<PAGE> 1
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 September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _________________to____________________
Commission file number 0-17684
ML/EQ Real Estate Portfolio, L.P.
(Exact name of registrant as specified in its governing instrument)
Delaware 58-1739523
(State of Organization) (I.R.S. Employer Identification No.)
3424 Peachtree Road N.E., Suite 800, Atlanta, Georgia 30326
(Address of principal executive office) (Zip Code)
(Registrant's telephone number, including area code) (404) 239-5002
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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ML/EQ REAL ESTATE PORTFOLIO, L.P.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial statements:
Consolidated balance sheets at September 30, 1998 and
December 31, 1997
Consolidated statements of operations for the three
and nine months ended September 30, 1998 and 1997
Consolidated statement of partners' capital for the
nine months ended September 30, 1998
Consolidated statements of cash flows for the nine
months ended September 30, 1998 and 1997
Notes to consolidated financial statements
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Items 1 through 6
Signatures
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ML/EQ REAL ESTATE PORTFOLIO, L.P.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
REAL ESTATE INVESTMENTS:
Rental properties, net of accumulated depreciation of
$5,214,061 in 1998 and $18,384,929 in 1997............. $ 39,841,452 $109,281,710
Rental properties held for sale (Note 3).................. 65,209,530 --
Mortgage loan receivable.................................. 6,000,000 6,000,000
------------ ------------
Total real estate investments..................... 111,050,982 115,281,710
------------ ------------
OTHER ASSETS:
Cash and cash equivalents................................. 6,966,295 21,256,903
Accounts receivable and accrued investment income, net of
allowance for doubtful accounts of $686,585 in 1998 and
$759,545 in 1997....................................... 4,214,224 3,364,216
Deferred rent concessions................................. 1,982,521 2,159,595
Guaranty fee, net of accumulated amortization of
$2,580,296 in 1998 and $2,401,462 in 1997 (Notes 1 and
2)..................................................... 1,162,420 1,341,253
Deferred leasing costs, net of accumulated amortization of
$937,641 in 1998 and $781,403 in 1997.................. 1,424,146 1,399,382
Prepaid expenses and other assets......................... 546,094 807,596
Interest receivable....................................... 26,977 116,937
Due from affiliates (Note 1).............................. 37,311 10,590
------------ ------------
Total other assets................................ 16,359,988 30,456,472
------------ ------------
TOTAL ASSETS...................................... $127,410,970 $145,738,182
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued real estate expenses......... $ 1,786,671 $ 1,817,435
Accrued capital expenditures.............................. 88,718 1,566,226
Security deposits and unearned rent....................... 507,849 683,546
Due to affiliates (Note 1)................................ 245,731 629,533
Distributions declared.................................... -- 14,916,619
------------ ------------
Total liabilities................................. 2,628,969 19,613,359
------------ ------------
MINORITY INTEREST IN THE VENTURE............................ 31,200,870 31,508,850
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 2)
PARTNERS' CAPITAL:
General partners.......................................... 2,566,021 2,549,957
Initial limited partner................................... 6,378 6,427
Limited partners (5,424,225 BACs issued and
outstanding)........................................... 91,008,732 92,059,589
------------ ------------
Total partners' capital........................... 93,581,131 94,615,973
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL........... $127,410,970 $145,738,182
============ ============
</TABLE>
See notes to consolidated financial statements.
1
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ML/EQ REAL ESTATE PORTFOLIO, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Rental income............................... $5,028,414 $6,220,326 $15,115,871 $19,067,500
Lease termination income.................... -- -- 12,501 132,840
Interest on loans receivable................ 153,750 153,750 461,250 461,250
---------- ---------- ----------- -----------
Total revenue....................... 5,182,164 6,374,076 15,589,622 19,661,590
---------- ---------- ----------- -----------
OPERATING EXPENSES:
Real estate operating expenses.............. 2,177,699 2,580,122 6,207,514 7,270,894
Depreciation and amortization............... 401,490 1,073,171 2,520,468 3,214,801
Real estate taxes........................... 279,525 823,307 1,363,810 2,478,275
Property management fees (Note 1)........... 111,813 133,967 334,383 420,380
---------- ---------- ----------- -----------
Total operating expenses............ 2,970,527 4,610,567 10,426,175 13,384,350
---------- ---------- ----------- -----------
INCOME FROM PROPERTY OPERATIONS............... 2,211,637 1,763,509 5,163,447 6,277,240
OTHER INCOME (EXPENSE):
Interest and other nonoperating income...... 121,736 344,877 426,944 1,104,311
Loss on write-down of real estate assets
(Note 3)................................. (650,000) -- (3,581,890) --
Asset management fees (Note 1).............. (157,013) (190,830) (465,919) (566,265)
Amortization of guarantee fee............... (44,708) (67,062) (178,834) (201,188)
General and administrative, including
$275,316 and $385,831 for the nine months
ended September 30, 1998 and 1997,
respectively, to affiliates (Note 1)..... (221,467) (169,350) (678,860) (530,124)
---------- ---------- ----------- -----------
Total other expense -- net.......... (951,452) (82,365) (4,478,559) (193,266)
---------- ---------- ----------- -----------
INCOME BEFORE MINORITY INTEREST............... 1,260,185 1,681,144 684,888 6,083,974
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED VENTURE........................ (330,523) (415,894) (363,611) (1,459,639)
---------- ---------- ----------- -----------
NET INCOME.................................... $ 929,662 $1,265,250 $ 321,277 $ 4,624,335
========== ========== =========== ===========
ALLOCATION OF NET INCOME:
General partners............................ $ 46,483 $ 63,263 $ 16,064 $ 231,217
Initial limited partner..................... 42 55 14 202
Limited partners............................ 883,137 1,201,932 305,199 4,392,916
---------- ---------- ----------- -----------
TOTAL............................... $ 929,662 $1,265,250 $ 321,277 $ 4,624,335
========== ========== =========== ===========
NET INCOME PER LIMITED PARTNER BAC............ $ 0.17 $ 0.22 $ 0.06 $ 0.81
========== ========== =========== ===========
WEIGHTED AVERAGE BACs OUTSTANDING............. 5,424,225 5,424,225 5,424,225 5,424,225
========== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
2
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ML/EQ REAL ESTATE PORTFOLIO, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INITIAL
GENERAL LIMITED LIMITED
PARTNERS PARTNER PARTNERS TOTAL
---------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31,1997........................ $2,549,957 $6,427 $92,059,589 $94,615,973
Net income....................................... 16,064 14 305,199 321,277
Distributions.................................... -- (63) (1,356,056) (1,356,119)
---------- ------ ----------- -----------
Balance, September 30, 1998...................... $2,566,021 $6,378 $91,008,732 $93,581,131
========== ====== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
ML/EQ REAL ESTATE PORTFOLIO, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Tenant rentals received................................... $ 14,279,741 $ 19,085,060
Interest received......................................... 978,154 1,634,851
------------ ------------
Cash received from operations............................. 15,257,895 20,719,911
Cash paid for operating activities........................ (9,230,272) (11,901,186)
Cash distributions to minority interest................... (671,591) (3,820,000)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 5,356,032 4,998,725
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and additions to rental properties.............. (3,192,900) (3,410,946)
Expenditures for deferred leasing costs................... (181,002) (83,854)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES....................... (3,373,902) (3,494,800)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to limited partners.................... (16,272,738) (15,459,717)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES....................... (16,272,738) (15,459,717)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (14,290,608) (13,955,792)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 21,256,903 27,310,460
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 6,966,295 $ 13,354,668
============ ============
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income.................................................. $ 321,277 $ 4,624,335
------------ ------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 2,699,302 3,415,989
Minority interest in Venture operations................... 363,611 1,459,639
Cash distributions to minority interest................... (671,591) (3,820,000)
Loss on write-down of real estate assets.................. 3,581,890 --
Changes in assets (increase) decrease:
Accounts receivable and accrued investment income...... (850,008) (235,740)
Deferred rent concessions.............................. 177,074 (122,240)
Interest receivable.................................... 89,960 69,290
Prepaid expenses and other assets...................... 261,502 (882,720)
Due from affiliates.................................... (26,721) 2,826
Changes in liabilities increase (decrease):
Accounts payable and accrued real estate expenses...... (30,765) 173,918
Security deposits and unearned rent.................... (175,697) 242,700
Due to affiliates...................................... (383,802) (287,576)
Other liabilities...................................... -- 358,304
------------ ------------
Total adjustments................................. 5,034,755 374,390
------------ ------------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES.............. $ 5,356,032 $ 4,998,725
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
ML/EQ REAL ESTATE PORTFOLIO, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
The consolidated financial statements of the Partnership included herein
have been prepared by the Partnership pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of management, the
accompanying unaudited consolidated financial statements reflect all
adjustments, which are of a normal recurring nature, to present fairly the
Partnership's financial position, results of operations, and cash flows at the
dates and for the periods presented. These consolidated financial statements
should be read in conjunction with the Partnership's audited financial
statements and notes thereto included in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1997, as certain footnote disclosures which
would substantially duplicate those contained in such audited financial
statements have been omitted from this report. Interim results of operations are
not necessarily indicative of results to be expected for the fiscal year.
1. TRANSACTIONS WITH AFFILIATES
The general partners (or affiliates) are entitled to receive various
recurring fees for the supervision and administration of Partnership assets and
for providing the guaranty of minimum return to BAC holders and to be reimbursed
for certain expenses incurred on behalf of the Partnership. At September 30,
1998 and December 31, 1997, the accrued balance of these fees and reimbursements
totaled $245,731 and $629,533, respectively. For each of the nine months ended
September 30, 1998 and 1997, the expense for these recurring fees totaled
$741,235 and $952,096, respectively, and this expense is included in the
statements of operations as asset management fees and as components of general
and administrative expense. Asset management fees are paid by the Partnership to
EREIM Managers Corp. (the "Managing General Partner"), which then pays the fees
to Lend Lease Real Estate Investments, Inc. ("Lend Lease") (formerly known as
ERE Yarmouth, Inc.), its investment advisor. Asset management fees paid by the
Partnership to the Managing General Partner were $465,919 and $566,265 for the
nine months ended September 30, 1998 and 1997, respectively.
Properties are managed and leased by third-party managing and leasing
agents, including Compass Management and Leasing, Inc. ("Compass") and Lend
Lease Retail Division ("Retail", formerly ERE Yarmouth Retail, Inc.), formerly
affiliates of Lend Lease. On October 1, 1998, Lend Lease sold Compass and Retail
to LaSalle Partners Incorporated. Property management fees are generally
established at specified percentages of 1% to 5% of the gross receipts of the
properties as defined in the management agreements. Property management fees
paid by EML Associates (the "Venture"), a joint venture in which the Partnership
holds an 80% interest and which invests in income-producing real properties and
a fixed-rate mortgage loan, to Compass and Retail for properties managed were
$292,713 and $296,401 for the nine months ended September 30, 1998 and 1997,
respectively.
Leasing commissions are based on a percentage of the rent payable during
the term of the lease as specified in each lease agreement. Leasing commissions
paid by the Venture to Compass and Retail in the aggregate were $58,698 and
$107,913 for the nine months ended September 30, 1998 and 1997, respectively.
Leasing commissions are capitalized in deferred leasing costs on the balance
sheet or expensed in real estate operating expenses on the statements of
operations in accordance with the Venture's capitalization policy. The Venture
reimbursed Compass and Retail for payroll incurred of $1,321,615 and $1,256,638
for each of the nine months ended September 30, 1998 and 1997, respectively.
Payroll reimbursements are included in real estate operating expenses on the
statements of operations.
5
<PAGE> 8
ML/EQ REAL ESTATE PORTFOLIO, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. GUARANTY AGREEMENT
EREIM LP Associates, a general partnership between The Equitable Life
Assurance Society of the United States ("Equitable") and EREIM LP Corp., a
wholly owned subsidiary of Equitable, entered into a guaranty agreement with the
Venture to provide a minimum return to the Partnership's limited partners on
their contributions. The Venture has assigned its rights under the guaranty
agreement to the Partnership. Payments on the guaranty are due 90 days following
the earlier of the sale or other disposition of all the properties and mortgage
loans and notes or the liquidation of the Partnership. The minimum return will
be an amount which, when added to the cumulative distributions to the limited
partners, will enable the Partnership to provide the limited partners with a
minimum return equal to their capital contributions plus a simple annual return
of 9.75% on their adjusted capital contributions calculated from the dates of
the investor closings. Adjusted capital contributions are the limited partners'
original cash contributions reduced by distributions of sale or financing
proceeds and by distributions of certain funds in reserves, as more particularly
described in the Partnership Agreement. The limited partners' original cash
contributions have been adjusted by that portion of distributions paid through
September 30, 1998 resulting from cash available to the Partnership as a result
of sale or financing proceeds paid to the Venture. The minimum return is subject
to reduction in the event that certain taxes, other than local property taxes,
are imposed on the Partnership or the Venture, and is also subject to certain
other limitations set forth in the prospectus. If there were no distributions
until December 31, 2002, the expiration of the term of the Partnership, the
maximum liability of EREIM LP Associates to the Venture under the guaranty
agreement as of September 30, 1998 would be limited to $179,315,069, plus the
value of EREIM LP Associates' interest in the Venture less any amounts
contributed by EREIM LP Associates to the Venture to fund cash deficits.
Capital contributions by the BAC holders of the Partnership totaled
$108,484,500. As of September 30, 1998, the cumulative 9.75% simple annual
return was $107,412,830. As of September 30, 1998, cumulative distributions by
the Partnership to the BAC holders totaled $65,752,441, of which $27,663,548 is
attributable to income from operations and $38,088,893 is attributable to sales
of Venture assets, principal payments on mortgage loans, and other capital
events. To the extent that future cash distributions to the limited partners are
insufficient to provide the specified minimum return, any shortfall will be
funded by the guarantor, up to the above described maximum.
Effective as of January 1, 1997, the Partnership entered into an amendment
to the Joint Venture Agreement of the Venture between the Partnership and EREIM
LP Associates pursuant to which EREIM LP Associates agreed to defer, without
interest, its rights to receive 20% of the Venture's distributions of sale or
financing proceeds until the Partnership has received aggregate distributions
from the Venture in an amount equal to the capital contributions made to the
Partnership by the BAC holders plus a noncompounded cumulative return computed
at the rate of 9.75% per annum on contributions outstanding from time to time.
Prior to the amendment, EREIM LP Associates had a right to receive 20% of all
the Venture's distributions of sale or financing proceeds on a pari passu basis
with the Partnership. The amendment has the effect of accelerating the return of
original contributions to BAC holders to the extent that sale or financing
proceeds are realized prior to the dissolution of the Partnership.
6
<PAGE> 9
ML/EQ REAL ESTATE PORTFOLIO, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. RENTAL PROPERTIES HELD FOR SALE
The Partnership evaluated appropriate strategies for the ownership of each
of the assets in the portfolio in order to achieve maximum value. As a result of
this evaluation, the Partnership decided to market for sale the 1200 Whipple
Road, 1345 Doolittle Drive, Richland Mall, 300 Delaware, and 16/18 Sentry Park
West properties, and to market for sale or lease the 1850 Westfork property. As
of September 30, 1998, these properties are classified as held for sale.
Management, through discussions with real estate brokers, determined that the
carrying values for Richland Mall and 1850 Westfork were in excess of the
estimated market values less selling costs, and losses of $2,931,890 and
$650,000, respectively, were recorded as a result of the reclassifications. For
each of the other properties classified as held for sale, management believes
that the carrying value does not exceed market value less selling costs. For the
three and nine months ended September 30, 1998, income from property operations
includes approximately $1.2 million, or 56% and $2.5 million, or 49%,
respectively, of income from the six rental properties held for sale.
In September 1998, the Partnership executed a purchase and sale agreement
to sell 1200 Whipple Road and 1345 Doolittle Drive as a package for $26.5
million. In October 1998, the Partnership executed a purchase and sale agreement
to sell 1850 Westfork Drive for $2.6 million. The Partnership anticipates making
a special distribution of the net proceeds to BAC holders shortly after the
transactions are complete. Based on the amendment to the Joint Venture Agreement
effective as of January 1, 1997, EREIM LP Associates agreed to defer, without
interest, its right to receive 20% of the Venture's distribution of sale or
financing proceeds, thereby entitling the Partnerhip to receive 100% of the sale
or financing proceeds attributable to the sales. The Partnership expects to
close these transactions prior to year end, subject to customary closing
conditions and results of due diligence procedures.
4. LEGAL PROCEEDINGS
As discussed in the Notes to Consolidated Financial Statements of the
Partnership's December 31, 1997 audited financial statements, the Partnership is
a defendant in a consolidated action brought in the Court of Chancery of the
State of Delaware entitled IN RE: ML/EQ Real Estate Partnership Litigation.
There have been no new developments associated with this action for the nine
months ended September 30, 1998.
7
<PAGE> 10
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the consolidated results of operations and
financial condition of the Partnership should be read in conjunction with the
consolidated financial statements and the related notes to consolidated
financial statements included elsewhere herein.
CERTAIN FORWARD-LOOKING INFORMATION
Certain of the statements contained in this Quarterly Report on Form 10-Q
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements include, without limitation,
statements regarding future capital expenditures relating to renovation and
development activities, and statements regarding expectations of future sales of
the properties. These forward-looking statements are included in this Quarterly
Report on Form 10-Q based on the intent, belief or current expectations of the
Partnership. However, such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. Although the Partnership believes that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Factors that could cause actual results to differ materially from the
Partnership's current expectations include general local market conditions,
availability of financing, the investment climate for particular property types,
individual property issues, construction delays due to unavailability of
materials, weather conditions or other causes, leasing activities, results of
due diligence procedures on properties under contract for sale, and the other
risks detailed from time to time in the Partnership's SEC reports, including the
Annual Report on Form 10-K for the year ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, cash and cash equivalents recorded on the balance
sheet were $7.0 million. The $7.0 million includes the Partnership's cash and
cash equivalents of approximately $1.3 million, which are available for
distribution to the extent not required for working capital. The balance of $5.7
million in cash and cash equivalents was held by the Venture, in which the
Partnership holds an 80% interest. This money was retained for the specific
purpose of funding the renovation work on 300 Delaware, to fund possible costs
to be incurred to increase tenancy at Northland Mall, and, to the extent
required, to increase tenancy at the other properties, and to cover general
working capital requirements.
The Partnership evaluated appropriate strategies for the ownership of each
of the assets in the portfolio in order to achieve maximum value. In this
regard, the Partnership took into account capital market and investment market
conditions for most types of real estate; local market conditions; future
capital needs, including potential lease exposure for specific properties; and
other issues that impact property performance. Among other things, this analysis
provided the basis for hold/sell recommendations for the properties. As a result
of the evaluation, the Partnership decided to market for sale the 1200 Whipple
Road, 1345 Doolittle Drive, Richland Mall, 300 Delaware, and 16/18 Sentry Park
West properties, and to market for sale or lease the 1850 Westfork property. As
of September 30, 1998, these properties are classified as held for sale.
Management, through discussions with real estate brokers, determined that the
carrying values for Richland Mall and 1850 Westfork were in excess of the
estimated market values less selling costs, and losses of $2,931,890 and
$650,000, respectively, were recorded as a result of the reclassifications.
While there is no guarantee that efforts to sell these properties will be
successful, the Partnership will continue to look for selling
8
<PAGE> 11
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
opportunities. Additionally, the Partnership continues to evaluate appropriate
strategies for Northland Mall. While the Partnership has not engaged a broker to
market the property for sale, several brokers have provided an evaluation of the
property to help determine an appropriate plan of action for an exit strategy.
In September 1998, the Partnership executed a purchase and sale agreement
to sell 1200 Whipple Road and 1345 Doolittle Drive as a package for $26.5
million. In October 1998, the Partnership executed a purchase and sale agreement
to sell 1850 Westfork Drive for $2.6 million. The Partnership anticipates making
a special distribution of the net proceeds to BAC holders shortly after the
transactions are complete. Based on the amendment to the Joint Venture Agreement
effective as of January 1, 1997, EREIM LP Associates agreed to defer, without
interest, its right to receive 20% of the Venture's distribution of sale or
financing proceeds, thereby entitling the Partnerhip to receive 100% of the sale
or financing proceeds attributable to the sales. The Partnership expects to
close these transactions prior to year end, subject to customary closing
conditions and results of due diligence procedures.
On December 16, 1996, Brookdale Center was transferred to the Venture and
Equitable, as tenants in common (collectively, the "Owners"), following default
by the borrower on the mortgage note securing the property. In November 1997,
the Partnership sold Brookdale Center for approximately $24.8 million, of which
the Venture's portion was approximately $17.8 million. The Partnership made a
special distribution of the net proceeds in December 1997. Based on the
amendment to the Joint Venture Agreement effective as of January 1, 1997, EREIM
LP Associates agreed to defer, without interest, its right to receive 20% of the
Venture's distribution of the sale or financing proceeds, thereby entitling the
Partnership to receive 100% of the sale or financing proceeds attributable to
the sale.
Management has established an enhancement, stabilization, and renovation
program for 300 Delaware which was transferred to the Venture by deed in lieu of
foreclosure on November 15, 1994. Estimated costs for this program total $4.4
million, of which $1.6 million was incurred in 1995, $1.2 million was incurred
in 1996, $398,000 was incurred in 1997, $764,000 was incurred for the nine
months ended September 30, 1998, and the remaining balance is expected to be
expended through 1998.
Included in the estimated $4.4 million of renovation expenditures is
approximately $2.3 million for asbestos abatement, $400,000 for sprinkler
installation, $400,000 for exterior deferred maintenance and $600,000 for
interior and exterior common area cosmetic upgrades. The deferred maintenance
and cosmetic upgrades have been substantially completed as of September 30,
1998. Management expects to complete the asbestos abatement and sprinkler
installation projects by the end of 1998. Additional costs not included in the
above figures are estimated tenant improvements of $3.7 million. The tenant
improvement costs are directly associated with actual leasing and will only be
expended as leasing transactions occur in the building. As of September 30,
1998, approximately $2.0 million had been expended for tenant improvements. The
remaining tenant improvement costs of approximately $1.7 million are expected to
be expended over the next few years in connection with leasing the currently
vacant space.
As of September 30, 1998, the Venture has incurred costs of approximately
$3.8 million to renovate Richland Mall and to increase tenancy at the property.
This project is near completion and management does not expect to incur any
additional significant renovation costs related to the project. One block of
vacant space remains and is being actively marketed by management.
9
<PAGE> 12
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Cash received by the Venture from tenant rentals for the nine months ended
September 30, 1998 decreased approximately $4.8 million, or 25%, to $14.3
million from $19.1 million for the nine months ended September 30, 1997. This
decrease is due to the sale of Brookdale Center and the Chicago Industrial
properties in late 1997. Rental income received from Brookdale Center and the
Chicago Industrial properties for the nine months ended September 30, 1997 was
approximately $4.9 million.
FINANCIAL CONDITION
Cash and cash equivalents decreased approximately $14.3 million, or 67%,
from $21.3 million at December 31, 1997 to $7.0 million at September 30, 1998
due mainly to distributions to BAC holders and minority interest of $16.3
million and $3.4 million of cash used in investing activities, offset by $5.4
million of cash provided by operating activities.
Accounts receivable and accrued investment income increased approximately
$800,000, or 25%, from $3.4 million at December 31, 1997 to $4.2 million at
September 30, 1998 due primarily to the timing of the remittance of rental
income.
Prepaid expenses and other assets decreased approximately $262,000, or 32%,
from $808,000 at December 31, 1997 to $546,000 at September 30, 1998 due to the
amortization of prepaid balances for real estate taxes and insurance costs.
Interest receivable decreased approximately $90,000, or 77%, from $117,000
at December 31, 1997 to $27,000 at September 30, 1998 due to lower average cash
balances held during September 1998 as compared to December 1997.
Total liabilities decreased approximately $17.0 million, or 87%, from $19.6
million at December 31, 1997 to $2.6 million at September 30, 1998. The decrease
is due primarily to the payment during the first quarter of 1998 of accrued
distributions to BAC holders and limited partners of $14.9 million,
approximately $1.5 million of accrued capital expenditures and approximately
$400,000 of fees due to affiliates.
The percentage of leased space at the Venture's properties at September 30,
1998 was 76% compared to the percentage of leased space at December 31, 1997 of
78%. The 2% decrease is due primarily to a decrease in occupancy at Northland
Mall.
RESULTS OF OPERATIONS
Rental income for the three and nine months ended September 30, 1998
decreased approximately $1.2 million, or 19%, and $4.0 million or 21%,
respectively, from $6.2 million for the three months and $19.1 million for the
nine months ended September 30, 1997 to $5.0 million for the three months and
$15.1 million for the nine months ended September 30, 1998. The decrease is due
primarily to the sale of Brookdale Center and the Chicago Industrial properties
during late 1997. Rental income for Brookdale Center and the Chicago Industrial
properties for the nine months ended September 30, 1997 was approximately $4.9
million, offset by an increase in rental income at 300 Delaware, Richland Mall
and Northland Mall of approximately $500,000, $200,000 and $200,000,
respectively.
Lease termination income for the nine months ended September 30, 1998
decreased approximately $120,000, or 90%, from $133,000 for the nine months
ended September 30, 1997 to $13,000 for the nine
10
<PAGE> 13
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
months ended September 30, 1998. The decrease is due to approximately $13,000 of
lease termination income recognized during the first nine months of 1998 at 300
Delaware compared to approximately $133,000 of lease termination income
recognized during the first nine months of 1997 at Richland Mall.
Real estate operating expenses decreased approximately $400,000, or 16%,
and $1.1 million, or 15% for the three and nine months ended September 30, 1998,
respectively, from $2.6 million for the three months and $7.3 million for the
nine months ended September 30, 1997 to $2.2 million for the three months and
$6.2 million for the nine months ended September 30, 1998 . The decrease is
primarily a result of a decrease of $1.2 million due to the sale of Brookdale
Center and the Chicago Industrial properties in late 1997.
Depreciation and amortization decreased approximately $700,000, or 63%, and
$700,000, or 22% for the three and nine months ended September 30, 1998,
respectively, from $1.1 million for the three months and $3.2 million for the
nine months ended September 30, 1997 to $400,000 for the three months and $2.5
million for the nine months ended September 30, 1998 due primarily to the
reclassification of 1200 Whipple, 1345 Doolittle, Richland Mall, Sentry Park
West and 300 Delaware to held for sale as of June 30, 1998. Depreciation of
these properties ceased upon the reclassification. The sale of Brookdale Center
and the Chicago Industrial properties also contributed to the decrease in
depreciation expense. These decreases were offset by an increase in depreciation
due to capital expenditures at 300 Delaware and Richland Mall during 1998.
Real estate taxes decreased approximately $543,000, or 66%, and $1.1
million, or 45%, for the three and nine months ended September 30, 1998,
respectively, from $823,000 for the three months and $2.5 million for the nine
months ended September 30, 1997 to $280,000 for the three months and $1.4
million for the nine months ended September 30, 1998. The decrease is due
primarily to the sale of Brookdale Center and the Chicago Industrial properties
in late 1997. Real estate tax expense associated with these properties in the
first nine months of 1997 was approximately $920,000.
Property management fees decreased approximately $22,000, or 17%, and
$86,000, or 20% for the three and nine months ended September 30, 1998,
respectively, from $134,000 for the three months and $420,000 for the nine
months ended September 30, 1997 to $112,000 for the three months and $334,000
for the nine months ended September 30, 1998, primarily due to the sale of
Brookdale Center and the Chicago Industrial properties in late 1997. Property
management fees for Brookdale Center and the Chicago Industrial properties for
the nine months ended September 30, 1997 totaled $102,000.
Interest and other nonoperating income decreased approximately $223,000, or
65%, and 677,000, or 61% for the three and nine months ended September 30, 1998,
respectively, from $345,000 and $1.1 million for the three and nine months ended
September 30, 1997 to $122,000 and $427,000 for the three and nine months ended
September 30, 1998, due primarily to lower cash balances held. This reduced the
amount of interest income received.
Loss on write-down of real estate assets was approximately $3.6 million for
the nine months ended September 30, 1998 due to the write-down of Richland Mall
and 1850 Westfork in 1998. The Venture has been in discussions with brokers to
market the properties for sale. Through these discussions, management determined
that the carrying values for Richland Mall and 1850 Westfork were in excess of
the estimated market values less selling costs, and losses totalling $3.6
million was recorded as a result of the reclassifications. There were no
write-downs of real estate assets in 1997.
11
<PAGE> 14
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
General and administrative expense increased $52,000 or 31%, and $149,000
or 28%, for the three and nine months ended September 30, 1998, respectively,
from $169,000 for the three months and $530,000 for the nine months ended
September 30, 1997 to $221,000 for the three months and $679,000 for the nine
months ended September 30, 1998, due primarily to an increase of $35,000 in
income taxes paid by the Partnership during 1998 as a result of the sale of
Brookdale Center and the Chicago Industrial properties in 1997. In addition, the
Partnership has incurred an increase in legal fees of approximately $96,000 for
the nine months ended September 30, 1998 due to the pending litigation against
the Partnership.
YEAR 2000
The inability of computers, software and other equipment to recognize and
properly process data fields containing a two-digit year is commonly referred to
as the Year 2000 compliance issue (Y2K). As the year 2000 approaches, such
systems may be unable to accurately process certain date-based information.
Y2K exposures of the Partnership and the Venture are currently being
assessed. Potential critical exposures include reliance on third party vendors
and building systems that are not Y2K compliant. The Venture has begun to
communicate with our third party service vendors such as Lend Lease, Merrill
Lynch and property managers in an effort to assess their Y2K compliance status
and the adequacy of their Y2K efforts.
Each property owned by the Venture is being individually assessed in an
effort to identify Y2K issues specific to each property. Required remediation
strategies will depend on the outcome of the assessments and therefore will not
be developed until the property assessments are complete. We expect the majority
of critical property assessments to be completed and remediation efforts to be
underway by the end of the first quarter of 1999.
Neither the Partnership nor the Venture has incurred any costs to date
relating to Y2K. Total property assessment costs to the Venture are expected to
total approximately $55,000. These costs were not incurred and therefore not
accrued as of September 30, 1998. Remediation efforts may vary significantly
from one building to the next. Therefore remediation costs can not be reasonably
estimated until the assessments are complete and remediation strategies
determined.
The failure to adequately address the Year 2000 issue may result in the
closure of buildings owned by the Venture, or delay in distributions to BAC
Holders. In order to reduce the potential impact on the operations of the
Partnership and the Venture, contingency plans will be developed once Y2K
exposures have been assessed.
Building contingency plans will only be developed on a property by property
basis once assessments have been completed. This will allow the efficient
development of contingency plans that take into account individual circumstances
surrounding each property. Contingency plans may involve the engagement of
additional security services, implementation of temporary systems modifications,
and the identification and engagement of alternate service vendors. Additional
contingency plans may be developed as circumstances warrant.
12
<PAGE> 15
PART II
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities and Use of Proceeds
Response: None
Item 3. Default Upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response:
a) Exhibits
10 Material Contracts
(a) 1200 Whipple Road, Union City, California and 1345
Doolittle Drive, San Leandro, California. Purchase
and Sale Agreement between EML Associates, a New
York general partnership as seller, and SPP Real
Estate (USA), Inc., a Delaware corporation, as
purchaser.
(b) 1850 Westfork Drive, Westfork Business Park, Lithia
Springs, Douglas County, Georgia. Purchase and Sale
Agreement between EML Associates, a joint venture in
the form of a New York general partnership as
seller, and Glenn E. Wyatt, Jr., an individual
resident of the State of Georgia as purchaser.
27 Financial Data Schedule (for SEC filing purposes only)
b) Reports
None
15
<PAGE> 16
SIGNATURES
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/ Patricia C. Snedeker
------------------------------
Patricia C. Snedeker
Vice President, Controller
and Treasurer
(Principal Accounting Officer)
Dated: November 13, 1998
16
<PAGE> 17
SIGNATURES
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/Patricia C. Snedeker
------------------------------
Patricia C. Snedeker
Vice President, Controller
and Treasurer
(Principal Accounting Officer)
Dated: November 13, 1998
17
<PAGE> 18
EXHIBIT INDEX
Exhibit No. Description
-------------------------------------------------
10 Material Contracts
(a) 1200 Whipple Road, Union City, California and 1345
Doolittle Drive, San Leandro, California. Purchase
and Sale Agreement between EML Associates, a New
York general partnership as seller, and SPP Real
Estate (USA), Inc., a Delaware corporation, as
purchaser.
(b) 1850 Westfork Drive, Westfork Business Park,
Lithia Springs, Douglas County, Georgia. Purchase
and Sale Agreement between EML Associates, a joint
venture in the form of a New York general
partnership as seller, and Glenn E. Wyatt, Jr., an
individual resident of the State of Georgia as
purchaser.
27 Financial Data Schedule (for SEC filing purposes
only)
18
<PAGE> 1
EXHIBIT 10A
================================================================================
PURCHASE AND SALE AGREEMENT
---------------------------
between
EML ASSOCIATES,
---------------
a New York general partnership
as Seller
and
SPP REAL ESTATE (USA), INC.,
----------------------------
a Delaware corporation
as Purchaser
1200 Whipple Road, Union City, California and
1345 Doolittle Drive, San Leandro, California
September 28, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I PURCHASE AND SALE........................................1
1.1 Agreement of Purchase and Sale...............................1
1.2 Property Defined.............................................2
1.3 Permitted Exceptions.........................................2
1.4 Purchase Price...............................................2
1.5 Payment of Purchase Price....................................2
ARTICLE II TITLE AND SURVEY.........................................2
2.1 Title Examination; Commitment for Title Insurance............2
2.2 Survey.......................................................2
2.3 Title Objections; Cure of Title Objections...................3
2.4 Conveyance of Title..........................................3
2.5 Pre-Closing "Gap" Title Defects..............................4
ARTICLE III INSPECTION PERIOD........................................4
3.1 Right of Inspection..........................................4
3.2 Right of Termination.........................................5
ARTICLE IV CLOSING..................................................5
4.1 Time and Place...............................................5
4.2 Seller's Obligations at Closing..............................5
4.3 Purchaser's Obligations at Closing...........................6
4.4 Credits and Prorations.......................................7
4.5 Conditions Precedent to Obligation of Purchaser..............9
4.6 Conditions Precedent to Obligation of Seller................10
ARTICLE V SELLER AND PURCHASER COVENANTS..........................10
5.1 Covenants of Seller.........................................10
5.2 Covenants of Purchaser......................................11
ARTICLE VI DEFAULT.................................................11
6.1 Default by Purchaser........................................11
6.2 Default by Seller...........................................12
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C> <C>
ARTICLE VII RISK OF LOSS............................................12
7.1 Minor Damage................................................12
7.2 Major Damage................................................12
7.3 Definition of "Major" Loss or Damage........................12
ARTICLE VIII COMMISSIONS.............................................13
8.1 Brokerage Commissions.......................................13
ARTICLE IX DISCLAIMERS AND WAIVERS.................................13
9.1 No Reliance on Documents....................................13
9.2 DISCLAIMERS.................................................13
9.3 Effect and Survival of Disclaimers..........................15
ARTICLE X MISCELLANEOUS...........................................15
10.1 Confidentiality.............................................15
10.2 Public Disclosure...........................................16
10.3 Discharge of Obligations....................................16
10.4 Assignment..................................................16
10.5 Notices.....................................................16
10.6 Binding Effect..............................................17
10.7 Modifications...............................................18
10.8 Tenant Notification Letters.................................18
10.9 Calculation of Time Periods.................................18
10.10 Successors and Assigns......................................18
10.11 Entire Agreement............................................18
10.12 Further Assurances..........................................18
10.13 Counterparts................................................18
10.14 Severability................................................18
10.15 Applicable Law..............................................19
10.16 No Third Party Beneficiaries................................19
10.17 Exhibits and Schedules......................................19
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C> <C> <C>
10.18 Captions....................................................19
10.19 Construction................................................19
10.20 Termination of Agreement....................................19
10.21 Survival....................................................19
10.22 Enforcement.................................................20
10.23 Marketing...................................................20
10.24 SEC Compliance..............................................20
ARTICLE XI REPRESENTATIONS AND WARRANTIES..........................20
11.1 Representations and Warranties of Seller....................20
11.2 Representations and Warranties of Purchaser.................22
ARTICLE XII INDEMNIFICATION.........................................23
12.1 Indemnification.............................................23
EXHIBIT A LEGAL DESCRIPTION OF THE LAND.....................................A-1
EXHIBIT B LEASE SCHEDULE....................................................B-1
EXHIBIT C OPERATING AGREEMENTS SCHEDULE.....................................C-1
EXHIBIT D TENANT ESTOPPEL FORM..............................................D-1
EXHIBIT E SELLER ENVIRONMENTAL ASSESSMENT REPORTS...........................E-1
</TABLE>
-iii-
<PAGE> 5
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of
September 28, 1998, by and between EML ASSOCIATES, a New York general
partnership ("Seller"), having its office at c/o Lend Lease Real Estate
Investments, Inc., One Front Street, Suite 1100, San Francisco, California
94104, and SPP REAL ESTATE (USA), INC., a Delaware corporation dba SPP
INVESTMENT MANAGEMENT, or its affiliated assignee and/or nominee as defined
hereinbelow ("Purchaser"), having an office at c/o AMB Property Corporation,
Inc., 505 Montgomery Street, San Francisco, California 94111.
W I T N E S S E T H:
ARTICLE I
PURCHASE AND SALE
1.1 Agreement of Purchase and Sale. Subject to the terms and
conditions hereinafter set forth, Seller agrees to sell and convey and Purchaser
agrees to purchase the following:
(a) that certain tracts or parcels of land located at 1200
Whipple Road, Union City, California and 1345 Doolittle Drive, San Leandro,
California, more particularly described on EXHIBIT A attached hereto and made a
part hereof, together with all and singular the rights and appurtenances
pertaining to such property, including any right, title and interest of Seller
in and to adjacent streets, alleys or rights-of-way (the property described in
clause (a) of this Section 1.1 being herein referred to collectively as the
"Land");
(b) the buildings, structures, fixtures and other improvements
on the Land, including, specifically, without limitation, two industrial
buildings located at 1200 Whipple Road, Union City, California, and 1345
Doolittle Drive, San Leandro, California (the property described in clause (b)
of this Section 1.1 being herein referred to collectively as the
"Improvements");
(c) all of Seller's right, title and interest in and to all
leases listed and described on EXHIBIT B (the "Lease Schedule") attached hereto
and made a part hereof, pursuant to which any portion of the Land or the
Improvements is used or occupied by anyone other than Seller (the property
described in clause (c) of this Section 1.1 being herein referred to
collectively as the "Leases"); and
(d) all of Seller's right, title and interest in and to any
intangible property used in connection with the Land or the Improvements,
including, without limitation, (i) the assignable contracts and agreements
(collectively, the "Operating Agreements") listed and described on EXHIBIT C
(the "Operating Agreements Schedule") attached hereto and made a part hereof,
relating to the upkeep, repair, maintenance or operation of the Land or the
Improvements which will extend beyond the date of Closing (as such term is
defined in Section 4.1 hereof) and (ii) all assignable existing warranties and
guaranties (expressed or implied) issued to Seller in connection with the
Improvements (the property described in clause (d) of this Section 1.1 being
sometimes herein referred to collectively as the "Intangibles").
1
<PAGE> 6
1.2 Property Defined. The Land, the Improvements, the Leases and the
Intangibles are hereinafter sometimes referred to collectively as the
"Property."
1.3 Permitted Exceptions. The Property shall be conveyed by grant deed
subject to the matters which are, or are deemed to be, Permitted Exceptions
pursuant to Article II hereof (herein referred to collectively as the "Permitted
Exceptions").
1.4 Purchase Price. Seller is to sell and Purchaser is to purchase the
Property for a total of Twenty-Six Million Nine Hundred Twenty-Five Thousand
Dollars ($26,925,000) (the "Purchase Price").
1.5 Payment of Purchase Price. The Purchase Price shall be paid as
follows:
(a) Within three (3) business days after the Effective Date (as
defined in Section 3.1 below), Purchaser shall deposit in escrow with First
American Title Company at 345 California Street, San Francisco, California,
attention: Virginia Bressman ("Title Company"), a deposit in the amount of Two
Hundred Fifty Thousand Dollars ($250,000) (the "Initial Deposit"). Unless
Purchaser has terminated this Agreement (or is deemed to have elected to
terminate this Agreement) pursuant to Section 3.1 below, Purchaser shall deposit
an additional Two Hundred Fifty Thousand Dollars ($250,000) (the "Final
Deposit") in escrow within two (2) business days after the expiration of the
Inspection Period described in 3.1 below. (The Initial Deposit and the Final
Deposit, if any, are collectively referred to herein as the "Deposit"). The
Deposit shall be held in an interest-bearing account and interest accruing
thereon shall be held for the account of Buyer subject to the terms hereof. In
the event the sale of the Property as contemplated hereunder is consummated, the
Deposit plus interest accrued thereon shall be credited against the Purchase
Price.
(b) The balance of Purchase Price, as increased or decreased by
prorations and adjustments as herein provided, shall be payable in full at
Closing through escrow (as hereinafter defined) in cash by wire transfer of
immediately available federal funds to a bank account designated by Seller in
writing to Purchaser prior to the Closing.
ARTICLE II
TITLE AND SURVEY
2.1 Title Examination; Commitment for Title Insurance. Purchaser shall
have until the expiration of the Inspection Period (defined in Section 3.1
hereof) to examine title to the Property. Purchaser will obtain from the Title
Company, at Purchaser's cost, a preliminary report (the "Title Commitment")
covering the Property, showing all matters affecting title to the Property.
Purchaser shall instruct the Title Company to deliver to Purchaser, Seller and
the surveyor described in Section 2.2 below copies of the Title Commitment and
copies of all instruments referenced therein.
2.2 Survey. During the Inspection Period, Purchaser may, at
Purchaser's expense, employ a reputable surveyor or surveying firm, licensed by
the state in which the Property is located, to survey the Property and prepare
and deliver to Purchaser, the Title Company and Seller an ALTA survey thereof
(the "Survey") reflecting the total area of the Property, the
2
<PAGE> 7
location of all improvements, recorded easements and encroachments, if any,
located thereon and all building and set back lines and other matters of record
with respect thereto.
2.3 Title Objections; Cure of Title Objections. Purchaser shall have
until the expiration of the Inspection Period to notify Seller, in writing, of
such objections as Purchaser may have to anything contained in the Title
Commitment or the Survey. Any item contained in the Title Commitment or any
matter shown on the Survey to which Purchaser does not object during the
Inspection Period shall be deemed a Permitted Exception. In the event Purchaser
shall notify Seller of objections to title or to matters shown on the Survey
prior to the expiration of the Inspection Period, Seller shall have the right,
but not the obligation, to cure such objections. Within five (5) days after
receipt of Purchaser's notice of objections, Seller shall notify Purchaser in
writing whether Seller elects to attempt to cure such objections. If Seller
elects to attempt to cure, and provided that Purchaser shall not have terminated
this Agreement in accordance with Section 3.2 hereof, Seller shall have until
the date of Closing to attempt to remove, satisfy or cure the same and for this
purpose Seller shall be entitled to a reasonable adjournment of the Closing if
additional time is required, but in no event shall the adjournment exceed thirty
(30) days after the date for Closing set forth in Section 4.1 hereof. If Seller
elects not to cure any objections specified in Purchaser's notice, or if Seller
is unable to effect a cure prior to the Closing (or any date to which the
Closing has been adjourned), Purchaser shall have the following options: (i) to
accept a conveyance of the Property subject to the Permitted Exceptions,
specifically including any matter objected to by Purchaser which Seller is
unwilling or unable to cure, and without reduction of the Purchase Price; or
(ii) to terminate this Agreement by sending written notice thereof to Seller,
and upon delivery of such notice of termination, this Agreement shall terminate,
the Deposit shall be returned to Purchaser, and thereafter neither party hereto
shall have any further rights, obligations or liabilities hereunder except to
the extent that any right, obligation or liability set forth herein expressly
survives termination of this Agreement. If Seller notifies Purchaser that Seller
does not intend to attempt to cure any title objection, or if, having commenced
attempts to cure any objection, Seller later notifies Purchaser that Seller will
be unable to effect a cure thereof, Purchaser shall, within five (5) days after
such notice has been given, notify Seller in writing whether Purchaser shall
elect to accept the conveyance under clause (i) or to terminate this Agreement
under clause (ii).
2.4 Conveyance of Title. At Closing, Seller shall convey and transfer
to Purchaser by grant deed such title to the Property as will enable the Title
Company to issue to Purchaser, at Purchaser's expense, an ALTA Owner's Policy of
title insurance (Form B, rev. 10/17/70) (the "Title Policy") covering the
Property, in the full amount of the Purchase Price with such endorsements
thereto as are reasonably requested by Purchaser. Notwithstanding anything
contained herein to the contrary, the Property shall be conveyed subject to the
following matters, which shall be deemed to be Permitted Exceptions:
(a) the rights of named tenants, as tenants only, under the
Leases and any new Leases entered into between the Effective Date (as
hereinafter defined) and Closing and, where required, approved by Purchaser in
accordance with the terms of this Agreement;
(b) the lien of all ad valorem real estate taxes and
assessments not yet due and payable as of the date of Closing;
3
<PAGE> 8
(c) local, state and federal laws, ordinances or governmental
regulations, including, but not limited to, building and zoning laws, ordinances
and regulations, now or hereafter in effect relating to the Property; and
(d) items appearing of record or shown on the Survey and, in
either case, not objected to by Purchaser or waived or deemed waived by
Purchaser in accordance with Sections 2.3 or 2.5 hereof.
2.5 Pre-Closing "Gap" Title Defects. Whether or not Purchaser shall
have furnished to Seller any notice of title objections pursuant to the
foregoing provisions of this Agreement, Purchaser may, at or prior to Closing,
notify Seller in writing of any objections to title first raised by the Title
Company or the Surveyor between (a) the date which is the earlier of (i) the
effective date of Purchaser's Title Commitment referred to above or (ii) the
expiration of the Inspection Period and (b) the date on which the transaction
contemplated herein is scheduled to close. With respect to any objections to
title set forth in such notice, Seller shall have the same option to cure and
Purchaser shall have the same option to accept title subject to such matters or
to terminate this Agreement as those which apply to any notice of objections
made by Purchaser before the expiration of the Inspection Period. If Seller
elects to attempt to cure any such matters, the date for Closing shall be
automatically extended by a reasonable additional time to effect such a cure,
but in no event shall the extension exceed thirty (30) days after the date for
Closing set forth in Section 4.1 hereof.
ARTICLE III
INSPECTION PERIOD
3.1 Right of Inspection. During the period beginning on the date this
Agreement is fully executed by Seller and Purchaser (the "Effective Date") and
ending on October 26, 1998 (hereinafter referred to as the "Inspection Period"),
Purchaser shall have the right to make a physical inspection of the Property and
to examine at such place or places at the Property, in the offices of the
property manager or elsewhere as the same may be located, any operating files
maintained by Seller or its property manager in connection with the leasing,
maintenance and/or management of the Property, including, without limitation,
the Leases, lease files, Operating Agreements, insurance policies, bills,
invoices, receipts and other general records relating to the income and expenses
of the Property, operating budget, correspondence, surveys, plans and
specifications, warranties for services and materials provided to the Property,
engineering reports, environmental audits and similar materials, but excluding
materials not directly related to the leasing, maintenance and/or management of
the Property such as Seller's internal memoranda, financial projections,
appraisals, accounting and tax records and similar proprietary or confidential
information. Purchaser shall make all inspection requests in writing to Seller.
Each request shall include a list of information to be made available during
such inspection. Purchaser understands and agrees that any on-site inspections
of the Property shall be conducted upon at least twenty-four (24) hours' prior
notice to Seller and in the presence of Seller or its representative. To the
extent reasonably possible, Seller agrees to cooperate with all of Purchaser's
requests for Property information within two (2) business days from the receipt
thereof, provided that Seller shall not be required to furnish any information
excluded specifically by the terms of this Agreement. Purchaser agrees to repair
and restore any damage
4
<PAGE> 9
to the Property caused by any testing conducted on the Property by Purchaser.
Purchaser shall return the Property to substantially the same condition as
existed prior to its entry. Purchaser agrees to indemnify and defend Seller
against and hold Seller harmless from any claim for liabilities, costs, expenses
(including reasonable attorneys' fees actually incurred), damages or injuries to
the extent arising out of or resulting from the inspection of the Property by
Purchaser or its agents, excluding any liability arising out of pre-existing
conditions on the Property, and notwithstanding anything to the contrary in this
Agreement, such obligation to indemnify and hold harmless Seller shall survive
Closing or any termination of this Agreement. All inspections shall occur at
reasonable times agreed upon by Seller and Purchaser and shall be conducted so
as not to interfere unreasonably with use of the Property by Seller or its
tenants.
3.2 Right of Termination. Seller agrees that in the event Purchaser
determines (such determination to be made in Purchaser's sole discretion) to
proceed with this transaction and purchase the Property, Purchaser shall make
such election by delivering to Seller written notice thereof prior to the
expiration of the Inspection Period, in which event Purchaser shall no longer
have any right to terminate this Agreement under this Section 3.2. If Purchaser
gives a notice of termination within the Inspection Period or fails to deliver
any notice within the Inspection Period, this Agreement shall terminate, the
Deposit shall be returned to Purchaser, and thereafter neither party shall have
any further rights, obligations or liabilities hereunder except to the extent
any right, obligation or liability set forth herein expressly survives
termination of this Agreement. Time is of the essence with respect to the
provisions of this Section 3.2.
ARTICLE IV
CLOSING
4.1 Time and Place. The consummation of the transaction contemplated
hereby ("Closing") shall occur on November 10, 1998 (the "Closing Date"),
through Escrow No. SP282473 with the Title Company at 345 California Street, San
Francisco, California 94111. At Closing, Seller and Purchaser shall perform the
obligations set forth in Section 4.2 and Section 4.3, respectively, the
performance of which obligations shall be concurrent conditions.
4.2 Seller's Obligations at Closing. At Closing, Seller shall:
(a) deliver to Purchaser a duly executed grant deed (the
"Deed") in recordable form, conveying the Land and the Improvements, subject
only to the Permitted Exceptions;
(b) assign to Purchaser, and Purchaser shall assume, the
landlord/lessor interest in and to the Leases by duly executed assignment and
assumption agreement pursuant to which (i) Seller shall indemnify Purchaser and
hold Purchaser harmless from and against any and all claims pertaining to the
Leases arising prior to Closing and (ii) Purchaser shall indemnify Seller and
hold Seller harmless from and against any and all claims pertaining to the
Leases arising from and after the Closing, including, without limitation, claims
made by tenants with respect to tenants' security deposits to the extent paid,
credited or assigned to Purchaser;
(c) to the extent assignable, assign to Purchaser, and
Purchaser shall assume, Seller's interest in the Operating Agreements and the
other Intangibles by duly executed
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assignment and assumption agreement pursuant to which (i) Seller shall indemnify
Purchaser and hold Purchaser harmless from and against any and all claims
pertaining to the Operating Agreements or the other Intangibles arising prior to
Closing and (ii) Purchaser shall indemnify Seller and hold Seller harmless from
and against any and all claims pertaining to the Operating Agreements or the
other Intangibles arising from and after the Closing;
(d) deliver to Purchaser such Tenant Estoppels (as hereinafter
defined) as are in Seller's possession;
(e) join with Purchaser to execute a notice in form and content
reasonably satisfactory to Purchaser and Seller which Purchaser shall send to
each tenant under each of the Leases informing such tenant of the sale of the
Property and of the assignment to Purchaser of Seller's interest in, and
obligations under, the Leases (including, if applicable, any security deposits)
and directing that all rent and other sums payable after the Closing under each
such Lease shall be paid as set forth in the notice;
(f) deliver to Purchaser such evidence as the Title Company may
reasonably require as to the authority of the person or persons executing
documents on behalf of Seller;
(g) deliver to Purchaser an affidavit duly executed by Seller
stating that Seller is not a "foreign person" as defined in Section 1445 of the
Internal Revenue Code of 1986;
(h) deliver to Purchaser the Leases, the Operating Agreements
and licenses and permits, if any, in the possession of Seller or Seller's
agents, together with such leasing and property files and records which are
material in connection with the continued operation, leasing and maintenance of
the Property. Purchaser shall cooperate with Seller for a period of seven (7)
years after Closing in case of Seller's need in response to any legal
requirement, a tax audit, tax return preparation or litigation threatened or
brought against Seller, by allowing Seller and its agents or representatives
access, upon reasonable advance notice (which notice shall identify the nature
of the information sought by Seller), at all reasonable times to examine and
make copies of any and all instruments files and records, which right shall
survive the Closing;
(i) deliver to Purchaser possession and occupancy of the
Property, subject to the Permitted Exceptions;
(j) deliver to Purchaser a California Form 590-RE Real Estate
Withholding Exemption Certificate duly executed by Seller; and
(k) deliver such additional documents as shall be reasonably
required to consummate the transaction contemplated by this Agreement.
4.3 Purchaser's Obligations at Closing. At Closing, Purchaser shall:
(a) pay to Seller the full amount of the Purchase Price as
increased or decreased by prorations and adjustments as herein provided, in
immediately available wire transferred funds pursuant to Section 1.5 above;
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(b) join Seller in execution of the instruments described in
Sections 4.2(b), 4.2(c) and 4.2(e) above;
(c) deliver to Seller such evidence as the Title Company may
reasonably require as to the authority of the person or persons executing
documents on behalf of Purchaser; and
(d) deliver such additional documents as shall be reasonably
required to consummate the transaction contemplated by this Agreement.
4.4 Credits and Prorations.
(a) The following shall be apportioned with respect to the
Property as of 12:01 a.m., on the day of Closing, as if Purchaser were vested
with title to the Property during the entire day upon which Closing occurs:
(i) rents and other income, if any, as and when
collected (the term "rents" as used in this Agreement includes all
payments due and payable by tenants under the Leases);
(ii) taxes and assessments levied against the Property;
(iii) payments under the Operating Agreements;
(iv) gas, electricity and other utility charges for which
Seller is liable, if any, such charges to be apportioned at Closing on
the basis of the most recent meter reading occurring prior to Closing;
and
(v) any other operating expenses or other items
pertaining to the Property which are customarily prorated between a
purchaser and a seller in the area in which the Property is located.
(b) Notwithstanding anything contained in the foregoing
provisions:
(i) At Closing, (A) Seller shall, at Seller's option,
either deliver to Purchaser any security deposits pursuant to the Leases
or credit to the account of Purchaser the amount of such security
deposits (to the extent such security deposits are not applied against
delinquent rents or otherwise as provided in the Leases), and (B)
Purchaser shall credit to the account of Seller all refundable cash or
other deposits posted with utility companies serving the Property, or, at
Seller's option, Seller shall be entitled to receive and retain such
refundable cash and deposits.
(ii) Any taxes and installments of special assessments
which became payable prior to the Closing shall be paid by Seller prior
to or as a part of the Closing. Taxes and assessments payable in tax year
1998-1999 shall be prorated by Seller and Purchaser as of the day of
Closing based upon the tax year.
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(iii) Charges referred to in Section 4.4(a) or in Section
4.4(b)(ii) above, if any, which are payable by any tenant to a third
party shall not be apportioned hereunder, and Purchaser shall accept
title subject to any of such charges unpaid and Purchaser shall look
solely to the tenant responsible therefor for the payment of the same. If
Seller shall have paid any of such charges on behalf of any tenant, and
shall not have been reimbursed therefor by the time of Closing, Purchaser
shall pay to Seller such amounts as they are collected subsequent to
Closing.
(iv) Seller shall receive the entire advantage of any
discounts for the prepayment by it of any taxes, water rates or sewer
rents.
(v) As to gas, electricity and other utility charges
referred to Section 4.4(a)(iv) above, Seller may on notice to Purchaser
elect to pay one or more or all of said items accrued to the date
hereinabove fixed for apportionment directly to the person or entity
entitled thereto, and to the extent Seller so elects, such item shall not
be apportioned hereunder, and Seller's obligation to pay such item
directly in such case shall survive the Closing.
(vi) Unpaid and delinquent rent collected by Seller and
Purchaser after the date of Closing shall be delivered as follows: (A) if
Seller collects any unpaid or delinquent rent for the Property, Seller
shall, within fifteen (15) days after the receipt thereof, deliver to
Purchaser any such rent which Purchaser is entitled to hereunder relating
to the date of Closing and any period thereafter, and (B) if Purchaser
collects any unpaid or delinquent rent from the Property, Purchaser
shall, within fifteen (15) days after the receipt thereof, deliver to
Seller any such rent which Seller is entitled to hereunder relating to
the period prior to the date of Closing. Seller and Purchaser agree that
all rent received by Seller or Purchaser after the date of Closing shall
be applied first to current rentals, and then to delinquent rentals, if
any, in the order of their maturity. Purchaser will make a good faith
effort after Closing to collect all rents in the usual course of
Purchaser's operation of the Property, but Purchaser will not be
obligated to institute any lawsuit or other collection procedures to
collect delinquent rents. Where the Leases contain tenant obligations for
taxes, common area expenses, operating expenses or additional charges of
any other nature, and where Seller shall have collected any portion
thereof in excess of amounts owed by Seller for such items for the period
prior to the Closing Date, then, to the extent such amounts can be
ascertained as of the Closing Date, there shall be an adjustment and
credit given to Purchaser on the Closing Date for such excess amounts
collected. Purchaser shall apply all such excess amounts to the charges
owed by Purchaser for such items for the period after the Closing Date
and, if required by the Leases, shall rebate or credit the tenants with
any remainder. If expenses actually paid by Seller for such items during
such period exceed the amounts actually collected by Seller which are
attributable to such items, Purchaser shall pay to Seller an amount equal
to such deficiency as and when such amounts are collected by Purchaser
from the applicable tenants. If it is determined that the amount
collected during Seller's ownership period exceeded expenses incurred
during the same period by more than the amount previously credited to
Purchaser at Closing, then Seller shall promptly pay to Purchaser the
deficiency. If it is determined that the amount collected during Seller's
ownership period exceeded expenses incurred during the same period by
less than the amount
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previously credited to Purchaser at Closing, then Purchaser shall
promptly pay to Seller the difference.
(vii) Seller and Purchaser shall jointly prepare a Closing
statement of prorations on the basis of the Leases and other sources of
income and expenses, and shall deliver such computation to the Title
Company prior to Closing.
(viii) If any of the aforesaid prorations cannot be
calculated accurately on the Closing Date, then they shall be calculated
as soon after the Closing Date as feasible. Either party owing the other
party a sum of money based on such subsequent proration(s) shall promptly
pay said sum to the other party, together with interest thereon at the
rate of two percent (2%) over the average "prime rate" (as announced from
time to time in The Wall Street Journal) per annum from the Closing Date
to the date of payment if payment is not made within ten (10) days after
delivery of a bill therefor.
(ix) The provisions of this Section 4.4 shall survive
Closing.
(x) Closing Costs. Seller shall pay (a) the fees of any
counsel representing it in connection with this transaction; (b) the
County transfer taxes; (c) 75% of the City of San Leandro transfer taxes
(based on a purchase price of $15,000,000); and (d) 75% of the City of
Union City transfer taxes (based on a purchase price of $11,925,000).
Purchaser shall pay (t) the fees of any counsel representing Purchaser in
connection with this transaction; (u) the escrow fee charged by the Title
Company for the Closing; (v) the chain-of-title search; (w) the fees for
recording the Deed conveying the Property to Purchaser; (x) the ALTA
premium for the Title Policy; (y) 25% of the City of San Leandro transfer
taxes (based on a purchase price of $15,000,000); and (z) 25% of the City
of Union City transfer taxes (based on a purchase price of $11,925,000).
All other costs and expenses incident to this transaction and the closing
thereof shall be allocated in accordance with local custom.
4.5 Conditions Precedent to Obligation of Purchaser. The obligation of
Purchaser to consummate the transaction hereunder shall be subject to the
fulfillment on or before the date of Closing of all of the following conditions,
any or all of which may be waived by Purchaser in writing in its sole
discretion:
(a) Seller shall have delivered to Purchaser all of the items
required to be delivered to Purchaser pursuant to the terms of this Agreement,
including, but not limited to, those provided for in Section 4.2.
(b) All of the representations and warranties of Seller
contained in this Agreement shall be true and correct in all material respects
as of the date of Closing (with appropriate modifications permitted under this
Agreement or not adverse to Purchaser).
(c) Seller shall have performed and observed, in all material
respects, all covenants and agreements of this Agreement to be performed and
observed by Seller as of the date of Closing.
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(d) Seller shall have obtained and delivered to Purchaser a
tenant estoppel certificate in substantially the form of EXHIBIT D attached
hereto and made a part hereof ("Tenant Estoppels") from each of the tenants (the
"Tenants") in the buildings comprising the Improvements (and provided that in
the event that any Tenant Estoppel delivered to and accepted by Purchaser with
respect to any Lease shall contain any statement of fact, information or other
matter which is inconsistent with the matters stated in Seller's representations
in this Agreement, the Tenant Estoppel shall control and Seller shall have no
liability for any claim based upon a breach of representation regarding such
statement of fact, information or other matter contained in the Tenant
Estoppel). The Tenant Estoppels shall be substantially in the form of EXHIBIT D
(as modified to address specific concerns arising as a result of Purchaser's
review of the Leases) and shall be dated no earlier than thirty (30) days prior
to the Closing Date.
(e) The physical condition of the Property shall be
substantially the same on the day of Closing as of the last day of the
Inspection Period, reasonable wear and tear and loss by casualty excepted
(subject to the provisions of Article VII below), and, as of the day of Closing,
there shall be no litigation or administrative agency or other governmental
proceeding of any kind whatsoever, pending or threatened, which after Closing
would, in Purchaser's reasonable discretion, materially adversely affect the
value of the Property or the ability of Purchaser to operate the Property in the
manner in which it is currently being operated, and no proceedings shall be
pending or threatened which could or would cause the redesignation or other
modification of the zoning classification of, or of any building or
environmental code requirements applicable to, any of the Property.
4.6 Conditions Precedent to Obligation of Seller. The obligation of
Seller to consummate the transaction hereunder shall be subject to the
fulfillment on or before the date of Closing of all of the following conditions,
any or all of which may be waived by Seller in its sole discretion:
(a) Seller shall have received the Purchase Price as adjusted
pursuant to and payable in the manner provided for in this Agreement.
(b) Purchaser shall have delivered to Seller all of the items
required to be delivered to Seller pursuant to the terms of this Agreement,
including, but not limited to, those provided for in Section 4.3.
(c) All of the representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the date of Closing.
(d) Purchaser shall have performed and observed, in all
material respects, all covenants and agreements of this Agreement to be
performed and observed by Purchaser as of the date of Closing.
ARTICLE V
SELLER AND PURCHASER COVENANTS
5.1 Covenants of Seller. Seller hereby covenants with Purchaser as
follows:
(a) From the Effective Date until the Closing or the earlier
termination of this Agreement, Seller shall use reasonable efforts to operate
and maintain the Property in a manner generally consistent with the manner in
which Seller has operated and maintained the Property prior to the date hereof.
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(b) Seller shall use reasonable efforts (but without obligation
to incur any cost or expense) to obtain and deliver to Purchaser prior to
Closing, a written Tenant Estoppel substantially in the form of EXHIBIT D
attached hereto and made a part hereof signed by each Tenant under the Leases
occupying space in the Improvements.
(c) Seller shall not execute any renewal or expansion of an
existing Lease or any new Lease between the Effective Date and the date of
Closing without the prior written approval of Purchaser, which approval shall
not be unreasonably withheld.
(d) With respect to any Leases in existence as of the Effective
Date, Seller shall pay prior to Closing all landlord obligations, including,
without limitation, tenant improvement costs and leasing commissions. The
provisions of this Section 5.1(d) shall survive the Closing.
5.2 Covenants of Purchaser. Purchaser hereby covenants with Seller
that Purchaser shall, in connection with its investigation of the Property
during the Inspection Period, inspect the Property for the presence of hazardous
substances, and shall furnish to Seller copies of any reports received by
Purchaser in connection with any such inspection. Purchaser shall also furnish
to Seller copies of any other reports received by Purchaser relating to any
other inspections of the Property conducted on Purchaser's behalf, if any
(including specifically, without limitation, any reports analyzing compliance of
the Property with the provisions of the Americans with Disabilities Act ("ADA"),
42 U.S.C. ss.12101, et seq., if applicable). Any reports furnished by Purchaser
to Seller shall be furnished without warranty of any kind whatsoever and shall
exclude any attorney-client privileged materials.
ARTICLE VI
DEFAULT
6.1 Default by Purchaser. In the event the sale of the Property is not
consummated because of the failure of any Condition Precedent or any other
reason except a default under this Agreement on the part of Purchaser, the
Deposit plus interest accrued thereon shall immediately be returned to Purchaser
and neither party shall have any liability for obligations thereafter accruing
hereunder. If said sale is not consummated because of a default under this
Agreement on the part of Purchaser, the Deposit together with the interest
accrued thereon shall be paid to and retained by Seller as liquidated damages.
THE PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT
BY PURCHASER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE
DEPOSIT HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE
ESTIMATE OF SELLER'S DAMAGES AND AS SELLER'S EXCLUSIVE REMEDY AGAINST PURCHASER,
AT LAW OR IN EQUITY, IN THE EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART
OF PURCHASER.
INITIALS: Seller ________ Purchaser _______
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6.2 Default by Seller. In the event that Seller fails to consummate
this Agreement for any reason other than Purchaser's default or the permitted
termination of this Agreement by Seller or Purchaser as herein expressly
provided, Purchaser shall be entitled, as its sole remedy, either (a) to
terminate this Agreement and receive the Deposit and all interest thereon from
the Title Company, or (b) to enforce specific performance of Seller's obligation
to execute the documents required to convey the Property to Purchaser, it being
understood and agreed that the remedy of specific performance shall not be
available to enforce any other obligation of Seller hereunder. Purchaser
expressly waives its rights to seek damages in the event of Seller's default
hereunder. Purchaser shall be deemed to have elected to terminate this Agreement
if Purchaser fails to file suit for specific performance against Seller, in a
court having jurisdiction in the county and state in which the Property is
located, on or before sixty (60) days following the date upon which Closing was
to have occurred.
ARTICLE VII
RISK OF LOSS
7.1 Minor Damage. In the event of loss or damage to the Property or
any portion thereof which is not "major" (as hereinafter defined), this
Agreement shall remain in full force and effect, provided Seller performs any
necessary repairs or, at Seller's option, assigns to Purchaser all of Seller's
right, title and interest to any claims and proceeds Seller may have with
respect to any casualty insurance policies or condemnation awards relating to
the premises in question. In the event that Seller elects to perform repairs
upon the Property, Seller shall use reasonable efforts to complete such repairs
promptly and the date of Closing shall be extended a reasonable time in order to
allow for the completion of such repairs. If Seller elects to assign a casualty
claim to Purchaser, the Purchase Price shall be reduced by an amount equal to
the deductible amount or uninsured loss under Seller's insurance policy. Upon
Closing, full risk of loss with respect to the Property shall pass to Purchaser.
7.2 Major Damage. In the event of a "major" loss or damage, either
Seller or Purchaser may terminate this Agreement by written notice to the other
party. If neither Seller nor Purchaser elects to terminate this Agreement within
ten (10) days after Seller sends Purchaser written notice of the occurrence of
major loss or damage, then Seller and Purchaser shall be deemed to have elected
to proceed with Closing, in which event Seller shall, at Seller's option, either
(a) perform any necessary repairs, or (b) assign to Purchaser all of Seller's
right, title and interest to any claims and proceeds Seller may have with
respect to any casualty insurance policies or condemnation awards relating to
the premises in question. In the event that Seller elects to perform repairs
upon the Property, Seller shall use reasonable efforts to complete such repairs
promptly and the date of Closing shall be extended a reasonable time in order to
allow for the completion of such repairs. If Seller elects to assign a casualty
claim to Purchaser, the Purchase Price shall be reduced by an amount equal to
the deductible amount or uninsured loss under Seller's insurance policy. Upon
Closing, full risk of loss with respect to the Property shall pass to Purchaser.
7.3 Definition of "Major" Loss or Damage. For purposes of Sections 7.1
and 7.2, "major" loss or damage refers to the following: (i) loss or damage to
the Property or any portion thereof such that the cost of repairing or restoring
the premises in question to a condition
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substantially identical to that of the premises in question prior to the event
of damage would be, in the opinion of an architect selected by Seller and
reasonably approved by Purchaser, equal to or greater than One Hundred Thousand
Dollars ($100,000), and (ii) any loss due to a condemnation. If Purchaser does
not give notice to Seller of Purchaser's reasons for disapproving an architect
within five (5) business days after receipt of notice of the proposed architect,
Purchaser shall be deemed to have approved the architect selected by Seller.
ARTICLE VIII
COMMISSIONS
8.1 Brokerage Commissions. In the event the transaction contemplated
by this Agreement is consummated, but not otherwise, Seller agrees to pay to
Colliers Parrish International, Inc. (the "Broker") at Closing a brokerage
commission pursuant to a separate written agreement between Seller and Broker.
Each party agrees that should any claim be made for brokerage commissions or
finder's fees by any broker or finder other than the Broker by, through or on
account of any acts of said party or its representatives, said party will
indemnify and hold the other party free and harmless from and against any and
all loss, liability, cost, damage and expense in connection therewith. The
provisions of this paragraph shall survive Closing.
ARTICLE IX
DISCLAIMERS AND WAIVERS
9.1 No Reliance on Documents. Except as expressly stated in this
Agreement, Seller makes no representation or warranty as to the truth, accuracy
or completeness of any materials, data or information delivered by Seller to
Purchaser in connection with the transaction contemplated hereby. Purchaser
acknowledges and agrees that all materials, data and information delivered by
Seller to Purchaser in connection with the transaction contemplated hereby are
provided to Purchaser as a convenience only and that any reliance on or use of
such materials, data or information by Purchaser shall be at the sole risk of
Purchaser, except as otherwise expressly stated herein. Without limiting the
generality of the foregoing provisions, Purchaser acknowledges and agrees that
(a) any environmental or other report with respect to the Property which is
delivered by Seller to Purchaser shall be for general informational purposes
only, (b) Purchaser shall not have any right to rely on any such report
delivered by Seller to Purchaser, but rather will rely on its own inspections
and investigations of the Property and any reports commissioned by Purchaser
with respect thereto, and (c) neither Seller, any affiliate of Seller nor the
person or entity which prepared any such report delivered by Seller to Purchaser
shall have any liability to Purchaser for any inaccuracy in or omission from any
such report.
9.2 DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, IT
IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE
ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR
IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A
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PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER'S LIMITED WARRANTY OF TITLE
PURSUANT TO THE DEED), ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR
ENVIRONMENTAL CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION,
GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS,
THE TRUTH, ACCURACY OR COMPLETENESS OF THE PROPERTY DOCUMENTS OR ANY OTHER
INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER
OR THING REGARDING THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON
CLOSING SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE
PROPERTY "AS IS, WHERE IS, WITH ALL FAULTS". EXCEPT TO THE EXTENT EXPRESSLY
PROVIDED OTHERWISE IN THIS AGREEMENT, PURCHASER HAS NOT RELIED AND WILL NOT RELY
ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED
WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO
THE PROPERTY OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION,
PROPERTY INFORMATION PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY) MADE OR
FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR
AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN
THIS AGREEMENT. PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED, OR
WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING,
BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS
PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY
AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO
ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED FROM THE PROPERTY, AND WILL
RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF
SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH
IN THIS AGREEMENT. UPON CLOSING, EXCEPT TO THE EXTENT OF ANY BREACH BY SELLER OF
THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 11.1 BELOW, OR OF ANY
OBLIGATIONS OF SELLER UNDER THIS AGREEMENT OR ANY DOCUMENTS EXECUTED BY SELLER
PURSUANT HERETO, AND EXCEPT WITH RESPECT TO ANY CLAIMS FOR DAMAGES, REMEDIATION,
CONTRIBUTION OR INDEMNITY BY THIRD PARTIES, INCLUDING, WITHOUT LIMITATION,
GOVERNMENTAL AUTHORITIES, RELATING TO THE PROPERTY AND SELLER'S PERIOD OF
OWNERSHIP THEREOF, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS,
INCLUDING, BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND
ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER'S
INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED,
RELINQUISHED AND RELEASED SELLER (AND SELLER'S OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL
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CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES,
DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT
COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER
MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER'S OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF
ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, VIOLATIONS OF
ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS) AND
ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING
THE PROPERTY. EXCEPT TO THE EXTENT OF ANY BREACH BY SELLER OF THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 11.1 BELOW, OR OF ANY
OBLIGATIONS OF SELLER UNDER THIS AGREEMENT OR ANY DOCUMENTS EXECUTED BY SELLER
PURSUANT HERETO, AND EXCEPT WITH RESPECT TO ANY CLAIMS FOR DAMAGES, REMEDIATION,
CONTRIBUTION OR INDEMNITY BY THIRD PARTIES, INCLUDING, WITHOUT LIMITATION,
GOVERNMENTAL AUTHORITIES, RELATING TO THE PROPERTY AND SELLER'S PERIOD OF
OWNERSHIP THEREOF, PURCHASER AGREES THAT SHOULD ANY CLEAN-UP, REMEDIATION OR
REMOVAL OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE
PROPERTY BE REQUIRED AFTER THE DATE OF CLOSING, SUCH CLEAN-UP, REMOVAL OR
REMEDIATION SHALL BE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE
COST AND EXPENSE OF PURCHASER.
9.3 Effect and Survival of Disclaimers. Seller and Purchaser agree
that the provisions of this Article IX shall survive Closing.
ARTICLE X
MISCELLANEOUS
10.1 Confidentiality. Purchaser and its representatives shall hold in
strictest confidence all data and information obtained with respect to Seller or
its business, whether obtained before or after the execution and delivery of
this Agreement, and shall not disclose the same to others; provided, however,
that it is understood and agreed that Purchaser may disclose such data and
information to (i) the employees, consultants, accountants and attorneys of
Purchaser, provided that such persons agree to treat such data and information
confidentially, or (ii) as required by law or any court having jurisdiction. In
the event this Agreement is terminated or Purchaser fails to perform hereunder,
Purchaser shall promptly return to Seller any statements, documents, schedules,
exhibits or other written information obtained from Seller in connection with
this Agreement or the transaction contemplated herein. It is understood and
agreed that, with respect to any provision of this Agreement which refers to the
termination of this Agreement, Purchaser shall fulfill its obligation to return
to Seller the materials described in the preceding sentence which were delivered
to Purchaser by Seller. In the event of a breach or threatened breach by
Purchaser or its agents or representatives of this Section 10.1, Seller shall be
entitled to an injunction restraining Purchaser or its agents or representatives
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as
15
<PAGE> 20
prohibiting Seller from pursuing any other available remedy at law or in equity
for such breach or threatened breach.
10.2 Public Disclosure. Prior to Closing, any release to the public of
information with respect to the sale contemplated herein or any matters set
forth in this Agreement will be made only in the form approved by Purchaser and
Seller and their respective counsel.
10.3 Discharge of Obligations. The acceptance of the Deed by Purchaser
shall be deemed to be a full performance and discharge of every representation
and warranty made by Seller herein and every agreement and obligation on the
part of Seller to be performed pursuant to the provisions of this Agreement,
except those which are herein specifically stated to survive Closing.
10.4 Assignment. Purchaser may not assign its rights under this
Agreement without first obtaining Seller's written approval, which approval may
be given or withheld in Seller's reasonable discretion. Under no circumstances
shall Purchaser have the right to assign this Agreement to any person or entity
owned or controlled by an employee benefit plan if Seller's sale of the Property
to such person or entity would, in the reasonable opinion of Seller's ERISA
advisor, create or otherwise cause a "prohibited transaction" under ERISA. In
the event Purchaser assigns this Agreement or transfers any ownership interest
in Purchaser without the consent of Seller, and such assignment or transfer
would make the consummation of the transaction hereunder a "prohibited
transaction" under ERISA and necessitate the termination of this Agreement,
then, notwithstanding any contrary provision which may be contained herein,
Seller shall have the right to pursue any remedy available at law or in equity
as a result of such assignment or transfer. Any transfer, directly or
indirectly, of any stock, partnership interest or other ownership interest in
Purchaser without Seller's written approval, which approval may be given or
withheld in Seller's reasonable discretion, shall constitute a default by
Purchaser under this Agreement. Notwithstanding anything to the contrary
contained in this Section 10.4, Purchaser shall have the right to assign its
rights and obligations hereunder to an affiliated assignee or nominee without
the consent of Seller. For purposes of the foregoing, "an affiliated assignee or
nominee" shall mean any person or entity that either: (i) directly owns at least
eighty percent (80%) of the legal and equitable ownership interests in Purchaser
or (ii) has at least eighty percent (80%) of its legal and equitable ownership
interests directly owned by Purchaser.
10.5 Notices. Any notice pursuant to this Agreement shall be given in
writing by (a) personal delivery, or (b) reputable overnight delivery service
with proof of delivery, or (c) United States Mail, postage prepaid, registered
or certified mail, return receipt requested, or (d) legible facsimile
transmission sent to the intended addressee at the address set forth below, or
to such other address or to the attention of such other person as the addressee
shall have designated by written notice sent in accordance herewith, and shall
be deemed to have been given either at the time of personal delivery, or, in the
case of expedited delivery service or mail, as of the date of first attempted
delivery at the address and in the manner provided herein, or, in the case of
facsimile transmission, as of the date of the facsimile transmission provided
that an original of such facsimile is also sent to the intended addressee by
means described in clauses (a), (b) or (c) above. Unless changed in accordance
with the preceding sentence, the addresses for notices given pursuant to this
Agreement shall be as follows:
16
<PAGE> 21
If to Seller:
EML Associates
c/o Lend Lease Real Estate Investments, Inc.
One Front Street, Suite 1100
San Francisco, CA 94104
Attention: Mr. Keith A. Fink
Facsimile: (415) 733-9219
with a copy to:
Pillsbury, Madison & Sutro LLP
235 Montgomery Street, 14th Floor
San Francisco, CA 94104
Attention: Frederick D. Minnes, Esq.
Facsimile: (415) 983-1200
If to Purchaser:
AMB Property Corporation
505 Montgomery Street
San Francisco, CA 94111
Attention: Mr. Tyler W. Higgins
Facsimile: (415) 394-9001
with a copy to:
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, California 94111-3413
Attention: William G. Murray, Jr., Esq.
Facsimile: (415) 773-4285
10.6 Binding Effect. This Agreement shall not be binding in any way
upon Purchaser unless and until Seller and Purchaser shall each execute and
deliver the same to the other. This Agreement shall not be binding in any way
upon Seller unless and until (a) Seller shall execute and deliver the same to
Purchaser, (b) each stage of Seller's investment approval process has approved
this transaction, and (c) Seller's Investment Committee has thereafter given its
written approval thereof. If Seller has not given Purchaser written notice (the
"Approval Notice") of such approvals on or before October 20, 1998 (the
"Approval Deadline"), or if prior to the Approval Deadline Seller notifies
Purchaser in writing that this Agreement has been disapproved by the persons or
entities referred to in clauses (b) or (c) of the preceding sentence, then this
Agreement shall be deemed terminated and Purchaser shall be entitled to the
return of the Deposit. It is understood and agreed that each stage of Seller's
investment approval process, Seller or its investment advisor, Lend Lease Real
Estate Investments, Inc., shall each have the right, in its unfettered
discretion, to disapprove the transaction contemplated by this Agreement for any
reason whatsoever, without obligation thereafter to proceed to the next stage of
Seller's investment approval process. Seller's approval of this Agreement shall
be evidenced only by
17
<PAGE> 22
both Seller's execution of this Agreement and Seller's sending of the Approval
Notice to Purchaser on or before the Approval Deadline, and, accordingly,
Purchaser acknowledges and agrees that Purchaser cannot and will not rely upon
any other statement or action of Seller or its representatives as evidence of
Seller's approval of this Agreement or the subject matter hereof.
10.7 Modifications. This Agreement cannot be changed orally, and no
executory agreement shall be effective to waive, change, modify or discharge it
in whole or in part unless such executory agreement is in writing and is signed
by the parties against whom enforcement of any waiver, change, modification or
discharge is sought.
10.8 Tenant Notification Letters. Purchaser and Seller shall deliver to
each and every tenant of the Property under a Lease thereof a signed statement
acknowledging Purchaser's receipt and responsibility for each tenant's security
deposit (to the extent delivered by Seller to Purchaser at Closing), if any, all
in compliance with and pursuant to the applicable provisions of applicable law.
The provisions of this paragraph shall survive Closing.
10.9 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described in this Agreement, the day of the act or
event after which the designated period of time begins to run is not to be
included and the last day of the period so computed is to be included, unless
such last day is a Saturday, a Sunday or a legal holiday under the laws of the
State in which the Property is located, in which event the period shall run
until the end of the next day which is not a Saturday, a Sunday or a legal
holiday. The final day of any such period shall be deemed to end at 5 p.m.,
local time.
10.10 Successors and Assigns. The terms and provisions of this Agreement
are to apply to and bind the permitted successors and assigns of the parties
hereto.
10.11 Entire Agreement. This Agreement, including the Exhibits, contains
the entire agreement between the parties pertaining to the subject matter hereof
and fully supersedes all prior written or oral agreements and understandings
between the parties pertaining to such subject matter.
10.12 Further Assurances. Each party agrees that it will without further
consideration execute and deliver such other documents and take such other
action, whether prior or subsequent to Closing, as may be reasonably requested
by the other party to consummate more effectively the purposes or subject matter
of this Agreement. Without limiting the generality of the foregoing, Purchaser
shall, if requested by Seller, execute acknowledgments of receipt with respect
to any materials delivered by Seller to Purchaser with respect to the Property.
The provisions of this Section 10.12 shall survive Closing.
10.13 Counterparts. This Agreement may be executed in counterparts, and
all such executed counterparts shall constitute the same agreement. It shall be
necessary to account for only one such counterpart in proving this Agreement.
10.14 Severability. If any provision of this Agreement is determined by
a court of competent jurisdiction to be invalid or unenforceable, the remainder
of this Agreement shall nonetheless remain in full force and effect.
18
<PAGE> 23
10.15 Applicable Law. This Agreement is performable in the state in
which the Property is located and shall in all respects be governed by, and
construed in accordance with, the substantive federal laws of the United States
and the laws of such state. Seller and Purchaser hereby irrevocably submit to
the jurisdiction of any state or federal court sitting in the state in which the
Property is located in any action or proceeding arising out of or relating to
this Agreement and hereby irrevocably agree that all claims in respect of such
action or proceeding shall be heard and determined in a state or federal court
sitting in the state in which the Property is located. Purchaser and Seller
agree that the provisions of this Section 10.15 shall survive the Closing of the
transaction contemplated by this Agreement.
10.16 No Third Party Beneficiaries. The provisions of this Agreement and
of the documents to be executed and delivered at Closing are and will be for the
benefit of Seller and Purchaser only and are not for the benefit of any third
party, and accordingly, no third party shall have the right to enforce the
provisions of this Agreement or of the documents to be executed and delivered at
Closing.
10.17 Exhibits and Schedules. The following schedules or exhibits
attached hereto shall be deemed to be an integral part of this Agreement:
(a) Exhibit A - Legal Description of the Land
(b) Exhibit B - Lease Schedule
(c) Exhibit C - Operating Agreements Schedule
(d) Exhibit D - Tenant Estoppel Form
(e) Exhibit E - Seller Environmental Assessment Reports
10.18 Captions. The section headings appearing in this Agreement are for
convenience of reference only and are not intended, to any extent and for any
purpose, to limit or define the text of any section or any subsection hereof.
10.19 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
10.20 Termination of Agreement. It is understood and agreed that if
either Purchaser or Seller terminates this Agreement pursuant to a right of
termination granted hereunder, such termination shall operate to relieve Seller
and Purchaser from all obligations under this Agreement, except for such
obligations as are officially stated herein to survive the termination of this
Agreement.
10.21 Survival. The provisions of the following Sections of this
Agreement shall survive Closing and shall not be merged into the execution and
delivery of the Deed: 3.1; 4.2(h); 4.4; 5.1(d); 8.1; 9.3; 10.8; 10.12; 10.15;
10.22; 11.1 and 11.2 (except that all provisions thereof other than subparagraph
11.1(m) shall only survive for a period not to exceed twelve (12) months
19
<PAGE> 24
following the Closing, and subparagraph 11.1(m) shall not be subject to such
12-month limitation); and 12.1.
10.22 Enforcement. If either party hereto fails to perform any of its
obligations under this Agreement or if a dispute arises between the parties
hereto concerning the meaning or interpretation of any provision of this
Agreement, then the defaulting party or the party not prevailing in such dispute
shall pay any and all costs and expenses incurred by the other party on account
of such default and/or in enforcing or establishing its rights hereunder,
including, without limitation, court costs and reasonable attorneys' fees and
disbursements. Any such attorneys' fees and other expenses incurred by either
party in enforcing a judgment in its favor under this Agreement shall be
recoverable separately from and in addition to any other amount included in such
judgment, and such attorneys' fees obligation is intended to be severable from
the other provisions of this Agreement and to survive and not be merged into any
such judgment.
10.23 Marketing. Seller agrees not to market or show the Property to any
other prospective purchasers during the term of this Agreement.
10.24 SEC Compliance. If within two (2) years following the Closing, it
becomes reasonably necessary to do so in order to comply with applicable
securities laws or the rules or regulations of the Securities and Exchange
Commission, Purchaser shall have the right, to the extent necessary, to inspect
the books and records of Seller relating to the operation of the Property for
the period of three (3) years preceding the Closing at no cost or expense to
Seller. Purchaser shall give reasonable prior written notice to Seller when
Purchaser wishes to exercise its right to inspect such books and records. Such
inspection shall take place at the offices of Seller's investment advisor,
property manager or other location as Seller shall reasonably designate during
normal business hours and on a date and at a time reasonably convenient to
Seller and Purchaser.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1 Representations and Warranties of Seller. Seller hereby represents
and warrants to and covenants with Purchaser as follows:
(a) To Seller's knowledge, Seller has received no written
notices that either the Property or the use thereof violates any laws, rules and
regulations of any federal, state, city or county government or any agency,
body, or subdivision thereof having any jurisdiction over the Property that have
not been resolved to the satisfaction to the issuer of the notice.
(b) To Seller's knowledge, Seller has made available to
Purchaser all documents, books, records and any other materials relating to or
concerning the Property which Seller has in its possession or are in the
possession of Seller's property manager or leasing agent. To Seller's knowledge,
there are no material agreements concerning the Property which are not in the
possession of Seller, its property manager or its leasing agent. The copies of
the Operating Agreements delivered to Purchaser by Seller are true, correct and
complete copies of such documents and, to Seller's knowledge, the Operating
Agreements are without default by (or
20
<PAGE> 25
notice of default to) any party. To Seller's knowledge, Seller has delivered or
caused to be delivered no written notices of default to any tenant of the
Property which are outstanding and remain uncured as of the date of execution
hereof (and as of the Closing Date), and Seller has received no written notices
from any tenant of any default by Seller under any Lease affecting the Property
which Seller has not heretofore cured or will not have cured prior to Closing.
(c) To Seller's knowledge, there are no condemnation,
environmental, zoning or other land-use regulation proceedings, either
instituted or, to Seller's knowledge, planned to be instituted, which would
detrimentally affect the use, operation or value of the Property, nor has Seller
received notice of any special assessment proceedings affecting the Property.
Seller shall notify Purchaser promptly of any such proceedings of which Seller
becomes aware.
(d) To Seller's knowledge, there is no litigation pending or
threatened that might detrimentally affect the value or the use or operation of
the Property for its intended purpose or the ability of Seller to perform its
obligations under this Agreement. Seller shall notify Purchaser promptly of any
such litigation of which Seller becomes aware.
(e) Seller is a general partnership duly organized, validly
existing and in good standing under the laws of the State of New York; this
Agreement and, subject to the provisions of Section 10.6 above, all documents
executed by Seller which are to be delivered to Purchaser at the Closing are and
at the time of Closing will be duly authorized, executed and delivered by
Seller, are and at the time of Closing will be legal, valid and binding
obligations of Seller enforceable against Seller in accordance with their
respective terms, and do not and at the time of Closing will not violate any
provision of any agreement or judicial order to which Seller or the Property is
subject.
(f) At the time of Closing there will be no outstanding
contracts made by Seller for any improvements to the Property, which have not
been fully paid for and Seller shall cause to be discharged all mechanics' and
materialmen's liens arising from any labor or materials furnished to the
Property prior to the time of Closing. To Seller's knowledge, Seller has
completed and paid for all tenant improvements, including punch-list items, with
respect to any tenant improvements to be constructed by Seller as landlord under
the Leases on the Property.
(g) Seller is not a "foreign person" within the meaning of
Section 1445 of the Internal Revenue Code of 1986.
(h) Except as set forth in any environmental assessment reports
in Seller's possession and disclosed to Purchaser or as otherwise disclosed to
Purchaser (all of which are listed on EXHIBIT E attached hereto and made a part
hereof), to Seller's knowledge Seller has received no written notification that
any governmental or quasi-governmental authority has determined that there are
any violations of environmental statutes, ordinances or regulations affecting
the Property. For the purposes hereof, "Hazardous Material" shall mean any
substance, chemicals, waste or other material which is listed, defined or
otherwise identified as "hazardous" or "toxic" under any federal, state, local
or administrative agency ordinance or law, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss.ss. 6901 et seq. and the Resource Conservation and Recovery Act, 52 U.S.C.
ss.ss. 6901 et seq., or any regulation, order, rule or requirement adopted
thereunder, as well as any
21
<PAGE> 26
formaldehyde, urea, polychlorinated biphenyls, petroleum, petroleum product or
by-product, crude oil, natural gas, natural gas liquids, liquefied natural gas,
or synthetic gas useable for fuel or mixture thereof, radon, asbestos, and
"source," "special nuclear" and "by-product" material as defined in the Atomic
Energy Act of 1985, 42 U.S.C. ss.ss. 3011 et seq.
(i) Except for any options, if any, granted to Tenants to
extend the term or lease additional space in the Property as set forth in their
respective Leases, Seller has not granted any option or right of first refusal
or first opportunity to any party to acquire any interest in any of the
Property.
(j) Neither Seller nor, to Seller's knowledge, any Tenant has
either filed or been the subject of any filing of a petition under the federal
Bankruptcy Code or any federal or state insolvency laws or laws for composition
of indebtedness or for the reorganization of debtors.
(k) The information contained in the Lease Schedule attached
hereto as EXHIBIT B is true, correct and complete in all material respects.
(l) To Seller's knowledge, no Tenant has indicated to Seller in
writing its intent to terminate its Lease prior to expiration of the term of the
Lease.
(m) No brokerage or similar fee is due or unpaid by Seller with
respect to the Leases. No brokerage or similar fee shall be due or payable after
the Closing in connection with the Leases, including, without limitation, as a
result of the exercise of, without limitation, any renewal, extension or
expansion options arising under the Leases.
(n) As used herein, "to Seller's knowledge" shall refer only to
the actual knowledge of the Designated Employees (as hereinafter defined) of (i)
Lend Lease Real Estate Investments, Inc. ("Lend Lease"), and (ii) Compass
Management and Leasing, Inc. ("Compass"), the property manager, respectively,
and shall not be construed, by imputation or otherwise, to refer to the
knowledge of Seller, or any affiliate of either of them, or to any other
officer, agent, manager, representative or employee of Seller or Lend Lease or
Compass or any affiliate thereof or to impose upon such Designated Employees any
duty to investigate the matter to which such actual knowledge, or the absence
thereof, pertains. As used herein, the term "Designated Employees" shall refer
to the following persons: (A) Keith A. Fink, who is the Lend Lease asset manager
and (B) Karl Saarni, who is the individual at Compass responsible for the
management of the Property.
11.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to and covenants with Seller as follows:
(a) Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and duly qualified
in the State of California; this Agreement and all documents executed by
Purchaser which are to be delivered to Seller at the Closing are and at the time
of Closing will be duly authorized, executed and delivered by Purchaser, are and
at the time of Closing will be legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their respective terms, and do
not and at
22
<PAGE> 27
the time of Closing will not violate any provision of any agreement or judicial
order to which Purchaser or the Property is subject.
(b) Purchaser is not, and at Closing will not be, acquiring the
Property with the assets of an "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to ERISA.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification.
(a) Each party hereby agrees to indemnify the other party and
defend and hold it harmless from and against any and all claims, demands,
liabilities, costs, expenses, penalties, damages and losses, including, without
limitation, reasonable attorneys' fees, resulting from any misrepresentation or
breach of warranty or breach of covenant made by such party in this Agreement or
in any document, certificate, or exhibit given or delivered to the other
pursuant to or in connection with this Agreement.
(b) Seller agrees to indemnify Purchaser and defend and hold
Purchaser harmless from and against any and all claims, demands, liabilities,
costs, expenses, penalties, damages and losses, including, without limitation,
reasonable attorneys' fees, asserted against, incurred or suffered by Purchaser
resulting from any personal injury or property damage occurring in, on or about
the Property or relating thereto before the Closing Date, from any cause
whatsoever other than as a consequence of the acts or omissions of Purchaser,
its agents, employees or contractors.
(c) Purchaser agrees to indemnify Seller and defend and hold
Seller harmless from any claims, losses, demands, liabilities, costs, expenses,
penalties, damages and losses, including, without limitation, reasonable
attorneys' fees, asserted against, incurred or suffered by Seller resulting from
any personal injury or property damage occurring in, on or about the Property or
relating thereto after the Closing Date, from any cause whatsoever other than as
a consequence of the acts or omissions of Seller, its agents, employees or
contractors.
(d) The indemnification provisions of this Section 12.1 shall
survive beyond the Closing, or, if the Closing does not occur pursuant to this
Agreement, beyond any termination of this Agreement.
23
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Effective Date.
SELLER:
EML ASSOCIATES,
a New York general partnership
By: ML/EQ REAL ESTATE PORTFOLIO,
LP, a Delaware limited partnership,
Managing Venturer
By: EREIM MANAGERS CORP.,
a Delaware corporation,
Managing General Partner
By:
---------------------------------
Title:
---------------------------------
PURCHASER:
SPP REAL ESTATE (USA), INC.
a Delaware corporation
By: AMB Property Corporation,
a Delaware corporation
Its: Authorized Agent
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
24
<PAGE> 29
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
A-1
<PAGE> 30
EXHIBIT B
LEASE SCHEDULE
<TABLE>
<CAPTION>
Tenant Location Lease Date of Security
------ -------- Documents Document Deposit
--------- -------- -------
<S> <C> <C> <C> <C>
</TABLE>
B-1
<PAGE> 31
EXHIBIT C
OPERATING AGREEMENTS SCHEDULE
None.
C-1
<PAGE> 32
EXHIBIT D
TENANT ESTOPPEL FORM
D-1
<PAGE> 33
EXHIBIT E
SELLER ENVIRONMENTAL ASSESSMENT REPORTS
E-1
<PAGE> 34
FIRST AMENDMENT TO
PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this "Amendment")
is entered into as of October __, 1998 (the "Effective Date") by and between EML
ASSOCIATES, a New York general partnership (the "Seller") and SPP REAL ESTATE
(USA), INC., a Delaware corporation (the "Purchaser").
WHEREAS, Seller and Purchaser entered into that certain Purchase and
Sale Agreement dated as of September 28, 1998 (the "Agreement") for the purchase
and sale of certain properties commonly known as 1200 Whipple Road, Union City,
California and 1345 Doolittle Drive, San Leandro, California, as more
particularly described therein;
WHEREAS, Seller and Purchaser desire to amend certain terms and
conditions of the Agreement;
WHEREAS, capitalized terms used in this Amendment and not otherwise
defined shall have the same respective meanings herein as in the Agreement;
NOW, THEREFORE, for the mutual covenants set forth herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
1. Section 3.1 of the Agreement is hereby amended by deleting the
date "October 26, 1998", and substituting the date "November 9, 1998" therefor.
2. Section 4.1 of the Agreement is hereby amended by deleting the
date "November 10, 1998" and substituting the date "November 17, 1998" therefor.
3. Except as expressly set forth in this Amendment, the Agreement
is not otherwise amended, and shall remain in full force and effect.
4. This Amendment may be executed in one or more counterparts,
each of which shall be deemed an original and all of which, when taken together,
shall be deemed to be one agreement.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
<PAGE> 35
IN WITNESS WHEREOF, Purchaser and Seller have executed this Amendment
effective as of the date set forth above.
SELLER:
EML ASSOCIATES,
a New York general partnership
By: ML/EQ REAL ESTATE PORTFOLIO,
LP, a Delaware limited
partnership,
Managing Venturer
By: EREIM MANAGERS CORP.,
a Delaware corporation,
Managing General Partner
By:
-----------------------------------
Title:
--------------------------------
PURCHASER:
SPP REAL ESTATE (USA), INC.
a Delaware corporation
By: AMB Property Corporation,
a Delaware corporation
Its: Authorized Agent
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
2
<PAGE> 36
November 9, 1998
via Facsimile
EML Associates
c/o Lend Lease Real Estate Investments, Inc.
One Front Street, Suite 1100
San Francisco, California 94104
Attention: Mr. Keith A. Fink
Re: Purchase and Sale Agreement/East Bay Portfolio
Dear Keith:
Confirming our conversations, pursuant to that certain Purchase and
Sale Agreement dated September 28, 1998 between SPP Real Estate (USA) Inc., a
Delaware corporation ("Purchaser") and EML Associates, a New York general
partnership ("Seller"), as amended by that certain First Amendment to Purchase
Agreement dated October 13, 1998 (collectively, the "Agreement"), Purchaser and
Seller hereby agree as follows:
1. Section 4.1 of the Agreement is hereby amended by deleting the
date "November 17, 1998" and substituting the date "November 24, 1998" therefor.
2. Section 1.4 of the Agreement is hereby amended by deleting
"Twenty-Six Million Nine Hundred Twenty-Five Thousand Dollars ($26,925,000) and
substituting "Twenty-Six Million Five Hundred Twelve Thousand Three Hundred
Seventy-Five Dollars ($26,512,375)" therefor.
3. Section 1.5(a) of the Agreement is hereby amended by deleting the
reference to "two (2) business days" and substituting the reference to "three
(3) business days" therefor.
4. Section 4.4(b)(x) of the Agreement is hereby amended by deleting
the references to (i) "$15,000,000" and substituting "$14,773,000" therefor and
(ii) "$11,925,000" and substituting "$11,739,375" therefor.
5. Subject to the terms and conditions contained in this letter
agreement, and without waiving or limiting Purchaser's rights pursuant to the
other terms and conditions of the Agreement, including but not limited to not
limited to, receipt of tenant estoppels satisfactory to
<PAGE> 37
EML Associates
November 9, 1998
Page Two
Purchaser (substantially in the form of Exhibit D to the Agreement, as modified
to address specific concerns arising as a result of Purchaser's review of the
Leases), Purchaser waives its right to terminate the Agreement pursuant to
Article III thereof.
Please reconfirm Seller's agreement to the terms of this letter
agreement by executing a copy hereof and return the original via overnight
courier and a copy via facsimile to me and a copy via facsimile to Pamela
Bennett.
Except as modified hereby, the Agreement shall remain in full force and
effect. All capitalized terms used herein which have defined meanings in the
Agreement shall have the same defined meanings herein. This letter agreement may
be executed in counterparts.
We sincerely appreciate your cooperation in this matter.
Very truly yours,
SPP REAL ESTATE (USA) INC.
By: AMB Property Corporation,
a Delaware corporation
Its: Authorized Agent
By: TYLER W. HIGGINS
----------------------------------
Tyler W. Higgins
Vice President
cc: Frederick D. Minnes, Esq.
Pamela H. Bennett, Esq.
We agree to the terms and conditions of this letter.
EML ASSOCIATES,
a New York general partnership
By: /s/
---------------------------
<PAGE> 1
EXHIBIT 10b
1850 WESTFORK DRIVE,
WESTFORK BUSINESS PARK
LITHIA SPRINGS,
DOUGLAS COUNTY, GEORGIA
PURCHASE AND SALE AGREEMENT
BETWEEN
EML ASSOCIATES, a joint venture
in the form of a New York General Partnership
AS SELLER
AND
GLENN E. WYATT, JR,
an individual resident of the State of Georgia
AS PURCHASER
As of , 1998
<PAGE> 2
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of the _____
day of ________, 1998 (the "Effective Date"), by and between EML ASSOCIATES, a
joint venture in the form of a New York general partnership ( "Seller" ), having
an address c/o Lend Lease Real Estate Investments, Inc., Suite 3200, One Atlanta
Plaza, 950 East Paces Ferry Road, Atlanta, GA 30326 and Glenn E. Wyatt, Jr., a
individual resident of the State of Georgia ("Purchaser"), having an address at
6289 Bankhead Highway, Building 12 A, Austell, Georgia 30168.
W I T N E S S E T H:
ARTICLE I
PURCHASE AND SALE
1.1 Agreement of Purchase and Sale. Subject to the terms and conditions
hereinafter set forth, Seller agrees to sell and convey and Purchaser agrees to
purchase the following:
(a) that certain tract or parcel of land situated in Douglas County,
Georgia, more particularly described on Exhibit A attached hereto and made
a part hereof, together with all and singular the rights and appurtenances
pertaining to such property, including any right, title and interest of
Seller in and to adjacent streets, alleys or rights-of-way (the property
described in clause (a) of this Section 1.1 being herein referred to
collectively as the "Land");
(b) the buildings, structures, fixtures and other improvements on the
Land, including specifically, without limitation, that certain [office
building /shopping center/industrial building] located thereon having a
street address of 1850 West Fork Drive, Lithia Springs, Georgia (the
property described in clause (b) of this Section 1.1 being herein referred
to collectively as the "Improvements");
1.2 Property Defined. The Land and the Improvements are hereinafter
sometimes referred to collectively as the "Property."
1.3 Permitted Exceptions. The Property shall be conveyed subject to the matters
which are, or are deemed to be, Permitted Exceptions pursuant to Article II
hereof (herein referred to collectively as the "Permitted Exceptions").
1.4 Purchase Price. Seller is to sell and Purchaser is to purchase the Property
for a total of TWO MILLION SIX HUNDRED THOUSAND AND NO/100 DOLLARS
($2,600,000.00) (the "Purchase Price").
<PAGE> 3
1.5 Payment of Purchase Price. The Purchase Price, as increased or decreased by
prorations and adjustments as herein provided, shall be payable in full at
Closing in cash by wire transfer of immediately available federal funds to a
bank account designated by Seller in writing to Purchaser prior to the Closing.
1.6 Earnest Money. Simultaneously with the execution and delivery of this
Agreement, Purchaser is depositing with Colliers Cauble & Co. (the "Escrow
Agent"), having its office at Suite 500, South Tower, 1335 Peachtree Street, NE,
Atlanta, GA 30309-3269; Attention: Michael L. Spears, the sum of Twenty Five
Thousand and No/100 Dollars ($25,000.00) (the "First Deposit") in good funds,
either by certified bank or cashier's check or by federal wire transfer. If
Purchaser does not exercise the right to terminate this Agreement in accordance
with Section 2.3 or Section 3.2 hereof, Purchaser shall, on or before the last
date of the Inspection Period (as such term is defined in Section 3.1 hereof),
deposit with the Escrow Agent the additional sum of Twenty Five Thousand and
No/100 Dollars ($25,000.00) (the "Second Deposit") in good funds, either by
certified bank or cashier's check or by federal wire transfer as an additional
deposit under this Agreement. The Escrow Agent shall hold the First Deposit and
the Second Deposit in an interest-bearing account for the benefit of Purchaser.
The First Deposit and the Second Deposit, together with all interest earned on
such sums, are herein referred to collectively as the "Earnest Money." All
interest accruing on such sums shall become a part of the Earnest Money and
shall be distributed as Earnest Money in accordance with the terms of this
Agreement. If Purchaser does not terminate this Agreement as provided in Section
3.2 hereof and thereafter fails to deliver the Second Deposit to the Escrow
Agent within the time period specified above, this Agreement shall terminate
automatically as of the last day of the Inspection Period, Escrow Agent shall
deliver the Earnest Money to Seller promptly thereafter and neither party shall
have any further rights, obligations or liabilities hereunder except to the
extent that any right, obligation or liability set forth herein expressly
survives termination of this Agreement. If Purchaser does not terminate this
Agreement and makes the Second Deposit as herein provided and the transaction
contemplated hereby is not consummated as herein provided for any reason other
than a default by Seller hereunder or the failure of Seller to deliver title to
the Property to Purchaser as herein required, the Earnest Money shall be
non-refundable to Purchaser and, in such event, shall be delivered by the Escrow
Agent to Seller. Time is of the essence for the delivery of Second Deposit under
this Agreement.
ARTICLE II
TITLE AND SURVEY
2.1 Title Examination, Commitment for Title Insurance. Purchaser shall have
until the expiration of the Inspection Period (defined in Section 3.1 hereof) to
examine title to the Property. During the Inspection Period, Purchaser shall
obtain from a nationally recognized title insurance company (the "Title
Company") at Purchaser's expense, an ALTA title insurance commitment (the "Title
Commitment") covering the Property, showing all matters affecting title to the
Property and binding the Title Company to issue at Closing an Owner's Policy of
Title Insurance in the full amount of the Purchase Price pursuant to Section 2.4
hereof. Purchaser shall instruct the Title Company to deliver to Purchaser,
Seller and the surveyor described in
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<PAGE> 4
Section 2.2 below copies of the Title Commitment and copies of all instruments
referenced in Schedule B and Schedule C thereof.
2.2 Survey. During the Inspection Period, Purchaser shall, at Purchaser's
expense, employ a reputable surveyor or surveying firm, licensed by the state in
which the Property is located, to survey the Property and prepare and deliver to
Purchaser, the Title Company and Seller an ALTA survey thereof (the "Survey")
reflecting the total area of the Property, the location of all improvements,
recorded easements and encroachments, if any, located thereon and all building
and set back lines and other matters of record with respect thereto.
2.3 Title Objections: Cure of Title Objections. (a) Purchaser shall have until
the expiration of the Inspection Period to give written notice to Seller of such
objections as Purchaser may have to any exceptions to title disclosed in the
Title Commitment, any amendments thereto issued during the Inspection Period or
the Survey. Any exception to title disclosed in the Title Commitment, any such
amendments or the Survey to which Purchaser does not object by timely written
notice shall be a Permitted Exception. Time is of the essence with respect to
the provisions of this Section 2.3.
(b) In the event Purchaser gives timely written notice of objection
to any exceptions to title, Seller shall have the right, but not the
obligation, to attempt to remove, satisfy or otherwise cure any exceptions
to title so objected to. Within ten (10) days after receipt of Purchaser's
notice of objection, Seller shall give written notice to Purchaser
informing Purchaser of Seller's election with respect to such exceptions.
If Seller fails to give written notice of election within such ten (10)
day period, Seller shall be deemed to have elected not to attempt to cure
the matter objected to. If Seller elects to attempt to cure any
exceptions, Seller shall be entitled to one or more reasonable
adjournments of the Closing of up to, but not beyond, the sixtieth (60th)
day following the date for Closing set forth in Section 4.1 hereof to
attempt such cure, but Seller shall not be obligated to expend any sums,
commence any suits or take any other action in order to effect the same.
(c) If Seller elects or is deemed to have elected not to cure any
exceptions to title objected to by Purchaser or if, after electing to
attempt to cure, Seller determines that it is unwilling or unable to
remove, satisfy or otherwise cure any such exceptions, Purchaser's sole
remedy hereunder in such event shall be either: (i) to accept title to the
Property subject to such exceptions as if Purchaser had not objected
thereto and without reduction of the Purchase Price or (ii) to terminate
this Agreement, whereupon the Earnest Money shall be returned to Purchaser
and neither party hereto shall have any further rights, obligations or
liabilities hereunder except to the extent that any right, obligation or
liability set forth herein expressly survives termination of this
Agreement.
(d) To terminate this Agreement pursuant to this Section 2.3,
Purchaser must give written notice to Seller of its election to terminate
not later than (a) five (5) business days after receipt of written notice
from Seller of Seller's election not to attempt to cure any exception or
of Seller's determination, having previously elected to attempt to cure,
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<PAGE> 5
that it is unable or unwilling to do so or (b) fifteen (15) days after
giving timely notice to Seller objecting to any exception to title if
Seller is deemed herein to have elected not to attempt to cure such
exception. If Purchaser fails to give timely notice of its election to
terminate for any reason whatsoever, Purchaser shall be deemed to have
elected to accept title subject to such exception without adjustment of
the purchase price.
2.4 Conveyance of Title. At Closing, Seller shall convey and transfer to
Purchaser such title to the Property as will enable the Title Company to issue
to Purchaser, at Purchaser's expense, an ALTA Owner's Policy of Title Insurance
(the "Title Policy") covering the Property, in the full amount of the Purchase
Price. Notwithstanding anything contained herein to the contrary, the Property
shall be conveyed subject to the following matters, which shall be deemed to be
Permitted Exceptions:
(a) the lien of all ad valorem real estate taxes and assessments not yet
due and payable as of the date of Closing, subject to adjustment as herein
provided;
(b) local, state and federal laws, ordinances or governmental regulations,
including but not limited to, building and zoning laws, ordinances and
regulations, now or hereafter in effect relating to the Property; and
(c) items appearing of record or shown on the Survey and, in either case,
not objected to by Purchaser or waived or deemed waived by Purchaser in
accordance with Sections 2.3 or 2.5 hereof.
(d) those matters listed as Matters Affecting Title set forth on Exhibit B
attached hereto and made a part hereof and not objected to by Purchaser as
provided above.
2.5 Pre-Closing "Gap" Title Defects. Whether or not Purchaser shall have
furnished to Seller any notice of title objections pursuant to the foregoing
provisions of this Agreement, Purchaser may, at or prior to Closing, notify
Seller in writing of any objections to title first raised by the Title Company
or the Surveyor between (a) the date which is the earlier of (i) the effective
date of Purchaser's Title Commitment referred to above or (ii) the expiration of
the Inspection Period, and (b) the date on which the transaction contemplated
herein is scheduled to close. With respect to any objections to title set forth
in such notice, Seller shall have the same option to cure and Purchaser shall
have the same option to accept title subject to such matters or to terminate
this Agreement as those which apply to any notice of objections made by
Purchaser before the expiration of the Inspection Period. If Seller elects to
attempt to cure any such matters, the date for Closing shall be automatically
extended by a reasonable additional time to effect such a cure, but in no event
shall the extension exceed sixty (60) days after the date for Closing set forth
in Section 4.1 hereof.
ARTICLE III
INSPECTION PERIOD
3.1 Right of Inspection. During the period beginning upon the Effective Date and
ending at 5:00 p.m. (local time at the Property) on the date that is thirty (30)
days after, but not including, the Effective Date (hereinafter referred to as
the "Inspection Period"), Purchaser shall have the right to make a physical
inspection of the Property and to examine at such place or places at the
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<PAGE> 6
Property, in the offices of the property manager or elsewhere as the same may be
located, any operating files maintained by Seller or its property manager in
connection with the maintenance and/or management of the Property, including,
without limitation, the general records relating to the income and expenses of
the Property, correspondence, surveys, plans and specifications, warranties for
services and materials provided to the Property, environmental audits and
similar materials, but excluding materials not directly related to the current
maintenance and/or management of the Property such as, without limitation,
Seller's internal memoranda, financial projections, budgets, appraisals,
accounting and tax records and similar proprietary, elective or confidential
information. Purchaser understands and agrees that any on-site inspections of
the Property shall be conducted upon at least twenty-four (24) hours' prior
written notice to Seller and, at the option of Seller, in the presence of Seller
or its representative. Purchaser's inspection shall not damage the Property in
any respect. Such physical inspection shall not be invasive in any respect
(unless Purchaser obtains Seller's prior written consent), and in any event
shall be conducted in accordance with standards customarily employed in the
industry and in compliance with all governmental laws, rules and regulations.
Following each entry by Purchaser with respect to inspections and/or tests on
the Property, Purchaser shall restore the Property to a condition which is as
near to its original condition as existed prior to any such inspections and/or
tests. Seller shall cooperate with Purchaser in its due diligence but shall not
be obligated to incur any liability or expense in connection therewith.
Purchaser agrees to indemnify against and hold Seller harmless from any claim
for liabilities, costs, expenses (including reasonable attorneys' fees actually
incurred) damages or injuries arising out of or resulting from the inspection of
the Property by Purchaser or its agents, and notwithstanding anything to the
contrary in this Agreement, such obligation to indemnify and hold harmless
Seller shall survive Closing or any termination of this Agreement. All
inspections shall occur at reasonable times agreed upon by Seller and Purchaser.
3.2 Right of Termination. Seller agrees that in the event Purchaser determines
(such determination to be made in Purchaser's sole discretion) that the Property
is not suitable for its purposes, Purchaser shall have the right to terminate
this Agreement by giving written notice thereof to Seller prior to the
expiration of the Inspection Period. If Purchaser gives such notice of
termination within the Inspection Period, this Agreement shall terminate and the
Earnest Money shall be returned to Purchaser. Time is of the essence with
respect to the provisions of this Section 3.2. If Purchaser fails to give Seller
a notice of termination prior to the expiration of the Inspection Period,
Purchaser shall no longer have any right to terminate this Agreement under this
Section 3.2 and (subject to the provisions of Section 2.5) shall be bound to
proceed to Closing and consummate the transaction contemplated hereby pursuant
to the terms of this Agreement.
ARTICLE IV
CLOSING
4.1 Time and Place. The consummation of the transaction contemplated hereby
("Closing") shall be held at the offices of Alston & Bird, at Suite 4200, 1201
West Peachtree Street, Atlanta, Georgia 30309, at 10:00 a.m. on the sixtieth
(60th) day after the Effective Date. At Closing, Seller and Purchaser shall
perform the obligations set forth in, respectively, Section 4.2 and Section 4.3,
the performance of which obligations shall be concurrent conditions.
-5-
<PAGE> 7
4.2 Seller's Obligations at Closing. At Closing, Seller shall:
(a) deliver to Purchaser a duly executed limited or special warranty deed
in recordable form, conveying the Land and Improvements, subject only to
the Permitted Exceptions; the warranty of title in the Deed will be only
as to claims made by, through or under Seller and not otherwise;
(b) deliver to Purchaser such evidence as Purchaser's counsel and/or the
Title Company may reasonably require as to the authority of the person or
persons executing documents on behalf of Seller;
(c) deliver to Purchaser an affidavit duly executed by Seller stating that
Seller is not a "foreign person" as defined in the Federal Foreign
Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform Act;
(d) deliver to Purchaser possession and occupancy of the Property, subject
to the Permitted Exceptions; and
(e) deliver such additional documents as shall be reasonably required to
consummate the transaction expressly contemplated by this Agreement.
4.3 Purchaser's Obligations at Closing. At Closing, Purchaser shall:
(a) pay to Seller the full amount of the Purchase Price, as
increased or decreased by prorations and adjustments as herein provided,
in immediately available wire transferred funds pursuant to Section 1.5
above, it being agreed that at Closing the Earnest Money shall be
delivered to Seller and applied towards payment of the Purchase Price;
(b) deliver to Seller a letter duly executed by Purchaser,
confirming that Purchaser is not acquiring the Property with the assets of
an employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), and, in the event
Purchaser is unable or unwilling to make such a representation, Purchaser
shall be deemed to be in default hereunder, and Seller shall have the
right to terminate this Agreement and to receive and retain the Earnest
Money;
(c) deliver to Seller such evidence as Seller's counsel and/or the
Title Company may reasonably require as to the authority of the person or
persons executing documents on behalf of Purchaser; and
(d) deliver such additional documents as shall be reasonably
required to consummate the transaction contemplated by this Agreement.
4.4 Credits and Prorations.
(a) The following shall be apportioned with respect to the Property
as of 12:01 a.m., on the day of Closing, as if Purchaser were vested with
title to the Property during the entire day upon which Closing occurs:
(i) taxes (including personal property taxes on the Personal
Property) and assessments levied against the Property;
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<PAGE> 8
(ii) gas, electricity and other utility charges for which
Seller is liable, if any, such charges to be apportioned at Closing on the
basis of the most recent meter reading occurring prior to Closing; and
(iii) any other operating expenses or other items pertaining
to the Property which are customarily prorated between a purchaser and a
seller in the area in which the Property is located.
(b) Notwithstanding anything contained in the foregoing provisions:
(i) Any taxes paid at or prior to Closing shall be prorated
based upon the amounts actually paid. If taxes and assessments for the
current year have not been paid before Closing, Seller shall be charged at
Closing an amount equal to that portion of such taxes and assessments
which relates to the period before Closing and Purchaser shall pay the
taxes and assessments prior to their becoming delinquent. Any such
apportionment made with respect to a tax year for which the tax rate or
assessed valuation, or both, have not yet been fixed shall be based upon
the tax rate and/or assessed valuation last fixed. To the extent that the
actual taxes and assessments for the current year differ from the amount
apportioned at Closing, the parties shall make all necessary adjustments
by appropriate payments between themselves following Closing.
(ii) Seller shall receive the entire advantage of any
discounts for the prepayment by it of any taxes, water rates or sewer
rents.
(c) The provisions of this Section 4.4 shall survive Closing.
4.5 Closing Costs. Seller shall pay (a) the fees of any counsel representing it
in connection with this transaction and (b) the Georgia Property Transfer Tax
due upon the recording of the deed of conveyance. Purchaser shall (u) pay the
fees of any counsel representing Purchaser in connection with this transaction;
(v) pay the amount of (i) the fee for the title examination and (ii) the Title
Commitment and pay the premium for the Owner's Policy of Title Insurance to be
issued to Purchaser by the Title Company at Closing; (w) pay for the cost of the
Survey; (x) pay the fees for recording the deed conveying the Property to
Purchaser; (y) pay all due diligence costs incurred by Purchaser in connection
with the exercise of the inspection rights granted under Section 3.1 of this
Agreement and (z) any escrow fees charged by the Escrow Agent or Title Company.
All other costs and expenses incident to this transaction and the closing
thereof shall be paid by the party incurring same.
4.6 Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser
to consummate the transaction hereunder shall be subject to the fulfillment on
or before the date of Closing of all of the following conditions, any or all of
which may be waived by Purchaser in its sole discretion:
(a) Seller shall have delivered to Purchaser all of the items
required to be delivered to Purchaser pursuant to the terms of this
Agreement, including but not limited to, those provided for in Section
4.2.
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<PAGE> 9
(b) All of the representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects as of
the date of Closing (with appropriate modifications permitted under this
Agreement or not adverse to Purchaser).
(c) Seller shall have performed and observed, in all material
respects, all covenants and agreements of this Agreement to be performed
and observed by Seller as of the date of Closing.
4.7 Conditions Precedent to Obligation of Seller. The obligation of Seller to
consummate the transaction hereunder shall be subject to the fulfillment on or
before the date of Closing of all of the following conditions, any or all of
which may be waived by Seller in its sole discretion:
(a) Seller shall have received the Purchase Price as adjusted
pursuant to and payable in the manner provided for in this Agreement.
(b) Purchaser shall have delivered to Seller all of the items
required to be delivered to Seller pursuant to the terms of this
Agreement, including but not limited to, those provided for in Section
4.3.
(c) All of the representations and warranties of Purchaser contained
in this Agreement shall be true and correct in all material respects as of
the date of Closing.
(d) Purchaser shall have performed and observed, in all material
respects, all covenants and agreements of this Agreement to be performed
and observed by Purchaser as of the date of Closing.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Representations and Warranties of Seller. Seller hereby makes the following
representations and warranties to Purchaser as of the Effective Date:
(a) Organization and Authority. Seller has been duly organized and
is validly existing under the laws of New York. Seller has the full right
and authority to enter into this Agreement and, subject to the provisions
of Section 10.6 hereof, to transfer all of the Property to be conveyed by
Seller pursuant hereto and to consummate or cause to be consummated the
transactions contemplated herein to be made by Seller. The person signing
this Agreement on behalf of Seller is authorized to do so.
(b) Condemnation. To Seller's knowledge, no condemnation proceedings
relating to the Property are pending or threatened.
(c) Environmental Matters. Except as set forth in that certain
Report for Preliminary Environmental Site Assessment prepared by Law
Engineering [LAW Project No. 11746-E, dated December 22, 1988 (reissuance
of Report no 11483.3)], a copy of which has been delivered to Purchaser or
as otherwise disclosed to Purchaser, to Seller's knowledge, Seller has
received no written notification that any governmental or
quasi-governmental authority has determined that there are any violations
of environmental statutes, ordinances or regulations affecting the
Property. As used herein, "Hazardous Substances" means all hazardous or
toxic materials, substances, pollutants, contaminants,
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<PAGE> 10
or wastes currently identified as a hazardous substance or waste in the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (commonly known as "CERCLA"), as amended, the Superfund Amendments
and Reauthorization Act (commonly known as "SARA"), the Resource
Conservation and Recovery Act (commonly known as "RCRA"), or any other
federal, state or local legislation or ordinances applicable to the
Property.
5.2 Knowledge Defined. References to the "knowledge" of Seller shall refer only
to the actual knowledge of the Designated Employees (as hereinafter defined) of
Lend Lease Real Estate Investments, Inc. ("Lend Lease"), the manager of this
asset for Seller, and shall not be construed, by imputation or otherwise, to
refer to the knowledge of Seller, Lend Lease or any affiliate of either of them,
to any property manager, or to any other officer, agent, manager, representative
or employee of Seller or Lend Lease or any affiliate thereof or to impose upon
such Designated Employees any duty to investigate the matter to which such
actual knowledge, or the absence thereof, pertains. As used herein, the term
"Designated Employees" shall refer to W. Randy Forth.
5.3 Survival of Seller's Representations and Warranties. The representations and
warranties of Seller set forth in Section 5.1 shall merge with the Closing and
delivery of the deed of conveyance.
5.4 Covenants of Seller. Seller hereby covenants with Purchaser as follows:
(a) From the Effective Date hereof until the Closing or earlier
termination of this Agreement, Seller shall use reasonable efforts to
operate and maintain the Property in a manner generally consistent with
the manner in which Seller has operated and maintained the Property prior
to the date hereof.
5.5 Representations and Warranties of Purchaser. Purchaser hereby represents and
warrants to Seller:
(a) Purchaser is not acquiring the Property with the assets of an
employee benefit plan as defined in Section 3(3) of ERISA.
(b) Purchaser has the full right, power and authority to purchase
the Property as provided in this Agreement and to carry out Purchaser's
obligations hereunder, and all requisite action necessary to authorize
Purchaser to enter into this Agreement and to carry out its obligations
hereunder have been, or by the Closing will have been, taken. The person
signing this Agreement on behalf of Purchaser is authorized to do so.
(c) There is no action, suit, arbitration, unsatisfied order or
judgment, government investigation or proceeding pending against Purchaser
which, if adversely determined, could individually or in the aggregate
materially interfere with the consummation of the transaction contemplated
by this Agreement.
5.6 Survival of Purchaser's Representations and Warranties. The representation
and warranties of Purchaser set forth in Section 5.5(a) shall survive Closing
and shall be a continuing
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<PAGE> 11
representation and warranty without limitation. All other representations and
warranties of Purchaser shall merge with the Closing and delivery of the deed of
conveyance.
5.7 Covenants of Purchaser. Purchaser hereby covenants with Seller that
Purchaser shall, in connection with its investigation of the Property during the
Inspection Period, inspect the Property for the presence of Hazardous Substances
(as defined in Section 5.1(c) hereof), and shall furnish to Seller copies of any
reports received by Purchaser in connection with any such inspection. Purchaser
hereby assumes full responsibility for such inspections and, except for claims
based on representations or warranties contained in Section 5.1(c), irrevocably
waives any claim against Seller arising from the presence of Hazardous
Substances on the Property. Purchaser shall also furnish to Seller copies of any
other reports received by Purchaser relating to any other inspections of the
Property conducted on Purchaser's behalf, if any (including, specifically,
without limitation, any reports analyzing compliance of the Property with the
provisions of the Americans with Disabilities Act ("ADA"), 42 U.S.C. ss.12101,
et seq., if applicable).
ARTICLE VI
DEFAULT
6.1 Default by Purchaser. If Purchaser defaults for any reason other than
Seller's default or the permitted termination of this Agreement by either Seller
or Purchaser as herein expressly provided, or if Purchaser otherwise defaults
under this Agreement, Seller shall be entitled, as its sole remedy, to terminate
this Agreement and receive the Earnest Money as liquidated damages for the
breach of this Agreement, it being agreed between the parties hereto that the
actual damages to Seller in the event of such breach are impractical to
ascertain and the amount of the Earnest Money is a reasonable estimate thereof.
6.2 Default by Seller. In the event that Seller fails to consummate this
Agreement for any reason other than Purchaser's default or the permitted
termination of this Agreement by Seller or Purchaser as herein expressly
provided, Purchaser shall be entitled, as its sole remedy, either (a) to receive
the return of the Earnest Money, which return shall operate to terminate this
Agreement and release Seller from any and all liability hereunder, or (b) to
enforce specific performance of Seller's obligation to execute the documents
required to convey the Property to Purchaser, it being understood and agreed
that the remedy of specific performance shall not be available to enforce any
other obligation of Seller hereunder. Purchaser expressly waives its rights to
seek damages in the event of Seller's default hereunder. Purchaser shall be
deemed to have elected to terminate this Agreement and receive back the Earnest
Money if Purchaser fails to file suit for specific performance against Seller in
a court having jurisdiction in the county and state in which the Property is
located, on or before sixty (60) days following the date upon which Closing was
to have occurred.
ARTICLE VII
RISK OF LOSS
7.1 Minor Damage. In the event of loss or damage to the Property or any portion
thereof which is not "major" (as hereinafter defined), this Agreement shall
remain in full force and effect provided Seller performs any necessary repairs
or, at Seller's option, assigns to Purchaser all of
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<PAGE> 12
Seller's right, title and interest to any claims and proceeds Seller may have
with respect to any casualty insurance policies or condemnation awards relating
to the premises in question. In the event that Seller elects to perform repairs
upon the Property, Seller shall use reasonable efforts to complete such repairs
promptly and the date of Closing shall be extended a reasonable time in order to
allow for the completion of such repairs. If Seller elects to assign a casualty
claim to Purchaser, the Purchase Price shall be reduced by an amount equal to
the deductible amount under Seller's insurance policy. Upon Closing, full risk
of loss with respect to the Property shall pass to Purchaser.
7.2 Major Damage. In the event of a "major" loss or damage, either Seller or
Purchaser may terminate this Agreement by written notice to the other party, in
which event the Earnest Money shall be returned to Purchaser. If neither Seller
nor Purchaser elects to terminate this Agreement within ten (10) days after
Seller sends Purchaser written notice of the occurrence of major loss or damage,
then Seller and Purchaser shall be deemed to have elected to proceed with
Closing, in which event Seller shall, at Seller's option, either (a) perform any
necessary repairs, or (b) assign to Purchaser all of Seller's right, title and
interest to any claims and proceeds Seller may have with respect to any casualty
insurance policies or condemnation awards relating to the premises in question.
In the event that Seller elects to perform repairs upon the Property, Seller
shall use reasonable efforts to complete such repairs promptly and the date of
Closing shall be extended a reasonable time in order to allow for the completion
of such repairs. If Seller elects to assign a casualty claim to Purchaser, the
Purchase Price shall be reduced by an amount equal to the deductible amount
under Seller's insurance policy. Upon Closing, full risk of loss with respect to
the Property shall pass to Purchaser.
7.3 Definition of "Major" Loss or Damage. For purposes of Sections 7.1 and 7.2,
"major" loss or damage refers to the following: (i) loss or damage to the
Property or any portion thereof such that the cost of repairing or restoring the
premises in question to a condition substantially identical to that of the
premises in question prior to the event of damage would be, in the opinion of an
architect selected by Seller and reasonably approved by Purchaser, equal to or
greater than One Hundred Thousand and No/100 Dollars ($100,000.00), and (ii) any
loss due to a condemnation which permanently and materially impairs the current
use of the Property. If Purchaser does not give notice to Seller of Purchaser's
reasons for disapproving an architect within five (5) business days after
receipt of notice of the proposed architect, Purchaser shall be deemed to have
approved the architect selected by Seller.
ARTICLE VIII
COMMISSIONS
8.1 Brokerage Commissions. In the event the transaction contemplated by this
Agreement is consummated, but not otherwise, Seller agrees to pay to Colliers
Cauble & Co. (the "Broker") at Closing a brokerage commission pursuant to a
separate written agreement between Seller and Broker. Each party agrees that
should any claim be made for brokerage commissions or finder's fees by any
broker or finder other than the Broker by, through or on account of any acts of
said party or its representatives, said party will indemnify and hold the other
party free and harmless from and against any and all loss, liability, cost,
damage and
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<PAGE> 13
expense in connection therewith. The provisions of this paragraph shall survive
Closing or earlier termination of this Agreement.
ARTICLE IX
DISCLAIMERS AND WAIVERS
9.1 No Reliance on Documents. Except as expressly stated herein, Seller makes no
representation or warranty as to the truth, accuracy or completeness of any
materials, data or information delivered by Seller to Purchaser in connection
with the transaction contemplated hereby. Purchaser acknowledges and agrees that
all materials, data and information delivered by Seller to Purchaser in
connection with the transaction contemplated hereby are provided to Purchaser as
a convenience only and that any reliance on or use of such materials, data or
information by Purchaser shall be at the sole risk of Purchaser, except as
otherwise expressly stated herein. Without limiting the generality of the
foregoing provisions, Purchaser acknowledges and agrees that (a) any
environmental or other report with respect to the Property which is delivered by
Seller to Purchaser shall be for general informational purposes only, (b)
Purchaser shall not have any right to rely on any such report delivered by
Seller to Purchaser, but rather will rely on its own inspections and
investigations of the Property and any reports commissioned by Purchaser with
respect thereto, and (c) neither Seller, any affiliate of Seller nor the person
or entity which prepared any such report delivered by Seller to Purchaser shall
have any liability to Purchaser for any inaccuracy in or omission from any such
report.
9.2 DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, IT IS
UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED,
WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR
REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, TITLE (OTHER THAN SELLER'S LIMITED WARRANTY OF TITLE TO BE SET FORTH IN
THE DEED), ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL
CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL
APPROVALS, THE COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH,
ACCURACY OR COMPLETENESS OF THE PROPERTY DOCUMENTS OR ANY OTHER INFORMATION
PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING
REGARDING THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING
SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE
PROPERTY "AS IS, WHERE IS, WITH ALL FAULTS", EXCEPT TO THE EXTENT EXPRESSLY
PROVIDED OTHERWISE IN THIS AGREEMENT. PURCHASER HAS NOT RELIED AND WILL NOT RELY
ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED
WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO
THE PROPERTY OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION,
PROPERTY INFORMATION PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY) MADE OR
FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR ANY REAL
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<PAGE> 14
ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO
WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS
SPECIFICALLY SET FORTH IN THIS AGREEMENT. PURCHASER REPRESENTS TO SELLER THAT
PURCHASER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS
OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL
CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE
CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION
TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED
FROM THE PROPERTY, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION
PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT
THERETO, OTHER THAN SUCH REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS
ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. UPON CLOSING, PURCHASER SHALL ASSUME
THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION
DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN
REVEALED BY PURCHASER'S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE
DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER (AND SELLER'S OFFICERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL
CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES,
DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT
COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER
MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER'S OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF
ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, VIOLATIONS OF
ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS) AND
ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING
THE PROPERTY. PURCHASER AGREES THAT SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL
OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE
REQUIRED AFTER THE DATE OF CLOSING, SUCH CLEAN-UP, REMOVAL OR REMEDIATION SHALL
BE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF
PURCHASER.
9.3 Effect and Survival of Disclaimers. Seller and Purchaser acknowledge that
the compensation to be paid to Seller for the Property has been decreased to
take into account that the Property is being sold subject to the provisions of
this Article IX. Seller and Purchaser agree that the provisions of this Article
IX shall survive Closing.
ARTICLE X
MISCELLANEOUS
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<PAGE> 15
10.1 Confidentiality. Purchaser and its representatives shall hold in strictest
confidence all data and information obtained with respect to Seller or its
business, whether obtained before or after the execution and delivery of this
Agreement, and shall not disclose the same to others; provided, however, that it
is understood and agreed that Purchaser may disclose such data and information
to the employees, consultants, accountants and attorneys of Purchaser provided
that such persons agree in writing to treat such data and information
confidentially. In the event this Agreement is terminated or Purchaser fails to
perform hereunder, Purchaser shall promptly return to Seller any statements,
documents, schedules, exhibits or other written information obtained from Seller
in connection with this Agreement or the transaction contemplated herein. It is
understood and agreed that, with respect to any provision of this Agreement
which refers to the termination of this Agreement and the return of the Earnest
Money to Purchaser, such Earnest Money shall not be returned to Purchaser unless
and until Purchaser has fulfilled its obligation to return to Seller the
materials described in the preceding sentence. In the event of a breach or
threatened breach by Purchaser or its agents or representatives of this Section
10.1, Seller shall be entitled to an injunction restraining Purchaser or its
agents or representatives from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Seller from pursuing any other available remedy at law or in equity for such
breach or threatened breach. The provisions of this Section 10.1 shall survive
Closing.
10.2 Public Disclosure. Prior to Closing, any release to the public of
information with respect to the sale contemplated herein or any matters set
forth in this Agreement will be made only in the form approved by Purchaser and
Seller and their respective counsel.
10.3 Discharge of Obligations. The acceptance of the Deed by Purchaser shall be
deemed to be a full performance and discharge of every representation and
warranty made by Seller herein and every agreement and obligation on the part of
Seller to be performed pursuant to the provisions of this Agreement, except
those which are herein specifically stated to survive Closing.
10.4 Assignment. Purchaser may not assign its rights under this Agreement
without first obtaining Seller's written approval, which approval may be given
or withheld in Seller's sole discretion. Under no circumstances shall Purchaser
have the right to assign this Agreement to any person or entity owned or
controlled by an employee benefit plan if Seller's sale of the Property to such
person or entity would, in the reasonable opinion of Seller's ERISA advisor,
create or otherwise cause a "prohibited transaction" under ERISA. In the event
Purchaser assigns this Agreement or transfers any ownership interest in
Purchaser, and such assignment or transfer would make the consummation of the
transaction hereunder a "prohibited transaction" under ERISA and necessitate the
termination of this Agreement then, notwithstanding any contrary provision which
may be contained herein, Seller shall have the right to pursue any remedy
available at law or in equity as a result of such assignment or transfer. Any
transfer, directly or indirectly, of any stock, partnership interest or other
ownership interest in Purchaser without Seller's written approval, which
approval may be given or withheld in Seller's sole discretion, shall constitute
a default by Purchaser under this Agreement.
10.5 Notices. Any notice pursuant to this Agreement shall be given in writing by
(a) personal delivery, or (b) reputable overnight delivery service with proof of
delivery, or (c) United States Mail, postage prepaid, registered or certified
mail, return receipt requested, or (d) legible
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<PAGE> 16
facsimile transmission sent to the intended addressee at the address set forth
below, or to such other address or to the attention of such other person as the
addressee shall have designated by written notice sent in accordance herewith,
and shall be deemed to have been given either at the time of personal delivery,
or, in the case of expedited delivery service or mail, as of the date of first
attempted delivery at the address and in the manner provided herein, or, in the
case of facsimile transmission, as of the date of the facsimile transmission
provided that an original of such facsimile is also sent to the intended
addressee by means described in clauses (a), (b) or (c) above. Unless changed in
accordance with the preceding sentence, the addresses for notices given pursuant
to this Agreement shall be as follows:
If to Seller:
The Equitable Life Assurance Society of the United States
c/o Lend Lease Real Estate Investments, Inc.
Suite 3200, One Atlanta Plaza
950 East Paces Ferry Road
Atlanta, GA 30326
Attn: W. Randy Forth
TELECOPY: (404) 504-5885
TELEPHONE: (404) 504-5866
with a copy to: Alston & Bird
Suite 4200, One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Walter W. Mitchell
TELECOPY: (404) 881-7777
TELEPHONE: (404) 881- 7790
If to Purchaser: Glenn E. Wyatt, Jr.
6289 Bankhead Highway
Building 12 - A
Austell, Georgia 30168
TELECOPY:
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<PAGE> 17
TELEPHONE:
with a copy to: _______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
10.6 Binding Effect. This Agreement shall not be binding in any way upon Seller
unless and until (a) Seller shall execute and deliver the same to Purchaser, (b)
each stage of Seller's investment approval process has approved this
transaction, and (c) Seller's Investment Committee has thereafter given its
written approval thereof. If Seller has not given Purchaser written notice (the
"Approval Notice") of such approvals on or before October 19, 1998 (the
"Approval Deadline"), or if prior to the Approval Deadline Seller notifies
Purchaser in writing that this Agreement has been disapproved by the persons or
entities referred to in clauses (b) or (c) of the preceding sentence, then this
Agreement shall be deemed terminated and Purchaser shall be entitled to the
return of the Earnest Money. It is understood and agreed that at each stage of
Seller's investment approval process, Seller or its investment advisor,
Equitable Real Estate Investment Management Inc., shall each have the right, in
its unfettered discretion, to disapprove the transaction contemplated by this
Agreement for any reason whatsoever, without obligation thereafter to proceed to
the next stage of Seller's investment approval process. Seller's approval of
this Agreement shall be evidenced only by both Seller's execution of this
Agreement and Seller's sending of the Approval Notice to Purchaser prior to the
Approval Deadline and, accordingly, Purchaser acknowledges and agrees that
Purchaser cannot and will not rely upon any other statement or action of Seller
or its representatives as evidence of Seller's approval of this Agreement or the
subject matter hereof.
10.7 Modifications. This Agreement cannot be changed orally, and no executory
agreement shall be effective to waive, change, modify or discharge it in whole
or in part unless such executory agreement is in writing and is signed by the
parties against whom enforcement of any waiver, change, modification or
discharge is sought.
10.8 Tenant Notification Letters. Purchaser shall deliver to each and every
tenant of the Property under a Lease thereof a signed statement acknowledging
Purchaser's receipt and responsibility for each tenant's security deposit (to
the extent delivered by Seller to Purchaser at Closing), if any, all in
compliance with and pursuant to the applicable provisions of applicable law. The
provisions of this paragraph shall survive Closing.
10.9 Calculation of Time Periods. Unless otherwise specified, in computing any
period of time described in this Agreement, the day of the act or event after
which the designated period of time begins to run is not to be included and the
last day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday under the laws of the State
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<PAGE> 18
in which the Property is located, in which event the period shall run until the
end of the next day which is neither a Saturday, Sunday or legal holiday. The
final day of any such period shall be deemed to end at 5 p.m., local time.
10.10 Successors and Assigns. The terms and provisions of this Agreement are to
apply to and bind the permitted successors and assigns of the parties hereto.
10.11 Entire Agreement. This Agreement, including the Exhibits, contains the
entire agreement between the parties pertaining to the subject matter hereof and
fully supersedes all prior written or oral agreements and understandings between
the parties pertaining to such subject matter.
10.12 Further Assurances. Each party agrees that it will without further
consideration execute and deliver such other documents and take such other
action, whether prior or subsequent to Closing, as may be reasonably requested
by the other party to consummate more effectively the purposes or subject matter
of this Agreement. Without limiting the generality of the foregoing, Purchaser
shall, if requested by Seller, execute acknowledgments of receipt with respect
to any materials delivered by Seller to Purchaser with respect to the Property.
The provisions of this Section 10.12 shall survive Closing.
10.13 Counterparts. This Agreement may be executed in counterparts, and all such
executed counterparts shall constitute the same agreement. It shall be necessary
to account for only one such counterpart in proving this Agreement.
10.14 Severability. If any provision of this Agreement is determined by a court
of competent jurisdiction to be invalid or unenforceable, the remainder of this
Agreement shall nonetheless remain in full force and effect.
10.15 Applicable Law. THIS AGREEMENT IS PERFORMABLE IN THE STATE IN WHICH THE
PROPERTY IS LOCATED AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE SUBSTANTIVE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS
OF SUCH STATE. SELLER AND PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE IN WHICH THE
PROPERTY IS LOCATED IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN A STATE OR FEDERAL COURT
SITTING IN THE STATE IN WHICH THE PROPERTY IS LOCATED. PURCHASER AND SELLER
AGREE THAT THE PROVISIONS OF THIS SECTION 10.15 SHALL SURVIVE THE CLOSING OF THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT.
10.16 No Third Party Beneficiary. The provisions of this Agreement and of the
documents to be executed and delivered at Closing are and will be for the
benefit of Seller and Purchaser only and are not for the benefit of any third
party, and accordingly, no third party shall have the right to enforce the
provisions of this Agreement or of the documents to be executed and delivered at
Closing.
10.17 Exhibits and Schedules. The following schedules or exhibits attached
hereto shall be deemed to be an integral part of this Agreement:
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<PAGE> 19
(a) Exhibit A - Legal Description of the Land
(b) Exhibit B - Matters Affecting Title
10.18 Captions. The section headings appearing in this Agreement are for
convenience of reference only and are not intended, to any extent and for any
purpose, to limit or define the text of any section or any subsection hereof.
10.19 Construction. The parties acknowledge that the parties and their counsel
have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
10.20 Termination of Agreement. It is understood and agreed that if either
Purchaser or Seller terminates this Agreement pursuant to a right of termination
granted hereunder, such termination shall operate to relieve Seller and
Purchaser from all obligations under this Agreement, except for such obligations
as are specifically stated herein to survive the termination of this Agreement.
10.21 Survival. The provisions of the following Sections of this Agreement shall
survive Closing and shall not be merged into the execution and delivery of the
Deed: 3.1; 4.2(j); 4.4; 5.3; 5.6; 8.1; 9.3; 10.1; 10.8; 10.12; and 10.15.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the Effective Date.
SELLER:
EML Associates, a joint Venture
in the form of a New York General Partnership
By: Lend Lease Real Estate Investment, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
PURCHASER
- ---------------------------------
Glenn E. Wyatt, Jr.
-18-
<PAGE> 20
SELLER:
EML Associates, a New York general partnership
By: ML/EQ REAL ESTATE PORTFOLIO, LP, its
Managing Venturer
By: EREIM MANAGERS CORP., its
Managing General Partner
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
-19-
<PAGE> 21
Exhibit A
LEGAL DESCRIPTION OF THE LAND
ALL THAT CERTAIN TRACT or parcel of land lying and being in Land Lot 371
of the 18th District, Douglas County, Georgia, and being more particularly
described as follows:
BEGINNING at an iron pin set at the point where the southwesterly
right-of-way line of Thornton Road (State Route No. 6) (200-foot right-of-way)
intersects the westerly right-of-way line of Westfork Drive (80-foot
right-of-way); run thence along said westerly right-of-way line of Westfork
Drive, South 26 degrees 4 minutes 9 seconds West a distance of 450.00 feet to an
iron pin set; thence leaving said westerly right-of-way line of Westfork Drive
and running North 63 degrees 59 minutes 22 seconds West a distance of 630.00
feet to an iron pin set; run thence North 26 degrees 4 minutes 9 seconds East a
distance of 450.00 feet to a point on said southwesterly right-of-way line of
Thornton Road; run thence along said southwesterly right-of-way line of Thornton
Road South 63 degrees 59 minutes 22 seconds East a distance of 630.00 feet to an
iron pin set on said westerly right-of-way line of Westfork Drive and the POINT
OF BEGINNING.
TOGETHER WITH the rights and benefits granted in Declaration of Protective
Covenants for Westfork by Hooker Atlanta (6) Corporation and Nona Blanton
Barnes, dated September 3, 1976, recorded in Deed Book 305, Page 756, Douglas
County, Georgia records; as amended by First Supplementary Declaration of
Protective Covenants for Westfork by Hooker Atlanta (6) Corporation and Nona
Blanton Barnes, dated June 29, 1979, recorded in Deed Book 354, Page 201,
aforesaid records; as amended by Second Supplementary Declaration of Protective
Covenants for Westfork by Hooker Atlanta (6) Corporation and Nona Barnes, Inc.
d/b/a Hooker/Barnes (6), dated September 28, 1983, recorded in Deed Book 425,
Page 773, aforesaid records; and as amended by Third Supplementary Declaration
of Protective Covenants for Westfork by Hooker Atlanta (6) and Nona Barnes,
Inc., dated December 4, 1984, recorded in Deed Book 461, Page 449, aforesaid
records.
TOGETHER WITH those rights and easements granted in that Drainage and
Utility Easement Agreement, dated July 8, 1988, between Anderson Partners
(Southside/Corporate Lakes), L.P. and Gene Anderson together d/b/a Southside
Corporate Lakes AA and Hooker Projects, Inc., recorded in Deed Book 611, Page
200, Douglas County, Georgia Records and in that Drainage and Utility Easement
Agreement, dated as of December _____, 1988 between Anderson Partners
(Southside/Corporate Lakes), L.P., Auerbach Associates, Ltd. and Gene Anderson,
together d/b/a Southside/Corporate Lakes AA and Westfork Development Company,
recorded or to be recorded in the Office of the Clerk of the Superior Court of
Douglas County, Georgia.
<PAGE> 22
Exhibit B
MATTERS AFFECTING TITLE
1. Taxes for 1998 and subsequent years, not yet due or payable.
2. Declaration of Protective Covenants for Westfork by Hooker
Atlanta (6) Corporation and Nona Blanton Barnes, as Executrix and
Sole Trustee under the Will of LeRoy William Barnes (a/k/a Roy W.
Barnes), deceased, dated September 31 1976, recorded in Deed Book
305, Page 756, aforesaid records; as amended by First
Supplementary Declaration of Protective Covenants, dated June 29,
1979, recorded in Deed Book 354, page 201, aforesaid records; as
further amended by Second Supplementary Declaration of Protective
Covenants for Westfork, dated September 28, 1983, recorded in
Deed Book 425, page 773, aforesaid records; as further amended by
Third Supplementary Declaration of Protective Covenants for
Westfork, dated December 4, 1984, recorded in Deed Book 461, page
449, Douglas County Records.
3. Easements to Georgia Power Company as follows:
(a) From Hooker Atlanta (6) Corporation and Nona Barnes, Inc., dated
October 23, 1984, recorded in Deed Book 503, page 544, aforesaid
records.
(b) From Hooker Atlanta (6) Corp. and Nona Barnes, Inc., dated January
28, 1988, filed June 21, 1988, recorded at Deed Book 608, page 146,
Douglas County Records.
(c) From Anderson Partners (Southside/Corporate Lakes), L.P. and Gene
Anderson, dated August 1988; unrecorded.
4. A Right-of-Way Deed from Neva T. Nelson Neal, dated December 18, 1961,
recorded at Deed Book 37, page 498, Douglas County Records.
5. Conveyance of Access Rights from Hooker/Barnes (6), Hooker Atlanta (6)
Corporation and Nona Barnes, Inc. to Department of Transportation, State
of Georgia, dated January 11, 1985, as follows:
(a) Recorded in Deed Book 473, page 109, aforesaid records.
(b) Recorded in Deed Book 473, page 111, aforesaid records.
6. Drainage and Utility Easement Agreement between Anderson Partners
(Southside/Corporate Lakes) L.P., and Gene Anderson, together d/b/a
Southside/Corporate Lakes AA, dated July 8, 1988, filed July 11, 1988,
recorded at Deed Book 611, Page 200, Douglas County Records.
-1-
<PAGE> 23
7. Drainage and Utility Easement dated as of December ____, 1988 between
Anderson Partners (Southside/Corporate Lakes), L.P., Auerbach Associates,
Ltd. and Gene Anderson, as tenants-in-common, together d/b/a
Southside/Corporate Lakes AA, and Westfork Development Company recorded or
to be recorded in the Office of the Clerk of the Superior Court of Douglas
County, Georgia.
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ML/EQ REAL ESTATE PORTFOLIO LP FOR THE PERIOD ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,966,295
<SECURITIES> 0
<RECEIVABLES> 4,965,097
<ALLOWANCES> 686,585
<INVENTORY> 0
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0
0
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</TABLE>
