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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 22, 1993
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ML/EQ Real Estate Portfolio, L.P.
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(Exact name of registrant as specified in its governing instrument)
Delaware 0-17684 58-1739523
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(State or other (Commission File (I.R.S. Employer
jurisdiction) Number) Identification No.)
3414 Peachtree Road, N.E., Atlanta, Georgia 30326-1162
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (404) 239-5002
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None
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(Former name or former address, if changed since last report.)
Page 1 of 13
Exhibit Index on page 5
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REPORT ON FORM 8-K
ITEM 5. OTHER EVENTS
Additional Information relating to Mortgage Investments
1. The Report on Form 8-K for the ML/EQ Real Estate Portfolio L.P. (the
"Partnership") filed on December 1, 1993 is hereby amended and restated to
reflect the Partnership's receipt of $2.1 million less in cash as a result of
its 80% interest in the proceeds received from the pay-off of a note secured by
a mortgage on a property located in Norwalk, Connecticut.
201 Merritt Seven, Norwalk, Connecticut
On November 22, 1993, EML Associates (the "Venture"), a joint venture
in which the Partnership holds an 80% interest, received cash of $10.5 million
reflecting the Venture's 50% share of a $21 million pay-off on the note secured
by the 240,000 square foot 201 Merritt Seven property located in Norwalk,
Connecticut. The Venture held a 50% participation interest in a loan made by
The Equitable Life Assurance Society (Equitable) to the Second Merritt Seven
Joint Venture (borrower). The borrower had approached Equitable, the lender,
to renegotiate the terms of the nonrecourse 10-1/4% interest-only loan which
bore a maturity date in 1998. The borrower ultimately proposed buying the loan
at a discount from its face amount of $28 million.
In November 1993, the borrower and lender agreed that borrower would
have a six-month option to purchase the loan at an amount not less than the
fair market value of the property, as determined by an independent appraisal,
but in no event less than $21 million.
Adequate reserves had been established by the Partnership during the
first and third quarters of 1993 to reflect the diminution of value of the
underlying security for the loan. In receiving $8.4 million, its 80% share of
the $10.5 million payment, the Partnership realized the carrying value of the
mortgage on its books.
Management believes that accepting the pay-off was in the best
interest of the Partnership, given the prospects for the property in a
difficult leasing environment. Many of the leases at the property are due to
expire in the next 12 months, and significant additional capital needs are
expected. Those tenants that do not vacate the property are expected to pay
significantly lower rents than can support the debt service on the loan and
other expenses of the property.
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2. Northland Shopping Center
On January 19, 1994, Equitable Real Estate Shopping Centers L.P., the
owner of the Northland Shopping Center, released the attached press release
with respect to its entering into a non-binding letter of intent with The
Equitable Life Assurance Society of the United States for the acquisition of
the shopping center. Consummation of this transaction would require
participation by the Venture. Management is presently determining its course
of action with respect to the matters described in the press release.
Refer to Exhibit A. Letter of Intent
Refer to Exhibit B. Press Release.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ML/EQ Real Estate Portfolio, L.P.
By: EREIM Managers Corp.
Managing General Partner
By: /s/ Peter J. Urdanick
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Peter J. Urdanick
Vice President, Controller and
Treasurer
(Principal Accounting Officer)
Dated: February 28, 1994
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EXHIBIT PAGE
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A Northland Center - Letter of Intent 6
B Press Release 13
Page 5 of 13
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EXHIBIT A
January 19, 1994
Equitable Real Estate Shopping Centers L.P.
c/o Mr. Paul Abbott
President
Midwest Centers Inc.
388 Greenwich Street, 28th Floor
New York, NY 10013
RE: Northland Center - Letter of Intent to Purchase
Dear Paul:
Equitable Real Estate Shopping Centers L.P. (the "Partnership"), the owner of
Northland Center in Southfield, Michigan ("Northland") and Brookdale Center in
Brooklyn Center, Minnesota ("Brookdale") and The Equitable Life Assurance
Society of the United States ("Equitable"), the holder of the first mortgages
on Northland and Brookdale, have entered into negotiations for the acquisition
of Northland from the Partnership by Equitable and EML Associates ("EML"),
Equitable's participant in both first mortgages. Equitable and EML are
sometimes referred to herein as "Purchaser".
This letter is intended to be non-binding and for discussion purposes only. It
is being written solely to summarize the discussions to date between Equitable
and the Partnership concerning certain terms and conditions of the proposed
transaction which, the parties contemplate, will be incorporated into a binding
definitive agreement for the acquisition of Northland (the "Contract") to be
entered into by the Partnership and Purchaser at such time as all terms and
conditions of the proposed acquisition have been negotiated to the full
satisfaction of all parties, which in no event shall be later than February 18,
1994.
The terms and conditions discussed to date are as follows:
1. Acquisition Price - The acquisition price of Northland will be
$6,600,000, all cash, paid to the Partnership; the Partnership shall be
released from the existing first mortgage held by Equitable and related
security instruments.
2. Closing Date - The parties will diligently undertake to close as soon
as possible after January 1, 1994, but in no event later than April 30,
1994.
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Equitable Real Estate Shopping Centers L.P.
January 19, 1994
Page 2
3. Prorations - Except as herein provided, all income and expenses will be
prorated as of 12:01 a.m. on January 1, 1994. Prorations and
adjustments shall be made between the Partnership and Equitable in the
same manner as provided in Paragraph 14 of the 1986 Agreement for
Purchase and Sale of Real Property between the Partnership, as buyer,
and Equitable, as seller. Purchaser will use reasonable efforts (short
of terminating leases) to collect rents due and payable prior to
January 1, 1994 which are in arrears on the date of closing.
Notwithstanding anything in this Paragraph 3 to the Contrary, all
arrearages outstanding as of January 1, 1994, whether collected before
or after the closing by the Partnership or Purchaser, less costs of
collection, shall belong to the Partnership; provided, however, the
final $500,000 of such arrearages shall belong to Purchaser.
4. Closing Costs - Except as otherwise provided, the Partnership shall
bear all reasonable and ordinary costs incurred by any party to close
the proposed transaction including, but not limited to, title
insurance, transfer taxes and survey, but specifically excluding
environmental, appraisal, valuation and engineering reports, and legal
expenses incurred on Purchaser's behalf.
5. Dayton Hudson ("Hudson") - Hudson notified the Partnership by letter
dated December 8, 1993 that Hudson may decide to terminate operation of
the Hudson's department store at Northland. Purchaser's obligation to
close will be expressly subject to Purchaser's entering into an
agreement with Hudson for the continued operation of the Hudson's store
at Northland after the closing on terms and conditions acceptable to
Purchaser in its sole discretion. Such agreement shall be executed
prior to the Contract, shall not be or purport to be binding
upon the Partnership, and shall not release or diminish, as against the
Partnership, any covenants set forth in the current operating
agreement, including without limitation, Hudson's operating covenant.
6. Montgomery Ward and Company ("Ward") - Purchaser's obligation to close
will be expressly subject to Purchaser's entering into an agreement
with Ward for the operation of a Ward's department store at Northland
after the closing on the terms and conditions acceptable to Purchaser
in its sole discretion. Such agreement shall not be or purport to be
binding upon the Partnership, and shall not release or diminish, as
against the Partnership, any covenants set forth in the current
operating agreement, including without limitation, Ward's operating
covenant.
7. Brookdale Mall - At the closing, the first mortgage on Brookdale (the
"Brookdale Mortgage") will be modified to permit prepayment in full on
the date Brookdale is sold by the Partnership to an unaffiliated third
party, such prepayment to be for an amount equal to the sum of all
outstanding principal and accrued and unpaid interest on such date,
plus a defeasance fee for certain sales. The defeasance fee on the
Brookdale Mortgage shall be waived in full if the Sale Price (as
hereinafter defined) is less than $45,000,000. In the event the Sale
Price for Brookdale is in
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Equitable Real Estate Shopping Centers L.P.
January 19, 1994
Page 3
excess of $45,000,000, seventy-five (75%) percent of the Sale Price in
excess of $45,000,000 up to the amount of the defeasance fee provided
for in the Brookdale Mortgage shall be payable at the closing of the
sale of Brookdale. "Sale Price" shall mean the gross sale price paid
including the amount of any contingency payments or holdbacks paid to
the Partnership less reasonable and customary selling costs (including
a fee to Lehman Brothers in an amount equal to 0.875% of the total
contract sales price, but in no event exceeding $425,000). The Sale
Price shall not include any payments payable to and received by the
Partnership from tenants or parties to reciprocal easement agreements,
including without limitation, the Carson's payment of $1,250,000, to
the extent such payments are transferred to the Purchaser. If the
Sale Price includes any consideration other than cash, such as stock
or securities, Sale Price shall mean the closing sale or bid price of
such stock or securities on the date of the sale or, if no established
trading market exists with respect to such stock or securities on the
date of the sale, Sales Price shall equal the fair market value of
such stock or securities as mutually estimated by the Partnership and
Purchaser (or, if they are unable to mutually agree, as shall be
estimated by an independent arbitrator). In the event that any
consideration is not presently payable to the Partnership, such as a
promissory note or a holdback or stock subject to a restriction, then
the defeasance payments relating to such consideration shall be
deferred until the Partnership converts such consideration into cash
currently available to the Partnership and/or distributes such
consideration to its limited partners. To the extent any such
consideration is restricted stock, Purchaser shall be entitled to
receive as a credit against its defeasance payment a pro-rata share
of any dividends or distributions derived from such stock, together
with the first proceeds from any permitted sales of such stock. The
Sale Price shall not include the value of any concessions or fees
waived or foregone by the asset manager, the holder of the Brookdale
Mortgage, Equitable or its affiliates.
8. Equitable Real Estate Investment Management, Inc. ("ERE") - The
Partnership will enter into an agreement with ERE terminating ERE's
service as full execution and delivery of this letter and approval of
such termination by the board of directors of the Partnership's general
partner. In such termination agreement, ERE and the Partnership shall
agree that notwithstanding anything to the contrary in the asset
management agreement, the Partnership shall not be required to change
its name or to cease use of the words "Equitable" and "Equitable Real
Estate" prior to June 30, 1994 if the Partnership has not entered into
a contract of sale for Brookdale on or before that date. The
termination agreement shall also provide that, if the Partnership has
entered into a contract of sale for Brookdale on or before June 30,
1994, ERE, at its option, may require the Partnership to change its
name and to cease use of the words "Equitable" and "Equitable Real
Estate" provided ERE reimburses the Partnership for its reasonable
costs and expenses (not to exceed $10,000) in complying with such
requirement. The Partnership will simultaneously pay ERE all fees and
other sums due and payable to ERE for
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Equitable Real Estate Shopping Centers L.P.
January 19, 1994
Page 4
services rendered under the asset management agreement on or prior to
the January 1, 1994 proration date. In the termination agreement ERE
will waive all other fees which ERE would otherwise be entitled to
receive thereunder and waive the rights of first refusal granted ERE
therein. The termination agreement will expressly provide that the
indemnities in Section 5 of the asset management agreement will
continue notwithstanding such termination. The termination agreement
will further provide that at closing the Partnership and ERE will
enter into an agreement (a) that neither party will pursue against
the other party any claims arising out of facts existing as of the
date of such agreement except as permitted by sub-paragraphs (b)
and (c) of this Paragraph 8 and except to enforce any continuing
indemnities of the other party, (b) the Partnership will not encourage
any limited partner of the Partnership to initiate any claim against
ERE, and (c) notwithstanding the foregoing, neither party shall be
precluded from asserting cross claims or third party claims against
the other party in the event that, in the Partnership's case, an action
is brought against it by any third party unaffiliated with Lehman
Brothers, Inc., and, in ERE's case, an action is brought against it by
any third party unaffiliated with Equitable.
9. Investigation Period - Purchaser shall have the right to perform any
due diligence deemed necessary by Purchaser prior to closing, including
approaching Hudson and Ward as the proposed new owner to negotiate
any required agreements. Any engineering, environmental, appraisal,
valuation, or other reports required to satisfy Purchaser shall be paid
for by Purchaser, and Purchaser agrees to limit any expenses incurred
to the extent reasonably prudent given Purchaser's existing knowledge
of physical conditions present at Northland.
The Contract shall contain seller's representations and warranties
substantially similar in type, form and duration as those provided by
Equitable in the 1986 Agreement for Purchase and Sale of Real Property;
provided, however, the Partnership shall make no representations or
warranties regarding matters currently known to ERE (including
without limitation, the asbestos located in certain portions of
Northland), or regarding matters existing prior to the Partnership
receiving title to Northland (except to the extent that such matters
were not known by the seller under the 1986 Agreement for Purchase and
Sale of Real Property and are known by the Partnership as of the date
of this letter agreement).
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Equitable Real Estate Shopping Centers L.P.
January 19, 1994
Page 5
10. Real Estate Broker's Commissions - The Partnership will be responsible
for any commission paid to Lehman Brothers for the acquisition of
Northland. The Partnership and Purchaser will represent and warrant to
each other that no other broker or agent has been involved in this
transaction.
11. General Releases - At the closing the Partnership and Purchaser will
exchange general releases, releasing each other from all obligations
other than (1) obligations, if any, under the Contract and/or the
documents executed and delivered pursuant thereto which pursuant to the
terms thereof are intended to survive the closing, all of which
obligations shall be similar in type, form and duration as those set
forth in the 986 Agreement for Purchase and Sale of Real Property, (2)
the obligations of the Partnership under any and all loan documents
pertaining to the Brookdale Mortgage, as modified at closing, which
loan documents the Partnership shall ratify and confirm at the closing
as being in full force and effect as so modified, and 3) liabilities
arising with respect to any cross claims or third party claims in the
event that an action is brought against the Partnership by any third
party unaffiliated with Lehman Brothers, Inc. At the closing the
Partnership and Purchaser will also enter into an agreement (a) that
neither the Partnership nor Purchaser will pursue against the other any
claims arising out of facts existing as of the date of such
agreement except as permitted by sub-paragraphs (1), (2), (3), (b)
and (c) of this Paragraph 11 and except to enforce any continuing
indemnities of the other party, (b) the Partnership will not encourage
any limited partner of the Partnership to initiate any claim against
Purchaser, and (c) notwithstanding the foregoing, neither party shall
be precluded from asserting cross claims or third party claims against
the other party in the event that, in the Partnership's case, an action
is brought against it by any third party unaffiliated with Lehman
Brothers, Inc., and, in the Purchaser's case, an action is brought
against it by any third party unaffiliated with Equitable.
12. Equitable Internal Approvals - Equitable's obligation to enter into the
Contract shall be subject to the approval of Equitable's Investment
Committee and to such other approvals as may be required at each stage
of Equitable's approval process preliminary thereto, with Equitable
having the right in its unfettered discretion to disapprove the
transaction at any stage of its investment approval process prior to
execution of the Contract.
13. EML Participation - Equitable has advised the Partnership that it is
unwilling to proceed with the proposed transaction unless EML, its
participant in the first mortgages on Northland and Brookdale, approves
all the terms and conditions of the proposed transaction and agrees to
join with Equitable in acquiring Northland from the Partnership in the
same proportion that it participates in the mortgages. This letter is
also issued therefore subject to obtaining such approval and agreement
from EML and to obtaining any and all necessary and appropriate
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Equitable Real Estate Shopping Centers L.P.
January 19, 1994
Page 6
consents and authorizations required in connection therewith from its
partners, ML/EQ Real Estate Portfolio, L.P. and EREIM L.P. Associates,
and from the partners thereof, which approvals shall be obtained within
a definite time frame to be set forth in the Contract.
14. Securities Filing - The Partnership will be required to obtain a proxy
consent from the majority of the investor limited partners in the
Partnership. Equitable understands that although this letter is not
binding, the Partnership is using this letter as a basis to file with
the Securities and Exchange Commission and seek limited partnership
approval of the acquisition of Northland.
15. Conditional Waiver of Appraisal - Equitable hereby agrees to waive the
Partnership's obligation under the Northland mortgage and other loan
instruments to deliver an appraisal of Northland; provided, however,
such waiver shall terminate as of, and the Partnership shall deliver an
appraisal in accordance with the loan documents within thirty (30) days
following, the earlier of (a) notice by either party to the other of
termination of this proposed transaction, and (b) April 30, 1994 or
such later date as may be mutually agreed to by the Partnership and
Purchaser.
It is understood and agreed that the terms and conditions set forth in this
letter do not constitute all the terms and conditions of the proposed
acquisition and that the Contract, if and when entered into by the parties,
will contain many other terms and conditions which have not yet been negotiated
and agreed to. Until a Contract has been drafted and approved by counsel to
the respective parties and has been properly executed and delivered, neither
the Partnership nor Purchaser shall have any legally binding obligations to the
other (whether under this letter or otherwise) with respect to the proposed
transaction, including but not limited to, a legal duty to continue
negotiations to conclude a Contract, and any party may discontinue negotiations
at any time for any reason whatsoever.
This letter is being issued subject to (a) the terms and conditions of that
certain letter dated November 16, 1993 issued by ERE to the Partnership and
agreed to by the Partnership, which terms and conditions continue in full force
and effect and (b) the understanding that, to expedite the process of
completing the transaction the Partnership has authorized Purchaser and ERE, on
Purchaser's behalf, to initiate discussions with Hudson and with Ward, prior to
execution of the Contract, to negotiate the agreements contemplated above, and
that neither Purchaser nor ERE shall be liable to the Partnership in respect of
any such negotiations or agreements entered into pursuant thereto (except to
the extent any such agreements breach the requirements of Paragraphs 5 or 6
hereof) whether or not a Contract is entered into or a closing takes place
thereunder. The provisions of this paragraph, notwithstanding anything to the
contrary contained in this letter, shall be binding upon the parties hereto.
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Equitable Real Estate Shopping Centers L.P.
January 19, 1994
Page 7
If the enclosed correctly expresses our understanding, please execute the
enclosed copy of this letter where indicated below and return the same. This
letter agreement may be executed in multiple counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same instrument.
Very truly yours,
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/Charles R. Beaver
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Charles R. Beaver
Agreed:
EQUITABLE ESTATE SHOPPING CENTERS L.P.
BY: MIDWEST CENTERS INC.
General Partner
By: /s/Robert J. Hellman
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EXHIBIT B
EQUITABLE REAL ESTATE SHOPPING
CENTERS L.P.
c/o Midwest Centers Inc.
388 Greenwich Street, 28th Floor
New York, New York 10013
Attn: Robert Hellman (212) 464-6739
Joan Berkowitz (212) 464-5921
PRESS RELEASE DATED JANUARY 19, 1994
FOR IMMEDIATE RELEASE
Equitable Real Estate Shopping Centers, L.P. (NYSE: EQM) (the "Partnership")
announced that it today entered into a non-binding letter of intent for the
acquisition of Northland Center, an enclosed regional shopping mall in
Southfield, Michigan, from the Partnership by The Equitable Life Assurance
Society of the United States (the "Purchaser"), the holder of the first
mortgage loan on the property. The proposed acquisition price is $6.6 million
in excess of the existing first mortgage loan. Consummation of the transaction
is subject to numerous conditions including:
(i) Approval of the transaction by the Board of Directors of the
Partnership's general partner;
(ii) approval of the transaction by the Partnership's limited
partners;
(iii) various additional approvals by the Purchaser and its loan
participant(s);
(iv) negotiation of agreements with various third parties; and
(v) the preparation and execution of definitive transaction documents.
There can be no assurance that these and other conditions to the transaction
will be satisfied.
The Partnership also owns Brookdale Center, an enclosed regional shopping mall
located in Brooklyn Center, Minnesota. The Partnership is a master limited
partnership, the limited partnership units of which are traded on the New York
Stock Exchange.
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