<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of
- ----- the Securities Exchange Act of 1934 [Fee required]
For the fiscal year ended: December 31, 1995
or
Transition Report Pursuant to Section 13 or 15(d) of
- ----- the Securities Exchange Act of 1934 [No fee required]
For the transition period from to
Commission file no.: 0-16285
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
--------------------------------------------------------------------
(Exact name of registrant as specified in its Partnership Agreement)
MARYLAND 52-1490861
(State of Organization) (IRS Employer Identification Number)
111 South Calvert Street
Baltimore, Maryland 21202
(Address of principal executive offices) (Zip code)
Registrant's phone number, including area code: (410) 539-0000
Securities registered pursuant to Section 12(b) of the Act: none
Securities registered pursuant to Section 12(g) of the Act:
Units of Assignee Limited Partnership Interests
(Title of Class)
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[X]
Portions of the Registrant's Prospectus dated March 25, 1987 (included in
Registration Statement No. 33-11086) are incorporated by reference into
Parts II and III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Mid-Atlantic Centers Limited Partnership (the "Partnership") was
organized as a limited partnership under the Maryland Revised Uniform
Limited Partnership Act on December 16, 1986. The Partnership was
formed to acquire, hold, lease and ultimately sell a portfolio of
community and neighborhood shopping center properties. The General
Partners of the Partnership are FW Realty Limited Partnership, a limited
partnership organized under the Uniform Limited Partnership Act of the
District of Columbia, and Realty Capital IV Limited Partnership, a
limited partnership organized under the Maryland Revised Uniform Limited
Partnership Act (collectively, the "General Partners").
The Partnership now owns a real estate portfolio of ten shopping center
properties in six states having sold Orchard Square Shopping Center on
December 29, 1995. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations of this report for a
discussion of the sale of Orchard Square Shopping Center. The shopping
centers range in size from approximately 47,000 leasable square feet to
approximately 328,000 leasable square feet, with an aggregate for all
shopping centers of approximately 1,034,000 leasable square feet as of
December 31, 1995. All of the shopping centers owned by the Partnership
were purchased from unaffiliated sellers. See Item 2. Properties of
this report for a description of each shopping center property. Such
descriptions are incorporated herein by reference.
The Partnership's investments in the shopping center properties are
subject to such risks as (i) adverse changes in general economic
conditions and adverse local conditions such as competitive over-
building or decreases in employment or population, (ii) the uncertainty
of lease renewals and possible inability to attract tenants to available
space, (iii) tenant nonperformance of lease obligations, (iv)
uncertainty of cash flow from operations, (v) adverse changes in the
investment climate for real estate, including adverse changes in the
availability of mortgage loans, (vi) adverse changes in zoning, tax or
other local or federal governmental rules or regulations and (vii) other
factors over which the Partnership may have little or no control and
which cannot be predicted.
The Partnership's shopping center properties compete for tenants and
consumer traffic with neighborhood and community shopping centers,
individual retail establishments and shopping malls. The Partnership's
properties have faced increased competition for tenants among shopping
center developers, owners and operators as well as other retail
establishments. Tenants consider many factors when evaluating potential
retail space, including location, competition, rental rates, tenant fit-
up allowances, lease terms, access, pedestrian and vehicular traffic,
<PAGE> 3
parking, quality of construction, tenant mix within the center and
management. The Partnership faces the risk that tenants may vacate
space prior to lease expirations or that the Partnership may not be
successful in obtaining renewals of expiring leases or new tenants for
available space. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations of this report for a
discussion of the operations of the shopping centers.
The Partnership does not have any employees. The General Partners or
their affiliates provide, or contract with third parties to provide,
services required for Partnership operation and administration. A
description of the services provided to the Partnership by the General
Partners or their affiliates is incorporated by reference from Item 13.
Certain Relationships and Related Transactions of this report.
ITEM 2. PROPERTIES
The following discussion should be read in conjunction with Tables I
through IV. Table I sets forth the average annual net rents and range
of net rental rates per square foot for each of the shopping centers.
Table II sets forth information relating to lease expirations during
1996. Table III provides information regarding tenants leasing 10% or
more of the space in each shopping center as of December 31, 1995.
Table IV sets forth information relating to estimated real estate taxes
payable in 1996 for each shopping center.
In order to provide certain information required by retirement account
investors, the current market values "as is" of the leased fee estates of
the ten shopping centers owned by the Partnership were appraised as of
December 31, 1995 by an independent MAI appraiser. The December 31, 1995
appraised values of the shopping centers described in the Restricted
Appraisal Report filed as an exhibit to this report are based upon the
projected net operating income approach to valuation. The Restricted
Appraisal Report is the result of a limited appraisal process and is
subject to the limiting conditions and assumptions stated therein.
An appraisal is only an estimate of current value and should not be
relied upon as reflecting realizable value. The value of real estate is
typically driven by occupancy and yield expectations, measured in the
form of capitalization rates. Capitalization rates depend on
anticipated growth or decline in income and the degree of risk
perceived. The income approach is a procedure which converts
anticipated income to be derived from the Partnership's ownership in the
shopping centers into a value estimate. In estimating the appraised
value of the shopping centers under the income approach, projections of
the stabilized level of net operating income (earnings before
depreciation, interest and income taxes) were developed by the
appraiser. The projected net operating income was then capitalized into
an estimate of fair value utilizing overall rates of return selected by
the appraiser. The appraiser also utilized a discounted cash flow
analysis whereby the anticipated cash flows were discounted at a yield
<PAGE> 4
rate selected by the appraiser to determine estimated present value.
The overall rates of return and yield rates used in such calculations
are determined by the appraiser based on rates derived from selected
current sales of comparable properties as well as investor surveys, and
are therefore deemed by the appraiser to be reflective of current
investor expectations. The appraised value of the Partnership's
shopping centers should not be relied upon as an indication of
realizable value at the present time or at any time in the future.
Furthermore, the methods and assumptions used by the appraiser in
preparing the appraisal report are those that the appraiser, in the
professional judgment of the appraiser, concluded were appropriate.
There is no assurance that such assumptions will materialize or that
other or different methods or assumptions that would result in lower
values might not be appropriate.
The intent of the Partnership has been to hold, maintain, and increase
the value of its shopping centers until market conditions improve. The
Partnership has begun to seek opportunities to sell Partnership
properties in markets where the General Partners believe a sale would be
appropriate. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 13. Certain
Relationships and Related Transactions of this Annual Report on Form 10-
K regarding current negotiation of a possible sale of the Partnership's
assets and liquidation of the Partnership. The Partnership sold one of
its properties, Orchard Square shopping center, on December 29, 1995.
In addition, in the second quarter of 1995, the Partnership entered into
brokerage agreements to sell two of its centers, Highlandtown Village
and Holiday. The brokerage agreement for Highlandtown Village expired
on September 30, 1995. No acceptable offers were received for that
property. In February 1996, the Partnership negotiated a contract to
sell Holiday to an unrelated third party for a price of $1,200,000. The
contract is subject to material contingencies and thus there can be no
assurance a sale transaction will occur.
The following table sets forth the appraised value (free and clear of
all mortgages or other financing secured by the shopping centers) of
each shopping center owned by the Partnership as of December 31, 1995:
<TABLE>
<CAPTION>
APPRAISED VALUE
PROPERTY AT 12/31/95
<S> <C>
Woodlawn Village $ 2,375,000
Lynnwood Place 6,950,000
Highlandtown Village 5,000,000
Jackson Heights 4,700,000
Holiday 1,200,000
Cloister 2,700,000
Edgewood 2,470,000
Tarrytown Mall 6,100,000
Berkeley Square 3,075,000
Quality Center 4,500,000
Total $39,070,000
</TABLE>
<PAGE> 5
The resulting aggregate fair value of the Partnership's shopping centers
as of December 31, 1995, less the Partnership's mortgages and after
certain other adjustments resulted in a valuation of the Partnership's
net assets at approximately $13,052,000. Based on 1,200,000 Assignee
Limited Partnership Units (the "Units") outstanding, this equates to
approximately $10.88 per Unit.
The aggregate fair value of the Partnership's shopping centers as of
November 30, 1994, less the Partnership's mortgages and other
adjustments resulted in a valuation of the Partnership's net assets at
approximately $13,320,000. Based on 1,200,000 Assignee Limited
Partnership Units (the "Units") outstanding, this equated to
approximately $11.10 per Unit. The 1994 appraisal was based on property
information provided to the appraiser as of November 30, 1994 with
retroactive effect given for subsequent developments related to
Tarrytown Mall and Quality Center which occurred in 1995. Tarrytown
Mall's appraisal was adjusted downward to reflect termination of lease
negotiations with a prospective tenant who had executed a letter of
intent to lease approximately 95,000 square feet. Quality Center's
appraisal was adjusted downward to reflect termination of a contract of
sale for the center.
The $.22 per Unit decrease in net asset value per Unit from November 30,
1994 to December 31, 1995 was primarily attributable to declines in the
values of Quality Center and Tarrytown Mall, offset in part by increases
in the values of Jackson Heights and Lynnwood Place. For 1995, the
Partnership's net equity in assets related to Tarrytown Mall is
effectively treated as zero, reflecting the difficulties encountered in
attempting to lease the vacant space at that center. For purposes of
the per Unit calculation for 1995, the value of the sum of all assets
related to Tarrytown Mall is equal to the balance of the outstanding
mortgage debt and accrued interest on the property. The mortgage debt
is nonrecourse to the Partnership. The decline in value of Tarrytown
Mall is a result of existing vacancies, predominantly the loss of
Wholesale Depot, and competitive conditions in the Rocky Mount, North
Carolina market, including the construction of new Target and K-Mart
stores and available competitive space formerly occupied by K-Mart. The
decline in the value of Quality Center reflects the decline in the
projected net operating income from that center.
In the fourth quarter of 1995, the Partnership wrote down the net book
value of assets by $2,606,156 related to Tarrytown Mall. In the fourth
quarter of 1994, the Partnership wrote down assets by $1,587,746 related
to Tarrytown Mall and Holiday. See the discussions under the caption
Liquidity and Capital Resources incorporated by reference from Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations and under Note G of Notes to Financial Statements
incorporated by reference from Item 8. Financial Statements and
Supplementary Data of this Annual Report on Form 10-K.
Depreciation of the shopping centers is computed using the straight-
line
<PAGE> 6
method based on the estimated useful lives of the respective assets.
The General Partners believe the shopping centers are adequately
insured.
The Partnership's shopping center portfolio, representing ten centers
with approximately 1,034,000 leasable square feet (after the sale of
Orchard Square on December 29, 1995), was 84% leased as of December 31,
1995. As of December 31, 1994, the portfolio, which represented eleven
centers with approximately 1,120,000 leasable square feet, was 84%
leased.
WOODLAWN VILLAGE SHOPPING CENTER
In December 1986, the Partnership purchased Woodlawn Village Shopping
Center ("Woodlawn Village"), a 49,800 leasable square-foot shopping
center anchored by a Food Lion grocery store and a Revco drugstore.
Woodlawn Village is located in Fredericksburg, Virginia. Woodlawn
Village was approximately 93% leased as of December 31, 1995 and 1994.
The Partnership has entered into an agreement to expand the Food Lion
store at Woodlawn Village from 25,000 to 32,744 square feet. Upon
completion, the expansion would add 4,444 square feet to the center and
convert 3,300 square feet of in-line space to Food Lion use. A
discussion of the Food Lion expansion is incorporated by reference from
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LYNNWOOD PLACE SHOPPING CENTER
In July 1987, the Partnership purchased Lynnwood Place Shopping Center
("Lynnwood Place"), a 96,666 leasable square-foot shopping center
anchored by a Kroger grocery store. Lynnwood Place is located in
Jackson, Tennessee. As of December 31, 1995, Lynnwood Place was 98%
leased, a decrease from 100% as of December 31, 1994.
HIGHLANDTOWN VILLAGE SHOPPING CENTER
In September 1987, the Partnership purchased Highlandtown Village
Shopping Center ("Highlandtown Village"), a 56,200 leasable square-foot
shopping center anchored by a Santoni's grocery store and a Rite-Aid
drugstore. Highlandtown Village is located in Baltimore, Maryland.
Highlandtown Village was 100% leased as of December 31, 1995, an
increase from approximately 98% as of December 31, 1994.
In 1995, the Partnership entered into a six month brokerage agreement to
sell Highlandtown Village. The agreement expired on September 30, 1995.
No acceptable offers were received for the property.
JACKSON HEIGHTS PLAZA SHOPPING CENTER
In September 1987, the Partnership purchased Jackson Heights Plaza
Shopping Center ("Jackson Heights"), a 155,878 leasable square-foot
shopping center. The larger tenants at Jackson Heights include a health
spa, a Carmike Theater, Badcock Furniture, Goodyear and Dollar General.
Jackson Heights is located in Murfreesboro, Tennessee. Jackson Heights
<PAGE> 7
was approximately 99% leased as of December 31, 1995 and 1994.
HOLIDAY SHOPPING CENTER
In October 1987, the Partnership purchased Holiday Shopping Center
("Holiday"), a 82,185 leasable square-foot shopping center anchored by a
Family Dollar discount store. Holiday is located in Collinsville,
Virginia. As of December 31, 1995, Holiday was approximately 90%
leased, an increase from approximately 84% as of December 31, 1994.
In 1995, the Partnership entered into a brokerage agreement to sell
Holiday. In February 1996, the Partnership negotiated a contract to
sell Holiday to an unrelated third party for a price of $1,200,000. The
contract is subject to material contingencies and thus there can be no
assurance a sale transaction will occur.
CLOISTER SHOPPING CENTER
In December 1987, the Partnership purchased Cloister Shopping Center
("Cloister"), a 53,610 leasable square-foot shopping center anchored by
a White Shield Drugs and a Family Dollar discount store. Cloister is
located in Ephrata, Pennsylvania. As of December 31, 1995, Cloister was
approximately 90% leased, a decrease from 100% as of December 31, 1994.
The 10% decline primarily resulted from the loss of three tenants which
leased an aggregate of 5,329 square feet.
EDGEWOOD PLAZA SHOPPING CENTER
In April 1988, the Partnership purchased Edgewood Plaza Shopping Center
("Edgewood") a 47,112 leasable square-foot shopping center anchored by a
Santoni's grocery store and a Rite-Aid drugstore. Edgewood is located
in Harford County, Maryland. Edgewood was 100% leased as of December
31, 1995 and 1994.
On September 20, 1995, the Partnership obtained a loan in the amount of
$1,400,000 secured by a mortgage on Edgewood. Approximately $450,000
was placed in escrow for the capital improvement program now underway,
which includes a new facade and parking lot resurfacing. A description
of the Edgewood Plaza improvements and financing are incorporated by
reference from Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
TARRYTOWN MALL SHOPPING CENTER
In September 1988, the Partnership purchased Tarrytown Mall Shopping
Center ("Tarrytown Mall"), a 328,081 leasable square-foot enclosed mall
anchored by Montgomery Ward and Goody's Family Clothing. Tarrytown Mall
is located in Rocky Mount, North Carolina. As of December 31, 1995,
Tarrytown Mall was approximately 64% leased, a decrease from
approximately 66% as of December 31, 1994.
BERKELEY SQUARE SHOPPING CENTER
In October 1988, the Partnership purchased Berkeley Square Shopping
Center ("Berkeley Square"), a 101,858 leasable square-foot shopping
center. The larger tenants at Berkeley Square include Dollar General,
<PAGE> 8
Advanced Auto, Educational Wonderland and a bingo emporium. Berkeley
Square is located in Goose Creek, South Carolina. As of December 31,
1995, Berkeley Square was approximately 95% leased, an increase from
approximately 83% as of December 31, 1994. The 12% increase primarily
resulted from the addition of three tenants leasing an aggregate of
13,456 square feet.
In November 1995, the Partnership completed the sale of a pad site at
Berkeley Square to an existing tenant. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations
of this report for information regarding the sale of the pad site.
QUALITY CENTER SHOPPING CENTER
In January 1989, the Partnership purchased Quality Center Shopping
Center ("Quality Center"), a 62,234 leasable square-foot shopping
center. The largest tenant at Quality Center is a Mikasa china outlet.
Quality Center is located in Lancaster, Pennsylvania. Quality Center
was approximately 70% leased as of December 31, 1995, an increase from
59% as of December 31, 1994. The 11% increase primarily resulted from
the addition of two tenants leasing an aggregate of 12,482 square feet
which was partially offset by the loss of one tenant which leased 5,885
square feet.
The Partnership is attempting to reposition Quality Center from a
factory outlet center to a neighborhood and community convenience
center.
ORCHARD SQUARE SHOPPING CENTER
In December 1987, the Partnership purchased Orchard Square Shopping
Center ("Orchard Square"), an 85,940 leasable square-foot shopping
center anchored by a Big B Drug pharmacy. Orchard Square is located in
Cobb County, Georgia. The Partnership sold Orchard Square to an
unrelated third party for $5,250,000 on December 29, 1995. See Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations of this report for information regarding the sale of
Orchard Square.
<PAGE> 9
TABLE I. AVERAGE ANNUAL NET RENTS AND RANGE OF NET RENTAL RATES PER
SQUARE FOOT
<TABLE>
<CAPTION>
AVERAGE ANNUAL RANGE OF
NET RENT (1) NET RENTAL RATES(2)
CENTER (PER SQUARE FOOT) (PER SQUARE FOOT)
<S> <C> <C>
Woodlawn Village $6.12 $5.60 to $9.67
Lynnwood Place 8.34 6.16 to 14.89
Highlandtown Village 10.36 7.85 to 19.45
Jackson Heights 4.35 .80 to 10.58
Holiday 3.01 1.27 to 9.00
Cloister 7.85 3.56 to 17.14
Edgewood 5.80 3.84 to 14.04
Tarrytown Mall 4.50 1.96 to 20.86
Berkeley Square 5.25 3.04 to 11.16
Quality Center 11.20 9.00 to 25.64
</TABLE>
(1) Average annual net rent is calculated based on the shopping center's
aggregate annual net rent (prior to assessments for pass-throughs)
for leases in place as of December 31, 1995 divided by the total
leased square feet for the shopping center as of that date.
(2) For purposes of this table net rental rates do not include net
rental rates for kiosks.
TABLE II. SCHEDULE OF LEASES EXPIRING IN 1996 BY SHOPPING CENTER
<TABLE>
<CAPTION>
TOTAL SQUARE NUMBER OF SQUARE FEET OF 1995 TOTAL ANNUAL RENT OF
FOOTAGE TENANTS WITH LEASES EXPIRING RENT OF LEASES EXPIRING
CENTER OF CENTER LEASES EXPIRING AS A % OF TOTAL CENTER(1) AS A % OF TOTAL
<S> <C> <C> <C> <C> <C>
Woodlawn 49,800 1 6.02% $285,351 6.50%
Lynnwood 96,666 9 19.48 791,258 24.32
Highlandtown 56,200 1 3.56 566,807 3.89
Jackson Heights 155,878 12 21.21 662,011 25.84
Holiday 82,185 12 37.52 184,414 52.87
Cloister 53,610 7 21.60 401,509 23.28
Edgewood Plaza 47,112 2 9.17 269,192 12.89
Tarrytown Mall 328,081 25 15.40 1,026,656 28.14
Berkeley Square 101,858 6 14.13 469,429 14.96
Quality Center 62,234 3 5.35 432,160 20.96
</TABLE>
(1) Total rent for purposes of this table does not include tenant
reimbursement income or rental income accrued for rent adjustments
related to rent abatements and scheduled rent increases.
<PAGE> 10
TABLE III. SCHEDULE OF TENANTS LEASING 10% OR MORE OF THE SPACE IN
EACH SHOPPING CENTER AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUAL
TOTAL LEASABLE RENT PER LEASE LEASE
SQUARE SPACE AS OF SQUARE EXPIRATION RENEWAL
FEET 12/31/95 FOOT DATE OPTIONS
<S> <C> <C> <C> <C> <C>
WOODLAWN VILLAGE
Food Lion-grocery store 25,000 50% $5.75 June, 2006 4 5-year (1)
Revco-pharmacy/drugstore 9,100 18% 6.75 June, 2001 4 5-year (1)
LYNNWOOD PLACE
Kroger-grocery store 49,296 51% 6.94 August, 2006 6 5-year (1)
HIGHLANDTOWN VILLAGE
Santoni's-grocery store 25,500 45% 7.85 July, 2007 4 5-year (2)
Rite-Aid-pharmacy/drugstore 11,200 20% 10.15 July, 2007 4 5-year (2)
JACKSON HEIGHTS
Southeast Spa-health spa 20,487 13% 2.51 March, 1999 none
Badcock Furniture-furniture 16,534 11% 3.25 February, 1999 2 5-year (2)
Carmike Theater - movie theater 17,110 11% 2.87(3) May, 2015 none
HOLIDAY
Family Dollar-discount store 9,948 12% 1.27 December, 1997 2 5-year (2)
Southwest Mills-floor coverings 9,627 12% 1.75 September, 1996 1 2-year (2)
CLOISTER
Family Dollar-discount store 6,890 13% 3.56 December, 2000 4 5-year (2)
Video Vibes-video rental store 6,330 12% 7.25 September, 1997 1 5-year (4)
EDGEWOOD
Santoni's-grocery store 23,832 51% 3.84 February, 2008 none
Rite Aid-pharmacy/drugstore 6,400 14% 6.50 July, 1999 4 5-year (2)
TARRYTOWN MALL
Montgomery Ward-department store 74,069 23% 1.96 October, 2003 3 5-year (1)
BERKELEY SQUARE
Toney & Coates Bingo
-entertainment 13,558 13% 5.75 June, 1998 none
QUALITY CENTER
Mikasa-china and crystal outlet 11,120 18% 10.54 July, 1997 none
Oriental Rugs - rug outlet 6,715 11% 9.00 November, 1998 1 3-year and
1 4-year (2)
</TABLE>
(1) Renewal options with rent at identical rate per square foot as original
lease.
(2) Renewal options with rent at escalating rates per square foot.
(3) Carmike Theater leases two spaces at different annual rents. The
annual rent per square foot for purposes of this schedule is an
average of the two annual rents.
(4) Renewal option with rent increase of 5%.
<PAGE> 11
TABLE IV. SCHEDULE OF ESTIMATED REAL ESTATE TAXES PAYABLE IN 1996
<TABLE>
<S> <C>
Woodlawn Village $ 36,800
Lynnwood Place 85,000
Highlandtown Village 126,800
Jackson Heights 98,000
Holiday 10,000
Cloister 60,400
Edgewood 20,500
Tarrytown Mall 74,600
Berkeley Square 46,600
Quality Center 61,100
$619,800
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not party to any material pending legal proceeding.
The Partnership is party to ordinary routine litigation incidental to
the Partnership's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of investors (the "Limited
Partners") holding Units during 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF ASSIGNEE LIMITED
PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
There is no trading market for the Units and there is no present
expectation that one will develop. Consequently, Limited Partners may
not be able to liquidate their investment in the event of an emergency
or for any other reason. Further, the transfer of Units is subject to
certain limitations. See Page 66 of the Partnership's Prospectus
dated March 25, 1987 incorporated by reference herein, for a
discussion of the restrictions on transfer of the Units. See Item 7.
<PAGE> 12
Management's Discussion and Analysis of Financial Condition and
Results of Operations and Item 13. Certain Relationships and Related
Transactions of this Annual Report on Form 10-K regarding current
negotiation of a possible sale of the Partnership's assets and
liquidation of the Partnership.
As of December 31, 1995, there were approximately 2,740 holders of
1,200,000 Units of the Partnership.
One of the objectives of the Partnership is to generate cash to be
distributed to Limited Partners on a quarterly basis. No cash
distributions have been made to Limited Partners since 1990. A
discussion of cash flow is incorporated by reference from Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations of this Annual Report on Form 10-K. See Pages
59 through 62 of the Prospectus dated March 25, 1987 incorporated by
reference herein for a discussion of the manner in which distributions
of cash flow, sale, or refinancing proceeds and allocations of the net
income or net loss from operations and gain or loss from a sale or
refinancing are made by the Partnership.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information relating
to the Partnership's financial position and operating results. This
information should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations and the
Financial Statements and Supplementary Data which are included in
Items 7 and 8, respectively, of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
For the Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Operating Results: (1)
Total income $7,426,069 $7,907,735 $7,013,668 $6,907,149 $6,962,218
Loss from rental operations (3,313,097) (1,727,918) (724,098) (1,191,145) (1,268,838)
Loss from sale of center (2,271,249) - - - -
Extraordinary gain related to
forgiveness of debt 1,602,902 - - 510,465 -
Net loss (3,778,465) (1,717,157) (691,862) (719,768) (1,253,706)
Financial Position, End of Year: (1)
Investment in real estate
held for lease, net 39,787,906 50,532,803 53,530,821 53,064,528 54,429,950
Total assets 43,564,545 53,218,234 55,764,988 55,535,253 56,753,496
Long-term debt, including
current maturities 29,130,611 35,285,891 34,528,736 35,004,686 35,507,396
Per Assignee Limited
Partnership Unit:
Net loss (1) (3.57) (1.42) (0.57) (0.59) (1.03)
Cash distributions - - - - -
</TABLE>
(1) - The 1995 and 1994 operating results and financial position as of December
31, 1995 and 1994 reflect the effect of write-downs of assets totalling
$2,606,156 in 1995 related to Tarrytown Mall and $1,587,746 in 1994
related to Tarrytown Mall and Holiday. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations for a discussion of the write-downs of assets.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Partnership completed its public offering of Units on November 11,
1987. The Partnership accepted subscriptions for 1,200,000 Units,
representing capital contributions from Limited Partners of
approximately $29,997,000. The capital contributions from Limited
Partners have been fully invested by the Partnership.
The Partnership's financial statements are prepared based on the
<PAGE> 13
accrual method of accounting. The Partnership's rental income from
its shopping center properties consists of base rents from tenants
occupying space in each shopping center. In addition, certain leases
provide for additional rent computed on the basis of a percentage of
gross sales in excess of specified levels. In some cases, leases
provide for rent abatements and scheduled rent increases over the life
of the lease. To the extent a lease provides for rent abatements or
adjustments, the Partnership, in accordance with generally accepted
accounting principles, recognizes rental income on the basis of equal
monthly payments over the term of such lease. Market conditions have
dictated offering a wide variety of concessions to prospective
tenants, which most frequently include a combination of free rent and
reduced rental rate.
The Partnership wrote off tenant rent receivables and charged the
allowance for doubtful accounts in 1993, 1994 and 1995 in the amounts
of $182,069, $261,363, and $198,993 respectively. During the year
ended December 31, 1994, the Partnership decreased its year-end
allowance for doubtful accounts by $66,809 to $353,507. During the
year ended December 31, 1995, the Partnership decreased its year-end
allowance for doubtful accounts by $26,834 to $326,673. The allowance
for doubtful accounts represents an allowance for tenant rent
receivables that may become uncollectible in the future. The
Partnership makes adjustments quarterly to the allowance for doubtful
accounts based its analysis of tenant rent receivables.
As of December 31, 1995, tenant rent receivables prior to the
allowance for doubtful accounts totaled $1,117,704 of which amount
$313,259 represented receivables required to be accrued in accordance
with applicable accounting principles to reflect scheduled rent
increases over the terms of the applicable leases and $804,445
represented the balance. As of December 31, 1994, comparative tenant
rent receivables totaled $1,734,428 of which amount $682,399
represented receivables required to be accrued and $1,052,029
represented the balance. The decline in tenant rent receivables from
December 31, 1994 to December 31, 1995 can primarily be attributed to
declines at Orchard Square as a result of the sale of that center and
at Tarrytown Mall due to collection of sums due from Wholesale Depot.
Tenant reimbursement income includes payments made under leases
representing payment of a tenant's agreed share of real estate taxes,
insurance, utility charges and common area maintenance expenses. With
the exception of Holiday, Berkeley Square and Jackson Heights, a
majority of the tenant leases at the Partnership's shopping centers
provide for reimbursement by tenants for some or all such expenses.
In most cases, tenant reimbursement payments are payable monthly,
although in some cases such payments are to be made annually.
Other expenses include the balance of utility expenses, leasing
expenses (other than commissions) and miscellaneous expenses such as
legal and accounting fees and administrative and travel expenses.
<PAGE> 14
The Partnership's shopping centers were held subject to mortgages with
principal balances as of December 31, 1993, 1994 and 1995 as described
in the following chart:
MORTGAGE LOANS SECURED BY SHOPPING CENTERS
<TABLE>
<CAPTION>
DESCRIPTION OF FACE
SHOPPING CENTER INTEREST MATURITY AMOUNT OF BALANCE BALANCE BALANCE
MORTGAGES RATE DATE MORTGAGES 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C> <C>
First mortgage
on Woodlawn Village 11.5% 12/01/96 $1,950,000 $1,869,947 $1,852,380 $1,832,675
First mortgage
on Lynnwood Place 9.00% 7/10/96 6,600,000 6,450,854 6,396,988 6,320,814
First mortgage
on Highlandtown 10.125% 12/21/97 3,275,000 3,247,272 3,213,952 3,177,097
First mortgage
on Jackson Heights 10.5% 9/12/98 2,450,000 2,122,052 2,088,413 2,051,068
First mortgage 6.375% at
on Holiday 12/31/95(1) 3/01/99 900,000 407,255 328,015 257,922
First mortgage 9.75% at
on Cloister 12/31/95(2) 6/01/98 1,750,000 1,595,667 1,545,237 1,494,717
First priority mortgage
on Orchard Square 6.0% - (4) 6,000,000 5,911,501 5,832,229 - (4)
First priority mortgage
on Berkeley Square 10.13% 12/31/97 1,975,000 1,857,438 1,826,762 1,454,215
Second priority mortgage
on Berkeley Square 7.0% 10/02/95 695,500 695,500 695,500 - (5)
First trust mortgage 10.0% at
on Tarrytown 12/31/95(3) 1/01/99 2,640,940 - 2,266,940 1,923,940
Second trust mortgage
on Tarrytown Mall 8.0% 1/01/99 6,500,000 6,500,000 5,384,997 5,384,997
First mortgage
on Edgewood Plaza 8.625% 9/19/00 1,400,000 - - 1,397,333
First mortgage 2/01/97
on Quality Center 10.625% (6) 4,150,000 3,871,250 3,854,478 3,835,833
Totals $40,286,440 $34,528,736 $35,285,891 $29,130,611
</TABLE>
(1) - Interest rate at 75.0% of the prime rate adjusted quarterly, with
a 6% floor.
(2) - Interest rate at the prime rate plus 1.25%, with a floor of 7.25%.
(3) - Interest rate at the prime rate plus 1.50%, with a floor of 7.5%.
(4) - On December 29, 1995, the lender accepted $3,900,000 as payment
in full satisfaction of the Orchard Square mortgage.
(5) - On October 2, 1995, the Partnership paid the Berkeley Square
second priority mortgage.
(6) - The Quality Center loan was scheduled to mature on February 1,
1996. The lender has agreed to extend the term of the loan for
one year subject to completion of
the required documentation.
<PAGE> 15
The mortgage loans are generally without recourse to the assets of the
Partnership other than the particular property (and related receivables,
leases, personal property and escrows) securing such mortgage loans. The
mortgages are not cross-collaterized.
On September 20, 1995, the Partnership obtained a loan in the amount
of $1,400,000 secured by a mortgage on Edgewood Plaza. This shopping
center was previously unencumbered. From proceeds of the loan,
$707,905 was disbursed to fund payment of the principal and accrued
interest of the Berkeley Square shopping center second priority
mortgage due October 2, 1995. The Edgewood Plaza mortgage has a term
of five years and an interest rate of 8.625% and requires level
payments of approximately $136,700 annually based on 25 year
amortization. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources of this report for a discussion of the Edgewood Plaza
financing.
During the fourth quarter of 1995, the mortgage debt on Berkeley
Square shopping center was reduced. Berkeley Square was previously
subject to two mortgages, (i) a first mortgage in the amount of
$1,454,215 at December 31, 1995 which was previously secured by a
$425,000 letter of credit and a $75,000 certificate of deposit posted
by the Partnership and (ii) a second mortgage in the principal amount
of $695,500. The letter of credit securing the first mortgage was
collateralized by a second mortgage on Cloister shopping center. In
order to release the $425,000 letter of credit, the $75,000
certificate of deposit and the second mortgage on Cloister shopping
center and to permit sale of a pad site at Berkeley Square for
$217,000, the Partnership met the requirements of the first mortgage
lender as follows: (i) the Partnership paid the principal and accrued
interest of the Berkeley Square second mortgage in full on its due
date October 2, 1995, (ii) the Partnership applied $192,000 from the
proceeds of a pad site sale at Berkeley Square on November 17, 1995 to
reduce the first mortgage and (iii) the Partnership paid an additional
$150,000 in reduction of the Berkeley Square first mortgage balance.
Since completion of these transactions, no Partnership property cross
collateralizes any other Partnership property.
On December 29, 1995, the Partnership sold Orchard Square shopping
center to an unrelated third party. At the time of sale, the holder
of the Orchard Square mortgage accepted $3,900,000 in satisfaction of
its mortgage, the principal balance and accrued interest of which were
$5,748,344 and $29,558, respectively. The mortgage on Orchard Square
was due and payable on demand. See Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources of this report for a discussion of the
sale of Orchard Square. The Partnership recorded the forgiveness of
debt, net of transaction expenses, as an extraordinary gain of
$1,602,902 in the fourth quarter of 1995.
<PAGE> 16
On March 29, 1995, in connection with Tarrytown Mall, the Partnership
made certain modifications to its first trust loan. Effective July 1,
1995, the required monthly principal payments were reduced to $19,000
from $39,000. That reduction will remain in effect until June 30,
1996 or such earlier date as a replacement tenant is found for the
Wholesale Depot space. All other loan terms remain unchanged.
In total, approximately $8,153,500 of the Partnership's mortgage debt
matures during 1996. This debt relates to the mortgages on Lynnwood
Place and Woodlawn Village. The Lynnwood Place mortgage, which had an
outstanding principal balance of $6,320,814 at December 31, 1995,
matures on July 10, 1996. The Woodlawn Village mortgage, which had
an outstanding principal balance of $1,832,675 at December 31, 1995,
matures December 1, 1996. The Partnership currently anticipates that
the holder of the Lynnwood Place mortgage will agree to extend that
loan and that the Partnership will refinance the Woodlawn Village
mortgage at maturity. The Partnership has received a non-binding
proposal from the holder of the Lynnwood Place mortgage for an
extension. If the Partnership is unable to extend these loans or
refinance on acceptable terms, the Partnership may be required to seek
additional borrowing, sell one or more of its shopping center
properties, or default on its obligations.
The Quality Center mortgage was scheduled to mature on February 1,
1996. The lender has agreed to extend the term of this loan for one
year to February 1, 1997 on the same terms and conditions as currently
exist, subject to completion of the required documentation. To obtain
this extension, the Partnership will pay the lender $115,025 in
reduction of the principal balance of this loan and a fee of
approximately $10,000 in 1996.
CASH FLOW
The Partnership recorded a $1,280,813 net increase in cash and cash
equivalents in 1995, with $1,578,842 in net cash provided by operating
activities and $4,489,136 provided by investing activities, partially
offset by $4,787,165 used in financing activities. The sale of
Orchard Square on December 29, 1995 contributed approximately $910,000
to the increase in cash and cash equivalents after payment of the
respective mortgage debt and transaction expenses. The Partnership
received an additional $35,000 in March 1996 which had been placed in
escrow with the title company at settlement. The Partnership has
accrued approximately $83,000 for additional sale expenses which are
included in accounts payable and accrued expenses in the Partnership's
financial statements as December 31, 1995.
The principal differences between the net loss of $3,778,465 and net
cash provided by operating activities of $1,578,842 were noncash
charges of $1,690,807 for depreciation and amortization, a write-down
of assets of $2,606,156 and a $2,271,249 net loss on sale of a
shopping center. These differences were partially offset by a gain
<PAGE> 17
on forgiveness of debt of $1,602,902. See the discussions of the
write-down of assets related to Tarrytown Mall, the sale of Orchard
Square and the forgiveness of debt incorporated by reference from Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources. Net cash
used in financing activities of $4,787,165 primarily resulted from the
retirement of debt at Orchard Square of $3,900,000 and Berkeley Square
of $1,037,500, partially offset by proceeds of $1,400,000 from the
financing of Edgewood Plaza.
LIQUIDITY AND CAPITAL RESOURCES
At the conclusion of its public offering, the Partnership established
a working capital reserve of 3% of the net proceeds of the offering,
or $900,000, an amount that was expected to be sufficient to satisfy
general liquidity requirements. The working capital reserve was
utilized to fund the build-up of the tenant rent receivables and to
pay for renovation and construction expenses at various shopping
centers and other expenses.
In the past, liquidity has been adversely affected by lower than
anticipated rental income and higher than anticipated tenant rents
receivable. The cash and cash equivalents position of the Partnership
at December 31, 1995 increased approximately $1,281,000 from that at
December 31, 1994, with approximately $910,000 of that increase
resulting from the sale of Orchard Square. The Partnership's cash and
cash equivalents position fluctuates from quarter to quarter as
follows: (i) decreasing with the funding of lease-up costs and tenant
improvements; (ii) decreasing with the funding of renovation and
expansion costs of the shopping centers; (iii) increasing as
borrowing proceeds, sale proceeds, net rental income and interest
income are received; (iv) decreasing as expenses (including debt
service requirements) are paid; and (v) decreasing by any payment of
Partnership distributions.
As of December 31, 1995, cumulative cash distributions of $6,647,888
and $62,391 had been made to Limited Partners and the General
Partners, respectively. These cash distributions represented a 7%
annualized return for each calendar quarter through and including the
quarter ended June 30, 1990. The distribution for the quarter ended
September 30, 1990 represented a 5.8% annualized return. The
cumulative distributions for 1990 represented a 5% annualized return
to Limited Partners. No distributions have been made to Limited
Partners since the distribution for the quarter ended September 30,
1990.
Under the Cash Flow Protector, the General Partners agreed to loan to
the Partnership, without interest, up to a maximum amount equal to 50%
of the acquisition fees actually paid to them at the time the loan was
made in the event the annual cumulative non-compounded return to
Limited Partners fell below 7% of the allocable invested capital for
<PAGE> 18
the period from February 1, 1989 through January 31, 1992. In 1990,
the General Partners fulfilled their obligation under the Cash Flow
Protector provisions. As of December 31, 1995, Cash Flow Protector
loans totalling $789,203 are payable to FW Realty Limited Partnership
in the amount of $599,794 and to Realty Capital IV Limited Partnership
in the amount of $189,409. The loans are non-interest bearing and are
to be repaid from distributable cash flow or sale or refinancing
proceeds only after the payment of a preferred return equal to a 10%
annual cumulative non-compounded return on invested capital to Limited
Partners.
The ability of the Partnership to distribute cash flow cannot be
predicted, as it depends upon future events, such as the profitability
of future operations, requirements for cash expenditures to attract
and retain tenants, and the requirements of lenders as mortgages
become payable and loans are extended, modified and refinanced. It
has been the policy of the Partnership to apply any increase in cash
to increase Partnership working capital reserves, to provide for
shopping center improvements if and when necessary, and to repay and
refinance debt as required. The General Partners believe that
maintenance of cash reserves is prudent in view of the current real
estate and general economic environments and is consistent with the
Partnership's objective to maintain and increase the value of the
shopping centers. Consequently, there is no assurance as to the
availability of cash flow to make distributions to partners. In the
event the Partnership closes on the sale of Holiday Shopping Center,
the General Partners intend to re-examine the Partnership's liquidity
position at the end of 1996 to determine if it would be appropriate to
reinstate distributions to Unitholders at that time. The
Partnership's Statements of Cash Flows is incorporated by reference
from Item 8. Financial Statements and Supplementary Data of this
Annual Report on Form 10-K.
A discussion of the Partnership's current portion of long-term debt is
incorporated by reference from Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - General.
On December 29, 1995, the Partnership sold Orchard Square shopping
center to an unrelated third party for a contract price of $5,250,000.
For financial reporting purposes, the Partnership recorded a loss on
sale, after transaction expenses, of $2,271,249 in December 1995. For
federal income tax purposes, the Partnership recorded a loss on sale,
after transaction expenses, of approximately $2,404,000 in 1995. At
the time of sale, the holder of the Orchard Square mortgage accepted
$3,900,000 in satisfaction of its mortgage, the principal balance and
accrued interest of which were $5,748,344 and $29,558, respectively.
The mortgage on Orchard Square was due and payable on demand. The
Partnership recorded the forgiveness of debt, net of transaction
expenses, as an extraordinary gain of $1,602,902 in December 1995.
The lender agreed to forgive a portion of the debt on Orchard Square
in conjunction with a lease modification agreement between the
<PAGE> 19
Partnership and A & P, an anchor tenant at that center. The net
effect of the Orchard Square transactions was a loss of approximately
$668,000 for financial reporting purposes. The net proceeds were
approximately equal to the net contribution of Orchard Square to the
net asset value in 1994.
On September 20, 1995, the Partnership obtained a loan in the amount
of $1,400,000 secured by a mortgage on Edgewood Plaza. This shopping
center was previously unencumbered. The proceeds of the loan were
designated for the following uses: (i) $452,485 was placed in escrow
for the capital improvement plan at Edgewood; (ii) $130,000 was placed
in escrow to be used to conduct certain environmental remediation work
at the property in the event the Partnership is unsuccessful in its
efforts to require third parties to complete that work; (iii) $707,905
was disbursed to fund payment of the principal and accrued interest of
the Berkeley Square shopping center second priority mortgage due
October 2, 1995; and (iv) the balance was used for loan fees and
closing costs, including insurance and tax escrows, of approximately
$70,000 and working capital. The Edgewood Plaza mortgage has a term
of five years and an interest rate of 8.625% and requires level
payments of approximately $136,700 annually based on 25 year
amortization.
In 1995, the Partnership expended $162,868 from the Edgewood capital
improvement escrow. The Partnership anticipates that the capital
improvement plan at Edgewood Plaza will be substantially completed by
the end of April 1996. The improvements to Edgewood Plaza include a
new facade and parking lot resurfacing. The Partnership has executed
a lease modification with Santoni's Market, an anchor tenant, which
requires a monthly rent increase of approximately $2,100 commencing
when the improvements are substantially completed. A second tenant
has agreed to a $3,800 annual increase also effective at that time.
In December 1995, the Partnership accrued a $30,000 contingent
liability for the estimated expenditures to be incurred from the
environmental escrow for certain remediation work required at Edgewood
Plaza.
In November 1995, the Partnership completed the sale of a pad site at
its Berkeley Square property to an existing tenant. The contract
price was $217,000, of which $192,000 was applied to pay down the
principal balance of the mortgage debt on Berkeley Square. A gain for
financial reporting and federal income tax purposes of approximately
$172,000 was recorded in the fourth quarter of 1995 in connection with
this sale.
In May 1993, the Partnership entered into a lease agreement with
Wholesale Depot at Tarrytown Mall. Pursuant to the lease agreement,
the Partnership obtained a commitment for requisite financing and
proceeded to build-out the space for Wholesale Depot whose occupancy
commenced in December 1993. Wholesale Depot filed for reorganization
under the provisions of Chapter XI of the U.S. Bankruptcy Code in May
1994. Wholesale Depot vacated its space at Tarrytown Mall in late
June 1994 and rejected its lease on October 7, 1994. Wholesale Depot
<PAGE> 20
met its obligations to the Partnership for rent payments through
September 30, 1994 with the exception of base rent and expense
reimbursement for the month of April 1994.
The Partnership had as a security deposit a $500,000 letter of credit
issued by Shawmut Bank to be used to fund the lease obligations of
Wholesale Depot. The Partnership collected $450,000 with regard to
the letter of credit in 1995. The Partnership also settled unsecured
claims against Wholesale Depot for an additional $50,000 which was
received in June 1995. The monthly lease obligations for Wholesale
Depot included approximately $36,240 in base rent and approximately
$10,540 in tenant reimbursements. Total income for the year ended
December 31, 1995 included rental income of approximately $313,000
with respect to Wholesale Depot. No further income with respect to
the Wholesale Depot lease obligations will be received or recognized.
In December 1995, the Partnership reduced the carrying value of
Tarrytown Mall by $2,606,156, the amount required to reduce the
Partnership's net equity in the property for financial reporting
purposes to zero. This action was required by virtue of the
difficulty encountered in leasing the vacant space. In December 1994,
the Partnership wrote down approximately $1,048,000 of the leasehold
improvements, net of accumulated depreciation, related to Wholesale
Depot.
The Partnership continues to solicit potential replacement tenants for
the Tarrytown Mall anchor space. Given competitive conditions in the
marketplace, there is no assurance that a replacement tenant will be
found. The Partnership will consider all available options in seeking
to lease the space.
On January 19, 1994, in connection with its Tarrytown Mall shopping
center, the Partnership obtained a loan from a new first trust lender
in the amount of $2,640,940 and made certain modifications to its
existing second trust loan. The proceeds of the new loan together
with approximately $636,000 in Partnership cash reserves were used as
follows: approximately $1,379,000 to fund the 1993 construction and
other costs related to the Wholesale Depot lease at Tarrytown Mall;
$250,000 to fund the 1993 renovations of the Montgomery Wards space at
Tarrytown Mall; approximately $1,102,000 to retire existing first
trust debt; approximately $180,000 to pay accrued interest to the
existing second trust lender which included $150,000 of deferred
interest as discussed below; approximately $206,000 to establish
required mortgage escrows; and approximately $160,000 to pay loan fees
and closing costs. The second trust financing requires that the net
cash flow from Tarrytown Mall after payment of first trust financing
be applied to mortgage curtailments. As a condition of the second
trust loan modification, the Partnership was required to pay the
lender at closing $150,000 toward the existing deferred interest of
approximately $347,000. The Partnership made three quarterly payments
of $25,000 in 1994 and four quarterly payments of $25,000 in 1995.
<PAGE> 21
The deferred interest bears interest at 8%. After two payments
totalling approximately $41,000 in 1996, the deferred interest will be
paid in full.
In 1993, 1994 and 1995, approximately $2,064,000, $275,000 and
$505,000, respectively was expended for tenant fit-up and other
shopping center improvements. The 1993 expenditures include
approximately $1,379,000 related to the construction and other costs
of the addition of Wholesale Depot at Tarrytown Mall and $250,000 for
renovations of the Montgomery Ward space at Tarrytown Mall. The
Partnership is currently obligated to expend approximately $105,000 in
1996 for tenant fit-up costs in connection with signed tenant leases
and other committed capital expenditures. This amount is expected to
be funded from Partnership cash reserves. This amount does not
include tenant improvement expenditures that may be required for
future or existing tenants or for shopping center renovations.
The Partnership has entered into an agreement to expand the Food Lion
store at Woodlawn Village from 25,000 to 32,744 square feet. Upon
completion, the expansion would add 4,444 square feet to the center
and convert 3,300 square feet of in-line space to Food Lion use. The
Partnership has obtained the necessary zoning and land use approvals.
Food Lion is currently submitting plans to obtain the required
building permits. As part of the agreement, Food Lion is funding
substantially all of the expansion costs. The expansion is estimated
to be completed in the fourth quarter of 1996 and is intended to add
to the stability of the center.
The Partnership has begun to seek opportunities to sell Partnership
properties in markets where the General Partners believe a sale would
be appropriate. Pursuant to that course of action, the Partnership
sold Orchard Square in December 1995. In addition, the Partnership
entered into brokerage agreements to sell two of its centers,
Highlandtown Village and Holiday, in 1995. The six month agreement
for Highlandtown Village expired on September 30, 1995. There were no
acceptable offers for that property. In February 1996, the
Partnership negotiated a contract to sell Holiday to an unrelated
third party for a price of $1,200,000. The contract is subject to
material contingencies. There can be no assurance a sale transaction
will occur.
The Partnership's operations and the operations and financial
conditions of many of its tenants have been adversely affected by
economic and competitive conditions. If the Partnership is not able
to fund its cash requirements from operations, the Partnership may be
required to seek additional borrowing. The Partnership could be
adversely affected by the increased standards employed by lenders to
determine the amount, terms and underwriting requirements for such
financing, all of which have affected the amount and cost of
borrowing. If additional borrowing is not available, the Partnership
may be required to sell one or more of its shopping center properties.
<PAGE> 22
There is no assurance that loans would be available, or that the
Partnership would be able to sell a particular shopping center, or
that the terms of such loans or any sales would be advantageous to the
Partnership. Furthermore, if alternative sources of cash were needed
and not found, the Partnership could default on its obligations,
including its obligations to pay debt service and mortgage interest,
which could result in the foreclosure by its mortgage lenders of one
or more shopping centers.
The Partnership valued its ten shopping center portfolio as of
December 31, 1995 and its eleven shopping center portfolio as of
November 30, 1994 in order to provide certain information required by
retirement account investors. All of the Partnership's properties
were appraised at year end by an independent MAI appraiser. A
description of the methodology used by the appraiser and the appraised
values of each of the shopping centers is incorporated by reference
from Item 2. Properties of this Annual Report on Form 10-K. The
resulting aggregate fair value of the Partnership's shopping centers
as of December 31, 1995, less the Partnership's mortgages and after
certain other adjustments resulted in a valuation of the Partnership's
net assets at approximately $13,052,000. Based on 1,200,000 Assignee
Limited Partnership Units (the "Units") outstanding, this equates to
approximately $10.88 per Unit. In the case of Tarrytown Mall, the net
equity in the center is deemed to be zero, reflecting an appraisal
below existing mortgage debt.
The aggregate fair value of the Partnership's shopping centers as of
November 30, 1994, less the Partnership's mortgages and other
adjustments resulted in a valuation of the Partnership's net assets at
approximately $13,320,000. Based on 1,200,000 Assignee Limited
Partnership Units (the "Units") outstanding, this equated to
approximately $11.10 per Unit. See Item 2. Properties of this report
for information regarding the November 30, 1994 appraisal and a
discussion of the decrease in the value per Unit.
The appraised value of the Partnership's shopping centers should not
be relied upon as an indication of realizable value at the present
time or at any time in the future. Furthermore, the methods and
assumptions used by the appraiser in preparing the appraisal report
are those that the appraiser, in his professional judgment, concluded
were appropriate. There is no assurance that such assumptions will
materialize or that other or different methods or assumptions that
would result in lower values might not be appropriate. The intent of
the Partnership has been to hold, maintain and increase the value of
its shopping centers until market conditions improve. The Partnership
has begun to seek opportunities to sell Partnership properties in
markets where the General Partners believe a sale would be
appropriate.
In the fourth quarter of 1995, the Partnership recorded a charge of
$2,606,156 to reflect the Partnership's revised estimate of net
<PAGE> 23
realizable value of Tarrytown Mall based on the decline in the
appraisal value to a level below the outstanding balance of the
mortgage debt on the property. The $2,606,156 represents the sum of
the difference of $2,542,295 between the net book value of Tarrytown
Mall's land, building and improvements and the balance of the mortgage
debt and accrued interest as of December 31, 1995, plus the write-off
of $63,861 in tenant rent receivables related to the recording of
rental income on a straight-line basis.
In the fourth quarter of 1994, the Partnership wrote down assets
totalling $1,587,746 related to Tarrytown Mall and Holiday Shopping
Center. The Partnership recorded a net charge of $1,047,746 for the
write-down of leasehold improvements related to Wholesale Depot, a
former anchor tenant which leased 79,066 square feet at Tarrytown
Mall. The leasehold improvements which were placed in service in
December 1993 were incurred as a direct result of specifications
within the Partnership's lease with Wholesale Depot. Wholesale Depot
filed for reorganization under the provisions of Chapter XI of the
U.S. Bankruptcy Code in May 1994. Wholesale Depot vacated its space
at Tarrytown Mall in late June 1994 and rejected its lease on October
7, 1994. The Partnership also recorded a charge of $540,000 in 1994
to reflect the Partnership's revised estimate of net realizable value
of Holiday Shopping Center. The write-down reflected the
Partnership's intention to offer the property for sale in 1995. The
$540,000 represented the difference between Holiday's book value and
estimated net realizable value from the sale of the center and
operating the center until sale.
In the fourth quarter of 1994, the Partnership negotiated a contract
to sell Quality Center to an unrelated third party. The contract was
subject to numerous conditions. In February of 1995, the buyer
terminated the contract, after determination that it would not be able
to overcome local zoning objections to its proposed use.
During late 1993 and into 1994, affiliates of Realty Capital IV
Limited Partnership discussed the possible sale of the Partnership's
shopping centers to a limited partnership, of which a real estate
investment trust ("FWREIT") formed by affiliates of FW Realty Limited
Partnership serves as the sole general partner. These discussions
were discontinued without reaching any agreement as the stock market
valuations of real estate investment trusts owning strip and
neighborhood shopping centers fell and the Partnership's portfolio
experienced significant issues potentially affecting values at
Tarrytown Mall, Quality Center and Orchard Square.
In the fourth quarter of 1995, discussions between Realty Capital IV
Limited Partnership on behalf of the Partnership and FWREIT were
reopened regarding the possible sale for cash of the Partnership's
shopping centers to an affiliate of FWREIT and those discussions are
continuing as of the date of the filing of this report. If a sale or
disposition of all of the Partnership's properties were to occur, it
<PAGE> 24
would be followed by a distribution of net proceeds to partners and
liquidation of the Partnership.
If an agreement is reached with respect to the basic terms of a sale,
the consummation of the sale would require negotiation of a definitive
agreement and would be subject to obtaining the prior consent of the
holders of a majority of the Units and approval of an amendment of the
Partnership Agreement to permit the sale of properties to an affiliate
of a general partner. There can be no assurance that a transaction
will be successfully negotiated, and, if negotiated, that it would be
approved by the requisite number of Unitholders and thereafter
consummated, which will require satisfaction of various substantive
conditions that will be contained in the agreement.
INFLATION, RECESSION AND OTHERS FACTORS
Over the past several years inflationary pressure has been relatively
modest and has not had a significant effect on the Partnership's
operations. Many of the Partnership's expenses could, however, be
affected by inflation. If inflation rises, then operating expenses
could increase to a level where they could not be passed on to tenants
through higher rents. The competitive state of the real estate market
also has made it more difficult to increase rents. With the exception
of Holiday, Berkeley Square and Jackson Heights, a majority of the
tenant leases at the Partnership's shopping centers provide for
reimbursement by tenants for some or all operating expenses. In most
cases, tenant reimbursement payments are payable monthly, although in
some cases such payments are to be made annually.
In addition, inflation can impact interest rates charged by lenders.
Certain Partnership mortgage loans have early maturity or interest
rate adjustment dates which may require the Partnership to negotiate
interest rates and other loan terms during a period when lending terms
are strict and/or interest rates are rising. An increase in expenses
or interest rates due to inflation could have an adverse effect on the
Partnership by reducing cash flow from operations and reducing the
market value of shopping centers. There is no assurance that
inflation would not have an adverse effect on the future operations of
the Partnership.
<PAGE> 25
RESULTS OF OPERATIONS
The net income (loss) for each shopping center for the three years
ended December 31, 1995, 1994, and 1993 was as follows:
<TABLE>
<CAPTION>
NET INCOME (LOSS)
SHOPPING CENTER 1995 1994 1993
<S> <C> <C> <C>
Woodlawn Village ($51,281) ($61,230) ($59,112)
Lynnwood Place (201,574) (185,286) (390,619)
Highlandtown Village 34,102 17,262 (11,011)
Jackson Heights 113,131 49,974 19,959
Holiday 27,249 (511,444) (8,490)
Orchard Square 48,467 204,269 186,478
Cloister 68,375 97,450 30,911
Edgewood 105,306 162,054 166,554
Tarrytown Mall (2,940,495) (1,286,716) (499,456)
Berkeley Square (62,125) (22,478) (56,387)
Quality Center (282,291) (36,032) 30,804
Subtotal (3,141,136) (1,572,177) (590,369)
Other Expenses (140,859) (144,980) (101,493)
Loss on sale of center (2,271,249) - -
Gain - forgiveness of debt 1,602,902 - -
Gain on sale of pad site 171,877 - -
($3,778,465) ($1,717,157) ($691,862)
</TABLE>
Results of Operations for the Three Years Ended December 31, 1995
General
During 1995, the Partnership owned and operated eleven shopping
centers until December 29, 1995 when Orchard Square shopping center
was sold. During 1994 and 1993, the Partnership owned and operated
eleven shopping centers for the entire period.
1995 Compared to 1994
The Partnership reported an increase in net loss of $2,061,308 from a
net loss of $1,717,157 in 1994 to a net loss of $3,778,465 in 1995.
The significant factors contributing to the increased net loss in 1995
were the write-down of assets of $2,606,156 in 1995 in comparison to
$1,587,746 in 1994; declines in rental income and tenant reimbursement
income; an increase in other expenses; and a loss on sale of shopping
center. These changes were partially offset by a gain on forgiveness
of debt and decreases in depreciation, amortization and management and
leasing expenses.
The Partnership's total income decreased $481,666 from $7,907,735 in
1994 to $7,426,069 in 1995. The change in total income consisted of a
decrease in rental income of $248,710 from $6,537,318 in 1994 to
$6,288,608 in 1995 and a decrease in tenant reimbursement income of
$232,956 from $1,370,417 in 1994 to $1,137,461 in 1995. Five of the
Partnership's eleven shopping centers had decreases in rental income,
<PAGE> 26
including significant decreases at Tarrytown Mall of $178,033 and
Quality Center of $166,374. Nine of the shopping centers had
decreases in tenant reimbursement income including significant
decreases at Tarrytown Mall of $79,604 and Lynnwood Place of $75,696.
The decreases in rental income and tenant reimbursement income at
Tarrytown Mall were primarily the result of the decline in income
recorded with respect to the Wholesale Depot lease obligations, as
well as a 2% decrease in Tarrytown Mall's leased percentage.
Tarrytown Mall was 64% and 66% leased at December 31, 1995 and 1994,
respectively. The decrease in rental income at Quality Center was due
to the loss of a number of tenants at the center. However, Quality
Center's leased percentage increased 11% to 70% leased at December 31,
1995 from 59% at December 31, 1994. The increase of 11% in 1995
primarily resulted from the addition of two tenants leasing an
aggregate of 12,482 square feet, partially offset by the loss of one
tenant which leased 5,885 square feet. Two tenants which leased
11,132 square feet vacated Quality Center in December 1994. The
decrease in tenant reimbursement income at Lynnwood Place can be
attributed to a reduction in real estate tax tenant reimbursements and
to adjustments for prior year accruals. Lynnwood Place was 98% leased
at December 31, 1995, a decrease of 2% from December 31, 1994.
These decreases in rental income and tenant reimbursement income were
partially offset by increases in rental income at six shopping
centers, including an increase of $78,183 at Jackson Heights and
increases in tenant reimbursement income at two shopping centers. The
increase in tenant reimbursement income at Jackson Heights was
primarily due to leasing activity during 1994 at the shopping center.
Jackson Heights was 99% leased at December 31, 1995 and 1994.
The following changes in leased percentages also contributed to
changes in rental income and tenant reimbursement income during the
year. Berkeley Square, Holiday and Highlandtown Village were 95%, 90%
and 100% leased, respectively, at December 31, 1995. This represented
increases of 12% at Berkeley Square, 6% at Holiday and 2% at
Highlandtown Village compared to December 31, 1994. The 12% increase
at Berkeley Square primarily resulted from the addition of three
tenants leasing an aggregate of 13,456 square feet. Edgewood Plaza
and Woodlawn remained unchanged at December 31, 1995 at 100% and 93%
leased, respectively. Cloister was 90% leased at December 31, 1995, a
decrease of 10% from December 31, 1994. The 10% decline primarily
resulted from the loss of three tenants which leased an aggregate of
5,329 square feet. The Partnership's aggregate portfolio was 84%
leased at December 31, 1995 and 1994. The Partnership's shopping
center portfolio at December 31, 1995 represented ten centers with
approximately 1,034,000 leasable square feet after the sale of Orchard
Square on December 29, 1995. The portfolio at December 31, 1994
represented eleven shopping centers with approximately 1,120,000
square feet.
Total operating expenses increased $1,103,513 from $9,635,653 in 1994
<PAGE> 27
to $10,739,166 in 1995. The increase in total operating expenses can
primarily be attributed to a higher write-down of assets in 1995
compared to 1994 and an increase in other expenses. These increases
were partially offset by declines in depreciation and amortization
expenses.
In the fourth quarter of 1995, the Partnership recorded a charge of
$2,606,156 to reflect the Partnership's revised estimate of net
realizable value of Tarrytown Mall based on the decline in the
appraisal value to a level below the outstanding balance of the
mortgage debt on the property. The $2,606,156 represents the sum of
the difference of $2,542,295 between the net book value of Tarrytown
Mall's land, building and improvements and the balance of the mortgage
debt and accrued interest as of December 31, 1995, plus the write-off
of $63,861 in tenant rent receivables related to the recording of
rental income on a straight-line basis.
In the fourth quarter of 1994, the Partnership wrote down assets
totalling $1,587,746 related to Tarrytown Mall and Holiday Shopping
Center. The Partnership recorded a net charge of $1,047,746 for the
write-down of leasehold improvements related to Wholesale Depot, a
former anchor tenant which leased 79,066 square feet at Tarrytown
Mall. The additional charge of $540,000 in 1994 represented an
adjustment to the carrying value of Holiday to the Partnership's
revised estimate of the center's net realizable value. This write-
down reflected the Partnership's intention to offer this property for
sale in 1995.
Other expenses increased $258,329 from $675,601 in 1994 to $933,930 in
1995. The increase can be attributed to the following changes: (i)
$64,308 incurred for financing fees in 1995 at Orchard Square related
to the Partnership's attempt to obtain a new mortgage loan; (ii) an
increase in administrative expense at Quality Center of $63,472; (iii)
increases in legal expenses at Tarrytown Mall and Quality Center of
$37,517 and $21,874, respectively, and (iv) $30,000 recorded in 1995
for the estimated environmental remediation work required at Edgewood.
The increase in administrative expense at Quality Center was primarily
due to an adjustment in the marketing fund as a result of a decline in
tenant contributions for this period and prior periods based on
occupancy at the property. The increase in legal expense at Tarrytown
Mall was related to the bankruptcy of Wholesale Depot and lease
negotiations with a potential tenant for the Wholesale Depot space.
The increase in legal expense at Quality Center was related to
unsuccessful negotiations with a potential buyer.
Depreciation expense decreased $86,761 from $1,685,458 in 1994 to
$1,598,697 in 1995. This decrease was primarily the result of the
write-down of the leasehold improvements related to Wholesale Depot at
Tarrytown Mall in the fourth quarter of 1994.
Amortization expense decreased $51,430 from $143,540 in 1994 to
<PAGE> 28
$92,110 in 1995. The decrease can be attributed to a decline in
amortization expense at Lynnwood Place of $29,217 due to full
amortization of loan costs in the second quarter of 1994 and a decline
at Orchard Square of $29,620 due to the full amortization of loan
costs in December 1994.
The aggregate provision for doubtful accounts was $194,554 in 1994 and
$172,159 in 1995. The provision related to Tarrytown Mall was lower
by $78,812 in 1995 as compared to 1994.
1994 Compared to 1993
The Partnership reported an increase in net loss of $1,025,295 from a
net loss of $691,862 in 1993 to a net loss of $1,717,157 in 1994. The
significant factors contributing to the increased net loss in 1994
were the write-down of assets of $1,587,746; increases in interest
expense, depreciation, management and leasing and repairs and
maintenance; a higher provision for doubtful accounts; and a decline
in other income. These changes were partially offset by increases in
rental income and tenant reimbursement income and declines in real
estate taxes and utilities expenses.
The Partnership's total income increased $894,067 from $7,013,668 in
1993 to $7,907,735 in 1994. The change in total income consisted of
an increase in rental income of $613,394 from $5,923,924 in 1993 to
$6,537,318 in 1994 and an increase in tenant reimbursement income of
$280,673 from $1,089,744 in 1993 to $1,370,417 in 1994. Nine of the
Partnership's eleven shopping centers had increases in rental income,
including significant increases at Tarrytown Mall of $359,025 and
Lynnwood Place of $90,504. Ten of the shopping centers had increases
in tenant reimbursement income including significant increases at
Tarrytown Mall of $147,551 and Highlandtown Village of $41,828. The
increases in rental income and tenant reimbursement income at
Tarrytown Mall were primarily the result of the addition of Wholesale
Depot in December 1993, which was partially offset by a decline in
receipts of $116,742 from the Buyers' Market. However, Tarrytown's
leased percentage decreased 21% to 66% at December 31, 1994 from 87%
at December 31, 1993 primarily due to the loss of Wholesale Depot
which rejected its lease on October 7, 1994. The increase in rental
income at Lynnwood Place and the increase in tenant reimbursement
income at Highlandtown Village were primarily due to increases in the
shopping centers' leased percentages. Lynnwood Place was 100% leased
at December 31, 1994, an increase of 4% from December 31, 1993.
Highlandtown Village was 98% leased at December 31, 1994, an increase
of 8% from December 31, 1993.
The following changes in leased percentages also contributed to
changes in rental income and tenant reimbursement income during the
year. Cloister, Woodlawn, Jackson Heights and Holiday were 100%, 93%,
99% and 84% leased, respectively, at December 31, 1994. This
represented increases of 3% at Cloister, 8% at Woodlawn, 5% at Jackson
Heights and 3% at Holiday compared to December 31, 1993. Edgewood
<PAGE> 29
Plaza remained unchanged at December 31, 1994 at 100% leased. Orchard
Square, Berkeley Square and Quality Center were 94%, 83% and 59%
leased, respectively, at December 31, 1994. This represented declines
of 1% at Orchard Square, 9% at Berkeley Square, and 17% at Quality
Center. The decline at Quality Center primarily resulted from the
loss of two tenants which together occupied 11,132 square feet. The
Partnership's aggregate portfolio was 84% leased at December 31, 1994,
a decrease of 6% from December 31, 1993. This decline was primarily
due to the loss of Wholesale Depot at Tarrytown Mall. Wholesale Depot
rejected its lease October 7, 1994.
Total operating expenses increased $1,897,887 from $7,737,766 in 1993
to $9,635,653 in 1994. The increase in total operating expenses can
be attributed to the write-down of assets, increases in interest
expense, depreciation, management and leasing, and repairs and
maintenance and a higher provision for doubtful accounts in 1994 as
compared to 1993. These increases were partially offset by declines
in real estate taxes and utilities expenses.
In the fourth quarter of 1994, the Partnership wrote down assets
totalling $1,587,746 related to Tarrytown Mall and Holiday. The
Partnership recorded a net charge of $1,047,746 for the write-down of
leasehold improvements related to Wholesale Depot at Tarrytown Mall.
The write-down reflects the loss of Wholesale Depot which filed for
reorganization under the U.S. Bankruptcy Code in May 1994. The
Partnership recorded an additional charge of $540,000 to adjust the
carrying value of Holiday to its estimated net realizable value, since
it was the Partnership's intention to offer the property for sale in
1995.
Interest expense increased $104,945 from $3,072,212 in 1993 to
$3,177,157 in 1994. The net increase is primarily attributable to an
increase at Tarrytown Mall of $116,279. The increase at Tarrytown
Mall was due to the additional debt of $2,640,940 obtained on January
19, 1994, offset by the retirement of $1,102,392 of the existing first
trust debt.
Depreciation expense increased $87,414 from $1,598,044 in 1993 to
$1,685,458 in 1994. This increase was primarily the result of an
increase at Tarrytown Mall of $77,348 which was predominantly
attributable to depreciation related to the construction and other
costs of the Wholesale Depot and Montgomery Ward spaces.
Repairs and maintenance increased $110,150 from $770,402 in 1993 to
$880,552 in 1994. A significant change in repairs and maintenance
expense during the year included an increase at Highlandtown Village
of $31,264.
Real estate tax expense decreased $46,357 from $713,728 in 1993 to
$667,371 in 1994. The significant change in real estate taxes
contributing to the net decrease was a decrease in real estate taxes
<PAGE> 30
at Lynnwood Place of $57,839 as a result of a reduced assessment for
1994.
The aggregate provision for doubtful accounts was higher by $86,058
from $108,496 in 1993 to $194,554 in 1994. The provisions related to
Tarrytown Mall and Quality Center were higher by $65,996 and $31,386,
respectively, in 1994 as compared to 1993.
Other expenses decreased $66,936 from $742,537 in 1993 to $675,601 in
1994. This decrease was primarily the result of a decrease in
utilities expense related to a significant reduction of the Buyers'
Market space at Tarrytown Mall. Utilities expense related to the
Buyers' Market decreased $40,554 from $56,768 in 1993 to $16,214 in
1994. The space available for the Buyers' Market was significantly
reduced during the third quarter of 1993.
Shopping Center by Shopping Center Analysis of Material Changes in the
Results of Operations for the Three Years Ended December 31, 1995
The following discussion reflects changes in the specific elements of
income or expense with respect to the Partnership's centers during the
three years ended December 31, 1995. For purposes of the following
analysis, rental income consists of rents paid by tenants occupying
space in each shopping center and rental income accrued for
adjustments for rent abatements and scheduled rent increases.
Woodlawn Village: Net loss decreased to $51,281 in 1995 from $61,230
in 1994. Net loss was $59,112 in 1993. Changes in individual
elements of income and expenses during 1995 and 1994 were not
significant to the Partnership considered as a whole.
Rental income increased 4% to $283,557 in 1995 from $272,047 in 1994.
Rental income was $276,461 in 1993. As of December 31, 1995 and 1994,
Woodlawn Village was approximately 93% leased. Woodlawn Village was
approximately 85% leased as of December 31, 1993.
Lynnwood Place: Net loss increased to $201,574 in 1995 from $185,286
in 1994. Net loss was $390,619 in 1993. The increase in net loss in
1995 can primarily be attributed to a decrease in tenant reimbursement
income, offset in part by a decline in interest and amortization
expenses. The decrease in tenant reimbursement income at Lynnwood
Place can be attributed to a reduction in real estate tax tenant
reimbursements and to adjustments for prior year accruals. The decline
in net loss in 1994 can primarily be attributed to an increase in
rental income and decreases in real estate taxes and amortization
expense. The decline in Lynnwood Place's taxes is due to a reduced
assessment for 1994. Amortization expense declined since certain loan
costs related to Lynnwood Place's mortgage became fully amortized in
July 1994 when the mortgage matured.
Rental income increased approximately 2% to $789,924 in 1995 from
<PAGE> 31
$778,111 in 1994. Rental income was $697,584 in 1993. As of December
31, 1995, Lynnwood Place was approximately 98% leased, a decrease from
100% as of December 31, 1994. Lynnwood was approximately 96% leased
as of December 31, 1993. The increases in rental income in 1995 and
1994 are primarily attributable to changes in occupancy.
Highlandtown Village: Net income increased to $34,102 in 1995 from
$17,262 in 1994. This center reported net loss of $11,011 in 1993.
The increase in net income in 1995 can be attributed to a decrease in
total expenses, offset in part by a decline in total income. Tenant
reimbursement income decreased $32,321 to $237,287 in 1995 from
$269,608 in 1994. The decrease in net loss in 1994 can primarily be
attributed to increases in rental and tenant reimbursement income
which were partially offset by an increase in repairs and maintenance
expense. Repairs and maintenance expense increased $31,264 to $96,999
in 1994 from $65,735 in 1993 due primarily to expenses related to
security and the parking lot.
Rental income increased approximately 5% to $558,979 in 1995 from
$534,605 in 1994. Rental income was $511,372 in 1993. As of December
31, 1995, Highlandtown Village was approximately 100% leased, an
increase from 98% as of December 31, 1994. Highlandtown Village was
90% leased as of December 31, 1993. The changes in rental income in
1995 and 1994 are primarily attributable to changes in occupancy.
Jackson Heights: Net income increased to $113,131 in 1995 from
$49,974 in 1994. Net income was $19,959 in 1993. The increases in
net income in 1995 and 1994 can primarily be attributed to increases
in rental income.
Rental income increased approximately 13% to $661,478 in 1995 from
$583,295 in 1994. Rental income was $547,521 in 1993. As of December
31, 1995 and 1994, Jackson Heights was approximately 99% leased.
Jackson Heights was approximately 94% leased as of December 31, 1993.
The increase in rental income in 1995 and 1994 can primarily be
attributed to changes in occupancy.
Holiday: This center reported net income of $27,249 in 1995, net loss
of $511,444 in 1994 and net loss of $8,490 in 1993. The increase in
net income in 1995 and the increase in net loss in 1994 can primarily
be attributed to the write-down of assets of $540,000 in 1994 to
adjust the carrying value of Holiday to its estimated net realizable
value, since it was the Partnership's intention to offer the property
for sale in 1995. There were no comparable adjustments in 1995 or
1993.
Rental income decreased approximately 1% to $187,163 in 1995 from
$189,508 in 1994. Rental income was $165,270 in 1993. As of December
31, 1995, Holiday was approximately 90% leased, an increase from
approximately 84% as of December 31, 1994. Holiday was approximately
81% leased as of December 31, 1993. The changes in rental income in
<PAGE> 32
1995 and 1994 are primarily attributable to changes in occupancy.
Orchard Square: Net income decreased to $48,467 in 1995 from net
income of $204,269 in 1994. Net income was $186,478 in 1993. The
decline in net income in 1995 can be attributed to a decrease in total
income of $70,538 and an increase in other expenses of $97,988. The
increase in net income in 1994 can primarily be attributed to an
increase in rental income.
Rental income decreased approximately 5% to $809,395 in 1995 from
$854,531 in 1994. Rental income was $828,117 in 1993. As of December
31, 1994, Orchard Square was approximately 94% leased, a decrease from
approximately 95% as of December 31, 1993. The decrease in rental
income in 1995 can be attributed to changes in occupancy and an
increase in rental abatements as a result of A&P closing its store in
August 1994. The increase in rental income in 1994 can be attributed
to changes in occupancy and increases in tenant rental rates as a
result of annual lease increases.
Cloister: Net income decreased to $68,375 in 1995 from $97,450 in
1994. Net income was $30,911 in 1993. The decrease in net income in
1995 can primarily be attributed to an increase in interest expense of
$29,431 due to adjustments in the interest rate on the Cloister
mortgage which floats at prime plus 1.25%. The increase in net income
in 1994 can primarily be attributed to an increase in total rental and
tenant reimbursement income. Total income increased $57,200 to
$559,146 in 1994 from $501,946 in 1993.
Rental income increased approximately 2% to $409,231 in 1995 from
$402,227 in 1994. Rental income was $364,217 in 1993. As of December
31, 1995, Cloister was approximately 90% leased, a decrease from 100%
as of December 31, 1994. Cloister was 97% leased at December 31,
1993. The changes in rental income in 1995 and 1994 are primarily
attributable to changes in occupancy.
Edgewood: Net income decreased to $105,306 in 1995 from $162,054 in
1994. Net income was $166,554 in 1993. The decrease in net income in
1995 can primarily be attributed to interest expense recorded in 1995
of $33,848 and a $30,000 charge recorded in 1995 for the estimated
environmental remediation work required at Edgewood. The mortgage
loan on Edgewood was secured in September 1995. The center was
previously unencumbered. There was no comparable environmental
expense in 1994. Changes in individual elements of income and expenses
during 1994 in comparison to 1993 were not significant to the
Partnership considered as a whole.
Rental income increased approximately 4% to $291,664 in 1995 from
$281,654 in 1994. Rental income was $276,151 in 1993. As of December
31, 1995, 1994, and 1993, Edgewood was 100% leased. The changes in
rental income in 1995 and 1994 are primarily attributable to changes
in rental rates.
<PAGE> 33
Tarrytown Mall: Net loss increased to $2,940,495 in 1995 from
$1,286,716 in 1994. Net loss was $499,456 in 1993. The increase in
net loss in 1995 can be attributed to a write-down of assets of
$2,606,156 in 1995 in comparison to $1,047,746 in 1994 and declines in
rental and tenant reimbursement income. Rental and tenant
reimbursement income decreased $257,637 to $1,316,361 in 1995 from
$1,573,998 in 1994. The decreases in income were primarily the result
of the decline in income recorded with respect to the Wholesale Depot
lease obligations. These changes contributing to the increased net
loss in 1995 were partially offset by decreases in depreciation
expense and a lower provision for doubtful accounts. Depreciation
expense decreased $93,111 to $337,005 in 1995 from $430,116 in 1994.
The decline in depreciation expense was primarily the result of the
write-down of the leasehold improvements related to Wholesale Depot at
Tarrytown Mall in the fourth quarter of 1994. The provision for
doubtful accounts was $16,848 in 1995 which was lower by $78,812
in comparison to $95,660 in 1994.
The increase in net loss in 1994 can primarily be attributed to the
write-down of leasehold improvements net of accumulated depreciation
related to Wholesale Depot of $1,047,746 in 1994 and increases in
interest, depreciation and amortization expenses and a higher
provision for doubtful accounts. Interest expense increased $116,279
to $644,161 in 1994 from $527,882 in 1993 due to the additional debt
of $2,640,940 obtained on January 19, 1994, offset by the retirement
of $1,102,392 of the existing first trust debt. Depreciation expense
increased $77,348 to $430,116 in 1994 from $352,768 in 1993 primarily
due to depreciation related to the construction and other costs of the
Wholesale Depot and Montgomery Ward spaces. Amortization expense was
$30,161 in 1994 due to amortization of deferred financing costs
related to the loan closing on January 19, 1994. The provision for
doubtful accounts was $95,660 in 1994 in comparison to $29,664 in
1993. These changes contributing to the increased net loss in 1994
were partially offset by an increase in rental and tenant
reimbursement income and a decline in utilities expense. Tenant
reimbursement income increased $147,551 to $295,193 in 1994 from
$147,642 in 1993 primarily due to the addition of Wholesale Depot in
December 1993. Utilities expense decreased $46,004 to $140,082 in
1994 from $186,086 in 1993 primarily due to a significant reduction of
the Buyers' Market space at Tarrytown Mall in the third quarter of
1993.
Rental income decreased approximately 14% to $1,100,772 in 1995 from
$1,278,805 in 1994. Rental income was $914,201 in 1993. As of
December 31, 1995, Tarrytown was approximately 64% leased, a decrease
from approximately 66% leased as of December 31, 1994. Tarrytown was
87% leased as of December 31, 1993. The decrease in rental income in
1995 was primarily the result of the bankruptcy of Wholesale Depot.
The increase in rental income in 1994 was primarily the result of the
addition of Wholesale Depot in December 1993.
<PAGE> 34
Berkeley Square: Net loss increased to $62,125 in 1995 from $22,478
in 1994. Net loss was $56,387 in 1993. The increase in net loss in
1995 can primarily be attributed to a decline in total rental and
tenant reimbursement income and an increase in repairs and maintenance
expense. The decrease in net loss in 1994 can primarily be attributed
to an increase in rental income.
Rental income decreased approximately 4% to $467,588 in 1995 from
$485,623 in 1994. Rental income was $456,001 in 1993. As of December
31, 1995, Berkeley Square was approximately 95% leased, an increase
from approximately 83% leased as of December 31, 1994. Berkeley
Square was 92% leased at December 31, 1993. The decrease in rental
income in 1995 and the increase in 1994 is primarily attributable to
changes in occupancy and the sale of a pad site in 1995. The 12%
increase in the center's leased percentage from 1994 to 1995 primarily
resulted from the addition of three tenants leasing an aggregate of
13,456 square feet. Berkeley Square's leased percentage decreased
from 1993 to 1994 primarily due to the loss of two tenants leasing
11,426 square feet in the second and third quarters of 1994.
Quality Center: Net loss increased to $282,291 in 1995 from $36,032
in 1994. This center reported net income of $30,804 in 1993. The
increase in net loss in 1995 can be attributed to a decline in rental
income and an increase in administrative expense. Administrative
expense increased $63,472 to $73,622 in 1995 from $10,150 in 1994
primarily due to an adjustment in the marketing fund as a result of a
decline in tenant contributions for this period and prior periods
based on occupancy at the property. The increase in net loss in 1994
can primarily be attributed to a decrease in rental income and a
higher provision for doubtful accounts. The provision for doubtful
accounts was higher by $31,386 in 1994 in comparison to 1993.
Rental income decreased approximately 27% to $455,963 in 1995 from
$622,337 in 1994. Rental income was $647,348 in 1993. As of December
31, 1995, Quality Center was approximately 70% leased, an increase
from approximately 59% leased as of December 31, 1994. Quality Center
was 76% leased at December 31, 1993. The decreases in rental income
in 1995 and 1994 are primarily attributable to changes in occupancy.
Two tenants paying aggregate annual rents of $121,833 vacated Quality
Center in December 1994. Four tenants paying aggregate annual rents
of $154,453 vacated Quality Center during 1993. A competing shopping
center located one mile west of Quality Center re-opened, after
extensive renovations, in April 1993. A second shopping center
competing with Quality Center, Rockvale Square, added approximately
125,000 square feet of retail outlet space in 1993 and 1994. Rockvale
Square is located directly across U.S. Route 30 from Quality Center.
<PAGE> 35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Financial Statement Schedules
Page
Report of Independent Public Accountants....................36
Financial Statements:
Balance Sheets............................................37
Statements of Operations..................................38
Statements of Partners' Equity............................39
Statements of Cash Flows..................................40
Notes to Financial Statements.............................41
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Account..........50
Schedule III - Real Estate and Accumulated Depreciation
and Notes to Schedule.....................51
Schedule IV - Mortgage Loans on Real Estate and Notes to
Schedule..................................54
All other schedules are omitted since they are not required, are not
applicable, or the financial information required is included in the
financial statements or the notes thereto.
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Mid-Atlantic Centers Limited Partnership:
We have audited the accompanying balance sheets of MID-ATLANTIC
CENTERS LIMITED PARTNERSHIP (a Maryland limited partnership) as of
December 31, 1995 and 1994, and the related statements of operations,
partners' equity and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements and the
schedules referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion
on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Mid-Atlantic Centers Limited Partnership as of December 31, 1995 and
1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the
index to financial statements are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state, in all
material respects, the financial data required to be set forth therein
in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN L.L.P.
Baltimore, Maryland
February 2, 1996
<PAGE> 37
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
ASSETS
<S> <C> <C>
Investment in real estate held for lease, at cost:
Land $9,124,457 $11,803,791
Buildings and improvements 43,934,858 49,387,790
------------ ------------
53,059,315 61,191,581
Less - accumulated depreciation (13,271,409) (10,658,778)
------------ ------------
39,787,906 50,532,803
Cash and cash equivalents 1,664,994 384,181
Tenant accounts receivable, net of allowance for
doubtful accounts ($326,673 in 1995 and
$353,507 in 1994) 791,031 1,380,921
Prepaid expenses and other assets 1,098,187 681,024
Intangible assets, net of accumulated amortization
($935,235 in 1995 and $966,779 in 1994) 222,427 239,305
------------ ------------
Total assets $43,564,545 $53,218,234
============ ============
LIABILITIES AND PARTNERS' EQUITY
Long-term debt, including current maturities $29,130,611 $35,285,891
Accounts payable and accrued expenses 211,208 61,093
Cash flow protector loans 789,203 789,203
Interest payable 683,682 488,734
Prepaid rents and security deposits 203,141 240,888
Due to related parties 90,903 118,163
------------ ------------
Total liabilities 31,108,748 36,983,972
General partners and assignor limited partner 501,599 (9,076)
Assignee limited partners (1,200,000 units
authorized, issued and outstanding) 11,954,198 16,243,338
------------ ------------
Total partners' equity 12,455,797 16,234,262
------------ ------------
Total liabilities and partners' equity $43,564,545 $53,218,234
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 38
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
for the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income $6,288,608 $6,537,318 $5,923,924
Tenant reimbursement income 1,137,461 1,370,417 1,089,744
------------ ------------ ------------
Total income 7,426,069 7,907,735 7,013,668
------------ ------------ ------------
Operating expenses:
Interest expense 3,188,433 3,177,157 3,072,212
Write-down of assets 2,606,156 1,587,746 -
Depreciation 1,598,697 1,685,458 1,598,044
Repairs and maintenance 880,272 880,552 770,402
Real estate taxes 681,870 667,371 713,728
Management and leasing to related parties 428,756 456,981 410,231
Insurance 156,783 166,693 170,918
Provision for doubtful accounts 172,159 194,554 108,496
Amortization 92,110 143,540 151,198
Other expenses 933,930 675,601 742,537
------------ ------------ ------------
Total operating expenses 10,739,166 9,635,653 7,737,766
------------ ------------ ------------
Loss from rental operations (3,313,097) (1,727,918) (724,098)
Other income (expenses):
Loss on sale of shopping center (2,271,249) - -
Gain on sale of pad site 171,877 - -
Interest income 31,102 10,761 1,787
Other income - - 30,449
------------ ------------ ------------
Net loss before extraordinary item (5,381,367) (1,717,157) (691,862)
Extraordinary gain related to
forgiveness of debt 1,602,902 - -
------------ ------------ ------------
Net loss $(3,778,465) $(1,717,157) $ (691,862)
============ ============ ============
Net gain (loss) allocated to
general partners $ 510,675 $ (17,172) $ (6,919)
============ ============ ============
Net loss allocated to assignee
limited partners $(4,289,140) $(1,699,985) $ (684,943)
============ ============ ============
Net loss allocated to assignee limited
partners per unit: (1,200,000 units
issued and outstanding)
Net loss before extraordinary item $ (4.57) $ (1.42) $ (0.57)
Extraordinary gain 1.00 - -
Net loss -------- -------- --------
$ (3.57) $ (1.42) $ (0.57)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 39
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY
for the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Assignee Assignor Total
General Limited Limited Partners'
Partners Partners Partner Equity
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Partners' equity, December 31, 1992 $ 14,938 $18,628,266 $ 77 $18,643,281
Net loss (6,919) (684,943) - (691,862)
----------- ------------ ----------- ------------
Partners' equity, December 31, 1993 8,019 17,943,323 77 17,951,419
Net loss (17,172) (1,699,985) - (1,717,157)
----------- ------------ ----------- ------------
Partners' equity, December 31, 1994 (9,153) 16,243,338 77 16,234,262
Net loss 510,675 (4,289,140) - (3,778,465)
----------- ------------ ----------- ------------
Partners' equity, December 31, 1995 $ 501,522 $11,954,198 $ 77 $12,455,797
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 40
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $(3,778,465) $(1,717,157) $ (691,862)
------------ ------------ ------------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,690,807 1,828,998 1,749,242
Write-down of assets 2,606,156 1,587,746 -
Forgiveness of debt (1,602,902) - -
Loss on sale of shopping center 2,271,249 - -
Gain on sale of pad site (171,877) - -
Changes in operating assets and liabilities:
Decrease (increase) in tenant accounts
receivable, net 240,256 (296,552) (116,012)
Decrease in prepaid expenses and other
assets, net 14,004 49,988 77,022
Increase (decrease) in accounts payable
and accrued expenses 112,368 (1,507,895) 1,279,717
Increase in interest payable, net of noncash
transactions of $29,558 in 1995 224,506 48,799 127,607
Increase (decrease) in due to related parties (27,260) 22,344 (9,777)
------------ ------------ ------------
Total adjustments 5,357,307 1,733,428 3,107,799
------------ ------------ ------------
Net cash provided by operating activities 1,578,842 16,271 2,415,937
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements of real estate (504,523) (275,186) (2,064,337)
Proceeds from sale of real estate 5,294,826 - -
Establishment of capital improvement escrow (289,617) - -
Assigned certificate of deposit for capital
improvements (11,550) - -
------------ ------------ ------------
Net cash provided by (used in) investing
activities 4,489,136 (275,186) (2,064,337)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 1,400,000 2,640,940 -
Retirement of long-term debt (4,937,500) (1,102,392) -
Principal payments on long-term debt (769,436) (781,393) (475,950)
Financing fees (350,229) (86,488) (110,812)
Establishment of mortgage escrow deposits (130,000) (206,148) -
Payment of deferred interest - (150,000) -
Assigned certificate of deposit to lender - (25,000) (50,000)
------------ ------------ ------------
Net cash provided by (used in) financing
activities (4,787,165) 289,519 (636,762)
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents 1,280,813 30,604 (285,162)
Cash and cash equivalents at beginning of period 384,181 353,577 638,739
------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,664,994 $384,181 $353,577
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 41
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1995
-----------------
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Mid-Atlantic Centers Limited Partnership (the "Partnership") was
organized under the laws of the State of Maryland on December 16,
1986. The Partnership was formed to acquire, hold, lease and
ultimately sell income-producing community and neighborhood shopping
centers.
The following is a summary of the significant accounting policies
followed in the preparation of the Partnership's financial statements.
LAND, BUILDINGS and IMPROVEMENTS. The cost of land, buildings and
improvements are capitalized, while expenditures for maintenance and
repairs are charged to operations as incurred. Depreciation is
computed using the straight-line method based on the estimated useful
lives of the respective assets.
AMORTIZATION. Deferred financing costs are amortized over the term of
the respective mortgage loans using the straight-line method.
Deferred leasing commissions are amortized over the term of the
respective tenant leases using the straight-line method.
INCOME TAXES. No provision for or benefit from income taxes has been
included in these financial statements since taxable income or loss
passes through to, and is reportable by, the partners individually.
RENTAL INCOME. Certain leases provide for either abatement of rents
or scheduled rent increases over the life of the lease. Rental income
is recorded on a straight-line basis of equal monthly payments over
the respective terms of such leases. The receivables related to the
recording of rental income on a straight-line basis totalled $313,259
and $682,399 at December 31, 1995 and 1994, respectively.
STATEMENTS OF CASH FLOWS. For purposes of the statements of cash
flows, the Partnership considers cash in banks, commercial paper and
repurchase agreements with original maturities of less than three
months to be cash and cash equivalents.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE> 42
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-----------------
NOTE B - PARTNERS' CAPITAL CONTRIBUTIONS:
The Partnership has two general partners -- Realty Capital IV Limited
Partnership and FW Realty Limited Partnership, and one assignor
limited partner -- LM Unit Trust, Inc. Each general partner and the
assignor limited partner have made capital contributions of $500 and
$100, respectively. Under the terms of the Partnership Agreement, the
general partners have no obligation to make additional capital
contributions to the Partnership, except under certain circumstances
upon liquidation.
The assignor limited partner has assigned all of its rights in its
limited partnership interests to the assignee limited partners. Total
assignee limited partners' contributions in accordance with the
Partnership Agreement were $29,997,125 (which excludes volume purchase
discounts of $2,875). Offering costs of $2,802,312 were funded from
such contributions.
NOTE C - RENTALS UNDER OPERATING LEASES:
The Partnership has leased space in its shopping center properties
under noncancellable operating leases. The following table summarizes
future minimum rental receipts due on noncancellable operating leases
as of December 31, 1995:
<TABLE>
<S> <C>
1996 $4,393,439
1997 3,611,497
1998 2,810,594
1999 1,984,737
2000 1,626,006
Thereafter 7,288,991
-----------
$21,715,264
===========
</TABLE>
These minimum future rentals do not include additional rent which may
be received from tenants for pass-through provisions in leases related
to increases in operating expenses and percentage rentals.
<PAGE> 43
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-----------------
NOTE D - LONG-TERM DEBT:
Long-term debt consists of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Mortgage loan due December 1, 1996 (1)
Interest at 11.5% $1,832,675 $1,852,380
Mortgage loan due July 10, 1996 (1)
Interest at 9.00% 6,320,814 6,396,988
Mortgage loan due December 21, 1997
Interest at 10.125% 3,177,097 3,213,952
Mortgage loan due March 1, 1999
Interest at 75% of the lender's
prime rate, adjusted quarterly, with
a floor of 6%
(6.375% at December 31, 1995) 257,922 328,015
Mortgage loan due on demand
Interest at 6% - 5,832,229
Mortgage loan due June 1, 1998
Interest at prime rate plus 1.25%,
with a floor of 7.25%
(9.75% at December 31, 1995) 1,494,717 1,545,237
Mortgage loan due September 12, 1998
Interest at 10.5% 2,051,068 2,088,413
Mortgage loan due September 19, 2000
Interest at 8.625% 1,397,333 -
Mortgage loan due January 1, 1999
Interest at 8% 5,384,997 5,384,997
Mortgage loan due January 1, 1999
Interest at prime rate plus 1.5%,
with a floor of 7.5%
(10% at December 31, 1995) 1,923,940 2,266,940
Mortgage loan due October 2, 1995
Interest at 7% - 695,500
Mortgage loan due December 31, 1997 (2)
Interest at 10.13% 1,454,215 1,826,762
Mortgage loan due February 1, 1997 (3)
Interest at 10.625% 3,835,833 3,854,478
----------- -----------
$29,130,611 $35,285,891
=========== ===========
</TABLE>
(1) - The Partnership currently anticipates the lenders will agree to
renew these mortgages.
(2) - This mortgage loan has extension options, exercisable by the
Partnership, to extend the term of such loan for one year. The
interest rate payable during the extension
period is adjusted to 2.75% over the one year U.S. Treasury bill.
(3) - The Quality Center loan was scheduled to mature on February 1, 1996.
The lender has agreed to extend the term of this loan for one year,
subject to the completion of the required documentation.
<PAGE> 44
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-----------------
NOTE D - LONG-TERM DEBT: (continued)
The mortgage loans are non-recourse obligations secured by deeds of
trust on the related real estate held for lease and by assignments of
rents. Interest expense of $3,188,433, $3,177,157, and $3,072,212
(including interest paid of $2,993,485, $3,278,358, and $2,944,605,
respectively) was incurred on these mortgages for the years ended
December 31, 1995, 1994 and 1993, respectively.
The general partners anticipate that the balloon or principal balance
payments required on the mortgage loans at maturity will require an
extension of the existing mortgage loan or sale or refinancing of the
property to which it relates at such time. Maturities of long-term
debt as of December 31, 1995 are as follows:
1996 $8,934,991
1997 9,025,287
1998 4,105,895
1999 5,744,049
2000 1,320,389
Thereafter -
$29,130,611
FORGIVENESS OF DEBT
On December 29, 1995, at the time of sale of Orchard Square Shopping
Center, the holder of the Orchard Square mortgage accepted $3,900,000
in satisfaction of its mortgage, the principal balance and accrued
interest of which was $5,748,344 and $29,558, respectively. The
mortgage was previously due and payable on December 31, 1994. For
financial reporting purposes, the forgiveness of principal and accrued
interest, net of transaction expenses, was recorded as an
extraordinary gain of $1,602,902 in the fourth quarter of 1995.
NOTE E - RELATED PARTY TRANSACTIONS:
MANAGEMENT FEES
In accordance with the Partnership Agreement, management fees (at the
rate of 6% of gross leasing receipts) of $428,756, $456,981, and
$410,231 in 1995, 1994 and 1993, respectively, were expensed for
amounts due to First Washington Management, Inc., an affiliate of FW
Realty Limited Partnership, for services rendered in connection with
the leasing and operation of the shopping centers. A portion of these
fees were paid by First Washington Management, Inc. to Legg Mason
Realty Capital, Inc. in consideration of its performance of certain
administrative services.
<PAGE> 45
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-----------------
NOTE E - RELATED PARTY TRANSACTIONS: (continued)
Amounts Due to Related Parties
At December 31, 1995, $576 and $16,896 were payable to First
Washington Management, Inc. and Legg Mason Realty Capital, Inc.,
respectively, for management fees and reimbursement of operating
expenses. At December 31, 1994, $23,536 and $21,196 were payable to
First Washington Management, Inc. and Legg Mason Realty Capital, Inc.,
respectively, for the aforementioned expenses.
The General Partners agreed to lend the Partnership, without interest,
up to 50% of the acquisition fees actually paid to them at the time
the loan was made in the event the annual cumulative non-compounded
return to assignee limited partners fell below 7% of the allocable
invested capital for the period from February 1, 1989 through January
31, 1992. In 1990, the General Partners fulfilled their obligation
under the cash flow protector provisions. As of December 31, 1995 and
1994, cash flow protector loans totalling $789,203 are payable to FW
Realty Limited Partnership in the amount of $599,794 and to Realty
Capital IV Limited Partnership in the amount of $189,409. The loans
are non-interest bearing and will be repaid from distributable cash
flow or sale or refinancing proceeds after the payment of a preferred
return equal to a 10% annual cumulative non-compounded return on
invested capital to assignee limited partners.
In addition, acquisition fees totalling $73,431 were payable as of
December 31, 1995 and 1994 to FW Realty Limited Partnership in the
amount of $55,808 and to Realty Capital IV Limited Partnership in the
amount of $17,623.
Other
In 1995, 1994 and 1993, the Partnership paid or accrued approximately
$25,000, $20,000, and $35,000, respectively, to First Washington
Management, Inc. for legal and architectural services related to the
renovation, leasing and rent collections of the shopping centers. The
Partnership paid or accrued approximately $71,000, $68,000, and
$66,000, in 1995, 1994 and 1993, respectively, to Legg Mason Realty
Capital, Inc. for reimbursement of operating expenses.
In the fourth quarter of 1995, discussions between Realty Capital IV
Limited Partnership on behalf of the Partnership and FWREIT were
reopened regarding the possible sale for cash of the Partnership's
shopping centers to an affiliate of FWREIT and those discussions are
continuing as of the date of the filing of this report. If a sale or
disposition of all of the Partnership's properties were to occur, it
would be followed by a distribution of net proceeds to partners and
liquidation of the Partnership.
<PAGE> 46
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-----------------
NOTE E - RELATED PARTY TRANSACTIONS: (continued)
If an agreement is reached with respect to the basic terms of a sale,
the consummation of the sale would require negotiation of a definitive
agreement and would be subject to obtaining the prior consent of the
holders of a majority of the Units and approval of an amendment of the
Partnership Agreement to permit the sale of properties to an affiliate
of a general partner. There can be no assurance that a transaction
will be successfully negotiated, and, if negotiated, that it would be
approved by the requisite number of Unitholders and thereafter
consummated, which will require satisfaction of various substantive
conditions that will be contained in the agreement.
NOTE F - PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS:
All profits and losses prior to the first date on which assignee
limited partners were admitted to the Partnership were allocated 99.9%
to the general partners and .1% to the assignor limited partner. Upon
admission of the assignee limited partners, the interest of the
general partners was reduced to 1% and the interest of the assignor
limited partner was reduced to zero.
Distributable cash flow is defined in the Partnership Agreement as the
sum of all cash receipts from operations and the principal amount of
loans from the general partners less disbursements for operating cash
expenses. Cash receipts under the master leaseback agreements are
treated as operating receipts in determining distributable cash flow.
Distributable cash flow is payable quarterly as follows:
1. 99% to the assignee limited partners and 1% to the general
partners until each assignee limited partner has received an
annual cumulative return equal to 10% of invested capital; and
2. the balance is distributable 98% to the assignee limited
partners and 2% to the general partners.
Income and loss from operations for each fiscal year is allocated as
follows:
1. If there has been a distribution of distributable cash flow
during such fiscal year, net income from operations shall be
allocated to the assignee limited partners and general partners
in proportion to such distribution of distributable cash flow.
2. If there has been no distribution of distributable cash flow
during such fiscal year, net income from operations shall be
allocated 99% to the assignee limited partners and 1% to the
general partners.
3. Net loss from operations for each fiscal year shall be allocated
99% to the assignee limited partners and 1% to the general
partners.
<PAGE> 47
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-----------------
NOTE F - PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS: (continued)
Sale or refinancing proceeds are distributed first to meet the debts
and obligations of the Partnership and to fund reserves for contingent
liabilities to the extent deemed reasonable by the general partners
and then to the assignee limited partners and general partners in the
order described in section 4.4 of the Partnership Agreement.
Any gain from a sale or refinancing is allocated as follows:
1. To the assignee limited partners and general partners having
negative balances in their capital accounts, prior to
distribution of sale or refinancing proceeds, an amount of such
gain sufficient to increase their negative balances to zero.
2. To each assignee limited partner and general partner who has
received or will receive a distribution out of the sale or
refinancing proceeds, the amount of and in proportion to the
excess of such distribution over the positive balance in his
capital account, determined after any allocation of gain from a
sale or refinancing pursuant to (1) above; and
3. The balance, 75% to the assignee limited partners and 25% to the
general partners.
Any loss from a sale or refinancing shall be allocated 99% to the
assignee limited partners and 1% to the general partners.
NOTE G - SALES AND WRITE-DOWNS OF ASSETS
On December 29, 1995, the Partnership sold Orchard Square shopping
center to an unrelated third party for a contract price of $5,250,000.
At the time of sale, the holder of the Orchard Square mortgage
accepted $3,900,000 in satisfaction of its mortgage, the principal
balance and accrued interest of which were $5,748,344 and $29,558,
respectively. The mortgage on Orchard Square was due and payable on
demand. The Partnership recorded the forgiveness of debt, net of
transaction expenses, as an extraordinary gain of $1,602,902 in the
fourth quarter of 1995. For financial reporting purposes, the
Partnership recorded a loss, after transaction expenses, of $2,271,249
in the fourth quarter of 1995 in connection with the sale of the
Orchard Square property. For federal income tax purposes, the
Partnership recorded a loss, after transaction expenses, of
approximately $2,404,000.
On November 17, 1995, the Partnership completed the sale of a pad site
at its Berkeley Square property to an existing tenant. The contract
price was $217,000, of which $192,000 was applied to pay down the
principal balance of the mortgage debt on Berkeley Square. A gain for
financial reporting and federal income tax purposes of approximately
<PAGE> 48
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-----------------
NOTE G - SALES AND WRITE-DOWNS OF ASSETS: (continued)
$172,000 was recorded in the fourth quarter of 1995 in connection with
this sale.
In the fourth quarter of 1995, the Partnership recorded a charge of
$2,606,156 to reflect the Partnership's revised estimate of net
realizable value of Tarrytown Mall based on the decline in the
appraisal value to $6,100,000 which is below the outstanding balance
of the mortgage debt and accrued interest on the property. The
$2,606,156 represents the sum of the difference of $2,542,295 between
the net book value of Tarrytown Mall's land, building and improvements
and the balance of the mortgage debt and accrued interest as of
December 31, 1995, plus the write-off of $63,861 in tenant rent
receivables related to the recording of rental income on a straight-
line basis.
In the fourth quarter of 1994, the Partnership wrote down assets
totalling $1,587,746 related to Tarrytown Mall and Holiday Shopping
Center. The Partnership recorded a net charge of $1,047,746 for the
write-down of leasehold improvements related to Wholesale Depot, a
former anchor tenant which leased 79,066 square feet at Tarrytown
Mall. The leasehold improvements which were placed in service in
December 1993 were incurred as a direct result of specifications
within the Partnership's lease with Wholesale Depot. Wholesale Depot
filed for reorganization under the provisions of Chapter XI of the
U.S. Bankruptcy Code in May 1994. Wholesale Depot vacated its space
at Tarrytown Mall in late June 1994 and rejected its lease on October
7, 1994.
The additional charge of $540,000 in 1994 represented an adjustment to
the carrying value of Holiday to the Partnership's revised estimate of
the center's net realizable value. This write-down reflected the
Partnership's intention to offer this property for sale in 1995. The
$540,000 represented the difference between Holiday's book value as of
December 31, 1994 and estimated net realizable value from the sale of
the center and operating the center until the sale.
The treatment of these write-downs of assets does not affect cash flow
or taxable income (loss) of the Partnership.
<PAGE> 49
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-----------------
NOTE H - FEDERAL TAXABLE NET LOSS:
A reconciliation of the financial statement net loss to the federal
taxable net loss for the years ended December 31, 1995, 1994 and 1993
is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Financial statement net loss ($3,778,465) ($1,717,157) ($691,862)
Adjustments:
-Write-down of assets for financial statement
purposes 2,606,156 1,587,746 -
-Loss on sale of property (132,709) - -
-Costs depreciated over a life longer for income
tax purposes than financial reporting purposes 7,376 94,897 45,004
-Rent abatements and scheduled rent increases 19,507 (28,059) (98,666)
-Effects of rents collected in advance (14,335) (20,162) 43,255
-Provision for doubtful accounts, net of write-offs (26,835) (66,809) (73,573)
-Other adjustments (63,023) (11,179) (5,928)
Federal taxable net loss ($1,382,328) ($160,723) ($781,770)
</TABLE>
Because many types of transactions are susceptible to varying
interpretations under federal and state income tax laws and
regulations, the amounts reported above may be subject to change at a
later date upon final determination by the taxing authorities.
<PAGE> 50
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNT
------------------------
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED DECEMBER 31,
1995 1994 1993
Allowance for doubtful tenant accounts receivable:
<S> <C> <C> <C>
Balance at beginning of period $353,507 $420,316 $493,889
Reserve charges to costs and expenses 172,159 194,554 108,496
Write-offs during the period (198,993) (261,363) (182,069)
Balance at end of period $326,673 $353,507 $420,316
</TABLE>
<PAGE> 51
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Column A Column B Column C Column D
- ------------------ ------------- ----------------------------- ----------------------------
Costs capitalized subsequent
Initial cost to Partnership to acquisition
Shopping Center/ Building & Carrying
Location Encumbrances Land Improvements Improvements Costs(1)
- ------------------ ------------- ------------ ---------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Woodlawn Village
Fredericksburg, VA $1,832,675 $396,805 $2,298,000 $52,898 $ (129,537)
Lynnwood Place
Jackson, TN 6,320,814 1,271,305 7,809,446 211,762 (269,476)
Highlandtown Village
Baltimore, MD 3,177,097 1,048,889 4,414,076 89,388 (112,422)
Jackson Heights
Murfreesboro, TN 2,051,068 1,012,279 4,078,383 707,266 -
Holiday
Collinsville, VA 257,922 250,103 1,139,358 857,926 (579,500)
Cloister
Ephrata, PA 1,494,717 269,773 2,727,707 236,253 (35,000)
Edgewood Plaza
Harford County, MD 1,397,333 525,755 1,133,771 365,472 -
Berkeley Square
Goose Creek, SC 1,454,215 730,113 2,288,132 1,370,540 (40,733)
Tarrytown Mall
Rocky Mount, NC 7,308,937 2,360,955 6,476,200 5,288,708 (1,479,320)
Quality Center
Lancaster, PA 3,835,833 1,662,556 4,899,369 61,653 (329,538)
----------- ----------- ----------- ----------- ------------
TOTALS $29,130,611 $9,528,533 $37,264,442 $9,241,866 $(2,975,526)
=========== =========== =========== =========== ============
</TABLE>
Note 1. CARRYING COSTS ADJUSTMENTS:
- ------------------------------------
For financial reporting purposes, payments received pursuant to master
leaseback agreements are treated as an adjustment to the carrying value of
the property. Column D - Carrying Costs also includes adjustments to
investments in real estate for sales of property or portions thereof and
write-downs of assets.
<PAGE> 52
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - (Continued)
<TABLE>
Column A Column E Column F Column G Column H Column I
- ------------------ ----------------------------------- -------- -------- -------- --------
Gross amount at which carried Accum- Depre-
at December 31, 1995 (2) ulated Date of ciable
Shopping Center/ Building & Depreci- Construc- Date Life
Location Land Improvements Totals(4) ation(3) tion Acquired (in yrs)
- ------------------ -------- --------------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Woodlawn Village
Fredericksburg, VA $396,758 $2,221,408 $2,618,166 $642,488 1986 12/31/86 31.5
Lynnwood Place
Jackson, TN 1,055,304 7,967,733 9,023,037 2,134,846 1986 07/16/87 31.5
Highlandtown Village
Baltimore, MD 1,048,889 4,391,042 5,439,931 1,156,456 1987 09/16/87 31.5
Jackson Heights
Murfreesboro, TN 1,012,279 4,785,649 5,797,928 1,191,684 1965 09/30/87 31.5
Holiday
Collinsville, VA 250,103 1,417,784 1,667,887 476,102 1967 10/19/87 31.5
Cloister
Ephrata, PA 269,954 2,928,779 3,198,733 714,247 1961 12/30/87 31.5
Edgewood Plaza
Harford County, MD 528,278 1,496,720 2,024,998 300,772 1962 04/14/88 31.5
Berkeley Square
Goose Creek, SC 689,381 3,658,671 4,348,052 783,779 1967 10/03/88 31.5
Tarrytown Mall
Rocky Mount, NC 2,360,955 10,285,588 12,646,543 4,821,964 1963 09/01/88 31.5
Quality Center
Lancaster, PA 1,512,556 4,781,484 6,294,040 1,049,071 1987-88 01/31/89 31.5
----------- ----------- ----------- -----------
TOTALS $9,124,457 $43,934,858 $53,059,315 $13,271,409
=========== =========== =========== ===========
</TABLE>
(2) - (4) See notes attached.
<PAGE> 53
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------
NOTE 2. RECONCILIATION OF REAL ESTATE:
<TABLE>
<CAPTION>
For the period ended December 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $61,191,581 $62,585,715 $60,521,378
----------- ----------- -----------
Additions during period:
Improvements 504,523 275,186 2,064,337
----------- ----------- -----------
Deductions during period:
Sale of shopping center property (8,596,056) - -
Sale of land (40,733) - -
Write-down of assets - (1,669,320) -
----------- ----------- -----------
(8,636,789) (1,669,320) -
----------- ----------- -----------
Balance at end of period $53,059,315 $61,191,581 $62,585,715
=========== =========== ===========
</TABLE>
In 1994, the Partnership wrote down assets totalling $1,669,320 and
accumulated depreciation of $81,574. The Partnership recorded a net charge
of $1,047,746 for the write-down of leasehold improvements related to
Wholesale Depot at Tarrytown Mall. The Partnership recorded an additional
charge of $540,000 to adjust the carrying value of Holiday to the
Partnership's revised estimate of the center's net realizable value as a
result of the expected sale of the center.
NOTE 3. RECONCILIATION OF ACCUMULATED DEPRECIATION:
<TABLE>
<CAPTION>
For the period ended December 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $10,658,778 $9,054,894 $7,456,850
Depreciation expense for the period 1,598,697 1,685,458 1,598,044
Write-down of assets 2,542,295 (81,574) -
Sale of shopping center property (1,528,361) - -
----------- ----------- -----------
Balance at end of period $13,271,409 $10,658,778 $9,054,894
=========== =========== ===========
</TABLE>
In the fourth quarter of 1995, the Partnership recorded a charge of
$2,542,295 to reflect the Partnership's revised estimate of net realizable
value of Tarrytown Mall based on the decline in the appraisal value. The
$2,542,295 represents the sum of the difference between the net book value
of Tarrytown Mall's land, building and improvements and the balance of the
mortgage debt and accrued interest as of December 31, 1995.
NOTE 4. FEDERAL INCOME TAX COST OF INVESTMENT IN REAL ESTATE
The aggregate cost of land and buildings and improvements for federal
income tax purposes is $9,045,687 and $46,311,117, respectively, for a
total cost of $55,356,804 at December 31, 1995.
<PAGE> 54
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
<TABLE>
<CAPTION>
Column A Column B Column C Column D
- ------------------------ ------------ ------------ ------------------------------------
Description of Final Periodic
Shopping Center Interest Maturity Payment
Mortgages/Location Rate Date Terms
- ------------------------ ------------ ------------ ------------------------------------
<S> <C> <C> <C>
First mortgage Level monthly payments of principal
on Woodlawn Village and interest with $1,810,780
Fredericksburg, VA 11.5% 12/01/96 balloon due at maturity (2)
First mortgage Level monthly payments of principal
on Lynnwood Place and interest, with entire principal
Jackson, TN 9.00% 7/10/96 due at maturity
First mortgage Level monthly payments of principal
on Highlandtown Village and interest with $3,091,245
Baltimore, MD 10.125% 12/21/97 balloon due at maturity (3), (4)
First mortgage
on Jackson Heights Level monthly payments of principal
Murfreesboro, TN 10.5% 9/12/98 and interest (5)
75.0% of prime rate
First mortgage adjusted quarterly,
on Holiday with a floor of 6%, Level monthly payments of principal
Collinsville, VA 6.375% at 12/31/95 3/01/99 and interest through maturity (6)
First mortgage Prime rate plus 1.25%, Fixed monthly principal payments
on Cloister with a floor of 7.25%, plus interest with balloon
Ephrata, PA 9.75% at 12/31/95 6/01/98 due at maturity
First priority mortgage 12/31/97,
on Berkeley Square with option to Level monthly payments of principal
Goose Creek, SC 10.13% (7) extend one year and interest (8)
First trust mortgage Prime rate plus 1.5%, Monthly payments of principal
on Tarrytown Mall with a floor of 7.5%, and interest with entire
Rocky Mount, NC 10% at 12/31/95 1/01/99 principal due at maturity
Monthly payments of net cash flow from
Second trust mortgage the property after payment of first
on Tarrytown Mall trust debt service, with principal and
Rocky Mount, NC 8.0% 1/01/99 accrued interest due at maturity
First mortgage
on Edgewood Plaza Level monthly payments of principal
Harford County, MD 8.625% 9/19/00 and interest
First mortgage
on Quality Center Level monthly payments of principal
Lancaster, PA 10.625% 2/01/97(9) and interest
</TABLE>
See notes attached.
<PAGE> 55
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE - (continued)
<TABLE>
<CAPTION>
Column A Column E Column F Column G Column H
- ------------------------ ---------- ------------ ------------ --------------------
Principal amount of
Description of Face Carrying loans subject to
Shopping Center Prior amount of amount of delinquent principal
Mortgages/Location Liens mortgages mortgages(1) or interest
- ------------------------ ---------- ------------ ------------ --------------------
<S> <C> <C> <C> <C>
First mortgage
on Woodlawn Village
Fredericksburg, VA None $1,950,000 $1,832,675 None
First mortgage
on Lynnwood Place
Jackson, TN None 6,600,000 6,320,814 None
First mortgage
on Highlandtown Village
Baltimore, MD None 3,275,000 3,177,097 None
First mortgage
on Jackson Heights
Murfreesboro, TN None 2,450,000 2,051,068 None
First mortgage
on Holiday
Collinsville, VA None 900,000 257,922 None
First mortgage
on Cloister
Ephrata, PA None 1,750,000 1,494,717 None
First priority mortgage
on Berkeley Square
Goose Creek, SC None 1,975,000 1,454,215 None
First trust mortgage
on Tarrytown
Rocky Mount, NC None 2,640,940 1,923,940 None
Second trust mortgage
on Tarrytown Mall
Rocky Mount, NC None 6,500,000 5,384,997 None
First mortgage
on Edgewood Plaza
Harford County, MD None 1,400,000 1,397,333 None
First mortgage
on Quality Center
Lancaster, PA None 4,150,000 3,835,833 None
----------- -----------
Totals $33,590,940 $29,130,611
=========== ===========
</TABLE>
See notes attached.
<PAGE> 56
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE - (continued)
(1) See Note 1 attached.
(2) Prepayment penalty: 1996 - 2% of prepayment.
(3) Prepayment penalty of the amount by which the loan rate exceeds the
yield on U.S. Treasury Notes with a maturity date closest to the loan
maturity date multiplied by the outstanding principle balance due
multiplied by the number of years remaining in the original term.
(4) Minimum prepayment of 1% of prepayment unless total payoff is made
during the final 60 days of the original loan term.
(5) Prepayment penalty of 1% of prepayment.
(6) Prepayment penalty of reasonable fees and expenses to be determined
at the date of prepayment.
(7) The interest rate changes based on the three year treasury constant
maturity as published by the Federal Reserve, plus 2.75%
(8) Prepayment penalty equal to the present value of the difference between
interest to be paid on the loan to maturity (or the next Interest Change
Date) and the interest payments (less 1%) which would be paid on
Treasury Securities issued at the rate available on the prepayment
date, with the same principal and remaining maturity.
(9) The Quality Center loan was scheduled to mature on February 1, 1996.
The lender has agreed to extend the term of this loan for one year,
subject to the completion of the required documentation.
<PAGE> 57
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
----------------------------------
Note 1. RECONCILIATION OF MORTGAGE LOANS:
<TABLE>
<CAPTION>
For the periods ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of period $35,285,891 $34,528,736 $35,004,686
Additions during the period:
Proceeds from long-term debt 1,400,000 2,640,940 -
1,400,000 2,640,940 -
Deductions during period:
Retirement of long-term debt 4,937,500 1,102,392 -
Principal payments 769,436 781,393 475,950
Forgiveness of debt, before
transaction and other costs
of $245,442 1,848,344 - -
7,555,280 1,883,785 475,950
Balance at end of period (a) $29,130,611 $35,285,891 $34,528,736
</TABLE>
(a) The carrying amount of mortgages for federal income tax purposes
was $29,130,611 at December 31, 1995.
<PAGE> 58
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Identification of Directors and Executive Officers
The Partnership does not have officers or directors. The General
Partners of the Partnership are FW Realty Limited Partnership and
Realty Capital IV Limited Partnership. The following tables set forth
the names, ages and positions held by the directors and executive
officers of FW Corporation and LMRC IV, Inc., the respective general
partners of the General Partners.
<TABLE>
<CAPTION>
Positions Held With Relationship to FW Realty
Name FW Corporation Age Limited Partnership
<S> <C> <C> <C>
William J. Wolfe President and Director 43 Limited Partner
Marvin Fabrikant Vice President and Director 51 Limited Partner
Stuart D. Halpert Secretary and Director 53 Limited Partner
Lester Zimmerman Treasurer and Director 46 Limited Partner
Jack E. Spector Director 46 Limited Partner
</TABLE>
<TABLE>
<CAPTION>
Relationship to
Positions Held With Realty Capital IV
Name LMRC IV, Inc. Age Limited Partnership
<S> <C> <C> <C>
Richard J. Himelfarb President and Director 54 none
Gerard F. Petrik, Jr. Vice President and
Director 37 none
L. Kay Strohecker Treasurer 40 none
C. Gregory Kallmyer Secretary 45 none
Robert Kleinpaste Director 49 none
</TABLE>
All of the FW Corporation individuals have served in the capacities
indicated above since 1987 (with the exception of Mr. Wolfe who served
as Vice President until March 31, 1995 when at that time he became
President). The LMRC IV, Inc. individuals have served in the
capacities indicated above since 1990 (with the exception of Gerard F.
Petrik, Jr. and L. Kay Strohecker who were elected to their respective
positions in June 1995). All of the directors and executive officers
will continue to serve in their current capacities until their
successors are elected and qualified.
The following discussion provides certain information regarding the
principal employment and business experience of the executive officers
and directors of the General Partners.
Officers and Directors of FW Corporation
William J. Wolfe is President of FW Corporation, having assumed that
office on March 31, 1995. He has served as a director of FW
<PAGE> 59
Corporation since 1987 and was a Vice President of that company from
1987 until becoming its President. Mr. Wolfe is President, Chief
Executive Officer and a director of First Washington Realty Trust,
Inc., a publicly held real estate investment trust formed in 1994. He
is also President, Chief Executive Officer and a director of First
Washington Management, Inc. Mr. Wolfe is responsible for the day to
day operations of the companies and the leasing of First Washington
Realty Trust, Inc. and First Washington Management, Inc. properties.
He has concentrated on the leasing of newly constructed shopping
centers as well as renovations and expansions. Mr. Wolfe was
President of JNC Enterprises, a diversified real estate development
company, from 1979 until December 1983 when he co-founded First
Washington Development Group, Inc. Mr. Wolfe is a member of the
International Council of Shopping Centers.
Marvin Fabrikant is Vice President and a director of FW Corporation.
Mr. Fabrikant retired from active participation in the operations of
FW Corporation in 1991. Prior to joining First Washington Development
Group, Inc. in June 1984, Mr. Fabrikant was engaged from 1979 to 1984
in commercial real estate acquisition and development with Fabrikant
and Kain, a real estate development firm.
Stuart D. Halpert is Secretary and a director of FW Corporation and
Chairman of First Washington Management, Inc. He is Chairman of First
Washington Realty Trust, Inc., a publicly held real estate investment
trust formed in 1994. Mr. Halpert is involved in the day to day
operations of the companies and in project analysis, selection and
financing. From 1982 until joining First Washington in June 1984, Mr.
Halpert was a practicing attorney with a major Washington, D.C. law
firm. Prior to entering the private practice of law, Mr. Halpert
served as Counsel to the House Committee on Banking and Currency,
United States Congress. Mr. Halpert is a member of the International
Council of Shopping Centers.
Lester Zimmerman is Treasurer and a director of FW Corporation and
Vice President of First Washington Management, Inc. He is Executive
Vice President and a director of First Washington Realty Trust, Inc.,
a publicly held real estate investment trust formed in 1994. Mr.
Zimmerman specializes in market analysis, project selection and sales.
He is a licensed real estate broker and has had experience in
commercial brokerage, specializing in the sale of major office and
apartment projects. Mr. Zimmerman also serves as President and a
director of First Capital Realty, Inc., an affiliated entity. Mr.
Zimmerman was a real estate broker with Carey Winston, a commercial
real estate brokerage company, from 1978 to 1981, and from 1981 until
joining First Washington in 1984 was employed as an independent real
estate broker.
Jack E. Spector is a director of FW Corporation, having served as a
director since 1987. From 1987 to March 31, 1995, he was the
President of FW Corporation. Mr. Spector was Executive Vice President
<PAGE> 60
of First Washington Management, Inc. from 1984 until March 31, 1995
when he resigned to become a business and real estate consultant. He
was Executive Vice President of First Washington Realty Trust, Inc., a
publicly held real estate investment trust formed in 1994 until March
1995. Mr. Spector is a Certified Public Accountant and prior to
joining First Washington Management, Inc., he was associated with
Grant Thornton, a national accounting firm. Mr. Spector is a member
of the American Institute of Certified Public Accountants.
One or both of Stuart D. Halpert and Marvin Fabrikant, individually,
are general partners of three real estate investment limited
partnerships, Elizabeth Associates Limited Partnership, Jamestown
Associates Limited Partnership, and Sterling Investments, which filed
for protection under Chapter XI of the U.S. Federal Bankruptcy Code in
February of 1992. The voluntary filing was precipitated by the
default in payments on a shared "blanket" first trust loan covering
shopping center properties owned by the partnerships, and the refusal
of the lender to extend it. The loan was without personal recourse to
Mr. Halpert and Mr. Fabrikant and the properties were generating cash
flow in excess of debt service. Neither Mid-Atlantic Centers Limited
Partnership nor any property in which it has an interest was involved
in these proceedings. The partnerships and the lender reached
consensual agreement in May 1993 and the petitions were dismissed
prior to the filing of any Plan of Reorganization.
Jack E. Spector, Lester Zimmerman, William J. Wolfe, Stuart D.
Halpert, and Marvin Fabrikant are general partners of SP Limited
Partnership, a real estate investment limited partnership which filed
for protection under Chapter XI of the U.S. Federal Bankruptcy Code in
August 1992. The voluntary filing was precipitated by the impending
maturity of a loan and the lender unwilling to enter into a loan
extension on terms acceptable to the partnership. On July 30, 1993,
the Fourth Amended Plan of Reorganization was confirmed by the
Bankruptcy Court. Neither Mid-Atlantic Centers Limited Partnership
nor any property in which it has an interest is involved in these
proceedings.
Officers and Directors of LMRC IV, Inc. and LM Unit Trust, Inc.
Richard J. Himelfarb is President and a director of LMRC IV, Inc. and
Legg Mason Realty Capital, Inc. He is Senior Executive Vice President
and a director of Legg Mason, Inc. and Legg Mason Wood Walker, Inc.
Mr. Himelfarb has senior management responsibility for the Corporate
Finance, Real Estate Finance and Direct Investments Departments of
Legg Mason Wood Walker, Inc. From 1972 until he joined Legg Mason,
Inc. in 1983, Mr. Himelfarb was a partner in the Baltimore law firm of
Weinberg and Green, where he served as senior outside counsel for Legg
Mason, Inc. He is a graduate of the Johns Hopkins University and the
Yale Law School.
Gerard F. Petrik, Jr. is Vice President and a director of LMRC IV,
<PAGE> 61
Inc. and Legg Mason Realty Capital, Inc. He is Vice President of Legg
Mason Wood Walker, Inc. Mr. Petrik joined Legg Mason in April 1987
and serves as manager of the Direct Investments Department. Prior to
his employment at Legg Mason, Mr. Petrik was a senior associate at
Paine Webber Properties, Inc. Mr. Petrik received his undergraduate
and graduate degrees from Loyola College.
L. Kay Strohecker is Treasurer of LMRC IV, Inc. She is Assistant Vice
President of Legg Mason Wood Walker, Inc. Ms. Strohecker joined Legg
Mason in 1988 and serves as a senior analyst and assistant to Legg
Mason, Inc.'s Chief Financial Officer. Prior to joining Legg Mason,
Ms. Strohecker was controller for a private corporation in Baltimore.
Ms. Strohecker is a graduate of the University of Baltimore and is a
Certified Public Accountant.
C. Gregory Kallmyer is Secretary of LMRC IV, Inc. He is Vice
President of Legg Mason Wood Walker, Inc. Mr. Kallmyer joined Legg
Mason in October 1985 and serves as the assistant to the Director of
Compliance. Prior to his employment at Legg Mason, Mr. Kallmyer was
Vice President, Secretary and Director of Legal Affairs at Union Trust
Bancorp. Mr. Kallmyer is a graduate of Mt. St. Mary's College and the
University of Baltimore School of Law.
Robert Kleinpaste is a director of LMRC IV, Inc. He is President of
Regency Homes Corporation, an Annapolis, Maryland home builder. From
1990 until 1994, he was President of Legg Mason Realty Group, Inc.
which is the real estate consulting and appraisal subsidiary of Legg
Mason, Inc. Prior to joining Legg Mason Realty Group, Inc. as a Vice
President in 1986, he was President and founder of Real Property
Research Group, Inc. That firm was acquired by Legg Mason, Inc. in
December 1986. Before founding his own firm in 1978, Mr. Kleinpaste
was Vice President of Marketing for Chesapeake Homes, Inc. and prior
to that served as Executive Vice President of Briggs Napier
Consultants, Inc., a real estate marketing consulting firm. He is a
graduate of the University of Maryland.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership is a limited partnership and therefore has no
directors or executive officers.
The General Partners and their affiliates are entitled to receive
various fees, distributions of distributable cash flow and sale or
refinancing proceeds and allocations of net income and net loss from
operations and gain or loss from a sale or refinancing from the
Partnership. Pages 10-14 of the Prospectus under the caption
MANAGEMENT COMPENSATION describe the manner in which fees are to be
paid, and pages 59-62 of the Prospectus under the caption PARTNERSHIP
DISTRIBUTIONS AND ALLOCATIONS describe the manner in which cash
distributions are to be made to the General Partners and their
Affiliates. These sections of the Prospectus are incorporated by
<PAGE> 62
reference herein.
A description of the amounts, and sources of payment of, the fees and
other compensation paid or accrued by the Partnership to the General
Partners and their affiliates for the fiscal year ended December 31,
1995 is included in Note E of Notes to Financial Statements
incorporated by reference from Item 8. Financial statements and
Supplementary Data of this Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information, as of March 31,
1996, with respect to the beneficial ownership of the Units by
individuals who are officers and/or directors of the corporate general
partners of the General Partners:
<TABLE>
<CAPTION>
Name Number of Units Percent of Class
<S> <C> <C>
Richard J. Himelfarb 80 (1)
Legg Mason Tower
111 South Calvert Street
Baltimore, Maryland 21202
Jack E. Spector 200 (2) (1)
c/o First Washington Management, Inc.
4350 East-West Highway
Bethesda, Maryland 20814
All executive officers and directors
as a group 280 (1)
</TABLE>
(1) Indicates less than 1%
(2) Mr. Spector disclaims direct beneficial ownership of these Units
owned by his wife as custodian for their minor child.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions With Management and Others
The Partnership is a limited partnership and therefore has no
directors or officers. The Partnership has engaged in no transactions
with individual officers or directors of FW Corporation or LMRC IV,
Inc., the General Partners of the Partnership. Those officers and
directors may have indirect interests in amounts paid to the General
Partners and their affiliates for services rendered by them to the
Partnership. A description of the amounts of and sources of payment
of the fees and other compensation paid or accrued by the Partnership
to the General Partners and their affiliates for the fiscal year ended
December 31, 1995 is incorporated by reference from Item 11.
Executive Compensation of this Annual Report on Form 10-K.
<PAGE> 63
During late 1993 and into 1994, affiliates of Realty Capital IV
Limited Partnership discussed the possible sale of the Partnership's
shopping centers to a limited partnership, of which a real estate
investment trust ("FWREIT") formed by affiliates of FW Realty Limited
Partnership serves as the sole general partner. These discussions
were discontinued without reaching any agreement as the stock market
valuations of real estate investment trusts owning strip and
neighborhood shopping centers fell and the Partnership's portfolio
experienced significant issues potentially affecting values at
Tarrytown Mall, Quality Center and Orchard Square.
In the fourth quarter of 1995, discussions between Realty Capital IV
Limited Partnership on behalf of the Partnership and FWREIT were
reopened regarding the possible sale for cash of the Partnership's
shopping centers to an affiliate of FWREIT and those discussions are
continuing as of the date of the filing of this report. If a sale or
disposition of all of the Partnership's properties were to occur, it
would be followed by a distribution of net proceeds to partners and
liquidation of the Partnership.
If an agreement is reached with respect to the basic terms of a sale,
the consummation of the sale would require negotiation of a definitive
agreement and would be subject to obtaining the prior consent of the
holders of a majority of the Units and approval of an amendment of the
Partnership Agreement to permit the sale of properties to an affiliate
of a general partner. There can be no assurance that a transaction
will be successfully negotiated, and, if negotiated, that it would be
approved by the requisite number of Unitholders and thereafter
consummated, which will require satisfaction of various substantive
conditions that will be contained in the agreement.
(b) Certain Business Relationships
The Partnership has entered into certain arrangements with the General
Partners and their affiliates whereby they will receive fees,
commissions, compensation and other income from transactions that have
not and will not be determined on the basis of arms-length
negotiations. The Partnership Agreement generally requires the terms
of such transactions to be no less favorable to the Partnership than
the terms obtainable from nonaffiliated entities rendering similar
services on an ongoing basis in the same geographic region. The types
of business transactions and the amounts payable in connection
therewith are described on pages 10-14 of the Prospectus under the
caption MANAGMENT COMPENSATION, pages 14-17 of the Prospectus under
the caption CONFLICTS OF INTEREST, pages 24-26 of the Prospectus under
the caption MANAGEMENT, and pages 37-39 of the Prospectus under the
caption INVESTMENT OBJECTIVES AND POLICIES. These sections of the
Prospectus are incorporated by reference herein. A description of the
amounts paid to the General Partners or their affiliates during the
fiscal year ended December 31, 1995 are set forth in Note E of the
Notes to Financial Statements incorporated by reference from Item 8.
<PAGE> 64
Financial Statements and Supplementary Data.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements and Financial Statement Schedules
(1) See Index to Financial Statements and Financial Statement
Schedules on Page 35.
<TABLE>
(2) Exhibits
<S> <C>
3.1 Third Amended and Restated Agreement and Certificate of Limited
Partnership. (1)
3.2 Third Certificate of Amendment to Third Amended and Restated Agreement
and Certificate of Limited Partnership. (3)
3.3 Second Certificate of Amendment to Third Amended and Restated
Agreement and Certificate of Limited Partnership. (3)
3.4 First Certificate of Amendment to Third Amended and Restated Agreement
and Certificate of Limited Partnership. (3)
4.1 Third Amended and Restated Agreement and Certificate of Limited
Partnership. (1)
4 The Partnership hereby agrees, pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K, to furnish to the Commission upon request a copy of
each instrument with respect to the rights of holders of the Edgewood
Plaza long-term debt of the Partnership.
10.1 Form of Shopping Center Management and Leasing Agreement. (2)
10.2 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Food Lion, Inc. (3)
10.3 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Revco Drug Centers of Virginia Inc. (3)
10.4 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
The Kroger Company. (3)
10.5 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Santoni's Markets Incorporated. (3)
10.6 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Rite-Aid of Maryland, Inc. (3)
10.7 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Family Dollar Stores of Martinsville, Virginia, Inc. (3)
10.8 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Southeastern Outdoorsman, Inc. (3)
10.9 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Noland Company, Inc. (3)
10.10 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
The Grand Union Company. (3)
10.11 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
The Reed Company. (3)
10.12 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
<PAGE> 65
<S> <C>
Family Dollar Stores of Pennsylvania, Inc. (3)
10.13 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
R.H. Properties Co. D/B/A New Ephrata Farmer's Market. (3)
10.14 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Santoni's, Inc. (3)
10.15 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
People's Service Drug Stores, Inc. (3)
10.16 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Montgomery Ward Co., Inc. (3)
10.17 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
S.E. Nichols, Inc. (3)
10.18 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Robert E. Lawlar. (3)
10.19 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Ottis T. Cato D/B/A Bingo Time. (3)
10.20 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Housewares Merchandisers, Inc. (3)
10.21 First Addendum to that certain contract between First Washington
Development Group, Inc. and BPT Lynnwood Place Associates, LTD. dated
March 11, 1987. (3)
10.22 Escrow Agreement between BPT Lynnwood Place Associates, Ltd. and Mid-
Atlantic Centers Limited Partnership (pursuant to First Addendum to
the Contract) dated July 16, 1987. (3)
10.23 Lease Guarantee Agreement between Mid-Atlantic Centers Limited
Partnership and The Mitchell Company dated December 30, 1987. (3)
10.24 Escrow Agreement between The Mitchell Company, Mid-Atlantic Centers
Limited Partnership and Mid-South Title Insurance Corporation dated
December 30, 1987. (3)
10.25 First Amendment of Real Estate Purchase Contract between First
Washington Development Group, Inc. and Five Shopping Center Co. dated
December 7, 1987. (3)
10.26 First Addendum to Real Estate Purchase Contract between Quality
Centers/Lancaster Limited Partnership and First Washington Development
Group, Inc. dated September 13, 1988. (3)
10.27 Escrow Agreement between Fidelity Title & Guaranty Company, Quality
Centers/Lancaster Limited Partnership and Mid-Atlantic Centers Limited
Partnership dated January 31, 1989. (3)
10.28 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Southeastern Health Spa, Inc. (4)
10.29 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Frensleys, Inc. (4)
10.30 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Nike Retail Services, Inc. (4)
10.31 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Wanda Fay Toney and T.A. Coats, Jr. (5)
10.32 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Video Vibes.(6)
10.33 Modification of Promissory Note and Statement of Loan Status between
Mid-Atlantic Centers Limited Partnership and The Mitchell Company. (7)
10.34 Supplemental agreement by and between Mid-Atlantic Centers Limited
Partnership and Montgomery Ward & Co., Incorporated amending lease
<PAGE> 66
<S> <C>
agreement included as Exhibit 10.16 of Form 10-K for the year ended
December 31, 1988. (7)
10.35 Lease agreement by and between Mid-Atlantic Centers Limited
Partnership and Wholesale Depot Holding Company, Inc. (7)
10.36 Amended and Restated Nonrecourse Purchase Money Promissory Note dated
January 13, 1994. (8)
10.37 Amendment to Note, Deed of Trust and Other Loan Documents dated
January 13, 1994. (8)
10.38 Promissory Note ($196,710.00) dated January 13, 1994. (8)
10.39 Loan Agreement between Mid-Atlantic Centers and FirstTrust Bank dated
January 13, 1994. (8)
10.40 Promissory Note between Mid-Atlantic Centers and FirstTrust Bank dated
January 13, 1994. (8)
10.41 Lease agreement by and between Mid-Atlantic Centers Limited
Partnership and W.S. Badcock Corporation. (8)
10.42 Purchase and Sale Agreement between Mid-Atlantic Centers
Limited Partnership, RRC Acquisitions, Inc. and Ulmer,
Murchison, Ashby and Taylor dated December 29, 1995.
27.1 Financial Data Schedule.
28.1 Letter of Valuation for 11 Shopping Center Properties as of
January 1, 1993. (6)
28.2 Pages 10-14 of the Registrant's Prospectus dated March 25,
1987. (1)
28.3 Pages 14-17 of the Registrant's Prospectus dated March 25,
1987. (1)
28.4 Pages 24-26 of the Registrant's Prospectus dated March 25,
1987. (1)
28.5 Pages 37-39 of the Registrant's Prospectus dated March 25,
1987. (1)
28.6 Pages 59-62 of the Registrant's Prospectus dated March 25,
1987. (1)
28.7 Page 66 of the Registrant's Prospectus dated March 25,
1987. (1)
28.8 Letter of Valuation for 11 Shopping Centers as of January 1,
1994. (8)
28.9 Letter of Valuation for 11 Shopping Centers as of November 30,
1994. (9)
28.10 Letter of Valuation for Ten Shopping Centers as of January 1,
1996
</TABLE>
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-11 under the Securities Act of 1933 (File No. 33-11086).
(2) Incorporated by reference to Amendment No. 3 to the Registrant's
Registration Statement on Form S-11 under the Securities Act of 1933
(File No. 33-11086).
(3) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1988 pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (File No. 0-16285).
(4) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1989 pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (File No. 0-16285).
(5) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1990 pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (File No. 0-16285).
(6) Incorporated by reference to the Registrant's Annual Report on Form
<PAGE> 67
10-K for the fiscal year ended December 31, 1992 pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (File No. 0-16285).
(7) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1993 pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (File No. 0-16285).
(8) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1993 pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (File No. 0-16285).
(9) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (File No. 0-16285).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter
ended December 31, 1995.
<PAGE> 68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
By: Realty Capital IV Limited Partnership,
General Partner
By: LMRC IV, Inc., General Partner
/s/ Richard J. Himelfarb
----------------------------------------------
Richard J. Himelfarb, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Title
Signature (Position held with LMRC IV, Inc.) Date
President and Director
/s/ Richard J. Himelfarb (Principal Executive Officer) April 1, 1996
Richard J. Himelfarb
Vice President and
/s/ Gerard F. Petrik, Jr. Director April 1, 1996
Gerard F. Petrik, Jr.
Treasurer (Principal Financial
/s/ L. Kay Strohecker and Accounting Officer) April 1, 1996
L. Kay Strohecker
/s/ Robert T. Kleinpaste Director April 1, 1996
Robert T. Kleinpaste
<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
By: FW Realty Limited Partnership,
General Partner
By: FW Corporation, General Partner
/s/ William J. Wolfe
---------------------------------------------
William J. Wolfe, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Title
Signature (Position held with FW Corporation) Date
President and Director
/s/ William J. Wolfe (Principal Executive Officer) April 1, 1996
William J. Wolfe
/s/ Marvin Fabrikant Vice President and Director April 1, 1996
Marvin Fabrikant
/s/ Stuart D. Halpert Secretary and Director April 1, 1996
Stuart D. Halpert
/s/ Lester Zimmerman Treasurer and Director April 1, 1996
Lester Zimmerman
/s/ Jack E. Spector Director April 1, 1996
Jack E. Spector
[DESCRIPTION] EXHIBIT 10.42
<PAGE> 1
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of the 29th day
of December, 1995, between MID-ATLANTIC CENTERS LIMITED
PARTNERSHIP, a Maryland limited partnership ("Seller"), RRC
ACQUISITIONS, INC., a Florida corporation ("Buyer"), and ULMER,
MURCHISON, ASHBY & TAYLOR, a professional association organized
under the laws of Florida ("Escrow Agent").
Background
Buyer wishes to purchase from Seller, and Seller wishes to
sell to Buyer, a shopping center in Cobb County, Atlanta,
Georgia, owned by Seller, known as the ORCHARD SQUARE SHOPPING
CENTER (the "Shopping Center"), in accordance with, and subject
to, the terms and conditions hereinafter set forth;
In consideration of the mutual agreements herein, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Seller agrees to sell to Buyer and
Buyer agrees to purchase from Seller the Property (as hereinafter
defined) on the following terms and conditions:
DEFINITIONS
As used in this Agreement, the following terms shall have
the following meanings:
1.1 Agreement means this instrument as it may be amended
from time to time.
1.2 Allocation Date means the close of business on the day
immediately prior to the Closing Date.
1.3 Closing means generally the execution and delivery of
those documents and funds necessary to effect the sale of the
Property by Seller to Buyer in accordance with the terms and
conditions of this Agreement.
1.4 Closing Date means December 29, 1995.
1.5 Contracts means all service contracts listed on Exhibit
1.5 attached hereto which are to be assigned by Seller to Buyer
at Closing, all of which are terminable by Buyer without penalty
or premium upon not more than thirty (30) days notice except as
otherwise noted therein.
1.6 Earnest Money Deposit means the deposit delivered to
Seller at Closing as part of the payment of the Purchase Price
pursuant to Section 2.2 of this Agreement, together with the
earnings thereon, if any.
<PAGE> 2
1.7 Escrow Agent means the party described as such in the
introductory paragraph hereof and any successor escrow agent
appointed by the mutual written agreement of the parties hereto.
1.8 Environmental Claim means any investigation, written
notice, violation, demand, allegation, action, suit, injunction,
judgment, order, consent decree, penalty, fine, lien, proceed-
ing, or claim (whether administrative, judicial, or private in
nature) arising (a) pursuant to, or in connection with, an actual
or alleged violation of, any Environmental Law, (b) in connection
with any Hazardous Material or actual or alleged Hazardous
Material Activity, (c) from any abatement, removal, remedial,
corrective, or other response action in connection with a
Hazardous Material, Environmental Law or other order of a
governmental authority or (d) from any actual or alleged damage,
injury, threat, or harm to health, safety, natural resources, or
the environment.
1.9 Environmental Law means any current legal requirement
in effect at the Closing Date pertaining to (a) the protection of
health, safety, and the indoor or outdoor environment, (b) the
conservation, management, protection or use of natural resources
and wildlife, (c) the protection or use of source water and
groundwater, (d) the management, manufacture, possession,
presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous
Material or (e) pollution (including any Release to air, land,
surface water, and groundwater); and includes, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 USC 9601
et seq., Solid Waste Disposal Act, as amended by the Resource
Conservation Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 USC 6901 et seq., Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, 33 USC 1251 et
seq., Clean Air Act of 1966, as amended, 42 USC 7401 et seq.,
Toxic Substances Control Act of 1976, 15 USC 2601 et seq.,
Hazardous Materials Transportation Act, 49 USC App. 1801,
Occupational Safety and Health Act of 1970, as amended, 29 USC
651 et seq., Oil Pollution Act of 1990, 33 USC 2701 et seq.,
Emergency Planning and Community Right-to-Know Act of 1986, 42
USC App. 11001 et seq., National Environmental Policy Act of
1969, 42 USC 4321 et seq., Safe Drinking Water Act of 1974, as
amended by 42 USC 300(f) et seq., and any similar, implementing
or successor law, any amendment, rule, regulation, order or
directive, issued thereunder.
1.10 Governmental Approval means any permit, license,
variance, certificate, consent, clearance, closure, exemption,
decision, action or approval of a governmental authority.
1.11 Hazardous Materials means any "Hazardous Substance" as
defined in any Environmental Law in effect at the pertinent date
or dates other than such substances which are used in the normal
and ordinary course of business in the operation and maintenance
of the Property and are stored in appropriate containers.
<PAGE> 3
1.12 Hazardous Material Activity means any activity, event,
or occurrence at or prior to the Closing Date involving a
Hazardous Material, including, without limitation, the
manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, Release, threatened
Release, abatement, removal, remediation, handling or corrective
or response action to any Hazardous Material.
1.13 Improvements means any buildings, structures or other
improvements situated on the Real Property.
1.14 Inspection Period means the period of time which
expires on December 29, 1995.
1.15 Leases means all leases between Seller as landlord and
tenants permitting tenants to occupy all or a portion of the
Property as set forth in the Rent Roll attached hereto as Exhibit
1.15.
1.16 Materials means Seller's right, title and interest in
and to all plans, drawings, specifications, soil test reports,
environmental reports, market studies, surveys, and similar
documentation, if any, owned by or in the possession of Seller
with respect to the Property, Improvements and any proposed
improvements to the Property, which Seller may lawfully transfer
to Buyer except that, as to financial and other records,
Materials shall include only photostatic copies.
1.17 Permitted Exceptions means only the following
interests, liens and encumbrances:
(a) Liens for ad valorem taxes not yet due;
(b) Rights of tenants under Leases;
(c) The matters noted on Exhibit 1.17(c) attached
hereto; and
(d) Other matters determined by Buyer to be
acceptable.
1.18 Personal Property means all of Seller's right, title
and interest in and to (a) sprinkler, plumbing, heating,
air-conditioning, electric power or lighting, incinerating,
ventilating and cooling systems, with each of their respective
appurtenant furnaces, boilers, engines, motors, dynamos,
radiators, pipes, wiring and other apparatus, equipment and
fixtures, elevators, partitions, fire prevention and
extinguishing systems located in or on the Improvements, (b) all
Materials, and (c) all other personal property used in
connection with the Improvements, provided the same are now owned
or are acquired by Seller prior to the Closing.
1.19 Property means collectively the Real Property, the
Improvements and the Personal Property.
<PAGE> 4
1.20 Prorated means the allocation of items of expense or
income between Buyer and Seller based upon that percentage of the
time period as to which such item of expense or income relates
which has expired as of the date at which the proration is to be
made.
1.21 Purchase Price means the consideration agreed to be
paid by Buyer to Seller for the purchase of the Property as set
forth in Section 2.1(a) (subject to the adjustments expressly
provided in Sections 2.1[b] and [c] herein).
1.22 Real Property means the real property more
particularly described on Exhibit 1.22.
1.23 Release means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the indoor or outdoor environment,
including, without limitation, the abandonment or discarding of
barrels, drums, containers, tanks, and other receptacles
containing or previously containing any Hazardous Material at or
prior to the Closing Date.
1.24 Buyer means the party identified as Buyer on the
initial page hereof and such assigns as may be permitted in
accordance with Section 12.10 hereof.
1.25 Shopping Center means the Shopping Center identified
on the initial page hereof.
1.26 Survey means the survey of the Real Property dated
December 7, 1995, prepared by David A. Burre & Associates, Inc.
under Project # 95-2017.
1.27 Seller means the party identified as Seller on the
initial page hereof.
1.28 Title Defect means any exception in the Title
Insurance Commitment other than a Permitted Exception.
1.29 Title Insurance means an ALTA Form B Owners Policy of
Title Insurance for the full Purchase Price insuring marketable
title in Buyer in fee simple, subject only to the Permitted
Exceptions, issued by Commonwealth Land Title Insurance Company
or such other title insurer acceptable to Buyer.
1.30 Title Insurance Commitment means a binder whereby the
title insurer agrees to issue the Title Insurance to Buyer.
1.31 Transaction Documents means this Agreement, the deed
conveying the Property, the assignment of leases, the bill of
sale conveying the Personal Property and all other documents
required by the provisions of this Agreement in connection with
the transactions contemplated hereby.
2. PURCHASE PRICE AND PAYMENT
<PAGE> 5
2.1 Purchase Price; Payment.
(a) Purchase Price and Terms. The total Purchase
Price for the Property (subject to the adjustments provided in
Sections 2.1[b] and [c] below) shall be Five Million Two Hundred
Fifty Thousand Dollars ($5,250,000). The Purchase Price shall be
paid to Seller in cash in immediately available funds by bank
wire transfer at Closing.
(b) Adjustments to the Purchase Price. The
Purchase Price shall be adjusted as of the Closing Date by:
(1) subtracting the portion of the current
year's real and tangible personal property taxes payable or paid
by Buyer for the period from January 1, of that year, through the
Allocation Date (if the amount of the current year's property
taxes are not available on the Allocation Date, such taxes will
be prorated based upon the prior year's assessment) or adding any
real and/or tangible personal property taxes actually paid by
Seller in respect of that portion of such year occurring on or
after the Allocation Date; and
(2) subtracting the amount of security
deposits, prepaid rents from tenants under the Leases and
subtracting or adding, as applicable, any other items customarily
prorated in a transaction of this nature. By adjusting the
Purchase Price by the amount of the security deposits, the
security deposits shall be deemed to have been transferred from
Seller to Buyer thereby. Any percentage rents or tenant
reimbursements payable after the Allocation Date but applicable
to periods prior to the Allocation Date (e.g., including ,
without limitation, the year end common area maintenance
reconciliation and other pass-throughs billed or to be billed to
A&P and Big B Drugs) shall be remitted to Seller by Buyer within
thirty (30) days after receipt. Seller agrees to remit to Buyer
promptly after receipt, Buyer's portion of December, 1995 rents
and tenant reimbursements prorated as of the Allocation Date, and
all post-Allocation Date rents and other tenant reimbursements in
respect of periods after the Allocation Date and received by
Seller after Closing from tenants in the Property under their
Leases. Buyer shall have no obligation to collect delinquencies,
but should Buyer collect any delinquent rents or other sums which
cover periods prior to the Allocation Date and for which Seller
has received no proration or credit, Buyer shall remit same to
Seller within thirty (30) days after receipt, less any costs of
collection. Buyer will not interfere in Seller's efforts to
collect sums due it whether prior to or after the Closing, except
that hereafter Seller shall not seek to terminate the occupancy
or tenancy of any tenant other than in accordance with the
provisions of Section 4.6 hereof. After Closing Seller shall
retain the right to bring a cause of action against tenants to
collect amounts due from tenants owed to Seller in respect of
periods prior to Closing, but Seller shall advise Buyer prior to
doing so. Buyer's approval shall not be required for Seller to
bring such a cause of action against tenants.
(c) At Closing, Seller shall pay to Buyer
the sum of One Hundred Two Thousand Five Hundred Dollars
($102,500) from the proceeds of the Purchase Price for use by
Buyer to supplement the rentals payable from tenants of the
Shopping Center.
<PAGE> 6
2.2 Earnest Money Deposit. An Earnest Money Deposit in the
amount of $25,000 in cash in immediately available funds shall be
paid by Buyer to Seller at Closing as part of the payment of the
Purchase Price.
2.3 Closing Costs.
(a) Seller shall pay:
(1) Seller's attorneys' fees relating to
the sale of the Property;
(2) Cost of satisfying any record liens on
the Property, (subject to the satisfaction of the condition
precedent set forth in Section 8.2[d] hereof) and all documentary
stamp taxes and/or other transfer/recording taxes imposed by any
governmental entities on recording the deed;
(3) Costs, if any, of curing title defects
and recording any curative title documents, but only if and to
the extent that Seller, in its sole discretion, hereafter agrees
to cure and pay the same (except that Seller hereby agrees to pay
or bond off any mechanic's or materialmen's liens on Seller's
title to the Property for work performed or claimed to be
performed for Seller prior to Closing); and
(4) All broker's commissions, finders' fees
and similar expenses incurred by Seller in connection with the
sale of the Property, subject however to Buyer's indemnity given
in Section 5.3 of this Agreement.
(b) Buyer shall pay:
(1) Buyer's attorneys' fees;
(2) Cost of Buyer's due diligence
inspection;
(3) Costs of environmental site assessments
obtained by Buyer, Survey and the title insurance premium and
search charges; and
(4) All costs, fees, taxes and other
amounts arising in connection with any financing to be obtained
by Buyer.
2.4 Prorations. Matters of income and expense shall be
prorated as of the Allocation Date.
<PAGE> 7
3. INSPECTION PERIOD AND CLOSING
3.1 Inspection Period.
(a) Buyer agrees that it will have the Inspection
Period to physically inspect the Property, review the economic
data, underwrite the tenants and review their leases, and to
otherwise conduct its due diligence review of the Property and
all books, records and accounts of Seller related thereto. Buyer
hereby agrees to indemnify and hold Seller harmless from any
damages, liabilities or claims for property damage or personal
injury arising out of such inspection and investigation by Buyer
or its agents or independent contractors, and such indemnity
obligation of Buyer shall survive any termination of this
Agreement notwithstanding anything contained herein to the
contrary. Within the Inspection Period, Buyer may, in its sole
discretion and for any reason or no reason, elect to go forward
with this Agreement to closing, which election shall be made by
notice to Seller given within the Inspection Period. If such
notice is not timely given, this Agreement and all rights, duties
and obligations of Buyer and Seller hereunder, except any which
expressly survive termination, shall terminate and Escrow Agent
shall forthwith return to Buyer the Earnest Money Deposit. If
Buyer so elects to go forward, the Earnest Money Deposit shall
not be refundable except upon the terms otherwise set forth
herein. Buyer recognizes that the Property is being sold
hereunder on an "as is", "where is" "with all faults" basis, with
no warranty or representation of any kind from Seller regarding
the condition of the Property, compliance of the Property with
applicable laws or otherwise, except as expressly stated in this
Agreement.
(b) Buyer, through its officers, employees and other
authorized representatives, shall have the right to reasonable
access to the Property and all records of Seller related thereto,
at reasonable times and in a reasonable manner which does not
interfere with the rights of tenants or others at the Property or
the normal operation of the Property during the Inspection Period
for the purpose of inspecting the Property, taking soil borings,
conducting Hazardous Materials inspections and reviewing the
books and records of Seller concerning the Property. Seller
shall cooperate with Buyer in making such inspections and
reviews. Seller shall give Buyer any reasonable authorizations
which may be reasonably requested by Buyer in order to gain
access to records or other information pertaining to the Property
or the use thereof maintained by any governmental or quasi-
governmental authority or organization. Buyer, for itself and
its agents, agrees not to enter into any contract with existing
tenants without the written consent of Seller if such contract
would be binding upon Seller. Buyer shall have the right to have
due diligence interviews and other discussions or negotiations
with tenants if and only if the same are arranged through Seller.
Seller's authorized representative will be afforded an
opportunity to be present.
(c) Buyer, through its officers or other authorized
representatives, shall have the right to reasonable access to all
Materials (other than privileged or confidential litigation
materials) for the purpose of reviewing and copying the same.
Buyer shall maintain all information obtained concerning the
Property confidential and shall not disclose the same to others
prior to Closing except to its employees, independent
contractors, attorneys, accountants, lenders and prospective
<PAGE> 8
lenders, and consultants in connection with proceeding to
Closing. In the event that Buyer does not proceed to Closing,
Buyer shall promptly return to Seller all documents and
information obtained from Seller with respect to the Property.
3.2 Hazardous Material. During the Inspection Period Buyer
may cause a "Phase 1" assessment of the Property to be made, and
a copy of any report shall be submitted to Buyer and Seller
promptly upon its completion, if made. If the inspection report
discloses the existence of any Hazardous Material, Buyer may
notify Seller in writing, within fifteen (15) business days after
receipt of the Phase 1 assessment report or by the Closing Date,
whichever is earlier, that it elects to terminate this Agreement,
whereupon, except for the provisions hereof which expressly
survive the termination of this Agreement, this Agreement shall
terminate and Escrow Agent shall return to Buyer its Earnest
Money Deposit.
3.3 Time and Place of Closing. Unless otherwise agreed in
writing by the parties, the Closing shall take place at the
offices of Escrow Agent in Jacksonville, Florida, at 10:00 A.M.
on the Closing Date. Seller may effect Closing by mail. Time is
of the essence in Closing on the Closing Date.
4. WARRANTIES, REPRESENTATIONS AND COVENANTS OF SELLER
Seller warrants and represents to the best of its actual
knowledge (but not limited to the best of Seller's actual
knowledge with respect to Sections 4.1, 4.2 and 4.3 below) as
follows as of the date of this Agreement and where expressly
indicated covenants and agrees as follows:
4.1 Organization; Authority. Seller is a limited
partnership duly organized, validly existing and in good standing
under the laws of the state of its organization and is qualified
to do business in the state in which the Shopping Center is
located, and has full power and authority to enter into and
perform this Agreement in accordance with its terms, and the
persons executing this Agreement and other Transaction Documents
have been duly authorized to do so on behalf of Seller.
4.2 Authorization; Validity. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly and validly
authorized in accordance with the limited partnership agreement
under which Seller is organized. This Agreement has been duly
and validly executed and delivered by Seller and (assuming the
valid execution and delivery of this Agreement by Buyer)
constitutes a legal, valid and binding agreement of Seller
enforceable against it in accordance with its terms, subject to
creditor rights and principles of equity.
4.3 Commissions. Seller has neither dealt with nor does it
have any knowledge of any broker or other party who has or may
have any claim against Seller, Buyer or the Property for a
brokerage commission or finder's fee or like payment arising out
of or in connection with the transaction provided herein and
Seller agrees to indemnify Buyer from any such claim arising by,
through or under Seller.
<PAGE> 9
4.4 Sale Agreements. The Property is not subject to any
outstanding agreement(s) of sale, purchase option(s), or other
right(s) of third parties to purchase any interest therein,
except for Permitted Exceptions and this Agreement.
4.5 Litigation. There is no litigation or proceeding
pending, or to the best of Seller's actual knowledge, threatened
against Seller relating to the Property.
4.6 Leases. There are no Leases affecting the Property,
oral or written, except as listed on Exhibit 1.15 attached hereto
and made a part hereof. Any new Leases or modifications to
existing Leases which are entered into by Seller between the date
of this Agreement and one week prior to the end of the Inspection
Period will be promptly provided to Buyer by Seller. During the
period commencing after one week preceding the end of the
Inspection Period and prior to Closing, Seller will not enter
into any new Leases or modify existing Leases without the written
consent of Buyer, such consent not to be unreasonably withheld.
Copies of the Leases, which have been delivered to Buyer or shall
be delivered to Buyer within ten (10) days from the date hereof,
are, to the best of Seller's actual knowledge, true, correct and
complete copies thereof, subject to the matters set forth on
Exhibit 1.15. Between the date hereof and the Closing Date,
Seller will not terminate or modify existing Leases or enter into
any new Leases without the consent of Buyer, such consent not to
be unreasonably withheld. To the best of Seller's actual
knowledge no defaults exist under the Property's tenant leases
except as noted on Exhibit 1.15. No rent has been paid more than
one (1) month in advance and no security deposit or prepaid rent
has been paid, except as noted on Exhibit 1.15. No tenants under
the Leases are entitled to interest on any security deposits
except as noted on Exhibit 1.15.
4.7 Property Operating Statements. To the best of Seller's
actual knowledge, the Property Operating Statements attached
hereto as Exhibit 4.7 accurately reflect in all material respects
the operations of the Property by Seller during the period noted
therein. Seller covenants to furnish Buyer with Seller's updated
monthly reports of income and expense from operating the Property
for interim periods beginning after December 31, 1994, promptly
after such statements are first made available to Seller; and
Buyer and its independent certified accountants shall be given
reasonable access to Seller's books and records relating to the
Property at any reasonable time prior to and, to the extent
required by governmental regulations, for the period ending six
months following Closing upon reasonable advance notice in order
that they may verify such Property Operating Statements for 1994
and 1995.
4.8 Contracts. To the best of Seller's actual knowledge,
except for the Leases, the Permitted Exceptions and the
Contracts, there are no management, service, maintenance, utility
or other contracts or agreements affecting the Property, oral or
written, which extend beyond the Closing Date and which would
bind Buyer or encumber the Property after the Closing. All such
Contracts (as defined in Section 1.5 hereof) are in full force
and effect in accordance with their respective terms, and all
obligations of Seller under the Contracts required to be
performed to date have been performed in all material respects;
no party to any Contract has asserted any claim of default or
offset against Seller with respect thereto and no event has
occurred or failed to occur, which would in any way affect the
validity or enforceability of any such Contract; and the copies
<PAGE> 10
of the Contracts delivered to Buyer prior to the date hereof are
true, correct and complete copies thereof. Between the date
hereof and the Closing, Seller covenants to fulfill all of its
obligations which are to be performed prior to Closing under all
of the Contracts, and covenants not to terminate or modify any
such Contracts other than in the ordinary course of business
without the consent of Buyer (such consent not to be unreasonably
withheld). Notwithstanding anything herein to the contrary,
Seller retains the right to enter into new contracts relating to
the Property which (i) are freely terminable without penalty by
Seller at Closing or which will not bind Buyer or the Property
after Closing, or (ii) relate to the work to be performed under
or in connection with that certain Lease Modification Agreement
between Seller and The Great Atlantic & Pacific Tea Company, Inc.
("A&P"), provided any such contract will not have a material
adverse financial impact on Buyer or the Shopping Center, and the
costs of which are covered by the A&P Reimbursement Escrow
referred to in Section 8.1(e)(8) below.
4.9 Maintenance and Operation of Property. From and after
the date hereof and until the Closing, Seller covenants to keep
and maintain and operate the Property substantially in the manner
in which it is currently being maintained and operated, subject
to normal wear and tear and casualty, and further covenants not
to cause any waste of the Property. Seller covenants not to
remove from the Improvements or the Real Property any article
included in the Personal Property except in the ordinary course
of business. Seller covenants to maintain prior to Closing such
casualty and liability insurance on the Property as it is
presently being maintained.
4.10 Permits and Zoning. To the best of Seller's actual
knowledge, except for the Permitted Exceptions (i) there are no
material permits and licenses (collectively referred to as
"Permits") required to be issued to Seller by any governmental
body, agency or department having jurisdiction over the Property
which materially affect the ownership or the use thereof which
have not been issued, (ii) the Property is zoned for its present
use; and (iii) there are no outstanding special assessments,
impact fees or other similar special governmental impositions
assessed against the Property.
4.11 Rent Roll; Estoppel Letters. To the best of Seller's
actual knowledge, the Rent Roll attached as Exhibit 1.15 is true
and correct in all material respects as of the date thereof.
Seller agrees to use commercially reasonable efforts to obtain
current estoppel letters from all Tenants under the Leases in the
form attached hereto as Exhibit 4.11 or, for A&P and perhaps
other larger tenants, in the form used by A&P and such larger
tenants, respectively, and which confirm the material matters
noted on the Rent Roll attached as Exhibit 1.15; provided,
however, that it is understood and agreed that the failure by
Seller to obtain all of such estoppel letters by the Closing Date
(i) shall not be a violation of Seller's obligations under this
Section 4.11, and (ii) shall not be construed as providing Buyer
with any basis not to fulfill its obligation to purchase the
Property at Closing as otherwise provided herein except as is
provided in Section 8.1(e)(7) hereof.
4.12 Condemnation. To the best of Seller's actual
knowledge, except for the Permitted Exceptions, neither the whole
nor any portion of the Property, including access thereto or any
easement benefiting the Property, is subject to temporary
requisition of use by any governmental authority or has been
<PAGE> 11
condemned, or taken in any proceeding similar to a condemnation
proceeding, nor is there now pending any condemnation,
expropriation, requisition or similar proceeding against the
Property or any portion thereof. Seller has received no written
notice nor has any knowledge that any such proceeding is
contemplated.
4.13 Governmental Matters. Seller has not entered into any
commitments or agreements with any governmental authorities or
agencies affecting the Property that have not been disclosed in
writing to Buyer and, except for that certain letter dated
November 27, 1995 from the Georgia Department of Natural
Resources to Mr. Morris Srochi of Blass Properties (the "Srochi
Letter"), Seller has received no written notices from any such
governmental authorities or agencies of uncured violations at the
Property of building, fire, air pollution or zoning codes, rules,
ordinances or regulations, environmental and hazardous substances
laws, or other rules, ordinances or regulations relating to the
Property. Seller shall be responsible for the remittance of all
sales tax for periods occurring prior to the Allocation Date
directly to the appropriate state department of revenue.
4.14 Repairs. Seller has received no notice of any
requirements or recommendations by any lender, insurance
companies, or governmental body or agencies requiring or recom-
mending any repairs or work to be done on the Property which have
not already been completed except for the Srochi Letter.
4.15 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by Seller nor the
consummation by Seller of the transactions contemplated hereby
will (a) require Seller to file or register with, notify, or
obtain any permit, authorization, consent, or approval of, any
governmental or regulatory authority; (b) conflict with or breach
any provision of the organizational documents of Seller;
(c) violate or breach any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would
constitute a default) under, any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which
Seller is a party, or by which Seller, the Property or any of
Seller's material assets may be bound; or (d) violate any order,
writ, injunction, decree, judgment, statute, law or ruling of any
court or governmental authority applicable to Seller, the
Property or any of Seller's material assets.
4.16 Environmental Matters.
(a) Seller represents and warrants that except as
otherwise contained or referred to in the Phase I Update
Environmental Site Assessment of Orchard Square Shopping Center
dated November 21, 1995 prepared by Environmental Management
Group and delivered by Seller to Buyer, and except for the
matters referred to in, and the subject of, the Srochi Letter
which Seller also delivered to Buyer, to the best of Seller's
actual knowledge as of the date hereof that:
<PAGE> 12
(1) Seller has not, and has no actual knowledge
of any other person who has, caused any Release or disposal of
any Hazardous Material at the Property in any material quantity;
(2) the Property does not now contain and to the
best of Seller's knowledge has not contained : (a) underground
storage tank, (b) material amounts of asbestos-containing
building material, (c) landfills or dumps, (d) hazardous waste
management facility as defined pursuant to the Resource
Conservation and Recovery Act ("RCRA") or any comparable state
law, or (e) site on or nominated for the National Priority List
promulgated pursuant to Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or any state remedial
priority list promulgated or published pursuant to any comparable
state law;
(3) Seller has used no Hazardous Material and
has conducted no Hazardous Material Activity at the Property;
(4) Seller has not received any written notice
that it is liable for response or corrective action, natural
resource damage, or other harm pursuant to CERCLA, RCRA, or any
comparable state law; and
(5) the Property is not subject to any, and
Seller has no actual knowledge of any imminent, restriction on
the ownership, occupancy, use, or transferability of the Property
in connection with any (a) Environmental Law or (b) Release,
threatened Release, or disposal of a Hazardous Material.
4.17 Foreign Investment and Real Property Tax Act. Seller
is not a "foreign person" within the meaning of Sections 1445 or
897 of the Internal Revenue Code, and has furnished Buyer with
its federal tax identification number, and at closing will
execute and deliver to Buyer an affidavit regarding the same, or
if Seller fails to execute and deliver such affidavit, Buyer may
deduct and withhold from the Purchase Price and pay to the
Internal Revenue Service such amounts as may be required by Buyer
in order to satisfy its tax withholding obligations, if any,
under the Internal Revenue Code. Seller shall also execute and
deliver an affidavit (the "Georgia Affidavit") to the effect that
the sales price in this transaction is less than its cost basis
so that there will be no withholding requirement from the sales
proceeds payable to Seller under applicable Georgia law.
Actual Knowledge. Whenever the words "to the best of actual
knowledge of Seller", "Seller's best knowledge" or words of
similar import are used in this Agreement, they shall mean the
actual knowledge of William J. Wolfe and Edward Dosik, employees
of First Washington Management, Inc., which is affiliated with
one of the General Partners in Seller, and who have had principal
responsibility for oversight of Seller's interest in the
Property, without any obligation on their part to conduct any
inquiry or due diligence other than such inquiry as has been
conducted by them in the ordinary course of business in
connection with such oversight. In addition, the parties hereto
agree that the representations and warranties of Seller contained
<PAGE> 13
in this Agreement shall survive the Closing Date a period of one
year, but only to the extent provided herein, and shall be of no
force or effect thereafter. No action or proceeding of any kind
or nature based upon a breach of a representation or warranty by
Seller under this Agreement shall be valid or enforceable, at law
or in equity, if not commenced in the appropriate jurisdiction
within one year after the Closing Date. These time limitations
do not apply to the representations and warranties set forth in
any warranty or covenant contained in any Closing document. It is
further agreed that to the extent that prior to Closing Buyer
becomes aware of any representation or warranty of Seller that is
incorrect, Buyer shall promptly so advise Seller in writing,
whereupon Buyer shall either (i) terminate this Agreement by
notice to Seller, in which event the Earnest Money Deposit shall
be returned to Buyer and no party shall have any further rights
or obligations hereunder except for Buyer's indemnity obligations
which are provided to survive termination, or (ii) Seller's
representations and warranties shall be deemed to be corrected
thereby, Buyer shall have no rights or claims against Seller or
otherwise arising from such incorrect representation or warranty,
and Buyer shall proceed to Closing hereunder in accordance with
the provisions hereof, subject to such corrected representation
and warranty.
5. WARRANTIES, REPRESENTATIONS AND COVENANTS OF BUYER
Buyer hereby warrants and represents as of the date of this
Agreement and as of the Closing and where indicated covenants and
agrees as follows:
5.1 Organization; Authority. Buyer is a corporation duly
organized, validly existing and in good standing under laws of
Florida and has full power and authority to enter into and
perform this Agreement in accordance with its terms, and the
persons executing this Agreement and other Transaction Documents
on behalf of Buyer have been duly authorized to do so.
5.2 Authorization; Validity. The execution, delivery and
performance of this Agreement and the other Transaction Documents
have been duly and validly authorized by the Board of Directors
of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer and (assuming the valid execution and delivery
of this Agreement by Seller) constitutes a legal, valid and
binding agreement of Buyer enforceable against it in accordance
with its terms, subject to creditors rights and principles of
equity.
5.3 Commissions. Buyer has neither dealt with nor does it
have any knowledge of any broker or other party who has or may
have any claim against Buyer or Seller for a brokerage commission
or finder's fee or like payment arising out of or in connection
with the transaction provided herein; and Buyer agrees to
indemnify Seller from any such claim arising by, through or under
Buyer. Such indemnity obligation of Buyer shall survive any
termination of this Agreement, notwithstanding anything herein to
the contrary.
5.4 Buyer's Investigation. Buyer will rely entirely on
Buyer's investigation of the Property during the Inspection
Period to satisfy itself as to the physical condition of the
Property, the compliance of the Property with Environmental Laws
<PAGE> 14
and other applicable laws and regulations, and the value of the
Property, subject however only to Seller's representations and
warranties expressly set forth in Article 4 hereof and the
indemnity contained in Article 9 hereof.
6. POSSESSION; RISK OF LOSS
6.1 Possession. Possession of the Property will be
transferred to Buyer at the conclusion of the Closing.
6.2 Risk of Loss. All risk of loss to the Property shall
remain upon Seller until the conclusion of the Closing. If,
before the possession of the Property has been transferred to
Buyer, any material portion of the Property is damaged by fire or
other casualty and will not be restored by the Closing Date
(whether as a result of Seller's decision not to do so, or
otherwise) or if any material portion of the Property is taken by
eminent domain or there is a material obstruction of access to
the Improvements by virtue of a taking by eminent domain, Seller
shall, within ten (10) days of such damage or taking, notify
Buyer thereof and Buyer shall, at its option do one of the
following:
(a) terminate this Agreement upon notice to Seller
given within ten (10) days after such notice from Seller, in
which case Buyer shall receive a return of its Earnest Money
Deposit; or
(b) proceed with the purchase of the Property, in which
event Seller shall assign to Buyer all of Seller's right, title
and interest in all amounts due or collected by Seller under the
insurance policies or as condemnation awards with respect to such
casualty or taking by eminent domain. In the event of such
casualty, the Purchase Price shall be reduced by the standard
deductible amount of any insurance under Seller's insurance
policy to the extent that it reduced the insurance proceeds
payable to Seller.
7. TITLE MATTERS
7.1 Title.
(a) Title Insurance. Buyer acknowledges receipt of
the Title Insurance Commitment from Commonwealth Land Title
Insurance Company and the Survey. Seller shall also provide
Buyer with access to its files containing any existing surveys
and title information in its possession promptly after execution
of this Agreement). Prior to the later of (i) the expiration of
the Inspection Period or (ii) three (3) business days following
Buyer's receipt of the Title Insurance Commitment and Survey,
Buyer shall notify Seller in writing of any Title Defects not
acceptable to Buyer. Any Title Defect disclosed by the Title
Insurance Commitment (other than liens removable by the payment
of money) or the Survey which is not timely specified in Buyer's
written notice to Seller of Title Defects shall be deemed to be a
Permitted Exception. Seller shall notify Buyer in writing within
five (5) days of Buyer's notice if Seller intends to cure any
Title Defect. If Seller elects not to cure such noted Title
Defects or if such noted Title Defects are not cured by the
Closing Date, then Buyer shall have the sole and exclusive right,
<PAGE> 15
in lieu of any other rights or remedies, to, and shall either:
(i) refuse to purchase the Property, terminate this Agreement and
receive a return of the Earnest Money Deposit, whereafter no
party shall have any further rights or obligations hereunder
except for the indemnity obligations of Buyer which are expressly
provided to survive the termination of this Agreement; or (ii)
waive such Title Defects and close the purchase of the Property
subject to them, with no reduction to the Purchase Price (except
for mechanic's and materialmen's liens on Seller's title to the
Property for work performed or claimed to be performed for Seller
prior to Closing which Seller will pay or bond off at or before
Closing) and no recourse to Seller with respect thereto.
Notwithstanding anything herein to the contrary, and
notwithstanding the terms of the Deed to be executed and
delivered by Seller to Buyer, Buyer acknowledges and agrees that
it will accept the conveyance of the Property subject to, in
addition to the other Permitted Exceptions, (i) rights of access
to and from Interstate Highway No. 575 or Bells Ferry Road as
taken by Department of Transportation under Declaration of Taking
in Case No. 774287, Cobb County Superior Court, (ii) any matters
that would be disclosed by a current and accruate survey and
inspection of the Property, and (iii) the fact that a portion of
the Property is or may be in a flood zone.
(b) Miscellaneous Title Matters. If a search of the
title discloses judgments, bankruptcies or other returns against
other persons having names the same as or similar to that of
Seller, Seller shall on request deliver to Buyer an affidavit
stating, if true, that such judgments, bankruptcies or the
returns are not against Seller. Seller further agrees to execute
and deliver to the Title Insurance agent at Closing such
documentation, if any, as the Title Insurance underwriter shall
reasonably require to evidence that the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized and that there are
no mechanics' liens on the Property or parties in possession of
the Property other than tenants under Leases and Seller.
8. CONDITIONS PRECEDENT
8.1 Conditions Precedent to Buyer's Obligations. The
obligations of Buyer under this Agreement are subject to
satisfaction (or written waiver by Buyer) of each of the
following conditions or requirements on or before the Closing
Date:
(a) Seller's warranties and representations under
this Agreement shall be true and correct in all material
respects, and Seller shall not be in default of any material
obligation hereunder.
(b) All obligations of Seller contained in this
Agreement, shall have been fully performed in all material
respects and Seller shall not be in default under any material
covenant, restriction, right-of-way or easement affecting the
Property.
(c) There shall have been no material adverse
change in the financial condition of A&P, Big B Drugs or
Winston's Pub since the date of this Agreement.
<PAGE> 16
(d) Except as otherwise provide in Section 6.2
hereof regarding damage by fire or casualty or taking by eminent
domain, there shall be no material change in the physical and
environmental condition of the Property from date of this
Agreement, ordinary wear and tear excepted.
(e) Seller shall have delivered to Buyer the
following:
(1) Limited Warranty deed, duly executed and
acknowledged so as to convey to Buyer the fee simple title to the
Real Property, subject only to the Permitted Exceptions;
(2) Originals, if available, or if not, true
copies of the Leases and of the contracts, agreements, permits
and licenses, and such Materials as may be in the possession or
control of Seller;
(3) A blanket assignment to Buyer of all
Leases and the contracts, agreements, permits and licenses (to
the extent assignable) as they affect the Property and an
indemnity against breach of such instruments by Seller prior to
the Closing Date;
(4) A bill of sale with respect to the
Personal Property and Materials;
(5) A title certificate or assignment,
properly endorsed by Seller, as to any items of Property for
which title certificates exist;
(6) A current rent roll for all Leases in
effect showing no material changes from the rent roll attached to
this Agreement other than those set forth in the Leases,
permitted hereunder or otherwise approved in writing by Buyer;
(7) Tenant estoppel letters obtained by
Seller from A&P, Big B Drugs and Winston's Pub and seventy
percent (70%) of the other tenants who have signed leases for any
portion of the Property in the form attached hereto (or in the
form used by A&P and other large tenants with respect to A&P or
other large tenants that use their own form) and confirming the
rent and other material terms of their Leases noted on the Rent
Roll attached hereto as Exhibit 1.15, and a letter from each of
A&P and Big B Drugs regarding off-site restrictions in form and
content reasonably acceptable to Buyer;
(8) It is acknowledged that Seller has
delivered a fully executed Lease Modification Agreement dated
December 4, 1995 between Seller and A&P which is attached hereto
as Exhibit 8.1(e)(8) (the "A&P Lease Amendment"). It is agreed
that Buyer shall perform the obligations of Seller as landlord
thereunder, provided, however, that: (A) Seller shall reimburse
to Buyer the reasonable costs incurred by Buyer (excluding any
Buyer overhead, general or administrative expense or charge) in
completing the work required to be performed by landlord under
new article 18.01 (the "Common Area Work") under the A&P Lease
Amendment, up to, but not in excess of, Seventy-Five Thousand
Dollars ($75,000). Such reimbursement shall be made by (i) Seller
<PAGE> 17
at Closing providing Buyer with a credit of Thirty Thousand
Dollars ($30,000) against the payment of a portion of the
Purchase Price, and (ii) after Closing, Seller paying to Buyer
the balance of such reimbursement for the Common Area Work up to,
but not in excess of, an additional Forty-Five Thousand Dollars
($45,000) after Buyer completes such work as required and renders
paid invoices and such other documents and material as Seller may
reasonably request in order for Seller to be able to confirm that
such work was performed under such new article 18.01 and was
reimbursable hereunder by Seller and properly completed to the
tenant's satisfaction. Buyer agrees to use its good faith efforts
to minimize the cost to complete Common Area Work in a proper
manner. Any of the Common Area Work performed by Buyer or any
person or entity affiliated with or related to Buyer shall be
competitively bid out (except that Common Area Work to be
performed by Buyer or any affiliated or related party as will
not, in the aggregate, cost more than Three Thousand Five Hundred
Dollars [$3,500] shall not be required to be bid out) and shall
cost no more than competitive market rates; and (B) In addition,
at Closing, in the event that Seller has not fulfilled its
obligation to reimburse A&P up to $50,000 for tenant improvements
undertaken by A&P in accordance with the second paragraph of new
article 17.01 in the A&P Lease Amendment (the "Special Tenant
Improvements"), then Seller shall escrow such amounts (the "A&P
Reimbursement Escrow"). In the event that after Closing A&P is
entitled to reimbursement for such Special Tenant Improvements
that it undertakes under the A&P Lease Amendment, then such A&P
Reimbursement Escrow shall be used to pay to A&P the balance of
the Seller's obligation to effect such reimbursement in
accordance with the A&P Lease Amendment, and the balance of such
A&P Reimbursement Escrow shall be paid to Seller. In the event
that the A&P Reimbursement Escrow has not been disbursed by June
30, 1996 in accordance with this Agreement, then Buyer and Seller
shall consider whether they should close the escrow by disbursing
an amount from the escrow as will be needed to reimburse A&P for
the Special Tenant Improvements and remitting to Seller the
balance of the escrowed funds.
(9) A general assignment of Seller's interest in all
assignable existing warranties relating to the Property;
(10) A non-foreign person affidavit and the Georgia
Affidavit;
(11) The originals or copies of any real property tax
bills for the Real Property and Improvements for the then current
fiscal year and the previous year in Seller's possession, and, if
requested, the originals or copies of any current water, sewer
and utility bills which are in Seller's possession;
(12) Resolutions of Seller authorizing the transactions
described herein, certified by the General Partner of Seller;
(13) All keys and other means of access to the
Improvements in the possession of Seller or its agents;
(14) Materials in Seller's possession; and
<PAGE> 18
(15) Such other documents as may reasonably be required
to effectuate the provisions of this Agreement and the
transactions contemplated herein.
In the event that all of the foregoing provisions of this
Section 8.1 are not satisfied at Closing, then subject to the
provisions of Section 10.1 hereof, if applicable, Buyer shall
either (i) elect in writing to terminate this Agreement, in which
event the Earnest Money Deposit shall be promptly delivered to
Buyer by Escrow Agent and, upon the making of such delivery,
neither party shall have any further claim against the other by
reasons of or in connection with this Agreement, except for those
indemnity obligations of Buyer which are expressly agreed to
survive termination hereunder, or (ii) waive such unsatisfied
conditions and complete Closing hereunder with no claim against
Seller for such unsatisfied conditions.
8.2 Conditions Precedent to Seller's Obligations. The
obligations of Seller under this Agreement are subject to
satisfaction (or written waiver by Seller) of each of the
following conditions or requirements on or before the Closing
Date:
(a) Buyer's warranties and representations under this
Agreement shall be true and correct, and Buyer shall not be in
default hereunder.
(b) All of the obligations of Buyer contained in this
Agreement shall have been fully performed by or on the date of
Closing in compliance with the terms and provisions of this
Agreement.
(c) Buyer shall have delivered to Seller at or prior to
the Closing Date the following, which shall be reasonably
satisfactory to Seller:
(1) Payment, in immediately available funds by
bank wire transfer, of the Purchase Price in accordance with
Section 2.1 at Closing;
(2) An assumption and indemnification agreement
whereby (A) Buyer will (i) assume all of Seller's obligations
under the Leases and the Contracts accruing from and after the
Closing (except Buyer shall assume all of Seller's obligations
under the A&P Lease Amendment with respect to the work and
related matters to be performed thereunder), and (ii) indemnify
Seller against any claims, liabilities, costs and expense
(including, without limitation, reasonable attorneys' fees and
court costs) arising in connection with any breach of such
obligation, and (B) Seller will provide reciprocal indemnities
for a breach of any or all obligations of Seller under the Leases
and the Contracts accruing prior to Closing (except as otherwise
expressly provided herein with respect to the A&P Lease
Amendment) and any claims, liabilities, costs and expenses
arising in connection with such breach of such obligation by
Seller prior to Closing.
(3) Such other documents as may reasonably be
required to effectuate the provisions of this Agreement and the
transactions contemplated herein.
<PAGE> 19
(d) At or prior to the Closing, Seller shall have paid
in full the existing first mortgage loan secured by the Property
at the discounted payoff price set forth in a certain
Modification Agreement between Seller and said lender. In the
event that the condition precedent in the immediately preceding
sentence is not satisfied on or before the Closing Date, then
notwithstanding anything herein to the contrary, Seller shall
have the right to terminate this Agreement, in which event the
Earnest Money Deposit shall be returned to Buyer and neither
party shall have any further claim against the other by reasons
of this Agreement, except such indemnity obligations of Buyer as
are expressly provided to survive termination of this Agreement.
In the event that all conditions precedent to Buyer's
obligation to purchase shall have been satisfied or waived but
the foregoing provisions of this Section 8.2(a) - (c), inclusive,
have not, and Seller elects in writing to terminate this
Agreement, then the Earnest Money Deposit shall be promptly
delivered to Seller by Escrow Agent and, upon the making of such
delivery, neither party shall have any further claim against the
other by reasons of this Agreement, except such indemnity
obligations of Buyer as are expressly agreed to survive
termination of this Agreement.
9. POST CLOSING INDEMNITIES AND COVENANTS
9.1 Seller's Indemnity. (a) From and after the Closing,
Seller, subject to the limitations set forth herein, shall
indemnify, defend and hold harmless Buyer from all claims,
demands, liabilities, direct (but not consequential) damages,
penalties, costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, which may be
imposed upon, asserted against or incurred or paid by Buyer by
reason of, or on account of, any breach by Seller of Seller's
warranties, representations and covenants. Seller's warranties,
representations and covenants, and the foregoing indemnity,
except for those contained in any of the Closing documents, shall
survive for a period of one year immediately following the
Closing Date and shall be of no further force of effect
thereafter. No action or proceeding of any kind or nature based
upon a breach of such representations, warranties or covenants,
or the foregoing indemnity (other than those contained in any of
the Closing documents), shall be valid or enforceable, at law or
in equity, if not commenced in the appropriate jurisdiction
within one year after the Closing Date. Buyer's rights and
remedies herein against Seller shall be the sole and exclusive
rights of Buyer in connection herewith and are agreed to be in
lieu of all other rights and remedies of Buyer at law or in
equity.
(b) It is acknowledged that the Srochi Letter was
issued by the Georgia Department of Natural Resources (the
"Department") based upon an alleged release of tetrachloroethane
at the edge of the parking lot near the Z.A.A.P. Cleaners as
referenced in such Letter (the "Srochi Release"). Seller has been
working through its environmental consultants with the Department
in connection with such Srochi Release. Seller shall continue
after Closing to work with the Department, and any other
applicable government agencies with jurisdiction, to undertake
and retain final authority and control over any environmental
investigations, assessments or remediation which the Department,
or any other applicable government agency with jurisdiction, may
<PAGE> 20
require it to perform under applicable law to address such Srochi
Release. Seller shall consult with Buyer and take into account
Buyer's concerns in connection with Seller's efforts to deal with
this particular matter. Seller shall have its environmental
consultant address environmental reports prepared by it to both
Seller and Buyer, it being intended that both Seller and Buyer
shall be deemed to be in privity with such consultant. Seller
will endeavor to provide Buyer with a copy of correspondence,
proposals and reports that Seller receives regarding the Srochi
Release. Seller agrees to indemnify and hold harmless Buyer from
(i) all costs of site assessments, monitoring and/or remediation
required to be performed by the Department, or by any other
applicable government agency with jurisdiction, under applicable
law to address the Srochi Release, (ii) claims made against Buyer
by third parties (other than subsequent owners of the Property)
for damage to property or injury to persons proximately caused by
this Srochi Release, and (iii) reasonable out of pocket costs and
reasonable attorneys fees incurred by Buyer in enforcing Seller's
obligations under this Section 9.1(b) where Seller has not
complied with its obligations under this Section 9.1(b) after
written notice to Seller and a reasonable period of time in which
Seller has failed to cure such non-compliance. After Closing,
Buyer shall provide Seller and Seller's contractors, agents,
representatives and consultants with access to the Property and
the right to perform such investigations, assessments,
remediation or other work on the Property in connection with
Seller performing its obligations hereunder with respect to the
Srochi Release. Seller shall have full and exclusive control of
the remedial and/or other work, and shall have final authority
and control of all contacts and negotiations with the Department,
and other applicable government agencies with jurisdiction, with
respect to the Srochi Release. In undertaking any assessment and
remedial work under this Section 9.1(b), Seller will, to the
extent practicable, use reasonable efforts not to interfere with
the operation of the Property. After the completion of any
remedial work performed by Seller, Seller will restore the
surface of the affected portion of the Property to as near the
approximate grade and surface as existed prior to such remedial
work as is reasonably practicable. Upon Seller receiving notice
from the Department, and any other applicable government agency
with jurisdiction, that no further remedial work and/or
monitoring is or will be required to be undertaken at the
Property to address such Srochi Release ("Closure"), or if the
Department or other applicable government agency with
jurisdiction fail to respond to a request for Closure within a
reasonable time, upon certification by an environmental
consultant reasonably satisfactory to Buyer and Seller that
remedial activities have been completed in compliance with
applicable law, the indemnification and hold harmless obligation
of Seller under this Section 9.1(b) shall automatically terminate
and be of no further force or effect, except that the
indemnification and hold harmless obligation with respect to the
third party claims referred to in clause "(ii)" above shall not
terminate. (A notice from the Department, or any other applicable
government agency with jurisdiction, that remediation and/or
monitoring is not required at that particular time because of a
deferral of work under a priority scheme but that remedial work
and/or monitoring will or may be required subsequently, shall not
constitute "Closure" for purposes of this Section 9.1[b].) Seller
shall be entitled to recover its costs in connection with the
Srochi Release from persons causing the Srochi Release, including
K.E. Service Company, Inc. trading as Z.A.A.P. Cleaners and
William R. Kitchin. Buyer hereby assigns any claims it may have
against such persons arising from the Srochi Release to Seller in
order to enable Seller's cost recovery action. Seller agrees to
<PAGE> 21
endeavor, to the extent practicable, to try to keep the Property
from being listed on the State and/or Federal Environmental
Hazardous Site Inventory List by reason of the Srochi Release.
9.2 Buyer's Indemnity. From and after the Closing, Buyer
shall indemnify, defend and hold harmless Seller from all claims,
demands, liabilities, direct (but not consequential) damages,
penalties, costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, which may be
imposed upon, asserted against or incurred or paid by Seller by
reason of, or on account of, any breach by Buyer of Buyer's
warranties, representations and covenants. Buyer's warranties,
representations and covenants, and the foregoing indemnity, shall
survive the Closing. Seller's rights and remedies herein against
Buyer shall be in addition to, and not in lieu of all other
rights and remedies of Seller at law or in equity.
10. BREACH; REMEDIES
10.1 Breach by Seller. In the event of a breach of
Seller's covenants or warranties herein and failure by Seller to
cure such breach within the time provided for Closing, Buyer
shall, at Buyer's election, and as Buyer's sole and exclusive
rights and remedies, (i) terminate this Agreement and receive a
return of the Earnest Money Deposit, and the parties shall have
no further rights or obligations under this Agreement (except
Buyer's indemnity obligations as are provided to survive
termination); or (ii) waive such breach (and waive all rights
against Seller with respect thereto) and close the purchase
contemplated hereby, notwithstanding such breach, and without any
reduction in the Purchase Price payable to Seller, except that
Seller shall pay or bond off any mechanic's or materialmen's lien
on Seller's title to the Property for work performed or claimed
to be performed for Seller prior to Closing; provided, however,
that in the event that all conditions precedent to Seller's
obligation to consummate Closing shall have occurred but Seller
wrongfully fails to convey the Property to Buyer hereunder, then
Buyer shall have the right to enforce Seller's obligation to
convey its right, title and interest in the Property to Buyer by
suit for specific performance, but Buyer shall have no claim
against Seller for damages nor any right to require that Seller
expend any funds.
10.2 Breach by Buyer. In the event of a breach of Buyer's
covenants or warranties herein and failure of Buyer to cure such
breach within the time provided for Closing, Seller's sole remedy
shall be to terminate this Agreement and retain Buyer's Earnest
Money Deposit as agreed liquidated damages for such breach, and
upon payment in full to Seller of such amounts, the parties shall
have no further rights, claims, liabilities or obligations under
this Agreement except for Buyer's indemnity obligations that
survive termination and which the parties hereby agree shall not
be limited to the Seller's retention of the Earnest Money
Deposit.
11. ESCROW AGENT; A&P REIMBURSEMENT ESCROW
11.1 Duties. By signing a copy of this Agreement, Escrow
Agent agrees to comply with the terms hereof insofar as they
apply to Escrow Agent. Escrow Agent shall receive and hold the
A&P Reimbursement Escrow in trust, to be disposed of in
accordance with the provisions of this Agreement. Such escrowed
<PAGE> 22
funds shall be held by the Escrow Agent in an interest bearing
FDIC insured account and shall not be disbursed except pursuant
to the joint written instructions of Buyer and Seller or as
otherwise provided in Section 11.3 below.
11.2 Certain Costs. Escrow Agent shall not be liable to
either party except for claims resulting from the gross
negligence or willful misconduct of Escrow Agent. If the escrow
is involved in any controversy or litigation, the parties hereto
shall each pay one-half of the cost incurred by Escrow Agent to
interplead the A&P Reimbursement Escrow into an appropriate
court, provided that if the aforesaid costs payable hereunder
result from the fault of Buyer or Seller (or their respective
agents), the party at fault shall pay, and hold the other party
harmless against, such costs.
11.3 Conflicting Demands. If conflicting demands are made
upon Escrow Agent with respect to the escrow, the parties hereto
expressly agree that Escrow Agent shall have the absolute
obligation to do either or both of the following: (i) withhold
and stop all proceedings in performance of this escrow and await
settlement of the controversy by final appropriate legal
proceedings or otherwise as Buyer, Seller and Escrow Agent may
mutually agree; or (ii) file suit for declaratory relief and/or
interpleader and obtain an order from the court requiring the
parties to interplead and litigate in such court their several
claims and rights between themselves. Upon the filing of any
such declaratory relief or interpleader suit and tender of the
A&P Reimbursement Escrow to the court, Escrow Agent shall
thereupon be fully released and discharged from any and all
obligations to further perform the duties or obligations imposed
upon it by this Agreement. Buyer and Seller agree to respond
promptly in writing to any request by Escrow Agent for
clarification, consent or instructions. Any action proposed to
be taken by Escrow Agent for which approval of Buyer and/or
Seller is requested shall be considered approved if Escrow Agent
does not receive written notice of disapproval within fourteen
(14) days after a written request for approval is received by the
party whose approval is being requested. Escrow Agent shall not
be required to take any action for which approval of Buyer and/or
Seller has been sought unless such approval has been received.
No disbursements shall be made, other than as provided in Section
11.1 or to a court in an interpleader action, unless Escrow Agent
shall have given written notice of the proposed disbursement to
Buyer and Seller and neither Buyer nor Seller shall have
delivered any written objection to the disbursement within 14
days after receipt of Escrow Agent's notice.
11.4 Continuing Counsel. Seller acknowledges that Escrow
Agent is counsel to Buyer herein and Seller agrees that in the
event of a dispute hereunder or otherwise between Seller and
Buyer, Escrow Agent may continue to represent Buyer
notwithstanding that it is acting and will continue to act as
Escrow Agent hereunder, it being acknowledged by all parties that
Escrow Agent's duties hereunder are ministerial in nature.
11.5 Withdrawal. No party shall have the right to withdraw
any monies or documents deposited by it with Escrow Agent prior
to the Closing or termination of this Agreement except in
accordance with the terms of this Agreement.
<PAGE> 23
11.6 Tax Identification. Seller and Buyer shall provide to
Escrow Agent appropriate Federal tax identification numbers.
12. MISCELLANEOUS
12.1 Disclosure. Neither party shall disclose the
transactions contemplated by this Agreement without the prior
approval of the other, except where disclosure is required by
law.
12.2 Radon Gas. Radon is a naturally occurring radioactive
gas which, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed
to it over time. Levels of radon which exceed federal and state
guidelines have been found in buildings. Additional information
regarding radon and radon testing may be obtained from the county
public health unit.
12.3 Entire Agreement. This Agreement, together with the
Exhibits attached hereto, constitutes the entire agreement
between the parties hereto with respect to the subject matter
hereof and may not be modified, amended or otherwise changed in
any manner except by a writing executed by Buyer and Seller.
12.4 Notices. All written notices and demands of any kind
which either party may be required or may desire to serve upon
the other party in connection with this Agreement may be served
(as an alternative to personal service) by registered or
certified mail, overnight courier service or facsimile (followed
promptly by hard copy) at the addresses set forth below:
As to Seller: Mid-Atlantic Centers Limited Partnership
c/o First Washington Management, Inc.
Attention: William J. Wolfe
Jeffrey S. Distenfeld, Esquire
4350 East-West Highway, Suite 400
Bethesda, Maryland 20814
Facsimile: (301) 907-4911
With a copy to: David, Hagner, Kuney & Krupin, P.C.
Attention: Bruce M. Levy, Esquire
1120 19th Street, N.W., Suite 800
Washington, D.C. 20036
Facsimile: (202) 467-6910
<PAGE> 24
As to Buyer: RRC Acquisitions, Inc.
Attention: Robert L. Miller
Suite 200, 121 W. Forsyth Street
Jacksonville, Florida 32202
Facsimile: (904) 634-3428
With a copy to: Ulmer, Murchison, Ashby & Taylor
Attention: William E. Scheu, Esquire
P. O. Box 479
Suite 1600, 200 W. Forsyth Street
Jacksonville, Florida 32201 (32202 for
courier)
Facsimile: (904) 354-9100
Any such notice or demand given by registered or certified mail
or by reputable overnight courier with postage or charges thereon
fully prepaid and addressed to the party to be served at the
addresses set forth above shall constitute proper notice
hereunder upon delivery to the United States Postal Service or to
such overnight courier.
12.5 Headings. The titles and headings of the various
sections hereof are intended solely for means of reference and
are not intended for any purpose whatsoever to modify, explain or
place any construction on any of the provisions of this
Agreement.
12.6 Validity. If any of the provisions of this Agreement
or the application thereof to any persons or circumstances shall,
to any extent, be invalid or unenforceable, the remainder of this
Agreement by the application of such provision or provisions to
persons or circumstances other than those as to whom or which it
is held invalid or unenforceable shall not be affected thereby,
and every provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
12.7 Attorneys' Fees. In the event of any litigation
between the parties hereto to enforce any of the provisions of
this Agreement or any right of either party hereto, the unsuc-
cessful party to such litigation agrees to pay to the successful
party all costs and expenses, including reasonable attorneys'
fees, whether or not incurred in trial or on appeal, incurred
therein by the successful party, all of which may be included in
and as a part of the judgment rendered in such litigation. Any
indemnity provisions herein shall include indemnification for
reasonable attorneys' fees and costs, whether or not suit be
brought and including fees and costs on appeal.
12.8 Time of Essence. Time is of the essence of this
Agreement.
12.9 Governing Law. This Agreement shall be governed by
the laws of Georgia and the parties hereto agree that any
litigation between the parties hereto relating to this Agreement
shall take place (unless otherwise required by law) in a court
located in Cobb County, State of Georgia. Each party waives its
right to jurisdiction or venue in any other location.
<PAGE> 25
12.10 Successors and Assigns. The terms and provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns. No third parties, including any brokers or creditors,
shall be beneficiaries hereof. Buyer shall not have the right to
assign this Agreement without Seller's prior written consent
(which Seller may withhold in its sole discretion), except to
Regency Realty Corporation or a wholly owned affiliate thereof,
provided, however, that in the event of such assignment, such
assignee shall be jointly and severally obligated and liable,
together with Buyer, for the full performance of all of Buyer's
obligations under or in connection with this Agreement.
12.11 Exhibits. All exhibits attached hereto are
incorporated herein by reference to the same extent as though
such exhibits were included in the body of this Agreement
verbatim.
12.12 Gender; Plural; Singular; Terms. A reference in this
Agreement to any gender, masculine, feminine or neuter, shall be
deemed a reference to the other, and the singular shall be deemed
to include the plural and vice versa, unless the context
otherwise requires. The terms "herein," "hereof," "hereunder,"
and other words of a similar nature mean and refer to this
Agreement as a whole and not merely to the specified section or
clause in which the respective word appears unless expressly so
stated.
12.13 Further Instruments, Etc. Seller and Buyer shall, at
or after Closing, execute any and all documents and perform any
and all acts reasonably necessary to fully implement this
Agreement.
12.14 Survival. Except as otherwise provided herein, the
obligations of Seller and Buyer intended to be performed after
the Closing shall survive the closing.
12.15 No Recording. Neither this Agreement nor any notice,
memorandum or other notice or document relating hereto shall be
recorded.
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Witnesses:
BUYER:
RRC ACQUISITIONS, INC.,
a Florida corporation
[ /s/ Ginger M. White ]
Name (Please Print)
Unofficial Witness
By: /s/ Robert L. Miller
Its: Vice President
[ /s/ W.I. Gulliford III ] Date: December 29, 1995
Name (Please Print)
Official Witness Tax Identification No. 59-3210155
<PAGE> 27
Witnesses:
SELLER:
MID-ATLANTIC CENTERS LIMITED
PARTNERSHIP,
A Maryland limited partnership
[ /s/ Bruce M. Levy_ ]
Name (Please Print) By: FW Realty Limited
Unofficial Witness Partnership, A District of
Columbia limited
partnership, Its general
partner
By: FW Corporation,
A District of Columbia
Corporation, Its general
partner
By: /s/ William J. Wolfe
[/s/ Jeffrey S. Distenfeld] Its: Vice President
Name (Please Print) Date: December 29, 1995
Official Witness
Tax Identification No:52-1490861
<PAGE> 28
Witnesses:
ESCROW AGENT:
ULMER, MURCHISON, ASHBY & TAYLOR
[Deborah L. Spadea ]
Name (Please Print)
Unofficial Witness
By: /s/
Its Authorized Agent
[W. I. Gulliford III] Date: December 29, 1995
Name (Please Print)
Official Witness
<PAGE> 29
EXHIBIT 1.5
Service Contracts
1. Service Agreement dated November 25, 1991 between Seller and
BFI Waste Systems a copy of which is attached hereto and the
terms of which are incorporated in this Exhibit 1.5 by this
reference.
Please note that this Contract is not terminable on thirty
(30) days' notice. This Contract by its terms is not assignable
without the consent of BFI Waste Systems.
Description: The service agreement is a BFI Waste System form
which includes the following information: Marked box indicating
that purpose is to change service level - reason code ITI;
billing information for customer - First Washington Development
Group; service location - Orchard Square; service description and
monthly equipment charge (new and old); and terms and conditions.
<PAGE> 30
EXHIBIT 1.15
Rent Roll
Description: The rent roll schedule is titled "Orchard Square
Shopping Center, dated December 1, 1995, Lease Synopsis". The
schedule details the following information tenant by tenant: bay
number, name, square footage leased, percentage of total building
occupied by tenant, rent per square foot, annual base rent, lease
start and expiration dates, annual rent increases (if
applicable), and any lease options or terms. The next set of
columns lists the passthrough expenses, which include the
tenant's share of real estate taxes, insurance, and common area
maintenance expenses. The last two columns list the tenant's
percentage rent obligation (if applicable) and the amount of any
security deposits held by the landlord. At the bottom of the
schedule are footnotes regarding specific tenants.
<PAGE> 31
EXHIBIT 1.17(c)
List of Permitted Exceptions
EXHIBIT "1.17"
PERMITTED TITLE EXCEPTIONS
1. All taxes and assessments for the year 1996, and subsequent
years, and any additional taxes for the current year or any prior
years as a result of any re-assessment or re-billing of taxes,
which are not yet due and payable.
2. Rights of parties in possession, as tenants only, under
unrecorded leases.
3. Easement agreement by and between The Mitchell Company and
shell Oil Company, dated June 22, 1987, and recorded in Deed Book
4533, page 318, Cobb County Records.
4. Conveyance of access rights from The Mitchell Company, an
Alabama general partnership (acting through Armay Development
Corp., a general partner) to Department of Transportation, State
of Georgia, dated June 22, 1987, filed for record August 12, 1987
at 12:40 P.M. and recorded in Deed Book 4602, Page 179, Cobb
County Records.
5. Easement to Cobb Electric Membership Corporation dated July
23, 1987 in Deed Book 4694, Page 170, Cobb County Records.
6. Declaration of Restrictions by The Mitchell Company, ex
parte, dated March 25, 1987, filed for record December 30, 1987,
at 4.02 P.M. and recorded in Deed Book 4763, Page 489, Cobb
County Records, as amended by Amendment to Declaration of
Restrictions by the Mitchell Company, ex parte, dated December 1,
1987, filed for record December 30, 1987 at 4:02 P.M. and
recorded in Deed Book 4763, Page 496, Cobb County Records.
7. Easement Agreement by and between the Mitchell Company, an
Alabama general partnership whose general partners are Armay
Development Corporation, Marbet Incorporated and Luco
Development, Incorporated, and Hawkins Store Development Co.,
Inc., dated October ( ), 1986, filed for record December 30, 1987
at 4:02 P.M. and recorded in Deed Book 4763, Page 482, Cobb
County Records.
8. Declaration of Plan of Easements and Restrictions by The
Mitchell Company, ex parte, dated December 30, 1987, filed for
record December 30, 1987 at 4:03 P.M. and recorded in Deed Book
4763, Page 498, Cobb County Records; as affected by Partial
Termination of Rights under Declaration of Plan of Easements and
Restrictions by Mid-Atlantic Centers Limited Partnership, a
Maryland limited partnership, dated 12/22/92, filed 2/4/93,
recorded at Deed Book 7132, Page 370, Cobb County Records.
<PAGE> 32
9. Sewer Easement Agreement by and among Jeffrey H. Hasty, M.D.,
Charles L. Hutchinson, M.D., James F. Nalley, M.D. and Carolyn S.
Rude, D.D.S.; Mid-Atlantic Centers Limited Partnership, a
Maryland limited partnership; and Cash Real Estate Fund-3, Ltd.,
a Georgia limited partnership, dated as of 6/17/88, filed
6/17/88, recorded at Deed Book 4966, Page 302, Cobb County
Records.
10. Indenture by and between The Mitchell Company, an Alabama
general partnership, as Landlord, and Grand Union Company, as
Tenant, dated as of March 25, 1987, filed for record April 27,
1987 and recorded in Deed Book 4440, Page 108, Cobb County
Records.
11. Short Form Lease from The Mitchell Company, an Alabama
general partnership, as Landlord, to The Reed Drug Company, as
Tenant, dated April 22, 1987, filed for record June 4, 1987 and
recorded in Deed Book 4499, Page 181, Cobb County Records.
12. Rights of access to and from Interstate Highway No. 575 or
Bells Ferry Road as taken by Department of Transportation under
Declaration of Taking in Case No. 774287, Cobb County Superior
Court.
13. Any matters that would be disclosed by a current and
accurate survey and inspection of the Property.
14. A Portion of the Property is located within the limits of a
flood hazard zone.
15. Notice of Rights by and between The Mitchell Company and
Mid-Atlantic Centers Limited Partnership dated December 30, 1987,
filed for record December 30, 1987 at 4:05 P.M. and recorded in
Deed Book 4764, Page 32, Cobb County Records, giving notice of an
option to purchase TRACT II of the property referred to in such
Notice.
10201/02/a/exh I 17.ecl
<PAGE> 33
EXHIBIT 1.22
Legal Description of Real Property
Legal Description
ALL THAT TRACT or parcel of land lying in and or being in Land
Lots 211 and 212 of the 16th District of the 2nd Section of Cobb
County, Georgia, said tract or parcel being more particularly
described as follows:
Commencing at the point of intersection of the northerly right-
of-way of U.S. Highway 575 (Georgia Hwy. 5) (R/W varies), with
the easterly right-of-way of Bells Ferry Road (R/W varies);
Thence, continuing along said easterly right-of-way of Bells
Ferry Road N34'54'45"W, a distance of 182.57 feet to a point;
Thence, along an arc to the left a distance of 99.27 feet to an
iron pin se@ said arc being subtended by a chord of NOI'56'01"W,
a distance of 99.26 feet; Thence, along an arc to the left a
distance of 187.82 feet to an iron pin set, said iron pin being
the TRUE POINT OF BEGFNNING, said arc being subtended by a chord
of N06'01'33"W, a distance of 187.76 feet; thence, continuing
along said easterly right-of-way of Bells Ferry Road along an arc
to the left a distance of 21.88 feet to an iron pin found, said
arc being subtended by a chord of N09'00'53"W, a distance of
21.88 feet; thence, leaving the aforementioned right-of-way
S88'13'18"E, a distance of 128.95 feet to an iron pin found;
thence, N02'19'54"E, a distance of 201.00 feet to an iron pin
found; thence, N52'28'58"W, a distance of I 0.00 feet to an iron
pin found; thence, S72'42'1 I "W, a distance of 147.00 feet to an
iron pin found; thence, S62'12'11"W, a distance of 40.89 feet to
an iron pin found located on the easterly right-of-way of Bells
Ferry Road (R/W varies); thence, continuing along said right-of-
way N27'47'49"W a distance of 135.21 feet to a point; thence,
N20105'07"W, a distance of 103.15 feet to an iron pin set;
thence, leaving the easterly right-of-way of Bells Ferry Road
S88'07'48"E, a distance of 197.95 feet to an iron pin set;
thence, N 01'51'59"E, a distance of 200.29 feet to an iron pin
set; thence N89'41'46"E, a distance of 96.06 feet to an iron pin
found; thence, N89'42'31"E, a distance of 928.83 feet to an iron
pin found (#4 R.B.); thence, S04'22'21"W, a distance of 659.00
feet to an iron pin set; thence, N88'07'32"W, a distance of
680.00 feet to an iron pin set; thence, N64'45'18"W, a distance
of I 1 2.00 feet to an iron pin found; thence, N87'43'3 I "W, a
distance of 248.97 feet to an iron pin set, said iron pin also
being the TRUE POINT OF BEGINNING. All as shown on As-Built
Survey for RRC GA One, Inc. and Commonwealth Land Title Insurance
Company, as prepared by David A. Burre & Assoc., Inc., under seal
of David A. Burre, G.R.L.S. No. 1965, dated December 7, 1995.
Being the same property as described in Limited Warranty Deed
dated December 30, 1987, from The Mitchell Company, to Mid-
Atlantic Centers Limited Partnership, recorded in Deed Book 4763,
Page 523, Cobb County, Georgia Records.
<PAGE> 34
TOGETHER WITH rights and easements created pursuant to Easement
Agreement dated June 22, 1987 by and between The Mitchell Company
and Shell Oil Company recorded in Deed Book 4533, Page 318, Cobb
County, Georgia Records.
TOGETHER WITH rights and easements created pursuant to
Declaration of Plan of Easements and Restrictions dated December
30, 1987, made by The Mitchell Company, as declarant, recorded in
Deed Book 4763, Page 498, Cobb County, Georgia Records; as
affected by Partial Termination of Rights Under Declaration of
Plan of Easements and Restrictions by MidAtlantic Centers Limited
Partnership, a Maryland limited partnership dated 12/22/92, filed
2/4/93, recorded at Deed Book 7132, Page 370, Cobb County,
Georgia Records.
<PAGE> 35
EXHIBIT 4.7
Property Operating Statements
This exhibit to the Purchase and Sale Agreement contains the
Statements of Operations for the twelve periods ending December
31, 1994 and 1995. The schedules include account balances for
all income and expense accounts for each month. The accounts are
grouped and subtotaled as follows: net rental income, operating
expenses - CAM (utilities, operating and maintenance, and
administrative expense), total operating expense - CAM, total
non-CAM expense, total operating expense and net cash flows from
operations. Three additioanl columns present totals for the
twelve months for each account, the budgeted amount, and the
variance between the twelve month total and budgeted amounts.
<PAGE> 36
EXHIBIT 4.11
Form of Estoppel Letter
, 199
RE: (Name of Shopping Center)
Ladies and Gentlemen:
The undersigned (Tenant) has been advised you may purchase
the above Shopping Center, and we hereby confirm to you that:
1. The undersigned is the Tenant of ,
Landlord, in the above Shopping Center, and is currently in
possession and paying rent on premises known as Store No.
[or Address:
], and containing approximately square feet,
under the terms of the lease dated , which has (not)
been amended by amendment dated (the "Lease"). There
are no other written or oral agreements between Tenant and
Landlord.
2. The term of the Lease commenced on ,
expiring on
, with options to extend of ( ) years each.
3. As of , monthly minimum rental is $ a
month.
4. Current additional monthly payments for expense
reimbursement total $ per month for common area maintenance,
property insurance and real estate taxes.
5. Tenant has given [no security deposit] [a security
deposit of $ ].
6. No payments by Tenant under the Lease have been made
for more than one (1) month in advance, and minimum rents and
other charges under the Lease are current.
7. All matters of an inducement nature and all obligations
of the Landlord under the Lease concerning the construction of
the Tenant's premises and development of the Shopping Center,
including without limitation, parking requirements, have been
performed by Landlord.
8. Tenant knows of no default by either Landlord or Tenant
under the Lease, and knows of no situations which, with notice or
the passage of time, or both, would constitute a default. Tenant
has no rights to off-set or defense against Landlord as of the
date hereof.
Very truly yours,
(Tenant)
Mailing Address:
By:
Its:
<PAGE> 37
EXHIBIT 8.1(e)(8)
A&P Lease Amendment
Address: 4290 Bells Ferry Road
Kennesaw, Georgia
A&P Key No. 41-78
LEASE MODIFICATION AGREEMENT
THIS AGREEMENT made this 4th day of December , 1995, by and
between MID-ATLANTIC CENTERS LIMITED PARTNERSHIP, a Maryland
Limited Partnership, and successor-in-interest to THE MITCHELL
COMPANY, an Alabama General Partnership, and having an office at
4350 East-West Highway, Suite 400, Bethesda, Maryland
(hereinafter called the "Landlord") and THE GREAT ATLANTIC &
PACIFIC TEA COMPANY, INC., a Maryland corporation, having an
office at Two Paragon Drive, Montvale, New Jersey 07645
(hereinafter called the "Tenant").
WITNESSETH:
WHEREAS, The Mitchell Company, predecessor-in-interest to
Landlord, as lessor, and The Grand Union Company, as lessee,
predecessor-in-interest to Tenant, entered into a certain lease
dated March 25, 1987 a notice of which was filed by Indenture
with the Superior Court Clerk of Cobb County, Georgia on April
27, 1987 in Book 4440, Page 108 (which lease as modified and
supplemented is hereinafter collectively called the "Lease")
covering the premises commonly known as the Northeast quadrant of
Bells Ferry Road and 1-575, Kennesaw, Cobb County, Georgia
(hereinafter called the "Demised Premisesti), which Demised
Premises are shown on Exhibit "A", attached hereto and made a
part hereof and are located in the shopping center (hereinafter
called the "Shopping Center") more particularly described as
Parcel A and Parcel B on Exhibit "All and Exhibit "B" to such
Lease and by reference made a part hereof; and
WHEREAS, Landlord and Tenant desire to modify and amend the
Lease,
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements hereinafter contained, the parties
covenant and agree as follows:
1. Landlord warrants and represents that Landlord has good and
marketable title to the Shopping center in fee simple absolute
and that the same is subject to no leases, tenancies, agreements,
encumbrances, liens or defects in title which would interfere
with Tenant's use and enjoyment of the Demised Premises and/or
Shopping Center in accordance with the terms of the Lease or
<PAGE> 38
would deprive Tenant of any rights granted to it hereunder.
Landlord further warrants and represents that it has full and
sole right and authority to enter into this Lease Modification
Agreement and has obtained any required consent or approval of
any party, including, without limitation, the consent of any
mortgagee required to be obtained in connection herewith,
including but not limited to the mortgagee pursuant to the
mortgage which encumbers the Demised Premises that is listed on
Exhibit "B" hereof. It is understood that title shall remain as
represented herein without any adverse changes until a memorandum
or notice of this Lease Modification Agreement is recorded. If
title does not remain as represented herein until a memorandum or
notice of this Lease Modification Agreement shall have been
recorded, then Tenant, in addition to any and all remedies
available at law and in equity, may terminate this Lease
Modification Agreement at any time thereafter by giving Landlord
notice of such termination, in which case, the Lease will remain
unchanged and in full force and effect.
2. The current initial term of the Lease expires on January 31,
2008. The fixed annual rent provided for in Article 1.02 of the
Lease is hereby modified so that the fixed annual rent payable
under the Lease during the remaining portion of the initial lease
term beginning as of the "Effective Date" (as hereinafter
defined) and ending on January 31, 2008 shall be reduced as
follows:
During the first twelve (12) month period immediately following
the Effective Date, the fixed annual rental shall be reduced by
the sum of Two Hundred Thousand and 00/100 ($200,000.00) Dollars,
applied in equal monthly installments of Sixteen Thousand Six
Hundred Sixty Six and 67/100 ($16,666.67) Dollars to fixed rent
payable in advance on the first day of each month of such period;
During the second twelve (12) month period following the
Effective Date, the fixed annual rental shall be reduced by the
sum of One Hundred Eighty Five Thousand and 00/100 ($185,000.00)
Dollars, applied in equal monthly installments of Fifteen
Thousand Four Hundred Sixteen and 67/100 ($15,416.67) Dollars to
fixed rent payable in advance on the first day of each month of
such period;
During the third twelve (12) month period following the Effective
Date, the fixed annual rental shall be reduced by the sum of One
Hundred Seventy Thousand and 00/100 ($170,000.00) Dollars,
applied in equal monthly installments of Fourteen Thousand One
Hundred Sixty Six and 67/100 ($14,166.67) Dollars to fixed rent
payable in advance on the first day of each month of such period;
During the fourth twelve (12) month period following the
Effective Date, the fixed annual rental shall be reduced by the
sum of one Hundred Sixty Thousand and 00/100 ($160,000.00)
Dollars, applied in equal monthly installments of Thirteen
Thousand Three Hundred Thirty Three and 33/100 ($13,333.33)
<PAGE> 39
Dollars to fixed rent payable in advance on the first day of each
month of such period;
Commencing as of the fifth twelve (12) month period following the
Effective Date through January 31, 2008, the fixed annual rental
shall be reduced by the sum of one Hundred Fifty Thousand and
00/100 ($150,000.00) Dollars, applied in equal monthly
installments of Twelve Thousand Five Hundred and 00/100
($12,500.00) Dollars to fixed rent payable in advance on the
first day of each month of such period. @
3. Tenant shall continue to have, and continues to be granted at
its option, four (4) successive options to extend the term of the
Lease for four (4) renewal periods (each such renewal period
being hereinafter called the "Renewal Period") for five (5) years
each, the first Renewal Period to begin on February 1, 2008 and
end on January 31, 2013, the second Renewal Period to begin on
February 1, 2013 and end on January 31, 2018, the third Renewal
Period to begin on February 1, 2018 and end on January 31, 2023,
and the fourth Renewal Period to begin on February 1, 2023 and
end on January 31, 2028 upon the same terms, covenants and
conditions as contained in the Lease except as herein modified.
The term of the Lease as modified by this lease modification
Agreement shall be automatically extended for each Renewal Period
unless Tenant notifies Landlord in writing at least one hundred
eighty (180) days before the beginning of the applicable Renewal
Period of its election to terminate the Lease as modified by this
Lease Modification Agreement as of the end of the term of the
Lease as modified by this Lease Modification Agreement (or any
extension thereof).
4.Effective as of the date that Tenant reopens the Demised
Premises for business to the public (hereinafter called the
"Effective Date"), the Lease is hereby amended by adding the
following new Articles at the end thereof. Tenant shall promptly
deliver to Landlord a written notice confirming the actual date
of the Effective Date for purposes hereof. For the purposes of
the following new Articles, reference to "the Lease" or "this
Lease" shall mean the Lease as modified by this Lease
Modification Agreement:
"15.01 Notices. To be effective herein, any notice, consent,
approval, submission or demand given under the Lease or pursuant
to any law or governmental regulation, by Landlord to Tenant or
by Tenant to Landlord shall be in writing. Unless otherwise
required by law or governmental regulation or the Lease any such
notice, consent, approval, submission or demand shall be deemed
given if sent by registered or certified mail, return receipt
requested, postage prepaid or overnight delivery service with
receipt of delivery (a) to Landlord, at the address of Landlord
set forth on the first page of this Lease Modification Agreement
or at such other address as Landlord may designate by notice to
<PAGE> 40
Tenant, or (b) to Tenant, then in triplicate (under separate
cover) one copy to the attention of the Vice President of Real
Estate of Tenant at Two Paragon Drive, Montvale, New Jersey
07645, one copy to the attention of the Vice President and
General Counsel of Tenant at Two Paragon Drive, Montvale, New
Jersey 07645, and one copy to the attention of the Regional
Director of .Real Estate of Tenant at 1200 White Street, S.W.,
Atlanta, Georgia 30310, or at such other addresses as Tenant may
designate by notice to Landlord. During the period of any postal
strike or other interference with the mails, personal delivery or
overnight delivery service with receipt of delivery, shall be
substituted for registered or certified mail. If Tenant shall be
in doubt as to Landlord's address, Tenant may send any
communication to Landlord at the address to which fixed annual
rent was last sent.
16.01 Validity. If any provision of the Lease, or any amendment
hereto, shall be invalid or unenforceable, the remainder of the
provisions of the Lease and amendments hereto shall not be
affected thereby and each and every provision of the Lease, as
the same may be amended, shall be enforceable to the fullest
extent permitted by law.
17.01 Alterations. Notwithstanding anything to the contrary
contained in the Lease, Tenant may, from time to time, at its own
cost and expense make such alterations, additions, enlargements,
improvements, restorations, replacements, installations and
changes, or other non-structural work (hereinafter called the
'Alterations') in, of or to the Demised Premises, as Tenant deems
necessary or desirable. Tenant shall obtain the written approval
of Landlord in the case of "Structural Alterations" (as
hereinafter defined), which approval shall not be unreasonably
withheld or delayed by Landlord upon request of Tenant. The term
"Structural Alterations" as used herein shall not include any
venting in or through the roof or walls or installation, changes
or closures to the windows or doors or changes to the loading
dock (including, without limitation, enclosing the loading dock).
Landlord may only withhold approval f or Structural Alterations
if the work described in such plans and specifications diminishes
the structural integrity of Tenant's store building. If Landlord
does not either approve or state its objections to said plans and
specifications (or any revisions thereof) within fifteen (15)
days after receipt thereof, then said plans and specifications
(or revisions) shall be deemed approved by Landlord; any
objection by Landlord with regard to Structural Alterations must
include a statement from a licensed professional engineer
explaining how the work will diminish the structural integrity of
the Demised Premises. Landlord acknowledges and approves that
Tenant intends (but has no obligation) to undertake the
improvements described on Exhibit "C" hereto. Tenant shall
obtain, or cause to be obtained all building permits, licenses,
temporary and permanent certificates of occupancy and other
governmental approvals which may be required in connection with
the making of any Alteration. Landlord shall cooperate with
Tenant in obtaining all such permits, licenses, certificates or
<PAGE> 41
other governmental approvals required in connection with the
making of any Alteration and shall execute any documents required
in the furtherance of such purpose. Tenant may, but shall not be
obligated to, remove any Alteration that was approved in advance
by Landlord.
As of the Effective Date as defined above, Landlord agrees to
promptly reimburse Tenant in the sum of up to Fifty Thousand and
00/100 ($50,000.00) Dollars upon notice from Tenant of the
completion by Tenant of all or any of the following improvements:
(i) replacement, at Tenant's option, of the front awning on the
Demised Premises, (ii) increasing the height of the existing
parapet wall in front of the Demised Premises as specified by
Tenant, (iii) installation of an additional pylon sign tower in
the Shopping Center located in the area shown on Exhibit "A"
hereto for purposes of adding Tenant's sign thereon on an
exclusive basis, subject to applicable codes and Landlord's
approval of plans therefor, which approval shall not be
unreasonably withheld or delayed, and (iv) work undertaken by
Tenant after the date hereof and prior to the Effective Date for
purposes of compliance with any applicable building codes and
regulations, which work shall be undertaken in the sole
discretion of Tenant without any continuing responsibility
therefore pursuant to the terms of Article 2.01 of the Lease
which shall remain in all respects unmodified and in full force
and effect. Tenant shall deliver copies of any invoices in its
possession evidencing payment at the time of delivery by Tenant
of the notice of completion to Landlord for purposes of
determining the reimbursement amount payable to Tenant by
Landlord hereunder up to a maximum of Fifty Thousand and 00/100
($50,000.00) Dollars. Tenant shall not be obligated to expend
any sums in excess of the reimbursement amount hereunder in
connection with (i)-(iv) above.
18.01 Common Area Work. Landlord agrees to immediately commence
and diligently complete to the reasonable satisfaction of Tenant
the following work (collectively the "Landlord's Work") in the
Demised Premises and/or the Shopping Center on or prior to the
Effective Date at its own cost and expense as an inducement to
having Tenant enter into this Lease Modification Agreement and
reopen the Demised Premises for business:
1. Increase the lighting in the parking lot for the Shopping
Center by adding additional lighting sufficient to maintain a
minimum of 2.5 foot candles of lumens with white light throughout
the Shopping Center;
2. Repair existing pot holes in the parking lot paving, entrance
and exit drives; seal coat and restripe the parking lot for the
Shopping Center for parking for a minimum of four hundred thirty-
eight (438) cars as well as enclosures for shopping carts;
3. Redesign the parking configuration scheme as shown on Exhibit
"A" and the service entrance as shown on Exhibit I'D" attached
hereto; and
<PAGE> 42
4. Permit Tenant to erect Tenant's operating name at the top of
the exterior pylon sign tower in the Shopping Center in the
location of the current Shopping Center name sign and otherwise
in accordance with Article 2.11 of the Lease. Tenant is
responsible for the cost of Tenant's sign and permits needed for
such Tenant's sign in connection therewith.
Landlord shall obtain, or cause to be obtained as soon as
reasonably possible all building permits, licenses, temporary and
permanent certificates of occupancy and other governmental
approvals which may be required in connection with any of
Landlord's Work herein described. In addition, Landlord will use
all reasonable efforts to complete the following items at its own
cost and expense on a timely basis as soon as possible:
1. Install a wooden dumpster enclosure around the dumpster
service areas at the rear of the outparcels in the Shopping
Center; and
2. Obtain an access driveway to and from Hawkins Store Road.
18.02 Landlord shall provide Tenant with a current copy of
Landlord's certificate of insurance obtained pursuant to Article
5.01 of the Lease prior to commencing Landlord's Work.
18.03 As a material inducement for Tenant to enter into this
Lease Modification Agreement, Landlord agrees to terminate the
lease with respect to the area within the Shopping Center,
currently occupied by a church (as shown on Exhibit "A" hereto),
on or before September 30, 1995 which is the expiration date
thereunder and to relet such area only to a tenant in a retail
business; provided, however, that such tenant may be permitted to
occupy such area for an additional thirty (30) days only as a
holdover month-to-month tenant, or for such additional thirty
(30) day time period as previously approved in writing by Tenant.
19.01 Percentage Payment. The provisions contained in Article
10.01 of the Lease shall be replaced and modified only for the
time period from the Effective Date through January 31, 2008 by
the following:
Commencing as of the Effective Date, and in addition to fixed
annual rent, Tenant shall make annually on or before the Sixtieth
(60th) day following the closing of the applicable Lease Year, as
an additional payment, a percentage of sales payment (hereinafter
called "Percentage Payment"), in an amount equal to one (1%)
percent of all Sales (as hereinafter defined), if any, in excess
of the following:
During the portion of the initial term of the Lease as herein
modified, for the period from the Effective Date through January
31, 1996, one (1t) percent of all Sales in excess of Thirty-
seven
<PAGE> 43
Million Five Hundred Thirty-Eight Thousand Eight Hundred and
00/100 ($37,538,800.00) Dollars made by Tenant in and from the
Demised Premises for such time period.
During the period from February 1, 1996 through January 31, 1997,
one (it) percent of all Sales in excess of Twenty-Three Million
Eight Hundred Thirty-Seven Thousand Eight Hundred and 00/100
($23,837,800.00) Dollars made by Tenant in and from the Demised
Premises for such time period.
During the period from February 1, 1997 through January 31, 1998,
one (1%) percent of all Sales in excess of Twenty-Six Million Two
Hundred Sixty-Three Thousand and 00/100 ($26,263,000.00) Dollars
made by Tenant in and from the Demised Premises for such time
period.
During the period from February 1, 1998 through January 31, 1999,
one (1%) percent of all Sales in excess of Twenty-Seven Million
Six Hundred Thirty-Eight Thousand and 00/100 ($27,638,000.00)
Dollars made by Tenant in and from the Demised Premises for such
time period.
During the period from February 1, 1999 through January 31, 2000,
one (1%) percent of all sales in excess of Twenty-Eight Million
Six Hundred Thirty-Eight Thousand and 00/100 ($28,638,000.00)
Dollars made by Tenant in and from the Demised Premises for such
time period.
During the period from February 1, 2000 through January 31, 2008,
one (1%) percent of all sales with respect to each Lease Year
within such time period in excess of Twenty-Nine Million Three
Hundred Eighty-Eight Thousand and 00/100 ($29,388,000.00) Dollars
made by Tenant in and from the Demised Premises for such time
period.
The Percentage Payment shall be payable on or before the sixtieth
(60th) day following the close of the applicable Lease Year. The
Percentage Payment for any period less than a Lease Year shall be
prorated and paid within sixty (60) days after the expiration of
such period.
The term "Sales" is hereby defined as the gross receipts of
merchandise sold by Tenant in and from the Demised Premises,
excluding therefrom however (1) cash discounts, deposit refunds
and credits, (2) rebates, refunds and allowances for merchandise
returned, (3) any sums paid, charged, or collected as an incident
to or measured by receipts or sales whether or not any such sums
be known as sales, receipts or income taxes, excise taxes, or by
any other name, which Tenant may be obligated to collect and/or
pay as a result of any law or ordinance, federal or state, county
or municipal, now or hereafter enacted, (4) cost of trading
stamps issued by Tenant to its customers, (5) receipts or
commissions from public pay telephones, (6) receipts or
commissions from vending machines or weighing machines, (7)
<PAGE> 44
receipts from delivery service, if any, (8) credits accruing to
said store arising from the transfer or exchange of merchandise
from said store to other stores or locations, (9) returns to
Tenant's warehouse or to shippers, suppliers or manufacturers,
(10) receipts from the sale of merchandise out of the ordinary
course of business, (11) receipts from sales of salvage cartons,
meat scraps, suet and other salvage merchandise, (12) receipts
from the sale of tobacco products, (13) receipts from sales at a
discount to hospitals and charitable organizations, (14) payments
received by Tenant elsewhere than at the Demised Premises on
orders taken at the Demised Premises but filled elsewhere, (15)
receipts from or arising out of sales of postage stamps, money
orders, lottery tickets and similar items, (16) cigarette taxes,
or any other tax or assessment an merchandise, (17) bad debts
arising out of sales from the Demised Premises, (18) personal
property taxes, (19) receipts, rents, fees and other charges from
and by any ATM, (20) receipts from the sale of fixtures,
equipment and personal property, (21) receipts, rents, fees,
allowances,.considerations, rebates, payments and other amounts
received from manufacturers, brokers, suppliers or any person or
entity, to stock, promote, display or advertise any product, (22)
interest on credit, sales and fees, commissions or discounts paid
by Tenant to any third party credit card, or other.credit
extension company and (23) banking, savings, lending or other
related financial transactions.
With each,Percentage Payment, Tenant shall provide Landlord with
a statement showing the amount of Sales during the preceding
Lease Year. Such statement shall be deemed to have been accepted
by Landlord as correct unless, within thirty 130) days
thereafter, Tenant receives notice of Landlord's dissatisfaction
therewith, in which event Landlord, within thirty (30) days from
the date of said notice, may cause any reputable audit company or
certified public accountant reasonably satisfactory to and
approved for the purpose by Tenant, to examine and to audit,
during reasonable business hours, the books and records of Tenant
pertaining to Sales in and from the Demised Premises for the
purpose of verifying the accuracy of said statement. Landlord
covenants and agrees to hold all such information in the
strictest confidence.
The determination and computation of any Percentage Payment shall
be made separately in respect of each Lease Year; it being
understood that the Sales in any Lease Year and the additional
payments which may become due and payable hereunder by reason of
such Sales shall hot be cumulative, nor have any bearing on, or
connection with, the Sales in any other Lease Year.
Tenant makes no representation or warranty that the business in
the Demised Premises will amount to any specified volume.
Landlord and Tenant agree that Tenant has no fiduciary
relationship with Landlord and Landlord shall not hereby acquire
any interest in Tenant's business. Nothing herein contained
shall be deemed to require that the Demised Premises be opened or
<PAGE> 45
remain open for any business.
20.01 Rent Adjustment. After the Demised Premises are reopened
for business by Tenant upon satisfactory completion of the
Landlord's Work referred to in Article 18.01 above, if the
Demised Premises remains closed thereafter for a period of time
of more than thirty (30) consecutive days for any reason other
than strike, lock-out, act of God, governmental restrictions,
enemy action, civil commotion or to permit remodeling,
alterations or repair of damage or destruction to the Demised
Premises, or due to a taking by condemnation or otherwise, or any
other reason beyond the reasonable control of Tenant, then
Landlord may at its election send Tenant thirty (30) days' prior
written notice of termination of both the rent provisions
contained in Article 2 of this Lease Modification Agreement and
the provisions of Article 19.01 (Percentage, Payment) contained
above in Article 4 of this Lease Modification Agreement. If
prior to expiration of thirty (30) days from receipt by Tenant of
Landlord's written notice of termination referred to above, the
Demised Premises is opened for business to the public then such
notice shall be automatically nullified and be of no further
force or effect whatsoever. If, however, upon expiration of
thirty (30) days from receipt by Tenant of Landlord's written
notice of termination referred to above, the Demised Premises
continue to remain closed for business to the public, then only
in such event shall both the fixed rent modification provisions
contained in Article 2 of this Lease Modification Agreement and
the provisions of Article 19.01 (Percentage Payment) contained
above in Article 4 of this Lease Modification Agreement
terminate, on the date which is thirty (30) days from the date of
receipt by Tenant of such written notice of termination, and the
parties agree that the terms of the Lease with respect to fixed
rent contained in Article 1.02 and percentage rent contained in
Article 10.01 of this Lease prior to the modifications contained
in this Lease Modification Agreement shall be reinstated and
payable by Tenant in accordance with the terms of such Article
1.02 and Article 10.01 effective as of such termination date."
5. Except as herein amended, the Lease is hereby ratified and
confirmed and shall continue in full force and effect.
6. Within ten (10) days after the request of either party,
Landlord and Tenant shall execute a notice or memorandum of this
Lease Modification Agreement which shall contain a summary of
restrictive covenants, in form for recording. In addition to
those matters necessary for recordation, the notice shall recite
those provisions of this Lease Modification Agreement that are
reasonably requested by either Landlord or Tenant. The
requesting party shall pay the costs of recordation of such
notice or memorandum. The parties hereto acknowledge and agree
that the Declaration of Restrictions dated March 25, 1987 and
recorded in Cobb County, Georgia on December 30, 1987 in Book
4763, Page 489 (the "Declaration") was recorded for the benefit
<PAGE> 46
of Tenant and that the restrictive covenants contained therein
are not hereby modified in any respect as a result of this Lease
Modification Agreement and that the restrictive covenants
contained in such Declaration shall continue to run with all
lands affected thereby unmodified and in full force and effect
for the greater of twenty (20) years, or the term of the Lease,
subject to renewal thereof. It is further agreed that such
Declaration (and the restrictive covenants contained therein)
shall. not be modified, amended, terminated, cancelled or
otherwise altered in any respect without the prior written
consent of Tenant obtained in each instance.
7. This Lease Modification Agreement shall bind and inure to the
benefit of and may be enforced by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
document on the date first above written.
WITNESS: LANDLORD:
MID-ATLANTIC CENTERS LIMITED
PARTNERSHIP, a Maryland limited
partnership
By: FW REALTY LIMITED PARTNERSHIP,
a District of Columbia limited
partnership, General Partner
By: FW CORPORATION, a District of
Columbia corporation,
General Partner
/s/ Jeffery Distenfeld By: /s/William J. Wolfe
Name: William J. Wolfe
Title: President
As To Landlord
/s/ Mary Jane Geraci
Notary Public
ATTEST: TENANT:
THE GREAT ATLANTIC & PACIFIC TEA
COMPANY, INC.
/s/ Mary Ellen Offer By: /s/ Brian P
Asst. Secretary Vice President
As to Tenant
1275u/095575
09/18/95
<PAGE> 47
EXHIBIT "A"
This exhibit is a complete site plan/analysis. It
includes a site location map, parking detail, and plot plan. The
shopping center and the surrounding property are surveyed.
Complete measurements of the site dimensions, building dimensions
and locations, and parcel divisions are provided. Total acreage
and parking availability is stated.
<PAGE> 48
EXHIBIT "B"
Mortgage in the original principal amount of $6,000,000.00 dated
December 30, 1987 and recorded on December 30, 1987 in Cobb
County, Georgia in Book 4763, Page 529.
<PAGE> 49
EXHIBIT "C"
A&P #41-678
4290 Bells Perry Road
Kennesaw, Georgia 30144
GENERAL SCOPE OF WORK OVERVIEW
REQUIREMENTS TO REOPEN STORE
1. Install surplus checkstands and IBM system.
2. New lighted lane markers and cigarette fixture in line with
checkout.
3. Replace one safe.
4. Install new Market Place Produce Kit (B Store).
5. Remodel Floral Department.
6. Add suspended lighting over Produce Islands.
7. Replace 281 Service Deli and 8' Hot Table.
8. Abandon Cheese Shop.
9. Install additional 121 Multi-Deck Cheese for 241 Cheese Pizza
Delivery.
10. Rework Meat line up, add 361 Lunch Meat in line.
11. Abandon Service Meat Department.
12. Expand Dairy 32' (old Lunch Meat modified with added
shelves).
13. Rework Seafood line up (with some new equipment).
14. Rework Bakery line up (with some new equipment).
15. Replace part of shelving (existing Hussman brand - none
available for reset).
16. General Repairs. Floor Tile, ceiling cleaning, steam clean,
etc.
17. Paint.
18. Minimum Decor Package, speed track, sign kits, H. Signs.
19. Refrigeration recharge, start up, tune up, add on.
20. HVAC start up, tune up.
21. Pharmacy computer replace (existing used for upgrades other
stores).
22. New shopping carts.
23. New handicap motorized carts.
24. New front elevation (more massive look).
25. Reinstall existing pylon and building signs.
26. Architectural work (elevation plans upgrade for permits, new
occupancy permit required).
27. Install additional pylon sign tower in the area shown on
hereof.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> $1,664,994
<SECURITIES> $0
<RECEIVABLES> $1,117,704
<ALLOWANCES> $326,673
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $53,059,315
<DEPRECIATION> $13,271,409
<TOTAL-ASSETS> $43,564,545
<CURRENT-LIABILITIES> $0
<BONDS> $29,130,611
<COMMON> $0
$0
$0
<OTHER-SE> $12,455,797
<TOTAL-LIABILITY-AND-EQUITY> $43,564,545
<SALES> $0
<TOTAL-REVENUES> $7,426,069
<CGS> $0
<TOTAL-COSTS> $7,286,464
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $172,159
<INTEREST-EXPENSE> $3,188,433
<INCOME-PRETAX> ($5,381,367)
<INCOME-TAX> $0
<INCOME-CONTINUING> ($5,381,367)
<DISCONTINUED> $0
<EXTRAORDINARY> $1,602,902
<CHANGES> $0
<NET-INCOME> ($3,778,465)
<EPS-PRIMARY> ($3.57)
<EPS-DILUTED> ($3.57)
</TABLE>
<PAGE> COVER
LETTER OF VALUATION FOR
10 Shopping Center Properties
Mid Atlantic Centers Limited Partnership
As of
January, 1 1996
Prepared For:
Mid-Atlantic Centers Limited Partnership
c/o Realty Capital IV Limited Partnership
111 South Calvert Street, 17th Floor
Baltimore, Maryland 21203-1476
Mid-Atlantic Centers Limited Partnership
c/o FW Realty Limited Partnership
4350 East-West Highway
Suite 400
Bethesda, Maryland 20814
Submitted by:
Sapperstein & Associates
6917 Arlington Road
Suite 300
Bethesda, Maryland 20814
File No. 032296DG
Sapperstein & Associates
Real Estate Appraisers/Consultants/ Due Diligence and
Valuation Specialists Established 1982
6917 Arlington Road
Bethesda, MD 20814
301-654-0214
Fax No. 301-654-0272
March 22, 1996
Mid-Atlantic Centers Limited Partnership
c/o Realty Capital IV Limited Partnership
111 South Calvert Street, 17th Floor
Baltimore, Maryland 21203-1476
Mid-Atlantic Centers Limited Partnership
c/o FW Realty Limited Partnership
4350 East-West Highway
Suite 400
Bethesda, Maryland 20814
Subject: Letter of Valuation for 10 shopping center properties
To: Mid-Atlantic Centers Limited Partnership
Realty Capital IV Limited Partnership
FW Realty Limited Partnership
Pursuant to your request and our letter of engagement,
please be advised that we have prepared a "limited - restricted"
appraisal document as described below.
This is a Restricted Appraisal Report which is intended to comply
with the reporting requirements set forth under Standards Rule 2-
2(c) of the Uniform Standards of Professional Appraisal Practice
for a Restricted Appraisal Report. As such, it presents no
discussions of the data, reasoning, and analyses that were used in
the appraisal process to develop the appraiser's opinion of value.
Supporting documentation concerning the data, reasoning, and
analyses is retained in the appraiser's file. The depth of
discussion contained in this report is specific to the needs of the
client and for the intended use stated below. The appraiser is not
responsible for unauthorized use of this report.
Furthermore, in accordance with prior agreement between the
Client and the appraiser, this report is the result of a limited
appraisal process in that certain allowable departures from
specific guidelines of the Uniform Standards of Professional
Appraisal Practice were involved. The intended user of this report
is warned that the reliability of the value conclusion provided may
be impacted to the degree there is departure from specific
guidelines of USPAP.
The subject of this appraisal consists of 10 neighborhood and
community shopping centers located in Pennsylvania, Maryland, South
Carolina, North Carolina, Virginia, and Tennessee. Since the prior
report conducted last year, the Orchard Square Shopping Center in
Atlanta, Georgia has been sold, and thus, is not included in this
valuation.
<PAGE> 1
Purpose and Function of the Appraisal
The purpose of this appraisal is to estimate the current
Market Value "as is" of the Leased Fee Estate of each individual
property as of January 1, 1996, based on the projected net
operating incomes for the properties. This estimate of value
recognizes binding lease commitments presently in effect with the
properties' various tenants. The market value estimates reflect
the most probable price in terms of financial arrangements
equivalent to cash (i.e., market rate, conventional financing).
The function of this assignment is to provide the Client with
an estimate of market value for internal purposes and to provide
certain information required by retirement account investors of the
Client. This appraisal document should only be used by the Client
in ascertaining the value of the subject properties as it relates
to Client's portfolio management. This document is not suitable
nor should it be used for mortgage lending, tax appeal, or
litigation purposes. The appraisers' knowledge of the function of
this assignment is not and should not be construed as bias with
regard to the opinion(s) of value rendered herein.
Per the Client's request and to the best of our knowledge,
this report conforms with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation; and, the Code of
Professional Ethics and Standards of Professional Practice of the
Appraisal Institute.
Definition of Market Value
Market Value is defined as:
"The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a
fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a
sale as of a specified date and the passing of title from seller
to buyer under conditions whereby:
1. Buyer and seller are typically motivated.
2. Both parties are well informed or well advised, and
acting in what they consider their own best interests;
3. A reasonable time is allowed for exposure in the open
market;
<PAGE> 2
4. Payment is made in terms of cash in United States
dollars in terms of financial arrangements comparable thereto; and
5. The price represents the normal consideration for the
property sold unaffected by special or creative financing
or sales concessions granted by anyone associated with the
sale.
Definition of Leased Fee Estate
Leased Fee Estate is defined as:
"an ownership interest held by a landlord with the right of use
and occupancy conveyed by lease to others; the rights of lessor
or the leased fee owner and leased fee are specified by contract
terms contained within the lease.
Scope/Extent of the Investigation Process
In completing the appraisal, we have performed the following
investigations and analyses. The valuation of the properties
were limited to an income capitalization approach to value, as
this is the most appropriate method of valuation for shopping
center properties. The investigation and analyses performed are
summarized below.
The Client has provided income and expense operating histories
and current rent rolls for each property. Operating histories
were provided for the period from 1989 to 1994. In addition, the
current year's operating histories were provided for January
through September and budgeted amounts for the remainder of the
year. Rent rolls for each property were provided, dated October
1, 1995. In addition, the Client provided an estimate of Capital
Expenditures projected for each property during the first year
of the analysis.
<PAGE> 3
For each property, we analyzed the rent roll to make projections
for gross revenues and vacancy. The income and expenses were
estimated based on an evaluation of the operating histories for
each property. As each of these centers has an operating history
and recent leasing activity, there was adequate information
available for each property to make assumptions regarding the
projected income streams. In addition, we also compared the
income and expense projections with regional averages provided
in the Urban Land Institute's Dollars and Cents of Shopping
Centers (1995 edition).
The appraisal process for each of the properties involved the
following:
Analysis of the operating history and rent roll for a
determination of market rents, existing vacancy, potential future
vacancy, and future operating expenses.
Prospective cash flows were developed to estimate the first-
year net operating income as well as a net present value summary
of the discounted cash flow (DCF) analysis. The ARGUS property
analysis software was employed in this analysis.
Estimate appropriate capitalization rates and yield rates for
each property. Discussions were held with appraisers and/or
brokers in the respective markets of the subject properties to
ascertain appropriate capitalization rates and discount rates.
Furthermore, discussions were held with these individuals to
discuss the subjects' respective positioning within the market.
Estimate the market value based on the direct capitalization and
discounted cash flow (DCF) methodologies.
Valuation Methodology
The sole approach employed in the valuation of the subject
properties is the Income Approach. In this approach, the
property's potential net operating income stream is estimated and
capitalized into a value estimate. The estimate of stabilized net
income is based upon projections of the subjects' historical income
and expense. An estimate of market value is than obtained by
taking the income as projected, and applying a capitalization rate.
This method is referred to as Direct Capitalization.
<PAGE>4
Another method of valuation within this approach forecasts the
potential gross income, vacancy, expenses, and the resulting net
income over a typical holding/analysis period. The property is
assumed to be sold at the end of the term and the net proceeds from
the sale (reversion) are combined with the last year's net income
to become part of that year's cash flow. In this case, cash flow
is net income available before paying debt service. The cash flows
are converted to a present value using a market derived that is
developed for the holding period is commonly referred to as the
Discounted Cash Flow model, or DCF. We have used the computer
program ARGUS to develop the Discounted Cash Flow.
The income approach is utilized by many institutional investors
when considering the purchase of an income-producing property. The
selection of appropriate capitalization and yield rates are based
on the subject properties' income generating characteristics, and
market derived investment criteria for similar properties.
Income and Expense Analysis
The estimates of income and associated expenses are based upon
current negotiated lease terms and conditions at the subject. As
each of these centers has an operating history and recent leasing
activity, there was adequate information available within each
subject property to make assumptions regarding the projected income
streams. In addition, we also compared the income and expense
projections with regional averages provided in the Urban Land
Institute's Dollars and Cents of Shopping Centers.
Effective Gross Income
Effective gross income is the sum of potential gross revenue
less vacancy. Potential gross revenue is the total income
attributable to a property at 100% occupancy. In addition,
potential gross income includes the income derived from the
reimbursement of expenses by tenants as specified in the leases.
The subject properties are anticipated to generate income primarily
from contract rent, and expense pass-throughs.
Rental Revenue: The rental revenue is the stated contract rent
for the contract tenants and the estimated market rent for the
vacant space. The total Rental Revenue consists of 100% of the
leased space and 100% of the potential rent for the unleased
space to be absorbed over the analysis period.
<PAGE> 5
Reimbursement Revenue: The recoveries represent the tenant
reimbursements for operating expenses that are passed through to
the tenants. These reimbursements are based on the individual
lease agreements for each tenant within each of the shopping
centers.
General Vacancy: An allowance for reductions in potential
income attributable to vacancies, tenant turnover, and non-
payment of rent. This item depends upon current vacancy at each
center, the properties' occupancy history, and expectation for
the future.
Operating Expenses
Reimbursable expenses are those expenses which are reimbursed
by the tenants on a pro-rata basis and generally include real
estate taxes, insurance, common area utilities, and repairs and
maintenance of the common area. Non-reimbursable expenses are
those expenses which are not reimbursed by the tenants and
generally include professional fees, promotion and advertising, and
miscellaneous administrative expenses. Management may be treated
as a reimbursable or non-reimbursable expense. The determination
of whether an expense is reimbursable is based on the lease terms
of the individual leases.
Real Estate Taxes and Insurance: These expenses were projected
based upon an increase of 3% over the expenses for the previous
year.
CAM/Utilities: This expense category includes such items as the
maintenance and repair of the subject's exterior improvements,
elevations/facade, parking lot and pedestrian walkway areas,
grounds/landscaping, snow and trash removal, general repairs,
maintenance, and cleaning and utility usage in the common areas.
In addition, this expense includes utility usage in the tenants'
spaces if they are not individually metered and billed by the
respective utility companies. We have projected this expense to
be 3% higher than the prior year's expense.
Management: A management fee of 6.0% was deducted from the
income stream as the management expense. Typical management
agreements are based on a range of 3.0% to 6.0% of the effective
gross income.
<PAGE> 6
Miscellaneous: This category includes legal, accounting,
professional fees, promotional expenses, and miscellaneous sundry
expenditures. The miscellaneous expense was projected based upon
an average of the prior year's expenses for this category. In
estimating the averages, we have excluded those years where the
amounts represented an aberration from the normal.
Discount Cash Flow Analysis
The following assumptions have been used in projecting the
cash flows and determining the values of the individual properties.
The DCF analysis is based on an all-cash purchase, a ten-year
holding period and resale with no seller financing.
Market rent and expenses are projected to increase with the
C.P.I. throughout our analysis at a rate of 3.0%. This is
consistent with parameters of investors as identified in the
Korpacz Real Estate Investor Survey. During the lease terms,
base rent will increase based upon negotiated contractual lease
terms.
Tenant Fit-Up is typically the responsibility of the tenant.
Upon lease rollover, we have allocated a rate of $2.00 per square
foot. A 50% to 65% renewal rate was assumed for existing
tenants.
A cost of sale at the end of the analysis period is estimated
to be 4.0% and is deducted from the capitalized value at the end
of the 10 year holding period. These costs include broker's
commission and seller's share of the closing and recording costs.
Capitalization rates used range from 10.0% to 11.0%. The
applicable rate for each property is dependent on age, condition,
tenancy, location, vacancy, upcoming lease expirations, and
general investor expectations for the individual markets. We
have also relied upon the Client's representation as to the
market appeal of each property, and conducted interviews with
appraisers and/or brokers active in the properties respective
markets.
Discount rates used ranged from 11.5% to 13.0% and are
applicable to each property based on the conditions as reported
above.
<PAGE> 7
A reversionary (terminal) capitalization rate was applied to the
11th year's net operating income. The terminal capitalization
rate was based on a 0.25% to 1.0% increase over the going-in
capitalization rate, depending on the age of the property and
economic prospects for the marketplace. This increase in
capitalization rates from the going-in rate also accounts for
capital improvements that may be required at the time of future
re-sale as the property will have aged 10 years. It also
considers the subject's market appeal at the end of the holding
period.
Valuation
The market value conclusions for the 10 shopping center properties
are provided on the following pages.
<PAGE> 8
SUBJECT PROPERTY
Shopping Center: Berkeley Square Shopping Center
Location:Goose Creek (Charleston), South Carolina
Size:98,258 square feet
Current Vacancy
Leasable: 4,591 square feet (4.7%)
Non-Leasable: 0
Total Vacancy:4,591 square feet (4.7%)
Capitalization Rate:11.0%
Value - Direct Capitalization: $2,990,000
Discount (Yield) Rate: 13.0%
Value - Discounted Cash Flow: $3,140,000
Reconciled Value: $3,075,000
Less: 1st Year Capital Improvement: $ 0
Value Conclusion: $3,075,000
Comments: The property was developed in the late 1960's and was
reported to have been renovated in the past ten years. The center
is situated in an L shape, and is located at the intersection of
U.S. Highway 52 and Thomason Boulevard in the Goose Creek area
north of Charleston, South Carolina. The center consists of a non-
anchored neighborhood center with one pad site. Another pad site
occupied by the Chinese restaurant was reported to have been sold
in 1995 for $217,000, and as such, is no longer included in the
income stream.
Local real estate professionals report that the closing of the
naval base has had a measurable effect on the local market,
although, not nearly as severe as most people had anticipated.
The area still has many non-military industrial employers such as
Miles, WestVaco, and Dupont in the northern region of Charleston.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
Income Approach Rate Value
Direct Capitalization 11.00% $2,990,000
Discounted Cash Flow 13.00% $3,140,000
<PAGE> 9
SUBJECT PROPERTY
Shopping Center: Cloister Shopping Center
Location: Ephrata, Pennsylvania
Size: 56,015 square feet
Current Vacancy
Leasable: 1,700 square feet (3.0%)
Non-Leasable: 3,262 (5.8%)
Total Vacancy: 4,962 square feet (8.9%)
Capitalization Rate: 11.0%
Value - Direct Capitalization: $2,870,000
Discount (Yield) Rate: 13.0%
Value - Discounted Cash Flow: $2,850,000
Reconciled Value: $2,850,000
Less: 1st Year Capital Improvement: $ 150,000
Value Conclusion: $2,700,000
Comments: This neighborhood shopping center is located in the
town of Ephrata, north of Lancaster, Pennsylvania. This property
consists of an unanchored neighborhood center that is reported to
be approximately 35 years old. The property is located at the
corner of North Reading Road (Route 272) and Martin Avenue. There
is a McDonald's pad site located at the frontage of the property;
however, the rental income is not part of the subject income
stream.
First Washington Management reports that the property requires
repair and replacement of the parking lot, roof, and facade and
other items of deferred maintenance, at an estimated cost of
$150,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
Income Approach Rate Value
Direct Capitalization 11.00% $2,870,000
Discounted Cash Flow 13.00% $2,850,000
<PAGE> 10
SUBJECT PROPERTY
Shopping Center: Edgewood Plaza Shopping Center
Location: Edgewood, Harford County, Maryland
Size: 49,612 square feet
Current Vacancy
Leasable:2,500 square feet (5.0%)
Non-Leasable: 0
Total Vacancy: 2,500 square feet (5.0%)
Capitalization Rate: 10.5%
Value - Direct Capitalization: $1,950,000
Discount (Yield) Rate: 12.5%
Value - Discounted Cash Flow: $2,350,000
Reconciled Value: $2,200,000
Less: 1st Year Capital Improvement: 0
Plus: Value of Excess Ground $ 270,000
Value Conclusion: $2,470,000
Comments: This property was constructed in 1973 and renovated in
late 1995 and early 1996. The property is located on the corner
of Edgewood Road and Hanson Road, approximately three miles east
of U.S. Route 40, the primary retailing corridor in the
neighborhood. The neighborhood center is anchored by Santoni's
grocery store and Rite Aid which leases 6,400 square feet. The
property includes a pad site that was formerly occupied by Texaco,
but is currently vacant. The center primarily serves the needs of
the nearby residents and military base.
It is reported that the pad site is under contract for $220,000,
with contingencies for subdivision, and additional building area
to be constructed.
It has been reported that Rite-Aid, one the of subject's lead
tenants, has purchased vacant ground on the opposite side of
Edgewood Road for construction of a free standing retail building.
The property was purchased on October 2, 1995 for a reported price
of $2.20 per square foot for 2.3 acres. Construction on the new
facility has begun. At this time, Rite-Aid has not discussed with
First Washington Management their plans for vacating the center.
However, their lease continues until July 1999, and according to
First Washington Management, Rite-Aid does have the right to sub-
lease and/or go dark. For purposes of this analysis, we have
<PAGE> 11
assumed that the Rite-Aid space will be released at the end of its
current lease term at $9.00 per square foot adjusted for inflation,
substantially higher than the current lease rate.
The property includes approximately 150,300 square feet of vacant
ground located along the Hanson Road frontage. This portion of the
property was reported to have received approvals for 12,000 square
feet of shopping center development. As such, this portion of the
property represents additional ground. In valuing the additional
ground, we have examined sales of vacant ground in the area and
neighborhood. The most relevant sale is the aforementioned sale
to Rite-Aid. As this sale was for a property that has frontage on
Edgewood Road, with level topography, and is ready for development,
a downward adjustment is required to reflect the inferior
conditions of the subject's excess land. The excess ground does
not have frontage on Edgewood Road, is not level, but slopes upward
away from Hanson Road, and would require resubdivision. As such,
the excess ground has been valued at $1.80 per square foot of
ground area, or $270,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
Income Approach Rate Value
Direct Capitalization 10.50% $1,950,000
Discounted Cash Flow 12.50% $2,350,000
<PAGE> 12
SUBJECT PROPERTY
Shopping Center: Highlandtown Shopping Center
Location: Baltimore, Maryland
Size: 56,200 square feet
Current Vacancy
Leasable: 0 square feet (0%)
Non-Leasable: 0
Total Vacancy: 0 square feet (0%)
Capitalization Rate: 10.0%
Value - Direct Capitalization: $5,090,000
Discount (Yield) Rate: 12.0%
Value - Discounted Cash Flow: $4,980,000
Reconciled Value: $5,050,000
Less: 1st Year Capital Improvement: $ 50,000
Value Conclusion: $5,000,000
Comments: This is a neighborhood shopping center located in
downtown Baltimore, Maryland. The neighborhood is located
approximately three miles from the Central Business District in an
area that is characterized by freestanding retail along Eastern
Avenue. This property was constructed in 1987 and is anchored by
Santoni's grocery store and Rite Aid.
Safeway is reported to be constructing a store 1.5 miles from the
subject property which may have the affect of cannibalizing some
of the store's sales.
First Washington Management reports that the property requires
repair and replacement of the parking lot, and other items of
deferred maintenance, at an estimated cost of $50,000.
The property was reported to be marketed for sale in 1995 at a
price of $5,750,000 or a 8.9% capitalization rate based on
projected income. No offers were received, and the offering price
probably temporarily soured investors on the property.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
Income Approach Rate Value
Direct Capitalization 10.00% $5,090,000
Discounted Cash Flow 12.00% $4,980,000
<PAGE> 13
SUBJECT PROPERTY
Shopping Center: Holiday Shopping Center
Location: Collinsville, Virginia
Size: 82,185 square feet
Current Vacancy
Leasable: 1,788 square feet (2.2%)
Non-Leasable: 6,352 (7.7%)
Total Vacancy: 8,140 square feet (9.9% )
Value Conclusion: $1,200,000 (based on contract of sale)
Comments: This is a neighborhood shopping center located in
Collinsville, Virginia, which is approximately 40 miles southeast
of Roanoke, Virginia. The property is about 20 years old and is
anchored by Family Dollar store and Southeast Mills. There is a
pad site that is leased by Crotts Custom Cars.
The property is currently subject to a contract of sale for a price
of $1,200,000. Based on projected income of $115,912, the price
generates a capitalization rate of 9.7%. Local real estate
professionals indicate that a market capitalization rate for a
property of the subject's characteristics would typically range
between 10.5% and 11.0%. Nonetheless, we have recognized the
contract as representative of the value of the subject property.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
<PAGE> 14
SUBJECT PROPERTY
Shopping Center: Jackson Heights Plaza
Location:Murfreesboro, Tennessee
Size: 156,373 square feet
Current Vacancy
Leasable: 1,900 square feet (1.2%)
Non-Leasable: 4,241 (2.7%)
Total Vacancy: 6,141 square feet (3.9%)
Capitalization Rate: 10.25%
Value - Direct Capitalization: 4,950,000
Discount (Yield) Rate: 12.0%
Value - Discounted Cash Flow: $4,810,000
Reconciled Value: $4,900,000
Less: 1st Year Capital Improvement: $ 200,000
Value Conclusion: $4,700,000
Comments: This community shopping center is located in
Murfreesboro, Tennessee. Murfreesboro is approximately 30 miles
southeast of Nashville. The property was constructed in 1959 and
is unanchored. There are pad sites that are leased by Goodyear,
Toot's, and First Union. The subject was the first center to be
built in Murfreesboro and is still located in the core shopping
area of Murfreesboro with an excellent location on Broad Street.
First Washington Management reports that the property requires
repair and replacement of the parking lot, roof, and facade and
other items of deferred maintenance, at an estimated cost of
$200,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
Income Approach Rate Value
Direct Capitalization 10.25% $4,950,000
Discounted Cash Flow 12.00% $4,810,000
<PAGE> 15
SUBJECT PROPERTY
Shopping Center: Lynnwood Place
Location: Jackson, Tennessee
Size: 96,666 square feet
Current Vacancy
Leasable: 0 square feet (0%)
on-Leasable: 620 (1%)
Total Vacancy: 660 square feet (1%)
Capitalization Rate: 10.25%
Value - Direct Capitalization: $6,910,000
scount (Yield) Rate: 12.5%
Value - Discounted Cash Flow: $6,970,000
Reconciled Value: $6,950,000
Less: 1st Year Capital Improvement: $ 0
Value Conclusion: $6,950,000
Comments: This is a neighborhood shopping center built in 1986
and is anchored by Kroger. The property is located in the town of
Jackson, Tennessee, which is situated approximately 50 miles
northeast of Memphis.
It was reported that Kroger's sales were approximately $20,690,000
or $420 per square foot.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
Income Approach Rate Value
Direct Capitalization 10.25% $6,910,000
Discounted Cash Flow 12.50% $6,970,000
<PAGE> 16
SUBJECT PROPERTY
Shopping Center: Quality Center
Location: Lancaster, Maryland
Size: 62,378 square feet
Current Vacancy
Leasable: 14,312 square feet (22.9%)
Non-Leasable: 5,885 (9.4%)
Total Vacancy: 20,197 square feet (32.4%)
Capitalization Rate: 11.0%
Value - Direct Capitalization: $4,470,000
Discount (Yield) Rate: 13.0%
Value - Discounted Cash Flow: $4,570,000
Reconciled Value: $4,500,000
Less: 1st Year Capital Improvement: $ 0
Value Conclusion: $4,500,000
Comments: This is a small outlet center that was constructed in
1987. The center is located on the outskirts of Lancaster,
Pennsylvania at the intersection of U.S. Route 30, and Pennsylvania
Route 896. The immediate neighborhood is dominated by outlet
centers. The center is unanchored and includes a pad site leased
to Dairy Queen. The subject's recent past has been turbulent as
many of the center's stronger tenants have relocated across the
street in a competing center that is better anchored and
positioned.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
Income Approach Rate Value
Direct Capitalization 11.00% $4,470,000
Discounted Cash Flow 13.00% $4,570,000
<PAGE> 17
SUBJECT PROPERTY
Shopping Center: Tarrytown Mall
Location: Rocky Mount, North Carolina
Size: 327,819 square feet
Current Vacancy
Leasable: 106,954 square feet (32.6%)
Non-Leasable: 15,543 (4.7%)
Total Vacancy: 122,497 square feet (37.4%)
Alternative One:
Releasing of Anchor Space
Discount (Yield) Rate: 12.0%
Value - Discounted Cash Flow: $7,265,000
Alternative Two:
No Releasing of Anchor Space
Discount (Yield) Rate:12.0%
Value - Discounted Cash Flow: $4,980,000
Reconciled Value: $6,100,000
Less: 1st Year Capital Improvement:$ 0
Value Conclusion: $6,100,000
Comments: This is a large community center/mall constructed in 1964
and remodeled in 1989. The center includes five kiosks and four
pad sites. The center is anchored by Montgomery Ward (74,069
square feet), Goody's Family Clothing (24,000 square feet), and K&W
(12,240 square feet). The other anchor, Wholesale Depot, declared
bankruptcy and vacated 79,066 square feet in 1994. The space has
remained unleased, with little immediate prospect of releasing.
It is reported that one of the pad sites is under contract for sale
at a reported price of $330,000. The purchaser is reportedly going
to knock down the existing building and replace it with a fast food
restaurant.
In valuing the subject property, we have examined two leasing
alternatives. The first alternative assumes that the vacant anchor
bay will be released in 24 months, at a rate of $2.50 per square
foot, net of any leasing/tenant improvement costs. The second
alternative assumes that the anchor space will not be released.
It is impossible for us to assess the likelihood of either
alternative happening, and as such, we have reconciled the value
of the property to be mid-way between the values indicated by the
<PAGE> 18
two alternatives. It is our belief that any investor looking at
purchasing the property would discount the property for the vacant
anchor space and the dim prospects for releasing the space.
However, we cannot ignore the potential value inherent in the
structure and the possibility for releasing the space.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
<PAGE> 19
SUBJECT PROPERTY
Shopping Center: Woodlawn Shopping Center
Location: Fredericksburg, Virginia
Size: 49,800 square feet
Current Vacancy
Leasable: 0 square feet (0%)
Non-Leasable: 0 (0%)
Total Vacancy: 0 square feet (0%)
Capitalization Rate: 10.0%
Value - Direct Capitalization: $2,380,000
Discount (Yield) Rate: 11.5%
Value - Discounted Cash Flow: $2,440,000
Reconciled Value: $2,400,000
Less: 1st Year Capital Improvement: $ 25,000
Value Conclusion: $2,375,000
Comments: This is a neighborhood shopping center located in
Fredericksburg, Virginia along Route 607 at Cleremont Drive. The
property is located northeast of the downtown area. The center is
anchored by Food Lion and Revco.
It is reported that Food Lion will expand into Bays 4 and 5 and new
construction. The area to be occupied by Food Lion will total
32,744 square feet. The construction and expansion will reportedly
be complete in October 1996.
First Washington Management reports that the property requires
repair and replacement of the parking lot, curbs/sidewalks, and
other items of deferred maintenance, at an estimated cost of
$25,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1989-1994)
of income less vacancies and abatements, expenses (real estate
taxes, insurance, common area maintanance, miscellaneous and
management fees), and net operating income. In addition, an
owner's projected for 1995 and appraiser's first year projection
of the income and expense amounts are provided. The source of the
schedule was First Washinton Management, Inc.
Income Approach Rate Value
Direct Capitalization 10.00% $2,380,000
Discounted Cash Flow 11.50% $2,440,000
<PAGE> 20
Capitalization Rate and Yield Rate Discussion
The capitalization of an income stream by direct
capitalization is a method used to convert a single year's estimate
of income into a market value indication. Alternatively, yield
capitalization is often used to convert future benefits to present
value by applying an appropriate yield rate. Both methods are
consistent with the premises on which income producing properties
are purchased. The typical investor is purchasing future benefits
which are anticipated from the income stream that a property is
capable of producing over the holding period. Inherent in the
capitalization and yield rates are the factors for the return on
and of capital, and for the risk attributed to the uncertainty of
realizing projected future benefits. Essentially, the rates
consider the quality, quantity, and durability of the income stream
which the property is capable of producing. There are several
factors which must be considered in determining an appropriate
rates for any given property. These factors include the following:
Location
Physical characteristics of the property
Stability of leasing
Strength and credibility of tenancy
Market conditions
The rates selected for each property were based on the
characteristics specific to each property, and the perceived risk
of receiving the projected net income. In order to assess the risk
associated with the properties' individual locational
characteristics, we contacted appraisers and/or real estate brokers
active in each of the respective markets and had discussions with
First Washington Management and Legg Mason. This information
provided us with some understanding of the state of each of the
markets, and the subjects' relative position within the markets.
Where available, information was obtained regarding sales of
comparable centers that were used to develop appropriate rates.
Information regarding the subject properties' income stream
patterns, vacancy and turnover was obtained by examining the
subjects' occupancy and operating histories.
<PAGE> 21
In the evaluation of each of the centers, rates were selected
based on the perceived risk associate with receiving the projected
net income. Investment criteria provided by the Korpacz Real
Estate Investor Survey, for the Fourth Quarter 1995, is shown
below.
NATIONAL RETAIL MARKET INDICES
KEY INDICATORS CURRENT QUARTER LAST YEAR
Free and Clear Equity Returns (IRR or Yield Rates)
Range 10.00% - 14.00% 10.00% - 14.00%
Average 11.72% 11.97%
Free and Clear Equity Capitalization Rate
Range 8.25% - 12.50% 8.50% - 11.00%
Average 9.74% 9.77%
Residual Capitalization Rate
Range 8.25% - 13.50% 8.50% - 12.00%
Average 9.98% 9.95%
In addition, we have consulted the Investment Bulletin of the
American Council of Life Insurance Companies, dated December 29,
1995. According to Table 8 of this publication, the average
capitalization rate for investment class retail centers (based upon
a sample of 180 transactions) was 9.3%. These transactions took
place in the Third Quarter 1995, the most recent period for which
information is available from this source.
In choosing the appropriate capitalization rates and yield
rates for the subject properties, we have reviewed the locational
and income characteristics of each property, and selected rates
that take into account the existing tenancy, condition of the
property, and current investor trends. The selected rates are felt
to be reflective of present investor requirements and current
financial market conditions. We have factored in the variables of
risk to include location, anticipated rent levels, existing tenancy
and mix, structure of the leases, i.e., terms, age and condition
of the improvements, the investment alternatives, and the class of
real estate in which the subject falls.
<TABLE>
<CAPTION>
Mid-Atlantic Centers Limited Partnership
Valuation Summary - January 1, 1996
NAME Berkeley Square Cloister Edgewood Plaza
LOCATION Goose Creek, MI Ephrata, PA Edgewood, MD
<S> <C> <C> <C>
SIZE 98,258 56,015 49,612
LEASABLE
VACANCY (SF) 4,591 1,700 2,500
% 4.7% 3.0% 5.0%
NON-LEASEABLE
VACANCY (SF) 0 3,262 0
% 0.0% 5.8% 0.0%
PROJECTED INCOME
EFFECTIVE GROSS
INCOME $486,651 $551,845 $319,708
EXPENSES 158,024 236,348 115,254
NET OPERATING
INCOME $328,627 $315,497 $204,454
CAPITALIZATION RATE 11.00% 11.00% 10.50%
VALUE BY DIRECT
CAPITALIZATION $2,990,000 $2,870,000 $1,950,000
DISCOUNT RATE 13.00% 13.00% 12.50%
VALUE BY DISC.
CASH FLOW $3,140,000 $2,850,000 $2,350,000
RECONCILED VALUE $3,075,000 $2,850,000 $2,200,000
PLUS: VALUE OF
EXCESS GROUND 270,000
LESS: CAPITAL IMPROV. 0 150,000 0
VALUE CONCLUSION $3,075,000 $2,700,000 $2,470,000
</TABLE>
<TABLE>
<CAPTION>
Mid-Atlantic Centers Limited Partnership
Valuation Summary - January 1, 1996 (cont)
NAME Highlandtown Holiday Jackson Heights
LOCATION Baltimore, MD Collinsville, VA Murfreesburo, TN
<S> <C> <C> <C>
SIZE 56,200 82,185 156,373
LEASABLE
VACANCY (SF) 0 1,788 1,900
% 0.0% 2.2% 1.2%
NON-LEASEABLE
VACANCY (SF) 0 6,352 4,241
% 0.0% 7.7% 2.7%
PROJECTED INCOME
EFFECTIVE GROSS
INCOME $809,034 $202,719 $803,226
EXPENSES 299,769 86,807 295,780
NET OPERATING
INCOME $509,265 $115,912 $507,446
CAPITALIZATION RATE 10.00% 9.65% 10.25%
VALUE BY DIRECT
CAPITALIZATION $5,090,000 $1,200,000 $4,950,000
DISCOUNT RATE 12.00% Value reflects 12.00%
VALUE BY DISC. signed
CASH FLOW $4,980,000 contract $4,810,000
RECONCILED VALUE $5,050,000 $1,200,000 $4,900,000
PLUS: VALUE OF
EXCESS GROUND
LESS: CAPITAL IMPROV. 50,000 0 200,000
VALUE CONCLUSION 5,000,000 $1,200,000 $4,700,000
</TABLE>
<TABLE>
<CAPTION>
Mid-Atlantic Centers Limited Partnership
Valuation Summary - January 1, 1996 (cont)
NAME Lynnwood Place Orchard Square Quality Center
LOCATION Jackson, TN Atlanta, GA Lancaster, PA
<S> <C> <C> <C>
SIZE 96,666 62,378
LEASABLE
VACANCY (SF) 0 14,312
% 0.0% SOLD 22.9%
NON-LEASEABLE
VACANCY (SF) 620 5,885
% 0.6% 9.4%
PROJECTED INCOME
EFFECTIVE GROSS
INCOME $939,490 $720,192
EXPENSES 231,708 228,268
NET OPERATING
INCOME $707,782 $491,924
CAPITALIZATION RATE 10.25% 11.00%
VALUE BY DIRECT
CAPITALIZATION $6,910,000 $4,470,000
DISCOUNT RATE 12.50% 13.00%
VALUE BY DISC.
CASH FLOW $6,970,000 $4,570,000
RECONCILED VALUE $6,950,000 $4,500,000
PLUS: VALUE OF
EXCESS GROUND
LESS: CAPITAL IMPROV. 0 0
VALUE CONCLUSION $6,950,000 $4,500,000
</TABLE>
<TABLE>
<CAPTION>
Mid-Atlantic Centers Limited Partnership
Valuation Summary - January 1, 1996 (cont)
NAME Tarrytown Mall Woodlawn Village MAC
LOCATION Rocky Mount, NC Fredericksburg, VA TOTAL
<S> <C> <C> <C>
SIZE 327,819 49,800 1,035,306
LEASABLE
VACANCY (SF) 106,954 0
% 32.6% 0.0%
NON-LEASEABLE
VACANCY (SF) 15,543 0
% 4.7% 0.0%
PROJECTED INCOME
EFFECTIVE GROSS
INCOME $1,221,387 $344,375 $6,398,627
EXPENSES 714,293 106,129 2,472,380
NET OPERATING
INCOME $507,094 $238,246 $3,926,247
CAPITALIZATION RATE See Analysis 10.00%
VALUE BY DIRECT
CAPITALIZATION $2,380,000
DISCOUNT RATE 11.50%
VALUE BY DISC.
CASH FLOW $2,440,000
RECONCILED VALUE $6,100,000 $2,400,000 $39,225,000
PLUS: VALUE OF
EXCESS GROUND 270,000
LESS: CAPITAL IMPROV. 0 25,000 425,000
VALUE CONCLUSION 6,100,000 $2,375,000 $39,070,000
</TABLE>
<PAGE> 22
CONCLUSION
On the facing page is a summary of the conclusions contained
within this report. As noted, the total value of the subject
properties are estimated to be $39,495,000. From this amount we
have deducted the costs of required capital improvements as
reported by First Washington Management. This cost totals
$425,000.
Thus, as a result of our study and by virtue of our
experience, we are of the opinion that the properties described
herein have a collective market value as of January 1, 1996, as
follows:
MARKET VALUE, "AS IS"
THIRTY NINE MILLION SEVENTY THOUSAND DOLLARS
($39,070,000)
The above estimated value is subject to and predicated upon
the general assumptions and limiting conditions set forth earlier
in the report. Neither this appraisal assignment nor the prospect
of future employment has been conditioned upon this appraisal
producing a specific value. Should you have any questions
concerning this appraisal or the value conclusions developed in
this report, please contact this office.
Respectfully submitted,
SAPPERSTEIN & ASSOCIATES
/s/ Dean G. Gutridge
Dean G. Gutridge, Senior Associate
Reviewed and Approved by:
/s/ Gary L. Sapperstein
Gary L. Sapperstein, MAI, SRPA
<PAGE> 23
CERTIFICATION
Except as otherwise noted in this appraisal report, we hereby
certify that:
1.To the best of our knowledge and belief the statements of fact
contained in this report are true and correct.
2.A personal inspection of the property that is the subject of this
report was made by Dean G. Gutridge and Gary Lee Sapperstein. The
inspections were made at different points in time by the respective
parties involved.
3.We have no present or contemplated future interest in the real
estate that is the subject of this appraisal report.
4.We have no personal interest or bias with respect to the subject
matter of this appraisal report or the parties involved.
5.The reported analyses, opinions and conclusions are limited only
by the reported assumptions and limiting conditions, and are our
personal, unbiased professional analyses, opinions, and
conclusions.
6.This appraisal report sets forth all of the special and limiting
conditions (imposed by the terms of the assignment or by the
undersigned) affecting the analyses, opinions and conclusions
contained in this report.
7.The use of this report is subject to the requirements of the
Appraisal Institute relating to review by its duly authorized
representatives.
8.This appraisal report has been made in conformity with and is
subject to the requirements of the Code of Ethics and Standards of
Professional Practice and Conduct of the Appraisal Institute, the
Appraisal Foundation, and the duly authorized legislative authority
for the states of Maryland, Virginia and the District of Columbia.
9.No one other than the undersigned prepared the analyses,
conclusions and opinions concerning real estate that are set forth
in this appraisal report (unless otherwise specified).
10.The Appraisal Institute conducts a mandatory program of
continuing education for its designated members. MAIs and RM who
meet the minimum standards of this program are awarded periodic
educational certification. Gary Lee Sapperstein has been certified
under this program. Mr. Sapperstein is a Certified/General Real
Estate Appraiser in the Commonwealth of Virginia, the State of
Maryland, and the District of Columbia. As of the date of this
report, Gary Lee Sapperstein, has completed the requirements under
the continuing education program of the Appraisal Institute.
11.Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of
the client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event.
12.We hereby certify that this appraisal was not based upon a
requested minimum valuation, a specific valuation, or the approval
of a loan.
13.The undersigned member(s) has (have) appraised properties
similar to the subject, and is (are) therefore in compliance with
the competency provision of the Uniform Standards of Professional
Appraisal Practice.
/s/ Dean G. Gutridge
Dean G. Gutridge, Senior Associate
Certified General Appraiser, MD License No.: 04-20093
/s/ Gary Lee Sapperstein
Gary Lee Sapperstein, MAI-SRPA, President
Certified General Appraiser, DC License No.: 04-10002
<PAGE> 24
LIMITING CONDITIONS
1.The appraiser will not be required to give testimony or appear
in court because of having made this appraisal, with reference to
the property in question, unless arrangements have been previously
made.
2.Possession of this report, or a copy thereof, does not carry with
it the right of publication. It may not be used for any purpose
by any person other than the party to whom it is addressed without
the written consent of the appraiser and, in any event, only with
proper qualification and only in its entirety.
3.The distribution of the total valuation in this report between
land and improvement applies only under the reported highest and
best use of the property. The allocations of value for land and
improvements must not be used in conjunction with any other
appraisal and are invalid if so used.
4.One (or more) of the signatories of this appraisal report is a
Member (or Candidate) of the Appraisal Institute. The Bylaws and
Regulations of the Institute require each Member and Candidate to
control the use and distribution of each appraisal report signed
by such Member or Candidate. Therefore, except as hereinafter
provided, the party for whom this appraisal was prepared may
distribute copies of this appraisal report, in its entirety, to
such third parties as may be selected by the party for whom this
appraisal report was prepared; however, selected portions of this
appraisal report shall not be given to third parties without the
prior written consent of the signatories of this appraisal report.
Further, neither all nor any part of this appraisal report shall
be disseminated to the general public by use of advertising media,
public relations media, news media, sales media or other media for
public communication without prior written consent of the
signatories of this appraisal report.
5.In the event that this appraisal contains a valuation of an
estate in land that is less than the entire fee simple estate, it
is noted that (i) the value reported for such estate relates to a
fractional interest only in the real estate involved; and (ii) the
value of this fractional interest, plus the value of all other
fractional interests, may or may not equal the value of the entire
fee simple estate considered as a whole.
<PAGE> 25
SPECIAL LIMITING CONDITIONS
1. As agreed upon with the client prior to the preparation of this
appraisal, this is a Limited Appraisal because it invokes the
Departure Provision of the Uniform Standards of Professional
Appraisal Practice. As such, information pertinent to the
valuation has not been considered and/or the full valuation process
has not been applied. Depending on the type and degree of
limitations, the reliability of the value conclusion provided
herein may be reduced.
2.This is a Restricted Appraisal Report which is intended to comply
with the reporting requirements set forth under Standard Rule 2-
2(c) of the Uniform Standards of Professional Appraisal Practice
for a Restricted Appraisal Report. As such, it does not include
discussions of the data, reasoning, and analyses that were used in
the appraisal process to develop the appraiser's opinion of value.
Supporting documentation concerning the data, reasoning and
analyses is retained in the appraiser's file. The information
contained in this report is specific to the needs of the client and
for the intended use stated in this report. The appraiser is not
responsible for unauthorized use of this report.
3.The appraiser has relied upon the rent rolls and financial
statements provided by the Client for valuing the subject
properties. An audit of this data was not conducted by the
appraiser or by a disinterested third party to ascertain its
integrity. The appraiser reserves the right to modify its value
conclusions if the data provided is not factually correct.
4.Physical inspections of the properties were not conducted by the
signatories of this report. The Client has provided an estimate
of capital expenses projected for each property in the first year
of the analysis. The appraiser reserves the right to modify its
value conclusions if the condition of the properties is different
from that represented by the Client or capital expenditures exceed
the estimates provided.
5.The appraiser has relied upon certain representatives made by the
client with respect to the various centers. The appraiser reserves
the right to modify its value conclusions if the data provided is
not factually correct.
<PAGE> 26
GENERAL ASSUMPTIONS
1.The legal description used in this report is assumed to be
correct.
2.No survey of the property has been made by the appraiser and no
responsibility is assumed in connection with such matters.
Sketches in this report are included only to assist the reader in
visualizing the property.
3.No responsibility is assumed for matters of a legal nature
affecting title to the property nor is an opinion of title
rendered. The title is assumed to be good and merchantable.
4.Information furnished by others is assumed to be true, correct,
and reliable. A reasonable effort has been made to verify such
information; however, no responsibility for its accuracy is assumed
by the appraiser.
5.All mortgages, liens, encumbrances, leases, and servitudes have
been disregarded unless so specified within the report. The
property is appraised as though under responsible ownership and
competent management.
6.It is assumed that there are no hidden or unapparent conditions
of the property, subsoil, or structures which would render it more
or less valuable. No responsibility is assumed for such conditions
or for engineering which may be required to discover such factors.
Further, it is assumed that no toxic or radioactive materials are
located upon or buried within the subject property. If such
materials are found on the properties under appraisal, the
appraisers reserve to the right to modify the value conclusion
found on the appraisal report.
7.It is assumed that there is full compliance with all applicable
federal, state and local environment regulations and laws of the
date of the appraisal unless noncompliance is stated, defined, and
considered in the appraisal report.
8.It is assumed that all applicable zoning and use regulations and
restrictions have been complied with, unless a non-conformity has
been stated, defined, and considered in the appraisal report.
9.It is assumed that all required licenses, consents, or other
legislative or administrative authority from any local, state, or
national governmental or private entity or organization have been
made or can be obtained or renewed for any use on which the value
estimate contained in this report is based.
10.It is assumed that the utilization of the land (and improve-
ments) is within the boundaries or property lines of the property
described and that there is no encroachment or trespass unless
noted within the report.
11.It is assumed that the property does not contain within its
confines any unmarked burial grounds which would preclude or hamper
the development process.
12.This document should not be used as a basis to determine the
structural adequacy/inadequacy of the property described herein,
but rather for valuation purposes only.
13.It is assumed that the subject structure meets the applicable
building codes for it's respective jurisdiction. We assume no
responsibility/liability for the inclusion/exclusion of any
structural component item which may have an impact on value.
<PAGE> 27
GENERAL ASSUMPTIONS (Continued)
14.It is assumed that the subject property will meet all code
requirements as they relate to proper soil compaction, grading, and
drainage. We further reserve the right to alter value should a
material change in the status of subject be discovered.
15.Building plans, surveys and gross building area calculations as
supplied to the appraisers by the client, are assumed to be
reasonably accurate. In any event, the appraiser assumes no
responsibility or liability for the accuracy of such
information/data provided. In this particular instance, we were
not afforded with building plans, specifications, site plan or
survey of the property. This information was provided to your
appraisers by the lender via a descriptive narrative from an
unknown source, and we have relied upon same.
16.Our investigation makes it reasonable to assume, for appraisal
purposes, that no insulation or other product banned by the
Consumer Products Safety Commission has been introduced into the
appraised premises.
17.Fundamental to the valuation analysis is the assumption that no
change in zoning is either proposed or eminent. Should a change
in zoning status occur from the property's present classification,
the appraisers reserve the right to alter or amend value
accordingly.
18.Unless stated otherwise in this report, the existence of
hazardous materials, which may or may not be present on the
property, was not observed by the appraiser(s). The appraiser has
no knowledge of the existence of such materials on or in the
property. The appraiser is not qualified to detect such
substances. The presence of substances such as asbestos, urea-
formaldehyde foam insulation, or other potentially hazardous
materials, may affect the value of the property. The value
estimate in this appraisal report is predicated on the assumption
that there is no such material on or in the property that would
cause a loss in value. No responsibility is assumed for any such
conditions, or for any expertise or engineering knowledge required
to discover them. If desired, the client is urged to retain an
expert in this field.
19. The Americans with Disabilities Act (ADA) became effective on
January 26, 1992. We have not made a specific compliance survey
and analysis of the property to determine if it is in conformance
with the various detailed requirements of the ADA. It is possible
that a compliance survey of the property along with a detailed
analysis of the requirements of the ADA could reveal that the
property is not in compliance with one or more of the requirements
of the Act. If so, this could have a negative effect upon the
value of the property. Since we do not have direct evidence
relating to this issue, we did not consider possible non-compliance
with the requirements of the ADA in estimating the value of the
property.
<PAGE> 28
The letter of valuation report has a section titled "ARGUS
Schedules". This section consists of the following schedules:
(a) Holiday Shopping Center, Schedule of Prospective Cash Flow,
In Inflated Dollars for the Fiscal Year beginning 12/1/1995.
(b) Holiday Shopping Center, Prospective Present Value, Cash
Flow Before Debt Service plus Property Resale Discounted Annually
(End-point on Cash Flow & Resale) over a 10-Year Period.
(c) Jackson Heights Plaza, Murfreesburo, Tennessee, Schedule of
Prospective Cash Flow, In Inflated Dollars for the Fiscal Year
beginning 12/1/1995.
(d) Jackson Heights Plaza, Prospective Present Value, Cash Flow
Before Debt Service plus Property Resale Discounted Annually (End-
point on Cash Flow & Resale) over a 10-Year Period.
(e) Berkeley Shopping Center, Schedule of Prospective Cash Flow,
In Inflated Dollars for the Fiscal Year beginning 12/1/1995.
(f) Berkeley Shopping Center, Prospective Present Value, Cash
Flow Before Debt Service plus Property Resale Discounted Annually
(End-point on Cash Flow & Resale) over a 10-Year Period.
(g) Cloister Shopping Center, Schedule of Prospective Cash Flow,
In Inflated Dollars for the Fiscal Year beginning 12/1/1995.
(h) Cloister Shopping Center, Prospective Present Value, Cash
Flow Before Debt Service plus Property Resale Discounted Annually
(End-point on Cash Flow & Resale) over a 10-Year Period.
(i) Edgewood Shopping Center, Schedule of Prospective Cash Flow,
In Inflated Dollars for the Fiscal Year beginning 12/1/1995.
(j) Edgewood Shopping Center, Prospective Present Value, Cash
Flow Before Debt Service plus Property Resale Discounted Annually
(End-point on Cash Flow & Resale) over a 10-Year Period.
(k) Highlandtown Village Shopping Center, Schedule of
Prospective Cash Flow, In Inflated Dollars for the Fiscal Year
beginning 12/1/1995.
(l) Highlandtown Village Shopping Center, Prospective Present
Value, Cash Flow Before Debt Service plus Property Resale
Discounted Annually (End-point on Cash Flow & Resale) over a 10-
Year Period.
(m) Lynnwood Place Shopping Center, Schedule of Prospective Cash
Flow, In Inflated Dollars for the Fiscal Year beginning 12/1/1995.
(n) Lynnwood Place Shopping Center, Prospective Present Value,
Cash Flow Before Debt Service plus Property Resale Discounted
Annually (End-point on Cash Flow & Resale) over a 10-Year Period.
(o) Quality Shopping Center, Schedule of Prospective Cash Flow,
In Inflated Dollars for the Fiscal Year beginning 12/1/1995.
(p) Quality Shopping Center, Prospective Present Value, Cash
Flow Before Debt Service plus Property Resale Discounted Annually
(End-point on Cash Flow & Resale) over a 10-Year Period.
(q) Tarrytown Mall, Schedule of Prospective Cash Flow, In
Inflated Dollars for the Fiscal Year beginning 12/1/1995.
Assumption: Releasing of ANCHOR in 24 months @ $2.50/s.f. - no cost
(r) Tarrytown Mall, Prospective Present Value, Cash Flow Before
Debt Service plus Property Resale Discounted Annually (End-point
on Cash Flow & Resale) over a 10-Year Period. Assumption:
Releasing of ANCHOR in 24 months @ $2.50/s.f. - no cost
(s) Tarrytown Mall, Schedule of Prospective Cash Flow, In
Inflated Dollars for the Fiscal Year beginning 12/1/1995.
Assumption: No release of ANCHOR space.
(t) Tarrytown Mall, Prospective Present Value, Cash Flow Before
Debt Service plus Property Resale Discounted Annually (End-point
on Cash Flow & Resale) over a 10-Year Period. Assumption: No
release of ANCHOR space.
(u) Woodlawn Shopping Center, Schedule of Prospective Cash Flow,
In Inflated Dollars for the Fiscal Year beginning 12/1/1995.
(v) Woodlawn Shopping Center, Prospective Present Value, Cash
Flow Before Debt Service plus Property Resale Discounted Annually
(End-point on Cash Flow & Resale) over a 10-Year Period.
The schedule of Prospective Cash Flow for each shopping center
presents for 11 years an account by account analysis in the
following categories: potential gross revenue, revenue
adjustments, operating expenses, and leasing and capital costs.
The resulting total is cash flow before debt service and income
tax.
The schedule of prospective present value for each shopping center
presents for 10 analysis periods the present value of cash flow at
10.00%, 10.50%, 11.00%, 11.50%, 12.00%, 12.50%, 13.00%, 13.50%, and
14.00% based on the annual cash flow amounts reached for years one
through ten from the respective schedule of prospective cash flow.
The present value of cash flow at each percentage rate for years
one through ten are totalled and a total property present value per
square foot is presented. A percentage value distribution table
is also presented which consists of assured income, prospective
income, and prospective property resale.
QUALIFICATIONS OF
GARY LEE SAPPERSTEIN, MAI-SRPA
6917 Arlington Road, Suite 300
Bethesda, Maryland 20814
EDUCATION Maryland University - B.S. Degree (Business) 1976
American University - Appraisal I-A, I-B, II, Residential
Valuation, Litigation Valuation and Course 202 - Applied Income
Property Valuation, Standards of Professional Practice
Yearly Seminars Sponsored by the Appraisal Institute, Maryland and
Virginia Board of Realtors, MBA and Other Organizations
MEMBERSHIPS The Appraisal Institute:
MAI - Member Appraisal Institute (04-1984)
SRPA - Senior Real Property Appraiser (10-1983)
1993, 1994 and 1995 - Chapter Board of Directors
Advisory Board Director, Allegiance Bank N.A.
EMPLOYMENT Sapperstein & Associates, September 1982 to Present
Former, V.P., Associate Appraiser - Philip R. Lamb & Co.,
October 1978 to August 1982
LICENSED Real Estate Broker in State of Maryland
Real Estate Broker in District of Columbia
CERTIFICATION Certified General Real Estate Appraiser in Maryland
(04-10002), Virginia (4001-000176), and the District of Columbia
(10042)
QUALIFIED EXPERT
WITNESS Maryland Tax Court, Expert Witness/Consultant - D.C.
Board of Appeals
TYPES OF
APPRAISALS Residential dwellings, condominiums, shopping
centers, apartments, office buildings, hotels, commercial,
industrial and special purpose buildings, school sites, parking
lots, farms and acreage, subdivision, golf and country clubs, dam
sites and parks, partial takings for highway and utility right-
of-ways, urban renewal projects, special benefits, fair annual
rental studies, re-use appraisals and feasibility studies.
OTHER SERVICES Professional consultation services and limited
brokerage services are provided, upon request.
APPRAISAL ASSIGNMENTS COMPLETED FOR THE FOLLOWING CLIENTS:
Government Agencies: Federal Government (U.S. Post Office
Department), Montgomery County Government, Prince George's County,
Department of Transportation, Maryland National Park and Planning
Commission, State Highway Administration, Montgomery County Board
of Realtors, City of Rockville, City of College Park, Government
of the District of Columbia, The Housing Opportunities Commission,
Department of Housing and Community Development, Pennsylvania
Avenue Development Corporation (P.A.D.C.).
Commercial and Industrial Firms: The Traveler's Insurance, Paine
Webber, Parallel Contimap, Equitable Relocation Service, Provident
Mutual Life Insurance Company, Bell Atlantic Company, The Michael
Companies, CNA Insurance Company, Columbia Financial, Kaiser
Permanente, First Washington Management, Inc., John Hancock Real
Estate Finance, Realty Investment Corporation, United Labor Life
Insurance Company, Carey Winston Company, Barnes, Morris & Pardoe,
K.T. Wade Associates, Foulger Pratt Construction Company, Lloyd
Moore Development Company, Marriott Corporation, C.I. Mitchell &
Best, Aid Association of Lutherans, FINOVA Capital Corporation,
GEICO, Aldre, Classic Communities, Potomac Investment Associates,
Abrams & Associates, Anastasi-Stephens Group, Howard Hughes Medical
Institute, Harvey Management Company, The Ward Corporation, Sigal-
Zuckerman, Greenhill Capital Corporation, Landstar Development
Company, ITT Real Estate Services, NV Land, Cross Builders, Goodman
Homes, Royco, and Standard Properties among others.
SERVING THE BALTIMORE/WASHINGTON/RICHMOND METROPOLITAN AREAS
Phone - (301) 654-0214
Fax - (301) 654-0272
DEAN G. GUTRIDGE
POSITION Senior Associate, Sapperstein & Associates
Bethesda, Maryland - 1991 to Present
CERTIFICATION Certified General Appraiser - Maryland - #4-20093
Certified General Appraiser - Virginia - #4001-003572
EDUCATION B.S., University of Maryland, College Park, MD
Appraisal Institute:
I-A, Basic Principles
I-B, Capitalization Theory and Techniques
II, Urban Properties
VIII, S.F.D. Residential Valuation
Standards of Professional Practice, A & B
Seminars and Professional Instruction:
Office Park Development - Urban Land Institute
Shopping Center Development - Urban Land Institute
Office/Retail Lease Negotiation - Northwest University
Urban Land Use Planning - American University
Housing Markets - American University
PROFESSIONAL
HISTORY Miller Properties, Vice President - Development
1987 to 1991
Westmark Mortgage Corp, Senior Vice President - Operations, 1984
to 1987
Lipman, Frizzell & Mitchell, Appraisal Associate
1983 to 1984
Adolph C. Rohland & Associates, Appraisal Associate
1978 to 1982
APPRAISAL
ASSIGNMENTS Shopping centers, office, industrial/warehouse,
retail, multi-family, special purpose, commercial and residential
land, fair annual rental studies, feasibility studies, residential
dwellings.
ADDITIONAL
INFORMATION Real Estate Broker in the State of Maryland
