UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-9331
EQUITABLE REAL ESTATE SHOPPING CENTERS L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3384643
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
BALANCE SHEETS
June 30, December 31,
1994 1993
Assets
Property held for disposition $ 98,906,111 $ 100,264,096
Cash 14,375,416 10,668,441
Accounts receivable, net of
allowance of $1,164,045 in 1994
and $1,251,805 in 1993 1,152,408 514,505
Due from affiliates, net 101,009 124,345
Deferred charges, net of accumulated
amortization of $1,640,121 in 1994
and $1,573,469 in 1993 133,302 199,954
Prepaid assets 169,403 1,676,333
Total Assets $114,837,649 $ 113,447,674
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 1,646,998 $ 2,170,236
Deferred Income 0 1,250,000
Mortgage notes payable 86,193,687 82,011,121
Due to Buyer, net (note 1) 3,183,995 0
Distribution payable 756,565 1,351,010
Total Liabilities 91,781,245 86,782,367
Partners' Capital (Deficit):
General Partner (755,944) (719,854)
Limited Partners
(10,700,000 securities outstanding) 23,812,348 27,385,161
Total Partners' Capital 23,056,404 26,665,307
Total Liabilities and Partners' Capital $114,837,649 $ 113,447,674
STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
Income
Rental income $ 3,072,546 $ 3,177,836 $ 6,221,251 $ 6,288,405
Escalation income 4,748,014 4,111,481 9,237,450 8,170,277
Interest income 107,345 83,986 160,117 147,440
Miscellaneous income 1,303,253 41,400 1,528,576 76,242
Total Income 9,231,158 7,414,703 17,147,394 14,682,364
Expenses
Property operating expenses 3,342,460 3,196,373 6,261,453 5,964,995
Interest expense 2,091,283 1,932,946 4,182,566 3,877,976
Real estate taxes 1,520,044 1,422,550 3,042,926 2,854,000
Depreciation and amortization 871,345 959,908 1,739,513 1,912,665
General and administrative 62,599 309,861 111,572 659,280
Management fee 133,376 125,372 290,258 273,930
Professional fees 318,511 50,490 342,549 85,077
Total Expenses 8,339,618 7,997,500 15,970,837 15,627,923
Income (Loss) from operations 891,540 (582,797) 1,176,557 (945,559)
Operating income payable
to buyer (note 1) (1,530,965) 0 (3,272,328) 0
Net Loss $ (639,425) $ (582,797) $(2,095,771) $ (945,559)
Net Loss Allocated:
To the General Partner $ (6,395) $ (5,827) $ (20,958) $ (9,455)
To the Limited Partners (633,030) (576,970) (2,074,813) (936,104)
$ (639,425) $ (582,797) $(2,095,771) $ (945,559)
Per limited partnership security
(10,700,000 outstanding) $(.06) $(.06) $(.19) $(.09)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
For the six months ended June 30, 1994
Limited General Total
Partners' Partner's Partners'
Capital Deficit Capital
Balance at December 31, 1993 $ 27,385,161 $ (719,854) $ 26,665,307
Net loss (2,074,813) (20,958) (2,095,771)
Distributions (1,498,000) (15,132) (1,513,132)
Balance at June 30, 1994 $ 23,812,348 $ (755,944) $ 23,056,404
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1994 and 1993
1994 1993
Cash Flows from Operating Activities:
Net loss $ (2,095,771) $ (945,559)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,739,513 1,912,665
Increase in interest on mortgage
notes payable 4,182,566 3,786,496
Operating income payable to buyer 3,272,328 0
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable (637,903) 1,205,900
Due from affiliates, net 23,336 (26,723)
Prepaid assets 1,506,930 1,418,465
Accounts payable and accrued expenses (523,238) 232,758
Deferred Income (1,250,000) 0
Due to Buyer, net (88,333) 0
Net cash provided by operating activities 6,129,428 7,584,002
Cash Flows from Investing Activities:
Real estate additions and improvements (314,876) (1,242,765)
Construction escrow 0 570,705
Net cash used for investing activities (314,876) (672,060)
Cash Flows from Financing Activities:
Payment of Note Payable 0 (3,000,000)
Cash distributions (2,107,577) (2,715,530)
Net cash used for financing activities (2,107,577) (5,715,530)
Net increase in cash 3,706,975 1,196,412
Cash at beginning of period 10,668,441 8,135,601
Cash at end of period $ 14,375,416 $ 9,332,013
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 0 $ 91,480
NOTES TO THE FINANCIAL STATEMENTS
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of June 30, 1994 and the
results of operations, changes in partners' capital (deficit), and cash flows
for the six months then ended. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1993,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Note 1:
On March 28, 1994, the Partnership executed a contract with Equitable Life
Assurance Society of the United States ("Equitable") for the sale of Northland
Center ("Northland") for the price of $6,600,000 in excess of the balance of
the first mortgage loan, subject to agreement by the parties to certain
additional documentation. The price was determined as if the sale were to
close on December 31, 1993 and any positive cash flow that is generated by
Northland Center from January 1, 1994 to the closing belongs to Equitable. For
the period ended June 30, 1994 positive cash flow for Northland Center amounted
to $3,272,328 (see below). This amount has been reduced by $88,333 which
represents a payment made to Equitable Real Estate Investment Management
("EREIM") for the January 1994 Asset Management Fee prior to the Asset
Management Agreement Termination effective December 31, 1993. As a result,
this amount will be refunded to the Partnership. This net amount is recorded
as Due to Buyer , net on the partnership's balance sheet.
On July 22, 1994, the Partnership closed the sale of Northland. The
Partnership received cash of $6,600,000. The transaction resulted in a gain on
sale of approximately $4.1 million, which will be recorded on the Partnership's
financial statements for the period ending September 30, 1994.
Summary of Due to Buyer, net
- - -----------------------------------------------------------------
Northland net operating income for the period ended June 30, 1994
Rental income $ 3,664,916
Escalation income 6,046,261
Interest and other 115,170
Total Income 9,826,347
Property operating expenses 4,952,308
Real estate taxes 1,210,042
General and administrative 218,228
Management fee 173,441
Total Expenses 6,554,019
Northland net operating income 3,272,328
Due from Buyer (88,333)
Due to Buyer, Net $ 3,183,995
Part l, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At June 30, 1994, the Partnership had cash totalling $14,375,416 compared to
$10,668,441 at December 31, 1993. The $3,706,975 increase represents cash flow
from operations in excess of real estate additions and cash distributions.
The General Partner is currently attempting to dispose of the Partnership's
assets and dissolve the Partnership in an orderly manner. The Partnership has
engaged Lehman Brothers, an affiliate of the General Partner, to advise and
assist the Partnership in the possible sale of both Northland and Brookdale
Centers. As a result of these efforts, the Partnership executed a contract
with Equitable Life Assurance Society of the United States ("Equitable") for
the sale of Northland Center for the price of $6,600,000 in excess of the
balance of the first mortgage loan subject to agreement by the parties to
certain additional documentation. The price was determined as if the sale were
to close on December 31, 1993 and any positive cash flow that is generated by
Northland Center from January 1, 1994 to the closing belongs to Equitable.
Additionally, the Asset Management Agreement with Equitable Real Estate
Investment Management, Inc. ("EREIM") for Northland Center and Brookdale Center
was te rminated effective December 31, 1993. In addition, the contract
provides for the release of the Partnership's obligations under the first
mortgage on Northland and the modification of the terms of the first mortgage
on Brookdale. The first mortgage on Brookdale has been modified to permit
prepayment in full, with a modified defeasance fee based on the sales price as
of the date Brookdale is sold to an unaffiliated third party. On July 22,
1994, the sale and proposed modification of the Partnership Agreement (see Part
2, Item 4 of this report) was approved by a majority in interest of the
Partnership's limited partners, and the sale of Northland was consummated. The
Partnership's net proceeds from the Northland Center sale, after closing
adjustments and expenses related to the sale, was approximately $4,771,000.
The transaction resulted in a gain on sale of approximately $4.1 million, which
will be recorded on the Partnership's financial statements for the period
ending September 3 0, 1994. On July 29, 1994, following the consummation of
the sale, a special cash distribution of $.865 per unit was declared for
unitholders of record on August 12, 1994, payable on or about August 31, 1994.
The special distribution, which exceeds the net proceeds from the Northland
Center sale, includes a disbursement of $4,484,000 from the Partnership's cash
reserves.
A portion of the Partnership's cash flow is currently being reserved to fund
leasing costs, necessary capital improvements and potential costs associated
with an anticipated sale of Brookdale. Cash distributions are determined on a
quarterly basis, and were reduced to $.07 per unit beginning with the first
quarter 1994 distribution in recognition of the likelihood of the Northland
sale. In view of an anticipated sale of Brookdale, capital expenditures, other
than leasing-related expenditures, will be kept to a minimum with only those
items addressed which require immediate attention due to code requirements,
safety concerns or lease and other contractual obligations.
Accounts receivable, net of allowance, increased from $514,505 at December 31,
1993 to $1,152,408 at June 30, 1994 primarily due to increased tenant
receivables associated with common area maintenance (CAM) and HVAC costs at
Northland, and property taxes at Brookdale.
Prepaid assets decreased from $1,676,333 at December 31, 1993 to $169,403 at
June 30, 1994 due to the recognition of first and second quarter insurance and
real estate tax expenses which had been prepaid as of December 31, 1993. At
June 30, 1994, accounts payable and accrued expenses totalled $1,646,998
compared with $2,170,236 at December 31, 1993. The decrease is the result of
the payment of year-end payables and the recognition of prepaid rent from
certain tenants.
Deferred income decreased from $1,250,000 at December 31, 1993 to $0 at June
30, 1994. Such amount was associated with the Carson's lease termination at
Brookdale and was recognized upon termination of the lease in May 1994.
Brookdale anchor tenant Kohl's did not renew its operating agreement which
expired August 1, 1993, but has not informed the Partnership of any intention
to leave the mall. Kohl's owns its building and its ground lease does not
expire until January 31, 2010. If Kohl's were to leave the mall, this would
likely result in a decline in mall traffic and cash flow, and would likely have
an adverse effect on future mall store leasing efforts.
Results of Operations
Cash provided by operating activities totalled $6,129,428 for the six months
ended June 30, 1994, compared with $7,584,002 for the six months ended June 30,
1993. The Partnership incurred net losses of $639,425 and $2,095,771 for the
three and six months ended June 30, 1994, respectively, compared to net losses
of $582,797 and $945,559 for the corresponding periods in 1993. The reduced
cash flow and higher net losses are primarily due to the assignment of positive
cash flow from Northland Center, in the amounts of $1,530,965 and $3,272,328
for the three and six months ended June 30, 1994, to Equitable, pursuant to the
terms of the proposed sale contract which provided for all operating income of
Northland commencing January 1, 1994 to be paid to Equitable upon closing of
the sale while the Partnership continued to recognize depreciation and interest
expense on Northland.
For the three and six months ended June 30, 1994, rental income totalled
$3,072,546 and $6,221,251, respectively, compared to $3,177,836 and $6,288,405
for the three and six months ended June 30, 1993. The decreases reflect lower
average occupancy at both malls in 1994. Escalation income for the three and
six months ended June 30, 1994, totalled $4,748,014 and $9,237,450,
respectively, compared to $4,111,481 and $8,170,277 for the corresponding
periods in 1993. Escalation income represents billings to tenants for their
proportionate share of CAM, HVAC, insurance and real estate tax expenses. The
increase in escalation income is primarily due to an increase in CAM and HVAC
expenses at Northland and to a lesser extent, an increase in real estate taxes
at Brookdale. Miscellaneous income increased $1,452,334 from the first six
months of 1993, primarily due to the recognition of a $1,250,000 termination
and restructuring fee paid by Carson's in connection with its lease settlement
and the receipt of $200,000 in connection with the Herman's lease buyout at
Brookdale.
Total expenses for the three and six months ended June 30, 1994 were $8,339,618
and $15,970,837, respectively, compared to $7,997,500 and $15,627,923 for the
corresponding periods in 1993. The increase in operating expenses is primarily
due to an increase in CAM and HVAC expense at Northland, offset by a decrease
in bad debt expense at Brookdale Center resulting from the collection of past
due Carson's receivables. Interest expense totaled $2,091,283 and $4,182,566
for the three and six months ended June 30, 1994, compared with $1,932,946 and
$3,877,976 in the corresponding periods in 1993. The increase is due to the
compounding of interest on the zero coupon notes. Depreciation and
amortization expense decreased from $1,912,665 in the first six months of 1993
to $1,739,513 in 1994 due to the writedown of Northland during 1993. Real
estate taxes for the first six months of 1994 increased $188,926 from the 1993
period, reflecting an increase in taxes at Brookdale. General and adm
inistrative expense decreased $547,708 from the first six months of 1993
primarily due to the termination of the EREIM asset management agreement as of
December 31, 1993.
Brookdale: For the five months ended May 31, 1994, mature mall tenant sales
(exclusive of anchor tenants) were $12,351,000, approximately 5% behind sales
of $12,984,000 for the five months ended May 31, 1993. Mature tenant sales are
defined as sales generated by tenants who have operated at the Mall for each
of the last two years. The General Partner attributes the decrease in sales at
Brookdale to a decrease in occupancy at the center as well as increased
competition from recently renovated centers and the Mall of America. As of
June 30, 1994, Brookdale was 76% occupied (exclusive of anchor and outparcel
stores) as compared to 83% on June 30, 1993.
Northland: For the five months ended May 31, 1994, mature mall tenant sales
(exclusive of anchor tenants) were $28,998,000, approximately 2% behind of
sales of $29,555,000 for the five months ended May 31, 1993. As of June 30,
1994, Northland was 64% occupied (exclusive of anchor tenants and secondary
space) as compared to 69% on June 30, 1993.
The General Partner attributes the decline in occupancy at both malls to an
increase in tenant bankruptcies, increased difficulty in identifying new,
credit-worthy tenants able to lease space at the centers and competition from
newly renovated malls in their respective markets. At Brookdale, the decline
in occupancy is largely attributable to the reconfiguration of approximately
40,000 square feet of previously leased space, which is currently undergoing a
renovation scheduled for completion by year-end 1994.
PART II OTHER INFORMATION
Items 1-3 Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
On June 7, 1994, the Partnership solicited the consents of the Limited
Partners to (i) the sale of Northland Center, and (ii) an amendment of
the Agreement of Limited Partnership of the Partnership to eliminate
the requirement to obtain Unitholder consent to the contemplated future
sale of Brookdale Center. Such solicitation was originally scheduled
to expire on June 5, 1994, but was extended to June 30, 1994, and
subsequently to July 21, 1994.
On July 22, 1994, the Partnership announced the approval of both
proposals by a majority of the Limited Partner's interest. As of that
date, proxies representing 6,731,374 units or 62.9% of the outstanding
units were received. Of this amount, proxies representing 6,108,908
units, or 57.1% of outstanding units approved the proposals, 384,960 or
3.6% withheld consent and 237,506 or 2.2% abstained.
Item 5 Other Information
Effective May 20, 1994, American Express Company ("American Express")
distributed to holders of record of American Express, shares of Lehman
Brothers Holdings Inc. ("Lehman Brothers") common stock. As a result
of this transaction, the Partnership's General Partner is no longer an
affiliate of American Express. This change is not expected to have any
impact on the Partnership.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits
10.1 Second Amendment to Agreement between The Equitable Life
Assurance Society of the United States and Equitable Real
Estate Shopping Centers L.P. relating to the sale of Northland
Center.
(b) Forms 8-K
On June 27, 1994, a Form 8-K was filed reporting that the
Partnership extended its solicitation of consents to sell
Northland Center and amend the Partnership Agreement to June
30, 1994, and the extension of the closing deadline on the sale
to July 15, 1994.
On August 2, 1994, a Form 8-K was filed reporting (i) a further
extension of the solicitation period to July 21, 1994; and (ii)
extension of the closing deadline of the sale to July 22, 1994;
and (iii) the consummation of the sale of Northland Center.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EQUITABLE REAL ESTATE SHOPPING CENTERS L.P.
BY: MIDWEST CENTERS INC.
General Partner
Date: August 12, 1994 BY: /S/ Paul L. Abbott
-----------------------
Title: Director, Chairman of the Board,
and President
Date: August 12, 1994 BY: /S/ Robert J. Hellman
--------------------------
Title: Director, Vice President and
Chief Financial Officer
EXHIBIT 10.1
SECOND AMENDMENT OF AGREEMENT
THIS SECOND AMENDMENT OF AGREEMENT is made as of June _____, 1994, by
and between EQUITABLE REAL ESTATE SHOPPING CENTERS L.P., a Delaware
limited partnership having an office at c/o Midwest Centers Inc., 3
World Financial Center, 29th Floor, New York, New York 10285 (formerly
388 Greenwich Street, 28th Floor, New York, New York 10013)
("Partnership"), and THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED
STATES, a New York corporation having an office at 787 Seventh Avenue,
New York, New York 10019 ("Equitable").
R E C I T A L S:
A. Partnership and Equitable entered into an Agreement dated March
25, 1994 relating to the Northland Center, Southfield, Michigan, as
said Agreement was amended by a First Amendment of Agreement, dated as
of April 22, 1994 (as amended, the "Agreement").
B. Partnership and Equitable desire to amend the Agreement upon
the terms and conditions contained in this Second Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein set forth, the parties agree as follows:
1. Defined Terms. All of the capitalized terms not defined in
this Second Amendment shall have the meanings specified in the
Agreement.
2. New Leases and Lease Amendments. The following is added to the
Agreement as Paragraph 32:
32. Partnership Shall Be Bound By Certain Leases Negotiated
By Equitable.
Notwithstanding anything in Paragraph 3(a)(ii), the last
sentence of Paragraph 3(b) or in any other provision of the
Agreement to the contrary, Partnership agrees to accept as its
property and to be bound by the terms and provisions of every
Lease, operating agreement, or amendment thereto relating to
the Premises which has been or may be negotiated by Equitable
from and after the Proration Date and prior to the earlier of
transfer of the Premises to Equitable or June 30, 1995
(collectively, a "Binding Lease") as follows:
(a) Partnership agrees to be and is currently bound by that
certain Amendment To Supplemental Agreement by and between
Equitable and Dayton Hudson Corporation dated as of March 31,
1994, that certain Amendment To Amendment To Supplemental
Agreement dated as of May 27, 1994, and that certain Second
Amendment to Operating Agreement described therein
(collectively, the "Hudson Agreements"), and to the extent
Closing is not consummated and Equitable determines that it is
necessary or appropriate to assign in writing the Hudson
Agreements to Partnership, Partnership hereby accepts such
assignment without the need for Partnership to execute such
assignment (but with Partnership receiving an executed original
of such assignment), the parties hereto acknowledging that the
Hudson Agreements collectively constitute the only Binding
Lease currently executed or in effect.
(b) Partnership agrees that, upon execution by Equitable
and delivery to Partnership of a true and complete copy
thereof, Partnership shall be bound by any lease between
Equitable and MW Land Corporation (the "Ward Lease"), and to
the extent Closing is not consummated and Equitable determines
that it is necessary or appropriate to assign in writing the
Ward Lease to Partnership, Partnership hereby accepts such
assignment without the need for Partnership to execute such
assignment (but with Partnership receiving an executed original
of such assignment). Partnership agrees to execute and deliver
to MW Land Corporation a letter substantially identical to that
attached hereto as Exhibit A regarding its agreement to be
bound by the Ward Lease.
(c) Partnership agrees that it shall be bound by every
Binding Lease demising less than 7500 gross square feet (a
"Small Binding Lease") upon execution and delivery by Equitable
to Partnership of a true and correct copy thereof.
(d) Prior to being bound by any Binding Lease other than
the Hudson Agreements, the Ward Lease or any Small Binding
Lease, Partnership shall receive a copy thereof or an extract
of the material terms thereunder, each certified by Equitable
as being true and complete, together with the calculation
described in subsection (f) below, and Partnership, upon
confirmation of the accuracy of such calculation and
confirmation that the NOI Shortfall Cap (as hereinafter
defined) is sufficient to cover potential decreases to net
operating income relating to the Premises as a result of the
execution of such Binding Lease, shall promptly acknowledge in
writing its agreement to be bound thereby.
(e) Partnership and Equitable hereby acknowledge and agree
that (i) the rents and other interests of the landlord or of Partnership under
the Hudson Agreements or other operating agreements (collectively, the party
holding such interests being hereinafter referred to as the "landlord") under a
Binding Lease are the current property of and are owned by Partnership, (ii)
Partnership shall be and is responsible, from and after the execution of the
Binding Lease, for the satisfaction and completion of all Binding Lease
obligations and liabilities ascribed to the landlord; provided, however, the
following landlord obligations (collectively, the "Equitable Obligations")
shall be and are the sole and exclusive liability of Equitable under the Ward
Lease and all other Binding Leases (whether or not fully executed or effective)
through and including June 30, 1995 (the "Stated Maturity Date"): (1) lien-free
completion of all construction and tenant improvement work for which sponsible,
all of which construction shall be paid for by Equitable and supervised by
General Growth pursuant to clause (9) below, (2) obtaining and maintaining
appropriate and sufficient insurance and/or bonds related to such construction
(to the extent obtaining such insurance or bonds is the responsibility of
landlord or to the extent that the party responsible fails to obtain and
maintain such items), and providing Partnership with a copy of the same upon
Partnership's request, (3) prompt satisfaction of all indemnifications by
landlord related to such construction, (4) payment of any reimbursements under
Binding Leases for tenant improvements, remodeling or construction not
performed by the landlord, (5) payment of any net increase to real property
taxes or assessments resulting from the construction of improvements to the
Premises, (6) payment of any sums necessary to induce current tenants of space
within the Premises to relinquish all or a portion of their demised premises
prio r to the end of their lease term, (7) payment of all costs and expenses
incurred in satisfying all "Landlord's Work" under the Ward Lease, including
without limitation, any transfer taxes, subdivision costs, title insurance
premiums and survey costs (which title and survey shall be obtained by
Equitable), and any costs incurred in obtaining necessary subordination,
non-disturbance agreements from Equitable (which agreements Equitable hereby
agrees to provide), (8) payment of all other sums of money required to be paid
or reserved by the landlord under the Ward Lease not currently set forth in
that draft of the Ward Lease sent to counsel to Partnership by counsel to
Equitable on May 23, 1994, and (9) payment of all fees and expenses incurred by
General Growth in (A) supervising all construction to be performed under a
Binding Lease or related instrument, whether by landlord or another party, (B)
confirming that appropriate insurance for such construction has been obtained
and maintained , and (C) confirming that such construction is performed in a
good and workmanlike manner and in accordance with the terms of the Binding
Lease, and is completed free of liens or encumbrances and in accordance with
applicable building and zoning codes and applicable law, the Partnership hereby
joining with Equitable to jointly appoint General Growth as agent to perform
such tasks, all at Equitable's sole cost and expense and all pursuant to
written agreement(s), obtained by Equitable and delivered to Partnership no
later than July 15, 1994, which agreement(s) shall be substantially similar
regarding General Growth's standard of care as that standard set forth in the
current management agreement between Partnership and General Growth.
Notwithstanding anything in Paragraph 5A or in any other provision of the
Agreement to the contrary, all amounts actually expended by Equitable in
satisfaction of its Equitable Obligations shall be added to the outstanding
principal balance of the loan ev idenced by the Note.
(f) As to all Binding Leases, including Small Binding
Leases, on December 31, 1994, and again on the Stated Maturity Date, Equitable
shall prepare and deliver to Partnership a calculation of New Revenue and
Baseline Revenue, in form and content reasonably satisfactory to Partnership.
As used herein, "New Revenue" means the amount by which (i) base rents, minimum
rents, percentage rents, common area maintenance ("CAM") receipts, payments
received from tenants under or to accomodate such Binding Lease in return for
being released from ongoing lease obligations, and all other rents, profits and
income accruing to and actually received by the landlord (collectively,
"Rents") under such Binding Lease from and after the earlier of such Binding
Lease becoming effective or being fully executed, through and including the
calculation date exceeds (ii) landlord-funded tenant improvements, funds
expended to induce tenants to relinquish demised premises they are entitled to
re rd expenses, or tenant concessions, refunds or credits of any kind actually
paid or made by landlord other than those actually paid by Equitable as part of
their Equitable Obligations (collectively, "Expenses") under such Binding Lease
over the same time period. As used herein, "Baseline Revenue" means, for the
land or demised premises covered by a particular Binding Lease, and for the
Lease(s) or other agreement(s) which would have governed the occupancy of that
land or demised premises if the Binding Lease had not been entered into
(collectively, the "Prior Lease"), the amount by which Rents under the Prior
Lease exceeded Expenses under the Prior Lease from and after execution and
effectiveness of the Binding Lease through and including the appropriate
calculation date (first, December 31, 1994, and then, June 30, 1995).
(g) The parties hereto acknowledge and agree the following
in regard to making the calculations described above: (i) Equitable shall
provide Partnership with a final accounting, reasonably acceptable in form and
content to Partnership, of all New Revenue calculations, and if percentage
rent projections and other estimates made in calculating New Revenue prove to
be inaccurate when compared to actual fixed or percentage rents received, the
parties agree to equitably adjust such items as soon as possible; (ii) in
calculating Baseline Revenue, if more than one Prior Lease governed the land
or demised premises covered by the Binding Lease, Rents and Expenses shall be
calculated by aggregating, on a pro rata basis, the Rents and Expenses of each
Prior Lease or portion thereof that governed such land or demised premises;
(iii) calculations of New Revenue and Baseline Revenue shall be aggregated for
the land or demised premises covered by every Binding Lease then in effec
extent CAM decreases resulting from execution of the Hudson Agreements can be
passed through to and are actually collected from other tenants, including the
tenant under the Ward Lease or a tenant under any other Binding Lease (but
only to the extent such amounts are not already included within the
calculation of New Revenue), such collection shall be included as part of New
Revenue.
(h) The parties hereto acknowledge and agree that, based on
the calculation made by Equitable and agreed to by Partnership pursuant to
clause (f) above, (i) Equitable shall pay to Partnership as hereinafter
provided an amount equal to the sum by which Baseline Revenue exceeds New
Revenue, and (ii) Partnership shall pay to Equitable as hereinafter provided an
amount equal to the sum by which New Revenue exceeds Baseline Revenue. Such
amounts shall be payable in two installments: all amounts accrued as of
December 31, 1994, shall be due and payable on January 10, 1995; and all
amounts accrued as of the Stated Maturity Date shall be due and payable on July
10, 1995. Without in any manner limiting Equitable's unlimited liability for,
and indemnity of Partnership regarding, all Equitable Obligations, the parties
hereto acknowledge that the amount owed Partnership by Equitable under all
Binding Leases pursuant to this clause (h) shall not exceed in the aggregate
$2,000, tfall Cap").
(i) Equitable shall have the right, at any time prior to
the earlier to occur of Closing and the Stated Maturity Date, following written
notice to Partnership, to terminate any Binding Lease for which landlord has
termination rights and to cease satisfying all Equitable Obligations under the
terminated Binding Lease (whether or not fully executed or effective),
including without limitation, all landlord construction requirements; provided,
however, (1) Equitable hereby agrees that it shall promptly complete in a
first-class manner all construction necessary (I) to maintain the structural
integrity of the Premises, (II) to keep all mechanical systems within the
Premises in full operational condition, (III) to restore any portion of the
exterior of the Premises which has been altered by such construction to a
condition that is structurally sound, blends together reasonably well with the
surrounding exterior portions of the Premises, and is free of building and
zoning nd (IV) to keep the interior of the Premises free of conditions that are
unsafe or in violation of applicable building and zoning codes, (2) the
Partnership shall have no liabilities for such Equitable Obligations, and (3)
the indemnity set forth in subsection (j) below shall be in full force and
effect as to such Binding Lease and such Equitable Obligations.
(j) Equitable will and hereby does indemnify and hold
harmless Partnership, General Partner, and their officers,
employees, agents and contractors against any and all damages,
costs, actions, claims, construction liens and liabilities
whatsoever (including without limitation, court costs and
reasonable attorney fees) now existing or hereafter arising as
a result of facts existing prior to the Stated Maturity Date
and which pertain to, arise out of or are in any way connected
with the performance of all Equitable Obligations under each
Binding Lease, including without limitation,
construction-related liabilities. The provisions of this
clause (j) shall survive the Closing or earlier termination of
the Agreement without any time limitation.
(k) Partnership acknowledges and agrees that nothing in
this Paragraph 32 affects or impairs (1) its liability to pay
the amount due under the Note on the Stated Maturity Date, as
said Note balance may have been increased pursuant to Paragraph
5A of the Agreement, as amended by clause (e) of this Paragraph
32, or (2) Equitable's ability under the loan evidenced by the
Note to pursue its available remedies upon a default
thereunder, including without limitation, foreclosure of the
Mortgage, exercise of its assignment of rents or exercise of
its other rights under the Security Documents which secure such
loan.
(l) The parties hereto acknowledge and agree that except as
set forth in clauses (g)(i) [regarding the possible need for
equitable adjustments to New Revenue calculations], (h)
[regarding a payment due on July 10, 1995], and (j) [regarding
Equitable's continuing indemnification for facts arising or
existing prior to the Stated Maturity Date], no obligations of
Equitable under this Paragraph 32 shall continue beyond the
Stated Maturity Date.
(m) At Equitable's request, Partnership agrees to execute a
Mortgage amendment, recordable memorandum of the Agreement or
of this Second Amendment, or other instrument to the extent the
form and content of such amendment or other instrument is
reasonably acceptable to Partnership. Partnership shall bear
no cost or expense related to the execution, filing or
recording of such instrument.
Upon Closing, Partnership shall no longer be bound by
the terms and provisions of any Binding Lease, and only
subsection (j) above shall continue to be effective and
shall survive such Closing.
3. Closing Extension. Pursuant to Paragraph 7A of the
Agreement, Equitable and Partnership hereby jointly elect to keep the
Agreement in full force and effect and to extend the closing deadline
(previously extended from April 30, 1994, to June 15, 1994, pursuant to
letter agreement dated April 29, 1994) to June 30, 1994, since each
party needs additional time to satisfy the conditions precedent set
forth in the Agreement.
4. Agreement Ratified. The Agreement as amended hereby is hereby
ratified and confirmed and shall remain in full force and effect in
accordance with and subject to the terms and conditions thereof.
5. Counterparts. This Second Amendment may be executed in any
number of counterparts, all of which taken together shall constitute
one and the same instrument, and any of the parties hereto may execute
this Second Amendment by signing any of such counterparts.
IN WITNESS WHEREOF, Partnership and Equitable have caused this Second
Amendment to be executed as of the day and year first above written.
EQUITABLE:
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES a New York
corporation
BY:__________________________________
Name:___________________________
Title:__________________________
PARTNERSHIP:
EQUITABLE REAL ESTATE SHOPPING CENTERS
L.P. a Delaware limited partnership
By: Midwest Centers Inc. (formerly
known as Shearson ESC/GP Inc.),
general partner
By:___________________________
Name:____________________
Title:___________________
STATE OF _________________ ) : ss: COUNTY OF_________________ )
The foregoing instrument was acknowledged before me this _____ day of
June, 1994, by _____________________, an _________________________ of
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York
corporation, on behalf of the corporation.
_______________________________
Notary Public
STATE OF ________________ ) : ss: COUNTY OF________________ )
The foregoing instrument was acknowledged before me this _____ day of
June, 1994, by _________________________, the ________________________
of Midwest Centers, Inc., a general partner, on behalf of THE EQUITABLE
REAL ESTATE SHOPPING CENTERS L.P., a Delaware limited partnership.
________________________________
Notary Public
EXHIBIT A
June ___, 1994
MW Land Corporation One Montgomery Ward Plaza 535 West Chicago Avenue Chicago,
Illinois 60671
Gentlemen:
The undersigned, Equitable Real Estate Shopping Centers L.P. (the
"Partnership") is the current owner of the Northland Center in Southfield,
Michigan ("Northland") and has entered into a certain Agreement with The
Equitable Life Assurance Society of the United States ("Equitable") dated as of
March 25, 1994, as amended from time to time (as amended, the "Agreement") for
the transfer of Northland to Equitable, subject to the satisfaction of certain
conditions precedent.
Partnership agrees that, upon execution by Equitable and delivery to
Partnership of a true and complete copy thereof, Partnership shall be bound by
any lease between Equitable and MW Land Corporation (the "Ward Lease"), and to
the extent closing of the transfer of title to Northland is not consummated and
Equitable determines that it is necessary or appropriate to assign in writing
the Ward Lease to Partnership, Partnership hereby accepts such assignment
without the need for Partnership to execute such assignment (but with
Partnership receiving an executed original of such assignment).
Very truly yours,
EQUITABLE REAL ESTATE SHOPPING CENTERS L.P.
By: Midwest Centers Inc., its general partner
By:_________________________________ Its______________________________
