($5,000,000).
Section 2.06 LOCKBOX; APPLICATION OF OPERATING REVENUES. On or prior to
the Closing Date, the Borrowers shall enter into the Lockbox Agreement, pursuant
to which, among other things, the Borrowers shall establish with a Lockbox Bank
selected by the Borrowers and reasonably acceptable to the Administrative Agent
(on behalf of the Lenders), (a) a post office lockbox (the "LOCKBOX") and (b) a
deposit account (the "LOCKBOX ACCOUNT") for the collection and deposit of all
checks, cash and other evidence of payment from tenants or subtenants
("TENANTS") of the Projects under the Leases. The Borrowers shall establish the
Lockbox Account with the Lockbox Bank by no later than December 1, 1999. The
Lockbox Account shall be in the name of the Administrative Agent (on behalf of
the Lenders) as secured party and shall be titled: "[Account No.] for the
benefit of GECC, as administrative agent". Until the Loans are repaid in full,
all Rents (as defined in the Mortgages) and Operating Revenues from the Projects
shall be sent directly to the Lockbox and deposited in the Lockbox Account and
processed in accordance with the terms and provisions of the Lockbox Agreement.
In the event that the Manager or any Borrower shall collect any Rents from any
Tenant or any other applicable sources, the Borrowers shall (and shall cause the
applicable Manager to) send such funds (endorsed as appropriate), within one (1)
Business Day of receipt thereof, to the Lockbox, and within three (3) Business
Days thereof shall send such Tenant or other source a notice directing that all
Rents be sent directly to the Lockbox for deposit in the Lockbox Account, and
shall send the Administrative Agent a duplicate copy of such notice, and if the
Borrowers' fail (or fail to cause the Manager) to do so, the Administrative
Agent is hereby appointed the Borrowers' attorney-in-fact for purposes of
sending such notice. As additional security for the Loans, the Borrowers shall
grant to the Administrative Agent (on behalf of the Lenders), pursuant to the
Account Pledge, a continuing security interest and Lien in the Lockbox, Lockbox
Account and in all amounts and proceeds deposited therein or derived therefrom.
In the event that the Lockbox
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Agreement is terminated for any reason whatsoever, the Borrowers shall cooperate
with the Administrative Agent and the Lenders and shall enter into a successor
lockbox arrangement with another Lockbox Bank on substantially the same terms
and conditions as the terminated Lockbox Agreement. The Borrowers acknowledge
and agree that in the event that such successor Lockbox Agreement is not entered
into prior to the effective date of the termination of the existing Lockbox
Agreement or if the security interest and Lien granted by the Borrowers to the
Administrative Agent with respect to the Lockbox, Lockbox Account and any funds
or proceeds deposited therein, (x) the Lockbox Bank shall transfer and deliver
all funds and items remaining or thereafter received by such Lockbox Bank with
respect to the Lockbox and Lockbox Account to the Administrative Agent or as
otherwise directed by the Administrative Agent and (y) shall cause all Tenants
to send all Rents directly to the Administrative Agent or as otherwise directed
by the Administrative Agent, in each case, until such time as a successor
Lockbox Agreement is entered into among the Borrowers, the Administrative Agent
and a successor Lockbox Bank, and a security interest and Lien in the successor
Lockbox and Lockbox Account is granted to the Administrative Agent (on behalf of
the Lenders). Subject to the terms and provisions of the Lockbox Agreement, for
so long as no Event of Default has occurred and is continuing, funds on deposit
in the Lockbox Account shall be swept at the close of business each day to an
account maintained by the Borrowers at the Lockbox Bank ("BORROWERS' ACCOUNT").
Notwithstanding anything to the contrary contained in this paragraph, during the
continuation of an Event of Default, no funds or proceeds or other evidence of
payment on deposit in the Lockbox or the Lockbox Account shall be delivered or
transferred to the Borrowers' Account. During the continuation of an Event of
Default, all funds, proceeds or other evidence of payment in the Lockbox or
Lockbox Account, shall be delivered or transferred to the Administrative Agent
(or as directed by the Administrative Agent (on behalf of the Lenders)) and the
Administrative Agent shall have the right to apply any and all such funds or
proceeds or other evidence of payment to satisfy the Borrowers' obligations
under the Loan Documents. The Borrowers covenant and agree that prior to
November 24, 1999, the Borrowers shall cause a notice to be sent to each Tenant,
requiring all rental payments or other amounts due under such Tenant's Lease to
be made directly payable to the Lockbox Account (or as otherwise directed by the
Administrative Agent (on behalf of the Lenders)) and to be sent directly to the
Lockbox. A form of such notice is attached hereto as A-3. A copy of each such
notice shall be delivered to Administrative Agent concurrently with delivery to
the Tenant. If the Borrowers or Manager fails to send such notice to each Tenant
of the Projects prior to November 24, 1999, the Administrative Agent may send
such notice to the Tenants and the Borrowers hereby irrevocably appoint the
Administrative Agent (on behalf of the Lenders) as the Borrowers'
attorney-in-fact for such purposes. The Borrowers shall deliver such notice to
every Tenant under each Lease executed after the Closing Date with respect to
any Project. The Lockbox and the Lockbox Account shall be under the sole
dominion and control of the Administrative Agent (on behalf of the Lenders). All
costs and expenses incurred in connection with establishing, maintaining and
operating the Lockbox and Lockbox Account (including, bank charges, transfer
fees and account fees) shall be paid by the Borrowers. The Borrowers shall cause
the Manager to comply with the terms and provisions of this paragraph and any
Lockbox Agreement.
Section 2.07 PAYMENTS; PRO RATA TREATMENT; ETC. PAYMENTS GENERALLY.
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(a) PAYMENTS BY BORROWER. Except to the extent otherwise
provided herein, all payments of principal, interest and other amounts to be
made by any Borrower under this Agreement and the Notes, and, except to the
extent otherwise provided therein, all payments to be made by any Borrower under
any other Loan Document, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Administrative Agent
at an account designated by the Administrative Agent by notice to Borrowers, not
later than 1:00 p.m., New York City time, on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day).
(b) APPLICATION OF PAYMENTS. Subject to the provisions of
SECTION 2.03(5), the Borrowers shall, at the time of making each payment under
this Agreement or any Note for the account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans or other amounts payable by the Borrowers hereunder to which such
payment is to be applied (and in the event that Borrower fails to so specify, or
if an Event of Default has occurred and is continuing, the Administrative Agent
may distribute such payment to the Lenders for application in such manner as it
may determine to be appropriate, subject to SECTION 2.07(2) and any other
agreement among the Administrative Agent and the Lenders with respect to such
application).
(c) FORWARDING OF PAYMENTS BY ADMINISTRATIVE AGENT. Except as
otherwise agreed by the Administrative Agent and the Lenders, each payment
received by the Administrative Agent under this Agreement or any Note for
account of any Lender shall be paid by the Administrative Agent promptly to such
Lender, in immediately available funds, for account of such Lender's Applicable
Lending Office for the Loan or other obligation in respect of which such payment
is made.
(d) EXTENSIONS TO NEXT BUSINESS DAY. If the due date of any
payment under this Agreement or any Note would otherwise fall on a day that is
not a Business Day, such date shall be extended to the next succeeding Business
Day, and interest shall be payable for any principal so extended for the period
of such extension (provided, however, that interest attributable to such
extension period shall not also be paid or payable during the immediately
succeeding Interest Period).
(2) PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each advance of a Loan from the Lenders under SECTION 2.01(1) shall
be made from the Lenders, and any termination of the obligation to make an
advance of the Loans shall be applied to the respective Commitments of the
Lenders, pro rata according to the amounts of their respective Commitments; (b)
except as otherwise provided in SECTION 2.08(4), Loans shall be allocated pro
rata among the Lenders according to the amounts of their respective Commitments
(in the case of the making of Loans) or their respective Loans (in the case of
Conversions or Continuations of Loans); (c) each payment or prepayment of
principal of Loans by the Borrowers shall be made for account of the Lenders pro
rata in accordance with the respective unpaid principal amounts of the Loans
held by them; and (d) each payment of interest on Loans by the Borrowers shall
be made for account of the Lenders pro rata in accordance with the amounts of
interest on such Loans then due and payable to the respective Lenders.
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(3) NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Administrative Agent shall have been notified by a Lender or a Borrower (in
either case, the "PAYOR") prior to the date on which the Payor is to make
payment to the Administrative Agent of (in the case of a Lender) the proceeds of
a Loan to be made by such Lender hereunder or (in the case of a Borrower) a
payment to the Administrative Agent for account of any Lender hereunder (in
either case, such payment being herein called the "REQUIRED PAYMENT"), which
notice shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Administrative Agent, the Administrative Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) on such date; and, if the Payor has not in fact made
the Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date (the "ADVANCE DATE") such amount was so made
available by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to (a) the Federal Funds Rate for
such day in the case of payments returned to the Administrative Agent by any of
the Lenders or (b) the applicable interest rate due hereunder with respect to
payments returned by any Borrower to the Administrative Agent and, if such
recipient(s) shall fail promptly to make such payment, the Administrative Agent
shall be entitled to recover such amount, on demand, from the Payor, together
with interest as aforesaid, PROVIDED that if neither the recipient(s) nor the
Payor shall return the Required Payment to the Administrative Agent within three
(3) Business Days of the Advance Date, then, retroactively to the Advance Date,
the Payor and the recipient(s) shall each be obligated to pay interest on the
Required Payment as follows:
(a) if the Required Payment shall represent a payment to be made
by the Borrowers to the Lenders, Borrowers and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of the
Required Payment at the Default Rate (without duplication of the obligation of
Borrowers under SECTION 2.02 to pay interest on the Required Payment at the
Default Rate), it being understood that the return by the recipient(s) of the
Required Payment to the Administrative Agent shall not limit such obligation of
Borrowers under SECTION 2.02 to pay interest at the Default Rate in respect of
the Required Payment, and
(b) if the Required Payment shall represent proceeds of a Loan
to be made by the Lenders to any Borrower, the Payor and such Borrower shall
each be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment pursuant to whichever of the rates specified in SECTION
2.02 is applicable to the Type of such Loan, it being understood that the return
by a Borrower of the Required Payment to the Administrative Agent shall not
limit any claim a Borrower may have against the Payor in respect of such
Required Payment.
(4) SHARING OF PAYMENTS, ETC.
(a) RIGHT OF SET-OFF. Each Borrower agrees that, in addition to
(and without limitation of) any right of set-off, banker's lien or counterclaim
a Lender may otherwise have, each Lender shall be entitled, at its option (to
the fullest extent permitted by law), to set off and apply any deposit (general
or special, time or demand, provisional or final), or other indebtedness, held
by it for the credit or account of any Borrower at any of its offices, in
Dollars
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or in any other currency, against any principal of or interest on any of such
Lender's Loans or any other amount payable to such Lender hereunder, that is not
paid when due (regardless of whether such deposit or other indebtedness is then
due to any Borrower), in which case it shall promptly notify the Borrowers and
the Administrative Agent thereof, PROVIDED that such Lender's failure to give
such notice shall not affect the validity thereof.
(b) SHARING. If any Lender shall obtain from any Borrower
payment of any principal of or interest on any Loan owing to it or payment of
any other amount under this Agreement or any other Loan Document through the
exercise of any right of set-off, banker's lien or counterclaim or similar right
or otherwise (other than from the Administrative Agent as provided herein), and,
as a result of such payment, such Lender shall have received a greater
percentage of the principal of or interest on the Loans or such other amounts
then due hereunder or thereunder by the Borrowers to such Lender than the
percentage received by any other Lender, it shall promptly purchase from such
other Lenders participations in (or, if and to the extent specified by such
Lender, direct interests in) the Loans or such other amounts, respectively,
owing to such other Lenders (or in interest due thereon, as the case may be) in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans or such other amounts,
respectively, owing to each of the Lenders. To such end all the Lenders shall
make appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.
(c) CONSENT BY BORROWER. Each Borrower agrees that any Lender so
purchasing such a participation (or direct interest) may exercise all rights of
set-off, banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or other
amounts (as the case may be) owing to such Lender in the amount of such
participation.
(d) RIGHTS OF LENDERS; BANKRUPTCY. Nothing contained herein
shall require any Lender to exercise any such right or shall affect the right of
any Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of any Borrower. If, under
any applicable bankruptcy, insolvency or other similar law, any Lender receives
a secured claim in lieu of a set-off to which this SECTION 2.07(4) applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this SECTION 2.07(4) to share in the benefits of any recovery on such
secured claim.
Section 2.08 EURODOLLAR PROTECTION; ETC.
(1) ADDITIONAL COSTS.
(a) COSTS OF MAKING OR MAINTAINING EURODOLLAR LOANS. Each
Borrower shall pay directly to each Lender from time to time such amounts as
such Lender may determine in good faith to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation
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to make any Eurodollar Loans hereunder, or any reduction in any amount
receivable by such Lender hereunder in respect of any of such Loans or such
obligation (such increases in costs and reductions in amounts receivable being
herein called "ADDITIONAL COSTS"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office
for any of such Loans) to any tax, duty or other charge in respect of
such Loans or its Note or changes the basis of taxation of any amounts
payable to such Lender under this Agreement or its Note in respect of
any of such Loans (excluding changes in the rate of tax on the overall
net income of such Lender or of such Applicable Lending Office by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements (other than the Reserve Requirement used in the
determination of the Adjusted Libor Rate for any Interest Period for
such Loan) relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, such Lender (including,
without limitation, any of such Loans or any deposits referred to in
the definition of "Libor Base Rate"), or any commitment of such Lender
(including, without limitation, the Commitment of such Lender
hereunder); or
(iii) imposes any other condition affecting this Agreement or
its Note (or any of such extensions of credit or liabilities) or its
Commitment.
If any Lender requests compensation from any Borrower under this
PARAGRAPH (A), such Borrower may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or Continue Eurodollar Loans, or to Convert Loans into Eurodollar Loans, until
the Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of SECTION 2.08(4) shall be applicable), PROVIDED that
such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) COSTS ATTRIBUTABLE TO REGULATORY CHANGE OR RISK-BASED
CAPITAL GUIDELINES. Without limiting the effect of the foregoing provisions of
this SECTION 2.08(1) (but without duplication), each Borrower shall pay directly
to each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a subsidiary) for any costs
that it determines are attributable to the maintenance by such Lender (or any
Applicable Lending Office of such bank holding company), pursuant to any law or
regulation or any interpretation, directive or request (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) of any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital guideline or other
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) hereafter issued by any
government or governmental or supervisory authority implementing at the national
level the Basle Accord, of capital in respect of its Commitment or Loans (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Lender (or any Applicable Lending
Office or such bank holding company) to a level below that which such
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Lender (or any Applicable Lending Office or such bank holding company) could
have achieved but for such law, regulation, interpretation, directive or
request.
(c) NOTIFICATION AND CERTIFICATION. Each Lender shall notify the
Borrowers of any event occurring after the date hereof entitling such Lender to
compensation under PARAGRAPH (A) or (B) of this SECTION 2.08(1) as promptly as
practicable, but in any event within 45 days, after such Lender obtains actual
knowledge thereof; PROVIDED that (i) if any Lender fails to give such notice
within 45 days after it obtains actual knowledge of such an event, such Lender
shall, with respect to compensation payable pursuant to this SECTION 2.08(1) in
respect of any costs resulting from such event, only be entitled to payment
under this SECTION 2.08(1) for costs incurred from and after the date 45 days
prior to the date that such Lender does give such notice and (ii) each Lender
will designate a different Applicable Lending Office for the Loans of such
Lender affected by such event if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole opinion of
such Lender, be disadvantageous to such Lender, except that such Lender shall
have no obligation to designate an Applicable Lending Office located in the
United States of America. Each Lender will furnish to the Borrowers a
certificate setting forth the basis and amount of each request by such Lender
for compensation under PARAGRAPH (A) or (B) of this SECTION 2.08(1).
Determinations and allocations by any Lender for purposes of this SECTION
2.08(1) of the effect of any Regulatory Change pursuant to PARAGRAPH (A) of this
SECTION 2.08(1), or of the effect of capital maintained pursuant to PARAGRAPH
(B) of this SECTION 2.08(1), on its costs or rate of return of maintaining Loans
or its obligation to make Loans, or on amounts receivable by it in respect of
Loans, and of the amounts required to compensate such Lender under this SECTION
2.08(1), shall be conclusive, PROVIDED that such determinations and allocations
are made on a reasonable basis.
(2) LIMITATION ON TYPES OF LOANS. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of the Libor Base
Rate for any Interest Period for any Eurodollar Loan:
(a) the Administrative Agent determines, which determination
shall be conclusive, that quotations of interest rates for the relevant
deposits referred to in the definition of Libor Base Rate are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Eurodollar Loans as
provided herein; or
(b) the Majority Lenders determine, which determination shall
be conclusive, and notify the Administrative Agent that the relevant
rates of interest referred to in the definition of Libor Base Rate upon
the basis of which the rate of interest for Eurodollar Loans for such
Interest Period is to be determined are not likely adequately to cover
the cost to such Lenders of making or maintaining Eurodollar Loans for
such Interest Period;
then the Administrative Agent shall give the Borrowers and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Loans of any other Type into Eurodollar Loans,
and Borrower shall, on the last day(s) of the then current Interest Period(s)
for the outstanding Eurodollar Loans, either prepay such Loans or such Loans
shall be automatically Converted into Alternate Base Rate Loans.
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(3) ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder (and, in the sole opinion of such Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or
would be disadvantageous to such Lender), then such Lender shall promptly notify
the Borrowers thereof (with a copy to the Administrative Agent) and such
Lender's obligation to make or Continue, or to Convert Loans of any other Type
into, Eurodollar Loans shall be suspended until such time as such Lender may
again make and maintain Eurodollar Loans (in which case the provisions of
SECTION 2.08(4) shall be applicable).
(4) TREATMENT OF AFFECTED LOANS. If the obligation of any Lender
to make Eurodollar Loans or to Continue, or to Convert Alternate Base Rate Loans
into, Eurodollar Loans shall be suspended pursuant to SECTION 2.08(1) or
2.08(3), such Lender's Loans shall be automatically Converted into Alternate
Base Rate Loans on the last day(s) of the then current Interest Period(s) for
Loans (or, in the case of a Conversion resulting from a circumstance described
in SECTION 2.08(3), on such earlier date as such Lender may specify to the
Borrowers with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
SECTION 2.08(1) or 2.08(3) that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Loans have been so
Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Loans shall be applied instead to
its Alternate Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Eurodollar Loans shall be made or Continued instead as
Alternate Base Rate Loans, and all Loans of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain as Alternate
Base Rate Loans.
If such Lender gives notice to Borrowers with a copy to the Administrative Agent
that the circumstances specified in SECTION 2.08(1) or 2.08(3) that gave rise to
the Conversion of such Lender's Loans pursuant to this SECTION 2.08(4) no longer
exist (which such Lender agrees to do promptly upon such circumstances ceasing
to exist) at a time when Eurodollar Loans made by other Lenders are outstanding,
such Lender's Alternate Base Rate Loans shall be automatically Converted, on the
first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Loans, to the extent necessary so that, after giving effect thereto,
all Alternate Base Rate Loans and Eurodollar Loans are allocated among the
Lenders ratably (as to principal amounts, Types and Interest Periods) in
accordance with their respective Commitments.
(5) COMPENSATION. Borrowers shall pay to the Administrative
Agent for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense that such Lender determines is attributable to:
(a) any payment, prepayment or Conversion of a Eurodollar Loan
made by such Lender for any reason (including, without limitation, the
acceleration of the Loans
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pursuant to the Administrative Agent's or the Lenders' rights referred
to in ARTICLE 10) on a date other than the last day of the Interest
Period for such Loan; or
(b) any failure by any Borrower for any reason to borrow a
Eurodollar Loan from such Lender on the date for such borrowing
specified in the relevant notice of borrowing given to the
Administrative Agent in accordance with the terms of this Agreement.
Without limiting the effect of the preceding sentence, such compensation may
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein OVER (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender), or if such Lender shall cease to make such bids, the equivalent rate,
as reasonably determined by such Lender, derived from Page 3750 of the Dow Jones
Markets (Telerate) Service or other publicly available source as described in
the definition of Libor Base Rate.
(6) U.S. TAXES.
(a) GROSS-UP FOR DEDUCTION OR WITHHOLDING OF U.S. TAXES. Each
Borrower agrees to pay to each Lender that is not a U.S. Person such additional
amounts as are necessary in order that the net payment of any amount due to such
non-U.S. Person hereunder after deduction for or withholding in respect of any
U.S. Taxes imposed with respect to such payment (or in lieu thereof, payment of
such U.S. Taxes by such non-U.S. Person), will not be less than the amount
stated herein to be then due and payable, PROVIDED that the foregoing obligation
to pay such additional amounts shall not apply:
(i) to any payment to any Lender hereunder unless such Lender
is, on the date hereof (or on the date it becomes a Lender hereunder as
provided in SECTION 11.24(2)) and on the date of any change in the
Applicable Lending Office of such Lender, either entitled to submit a
Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all
interest to be received by such Lender hereunder in respect of the
Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure
by such non-U.S. Person to comply with applicable certification,
information, documentation or other reporting requirements concerning
the nationality, residence, identity or connections with the United
States of America of such non-U.S. Person if such compliance is
required by statute or regulation of the United States of America as a
precondition to relief or exemption from such U.S. Taxes.
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For the purposes hereof, (A) "U.S. PERSON" means a citizen, national or resident
of the United States of America, a corporation, limited liability company,
partnership or other entity created or organized in or under any laws of the
United States of America or any State thereof, or any estate or trust that is
subject to Federal income taxation regardless of the source of its income, (B)
"U.S. TAXES" means any present or future tax, assessment or other charge or levy
imposed by or on behalf of the United States of America or any taxing authority
thereof or therein, (C) "FORM 1001" means Form 1001 (Ownership, Exemption, or
Reduced Rate Certificate) of the Department of the Treasury of the United States
of America and (D) "FORM 4224" means Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States) of the Department of the Treasury of the United States of
America. Each of the Forms referred to in the foregoing clauses (C) and (D)
shall include such successor and related forms as may from time to time be
adopted by the relevant taxing authorities of the United States of America to
document a claim to which such Form relates.
(b) EVIDENCE OF DEDUCTION, ETC. Within thirty (30) days after
paying any amount to the Administrative Agent or any Lender from which it is
required by law to make any deduction or withholding, and within 30 days after
it is required by law to remit such deduction or withholding to any relevant
taxing or other authority, Borrowers shall deliver to the Administrative Agent
for delivery to such non-U.S. Person evidence satisfactory to such Person of
such deduction, withholding or payment (as the case may be).
(7) REPLACEMENT OF LENDERS. If any Lender requests compensation
pursuant to SECTION 2.08(1) or 2.08(6), or any Lender's obligation to Continue
Loans of any Type, or to Convert Loans of any Type into the other Type of Loan,
shall be suspended pursuant to SECTION 2.08(2) or 2.08(3) (any such Lender
requesting such compensation, or whose obligations are so suspended, being
herein called a "REQUESTING LENDER"), Borrowers, upon three (3) Business Days
notice, may require that such Requesting Lender transfer all of its right, title
and interest under this Agreement and such Requesting Lender's Note to any bank
or other financial institution (a "PROPOSED LENDER") identified by such Borrower
that is satisfactory to the Administrative Agent (i) if such Proposed Lender
agrees to assume all of the obligations of such Requesting Lender hereunder, and
to purchase all of such Requesting Lender's Loans hereunder for consideration
equal to the aggregate outstanding principal amount of such Requesting Lender's
Loans, together with interest thereon to the date of such purchase (to the
extent not paid by any Borrower), and satisfactory arrangements are made for
payment to such Requesting Lender of all other amounts accrued and payable
hereunder to such Requesting Lender as of the date of such transfer (including
any fees accrued hereunder and any amounts that would be payable under SECTION
2.08(5) as if all of such Requesting Lender's Loans were being prepaid in full
on such date) and (ii) if such Requesting Lender has requested compensation
pursuant to SECTION 2.08(1) or 2.08(6), such Proposed Lender's aggregate
requested compensation, if any, pursuant to SECTION 2.08(1) or 2.08(6) with
respect to such Requesting Lender's Loans is lower than that of the Requesting
Lender. Subject to the provisions of SECTION 11.24(2), such Proposed Lender
shall be a "Lender" for all purposes hereunder. Without prejudice to the
survival of any other agreement of any Borrower hereunder the agreements of
Borrowers contained in SECTIONS 2.08(1), 2.08(6) and 11.05 (without duplication
of any payments made to such
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Requesting Lender by any Borrower or the Proposed Lender) shall survive for the
benefit of such Requesting Lender under this SECTION 2.08(7) with respect to the
time prior to such replacement.
Section 2.09 IMMEDIATE REPAIRS RESERVE.
(1) Each Borrower acknowledges that on or prior to the date
hereof, the Administrative Agent (on behalf of the Lenders) has caused each
Project to be inspected and such inspection has revealed that certain Projects
are in need of certain maintenance, repairs and/or remedial or corrective work
(the "IMMEDIATE REPAIRS") as more particularly described on SCHEDULE 2.9
attached hereto. On or prior to the date hereof, the Borrowers shall establish
with the Administrative Agent or at a financial institution designated by the
Administrative Agent (on behalf of the Lenders), a reserve in the amount of
$220,709 (the "IMMEDIATE REPAIRS RESERVE"). The Immediate Repairs Reserve shall
be in the name of and under the sole dominion and control of the Administrative
Agent (on behalf of the Lenders), subject only to the Lenders' obligations
hereunder to advance or otherwise make available funds therefrom in accordance
with this Agreement, and the Borrowers shall have no authority or power to make
withdrawals from the Immediate Repairs Reserve. The amount required to be
deposited in the Immediate Repairs Reserve by the Borrowers shall be deposited
on the Borrowers' behalf by the Lenders' funding of said amount out of the
proceeds of the Initial Advance on the date hereof. Borrowers shall cause the
Immediate Repairs to be completed, performed, remediated and corrected to the
satisfaction of the Administrative Agent (on behalf of the Lenders) and as
necessary to bring the Project into compliance with all applicable laws,
ordinances, rules and regulations on or before March 31, 2000. After March 31,
2000, the Administrative Agent (on behalf of the Lenders) shall not be obligated
to release any funds on deposit in the Immediate Repairs Reserve prior to the
repayment in full of the Loans and may apply such funds to either complete such
Immediate Repairs or to satisfy Borrowers' obligations under the Loan Documents
as determined by the Administrative Agent (on behalf of the Lenders) in its sole
discretion.
(2) So long as no Event of Default has occurred hereunder and is
continuing, all sums in the Immediate Repairs Reserve shall be held by the
Administrative Agent (on behalf of the Lenders) to pay the costs and expenses of
completing the Immediate Repairs. The Immediate Repairs Reserve will be held by
the Administrative Agent (on behalf of the Lenders) without interest and may be
commingled with Lenders' own funds. Borrowers hereby grant to the Administrative
Agent (on behalf of the Lenders) a security interest in the Immediate Repairs
Reserve and in the event the Immediate Repairs Reserve is deposited with a
financial institution other than the Administrative Agent, the Administrative
Agent shall be a required signatory for such account. While an Event of Default
or a Potential Default exists, the Administrative Agent shall not be obligated
to permit advances to Borrowers of the Immediate Repairs Reserve, and while an
Event of Default exists, the Administrative Agent shall be entitled, without
notice to the Borrowers, to apply any funds in the Immediate Repair Reserve to
satisfy Borrowers' obligations under the Loan Documents.
(3) So long as no Event of Default has occurred and is
continuing the Administrative Agent shall, to the extent that funds are
available for such purpose in the Immediate Repairs Reserve, disburse to the
Borrowers the amount paid or incurred by the Borrowers in completing,
performing, remediating or correcting the Immediate Repairs upon (i) the receipt
by the Administrative Agent of a written request from the Borrowers for
disbursement
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from the Immediate Repair Reserve and a certification by the Borrowers that the
applicable item of Immediate Repair has been completed in accordance with the
terms of this Agreement; (ii) delivery to the Administrative Agent of invoices,
receipts or other evidence satisfactory to the Administrative Agent (on behalf
of the Lenders) verifying the costs of the Immediate Repair to be reimbursed or
paid; (iii) delivery to the Administrative Agent of a certification from an
inspecting architect, engineer or other consultant reasonably acceptable to the
Administrative Agent describing the completed work, verifying the completion of
the work and the value of the completed work and, if applicable, certifying that
the applicable Project is, as a result of such work, in full compliance with all
applicable laws, ordinances, rules and regulations relating to the Immediate
Repair so performed; (iv) delivery to the Administrative Agent of title
affidavits, title insurance endorsements, lien waivers or other evidence
satisfactory to the Administrative Agent (on behalf of the Lenders) showing or
insuring that all materialmen, laborers, subcontractors and any other parties
who might or could claim statutory or common law liens and are furnishing or
have furnished materials or labor to any Project have been paid all amounts due
for such labor and materials furnished and confirming the first priority lien of
the Mortgages.
(4) The Administrative Agent shall not be required to make
advances from the Immediate Repair Reserve more frequently than once in any
thirty (30) day period. In making any disbursement from the Immediate Repair
Reserve, the Administrative Agent shall be entitled to rely on such request from
the Borrowers without any inquiry into the accuracy, validity or contestibility
of any such amount. In no event shall any Borrower be entitled to reimbursement
of any costs with respect to any item of Immediate Repair in excess of the
applicable amount set forth in SCHEDULE 2.9 attached hereto. The Immediate
Repairs Reserve is solely for the protection of the Administrative Agent (on
behalf of the Lenders) and entails no responsibility on the Administrative
Agent's part beyond the payment of costs and expenses described in this
paragraph in accordance with the terms hereof and beyond the allowing of due
credit for the sums actually received. In the event that the amounts on deposit
in the Immediate Repairs Reserve are insufficient to pay the costs of the
Immediate Repairs, the Borrowers shall immediately deposit with the
Administrative Agent any such deficiency. The Borrowers hereby grant to the
Administrative Agent (on behalf of the Lenders) a power of attorney, coupled
with an interest, to cause the Immediate Repairs to be completed, performed,
remediated and corrected to the satisfaction of the Administrative Agent upon
the Borrowers' failure to do so in accordance with the terms and conditions of
this Agreement, and to apply the amounts on deposit in the Immediate Repairs
Reserve to the costs associated therewith, all as the Administrative Agent may
determine in its sole and absolute discretion but without obligation to do so.
ARTICLE 3
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 3.01 INSURANCE. Borrowers shall maintain insurance as follows:
(1) CASUALTY; BUSINESS INTERRUPTION. Borrowers shall keep each
Project insured against damage by fire and the other hazards covered by a
standard extended coverage and all-risk insurance policy for the full insurable
value thereof (without reduction for depreciation or co-insurance), and shall
maintain such other casualty insurance as reasonably required by the
Administrative Agent. Borrowers shall keep each Project insured against loss by
flood if such Project is located in an area identified by the Federal Emergency
Management
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Agency as an area having special flood hazards and in which flood insurance has
been made available under the National Flood Insurance Act of 1968 (and any
successor act thereto) in an amount at least equal to the lesser of (i) the
Allocated Loan Amount with respect to such Project or (ii) the maximum limit of
coverage available under said act. Borrowers shall maintain use and occupancy
insurance covering, as applicable, rental income or business interruption, with
coverage in an amount not less than twelve (12)-months anticipated gross rental
income or gross business earnings, as applicable in each case, attributable to
each Project. Borrowers shall not maintain any separate or additional insurance
which is contributing in the event of loss unless it is properly endorsed and
otherwise satisfactory to the Administrative Agent in all respects. The proceeds
of insurance paid on account of any damage or destruction to any Project shall
be paid to the Administrative Agent (subject to the rights of any ground lessor
and/or any superior tenant which exist as of the date of this Agreement if
approved by Administrative Agent) to be applied as provided in SECTION 3.02.
(2) LIABILITY. Borrowers shall maintain (a) commercial general
liability insurance with respect to each Project providing for limits of
liability of not less than $5,000,000 per occurrence and per location in the
aggregate covering bodily injury to or death of a person and for property damage
with umbrella liability insurance providing for limits of not less than
$5,000,000 per occurrence and $50,000,000 in the aggregate, and (b) such other
liability insurance as reasonably required by the Administrative Agent (on
behalf of the Lenders).
(3) FORM AND QUALITY; ADDITIONAL INSURANCE. All insurance
policies shall be endorsed in form and substance acceptable to the
Administrative Agent to name the Administrative Agent (on behalf of the
Lenders), with respect to the Projects, as an additional insured, loss payee or
mortgagee thereunder, as its interest may appear, with loss payable to the
Administrative Agent, with respect to the Projects, without contribution, under
a standard New York (or local equivalent) mortgagee clause. All such insurance
policies and endorsements shall be fully paid for and contain such provisions
and expiration dates and be in such form and issued by such insurance companies
licensed to do business in the applicable state where the Project is located,
with a rating of "A-X" or better as established by Best's Rating Guide or "AA"
or better as established by Standard & Poor's Group, Inc. (or an equivalent
rating approved in writing by the Administrative Agent). Each policy shall
provide that such policy may not be canceled or materially changed except upon
thirty (30) days prior written notice of intention of non-renewal, cancellation
or material change to Lender and that no act or thing done by any Borrower with
respect to the Projects shall invalidate any policy as against the
Administrative Agent or any Lender. The Administrative Agent (on behalf of the
Lenders) reserves the right to require the Borrowers to obtain any additional
insurance coverages as it may deem necessary or prudent to protect its
interests, including, without limitation, insurance against loss or damage from
leakage of sprinkler systems and explosion of steam boilers, air conditioning
equipment, high pressure piping or similar apparatus, worker's compensation
insurance, earthquake and/or sinkhole insurance and building ordinance or law
coverage. If any Borrower fails to maintain insurance in compliance with this
SECTION 3.01(3), the Administrative Agent may obtain such insurance and pay the
premium therefor and the Borrowers shall, on demand, reimburse the
Administrative Agent for all expenses incurred in connection therewith. The
Borrowers shall assign the policies or proofs of insurance to the Administrative
Agent (on behalf of the Lenders), in such manner and form that Lender and its
successors and assigns shall at all times have and hold the same as
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security for the payment of the Loan. The Borrowers shall deliver copies of all
original policies certified to the Administrative Agent by the insurance company
or authorized agent as being true copies, together with the endorsements
required hereunder. The proceeds of insurance policies coming into the
possession of the Administrative Agent shall not be deemed trust funds, and the
Administrative Agent shall be entitled to apply such proceeds as herein
provided.
(4) ADJUSTMENTS. The Borrowers shall give immediate written
notice of any loss to the insurance carrier and to the Administrative Agent and
shall give further notices from time to time with respect to settlement of any
insurance claim therefor. Each Borrower hereby irrevocably authorizes and
empowers the Administrative Agent, as attorney-in-fact for such Borrower coupled
with an interest, to make proof of loss, to adjust and compromise any claim
under insurance policies, to appear in and prosecute any action arising from
such insurance policies, to collect and receive insurance proceeds, and to
deduct therefrom the Administrative Agent's expenses incurred in the collection
of such proceeds. Nothing contained in this SECTION 3.01(4), however, shall
require the Administrative Agent to incur any expense or take any action
hereunder.
Section 3.02 USE AND APPLICATION OF INSURANCE PROCEEDS. The
Administrative Agent shall apply insurance proceeds to costs of restoring any
Project or the Loans as follows:
(1) if the loss is less than or equal to $100,000 for any
Project, the Administrative Agent shall apply the insurance proceeds to
restoration provided (a) no Event of Default or Potential Default exists, and
(b) the Borrowers promptly commence and are diligently pursuing restoration of
the affected Project;
(2) if the loss exceeds $100,000 for any Project, but is not
more than 10% of the replacement value of the improvements (for Projects
containing multiple phases or stand alone structures, such calculation to be
based on the damaged phase or structure, not the applicable Project as a whole),
the Administrative Agent shall apply the insurance proceeds to restoration
provided that at all times during such restoration (a) no Event of Default or
Potential Default exists; (b) the Administrative Agent determines that there are
sufficient funds available to restore and repair the affected Project to a
condition approved by the Administrative Agent; (c) the Administrative Agent
determines that the Net Operating Income of the Project during restoration will
be sufficient to pay Adjusted Debt Service; (d) the Administrative Agent
determines (based on leases which will remain in effect after restoration is
complete) that after restoration the Debt Service Coverage for the Projects will
be at least equal to 1:30 to 1:00 and the Cash on Cash Return for the Projects
will be at least equal to eleven percent (11%); (e) the Administrative Agent
determines that restoration and repair to a condition approved by the
Administrative Agent will be completed within six (6) months after the date of
loss or casualty and in any event ninety (90) days prior to the Maturity Date;
and (f) the Borrowers promptly commence and diligently pursue restoration of the
affected Project;
(3) if the conditions set forth above are not satisfied or the
loss exceeds the maximum amount specified in SECTION 3.02(2) above, in the
Administrative Agent's sole discretion, the Administrative Agent may (subject to
the approval of the Majority Lenders) apply any insurance proceeds it may
receive to the payment of the Loans or allow all or a portion of such proceeds
to be used for the restoration of the affected Project; and
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(4) insurance proceeds applied to restoration will be disbursed
on receipt of satisfactory plans and specifications, contracts and subcontracts,
schedules, budgets, lien waivers and architects' certificates, and otherwise in
accordance with prudent commercial construction lending practices for
construction loan advances, including, as applicable, the Additional Advance
conditions under SCHEDULE 2.1.
Section 3.03 CONDEMNATION AWARDS. The Borrowers shall immediately
notify the Administrative Agent of the institution of any proceeding for the
condemnation or other taking of any Project or any portion thereof. The
Administrative Agent may participate in any such proceeding and the Borrowers
will deliver to the Administrative Agent (on behalf of the Lenders) all
instruments necessary or required by the Administrative Agent to permit such
participation. Without the Administrative Agent's prior consent (subject to the
approval of the Majority Lenders), the Borrowers (a) shall not agree to any
compensation or award, and (b) shall not take any action or fail to take any
action which would cause the compensation to be determined. All awards and
compensation for the taking or purchase in lieu of condemnation of a Project or
any part thereof are hereby assigned to and shall (to the extent such moneys are
not required to be applied differently under any applicable Leasehold Property
Lease approved by Administrative Agent) be paid to the Administrative Agent (on
behalf of the Lenders). The Borrowers hereby authorize the Administrative Agent
(on behalf of the Lenders) to collect and receive such awards and compensation,
to give proper receipts and acquaintances therefor, and in the Administrative
Agent's sole discretion (to the extent such moneys are not required to be
applied differently under any applicable Leasehold Property Lease approved by
Administrative Agent) to apply the same toward the payment of the Loans,
notwithstanding that the Loans may not then be due and payable, or to the
restoration of the affected Project; PROVIDED, HOWEVER, THAT, if the award is
less than or equal to $100,000 and the Borrowers request that such proceeds be
used for the restoration of the remaining portions of such a Project or
non-structural site improvements (such as landscape, driveway, walkway and
parking area repairs) required to be made as a result of such condemnation, the
Administrative Agent will apply the award to such restoration in accordance with
disbursement procedures applicable to insurance proceeds pursuant to SECTION
3.02 hereof, provided there exists no Potential Default or Event of Default. The
Borrowers, upon request by the Administrative Agent, shall execute all
instruments requested to confirm the assignment of the awards and compensation
to the Administrative Agent, free and clear of all liens, charges or
encumbrances.
Section 3.04 IMPOUNDS. After the occurrence of an Event of Default, the
Borrowers shall deposit with the Administrative Agent (on behalf of the
Lenders), monthly, one-twelfth (1/12th) of the annual charges for ground or
other rent, if any, and real estate taxes, assessments and similar charges
relating to the Projects. Upon the occurrence of an Event of Default, the
Borrowers shall deposit with the Administrative Agent a sum of money which
together with the monthly installments will be sufficient to make each of such
payments thirty (30) days prior to the date any delinquency or penalty becomes
due with respect to such payments. Deposits shall be made on the basis of the
Administrative Agent's good faith estimate from time to time of the charges for
the current year (after giving effect to any reassessment or, at the
Administrative agent's election, on the basis of the charges for the prior year,
with adjustments when the charges are fixed for the then current year). All
funds so deposited shall be held by the Administrative Agent, without interest,
and may be commingled with the Administrative Agent's general funds.
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The Borrowers hereby grant to the Administrative Agent (on behalf of the
Lenders), a security interest in all funds so deposited with the Administrative
Agent for the purpose of securing the Loan. While an Event of Default exists,
the funds deposited may be applied in payment of the charges for which such
funds have been deposited, or to the payment of the Loans or any other charges
affecting the security of the Administrative Agent and the Lenders, as the
Administrative Agent may elect, but no such application shall be deemed to have
been made by operation of law or otherwise until actually made by the
Administrative Agent. The Borrowers shall furnish the Administrative Agent with
bills for the charges for which such deposits are required at least thirty (30)
days prior to the date on which the charges first become payable. If at any time
after the occurrence of an Event of Default, the amount on deposit with the
Administrative Agent required to be maintained pursuant to this SECTION 3.04,
together with amounts to be deposited by the Borrowers before such charges are
payable, is insufficient to pay such charges, Borrowers shall deposit any
deficiency with the Administrative Agent immediately upon demand. So long as no
Event of Default has occurred, the Administrative Agent shall pay such charges
when the amount on deposit with the Administrative Agent is sufficient to pay
such charges and the Administrative Agent has received a bill for such charges.
ARTICLE 4
ENVIRONMENTAL MATTERS
Section 4.01 CERTAIN DEFINITIONS. As used herein, the following terms
have the meanings indicated:
(1) "ENVIRONMENTAL LAWS" means any federal, state or local law
(whether imposed by statute, or administrative or judicial order, or common
law), now or hereafter enacted, governing health, safety, industrial hygiene,
the environment or natural resources, or Hazardous Materials, including, such
laws governing or regulating the use, generation, storage, removal, recovery,
treatment, handling, transport, disposal, control, discharge of, or exposure to,
Hazardous Materials.
(2) "HAZARDOUS MATERIALS" means (a) petroleum or chemical
products, whether in liquid, solid, or gaseous form, or any fraction or
by-product thereof, (b) asbestos or asbestos-containing materials, (c)
polychlorinated biphenyls (pcbs), (d) radon gas, (e) underground storage tanks,
(f) any explosive or radioactive substances, (g) lead or lead-based paint, or
(h) any other substance, material, waste or mixture which is or shall be listed,
defined, or otherwise determined by any governmental authority to be hazardous,
toxic, dangerous or otherwise regulated, controlled or giving rise to liability
under any Environmental Laws.
Section 4.02 REPRESENTATIONS AND WARRANTIES ON ENVIRONMENTAL MATTERS.
To Borrowers' knowledge, except as set forth in any Site Assessment or set forth
on SCHEDULE 4.02 attached hereto:
(1) no Hazardous Material is now or was formerly used, stored,
generated, manufactured, installed, disposed of or otherwise present at or about
any Project or any property adjacent to any Project (except for cleaning and
other products currently used in connection with the routine maintenance or
repair of a Project in full compliance with Environmental Laws):
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(2) all permits, licenses, approvals and filings required by
Environmental Laws have been obtained, and the use, operation and condition of
each Project does not, and did not previously, violate any Environmental Laws:
and
(3) no civil, criminal or administrative action, suit, claim,
hearing, investigation or proceeding has been brought or been threatened, nor
have any settlements been reached by or with any parties or any liens imposed in
connection with any Project concerning Hazardous Materials or Environmental
Laws.
Section 4.03 COVENANTS ON ENVIRONMENTAL MATTERS.
(1) Borrowers shall (a) comply strictly and in all respects with
applicable Environmental Laws; (b) notify the Administrative Agent immediately
upon any Borrower's discovery of any spill, discharge, release or presence of
any Hazardous Material at, upon, under, within, contiguous to or otherwise
affecting any Project; (c) promptly remove such Hazardous Materials and
remediate any Project in full compliance with Environmental Laws and in
accordance with the recommendations and specifications of an independent
environmental consultant approved by the Administrative Agent; and (d) promptly
forward to the Administrative Agent copies of all orders, notices, permits,
applications or other communications and reports in connection with any spill,
discharge, release or the presence of any Hazardous Material or any other
matters relating to the Environmental Laws or any similar laws or regulations,
as they may affect any Borrower or any Project.
(2) Borrowers shall not cause, shall prohibit any other Person
within the Control of any Borrower from causing, and shall use prudent,
commercially reasonable efforts to prohibit other Persons (including tenants)
from (a) causing any spill, discharge or release, or the use, storage,
generation, manufacture, installation, or disposal, of any Hazardous Materials
at, upon, under, within or about any Project or the transportation of any
Hazardous Materials to or from any Project (except for cleaning and other
products used in connection with routine maintenance or repair of such Project
in full compliance with Environmental Laws), (b) installing any underground
storage tanks at any Project, or (c) conducting any activity that requires a
permit or other authorization under Environmental Laws unless the Borrower shall
have first obtained all requisite governmental permits, authorizations and
consents, if any.
(3) Borrowers shall provide to the Administrative Agent, at
Borrowers' expense promptly upon the written request of the Administrative Agent
from time to time, a Site Assessment or, if required by the Administrative
Agent, an update to any existing Site Assessment, to assess the presence or
absence of any Hazardous Materials and the potential costs in connection with
abatement, cleanup or removal of any Hazardous Materials found on, under, at or
within any Project. Borrowers shall pay the cost of no more than one such Site
Assessment or update in any twelve (12)-month period, unless the Administrative
Agent's request for a Site Assessment is based on information provided under
SECTION 4.02 above, a reasonable suspicion of Hazardous Materials at or near the
Project, a breach of representations under SECTION 4.02, or an Event of Default,
in which case any such Site Assessment or update shall be at the Borrowers'
expense.
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Section 4.04 ALLOCATION OF RISKS AND INDEMNITY. As between the
Borrowers, the Administrative Agent and the Lenders, all risk of loss associated
with non-compliance with Environmental Laws, or with the presence of any
Hazardous Material at, upon, within, contiguous to or otherwise affecting any
Project, shall lie solely with the Borrowers. Accordingly, the Borrowers shall
bear all risks and costs associated with any loss (including any loss in value
attributable to Hazardous Materials), damage or liability therefrom, including
all costs of removal of Hazardous Materials or other remediation required by the
Administrative Agent or by law. The Borrowers shall indemnify, defend and hold
the Administrative Agent and the Lenders harmless from and against all loss,
liabilities, damages, claims, costs and expenses (including reasonable costs of
defense) arising out of or associated, in any way, with the non-compliance with
Environmental Laws, or the existence of Hazardous Materials in, on, or about any
Project, or a breach of any representation, warranty or covenant contained in
this ARTICLE 4, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law, including those
arising from the joint, concurrent, or comparative negligence of the
Administrative Agent and Lenders; however, the Borrowers shall not be liable
under such indemnification to the extent such loss, liability, damage, claim,
cost or expense results from the Administrative Agent's or any Lender's gross
negligence or willful misconduct. The Borrowers' obligations under this SECTION
4.04, shall arise upon the discovery of the presence of any Hazardous Material,
whether or not any governmental authority has taken or threatened any action in
connection with the presence of any Hazardous Material, and whether or not the
existence of any such Hazardous Material or potential liability on account
thereof is disclosed in the relevant Site Assessment and shall continue
notwithstanding the repayment of the Loans or any transfer or sale of any right,
title and interest in the Project (by foreclosure, deed in lieu of foreclosure
or otherwise), provided the same was not caused by the acts of Administrative
Agent, the Lenders, and/or their respective agents, employees and/or contractors
(and provided further, that omissions to act of Administrative Agent, Lenders,
and/or their respective agents, employees and/or contractors shall not be deemed
to be the causation of the presence of any such Hazardous Materials).
Section 4.05 NO WAIVER. Notwithstanding any provision in this ARTICLE 4
or elsewhere in the Loan Documents, or any rights or remedies granted by the
Loan Documents, the Administrative Agent and the Lenders do not waive and
expressly reserves all rights and benefits now or hereafter accruing to the
Administrative Agent and/or the Lenders under the "security interest" or
"secured creditor" the Administrative Agent and/or any exception under
applicable Environmental Laws, as the same may be amended. No action taken by
the Administrative Agent and/or any Lender pursuant to the Loan Documents shall
be deemed or construed to be a waiver or relinquishment of any such rights or
benefits under the "security interest exception."
ARTICLE 5
LEASING MATTERS
Section 5.01 REPRESENTATIONS AND WARRANTIES ON LEASES. Each Borrower
represents and warrants to the Administrative Agent and the Lenders with respect
to all Leases that:
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(1) to Borrower's knowledge, the rent rolls delivered to the
Administrative Agent are true and correct, and the Leases are valid and in full
force and effect;
(2) the Leases (including amendments) are in writing, and there
are no oral agreements with respect thereto;
(3) the copies of the Leases delivered to the Administrative
Agent are true and complete;
(4) except as shown on the rent roll delivered to the
Administrative Agent by the Borrowers or on SCHEDULE 5.01 annexed hereto, to
Borrower's knowledge, neither the landlord nor any tenant is in default under
any of the Leases beyond the expiration of any applicable notice and cure period
in the performance of any of its material obligations;
(5) Borrower has not received or given any notice of termination
or default with respect to any Lease that remains outstanding;
(6) Borrower has not assigned or pledged any of the Leases, the
rents or any interests therein for any Project (which assignment or pledge
remains in effect as of the date of this Agreement) except to the Administrative
Agent (on behalf of the Lenders);
(7) except as set forth in the rent rolls or as set forth on the
attached SCHEDULE 5.01, delivered to the Administrative Agent, no tenant or
other party has an option to purchase right of first refusal or offer with
respect to all or any portion of any Project;
(8) except as set forth in the rent rolls or as set forth on the
attached SCHEDULE 5.01, no tenant has the right to terminate its Lease prior to
expiration of the stated term of such Lease; and
(9) except as set forth in the rent rolls or as set forth on the
attached SCHEDULE 5.01, no tenant has prepaid more than one month's rent in
advance (except for bona fide security deposits not in excess of an amount equal
to two month's rent).
Section 5.02 STANDARD LEASE FORM; APPROVAL RIGHTS. All Leases and other
rental arrangements entered into or otherwise amended or modified during the
Term of the Loan shall in all respects be approved by the Administrative Agent
and shall be on a standard lease form approved by the Administrative Agent with
respect to each Project with no material modifications (except as approved by
the Administrative Agent). Such lease form shall provide that the tenant shall
attorn to the Administrative Agent (on behalf of the Lenders), and that any
cancellation, surrender, or amendment of such Lease without the prior written
consent of the Administrative Agent shall be voidable by the Administrative
Agent. Administrative Agent, upon request by Borrowers, will provide
non-disturbance agreements in form and substance reasonably acceptable to
Administrative Agent, to all tenants under leases hereafter entered into, within
twenty (20) days after such request, provided Administrative Agent approves such
Lease. The Borrowers shall hold in trust, all tenant security deposits in a
segregated account, and, to the extent required by applicable law or any Lease,
shall not commingle any such funds with any other funds of the Borrowers. Within
ten (10) days after the Administrative Agent's request, the
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Borrowers shall furnish to the Administrative Agent a statement of all tenant
security deposits, and copies of all Leases not previously delivered to the
Administrative Agent, certified by the Borrowers as being true and correct.
Notwithstanding anything to the contrary contained in this paragraph, the
Administrative Agent's approval shall not be required for future Leases or Lease
extensions if the following conditions are satisfied: (a) there exists no
Potential Default or Event of Default; (b) the Lease is on the standard lease
form approved by the Administrative Agent with no material modifications; (c)
the Lease does not conflict with any restrictive covenant affecting such Project
or any other lease for space in such Project; (d) the leased premises, when
combined with all other space in the Project leased to the same tenant or any
affiliate thereof, are not greater than ten percent (10%) of the rentable square
feet contained in such Project and such leased premises do not constitute ten
percent (10%) or more of the gross revenues from such Project, and the lease
term is at least twelve (12) months (but not more than one hundred twenty (120)
months); and (e) the effective rental rate is at least equal to the then
prevailing market rents for similar properties in the market where such Project
is located for the entire term of the Lease.
Section 5.03 COVENANTS. The Borrowers (a) shall perform the obligations
which each Borrower is required to perform under the applicable Leases; (b)
shall enforce the material obligations to be performed by the tenants
thereunder; (c) shall promptly furnish to the Administrative Agent any notice of
default or termination received by any Borrower from any tenant, and any notice
of default or termination given by any Borrower to any tenant; (d) shall not
collect any rents for more than thirty (30) days in advance of the time when the
same shall become due, except for bona fide security deposits not in excess of
an amount equal to two months rent; (e) shall cause each and every tenant of the
Projects to deliver all payments of rent or other amounts due under the Leases
to the landlord to be paid in accordance with the terms and provisions of the
Lockbox Agreement; (f) shall not enter into any ground lease or master lease of
any part of any Project; (g) shall not further assign or encumber any Lease; (h)
shall not, except with the Administrative Agent's prior written consent, cancel
or accept surrender or termination of any Lease; and (i) shall not, except with
the Administrative Agent's prior written consent, modify or amend any Lease
(except for minor modifications and amendments entered into in the ordinary
course of business, consistent with prudent property management practices, not
affecting the economic terms of the Lease), and any action in violation of
clauses (e), (f), (g), (h) and (i) of this SECTION 5.03 shall be void at the
election of the Administrative Agent in its sole discretion.
Section 5.04 TENANT ESTOPPELS. At the Administrative Agent's request,
Borrowers shall obtain and furnish to the Administrative Agent (on behalf of the
Lenders), (a) written estoppels in form and substance reasonably satisfactory to
the Administrative Agent, executed by tenants under Leases in each Project and
confirming the term, rent, and other provisions and matters relating to the
Leases and (b) written subordination and attornment agreements, in form and
substance satisfactory to the Administrative Agent, executed by tenants under
leases in the Project, whereby, among other things, such tenants subordinate
their interest in the Project to the Loan Documents and agree to attorn to the
Administrative Agent (on behalf of the Lenders) and its successors and assigns
upon foreclosure or other transfer of the Project after an Event of Default.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Administrative Agent and
the Lenders as to itself that:
Section 6.01 ORGANIZATION AND POWER. Borrower and each Borrower Party
is duly organized, validly existing and in good standing under the laws of the
state of its formation or existence, and each Borrower is in compliance with all
legal requirements applicable to doing business in the state where each Project
owned by the applicable Borrower is located. Borrower is not a "foreign person"
within the meaning of ss. 1445(f)(3) of the Internal Revenue Code.
Section 6.02 VALIDITY OF LOAN DOCUMENTS. The execution, delivery and
performance by Borrower and each Borrower Party of the Loan Documents to which
it is a signatory:
(1) are duly authorized and do not require the consent or
approval of any other party or governmental authority which has not been
obtained; and
(2) will not violate any law or result in the imposition of any
lien, charge or encumbrance upon the assets of any such party, except as
contemplated by the Loan Documents. The Loan Documents constitute the legal,
valid and binding obligations of Borrowers and each Borrower Party which is a
party thereto, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, or similar laws generally affecting the
enforcement of creditors' rights.
Section 6.03 LIABILITIES; LITIGATION; DEBT.
(1) The financial statements delivered to the Administrative
Agent by Borrowers and each Borrower Party are true and correct with no
significant change since the date of preparation. Except as disclosed in such
financial statements, (i) there are no liabilities (fixed or contingent)
affecting any Project other than customary liabilities related to the ownership
of real estate, such as leases, management, landscape and maintenance contracts,
and (ii) there are no liabilities (fixed or contingent) affecting Borrowers or
any Borrower Party required to be disclosed according to GAAP that have not been
disclosed in such financial statements. Except as disclosed in such financial
statements or as disclosed on SCHEDULE 6.03 annexed hereto, there is no
litigation, administrative proceeding, investigation or other legal action
(including any proceeding under any state or federal bankruptcy or insolvency
law) pending or, to the knowledge of any Borrower, threatened, against any
Project, Borrower or any Borrower Party which if adversely determined could have
a material adverse effect on such party, any Project or the Loans.
(2) Neither any Borrower nor any Borrower Party is contemplating
either the filing of a petition by it under state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or
property, and neither any Borrower nor any Borrower Party has knowledge of any
Person contemplating the filing of any such petition against it.
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Section 6.04 TAXES AND ASSESSMENTS. Each Project is comprised of one or
more parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot. To Borrowers' best knowledge, there
are no pending or proposed, special or other assessments for public improvements
or otherwise affecting any Project, nor are there any contemplated improvements
to any Project that may result in such special or other assessments.
Section 6.05 OTHER AGREEMENTS; DEFAULTS. Except as disclosed on
SCHEDULE 6.05 annexed hereto, neither any Borrower nor any Borrower Party is a
party to any agreement or instrument or subject to any court order, injunction,
permit, or restriction which might adversely affect any Project or the business,
operations, or condition (financial or otherwise) of any Borrower or any
Borrower Party. Except as disclosed on SCHEDULE 6.05 annexed hereto, neither any
Borrower nor any Borrower Party is in violation of any agreement which violation
would have a material adverse effect on any Project, Borrower, or any Borrower
Party or Borrower's or Borrower Party's business, properties, or assets,
operations or condition, financial or otherwise.
Section 6.06 COMPLIANCE WITH LAW. Each Borrower has all requisite
licenses, permits, franchises, qualifications, certificates of occupancy or
other governmental authorizations to own, lease and operate each Project and
carry on its business except as may be disclosed in written reports delivered to
Administrative Agent prior to the date hereof, and, except for the Immediate
Repairs and as disclosed in the engineering and structural reports delivered by
the Borrowers to the Administrative Agent prior to the Closing Date, to the best
knowledge of Borrowers each Project is in compliance in all material respects
with all applicable legal requirements and is free of structural defects, and
all building systems contained therein are in good working order, subject to
ordinary wear and tear. Except as disclosed on Schedule 6.06 annexed hereto, no
Project constitutes, in whole or in part, a legally non-conforming use under
applicable legal requirements;
(1) To Borrowers' knowledge, no condemnation has been commenced
or, to Borrowers' knowledge, is contemplated with respect to all or any portion
of any Project or for the relocation of roadways providing access to any
Project; and
(2) To Borrowers' knowledge, each Project has adequate rights of
access to public ways and is served by adequate water, sewer, sanitary sewer and
storm drain facilities. All public utilities necessary or convenient to the full
use and enjoyment of each Project are located in the public right-of-way
abutting such Project, and all such utilities are connected so as to serve such
Project without passing over other property, except to the extent such other
property is subject to a perpetual easement for such utility benefiting such
Project. All roads necessary for the full utilization of each Project for its
current purpose have been completed and dedicated to public use and accepted by
all governmental authorities.
Section 6.07 LOCATION OF BORROWER. Each Borrower's principal place of
business and chief executive offices are located at 110 West A Street, San
Diego, California 92101-3711.
Section 6.08 ERISA. No Borrower has established any pension plan for
employees which would cause such Borrower to be subject to the Employee
Retirement Income Security Act of 1974, as amended.
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Section 6.09 MARGIN STOCK. No part of proceeds of the Loan will be used
for purchasing or acquiring any "margin stock" within the meaning of Regulations
T, U or X of the Board of Governors of the Federal Reserve System.
Section 6.10 TAX FILING. Each Borrower and each Borrower Party have
filed (or have obtained effective extensions for filing) all federal, state and
local tax returns required to be filed and have paid or made adequate provision
for the payment of all federal, state and local taxes, charges and assessments
payable by each Borrower and each Borrower Party, respectively.
Section 6.11 SOLVENCY. Giving effect to the Loans, the fair saleable
value of each Borrower's assets exceeds and will, immediately following the
making of the Loans, exceed such Borrower's total liabilities, including,
without limitation, subordinated, unliquidated, disputed and contingent
liabilities. The fair saleable value of each Borrower's assets is and will,
immediately following the making of the Loans, be greater than such Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
on its Debts as such Debts become absolute and matured. Each Borrower's assets
do not and, immediately following the making of the Loan will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. Each Borrower does not intend to, and does not believe that it
will, incur Debts and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such Debts as they mature (taking into
account the timing and amounts of cash to be received by each Borrower and the
amounts to be payable on or in respect of obligations of each Borrower).
Section 6.12 FULL AND ACCURATE DISCLOSURE. Subject to any qualification
to such statement as to the knowledge of Borrowers or Borrower Parties, no
statement of fact made by or on behalf of any Borrower or any Borrower Party in
this Agreement or in any of the other Loan Documents contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained herein or therein not misleading. There is no fact
presently known to any Borrower which has not been disclosed to the
Administrative Agent which adversely affects, nor as far as any Borrower can
foresee, might adversely affect, in any material respect any Project or the
business, operations or condition (financial or otherwise) of any Borrower or
any Borrower Party.
Section 6.13 SINGLE PURPOSE ENTITY. Each Borrower (other than BPOP) is
and has at all times since its formation been a Single Purpose Entity.
Section 6.14 MANAGEMENT AGREEMENT. The Management Agreements are the
only management agreement in existence with respect to the operation or
management of the Projects. The copies of the Management Agreements delivered to
the Administrative Agent are true and correct, and such agreements have not been
amended or modified. To the best of Borrowers' knowledge, neither party to such
agreement is in default under such agreement and the applicable Manager has no
defense, offset right or other right to withhold performance under or terminate
such agreement.
Section 6.15 YEAR 2000 COMPLIANCE. The Borrowers are aware of the
potential effect of the problem generally known as "Year 2000 computer-related
dysfunction" ("YEAR 2000 PROBLEM"). All computers and computer-dependent systems
of each Borrower, and to the best
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knowledge of each Borrower, its suppliers and vendors, and such systems used in
or in connection with the Projects, are, or will be, on or before December 1,
1999, able to function notwithstanding Year 2000 Problem. The Borrowers will
promptly notify the Administrative Agent in the event any Borrower discovers or
determines that any of the above-referenced computers or systems will not be
Year 2000 compliant prior to December 1, 1999.
Section 6.16 JV PROPERTIES; NO LIENS
Other than with respect to the deed of trust on the Point Loma property
in the approximate outstanding principal amount of $14,250,000, there are no
Liens on the JV Properties other than mechanics' liens and other minor
encumbrances that, as to any JV Property, are not material.
Section 6.17 LEASEHOLD PROPERTIES
Other than the Leasehold Property Leases described on EXHIBIT F,
attached hereto and made a part hereof, no Project is subject to any ground
leases or any other leases where a Borrower is the lessee thereunder. The
Borrowers have delivered to the Administrative Agent (on behalf of the Lenders)
true, correct and complete copies of all Leasehold Property Leases on or prior
to the date hereof. With respect to the Leasehold Property Leases described on
EXHIBIT F, except as set forth on SCHEDULE 6.17 annexed hereto:
(1) Each such Leasehold Property Lease or memorandum thereof,
including all amendments and modifications thereto, or a separate agreement
signed by the applicable lessor has been duly recorded; each such Leasehold
Property Lease by its terms (or pursuant to a written consent from the
applicable lessor thereunder which has been obtained) permits the interest of
the respective Borrower to be encumbered by the applicable Mortgage; and there
has been no material change in the terms of such Leasehold Property Lease since
its recordation other than as set forth in EXHIBIT F;
(2) Except shown on the applicable Title Policy, no Leasehold
Property Lease is subject to any Liens or encumbrances other than the related
Mortgage;
(3) Each such Leasehold Property Lease is valid and subsisting
and is in full force and effect in accordance with its terms and no uncured
event of default or event or condition which, with the giving of notice, the
passage of time or both, would constitute an event of default has occurred under
such Leasehold Property Lease;
(4) The Mortgage encumbering each Leasehold Property Lease
conforms and complies with such Leasehold Property Lease (or applicable written
consent from the lessor thereunder), does not constitute a violation or default
under such Leasehold Property Lease, and is and shall at all times constitute a
valid Lien on the relevant Borrower's entire estate under such Leasehold
Property Lease;
(5) All Leasehold Property Rent due and payable through and
including the Closing Date has been paid; and
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(6) All material terms, conditions, and agreements contained in
the Leasehold Property Leases have been performed to the extent they apply to
periods through and including the Closing Date.
Section 6.18 REIT MATTERS. BPPI has, at all times during its existence,
met the requirements for qualification and taxation as a REIT under the Code
and, to the best knowledge of BPPI, its method of operation will enable it to
continue to meet the requirements for qualification and taxation as a REIT under
the Code.
ARTICLE 7
FINANCIAL REPORTING; FINANCIAL COVENANTS
Section 7.01 FINANCIAL STATEMENTS.
(1) Intentionally Omitted.
(2) QUARTERLY REPORTS. Within forty-five (45) days after the end
of each calendar quarter, the Borrowers shall furnish to the Administrative
Agent (on behalf of the Lenders) a detailed operating statement (showing
quarterly activity and year-to-date) stating Operating Revenues, Operating
Expenses, operating income and net cash flow for the calendar quarter just ended
including a comparison of such Operating Revenues and Operating Expenses to
budget. Each such quarterly report shall also include calculations certified by
Borrower for such quarter of each of the financial covenants contained in
SECTION 7.06 through SECTION 7.12, inclusive, together with sufficient
information for Administrative Agent to make the determinations provided for in
such sections.
(3) ANNUAL REPORTS. Within ninety (90) days after the end of
each fiscal year of the Borrowers' operation of each Project, the Borrowers
shall furnish to the Administrative Agent (on behalf of the Lenders) a current
(as of the end of such fiscal year) balance sheet, a detailed operating
statement stating Operating Revenues, Operating Expenses, and net cash flow for
the Borrowers and each of the Projects, and, if required by the Administrative
Agent, prepared on a review basis and certified by an independent public
accountant satisfactory to the Administrative Agent.
(4) CERTIFICATION; SUPPORTING DOCUMENTATION. Each such financial
statement shall be in scope and detail satisfactory to the Administrative Agent
and certified by the chief financial representative of Borrowers.
Section 7.02 ACCOUNTING PRINCIPLES. All financial statements shall be
prepared in accordance with sound accounting principles applicable to commercial
real estate, consistently applied from year to year. If the financial statements
are prepared on an accrual basis, such statements shall be accompanied by a
reconciliation to cash basis accounting principles.
Section 7.03 OTHER INFORMATION. The Borrowers shall deliver to the
Administrative Agent such additional information regarding any Borrower, its
subsidiaries, its business, any Borrower Party, the JV Entities, the JV
Properties and the Projects within thirty (30) days after the Administrative
Agent's request therefor.
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Section 7.04 ANNUAL BUDGET. At least fifteen (15) days prior to the
commencement of each fiscal year, the Borrowers will provide to the
Administrative Agent (on behalf of the Lenders) its proposed annual operating
and capital improvements budget for the Projects, and the JV Properties for such
fiscal year for review and approval by Lender.
Section 7.05 AUDITS. The Administrative Agent shall have the right to
choose and appoint a certified public accountant to perform financial audits as
it deems necessary, at Borrowers' expense if Borrowers shall fail to deliver the
reports and materials provided for in SECTION 7.01 above and such failure shall
continue beyond the period set forth in this Agreement for the cure of covenants
hereunder. The Borrowers shall permit the Administrative Agent to examine such
records, books and papers of Borrowers which reflect upon their financial
condition and the income and expense relative to any Project.
Section 7.06 FIXED CHARGE COVERAGE RATIO. The Fixed Charge Coverage
Ratio as of the end of each fiscal quarter shall be not less than 1.50 to 1.00
as confirmed by Administrative Agent.
Section 7.07 INTEREST COVERAGE RATIO. The Interest Coverage Ratio as of
the end of each fiscal quarter shall be not less than 1.75 to 1.00 as confirmed
by Administrative Agent.
Section 7.08 CONSOLIDATED LOAN TO VALUE RATIO. The Consolidated Loan to
Value Ratio as of the end of each fiscal quarter shall not exceed 65% as
confirmed by Administrative Agent based on the last four (4) completed fiscal
quarters on a trailing four (4) quarter basis.
Section 7.09 LEVERAGE RATIO. The Leverage Ratio as of the end of each
fiscal quarter shall be not less than 8.00 to 1.00 as confirmed by
Administrative Agent based on the last four (4) completed fiscal quarters on a
trailing four (4) quarter basis.
Section 7.10 NET WORTH REQUIREMENT. The Borrower Net Worth as of the
end of each fiscal quarter shall be in an amount at least equal to eighty-five
(85%) of the sum of (a) the Borrower Net Worth as of the date hereof and (b) the
net proceeds of any Equity Offerings made after the date hereof, as confirmed by
Administrative Agent based on the last four (4) completed fiscal quarters on a
trailing four (4) quarter basis.
Section 7.11 PORTFOLIO COVENANTS. With respect to the Projects, as of
the end of each fiscal quarter (i) the Debt Service Coverage shall be at least
1.2 to 1.00 and (ii) Cash on Cash Return shall be at least 11% as determined by
Administrative Agent (on behalf of the Lender).
Section 7.12 JV COVENANTS. As of the end of each fiscal quarter, BPP
Retail shall have a ratio, expressed as a percentage of Debt to Book Value equal
to or less than fifty percent (50%).
ARTICLE 8
COVENANTS
Each Borrower covenants and agrees with the Administrative Agent and
the Lenders to do as follows:
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Section 8.01 DUE ON SALE AND ENCUMBRANCE; TRANSFERS OF INTERESTS.
Without the prior written consent of the Administrative Agent and the Lender (to
the extent required under SECTION 11.02 hereof), except in connection with
Partial Releases permitted under this Agreement:
(1) Neither any Borrower nor any other Person having a direct or
indirect ownership or beneficial interest in any Borrower, in BPE, or in either
P&V Owner shall (a) directly or indirectly sell, transfer, convey, mortgage,
pledge, or assign any interest in any Project or any part thereof or any
partnership or any other ownership interest in any Borrower, BPE or either P&V
Owner, or any rights to receive distributions from BPE, BPOP or the P&V Owners;
(b) further encumber, alienate, grant a Lien or grant any other interest in any
Project or any part thereof or any partnership or other ownership interest in
any Borrower, BPE or either P&V Owner, or any rights to receive distributions
from BPE, BPOP or the P&V Owners, whether voluntarily or involuntarily; or (c)
enter into any easement or other agreement granting rights in or restricting the
use or development of any Project (except for immaterial utilities and the like)
or permit the same or agree to the same.
(2) No new general partner, member, or limited partner having
the ability to Control the affairs of any Borrower, BPE or either P&V Owner
shall be admitted to or created in any Borrower, BPE or either P&V Owner (nor
shall any existing general partner or member or Controlling limited partner
withdraw from any Borrower, BPE or either P&V Owner ), and no change in the
organizational documents of any Borrower, BPE or either P&V Owner relating to
Control over such Borrower, BPE or either P&V Owner and/or any Project shall be
effected.
(3) BPPI shall at all times, whether directly or indirectly,
Control the Borrowers, BPE, the P&V Owner and the operation and management of
the Projects, the JV Properties and the P&V Sale Properties.
(4) As used in this SECTION 8.01, "transfer" shall include the
sale, transfer, conveyance, mortgage, pledge, or assignment of the legal or
beneficial ownership of (a) any Project, (b) any partnership interest in any
partner in any Borrower that is a partnership, (c) any voting stock in any
partner in Borrower that is a corporation, and (d) any membership interest of a
member of any Borrower that is a limited liability company; PROVIDED, HOWEVER,
THAT, "transfer" shall not include (i) the leasing of individual units within
any Project so long as the Borrowers comply with the provisions of the Loan
Documents relating to such leasing activity, (ii) the sale, transfer, pledge or
assignment of any limited partnership interest or non-managing member interest
in any Borrower or Borrower Party or in any direct or indirect general managing
member of any Borrower or Borrower Party, (iii) the creation of any Lien on any
Non-Mortgaged Properties other than the P&V Sale Properties, or (iv) the sale,
transfer, pledge or assignment of any beneficial ownership interests in BPPI,
(v) so long as there is no violation of SECTIONS 8.01(2), 8.01(3) and 8.03 after
giving effect to the transactions described in clauses (i) through (iv) of this
Section 8.01(4).
Section 8.02 TAXES; CHARGES. The Borrowers shall pay, before any fine,
penalty, interest or cost may be added thereto, and shall not enter into any
agreement to defer, any real estate taxes and assessments, franchise taxes and
charges, and other governmental charges that may become a Lien upon any Project
or become payable during the term of the Loans, and will
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promptly furnish the Administrative Agent with evidence of such payment;
however, (i) the Borrowers may unless such taxes have become a Lien on any
Project and, in all cases, before any penalty or interest accrues thereon,
contest (or continue to contest) the validity or amount of any such taxes or any
related tax assessment so long as (a) the Borrowers notify the Administrative
Agent that they intend to contest such taxes, (b) Borrowers are diligently
contesting the same by appropriate legal proceedings in good faith and at its
own expense and (c) adequate reserve or other appropriate provision shall have
been made therefor to the extent required by GAAP, the Borrowers' compliance
with SECTION 3.04 of this Agreement relating to impounds for taxes and
assessments shall, with respect to payment of such taxes and assessments, be
deemed compliance with this SECTION 8.02. The Borrowers shall not suffer or
permit the joint assessment of any Project with any other real property
constituting a separate tax lot or with any other real or personal property. The
Borrowers shall pay when due all claims and demands of mechanics, materialmen,
laborers and others which, if unpaid, might result in a Lien on any Project;
however, the Borrowers may contest the validity of such claims and demands so
long as (a) the Borrowers notify the Administrative Agent that they intend to
contest such claim or demand, (b) the Borrowers provide the Administrative Agent
with an indemnity, bond or other security satisfactory to the Administrative
Agent (including an endorsement to the Administrative Agent's title insurance
policy insuring against such claim or demand) assuring the discharge of the
Borrowers' obligations for such claims and demands, including interest and
penalties, and (c) the Borrowers are diligently contesting the same by
appropriate legal proceedings in good faith and at its own expense and concludes
such contest prior to the tenth (10th) day preceding the earlier to occur of the
Maturity Date or the date on which such Project is scheduled to be sold for
non-payment.
Section 8.03 CONTROL; MANAGEMENT. There shall be no change in the
day-to-day Control and management of any Borrower or Borrower Party without the
prior written consent of the Administrative Agent; provided, however, that a
change in the day-to-day control and management of any Borrower, BPE or either
P&V Owner shall not be deemed to have occurred hereunder if and for so long as
BPPI has direct or indirect Control over the Borrowers, BPE and the P&V Owners.
The Borrowers shall not terminate, replace or appoint any Manager or terminate
or amend any Management Agreement for the Projects without the Administrative
Agent's prior written approval which approval shall not be unreasonably,
withheld, delayed or conditioned. Any change in ownership or Control of the
Manager shall be cause for the Administrative Agent to re-approve such Manager
and Management Agreement. If at any time the Administrative Agent consents to
the appointment of a new manager, such new manager and the applicable Borrower
shall, as a condition of the Administrative Agent's consent, execute a Property
Manager's Consent and Subordination of Management Agreement in the form then
used by the Administrative Agent. Each Manager shall hold and maintain all
necessary licenses, certifications and permits required by law. The Borrowers
shall fully perform all of its covenants, agreements and obligations under each
Management Agreement. The Borrowers shall:
(1) cause each Manager to perform in all material respects all
of its covenants, agreements and obligations under the applicable Management
Agreements;
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(2) give prompt notice to the Administrative Agent of any
material notice of default under any Management Agreement by Manager when
received or delivered by Manager in connection with or otherwise affecting a
Project together with a complete copy of any such notice;
(3) not terminate or materially modify, alter or amend the terms
of any Management Agreement in connection with or otherwise affecting a Project
without the prior written consent of the Administrative Agent or as expressly
permitted hereunder;
(4) not take any action that is in contravention of the Manager
Subordination Agreement and Assignment of Contracts as it relates to the
Management Agreement; and
(5) appear in and defend any action growing out of or in any
manner connected with any Management Agreement.
Section 8.04 OPERATION; MAINTENANCE; INSPECTION. The Borrowers shall
observe and comply with all legal requirements applicable to the ownership, use
and operation of each Project, the non-compliance with which may have an adverse
effect on the Borrowers on such Project. The Borrowers shall maintain each
Project in good condition and promptly repair any damage or casualty. The
Borrowers shall permit the Administrative Agent and the Lenders and its agents,
representatives and employees, upon reasonable prior notice to the Borrowers, to
inspect each Project and conduct such environmental and engineering studies as
the Administrative Agent may require, provided such inspections and studies do
not materially interfere with the use and operation of each Project.
Section 8.05 TAXES ON SECURITY. The Borrowers shall pay all taxes,
charges, filing, registration and recording fees, excises and levies payable
with respect to the Notes or the Liens created or secured by the Loan Documents,
other than income, franchise and doing business taxes imposed on the
Administrative Agent or any Lender. If there shall be enacted any law (a)
deducting the Loans from the value of the Projects for the purpose of taxation,
(b) affecting any Lien on any Project, or (c) changing existing laws of taxation
of mortgages, deeds of trust, security deeds, or debts secured by real property,
or changing the manner of collecting any such taxes, the Borrowers shall
promptly pay to the Administrative Agent, on demand, all taxes, costs and
charges for which the Administrative Agent or any Lender is or may be liable as
a result thereof; however, if such payment would be prohibited by law or would
render the Loan usurious, then instead of collecting such payment, the
Administrative Agent may (and on request of the Majority Lenders shall) declare
all amounts owing under the Loan Documents to be immediately due and payable.
Section 8.06 LEGAL EXISTENCE; NAME, ETC. The Borrowers and each
Borrower Party shall preserve and keep in full force and effect, entity status,
franchises, rights and privileges under the laws of the state of its formation,
and all qualifications, licenses and permits applicable to the ownership, use
and operation of each Project or its assets, as applicable. Neither the
Borrowers nor any Borrower Party shall wind up, liquidate, dissolve, reorganize,
merge, or consolidate with or into, or convey, sell, assign, transfer, lease, or
otherwise dispose of all or substantially all of its assets, or acquire all or
substantially all of the assets of the business of any Person, or permit any
Subsidiary or Affiliate of any Borrower to do so. The Borrowers and each
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Borrower Party shall conduct business only in its own names and shall not change
such name, identity, or organizational structure, or the location of its chief
executive office or principal place of business unless the Borrowers or such
Borrower Party (a) shall have obtained the prior written consent of the
Administrative Agent to such change, and (b) shall have taken all actions
necessary or requested by the Administrative Agent to file or amend any
financing statement or continuation statement to assure perfection and
continuation of perfection of security interests under the Loan Documents. For
so long as the Projects owned by Cameron and Riley remain as Projects hereunder,
Cameron and Riley shall maintain their existence as Single Purpose Entities.
Section 8.07 AFFILIATE TRANSACTIONS. Without the prior written consent
of the Administrative Agent, no Borrower shall engage in any transaction
affecting any Project with any Affiliate of the Borrowers except for
transactions for necessary and customary services for the operation and
ownership of commercial real property at no more than normal and customary
market rates payable to third parties for such services and provided that no
contract for any such services shall have a term of greater than one (1) year;
Section 8.08 LIMITATION ON OTHER DEBT. Neither BPPI nor any of its
respective Subsidiaries shall guarantee, incur or assume any Debt (other than
with respect to the Loans and any guarantees currently existing on a nonrecourse
basis as of the date hereof which has been disclosed to the Administrative Agent
in writing prior to the Closing Date) of any Person on a recourse basis, in
excess of $95,000,000 in the aggregate.
Section 8.09 FURTHER ASSURANCES. The Borrowers shall promptly (a) cure
any defects in the execution and delivery of the Loan Documents, and (b) execute
and deliver, or cause to be executed and delivered, all such other documents,
agreements and instruments as the Administrative Agent may reasonably request to
further evidence and more fully describe the collateral for the Loans, to
correct any omissions in the Loan Documents, to perfect, protect or preserve any
liens created under any of the Loan Documents, or to make any recordings, file
any notices, or obtain any consents, as may be necessary or appropriate in
connection therewith.
Section 8.10 ESTOPPEL CERTIFICATES. The Borrowers, within ten (10) days
after request, shall furnish to the Administrative Agent a written statement,
duly acknowledged, setting forth the amount due on the Loans, the terms of
payment of the Loans, the date to which interest has been paid, whether any
offsets or defenses exist against the Loans and, if any are alleged to exist,
the nature thereof in detail, and such other matters as the Administrative Agent
reasonably may request.
Section 8.11 NOTICE OF CERTAIN EVENTS. The Borrowers shall promptly
notify the Administrative Agent of (a) any Potential Default or Event of
Default, together with a detailed statement of the steps being taken to cure
such Potential Default or Event of Default; (b) any notice of default received
by Borrowers under other obligations relating to any Project or otherwise
material to the Borrowers' business; and (c) any threatened or pending legal,
judicial or regulatory proceedings, including any dispute between any Borrower
and any governmental authority, affecting any Borrower or any Project.
Section 8.12 INDEMNIFICATION. The Borrowers shall indemnify, defend and
hold the Administrative Agent and each Lender harmless from and against any and
all losses, liabilities,
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claims, damages, expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements of any kind or nature whatsoever, including the
reasonable fees and actual expenses of their counsel, which may be imposed upon,
asserted against or incurred by any of them relating to or arising out of (1)
any Project or (2) any of the Loan Documents or the transactions contemplated
thereby, including, without limitation, (a) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about any of the
Project or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways, (b) any inspection, review
or testing of or with respect to the Project, (c) any investigative,
administrative, mediation, arbitration, or judicial proceeding, whether or not
the Administrative Agent or any Lender is designated a party thereto, commenced
or threatened at any time (including after the repayment of the Loans) in any
way related to the execution, delivery or performance of any Loan Document or to
the Projects, (d) any proceeding instituted by any Person claiming a Lien with
respect to one or more Projects or any other security or collateral granted by
the Borrowers to the Administrative Agent or the Lenders, and (e) any brokerage
commissions or finder's fees claimed by any broker or other party in connection
with the Loans, the Projects, or any of the transactions contemplated in the
Loan Documents, including those arising from the joint, concurrent, or
comparative negligence of the Administrative Agent or any Lender, except to the
extent any of the foregoing is caused by the Administrative Agent's or any
Lender's gross negligence or willful misconduct.
Section 8.13 P&V SALE PROPERTIES. The Borrowers shall (or shall cause
the applicable owner of the P&V Sale Properties to) use its best efforts to
market and sell the P&V Sale Properties to third party purchasers. Upon the
consummation of any sale of a P&V Sale Property, the Borrowers shall promptly
pay to the Administrative Agent (on behalf of the Lenders) any and all P&V Net
Sales Proceeds that it receives to be applied in accordance with SECTION 2.03(2)
hereof.
Section 8.14 LEASEHOLD PROPERTY LEASES. The Borrowers shall pay,
promptly when due and payable before default (before the commencement of any
"cure" or "grace" period), any and all Leasehold Property Rent. Upon notice from
the Administrative Agent (which may only be given after the occurrence of an
Event of Default or Potential Default), simultaneously with the making of each
and every payment of Leasehold Property Rent payable after the delivery of such
notice, the applicable Borrower shall simultaneously deliver to the
Administrative Agent a copy of the check in the amount of such payment delivered
to the payee.
(1) The Borrowers shall perform and observe (before the
commencement of any "cure" or "grace" period) all material terms, covenants, and
conditions that any Borrower is required to perform and observe under the
applicable Leasehold Property Lease and do everything necessary to preserve and
to keep unimpaired and in full force and effect the applicable Leasehold
Property Lease. No Borrower shall permit any Leasehold Property Lease to go into
default (whether or not any cure period in the Leasehold Property Lease has
expired).
(2) The Borrowers shall enforce the material obligations of the
applicable lessor under each Leasehold Property Lease so that such Borrower may
at all times enjoy all its rights, benefits and privileges under the applicable
Leasehold Property Lease.
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(3) The Borrowers shall not, without the Administrative Agent's
consents, cause, agree to, permit or suffer, to occur any Leasehold Property
Lease Impairment. Any Leasehold Property Lease Impairment made without the
Administrative Agent's consent shall be null, void, and of no force and effect.
Any party entering into or purportedly obtaining the benefit of such a purported
Leasehold Property Lease Impairment is hereby placed on notice that no Borrower
has the power or authority to cause, consent, or agree to such Leasehold
Property Lease Impairment without the Administrative Agent's consent.
(4) The Borrowers shall promptly deliver to the Administrative
Agent a copy of any notice of default or termination, or demand for performance
(other than routine bills for current Leasehold Property Rent) that it receives
from any lessor under a Leasehold Property Lease. Each Borrower shall furnish to
the Administrative Agent all information that any Lender may reasonably request
from time to time concerning the Leasehold Property Leases and such Borrower's
compliance with the Leasehold Property Leases. Each Borrower, immediately upon
learning that any lessor under a Leasehold Property Lease has failed to perform
any of the material terms and provisions under any Leasehold Property Lease
(including by reason of a rejection of disaffirmance or purported rejection or
disaffirmance of such Leasehold Property Lease pursuant to any state or federal
bankruptcy law), shall notify the Administrative Agent thereof. Promptly after
the Closing Date, and again promptly after execution of any amendment to the
related Mortgage, each Borrower shall notify the applicable lessor of the
execution and delivery of the related Mortgage or such amendment. Such notice
shall set forth, verbatim, in a form satisfactory to the Administrative Agent,
all provisions of the related leasehold Mortgage relating to Leasehold Property
Lease Impairments. The Administrative Agent shall have the right, but not the
obligation, to give any lessor under a Leasehold Property Lease at any time any
notice described in this paragraph or otherwise relating to the related
Mortgage.
(5) The Borrowers shall promptly notify the Administrative Agent
of any request that any party to a Leasehold Property Lease makes for
arbitration or other dispute resolution procedure pursuant to such Leasehold
Property Lease and of the institution of any such arbitration or dispute
resolution. The Borrowers hereby authorize the Administrative Agent to
participate in any such arbitration or dispute resolution. Such participation
may, after the occurrence of an Event of Default or any Potential Default or, in
the event the Administrative Agent determines in good faith that its Lien or
Mortgage is threatened, at the Administrative Agent's option, be to the
exclusion of, and in place of, any Borrower. The Borrowers shall promptly
deliver to the Administrative Agent a copy of the determination of each such
arbitration or dispute resolution mechanism.
(6) If the Administrative Agent or its designee shall acquire or
obtain a New Leasehold Property Lease, then no Borrower shall have any right,
title or interest whatsoever in or to such New Leasehold Property Lease, or any
proceeds or income arising from the estate arising under any such New Leasehold
Property Lease, including from any sale or other disposition thereof. The
Administrative Agent or its designee shall hold such New Leasehold Property
Lease free and clear of any right or claim of any Borrower.
(7) No Borrower shall elect to treat any Leasehold Property
Lease as terminated, cancelled or surrendered pursuant to the applicable
provisions of Title 11, United States Code, or any other similar state or
federal statute for the relief of debtors, including any
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assignment for the benefit of creditors or similar proceeding (including, but
not limited to, Section 365(h)(1) thereof)(a "BANKRUPTCY PROCEEDING") without
the Administrative Agent's prior written consent in the event of a Bankruptcy
Proceeding affecting the lessor under any Leasehold Property Lease. In addition,
the Borrowers shall, in the event of any Bankruptcy Proceeding affecting any
lessor under any Leasehold Property Lease, reaffirm and ratify the legality,
validity, binding effect and enforceability of the Leasehold Property Lease and
shall remain in possession of the Project and the leasehold estate created by
the Leasehold Property Lease, notwithstanding any rejection thereof by the
lessor under the Leasehold Property Lease or any trustee, custodian or receiver.
(8) Borrowers shall give the Administrative Agent not less than
forty-five (45) days' prior written notice of the date on which any Borrower
shall apply to any court or other governmental authority for authority and
permission to reject any Leasehold Property Lease in the event that there shall
be filed by or against any Borrower any petition, action or proceeding under
Title 11, United States Code or under any other similar federal or state law now
or hereafter in effect and if such Borrower determines to reject the Leasehold
Property Lease, the Administrative Agent shall have the right, but not the
obligation, to serve upon such Borrower within such forty-five (45) day period a
notice stating that (i) the Administrative Agent demands that such Borrower
assume and assign the Leasehold Property Lease to the Administrative Agent
subject to and in accordance with Title 11, United States Code or any other
similar federal or state law now or hereafter in effect and (ii) the Borrowers
covenant to cure or provide reasonably adequate assurance thereof with respect
to all defaults reasonably susceptible of being cured by the Administrative
Agent (on behalf of the Lenders) and of future performance under the Leasehold
Property Lease. If the Administrative Agent serves upon such Borrower the notice
described above, such Borrower shall not seek to reject the Leasehold Property
Lease and shall comply with the demand provided for in clause (i) above within
five (5) Business Days after the notice shall have been given by the
Administrative Agent.
(9) The Administrative Agent (on behalf of the Lenders) shall
have the right, but not the obligation, to proceed in its own name or in the
name of any Borrower in respect of any claim, suit, action or proceeding
relating to the rejection of any Leasehold Property Lease by the lessor
thereunder as a result of a Bankruptcy Proceeding affecting any such lessor
including, but not limited to, the right to file and prosecute, to the exclusion
of Borrowers, any and all proofs of claims, complaints, notices and other
documents in any case in respect of the lessor thereunder and pursuant to Title
11, United States Code or any other similar federal or state law now or
hereafter in effect.
Section 8.15 REIT MATTERS; DISTRIBUTIONS. Except as may be otherwise
expressly permitted by this Agreement, neither any Borrower, nor any Borrower
Party shall make any distributions or declare or pay any cash or non-cash
dividends (including making any special distributions arising in connection with
the sale of any of the real property assets of any of the Borrowers or in
connection with any capital events) without the prior written consent of the
Administrative Agent, PROVIDED, HOWEVER, THAT, Administrative Agent (on behalf
of the Lenders) hereby consents to Cameron and Riley making distributions of any
or all such proceeds to BPOP, and all such Persons may make distributions and
declare or pay any such dividends necessary to
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enable BPPI to satisfy the requirements for maintaining its qualification as a
REIT under the Code.
Section 8.16 INVESTMENT RESTRICTIONS. Subject to the limitations set
forth herein, BPPI shall not at any time make or own any Investment in any
Person that purchases, leases or owns any real property or other asset, except
for Investments in retail shopping center properties and except as follows:
(a) Investments in unimproved land not to exceed 2.5% of total assets
or $25,000,000;
(b) Investments in office buildings and related parking facilities not
to exceed 5% of total assets or $50,000,000;
(c) Investments in notes of any Person, which notes are secured by
mortgages or deeds of trust on any real properties located in the United States
not to exceed 2.5% of total assets or $25,000,000; and
(d) Investments in real property that is under construction or
development as a retail shopping center (but excluding tenant improvements and
rehabilitation projects), and in any case not to exceed 10% of total assets or
$100,000,000.
Section 8.17 NO STOCK REPURCHASE. No Advances of the Loans shall be
used by the Borrowers, any Borrower Party or its Affiliates for the purposes of
purchasing or repurchasing any outstanding shares of stock or other equity or
debt securities of BPPI. The Borrowers and any Borrower Party shall not be
permitted to purchase the Stock or other equity or debt securities of BPPI,
until after the sale of the P&V Sale Properties to a third-party in an
arms-length transaction and the application of the P&V Net Sales Proceeds in
accordance with the provisions of SECTION 2.03(2) hereof.
ARTICLE 9
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default under the
Loans:
Section 9.01 PAYMENTS. The Borrowers' failure to pay any regularly
scheduled installment of principal, interest or other amount due under the Loan
Documents within five (5) days after the date when due, or the Borrowers'
failure to pay the Loans at the Maturity Date, whether by acceleration or
otherwise.
Section 9.02 INSURANCE. Borrowers' failure to maintain insurance as
required under SECTION 3.01 of this Agreement.
Section 9.03 SALE, ENCUMBRANCE, ETC. Subject to the terms and
provisions of SECTION 2.04 hereof, the sale, transfer, conveyance, pledge,
mortgage or assignment of any part or all of any Project, or any interest
therein, or of any interest in Borrower in violation of SECTION 8.01 of this
Agreement.
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Section 9.04 SINGLE PURPOSE ENTITY. If Cameron or Riley breaches its
covenant under SECTION 6.13 hereof.
Section 9.05 TAXES. If any of the Taxes are not paid when the same are
due and payable, subject to the Borrowers' right to contest such payments as
provided in, and subject to the conditions in, SECTION 8.02 hereof.
Section 9.06 REPRESENTATIONS AND WARRANTIES. Any representation or
warranty made in any Loan Document proves to be untrue in any material respect
when made or deemed made.
Section 9.07 OTHER ENCUMBRANCES. Any default under any document or
instrument, other than the Loan Documents, evidencing or creating a Lien on a
Project or any part thereof, which default continues beyond any applicable
notice and cure period.
Section 9.08 INVOLUNTARY BANKRUPTCY OR OTHER PROCEEDING. Commencement
of an involuntary case or other proceeding against any Borrower or any Borrower
Party (each, a "BANKRUPTCY PARTY") which seeks liquidation, reorganization or
other relief with respect to it or its debts or other liabilities under any
bankruptcy, insolvency or other similar law now or hereafter in effect or seeks
the appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any of its property, and such involuntary case or other
proceeding shall remain undismissed or unstayed for a period of sixty (60) days;
or an order for relief against a Bankruptcy Party shall be entered in any such
case under the Federal Bankruptcy Code.
Section 9.09 VOLUNTARY PETITIONS, ETC. Commencement by a Bankruptcy
Party of a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its Debts or other
liabilities under any bankruptcy, insolvency or other similar law or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for it or any of its property, or consent by a Bankruptcy Party to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or the making
by a Bankruptcy Party of a general assignment for the benefit of creditors, or
the failure by a Bankruptcy Party, or the admission by a Bankruptcy Party in
writing of its inability, to pay its debts generally as they become due, or any
action by a Bankruptcy Party to authorize or effect any of the foregoing.
Section 9.10 CHASE FACILITY. An event of default shall have occurred
under the Chase Loan Facility and any other agreements or loan documents
executed in connection therewith.
Section 9.11 IMMEDIATE REPAIRS. Borrowers failure to complete all of
the Immediate Repairs by March 31, 2000, to the satisfaction of the
Administrative Agent (on behalf of the Lenders).
Section 9.12 COVENANTS. Any Borrower's failure to perform or observe
any of the agreements and covenants contained in this Agreement or in any of the
other Loan Documents and not specified above, and the continuance of such
failure for ten (10) days after notice by the Administrative Agent to any
Borrower; however, subject to any shorter period for curing any failure by any
Borrower as specified in any of the other Loan Documents, Borrowers shall have
an additional forty-five (45) days to cure such failure if (a) such failure does
not involve the
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failure to make payments on a monetary obligation; (b) such failure cannot
reasonably be cured within ten (10) days; (c) such Borrower is diligently
undertaking to cure such default, and (d) such Borrower has provided the
Administrative Agent with security reasonably satisfactory to the Administrative
Agent against any interruption of payment or impairment of collateral as a
result of such continuing failure. The notice and cure provisions of this
SECTION 9.12 do not apply to the Events of Default described in SECTION 9.01
through SECTION 9.11 hereof.
ARTICLE 10
REMEDIES
Section 10.01 REMEDIES - INSOLVENCY EVENTS. Upon the occurrence of any
Event of Default described in SECTION 9.08 or SECTION 9.09, the obligations of
the Lenders to advance amounts hereunder shall immediately terminate, and all
amounts due under the Loan Documents immediately shall become due and payable,
all without written notice and without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate the maturity thereof, notice
of acceleration of the maturity thereof, or any other notice of default of any
kind, all of which are hereby expressly waived by the Borrowers; however, if the
Bankruptcy Party under SECTION 9.08 or SECTION 9.09 is other than any Borrower,
then all amounts due under the Loan Documents shall become immediately due and
payable at the Administrative Agent's election, in the Administrative Agent's
sole discretion.
Section 10.02 REMEDIES - OTHER EVENTS. Except as set forth in SECTION
10.01 above, while any Event of Default exists, the Administrative Agent may (a)
by written notice to the Borrowers, declare the entire amount of the Loans to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate the maturity thereof, notice
of acceleration of the maturity thereof, or other notice of default of any kind,
all of which are hereby expressly waived by the Borrowers, (b) terminate the
obligation, if any, of the Lenders to advance amounts hereunder, and (c)
exercise all rights and remedies therefor under the Loan Documents and at law or
in equity.
Section 10.03 LENDER'S RIGHT TO PERFORM THE OBLIGATIONS. If the
Borrowers shall fail, refuse or neglect to make any payment or perform any act
required by the Loan Documents, then while any Event of Default exists, and
without notice to or demand upon the Borrowers and without waiving or releasing
any other right, remedy or recourse the Administrative Agent or any Lender may
have because of such Event of Default, the Administrative Agent may (but shall
not be obligated to) make such payment or perform such act for the account of
and at the expense of the Borrowers, and shall have the right to enter upon the
Projects for such purpose and to take all such action thereon and with respect
to the Projects as it may deem necessary or appropriate. If the Administrative
Agent shall elect to pay any sum due with reference to the Projects, the
Administrative Agent may do so in reliance on any bill, statement or assessment
procured from the appropriate governmental authority or other issuer thereof
without inquiring into the accuracy or validity thereof. Similarly, in making
any payments to protect the security intended to be created by the Loan
Documents, the Administrative Agent shall not be bound to inquire into the
validity of any apparent or threatened adverse title, lien, encumbrance, claim
or charge before making an advance for the purpose of preventing or removing the
same. Additionally, if any Hazardous Materials affect or threaten to affect any
Project, the Administrative Agent may (but
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shall not be obligated to) give such notices and take such actions as it deems
necessary or advisable in order to abate the discharge of any Hazardous
Materials or remove the Hazardous Materials. The Borrowers shall indemnify,
defend and hold the Administrative Agent and the Lenders harmless from and
against any and all losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements of any kind or
nature whatsoever, including reasonable attorneys' fees, incurred or accruing by
reason of any acts performed by the Administrative Agent or any Lender pursuant
to the provisions of this SECTION 10.03, including those arising from the joint,
concurrent, or comparative negligence of the Administrative Agent and any
Lender, except as a result of the Administrative Agent's or any Lender's gross
negligence or willful misconduct. All sums paid by the Administrative Agent
pursuant to this SECTION 10.03, and all other sums expended by the
Administrative Agent or any Lender to which it shall be entitled to be
indemnified, together with interest thereon at the Default Rate from the date of
such payment or expenditure until paid, shall constitute additions to the Loans,
shall be secured by the Loan Documents and shall be paid by Borrower to the
Administrative Agent upon demand.
ARTICLE 11
MISCELLANEOUS
Section 11.01 NOTICES. Any notice required or permitted to be given
under this Agreement shall be in writing and either shall be mailed by certified
mail, postage prepaid, return receipt requested, or sent by overnight air
courier service, or personally delivered to a representative of the receiving
party, or sent by telecopy (provided an identical notice is also sent
simultaneously by mail, overnight courier, or personal delivery as otherwise
provided in this SECTION 11.01) to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof. Any
communication so addressed and mailed shall be deemed to be given on the
earliest of (1) when actually delivered, (2) on the first Business Day after
deposit with an overnight air courier service, or (3) on the third Business Day
after deposit in the United States mail, postage prepaid, in each case to the
address of the intended addressee (except as otherwise provided in the
Mortgage), and any communication so delivered in person shall be deemed to be
given when receipted for by, or actually received by the Administrative Agent, a
Lender or any Borrower, as the case may be. If given by telecopy, a notice shall
be deemed given and received when the telecopy is transmitted to the party's
telecopy number specified above, and confirmation of complete receipt is
received by the transmitting party during normal business hours or on the next
Business Day if not confirmed during normal business hours, and an identical
notice is also sent simultaneously by mail, overnight courier, or personal
delivery as otherwise provided in this SECTION 11.01. Any party may designate a
change of address by written notice to each other party by giving at least ten
(10) days prior written notice of such change of address.
Section 11.02 AMENDMENTS, WAIVERS, ETC.
(a) Subject to any consents required pursuant to this SECTION
11.02 and any other provisions of this Agreement and any other Loan Document
which expressly require the consent, approval or authorization of the Majority
Lenders, this Agreement and any other Loan Document may be modified or
supplemented only by an instrument in writing signed by the
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Borrowers and the Administrative Agent; PROVIDED that, the Administrative Agent
may (without any Lender's consent) give or withhold its agreement to any
amendments of the Loan Documents or any waivers or consents in respect thereof
or exercise or refrain from exercising any other rights or remedies which the
Administrative Agent may have under the Loan Documents or otherwise provided
that such actions do not, in the Administrative Agent's judgment reasonably
exercised, materially adversely affect the value of any collateral, taken as a
whole, or represent a departure from Administrative Agent's standard of care
described in SECTION 13.05 (and the assignment or granting of a participation by
GECC shall not limit or otherwise affect its discretion in respect of any of the
foregoing), except that the Administrative Agent will not, without the consent
of each Lender, agree to the following (provided that no Lender's consent shall
be required for any of the following which are otherwise required under the Loan
Documents): (a) any increase in the amount of the Commitments; (b) reduce the
principal amount of the Loans or reduce the interest rate thereon; (c) extend
any stated payment date for principal of or interest on the Loans payable to
such Lender; (d) release the Borrower, any Guarantor or any other party from
liability under the Loan Documents; (e) release or subordinate in whole or in
part any material portion of the collateral given as security for the Loans; (f)
modify any of the provisions of this Section, the definition of "Majority
Lenders" or any other provision in the Loan Documents specifying the number or
percentage of the Lenders required to waive, amend or modify any rights
thereunder or make any determination or grant any consent thereunder; (g) modify
the terms of any Event of Default; (h) consent to (i) the sale, transfer or
encumbrance of any portion of the Project (or any interest therein) or any
direct or indirect ownership interest therein and (ii) the incurrence by any
Borrower of any additional indebtedness secured by the Project, in each case to
the extent (and subject to any standard of reasonability) such consent is
required under the Loan Documents; (i) any extension of the Maturity Date; or
(j) any changes in the sharing provisions among the Lenders.
(b) Notwithstanding anything to contrary contained in this
Agreement, any modification or supplement of ARTICLE 13, or of any of the rights
or duties of the Administrative Agent hereunder, shall require the consent of
the Administrative Agent.
Section 11.03 LIMITATION ON INTEREST. It is the intention of the
parties hereto to conform strictly to applicable usury laws. Accordingly, all
agreements between the Borrowers, the Administrative Agent and the Lenders with
respect to the Loans are hereby expressly limited so that in no event, whether
by reason of acceleration of maturity or otherwise, shall the amount paid or
agreed to be paid to the Administrative Agent or any Lender or charged by any
Lender for the use, forbearance or detention of the money to be lent hereunder
or otherwise, exceed the maximum amount allowed by law. If the Loans would be
usurious under applicable law (including the laws of the state and the laws of
the United States of America), then, notwithstanding anything to the contrary in
the Loan Documents: (a) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, taken, reserved, charged
or received under the Loan Documents shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited on the Notes by the holders thereof (or, if the Notes have been paid in
full, refunded to the Borrowers); and (b) if maturity is accelerated by reason
of an election by the Administrative Agent in accordance with the terms hereof,
or in the event of any prepayment, then any consideration which constitutes
interest may never include more than the maximum amount
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allowed by applicable law. In such case, excess interest, if any, provided for
in the Loan Documents or otherwise, to the extent permitted by applicable law,
shall be amortized, prorated, allocated and spread from the date of advance
until payment in full so that the actual rate of interest is uniform through the
term hereof. If such amortization, proration, allocation and spreading is not
permitted under applicable law, then such excess interest shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on the Notes (or, if the Notes have been
paid in full, refunded to the Borrowers). The terms and provisions of this
SECTION 11.03 shall control and supersede every other provision of the Loan
Documents. The Loan Documents are contracts made under and shall be construed in
accordance with and governed by the laws of the State, except that if at any
time the laws of the United States of America permit the Lenders to contract
for, take, reserve, charge or receive a higher rate of interest than is allowed
by the laws of the State (whether such federal laws directly so provide or refer
to the law of any state), then such federal laws shall to such extent govern as
to the rate of interest which the Lenders may contract for, take, reserve,
charge or receive under the Loan Documents.
Section 11.04 INVALID PROVISIONS. If any provision of any Loan Document
is held to be illegal, invalid or unenforceable, such provision shall be fully
severable; the Loan Documents shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof;
the remaining provisions thereof shall remain in full effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom; and in lieu of such illegal, invalid or unenforceable provision there
shall be added automatically as a part of such Loan Document a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible to be legal, valid and enforceable.
Section 11.05 REIMBURSEMENT OF EXPENSES. The Borrowers shall pay or
reimburse on demand of the applicable party for: (a) all reasonable expenses
incurred by the Administrative Agent in connection with the origination and
syndication of the Loans, including reasonable fees and expenses of the
Administrative Agent's attorneys, environmental, engineering and other
consultants, and fees, charges or taxes for the recording or filing of Loan
Documents, (b) all reasonable expenses of the Administrative Agent in connection
with the administration of the Loans, including audit costs, inspection fees,
settlement of condemnation and casualty awards, and premiums for title insurance
and endorsements thereto, and (c) for all reasonable amounts expended, advanced
or incurred by the Administrative Agent or any Lender to collect the Notes, or
to enforce the rights of the Administrative Agent and the Lenders under this
Agreement or any other Loan Document, or to defend or assert the rights and
claims of the Administrative Agent and the Lenders under the Loan Documents or
with respect to any Project (by litigation or other proceedings), which amounts
will include all court costs, attorneys' fees and expenses, fees of auditors and
accountants, and investigation expenses as may be incurred by the Administrative
Agent and the Lenders in connection with any such matters (whether or not
litigation is instituted), together with interest at the Default Rate on each
such amount from the date of disbursement until the date of reimbursement to the
Administrative Agent and the Lenders, all of which shall constitute part of the
Loans and shall be secured by the Loan Documents.
Section 11.06 APPROVALS; THIRD PARTIES; CONDITIONS. All approval rights
retained or exercised by the Administrative Agent and the Lenders with respect
to leases, contracts, plans,
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studies and other matters are solely to facilitate the Lenders' credit
underwriting, and shall not be deemed or construed as a determination that the
Lenders have passed on the adequacy thereof for any other purpose and may not be
relied upon by the Borrowers or any other Person. This Agreement is for the sole
and exclusive use of the Administrative Agent, the Lenders and Borrowers and may
not be enforced, nor relied upon, by any Person other than the Administrative
Agent, the Lenders and Borrowers. All conditions of the obligations of the
Administrative Agent, the Lenders hereunder, including the obligation to make
Advances, are imposed solely and exclusively for the benefit of the
Administrative Agent, the Lenders, their successors and assigns, and no other
Person shall have standing to require satisfaction of such conditions or be
entitled to assume that the Lenders will refuse to make Advances in the absence
of strict compliance with any or all of such conditions, and no other Person
shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any and all of which may be freely waived in whole or in part by the
Administrative Agent and the Lenders at any time in their sole discretion.
Section 11.07 LENDERS AND ADMINISTRATIVE AGENT NOT IN CONTROL; NO
PARTNERSHIP. None of the covenants or other provisions contained in this
Agreement shall, or shall be deemed to, give the Administrative Agent or any
Lender the right or power to exercise control over the affairs or management of
any Borrower, the power of the Administrative Agent and the Lenders being
limited to the rights to exercise the remedies referred to in the Loan
Documents. The relationship between the Borrowers and the Lenders is, and at all
times shall remain, solely that of debtor and creditor. No covenant or provision
of the Loan Documents is intended, nor shall it be deemed or construed, to
create a partnership, joint venture, agency or common interest in profits or
income between the Administrative Agent, the Lenders and the Borrowers or to
create an equity in the Project in the Administrative Agent or any Lender. The
Administrative Agent and the Lenders neither undertake nor assume any
responsibility or duty to any Borrower or to any other person with respect to
the Project or the Loans, except as expressly provided in the Loan Documents;
and notwithstanding any other provision of the Loan Documents: (1) neither the
Administrative Agent nor any Lender is, nor shall be construed as, a partner,
joint venturer, alter ego, manager, controlling person or other business
associate or participant of any kind of any Borrower or its stockholders,
members, or partners and neither the Administrative Agent nor any Lender intends
to ever assume such status; (2) no Lender or the Administrative Agent shall in
any event be liable for any Debts, expenses or losses incurred or sustained by
any Borrower; and (3) no Lender or the Administrative Agent shall be deemed
responsible for or a participant in any acts, omissions or decisions of any
Borrower or its stockholders, members, or partners. The Administrative Agent,
the Lenders and each Borrower disclaim any intention to create any partnership,
joint venture, agency or common interest in profits or income between the
Administrative Agent, the Lenders and the Borrowers, or to create an equity in
the Project in the Administrative Agent or any Lender, or any sharing of
liabilities, losses, costs or expenses.
Section 11.08 TIME OF THE ESSENCE. Time is of the essence with respect
to this Agreement.
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Section 11.09 SUCCESSORS AND ASSIGNS; SECONDARY MARKET TRANSACTIONS.
(1) This Agreement shall be binding upon and inure to the
benefit of the Administrative Agent, the Lenders and the Borrowers and the
respective successors and permitted assigns, provided that neither the Borrowers
nor any other Borrower Party shall, without the prior written consent of the
Administrative Agent and all of the Lenders, assign any rights, duties or
obligations hereunder.
(2) Each Borrower acknowledges that the Administrative Agent and
each Lender and its respective successors and assigns may without notice to or
consent from the Borrowers (a) sell this Agreement, the Mortgage, the Notes, the
other Loan Documents, and any and all servicing rights thereto, or any portions
thereof, to one or more investors, (b) participate and/or syndicate the Loans to
one or more investors, (c) deposit this Agreement, the Notes and the other Loan
Documents, or any portions thereof, with a trust, which trust may sell
certificates to investors evidencing an ownership interest in the trust assets,
or (d) otherwise sell, transfer or assign the Loans or interests therein in one
or more transactions to investors (the transactions referred to in CLAUSES (A)
through (D) are hereinafter each referred to as a "SECONDARY MARKET
TRANSACTION"). The Borrowers shall reasonably cooperate at its expense with the
Administrative Agent and each Lender in effecting any such Secondary Market
Transaction and shall reasonably cooperate and use all reasonable efforts to
satisfy the market standards to which the Administrative Agent and each Lender
customarily adheres or which may be reasonably required by any participant,
investor, purchaser or any rating agency involved in any Secondary Market
Transaction (including, without limitation, delivery of opinions of counsel in
form and substance similar to the opinions of counsel delivered to the
Administrative Agent on the date hereof and, delivery of an Appraisal for the
Projects). The Borrowers shall provide such information and documents relating
to the Borrowers and the Project as the Administrative Agent and each Lender may
reasonably request in connection with such Secondary Market Transaction. In
addition, the Borrowers shall make available to the Administrative Agent and the
Lenders all information concerning the Project, its business and operations that
the Administrative Agent and the Lenders may reasonably request. The
Administrative Agent and the Lenders shall be permitted to share all information
with the participants, investors, purchasers, investment banking firms, rating
agencies, accounting firms, law firms and third-party advisory firms involved
with the Loans and Loan Documents or the applicable Secondary Market
Transaction. The Administrative Agent and the Lenders and all of the aforesaid
participants, investors, purchasers, advisors, rating agencies and professional
firms shall be entitled to rely on the information supplied by or on behalf of
the Borrowers. Each Borrower also agrees to execute any amendment of or
supplement to this Agreement and the other Loan Documents as the Administrative
Agent and the Lenders may reasonably request in connection with any Secondary
Market Transaction, provided that such amendment or supplement does not change
the economic terms of the Loan.
(3) The Notes may hereafter be split, severed and subdivided, by
in substitution for promissory notes of lesser denominations or otherwise, and,
in such event, the Borrowers shall promptly execute additional or replacement
Notes.
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Section 11.10 RENEWAL, EXTENSION OR REARRANGEMENT. All provisions of
the Loan Documents shall apply with equal effect to each and all promissory
notes and amendments thereof hereinafter executed which in whole or in part
represent a renewal, extension, increase or rearrangement of the Loan. For
portfolio management purposes, the Lenders may elect to divide the Loans into
two or more separate loans evidenced by separate promissory notes so long as the
payment and other obligations of the Borrowers are not effectively increased or
otherwise modified. Each Borrower agrees to cooperate with the Administrative
Agent and the Lenders and to execute such documents as the Administrative Agent
reasonably may request to effect such division of the Loans.
Section 11.11 WAIVERS. No course of dealing on the part of the
Administrative Agent, its officers, employees, consultants or agents, nor any
failure or delay by the Administrative Agent or any Lender with respect to
exercising any right, power or privilege of the Administrative Agent or any
Lender under any of the Loan Documents, shall operate as a waiver thereof.
Section 11.12 CUMULATIVE RIGHTS. Rights and remedies of the
Administrative Agent and the Lenders under the Loan Documents shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 11.13 SINGULAR AND PLURAL. Words used in this Agreement and the
other Loan Documents in the singular, where the context so permits, shall be
deemed to include the plural and vice versa. The definitions of words in the
singular in this Agreement and the other Loan Documents shall apply to such
words when used in the plural where the context so permits and vice versa.
Section 11.14 PHRASES. When used in this Agreement and the other Loan
Documents, the phrase "including" shall mean "including, but not limited to,"
the phrases "satisfactory to any Lender" or "satisfactory to the Administrative
Agent" shall mean in form and substance satisfactory to such Lender or the
Administrative Agent, as the case may be, in all respects, the phrases "with
Lender's consent", "with Lender's approval", "with the Administrative Agent's
consent" or "with the Administrative Agent's approval" shall mean such consent
or approval at Lender's or the Administrative Agent's, as the case may be,
discretion, and the phrases "acceptable to Lender" or "acceptable to the
Administrative Agent" shall mean acceptable to Lender or the Administrative
Agent, as the case may be, at such party's sole discretion."
Section 11.15 EXHIBITS AND SCHEDULES. The exhibits and schedules
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for the purposes stated herein.
Section 11.16 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. All titles
or headings to articles, sections, subsections or other divisions of this
Agreement and the other Loan Documents or the exhibits hereto and thereto are
only for the convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such articles, sections,
subsections or other divisions, such other content being controlling as to the
agreement between the parties hereto.
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Section 11.17 PROMOTIONAL MATERIAL. Subject to the Borrowers' approval
rights set forth in the last sentence of this paragraph, the Borrowers authorize
the Administrative Agent and each Lender to issue press releases, advertisements
and other promotional materials in connection with the Administrative Agent's or
such Lender's own promotional and marketing activities, and describing the Loans
in general terms or in detail and the Administrative Agent's or such Lender's
participation in the Loans. All references to the Administrative Agent or any
Lender contained in any press release, advertisement or promotional material
issued by any Borrower shall be approved in writing by the Administrative Agent
or such Lender in advance of issuance. All references to the Borrowers contained
in any press release, advertisement or promotional material issued by GECC shall
be approved in writing by BPPI or BPOP in advance of such issuance, except in
connection with a Secondary Market Transaction.
Section 11.18 SURVIVAL. All of the representations, warranties,
covenants, and indemnities of the Borrowers hereunder (including environmental
matters under ARTICLE 4 and the obligations under SECTIONS 2.08(1), 2.08(5) and
2.08(6)), and under the indemnification provisions of the other Loan Documents
shall survive (a) the repayment in full of the Loans and the release of the
Liens evidencing or securing the Loans, (b) the transfer (by sale, foreclosure,
conveyance in lieu of foreclosure or otherwise) of any or all right, title and
interest in and to a Project to any party, whether or not an Affiliate of
Borrower and (c) in the case of any Lender that may assign any interest in its
Commitment or Loans hereunder in accordance with the terms of this Agreement,
the making of such assignment, notwithstanding that such assigning Lender may
cease to be a "Lender" hereunder.
Section 11.19 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, THE BORROWERS, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY
EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN
ANY WAY RELATING TO THE LOANS OR THE PROJECTS (INCLUDING, WITHOUT LIMITATION,
ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE
ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR
VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND
EACH LENDER TO ENTER THIS AGREEMENT.
Section 11.20 WAIVER OF PUNITIVE OR CONSEQUENTIAL DAMAGES. None of the
Administrative Agent, the Lenders or Borrowers shall be responsible or liable to
the other or to any other Person for any punitive, exemplary or consequential
damages which may be alleged as a result of the Loans or the transaction
contemplated hereby, including any breach or other default by any party hereto.
Section 11.21 GOVERNING LAW. A. THIS AGREEMENT WAS NEGOTIATED IN THE
STATE OF NEW YORK, AND MADE BY THE ADMINISTRATIVE AGENT AND
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THE LENDERS AND ACCEPTED BY THE BORROWERS IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THE NOTES DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL
TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS
AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
IN WHICH THE PROJECT IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT
PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND
ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT
PERMITTED BY LAW, THE BORROWERS, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTES, AND THIS AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.
B. ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST THE
ADMINISTRATIVE AGENT, ANY LENDER OR ANY BORROWER ARISING OUT OF OR RELATING TO
THE LOAN DOCUMENTS MAY AT THE ADMINISTRATIVE AGENT'S OPTION (WHICH DECISION
SHALL BE MADE BY THE MAJORITY LENDERS) BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW AND EACH BORROWER WAIVES ANY OBJECTIONS
WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF
ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT,
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ACTION OR PROCEEDING. EACH BORROWER DOES HEREBY DESIGNATE AND APPOINT CT
CORPORATION AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT
SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID
SERVICE MAILED OR DELIVERED TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN SHALL
BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER, IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. EACH BORROWER (A)
SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED
AGENT HEREUNDER, (B) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A
SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH
SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR
SERVICE OF PROCESS), AND (C) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS
AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.
Section 11.22 ENTIRE AGREEMENT. This Agreement and the other Loan
Documents embody the entire agreement and understanding between the
Administrative Agent, the Lenders and the Borrowers and supersede all prior
agreements and understandings between such parties relating to the subject
matter hereof and thereof. Accordingly, the Loan Documents may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties. If any conflict or inconsistency exists between this Agreement or any
of the other Loan Documents, the terms of this Agreement shall control.
Section 11.23 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which shall
constitute one document.
Section 11.24 ASSIGNMENTS AND PARTICIPATION
(1) ASSIGNMENTS BY BORROWER. The Borrowers may not assign any of
their rights or obligations hereunder or under the Notes without the prior
consent of all of the Lenders and the Administrative Agent.
(2) ASSIGNMENTS BY THE LENDERS. Each Lender may assign any of
its Loans, its Note and its Commitment (but only with the consent of the
Administrative Agent); PROVIDED that:
(a) no such consent by the Administrative Agent shall be
required in the case of any assignment to another Lender or an
affiliate of a Lender;
(b) except to the extent the Administrative Agent shall
otherwise consent, any such partial assignment (other than to another
Lender or an affiliate of a Lender) shall be in an amount at least
equal to $10,000,000;
(c) each such assignment (including an assignment to another
Lender or an affiliate of a Lender) by a Lender of its Loans or
Commitment shall be made in such manner so that the same portion of its
Loans and Commitment is assigned to the respective assignee;
(d) subject to the applicable Lender's compliance with the
provisions of CLAUSES (B) and (C) above, the Administrative Agent's
consent to an assignment shall not be unreasonably withheld, delayed or
conditioned if (i) in the reasonable judgment of
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the Administrative Agent, such assignment is made to a reputable
institutional investor with substantial experience in real estate
lending and originating mortgage loans similar to the Loans, and a
financial net worth of at least $100,000,000, (ii) such assignment is
first offered to the Administrative Agent in accordance with the terms
and conditions a separate agency agreement among the Administrative
Agent and the Lenders, and (iii) the provisions of CLAUSE (E) have been
satisfied; and
(e) upon execution and delivery by the assignee (even if
already a Lender) to Borrowers and the Administrative Agent of an
Assignment and Acceptance pursuant to which such assignee agrees to
become a "Lender" hereunder (if not already a Lender) having the
Commitment and Loans specified in such instrument, and upon consent
thereto by the Administrative Agent to the extent required above, the
assignee shall have, to the extent of such assignment (unless otherwise
consented to by the Administrative Agent), the obligations, rights and
benefits of a Lender hereunder holding the Commitment and Loans (or
portions thereof) assigned to it (in addition to the Commitment and
Loans, if any, theretofore held by such assignee) and the assigning
Lender shall, to the extent of such assignment, be released from the
Commitment (or portion thereof) so assigned. Upon each such assignment
the assigning Lender shall pay the Administrative Agent a processing
and recording fee of $3,500 and the reasonable fees and disbursements
of the Administrative Agent's counsel incurred in connection therewith.
(3) PARTICIPATION. A Lender may sell or agree to sell to one or
more other Persons (each a "PARTICIPANT") a participation in all or any part of
any Loans held by it, or in its Commitment, PROVIDED that such Participant shall
not have any rights or obligations under this Agreement or any Note or any other
Loan Document (the Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed by such Lender in
favor of the Participant). All amounts payable by the Borrowers to any Lender
under SECTION 2.08 in respect of Loans held by it and its Commitment shall be
determined as if such Lender had not sold or agreed to sell any participations
in such Loans and Commitment, and as if such Lender were funding each of such
Loans and Commitment in the same way that it is funding the portion of such
Loans and Commitment in which no participations have been sold. In no event
shall a Lender that sells a participation agree with the Participant to take or
refrain from taking any action hereunder or under any other Loan Document except
that such Lender may agree with the Participant that it will not, without the
consent of the Participant, agree to (i) increase or extend the term of such
Lender's Commitment, (ii) extend the date fixed for the payment of principal of
or interest on the related Loan or Loans or any portion of any fee hereunder
payable to the Participant, (iii) reduce the amount of any such payment of
principal, (iv) reduce the rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee or (v) consent to any
modification, supplement or waiver hereof or of any of the other Loan Documents
to the extent that the same, under SECTION 11.02, requires the consent of each
Lender.
(4) CERTAIN PLEDGES. In addition to the assignments and
participations permitted under the foregoing provisions of this SECTION 11.24
(but without being subject thereto), any Lender may (without notice to the
Borrowers, the Administrative Agent or any other
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Lender and without payment of any fee) assign and pledge all or any portion of
its Loans and its Note to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any operating circular issued by such Federal
Reserve Bank, and such Loans and Note shall be fully transferable as provided
therein. No such assignment shall release the assigning Lender from its
obligations hereunder.
(5) PROVISION OF INFORMATION TO ASSIGNEES AND PARTICIPANTS. A
Lender may furnish any information concerning any Borrower or any of its
Affiliates in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants).
(6) NO ASSIGNMENTS TO BORROWERS OR AFFILIATES. Anything in this
SECTION 11.24 to the contrary notwithstanding, no Lender may assign or
participate any interest in any Loan held by it hereunder to any Borrower or any
of its Affiliates without the prior consent of each Lender.
ARTICLE 12
LIMITATIONS ON LIABILITY
Section 12.01 PERSONAL LIABILITY. The Borrowers shall be personally
liable to the Administrative Agent and the Lenders for repayment of the Loans
and any and all amounts due hereunder and under the other Loan Documents. The
Administrative Agent (on behalf of the Lenders) may resort for the enforcement
thereof to the property and assets of the Borrowers but, notwithstanding
anything to the contrary contained in any Loan Document to the contrary, shall
not resort to the personal property or assets of the directors, officers,
employees, shareholders, or agents of the Borrowers or any of their direct or
indirect partners or members (other than any Guarantor pursuant to the
applicable Guaranty).
Section 12.02 LIMITATION ON LIABILITY OF LENDER'S OFFICERS, EMPLOYEES,
ETC. Any obligation or liability whatsoever of the Administrative Agent or any
Lender which may arise at any time under this Agreement or any other Loan
Document shall be satisfied, if at all, out of the Administrative Agent or any
such Lender's assets only. No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of the Administrative Agent or any such Lender's shareholders,
directors, officers, employees or agents, regardless of whether such obligation
or liability is in the nature of contract, tort or otherwise.
ARTICLE 13
THE ADMINISTRATIVE AGENT
Section 13.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Loan Documents with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and of the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in SECTION 13.05 and the first sentence of SECTION 13.06 shall
include reference to its affiliates and its own and its affiliates' officers,
directors, employees and agents):
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(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document be
a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement
or in any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by any
Borrower or any other Person to perform any of its obligations
hereunder or thereunder; and
(c) shall not be responsible for any action taken or omitted
to be taken by it hereunder or under any other Loan Document or under
any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except to the extent
any such action taken or omitted violates the Administrative Agent's
standard of care set forth in the first sentence of SECTION 13.05.
The Administrative Agent may employ agents and attorneys-in-fact, and may
delegate all or any part of its obligations hereunder, to third parties and
shall not be responsible for the negligence or misconduct of any such agents,
attorneys-in-fact or third parties selected by it in good faith. The
Administrative Agent may deem and treat the payee of a Note as the holder
thereof for all purposes hereof unless and until a notice of the assignment or
transfer thereof shall have been filed with the Administrative Agent.
Section 13.02 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including, without limitation, any thereof by telephone,
telecopy, telegram or cable) reasonably believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Administrative Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, the
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with instructions
given by the Majority Lenders, and such instructions of the Majority Lenders and
any action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.
Section 13.03 DEFAULTS. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of a Potential Default or Event of
Default unless the Administrative Agent has received notice from a Lender or any
Borrower specifying such Potential Default or Event of Default and stating that
such notice is a "Notice of Default". In the event that the Administrative Agent
receives such a notice of the occurrence of a Potential Default or Event of
Default, the Administrative Agent shall give prompt notice thereof to the
Lenders. The Administrative Agent shall (subject to Section 13.07) take such
action with respect to such Potential Default or Event of Default and other
matters relating to the Loans as shall be directed by the Lenders in accordance
with a separate agreement entered into by the Administrative Agent and the
Lenders.
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Section 13.04 RIGHTS AS A LENDER. With respect to GECC's Commitment and
the Loans made by it, GECC (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. GECC (and any successor acting as Administrative Agent) and
its affiliates (including GECC) may (without having to account therefor to any
Lender) lend money to, make investments in and generally engage in any kind of
lending, trust or other business with the Borrowers (and any of their
Affiliates) as if it were not acting as the Administrative Agent, and GECC and
its affiliates (including GECC may accept fees and other consideration from the
Borrowers for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
Section 13.05 STANDARD OF CARE; INDEMNIFICATION. In performing its
duties under the Loan Documents, the Administrative Agent will exercise the same
degree of care as GECC normally exercises in connection with real estate loans
in which no syndication or participation are involved, but the Administrative
Agent shall have no further responsibility to any Lender except as expressly
provided herein and except for its own gross negligence or willful misconduct
which resulted in actual loss to such Lender, and, except to such extent, the
Administrative Agent shall have no responsibility to any Lender for the failure
by the Administrative Agent to comply with any of the Administrative Agent's
obligations to the Borrowers under the Loan Documents or otherwise. The Lenders
agree to indemnify the Administrative Agent (to the extent not reimbursed under
SECTION 11.05, but without limiting the obligations of any Borrower under
SECTION 11.05) ratably in accordance with the aggregate principal amount of the
Loans held by the Lenders (or, if no Loans are at the time outstanding, ratably
in accordance with their respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Administrative Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Loan Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that any Borrower is obligated to pay under SECTION 11.05,
but excluding, unless a Event of Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, PROVIDED, THAT, no Lender shall be liable for any of
the foregoing to the extent they arise from the Administrative Agent's breach of
its standard of care set forth in the first sentence of this Section.
Section 13.06 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrowers and its Affiliates and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this
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Agreement or under any other Loan Document. Subject to the provisions of the
first sentence of SECTION 13.05, the Administrative Agent shall not be required
to keep itself informed as to the performance or observance by Borrowers of this
Agreement or any of the other Loan Documents or any other document referred to
or provided for herein or therein or to inspect the Project or the books of
Borrowers or any of its Affiliates. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder or as otherwise agreed by the Administrative
Agent and the Lenders, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of Borrowers or any of
their Affiliates that may come into the possession of the Administrative Agent
or any of its affiliates.
Section 13.07 FAILURE TO ACT. Except for action expressly required of
the Administrative Agent hereunder, and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under SECTION 13.05 against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such action.
Section 13.08 RESIGNATION OF ADMINISTRATIVE AGENT. The Administrative
Agent may resign at any time by giving notice thereof to the Lenders and the
Borrowers. Upon any such resignation, the Majority Lenders shall have the right
to appoint a successor Administrative Agent which shall be a financial
institution that has (a) an office in New York, New York with a combined capital
and surplus of at least $500,000,000 and (b) knowledge and experience comparable
to the resigning Administrative Agent's knowledge and experience in the
servicing of loans similar to the Loans hereunder. If no successor
Administrative Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within 30 days after the retiring
Administrative Agent's giving of notice of resignation of the retiring
Administrative Agent, then the retiring Administrative Agent's resignation shall
nonetheless become effective and (i) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and (ii) the Majority
Lenders shall perform the duties of the Administrative Agent (and all payments
and communications provided to be made by, to or through the Administrative
Agent shall instead be made by or to each Lender directly) until such time as
the Majority Lenders appoint a successor agent as provided for above in this
SECTION 13.08. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring (or retired) Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder (if not already discharged therefrom as provided above in
this SECTION 13.08). The fees payable by the Borrowers to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between Borrowers and such successor. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this ARTICLE 13 and SECTION 11.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Administrative Agent.
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ARTICLE 14
BORROWERS' RIGHT OF CONTRIBUTION
Section 14.01 CONTRIBUTION. To provide for a just and equitable
contribution among each Borrower, if any payment is made by a Borrower (a
"FUNDING BORROWER") hereunder or under any Note or any other Loan Document in
respect of the Loans, such Funding Borrower shall be entitled to a contribution
from each other Borrower for all payments, damages and expenses, incurred by
such Funding Borrower under or in connection with the Loans, such contributions
to be made in the manner and to the extent set forth below. Any amount payable
as a contribution under this Agreement shall be determined as of the date on
which the related payment is made by a Funding Borrower.
Section 14.02 CALCULATION OF CONTRIBUTIONS. Each Borrower shall be
liable for contribution to each Funding Borrower in respect of all payments,
damages and expenses incurred by such Funding Borrower hereunder or under the
Notes or any other Loan Document in an aggregate amount, subject to SECTION
14.03 hereof, equal to (i) the ratio of (x) the aggregate Minimum Release Prices
for the Project(s) held by such Borrower to (y) the aggregate Minimum Release
Prices of all the Projects, multiplied by (ii) the aggregate amount of such
payments, damages and expenses incurred by such Funding Borrower under or in
connection with the Loan.
Section 14.03 RIGHTS TO CONTRIBUTION SUBORDINATED. Each Borrower agrees
that all of its rights to receive contribution under this ARTICLE 14 (whether
for payments, damages, expenses or otherwise) and all of its rights, if any, to
be subrogated to any of the rights of the Lenders shall be subordinated in right
of payments (in liquidation or otherwise) to the prior payment in full of all of
the Loans (whether for principal, interest, premium or otherwise). If any amount
shall at any time be paid to a Borrower on account of such rights of
contribution or subrogation, or in contravention of the provisions of this
SECTION 14.03 at any time, such amount shall be held in trust, segregated from
the other assets of such Borrower, for the benefit of the Lenders and shall
promptly be paid to the Lenders. The foregoing shall constitute a continuing
offer to, and agreement with, all persons that from time to time may become
holders of, or continue to hold, obligations under the Agreement, and the
provisions of the foregoing sentence are made for the benefit of such holders
and such holders, as third party beneficiaries hereunder, are entitled to
enforce such provisions.
Section 14.04 PRESERVATION OF RIGHTS. In the case of any payments,
damages or expenses incurred by a Funding Borrower in respect of the Loan, this
Agreement shall not limit any right which any party may have against any other
person whether or not a party hereto.
Section 14.05 ASSET OF PARTY TO WHICH CONTRIBUTION IS OWING. Each
Borrower acknowledges that the right of contribution hereunder shall constitute
an asset of the party to which such contribution is owing, including, without
limitation, for purposes of determining any limitation of liability contained in
any guarantee calculated, directly or indirectly, by reference to the assets of
such party.
Section 14.06 JOINT AND SEVERAL/CONTINUING OBLIGATIONS.
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(1) Notwithstanding anything to the contrary set forth in this
Agreement or any of the other Loan Documents and subject only to the foregoing
provisions of this ARTICLE 14 and the provisions of SECTION 12.01 hereof and any
similar provisions contained in the other Loan Documents, each Borrower shall be
jointly and severally liable for all of the Loans.
(2) Each Borrower's obligations hereunder shall remain
outstanding until the Loans have been paid in full, provided, however that
Cameron and Riley shall have no further obligations hereunder (and shall be
released from any such obligations, in writing, by Administrative Agent (on
behalf of the Lenders)) at such time as the Projects owned by Cameron and Riley
are no longer Projects under this Agreement, provided further, however, that
Cameron and Riley shall not be so released (a) if and to the extent that a
Potential Default or an Event of Default then exists and (b) with respect to any
indemnification obligations under the Agreement that expressly survive after the
termination of this Agreement (including, without limitation, any obligations
under ARTICLE 4 and SECTION 8.14 hereof).
(3) No payment or payments with respect to the obligations of
any Borrower hereunder made by any other Borrower or any other Person or
received or collected by the Administrative Agent or any Lender from such other
Borrower or such other Person by virtue of any action or proceeding or any
setoff or appropriation or application, at any time or from time to time, in
reduction of or in payment of the Loan or any release of security hereunder
shall be deemed to modify, reduce, release or otherwise affect the primary
liability of such Borrower in respect thereof.
SIGNATURES COMMENCE ON FOLLOWING PAGE.
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EXECUTED as of the date and year first written above.
LENDER:
GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation
By: /s/ Anthony Julian
----------------------------------
Name: Anthony Juliano
Title: Authorized Signatory
Address for Notices:
125 Park Avenue, 10th Floor
New York, NY 10017
Attention:
Facsimile: (212) 716-8910
Lending Office for Eurodollar and
Alternate Base Rate Loans:
125 Park Ave., 10th Floor
-------------------------
New York, NY 10017
-------------------
Attention:
Facsimile:
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BORROWERS: BURNHAM PACIFIC OPERATING
PARTNERSHIP, L.P.,
a Delaware limited partnership
By: BURNHAM PACIFIC PROPERTIES, INC.
a Maryland corporation, its general partner
By: /s/ Daniel B. Platt
----------------------------------------
Name: Daniel B. Platt
Title: CFO
Address for Notices:
110 West A Street
San Diego, California 92101-3711
Attention: Daniel Platt, Chief Financial Officer
Facsimile: (619) 652-4711
BPP/CAMERON PARK, L.P., a
California limited partnership
By: BURNHAM PACIFIC OPERATING
PARTNERSHIP, L.P., a limited partnership,
its general partner
By: BURNHAM PACIFIC PROPERTIES,
INC., a Maryland corporation, its general
partner
By: /s/ Daniel B. Platt
-------------------------------------
Name: Daniel B. Platt
Title: CFO
Address for Notices:
110 West A Street
San Diego, California 92101-3711
Attention: Daniel Platt, Chief Financial Officer
Facsimile: (619) 652-4711
2
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BPP/RILEY, L.P., a California limited partnership
By: BURNHAM PACIFIC OPERATING
PARTNERSHIP, L.P., a Delaware limited
partnership, its general partner
By: BURNHAM PACIFIC PROPERTIES,
INC., a Maryland corporation, its general
partner
By: /s/ Daniel B. Platt
-------------------------------------
Name: Daniel B. Platt
Title: CFO
Address for Notices:
110 West A Street
San Diego, California 92101-3711
Attention: Daniel Platt, Chief Financial Officer
Facsimile: (619) 652-4711
3
<PAGE>
ADMINISTRATIVE AGENT: GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation
By: /s/ Anthony Juliano
---------------------------------
Name: Anthony Juliano
Title: Authorized Signatory
Address for Notices to the
Administrative Agent:
125 Park Avenue, 10th Floor
New York, NY 10017
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Exhibit 10.35
MODIFICATION TO LOAN AGREEMENT AND OTHER DOCUMENTS
This Modification to Loan Agreement and Other Documents (this
"MODIFICATION"), dated as of December 20, 1999, is made by and among BURNHAM
PACIFIC OPERATING PARTNERSHIP, L.P., a Delaware limited partnership ("BPOP"),
BPP/Cameron Park, L.P., a California limited partnership and BPP/RILEY, L.P., a
California limited partnership (each, individually, a "BORROWER" and
collectively, "BORROWERS"), BURNHAM PACIFIC PROPERTIES, INC., a Maryland
corporation ("BPPI", and together with Borrowers, each, individually, a "LOAN
PARTY" and collectively, the "LOAN PARTIES"), and CMF CAPITAL COMPANY, LLC, a
Delaware limited liability company ("CMF"), successor-in-interest to General
Electric Capital Corporation, as Administrative Agent for the Lenders (as
hereinafter defined, and in such capacity, together with its successors and
assigns in such capacity, the "ADMINISTRATIVE AGENT") and the Lender.
R E C I T A L S :
WHEREAS, Borrowers have (i) executed and delivered to the
Administrative Agent that certain Loan Agreement (the "ORIGINAL LOAN AGREEMENT";
capitalized terms used but not otherwise defined herein shall have the meanings
set forth in the Original Loan Agreement, as amended hereby), dated as of
November 19, 1999, among Borrowers, as borrowers, the Administrative Agent, as
administrative agent for itself and certain financial institutions signatory
thereto, as lenders (the "LENDERS") and the Lenders, pursuant to which the
Lenders have agreed to make certain loans (the "LOANS") to Borrowers, and (ii)
executed and delivered to each applicable Lender, Revolving Loan Notes (the
"ORIGINAL REVOLVING LOAN NOTES") and Term Loan Notes (the "ORIGINAL TERM LOAN
NOTES"), as the case may be, in the aggregate principal amount of $202,800,000
evidencing the Loans (collectively, the "ORIGINAL NOTES");
WHEREAS, as additional security for the Loans, Burnham Pacific
Employees LLC, a Delaware limited liability company ("BPE"), BPAC Texas, Inc., a
Delaware corporation ("BPAC TEXAS", and together with BPE, individually, a "JV
PLEDGOR" and collectively, the "JV PLEDGORS") have executed and delivered to the
Administrative Agent that certain Pledge and Security Agreement (the "JV PLEDGE
AGREEMENT"), dated as of November 19, 1999, pursuant to which, among other
things, the JV Pledgors have granted to the Administrative Agent (on behalf of
the Lenders), a security interest in each JV Pledgor's rights to receive
distributions and proceeds from BPP Retail, LLC, a Delaware limited liability
company ("BPP RETAIL") and BPAC Texas GP, LLC, a Delaware limited liability
company ("BPAC TEXAS GP", and together with BPP Retail, the "JV ENTITIES");
WHEREAS, as additional security for the Loans, BPOP and J. David
Martin, Daniel B. Platt, Joseph W. Byrne, James W. Gaube and Scott C. Verges
(collectively, the "KEY PERSONNEL" and together with BPOP, individually, a "BPE
PLEDGOR" and collectively, the "BPE
<PAGE>
PLEDGORS"), have executed and delivered to the Administrative Agent that certain
Pledge and Security Agreement (the "BPE PLEDGE AGREEMENT"), dated as of November
19, 1999, pursuant to which, among other things, the BPE Pledgors have granted
to the Administrative Agent (on behalf of the Lenders), a security interest in
all of the right, title and interest of each BPE Pledgor as a member or manager,
as the case may be, of BPE;
WHEREAS, as additional security for the Loans, BPOP and BPPI (each,
individually, a "P&V PLEDGOR" and collectively, the "P&V PLEDGORS") have
executed and delivered to the Administrative Agent that certain Pledge and
Security Agreement (the "P&V SALE PLEDGE AGREEMENT"), dated as of November 19,
1999, pursuant to which, among other things, the P&V Pledgors have granted to
the Administrative Agent (on behalf of the Lenders), a security interest in each
P&V Pledgor's rights to receive, directly or indirectly, distributions and
proceeds from the P&V Owners and from the sale of the P&V Sale Properties;
WHEREAS, in order to induce the Lenders to make the Loans, the JV
Pledgors executed and delivered to the Administrative Agent that certain
Guaranty Agreement (the "JV GUARANTY"), dated as of November 19, 1999, pursuant
to which, among other things, the JV Pledgors guaranteed on a nonrecourse basis,
all of Borrowers' obligations and liabilities under the Original Loan Agreement,
Original Notes and other Loan Documents;
WHEREAS, in order to induce the Lenders to make the Loans, BPPI
executed and delivered to the Administrative Agent that certain Guaranty
Agreement (the "BPPI GUARANTY", and together with the JV Guaranty, the
"GUARANTIES"), dated as of November 19, 1999, pursuant to which, among other
things, BPPI guaranteed on a recourse basis, all of Borrowers' obligations and
liabilities under the Original Loan Agreement, Original Notes and other Loan
Documents;
WHEREAS, Borrowers have informed the Lenders and the Administrative
Agent that BPP Retail desires to amend its operating agreement pursuant to a
certain Second Amendment to Operating Agreement (the "AMENDMENT"), dated as of
December 15, 1999, between the State of California Public Employees' Retirement
System and BPE, pursuant to which, among other things, (a) BPE's Percentage
Interest (as defined in the Operating Agreement) in BPP Retail shall be
decreased to 1%, (b) BPE shall transfer to BPOP all of its right, title and
interest with respect to the shopping center commonly known as Bell Gardens
located in the City of Bell Gardens, California (the "BELL GARDENS PROJECT") and
(c) BPP Retail shall make certain cash distributions to BPE (the "CASH
DISTRIBUTION");
WHEREAS, subject to the terms and provisions of this Modification,
Borrowers desire to paydown the outstanding principal balance of the Revolving
Loans and a portion of the outstanding principal balance of the Term Loans
concurrently with the receipt of the proceeds of such Cash Distribution (the
"PREPAYMENT");
WHEREAS, Borrowers and Lender desire to amend the Loan Agreement and
the other Loan Documents to reflect such Prepayment and certain other changes;
and
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<PAGE>
WHEREAS, in order to induce the Administrative Agent and the Lenders to
enter into this Modification, the Loan Parties have agreed to confirm and ratify
their respective obligations and liabilities under the Loan Documents as amended
hereby.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows, effective as of the date
hereof:
1. PREPAYMENT; REDUCTION IN TERM LOAN COMMITMENT AND INCREASE IN REVOLVING
LOAN COMMITMENT. (a) On the date hereof, Borrowers shall (i) repay a portion of
the outstanding principal balance of the Term Loans in an amount equal to
$25,000,000 and all interest outstanding thereon (the "TERM LOAN REPAYMENT
AMOUNT") and (ii) repay the entire outstanding principal balance of the
Revolving Loans and all interest outstanding thereon (the "REVOLVING LOAN
PREPAYMENT AMOUNT"). Borrowers covenant that any portion of the Cash
Distribution remaining after application toward the Term Loan Prepayment Amount,
the Revolving Loan Prepayment Amount and any other amounts required to be paid
by Borrowers under this Modification shall be used by Borrowers for working
capital prior to Borrowers requesting any Additional Advances of the Revolving
Loans.
(b) Notwithstanding anything to the contrary contained in SECTION 2.01
of the Loan Agreement, the maximum aggregate principal amount available under
the Term Loan Commitments is hereby reduced to One Hundred Fifty-One Million Two
Hundred Sixty-Two Thousand Eight Hundred Sixty-Seven Dollars ($151,262,867). On
the date hereof, Borrowers shall execute and deliver to each applicable Lender
making a Term Loan Commitment, an Amended And Restated Term Loan Promissory
Note, dated the date hereof, amending and restating the Original Term Loan Notes
to reflect such permanent reduction in the Term Loan Commitments.
Notwithstanding anything to the contrary contained in SECTION 2.01 of the Loan
Agreement, but subject to Part E of SCHEDULE 2.1 of the Loan Agreement, the
maximum aggregate principal amount available under the Revolving Loan
Commitments is hereby increased from Twenty Million Dollars ($20,000,000) to
Twenty-Five Million Dollars ($25,000,000). On the date hereof, Borrowers shall
execute and deliver to each applicable Lender making a Revolving Loan
Commitment, an Amended and Restated Revolving Loan Promissory Note, dated the
date hereof, amending and restating the Original Revolving Loan Note to reflect
such increase in the Revolving Loan Commitments.
(c) The Administrative Agent and the Lenders acknowledge and agree that
the Borrowers shall not be required to pay the repayment fee in the amount of
.6% of the outstanding principal balance of the Loans set forth in SECTION
2.03(4) of the Credit Agreement in connection with the Prepayment.
2. ACQUISITION OF BELL GARDENS PROJECT. (a) Concurrently herewith, BPP
Retail shall transfer to BPOP all of its right, title and interest in the Bell
Gardens Project. Within a reasonable period of time after the date hereof, but
in no event later than February 29, 2000 (the "BELL GARDENS OUTSIDE CLOSING
DATE"), Borrowers shall (i) satisfy all of the conditions, deliveries
3
<PAGE>
and requests set forth on SCHEDULE 1 attached hereto with respect to the Bell
Gardens Project (the "BELL GARDENS CLOSING CONDITIONS") as determined by the
Administrative Agent (ii) execute and deliver to the Administrative Agent (on
behalf of the Lenders) to further evidence or secure or to otherwise support the
Loans, (A) a leasehold deed of trust, security agreement and fixture filing, in
form and substance similar to the Mortgages and constituting a Lien encumbering
BPOP's leasehold estate in the Bell Gardens Project (the "BELL GARDENS
MORTGAGE"), (B) an assignment of rents and leases, in form and substance similar
to the Assignment of Rents and pertaining to leases or subleases of space at the
Bell Gardens Project (the "BELL GARDENS ASSIGNMENT OF RENTS"), (C) an assignment
of contracts, licenses, permits, agreements, warranties and approvals, in form
and substance similar to the Assignments of Contracts and pertaining to an
assignment of all of BPOP's right, title and benefits under and otherwise
pertaining to any third party management agreement and all other operating and
service agreements, license agreements, permits (including, building and
occupancy permits), approvals, operating contracts, trade names, signage
agreements and all service, supply and maintenance contracts relating to the
Bell Gardens Project, unless prohibited by law, (D) a hazardous materials
indemnity agreement, in form and substance similar to the Hazardous Materials
Indemnity, (E) such other documents, instruments, certificates, assignments or
financing statements, requested by the Administrative Agent in order to further
evidence and secure the Loans or to protect any Liens or other security granted
to the Administrative Agent and the Lenders with respect to the Bell Gardens
Project and any other Project, and (F) amendments to the Loan Documents as
necessary or appropriate in connection with the addition of the Bell Gardens
Project as security for the Loans, including, without limitation, an amendment
to SCHEDULE 3 to the Loan Agreement to provide for an "Allocated Loan Amount"
for the Bell Gardens Project as determined by the Administrative Agent. All
documents required to be delivered under this paragraph (collectively, the "BELL
GARDENS CLOSING DOCUMENTS") shall be subject to the approval of the
Administrative Agent. In addition, based on its due diligence review (including
the review of any materials or deliveries set forth on SCHEDULE 1 attached
hereto) and underwriting of the Bell Gardens Project, the Administrative Agent
(on behalf of the Lenders) shall have the right to require the Borrowers to make
such additional representations, warranties and/or covenants as it may require,
or impose such additional conditions, deliveries and requirements in connection
with the addition of the Bell Gardens Project as additional security for the
Loans. All determinations, requirements and approvals made by the Administrative
Agent and the Lenders under this paragraph shall be made in the sole discretion
of the Administrative Agent and the Lenders.
(b) Section E of SCHEDULE 2.1 of the Loan Agreement is hereby deleted
in its entirety and replaced with the following:
"PART E. UNSATISFIED CLOSING CONDITIONS
The maximum aggregate outstanding principal amount of the
Revolving Loans shall not exceed $13,397,496 until satisfaction of the
following conditions to the satisfaction of Administrative Agent in its
sole discretion. Subject to paragraphs 3 and 4 below, the maximum
outstanding amount under the Revolving Loans shall increase by the
holdback amounts (each, a "HOLDBACK AMOUNT") indicated in the following
conditions
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<PAGE>
upon satisfaction thereof; provided, however, that in no event shall
the aggregate principal amount outstanding for the Revolving Loans at
any time exceed $25,000,000. For any conditions that have not been
satisfied prior to the date that is 6 months after the date hereof, the
maximum availability under the Revolving Loans shall be reduced
permanently by the applicable Holdback Amount set forth below.
1. Receipt by Administrative Agent of estoppel certificates
from the landlords under the following Leasehold Property Leases and
from the subtenants for the Projects described under clauses (b)
through (d) below:
(a) Mission Plaza. Holdback Amount: $2,841,474
(b) Ernst-Bear Creek. Holdback Amount:
$2,091,882
(c) Ernst-James Village. Holdback Amount:
$1,133,103
(d) Ernst-Brickyard. Holdback Amount: $536,045
2. With respect to the Hilltop Plaza Project, receipt by
Administrative Agent of satisfactory evidence in its sole discretion
(i) that a lease with a cinema tenant has been fully executed and (ii)
that the tenant under the Barnes and Noble Lease has entered into a
written waiver of (A) the cotenancy covenants with respect to the
cinema tenant and (B) the covenant giving the tenant the right to
terminate its lease if it does not earn revenues from operations at the
site of over $4,000,000 in the third year after the commencement date.
Holdback Amount: $5,000,000.
3. In the event that the Administrative Agent (on behalf of
the Lenders) determines in its sole discretion (a) in accordance with
the Administrative Agent's customary underwriting practices in effect
at the time of such determination for assets similar to the Bell
Gardens Project, that the value of the Bell Gardens Project is at least
$10,000,000 and (b) the Bell Gardens Closing Conditions and any other
additional requirements, conditions and deliveries required by the
Administrative Agent in its sole discretion as a result of its
underwriting or due diligence review of the Bell Gardens Project
(including, without limitation, the delivery of the Bell Gardens
Closing Documents) have been satisfied by the Borrowers by the Bell
Gardens Outside Closing Date, the maximum outstanding amount under the
Revolving Loans shall increase by an amount equal to 50% of the
Holdback Amounts remaining at such time, on a property by property
basis. Notwithstanding anything to the contrary set forth in this
Section E, in the event that (x) the Administrative Agent determines in
its sole discretion (in accordance with the Administrative Agent's
customary underwriting practices in effect at the time of such
determination for assets similar to the Bell Gardens Project) that the
value of the Bell Gardens Project is less than $10,000,000 or (y) the
Bell Gardens Project is not included as additional collateral for the
Loans by the Bell Gardens Outside Closing Date,
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the maximum availability under the Revolving Loans shall be reduced
permanently by $5,801,252.
4. Until such time as the Administrative Agent determines in
its sole discretion (in accordance with the Administrative Agent's
customary underwriting practices in effect at the time of such
determination for assets similar to the Bell Gardens Project) that the
value of the Bell Gardens Project is greater than $10,000,000 and the
Bell Gardens Closing Conditions and any other additional requirements,
conditions and deliveries required by the Administrative Agent in its
sole discretion as a result of its underwriting or due diligence review
of the Bell Gardens Project (including, without limitation, the
delivery of the Bell Gardens Closing Documents) have been satisfied by
the Borrowers, notwithstanding any contrary provision of this Section
E, upon the satisfaction of the applicable conditions for release set
forth in paragraphs 1 and 2 above, the maximum outstanding amount under
the Revolving Loans shall only be increased by 50% of the applicable
Holdback Amount with respect to any Project described in paragraphs 1
or 2 above.
(c) Without limiting the provisions of paragraph 2(a) above, the Bell
Gardens Mortgage shall be cross-defaulted and cross-collateralized with all
other Mortgages previously executed or hereafter made by any Borrower in favor
of the Administrative Agent (on behalf of the Lenders) in connection with the
Loans and the Bell Gardens Assignment of Rents shall be cross-defaulted and
cross-collateralized with all other Assignments of Rents and Leases previously
executed or hereafter made by any Borrower in favor of the Administrative Agent
(on behalf of the Lenders) in connection with the Loans.
3. TERMINATION OF JV COLLATERAL. Subject to the satisfaction of the
Modification Conditions, from and after the date hereof, the JV Pledge Agreement
and JV Guaranty shall be terminated and of no further force and effect and the
JV Pledgors shall be released of all liability and obligation thereunder except
as otherwise expressly set forth therein. Subject to the satisfaction of the
Modification Conditions, from and after the date hereof, the BPE Pledge
Agreement shall be terminated and of no further force and effect and the BPE
Pledgors shall be released of all liability and obligation thereunder except as
otherwise expressly set forth therein.
4. MODIFICATION CONDITIONS. This Modification shall not become effective
until the date on which all of the following conditions are satisfied in the
sole discretion of the Administrative Agent (collectively, THE "MODIFICATION
CONDITIONS"):
(a) The Administrative Agent shall have received from
each Loan Party that is a party thereto executed
counterparts of this Modification, and, with respect
to each Project, and in recordable form, the
Modification of Deeds of Trust (hereafter defined)
and the Modification of Assignments of Rents
(hereafter defined).
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(b) Borrowers' payment to the Administrative Agent of (i)
the Revolving Loan Prepayment Amount and the Term
Loan Prepayment Amount, together with any LIBOR
breakage costs, (ii) the Unused Line Fee due and
payable pursuant to the terms and provisions of
SECTION 2.03(4) of the Loan Agreement for the portion
of the calendar quarter in which such prepayment
occurs and (iii) all reasonable costs and expenses of
the Administrative Agent and the Lenders in
connection with, or arising out of the negotiation,
execution and delivery of this Modification
(including the reasonable fees and expenses of
counsel) and the consummation of the transactions
contemplated by this Modification (including all
title insurance charges and recording fees).
(c) The Borrowers shall deliver to the Administrative
Agent (on behalf of the Lenders) such endorsements to
the existing Title Policies and amendments to the
Loan Documents as the Administrative Agent may
reasonably request to protect its interests or to
confirm the validity and priority of the Mortgages
and any other Liens or collateral granted to
Administrative Agent (on behalf of the Lenders) in
connection with the Loans.
(d) The Administrative Agent shall have determined to its
satisfaction (provided, however, that such
determination shall be consistent with, and similar
in substance to, the determination of such
calculation as of the date of the Loan Agreement)
that the Projects generate an annualized Net
Operating Income sufficient to produce (a) an
aggregate Cash on Cash Return of at least 12%; (b) an
aggregate Debt Service Coverage of at least 1.25 to
1.00 and (c) a Portfolio LTV equal to, or less than,
77%.
(e) The Administrative Agent shall have determined to its
satisfaction (provided, however, that such
determination shall be consistent with, and similar
in substance to, the determination of such
calculation as of the date of the Loan Agreement)
that the REIT Net Cash Flow Test and the REIT Net
Worth Test have been satisfied as of the date of this
Modification.
(f) No event of default (or any event or condition which,
with the giving of notice, the passage of time or
both, would constitute an event of default) under the
Chase Loan Facility has occurred and is continuing.
(g) The delivery by Borrowers to the Administrative Agent
of evidence satisfactory to the Administrative Agent
that the lenders under the Chase Loan Facility have
consented to the Amendment.
(h) The Administrative Agent shall have received such
other documents and certificates (including opinions
from counsel to the Loan Parties) as the
Administrative Agent or its counsel may reasonably
request relating to the
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organization, existence and good standing of the Loan
Parties, the continued enforceability of the Loan
Documents as modified by this Modification, the
authorization of this Modification or the
consummation of the transactions described therein
and herein, all in form reasonably satisfactory to
the Administrative Agent.
By entering into this Modification, each Loan Party shall be deemed to represent
and warrant on the date hereof that each of the Modification Conditions has been
satisfied.
5. DEFINED TERMS; ADDITIONAL AMENDMENTS.
5.1 The following definitions are hereby added and made a part of
SECTION 1.01 of the Loan Agreement:
"Modification of Deeds of Trust" means those certain Modification
to Deeds of Trust, Security Agreement and Fixture Filing and Modification to
Leasehold Deeds of Trust, Security Agreement and Fixture Filing, dated as of
December 15, 1999, executed by the applicable Borrower in favor of the
Administrative Agent (on behalf of the Lenders), together with all future
amendments, modifications and supplements thereto."
"Modification of Assignments of Rents" means those certain
Modification to Assignments of Rents and Leases and Modification to Assignment
of Rents and Subleases, dated as of December 15, 1999, executed by the
applicable Borrower in favor of the Administrative Agent (on behalf of the
Lenders), together with all future amendments, modifications and supplements
thereto."
5.2 From and after the date hereof, the definition of "Mortgages"
shall be amended to refer to the Mortgages as amended by the applicable
Modification of Deeds of Trust.
5.3 From and after the date hereof, the definition of "Assignments
of Rents and Leases" shall be amended to refer to the Assignments of Rents and
Leases as amended by the applicable Modification of Assignments of Rents.
5.4 The following definitions shall be deleted in their entirety
from SECTION 1.01 of the Loan Agreement and all references to such terms in the
Loan Agreement and any other Loan Documents shall be amended accordingly to
reflect such deletion: "BPE", "JV Book Value", "JV Entities", "JV Pledge
Agreement", "JV Properties", "Key Personnel".
5.5 The last sentence in the definition of "Revolving Loan
Commitment" set forth in SECTION 1.01 of the Loan Agreement is hereby deleted in
its entirety and replaced with the following: "The initial aggregate principal
amount of the Revolving Loan Commitments is $25,000,000."
5.6 The last sentence in the definition of "Term Loan Commitment"
set forth in Section 1.01 of the Loan Agreement is hereby deleted in its
entirety and replaced with the
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following: "The initial aggregate principal amount of the Term Loan Commitments
is $151,262,867."
5.7 The definition of "Maximum Loan Amount" is hereby deleted in
its entirety and replaced with the following:
"MAXIMUM LOAN AMOUNT" means $176,262,867.
5.8 SECTION 2.01(2)(a) of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
"(a) An amount equal to interest to accrue at the rate of 7.94% per
annum for the period commencing on the Closing Date to the first Business Day of
the next succeeding month, plus all other sums owing to the Lenders and the
Administrative described in Part A of SCHEDULE 2.1 attached hereto, shall be
disbursed to the Lenders and the Administrative Agent in payment of such sums."
5.9 SECTION 2.01(6)(e) of the Loan Agreement shall be deleted in
its entirety and replaced with the following:
"(e) The Administrative Agent (on behalf of the Lenders) shall have
determined to its satisfaction (provided, however, that such determination shall
be consistent with, and similar in substance to, the determination of such
funding criteria calculations as of the date of this Agreement) based on
information and documentation provided by the Borrowers to the Administrative
Agent (on behalf of the Lenders) at least five (5) Business Days prior to the
proposed date of the funding of the requested Additional Advance that after
giving effect to such Additional Advance, the Projects will generate an
annualized Net Operating Income sufficient to produce (i) an aggregate Cash on
Cash Return of at least 12%, (ii) an aggregate Debt Service Coverage of at least
1.50 to 1.00 (or, with respect to Additional Advances of the Revolving Loans,
1.25 to 1.00) and (iii) a Portfolio LTV equal to, or less than, 77%, in each
case, calculated based on the assumption that (x) with respect to any Advance
made prior to the occurrence of any Partial Release pursuant to SECTION 2.04
hereof, the full amount of the Loans have been disbursed and are outstanding,
less any undisbursed amounts allocated to phase II of the Fremont Additional
Advance (as more particularly described on the Budget) and/or SCHEDULE 5 annexed
hereto, and (y) with respect to any Advance made after the occurrence of a
Partial Release pursuant to SECTION 2.04 hereof, the Required Release Paydown
Amount has not been paid and is outstanding; provided, however, that for the
purposes of determining satisfaction of this condition, but not for the purposes
of determining satisfaction of the condition set forth in Paragraph C.4 of
SCHEDULE 2.1, the parties shall use the annualized Net Operating Income
determined as of the end of the most recently ended fiscal quarter."
5.10 SECTION 2.04(a)(4) of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
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"(4) The Administrative Agent shall have determined to its
satisfaction (provided, however, that such determination shall be consistent
with, and similar in substance to, the determination of such calculations as of
the date of this Agreement) that after giving effect to such Partial Release,
the Projects will generate an annualized Net Operating Income sufficient to
produce (a) an aggregate Cash on Cash Return of at least 12%, (b) an aggregate
Debt Service Coverage of at least 1.50 to 1.00 and (c) a Portfolio LTV equal to,
or less than, 77%, in each case, calculated based on the assumption that, (i)
with respect to the first Partial Release made pursuant to this SECTION 2.04,
the full amount of the Loans have been disbursed (less any amounts allocated to
phase II of the Fremont Additional Advance) and (ii) with respect to all other
Partial Releases, the Required Release Paydown Amount with respect to such
Partial Release has not been paid and is outstanding;"
5.11 Clause (d) of SECTION 3.02(2) is hereby deleted in its
entirety and replaced with the following:
"(d) the Administrative Agent determines (based on leases which will
remain in effect after restoration is complete) that after restoration
(i) the Debt Service Coverage for the Projects will be at least equal
to 1.50 to 1.00, (ii) the Cash on Cash Return for the Projects will be
at least equal to 12% and (iii) the Portfolio LTV is equal to, or less
than, 77%;"
5.12 SECTION 7.11 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"Section 7.11 PORTFOLIO COVENANTS. With respect to the Projects, as
of the end of each fiscal quarter (i) the Debt Service Coverage shall be at
least 1.25 to 1.00, (ii) the Cash on Cash Return shall be at least 12% and (iii)
the Portfolio LTV shall be equal to, or less than, 77%, in each case, as
determined by Administrative Agent (on behalf of the Lenders)."
5.13 SECTION 7.12 of the Loan Agreement is hereby deleted in its
entirety.
5.14 Paragraph C.4 of SCHEDULE 2.1 to the Loan Agreement is hereby
amended to delete the references to the phrase "eleven percent (11%)" and
substitute in lieu thereof the phrase "twelve percent (12%)."
5.15 The Borrowers and the Lenders acknowledge and agree that
subject to the satisfaction of the Modification Conditions, SCHEDULE 3 to the
Loan Agreement is hereby deleted in its entirety and replaced with the schedule
attached hereto as SCHEDULE 3. From and after the date hereof, the term
"Allocated Loan Amount" as used in the Loan Agreement shall mean the Loan
amounts as set forth in the schedule attached to this Modification as SCHEDULE
3.
5.16 EXHIBIT A-1 to the Loan Agreement is hereby deleted in its
entirety and replaced with the schedule attached hereto as EXHIBIT A-1.
5.17 EXHIBIT A-2 to the Loan Agreement is hereby deleted in its
entirety.
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6. COVENANTS, REPRESENTATIONS AND WARRANTIES OF LOAN PARTIES.
6.1 Each Loan Party hereby represents and warrants to the
Administrative Agent and the Lenders that (a) it has the legal power and
authority to enter into this Modification without consent or approval by any
third party and this Modification constitutes the legal, valid and binding
obligation of such Loan Party, enforceable against such Loan Party in accordance
with its terms, and (b) the execution and delivery by such Loan Party of this
Modification has been duly authorized by all requisite limited liability
company, partnership or corporate action, as the case may be, on the part of
such Loan Party, will not violate any provision of such Loan Party's
organizational documents, as applicable, does not contravene any law, rule or
regulation applicable to it or violate or create a default under any contractual
provision binding on it or affecting it or any of its properties or assets, and
(c) no consent of any Person is required in connection with the execution,
delivery and performance by the Loan Parties of this Modification (other than
any consents that have been obtained and are in full force and effect).
6.2 Each Loan Party hereby represents and warrants to the
Administrative Agent and the Lenders that, as of the date hereof, (a) no
Potential Default or Event of Default has occurred and is continuing under any
applicable Loan Document executed by such Loan Party, (b) no Potential Default
or Event of Default will occur as a result of the execution, delivery and
performance by such Loan Party of this Modification, the Modification of Deeds
of Trust or Modification of Assignments of Rents to which such Loan Party is a
party, as applicable, (c) such Loan Party has not given any notice of any
uncured Potential Default to the Administrative Agent or any Lender, (d) there
are no legal proceedings commenced or threatened against the Administrative
Agent or any Lender by such Loan Party.
6.3 Each Loan Party hereby confirms and acknowledges that such Loan
Party has no offsets, defenses, claims, counterclaims, setoffs, or other basis
for reduction with respect to any of Borrowers' indebtedness to the Lenders
under the Loans or any obligations or liabilities of such Loan Party to the
Administrative Agent and the Lenders under any Loan Document executed by such
Loan Party. Each Loan Party hereby confirms and acknowledges that all
representations and warranties made by such Loan Party in the Loan Documents to
which such Loan Party is a party to, are true and correct in all material
respects on and as of the date of this Modification.
6.4 Each Borrower hereby agrees that a breach of any of the
representations warranties and covenants made herein (including, without
limitation, the covenants set forth in SECTION 3 hereof) shall constitute an
Event of Default under ARTICLE 9 of the Loan Agreement, subject to the notice
and cure provisions provided therein.
7. EFFECT UPON LOAN DOCUMENTS.
7.1 Except as specifically set forth herein, the Loan Agreement and
Loan Documents shall remain in full force and effect and are hereby ratified and
confirmed by each applicable Loan Party signatory thereto. The parties hereto
acknowledge and agree that the
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Original Loan Agreement, as hereby amended, is in full force and effect in
accordance with its terms and has not been supplemented, modified or otherwise
amended, canceled, terminated or surrendered, except pursuant to this
Modification. The Loan Agreement is binding and enforceable as against the
parties thereto in accordance with its terms. All references to the "Loan
Agreement" in the Loan Documents and to "this Agreement" in the Original Loan
Agreement shall mean and refer to the Original Loan Agreement as modified and
amended hereby.
7.2 The execution, delivery and effectiveness of this Modification
shall not operate as a waiver of any right, power or remedy of the
Administrative Agent or the Lenders under the Loan Documents (except to the
extent expressly set forth herein), or any other document, instrument or
agreement executed and/or delivered in connection therewith.
8. GOVERNING LAW.
8.1 THIS MODIFICATION SHALL BE CONSTRUED, INTERPRETED AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS
PRINCIPLES.
9. COUNTERPARTS.
9.1 This Modification may be executed in any number of counterparts,
and all such counterparts shall together constitute the same agreement.
SIGNATURES COMMENCE ON FOLLOWING PAGE.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Modification to be executed as of the day and year first above written.
BURNHAM PACIFIC OPERATING
PARTNERSHIP, L.P.,
a Delaware limited partnership
By: BURNHAM PACIFIC PROPERTIES,
INC., a Maryland corporation,
its general partner
By:
--------------------------------------
Name:
Title:
BPP/CAMERON PARK, L.P.,
a California limited partnership
By: BURNHAM PACIFIC OPERATING
PARTNERSHIP, L.P., a Delaware limited
partnership, its managing member
By: BURNHAM PACIFIC PROPERTIES,
INC., a Maryland corporation, its
general partner
By:
--------------------------------
Name:
Title:
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BPP/RILEY, L.P.,
a California limited partnership
By: BURNHAM PACIFIC OPERATING
PARTNERSHIP, L.P., a Delaware
limited partnership, its general partner
By: BURNHAM PACIFIC PROPERTIES,
INC., a Maryland
corporation, its general partner
By:
------------------------------
Name:
Title:
BURNHAM PACIFIC PROPERTIES, INC., a
Maryland corporation
By:
------------------------------
Name:
Title:
CMF CAPITAL COMPANY, LLC, a Delaware
limited liability company, as
Administrative Agent for the Lenders and
as Lender
By:
--------------------------------
Name:
Title:
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SCHEDULE 1
Bell Gardens Closing Conditions
At Borrowers' sole cost and expense, Borrowers shall cause each of the following
to be executed, delivered, prepared, confirmed or issued to the Administrative
Agent (on behalf of the Lenders), each in form and content satisfactory to the
Administrative Agent (on behalf of the Lenders) in its sole discretion (unless
otherwise specified to the contrary):
1. An ALTA (or equivalent) leasehold mortgagee policy of title
insurance in the maximum amount of the Allocated Loan Amount for the Bell
Gardens Project, with reinsurance or co-insurance and such endorsements as the
Administrative Agent may require, containing no exceptions to title (printed or
otherwise) which are unacceptable to the Administrative Agent, and insuring that
the Bell Gardens Mortgage is a first-priority Lien on the Bell Gardens Project
and related collateral. Without limitation, such policy shall (a) be in the 1970
ALTA (as amended 84) form or, if not available, ALTA 1992 form (deleting
arbitration and creditors' rights, if permissible) or, if not available, the
form commonly used in the state where the Bell Gardens Project is located,
insuring the Administrative Agent (on behalf of the Lenders) or any and its
successors and assigns; and (b) include the following endorsements and/or
affirmative coverages: (1) ALTA 9 Comprehensive, (2) Survey, (3) ALTA 3.1 Zoning
(with additional coverage for number and type of parking spaces), (4) Usury, (5)
Doing Business, (6) Access, (7) Separate Tax Lot, (8) Environmental Protection
Lien, (9) Subdivision, (10) Contiguity, (11) Tax Deed (as applicable), and (12)
Mortgage Recording Tax (as applicable).
2. The Administrative Agent shall have received such endorsements to
the existing Title Policies and amendments to the existing Loan Documents as the
Administrative Agent may reasonably request to protect its interests or to
confirm the validity and priority of the Mortgages and any other Liens or
collateral granted to the Administrative Agent (on behalf of the Lenders) in
connection with the Loans.
3. Documents and certificates evidencing the formation, organization,
valid existence, good standing, and due authorization of each Loan Party.
Evidence of each Loan Parties' qualification to do business in the state where
the Bell Gardens Project is located.
4. Legal opinions issued by counsel for each Loan Party, opining as to
the due organization, valid existence and good standing of each Loan Party, and
the due authorization, execution, delivery, enforceability and validity of any
loan documents executed by such Loan Party (including any amendments or
modifications to any existing Loan Documents) and such other matters as the
Administrative Agent or its counsel reasonably may request.
5. Current Uniform Commercial Code searches, and litigation, bankruptcy
and judgment reports as requested by the Administrative Agent, with respect to
the Borrowers, and any Loan Party, their principals, and such other persons
reasonably selected by the Administrative Agent.
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6. Evidence of insurance as required by the Loan Agreement for the Bell
Gardens Project, and conforming in all respects to the requirements of the
Administrative Agent.
7. A current "as-built" survey of the Bell Gardens Project, dated or
updated to a date not earlier than thirty (30) days prior to the Bell Gardens
Outside Closing Date, certified to the Administrative Agent (on behalf of the
Lenders) and the issuer of the title insurance described in paragraph 1 above,
prepared by a licensed surveyor acceptable to the Administrative Agent and such
title insurance company, and conforming to the Administrative Agent's current
standard survey requirements, which may include certification to additional
participants, co-lenders and/or investors in a Secondary Market Transaction.
Without limitation, the minimum requirements for the survey shall be as set
forth in the 1997 Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys, "Urban Survey" classification, with the following additional items from
Table A, "Optional Survey Responsibilities and Specifications": "2" (vicinity
map showing nearby highway or major intersection), "3" (flood zone designation),
"4" (land area), "6" (setbacks, height and bulk restrictions), "8" (other
visible improvements), "9" (parking areas), "10" (access to public way, driveway
and curb cuts), "11" (utilities), and "13" (other significant observations).
Notwithstanding the foregoing, the Administrative Agent (on behalf of the
Lenders) shall accept the existing survey for the Bell Gardens Project provided
(a) such survey is recertified to the Administrative Agent and its successors
and assigns and the Title Company, (b) the title insurance policy described in
paragraph 1 above shall insure the Administrative Agent (on behalf of the
Lenders) for any state of facts not shown on any survey, (c) any indemnity
delivered by Borrowers to the Title Company with respect to the state of facts
not shown on any survey shall also be delivered to the Administrative Agent (on
behalf of the Lenders), (d) Borrowers shall certify to the Administrative Agent
(on behalf of the Lenders) and its successors and assigns and to the Title
Company that there has been no construction, demolition or other material
modification to the improvements located on the Bell Gardens Project since the
date of such survey other than tenant improvement work or such construction,
demolition or other material modification as to which such certificate shall
contain a detailed description of the nature, location and extent thereof, and
(e) the surveys were prepared by a licensed surveyor and would otherwise be
acceptable to a prudent lender upon the satisfaction of (a)-(d) above.
8. A current engineering report or architect's certificate with respect
to the Bell Gardens Project, covering, among other matters, inspection of
heating and cooling systems, roof and structural details, showing no failure of
compliance in any material respect with building plans and specifications,
applicable legal requirements (including requirements of the Americans with
Disabilities Act) and fire, safety and health standards and reviewing and
approving, among other matters, soil tests, plans and specifications (including
heating, ventilation and cooling systems, roof and structural details,
mechanical and electrical systems), and compliance with local, state or federal
laws, regulations, codes, ETC., and containing a declaration satisfactory to the
Administrative Agent that there will be no asbestos in the Bell Gardens Project.
The engineer/architect preparing such report or certificate must be satisfied
that the Bell Gardens Project is in compliance with fire, safety and health
standards which such engineer/architect deems reasonable, in addition to
standards imposed by law, regulation or
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<PAGE>
codes. Such report shall also include an assessment of the Bell Gardens
Project's tolerance for earthquake and seismic activity.
9. All Appraisals, environmental reports, building condition reports
and Site Assessments delivered to the Lenders with respect to the Bell Gardens
Project shall be certified to the Administrative Agent (on behalf of the Lenders
and their successors and assigns) without modification or change thereto in the
form reasonably requested by the Administrative Agent which may include
certification to additional participants, co-lenders and/or investors in a
Secondary Market Transaction.
10. A current rent roll for the Bell Gardens Project, certified by the
Borrowers. Such rent roll shall include the following information: (a) tenant
names; (b) unit/suite numbers; (c) area of each demised premises and total area
of such Project (stated in net rentable square feet); (d) rental rate (including
escalations) (stated in gross amount and in amount per net rentable square foot
per year); (e) Lease term (commencement, expiration and renewal options); (f)
expense pass-throughs; (g) cancellation/termination provisions; (h) security
deposit; and (i) material operating covenants and co-tenancy clauses. In
addition, the Borrowers shall provide the Administrative Agent with a copy of
the standard lease form to be used by the Borrowers in leasing space at the Bell
Gardens Project, and, at the Administrative Agent's request, true and correct
copies of all Leases at the Bell Gardens Project. As requested by the
Administrative Agent, the Borrowers shall deliver to the Administrative Agent
for its review (on behalf of the Lenders), copies of all existing Leases and
material service contracts.
11. A copy of the third-party management agreement for the Bell Gardens
Project, certified by the Borrowers as being true, correct and complete.
12. The Borrowers' deposit with the Administrative Agent of the amount
required by the Administrative Agent with respect to any maintenance, repairs
and/or remedial or corrective work required to be performed by the
Administrative Agent at the Bell Gardens Project and to fund any other required
escrows or reserves.
13. Evidence that (a) the Bell Gardens Project and the operation
thereof comply with all legal requirements, including that all requisite
certificates of occupancy, building permits, and other licenses, certificates,
approvals or consents required by any governmental authority have been issued
without variance or condition, (b) following any casualty, the improvements
which form a part of the Bell Gardens Project may be reconstructed and the
current use thereof restored, and (c) that there is no litigation, action,
citation, injunctive proceedings, or like matter pending or threatened with
respect to the validity of such matters. At the Administrative Agent's request,
the Borrowers shall furnish the Administrative Agent with a zoning endorsement
to the Administrative Agent's title insurance policy, zoning letters from
applicable municipal agencies, and utility letters from applicable service
providers.
14. No change shall have occurred in the financial condition of any
Borrower, or BPPI or in the Net Operating Income of the Projects (including, the
Bell Gardens Project), or
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<PAGE>
P&V Sale Properties, or in the financial condition of any major or anchor
tenant, which would have, in the Administrative Agent's or any Lender's
judgment, a material adverse effect on any of the Projects or on any Borrower's
or any Borrower Party's ability to repay the Loan or otherwise perform its
obligations under the Loan Documents.
15. No condemnation or adverse zoning or usage change proceeding shall
have occurred or shall have been threatened against any Project (including the
Bell Gardens Project); no Project (including the Bell Gardens Project) shall
have suffered any significant damage by fire or other casualty which has not
been repaired; no structural change shall have occurred to any of the
improvements located at any Project (including the Bell Gardens Project); no
law, regulation, ordinance, moratorium, injunctive proceeding, restriction,
litigation, action, citation or similar proceeding or matter shall have been
enacted, adopted, or threatened by any governmental authority, which would have,
in the Administrative Agent's or any Lender's good faith judgment, a material
adverse effect on any Borrower, any Borrower Party or any Project (including the
Bell Gardens Project).
16. All fees and commissions payable to real estate brokers, mortgage
brokers, or any other brokers or agents in connection with the Amendment or the
acquisition of the Bell Gardens Project by BPOP have been paid, such evidence to
be accompanied by any waivers or indemnifications deemed reasonably necessary by
the Administrative Agent.
17. Payment of the Administrative Agent's reasonable costs and expenses
in underwriting and documenting the Bell Gardens Project, including reasonable
fees and expenses of the Administrative Agent's inspecting engineers,
consultants, and outside counsel.
18. Estoppel certificates and subordination, non-disturbance and
attornment agreements (in form and substance satisfactory to the Administrative
Agent) from tenants under Leases of space at the Bell Gardens Project of at
least 10,000 gross leaseable square feet or occupying at least 80% of the gross
leaseable area at such Project. The Borrowers shall deliver to the
Administrative Agent consent and estoppel certificates (in form and substance
satisfactory to the Administrative Agent) from all lessors under any Leasehold
Property Lease covering the Bell Gardens Project.
19. No Potential Default or Event of Default shall have occurred or
exist including, without limitation any defaults under the Chase Loan Facility.
All such defaults, if any, must be cured to the Administrative Agent's
satisfaction.
20. The Administrative Agent shall have determined to its satisfaction
that the Projects (including the Bell Gardens Project) generate an annualized
Net Operating Income sufficient to produce (a) an aggregate Cash on Cash Return
of at least 12%; (b) an aggregate Debt Service Coverage of at least 1.25 to 1.00
and (c) a Portfolio LTV equal to, or less than, 77%.
20
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21. The Administrative Agent shall have determined to its satisfaction
that the REIT Net Cash Flow Test and the REIT Net Worth Test have been satisfied
as of the date of this Modification.
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Exhibit 21.1
Subsidiaries of the Company
Wholly-Owned Corporate Subsidiaries of the Company:
BPAC Texas, Inc. (Delaware) (Unconsolidated)
BPP/Arrowhead, Inc. (Delaware) (Consolidated)
BPP/Crenshaw-Imperial, Inc. (Delaware) (Consolidated)
BPP/Golden State Acquisitions, Inc. (Delaware) (Consolidated)
BPP/Mountaingate, Inc. (Delaware) (Consolidated)
BPP/Northwest Acquisitions, Inc. (Delaware) (Consolidated)
BPP/Puente Hills, Inc. (Delaware) (Consolidated)
BPP/Riley, Inc. (California) (Consolidated)
BPP/Simi Valley, Inc. (Delaware) (Consolidated)
BPP/Valley Central, Inc. (Delaware) (Consolidated)
Burnham Pacific L.P., Inc. (Delaware) (Consolidated)
Corporations in which the Company holds an interest:
BPP Services, Inc.
Partnerships in which the Company holds interests:
BPAC Texas, L.P. (Delaware) (Unconsolidated)
BPP/Arrowhead, L.P. (Delaware) (Consolidated)
BPP/Cameron Park, L.P. (California) (Consolidated)
BPP/Crenshaw-Imperial, L.P. (Delaware) (Consolidated)
BPP/East Palo Alto, L.P. (California) (Consolidated)
BPP/Hilltop, L.P. (California) (Consolidated)
BPP/Marin, L.P. (California) (Consolidated)
BPP/Mission Viejo, L.P. (California) (Consolidated)
BPP/Pleasant Hill, L.P. (California) (Consolidated)
BPP/Richmond, L.P. (California) (Consolidated)
BPP/Riley, L.P. (California) (Consolidated)
BPP/Simi Valley, L.P. (Delaware) (Consolidated)
BPP/Valley Central, L.P. (California) (Consolidated)
BPP/Van Ness, L.P. (California) (Consolidated)
Burnham Pacific Operating Partnership, L.P. (Delaware) (Consolidated)
BPP/Van Ness Operating Company, L.P. (California) (Consolidated)
Limited Liability Companies in which the Company holds an interest:
BPAC Texas GP, LLC (Delaware) (Unconsolidated)
BPP/Golden State Acquisitions, L.L.C. (Delaware) (Consolidated)
BPP/Northwest Acquisitions, L.L.C. (Delaware) (Consolidated)
BPP/Puente Hills, L.L.C. (Delaware) (Consolidated)
BPP Retail, LLC (Delaware) (Unconsolidated)
Burnham Pacific Employees LLC (Delaware) (Consolidated)
Ladera Center Associates, LLC (Delaware) (Unconsolidated)
Margarita Plaza Associates, LLC (Delaware) (Unconsolidated)
Historic Van Ness, LLC (California) (Unconsolidated)
BPP/Van Ness Operating Company, LLC (California) (Unconsolidated)
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
Burnham Pacific Properties, Inc.
We consent to the incorporation by reference in Registration Statement Nos.
333-10559, 333-58347 and 333-86419 on Form S-8 and 33-56555, 333-31591 and
333-69957 on Form S-3 of Burnham Pacific Properties, Inc. of our report dated
March 1, 2000 appearing in this Annual Report on Form 10-K of Burnham Pacific
Properties, Inc. for the year ended December 31, 1999.
//Deloitte & Touche, LLP//
March 28, 2000
San Diego, California
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,946<F1>
<SECURITIES> 0
<RECEIVABLES> 11,724
<ALLOWANCES> 3,311
<INVENTORY> 0
<CURRENT-ASSETS> 55,478<F2><F3>
<PP&E> 1,045,031<F4><F3>
<DEPRECIATION> 65,494
<TOTAL-ASSETS> 1,035,015
<CURRENT-LIABILITIES> 31,830
<BONDS> 538,830
0
68,894
<COMMON> 460,268
<OTHER-SE> (131,157)
<TOTAL-LIABILITY-AND-EQUITY> 1,035,015<F5><F6>
<SALES> 126,091
<TOTAL-REVENUES> 132,810
<CGS> 36,607
<TOTAL-COSTS> 36,607
<OTHER-EXPENSES> 45,052
<LOSS-PROVISION> 1,231
<INTEREST-EXPENSE> 36,391
<INCOME-PRETAX> 19,953
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,353<F7><F8><F9><F10>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 1,866
<NET-INCOME> 12,487
<EPS-BASIC> .39
<EPS-DILUTED> .39
<FN>
<F1>Includes 9,827 of Restricted Cash
<F2>Includes 3,650 of Investment in Unconsolidated Subsidiaries
<F3>Also includes 22,469 of Other Assets and 8,413 of Receivable-Net
<F4>Includes 8,737 of Real Estate Held for Sale
<F5>Includes 528,811 of Paid in Capital in Excess of Par
<F6>Also Includes 66,350 of Minority Interest
<F7>Includes 5,024 Minority Interest
<F8>Also Includes 1,077 of Income from Unconsolidated Subsidiaries
<F9>Also Includes 10,371 of Gain from Sales of Real Estate
<F10>Also Includes 5,600 Dividends Paid to Preferred Stockholders
</FN>
</TABLE>
