UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to_____________
Commission file number 0-17173
McNEIL REAL ESTATE FUND XXVII, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 33-0214387
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: Limited partnership
- ---------------------------------------------------------- units
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
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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. [ ]
4,863,585 of the registrant's 5,273,885 limited partnership units are held by
non-affiliates. The aggregate market value of units held by non-affiliates is
not determinable since there is no public trading market for limited partnership
units and transfers of units are subject to certain restrictions.
Documents Incorporated by Reference: See Item 14, Page 43
TOTAL OF 45 PAGES
<PAGE>
PART I
ITEM 1. BUSINESS
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ORGANIZATION
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McNeil Real Estate Fund XXVII, L.P. (the "Partnership"), formerly known as
Southmark Prime Plus, L.P., was organized by affiliates of Southmark Corporation
("Southmark") on January 16, 1987 as a limited partnership under the provisions
of the Delaware Revised Uniform Limited Partnership Act to make short-term loans
to affiliates of the general partner. The general partner of the Partnership is
McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership,
an affiliate of Robert A. McNeil ("McNeil"). The General Partner was elected at
a meeting of limited partners on March 30, 1992, at which time an amended and
restated partnership agreement (the "Amended Partnership Agreement") was
adopted. Prior to March 30, 1992, the general partner of the Partnership was
Prime Plus Corp. (the "Original General Partner"), a wholly-owned subsidiary of
McNeil. The Original General Partner was purchased from Southmark by McNeil on
March 13, 1991, as discussed further below. The principal place of business for
the Partnership and the General Partner is 13760 Noel Road, Suite 700, Dallas,
Texas 75240.
The sole limited partner of the Partnership was initially Southmark Depositary
Corp. (the "Depositary"), a wholly-owned subsidiary of Southmark. On August 14,
1987, the Partnership registered with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933 (File No. 33-11824) and commenced a
public offering for sale of $100,000,000 of Depositary units. The sale of
Depositary units closed on August 14, 1988, with 5,548,888 units sold at $10
each, or gross proceeds of $55,488,880 to the Partnership. The Partnership
subsequently filed a Form 8-A Registration Statement with the SEC and registered
its Depositary units under the Securities Exchange Act of 1934 (File No.
0-17173). The Depositary assigned the principal attributes of its aggregate
limited partner interest in the Partnership to the Depositary unit holders. As
further discussed, the Depositary units were subsequently converted to limited
partnership units. The Depositary, Depositary units or limited partnership units
are referred to herein as "Units" and the holders thereof as "Unitholders." The
Units represent equity interests in the Partnership and entitle the Unitholders
to participate in certain allocations and distributions of the Partnership. As
of December 31, 1995, 275,003 of the Units have been repurchased pursuant to the
terms of the Amended Partnership Agreement.
SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
- --------------------------------------------------
On July 14, 1989, Southmark filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, the General
Partner nor the Original General Partner were included in the filing.
Southmark's reorganization plan became effective August 10, 1990. Under the
plan, most of Southmark's assets, which included Southmark's interests in the
Original General Partner, are being sold or liquidated for the benefit of
creditors.
In accordance with Southmark's reorganization plan, Southmark, McNeil and
various of their affiliates entered into an asset purchase agreement on October
12, 1990, providing for, among other things, the transfer of control to McNeil
or his affiliates of 34 limited partnerships (including the Partnership) in the
Southmark portfolio.
On February 14, 1991, pursuant to the asset purchase agreement as amended on
that date, McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of
McNeil, acquired the assets relating to the property management and partnership
administrative business of Southmark and its affiliates. On March 13, 1991,
McREMI commenced management of the Partnership's properties pursuant to an
assignment of the existing property management agreements from the Southmark
affiliates.
On March 30, 1992, the Unitholders approved a restructuring proposal that
provided for (i) the replacement of the Original General Partner with the
General Partner; (ii) the adoption of the Amended Partnership Agreement which
(a) substantially alters the provisions of the original Partnership Agreement
relating to, among other things, compensation, reimbursements of expenses, and
voting rights and (b) makes Depositary unit holders direct limited partners of
the Partnership; (iii) the approval of an amended property management agreement
with McREMI, the Partnership's property manager; and (iv) the approval to change
the Partnership's name to McNeil Real Estate Fund XXVII, L.P. Under the Amended
Partnership Agreement, the Partnership began accruing an asset management fee,
<PAGE>
retroactive to March 13, 1991, which is payable to the General Partner. For a
discussion of the methodology for calculating the asset management fee, see Item
13 - Certain Relationships and Related Transactions. The proposals approved at
the March 30, 1992 meeting were implemented as of that date.
Settlement of Claims:
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, which
totaled approximately $17,024,326, for the full amount claimed and such
settlement was approved by the Bankruptcy Court.
Pursuant to the settlement agreement, the Partnership released Southmark and its
affiliates and the Original General Partner from any further liability in
connection with the claims made with the Bankruptcy Court. In return, an
affiliate of McNeil agreed to waive payment on a dollar for dollar basis in an
amount equal to the settled claims against Partnership advances owed at that
time. In addition, the Partnership received Southmark bankruptcy plan assets in
respect to its claims which were not offset against the Partnership advances.
Because the Partnership's claims against Southmark were settled for $17,024,326,
the Partnership advances of $223,800 owed at that time were reduced in their
entirety and the claims had a remaining balance of $16,800,526. Although the
Partnership settled the claims against Southmark for the full amount claimed,
the settlement agreement provided that the Partnership receive a distribution of
Southmark bankruptcy plan assets based on a claim amount of approximately
$9,157,000.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995, the Partnership received in full satisfaction of its claims, $984,649
in cash, and common and preferred stock in the reorganized Southmark which was
subsequently sold for $317,675. These amounts represent the Partnership's
pro-rata share of Southmark assets available for Class 8 Claimants.
CURRENT OPERATIONS
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General:
Under the original partnership agreement, the Partnership's primary business was
to make short-term nonrecourse mortgage or deed of trust loans to affiliates of
the Original General Partner and to partnerships or real estate investment
trusts sponsored by affiliates of the Original General Partner formed for the
purpose of acquiring income-producing real properties. Due to borrower defaults
and foreclosures on the properties securing all but one of these mortgages, the
Partnership's business also includes ownership and operation of real estate.
Since the beginning of operations and prior to the restructuring, the
Partnership funded twelve mortgage loans, seven in 1987 and five in 1988, which
completed the Partnership's investment of the proceeds from the sale of Units.
The borrowers on the mortgage loan investments held by the Partnership were all
affiliates of Southmark. During the early part of the terms of the loans, to the
extent that property operations were insufficient to pay required interest,
Southmark supported the borrowers with cash and the Partnership's loans were
kept current. On July 14, 1989, Southmark filed for bankruptcy protection, and
such support ceased and all loans went into default.
In 1994, the remaining mortgage loan investment, which is secured by a
mini-storage warehouse in Stone Mountain, Georgia that was sold to an
unaffiliated borrower, was modified. Principal and interest payments under the
modified terms have been received by the Partnership. See Item 8 - Note 5 -
"Mortgage Loan Investment."
In 1992, the Partnership received the proceeds from a $7,000,000 mortgage note
payable secured by five of the Partnership's mini-storage warehouses located in
Florida. A portion of the proceeds from the loan was used to make nonrecourse
mortgage loans to affiliates of the General Partner in accordance with the
Amended Partnership Agreement. The loans were secured by income-producing real
estate and were either junior or senior to other indebtedness as more fully
described in Item 8 - Note 6 - "Mortgage Loan Investments - Affiliates." The
mortgage note payable was repaid by the Partnership in 1995 and a $5 million
line of credit was obtained that will be used to fund any future loans made to
affiliates of the General Partner. See Item 8 - Note 7 - "Long-Term Debt."
The Partnership is engaged in the ownership, operation and management of
commercial real estate and other real estate related assets. At December 31,
1995, the Partnership owned one mortgage loan investment to an unaffiliated
borrower, three mortgage loan investments to affiliates of the General Partner,
and ten income-producing properties as described in Item 2 - Properties.
The Partnership does not directly employ any personnel. The General Partner
conducts the business of the Partnership directly and through its affiliates.
The Partnership reimburses affiliates of the General Partner for such services
rendered in accordance with the Amended Partnership Agreement. See Item 8 - Note
2 "Transactions With Affiliates."
The business of the Partnership to date has involved only one industry segment.
See Item 8 - Financial Statements and Supplementary Data. The Partnership has no
foreign operations. The Partnership's business is not seasonal.
Business Plan:
The Partnership's anticipated plan of operations for 1996 is to preserve or
increase the net operating income of its properties whenever possible, while at
the same time making whatever capital expenditures are reasonable under the
circumstances in order to preserve and enhance the value of the Partnership's
properties. The General Partner is evaluating market and other economic
conditions to determine the optimum time to commence an orderly liquidation of
the Partnership's properties in accordance with the terms of the Amended
Partnership Agreement. The Partnership will continue to collect principal and
interest payments on its mortgage loan investment to an unaffiliated borrower.
Further, the Partnership may continue to make loans to affiliates in accordance
with the terms of the Amended Partnership Agreement. In conjunction therewith,
the General Partner will continue to explore potential avenues to enhance the
value of the Units in the Partnership, which may include, among other things,
asset sales or refinancings of the Partnership's properties which may result in
distributions to the limited partners. See Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Competitive Conditions:
Since the principal business of the Partnership is to own and operate real
estate and to service notes receivable secured by real estate, the Partnership
is subject to all of the risks incidental to ownership of real estate and
interests therein, many of which relate to the illiquidity of this type of
investment. These risks include changes in general or local economic conditions,
changes in supply or demand for competing properties in an area, changes in
interest rates and availability of permanent mortgage funds which may render the
sale or refinancing of a property difficult or unattractive, changes in real
estate and zoning laws, increases in real property tax rates and Federal or
local economic controls. The illiquidity of real estate investments generally
impairs the ability of the Partnership to respond promptly to changed
circumstances. The Partnership competes with numerous established companies,
private investors (including foreign investors), real estate investment trusts,
limited partnerships and other entities (many of which have greater resources
than the Partnership and the borrowers) in connection with the sale, financing
and leasing of properties. The impact of these risks on the Partnership,
including losses from operations and foreclosures of the Partnership's
properties, is described in Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations. See Item 2 - Properties for a
discussion of the competitive conditions at each of the Partnership's
properties.
Other Information:
The environmental laws of the Federal government and of certain state and local
governments impose liability on current property owners for the clean-up of
hazardous and toxic substances discharged on the property. This liability may be
imposed without regard to the timing, cause or person responsible for the
release of such substances onto the property. The Partnership could be subject
to such liability in the event that it owns properties having such environmental
problems. The Partnership has no knowledge of any pending claims or proceedings
regarding such environmental problems.
ITEM 2. PROPERTIES
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The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1995. All of the buildings and the land on which
they are located are owned in fee. The two office buildings and Kendall Sunset
Mini-Storage secure a $5 million line of credit as described more fully in Item
8 - Note 7 - "Long-Term Debt." No borrowings were outstanding under the line of
credit as of December 31, 1995. The remaining properties are unencumbered by
mortgage indebtedness. See also Item 8 - Note 4 - "Real Estate Investments" and
Schedule III - Real Estate Investments and Accumulated Depreciation and
Amortization. In the opinion of management, the properties are adequately
covered by insurance.
<PAGE>
<TABLE>
Net Basis 1995 Date
Property Description of Property Debt Property Taxes Acquired
- -------- ----------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
AAA Century
Airport Self-Storage
Inglewood, CA 567 units $2,054,531 $ - $37,053 9/90
AAA Sentry Mini-Storage
N. Lauderdale, FL 803 units 472,231 - 50,942 10/90
Burbank Mini-Storage
Burbank, CA 986 units 2,781,188 - 41,848 9/90
Forest Hill Mini-Storage
W. Palm Beach, FL 679 units 2,040,260 - 34,678 8/90
Fountainbleau Mini-Storage
Miami, FL 769 units 1,262,761 - 63,127 11/90
Kendall Sunset Mini-Storage
Miami, FL 940 units 3,745,804 - 73,105 10/90
Margate Mini-Storage
Margate, FL 642 units 1,256,989 - 49,035 10/90
Military Trail Mini-Storage
W. Palm Beach, FL 688 units 1,991,963 - 39,724 8/90
One Corporate
Center I Office Building
Edina, MN 111,146 sq. ft. 4,565,247 - 180,206 12/89
One Corporate
Center III Office Building
Edina, MN 111,252 sq. ft. 4,806,601 - 182,130 12/89
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$24,977,575 $ - $751,848
========== ======= =======
</TABLE>
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Total: Office Buildings - 222,398 sq. ft.
Mini-storage and self-storage warehouses - 6,074 units
The following table sets forth the properties' occupancy rate and rent per
square foot for the last five years:
<TABLE>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AAA Century Airport
Occupancy Rate............ 94% 95% 82% 77% 81%
Rent Per Square Foot...... $10.19 $ 8.87 $ 7.90 $ 7.95 $ 8.09
AAA Sentry
Occupancy Rate............ 96% 95% 98% 84% 48%
Rent Per Square Foot...... $ 7.70 $ 7.00 $ 6.17 $ 4.06 $ 2.96
Burbank
Occupancy Rate............ 81% 81% 84% 76% 70%
Rent Per Square Foot...... $10.29 $10.32 $ 8.74 $ 8.09 $ 7.49
Forest Hill
Occupancy Rate............ 97% 99% 100% 92% 69%
Rent Per Square Foot...... $ 9.82 $ 9.22 $ 8.45 $ 7.35 $ 7.13
Fountainbleau
Occupancy Rate............ 97% 99% 100% 98% 68%
Rent Per Square Foot...... $ 8.38 $ 8.08 $ 7.66 $ 6.12 $ 5.62
Kendall Sunset
Occupancy Rate............ 95% 96% 99% 100% 81%
Rent Per Square Foot...... $11.72 $11.71 $11.23 $ 9.63 $ 8.29
Margate
Occupancy Rate............ 90% 100% 98% 96% 74%
Rent Per Square Foot...... $ 9.90 $10.06 $ 9.55 $ 8.08 $ 6.35
</TABLE>
<PAGE>
<TABLE>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Military Trail
Occupancy Rate............ 91% 90% 91% 83% 84%
Rent Per Square Foot...... $ 9.35 $ 8.46 $ 7.76 $ 7.76 $ 7.99
One Corporate Center I
Occupancy Rate............ 93% 95% 99% 81% 64%
Rent Per Square Foot...... $10.92 $10.34 $11.56 $ 8.28 $ 8.15
One Corporate Center III
Occupancy Rate............ 97% 96% 78% 54% 34%
Rent Per Square Foot...... $11.17 $11.03 $ 7.38 $ 4.09 $ 4.04
</TABLE>
Occupancy rate represents all units leased divided by the total number of units
for mini-storage properties and square footage leased divided by total square
footage for other properties as of December 31 of the given year. Rent per
square foot represents all revenue, except interest, derived from the property's
operations divided by the leasable square footage of the property.
Competitive conditions:
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AAA Century Airport
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AAA Century Airport Self-Storage consists of three, two-story self-storage
warehouse buildings and one apartment/leasing office. The rentable space is
divided into 567 units, including 10 recreational vehicle parking spaces. Each
unit is individually alarmed for additional security. The property does not
offer climate-controlled units.
The property is located approximately two miles from the Los Angeles
International Airport in Inglewood, California. Inglewood is a relatively mature
area with growth to the west generated by development around the airport. There
is little competition which represents a threat to the property. The property
raised rental rates in 1995 and plans to increase rental rates slightly in 1996.
The Partnership expects to maintain occupancy in the low to middle 90% range in
1996.
AAA Sentry
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AAA Sentry Mini-Storage consists of five, two-story self-storage warehouse
buildings and one apartment/leasing office. The rentable space is divided into
803 units, with 85% of these units air conditioned.
The property is located in a predominately commercial area, with a mixture of
single and multi-family residential properties. The property's rental rates and
occupancy are currently higher than the competition in the immediate area. A
rental rate increase is not planned until late 1996 since a new competing
facility was recently built that may affect occupancy. Management anticipates
maintaining occupancy in the middle 90% range in 1996.
Burbank
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Burbank Mini-Storage consists of two, two-story and one, three-story
self-storage warehouse buildings and one apartment/leasing office. The rentable
space is divided into 986 units, with 10 of these units being recreational
<PAGE>
vehicle parking spaces. All of the buildings have fire sprinklers, but do not
offer climate-controlled environments.
The property is located in the eastern quadrant of Burbank, California, just
west of Interstate 5 and approximately twenty miles north of downtown Los
Angeles and seven miles south of the Burbank Airport. There are two competing
self-storage properties with superior visibility and highway access. Another
competing property has recently been built closer to the airport that may have a
negative effect on Burbank's occupancy. Due to the property's lack of air
conditioning and third floor units that are far away from stairwells or
elevators, an increase in occupancy is not likely. The Partnership expects to
maintain occupancy in the low 80% range in 1996.
Forest Hill
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Forest Hill Mini-Storage consists of nine, one-story self-storage warehouse
buildings and one apartment/leasing office. The rentable space is divided into
679 units, with 20 of these units being recreational vehicle parking spaces. 35%
of the units are air conditioned.
The property is located in a predominately residential neighborhood in West Palm
Beach, Florida consisting of single family homes and small businesses to the
east and multi-family apartment communities to the south and west. The
property's rental rates and occupancy are currently higher than the competition
in the immediate area.
Construction of two competing facilities within one mile of Forest Hill is
currently being considered, which could have a negative impact on the property.
The Partnership expects to maintain occupancy in the middle 90% range. An
increase in rental rates is anticipated in 1996.
Fountainbleau
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Fountainbleau Mini-Storage consists of three, two-story self-storage warehouse
buildings and one apartment/leasing office. The rentable space is divided into
769 units. 56% of the units are air conditioned.
The property is located in the central western quadrant of the Miami metroplex
and is in close proximity to the Miami International Airport. The immediate
neighborhood is predominately industrial with single family residential and
multi-family communities further to the south and north. The tenant profile
consists of local businesses and a major international moving company that
leases more than 90 of the units and receives a 5% discount. The Partnership
expects to maintain occupancy in the high 90% range in 1996. Surrounding vacant
property is currently being marketed for future mini-storage development. If
facilities are built, it could have an impact on the property's performance.
Kendall Sunset
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Kendall Sunset Mini-Storage consists of ten, one-story self-storage warehouse
buildings and one apartment/leasing office. The rentable space is divided into
940 units. 35% of the units are air conditioned.
The property is located in a residential neighborhood at the southwestern edge
of the Miami metroplex. The area is tropical in nature and is in close proximity
to the Everglades and Key West. The property's rental rates and occupancy are
currently higher than the competition in the immediate area. The Partnership
expects to maintain occupancy in the middle 90% range in 1996. Margate
Margate Mini-Storage consists of four, one-story and one, three-story
self-storage warehouse buildings and one apartment/leasing office. The rentable
space is divided into 642 units, with 11 of the units being recreational vehicle
parking spaces. 52% of the units are air conditioned.
<PAGE>
The property is located in a predominately commercial/retail neighborhood with
single family homes and multi-family communities along the secondary streets.
The property's rental rates and occupancy are currently higher than the
competition in the immediate area. The development of a new self-storage
facility near the property had an adverse effect on the property's occupancy at
the end of 1995. However, the Partnership expects to increase occupancy slightly
in 1996.
Military Trail
- --------------
Military Trail Mini-Storage consists of eight, one-story self-storage warehouse
buildings and one apartment/leasing office. The rentable space is divided into
688 units, with 16 of the units being recreational vehicle parking spaces. 35%
of the units are air conditioned.
The property is located in a predominately commercial/retail neighborhood. The
majority of the apartment complexes in the area are to the north with single
family residences to the west. The location is the most positive feature with
direct access on Military Trail, a major thoroughfare. There are two competitors
in the immediate area with similar access and appearance but inferior
management. The Partnership expects to maintain occupancy in the low 90% range
throughout 1996.
One Corporate Center I and One Corporate Center III
- ---------------------------------------------------
One Corporate Center I and III are six-story class "B" office buildings located
in the southwest suburban Minneapolis/St. Paul metropolitan area. The buildings
are two of four identical buildings located in a commercial development
identified as One Corporate Center.
There has been no new office development in the past three years and no new
speculative construction is currently underway, so there has been a continued
demand for a decreasing supply of space. Developers are currently actively
seeking tenants for potential competing construction. Management will
concentrate on retaining existing tenants in 1996. The properties will continue
to perform capital improvements in 1996 in order to replace aging building
systems and to upgrade common areas to remain competitive in the marketplace.
The Partnership will continue to lease up vacancies with few concessions and
higher rental rates. The Partnership expects to maintain occupancy in the middle
90% range.
The following schedule shows lease expirations for each of the Partnership's
commercial properties for 1996 through 2005:
<TABLE>
Number of Annual % of Gross
Expirations Square Feet Rent Annual Rent
----------- ----------- -------- -----------
<S> <C> <C> <C> <C>
One Corporate Center I
- ----------------------
1996 9 19,772 $ 264,757 19%
1997 6 27,148 287,349 21%
1998 3 32,410 413,691 30%
1999 6 17,860 215,436 16%
2000 2 3,558 50,848 4%
Thereafter - - - -
</TABLE>
<PAGE>
<TABLE>
Number of Annual % of Gross
Expirations Square Feet Rent Annual Rent
----------- ----------- -------- -----------
<S> <C> <C> <C> <C>
One Corporate Center III
- ------------------------
1996 7 18,915 $ 227,224 17%
1997 4 9,596 118,989 9%
1998 9 40,538 495,589 37%
1999 4 18,370 212,380 16%
2000 2 9,647 130,866 10%
2001 - - - -
2002 2 7,152 77,226 6%
Thereafter - - - -
</TABLE>
No mini-storage tenant leases 10% or more of the available rental space except
for a moving company that leases approximately 12% of the units at Fountainbleau
Mini-Storage on a month-to-month basis. The following schedule reflects
information on commercial tenants occupying 10% or more of the leasable square
feet for each property:
<TABLE>
Nature of
Business Square Footage Lease
Use Leased Annual Rent Expiration
- --------- -------- --------- ----------
<S> <C> <C> <C>
One Corporate Center I
- ----------------------
General Office 14,642 $ 200,303 1998
Bank 11,169 131,236 1999
One Corporate Center III
- ------------------------
General Office 12,988 $ 158,454 1998
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
- ------ -----------------
The Partnership is not party to, nor are any of the Partnership's properties the
subject of, any material pending legal proceedings, other than ordinary, routine
litigation incidental to the Partnership's business, except for the following:
1) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young, BDO Seidman et
al. (Case #92-06560-A). This suit was filed on behalf of the Partnership
and other affiliated partnerships (the "Affiliated Partnerships") on May
26, 1992, in the 14th Judicial District Court of Dallas County. The
petition sought recovery against the Partnership's former auditors, Ernst &
Young, for negligence and fraud in failing to detect and/or report
overcharges of fees/expenses by Southmark, the former general partner. The
former auditors initially asserted counterclaims against the Affiliated
Partnerships based on alleged fraudulent misrepresentations made to the
auditors by the former management of the Affiliated Partnerships
(Southmark) in the form of client representation letters executed and
delivered to the auditors by Southmark management. The counterclaims sought
recovery of attorneys' fees and costs incurred in defending this action.
The counterclaims were later dismissed on appeal, as discussed below.
The trial court granted summary judgment against the Partnership based on
the statute of limitations; however, on appeal, the Dallas Court of Appeals
reversed the trial court and remanded for trial the Affiliated
Partnerships' fraud claims against Ernst & Young. The Texas Supreme Court
denied Ernst & Young's application for writ of error on January 11, 1996.
The Partnership is continuing to pursue vigorously its claims against Ernst
& Young; however, the final outcome of this litigation cannot be determined
at this time.
<PAGE>
2) Robert Lewis v. McNeil Real Estate Fund XXVII, L.P. and McNeil Partners,
L.P., Civil Action No. 13287 (Del. Ch.). This complaint alleged, among
other things, that the General Partner caused the Partnership to loan money
to affiliated partnerships at rates lower than the Partnership's cost of
borrowing, which the plaintiff alleged constituted a breach of the General
Partner's fiduciary duties. The complaint alleged that the affiliate loans
were designed to enable the affiliated partnerships to continue in business
so as to enable the General Partner to continue collecting fees from them.
An answer to the complaint was filed on February 3, 1994, denying the
material averments of wrongdoing and asserting affirmative defenses. In
1995, the plaintiff and the Partnership executed a Stipulation and Order of
Dismissal, which dismissed the action without prejudice.
3) Helen Pasco v. McNeil Real Estate Fund XXVII, L.P., Southmark Prime Plus
Corp., et al. and Does 1-50 Inclusive. This complaint alleges that several
limited partnerships and funds, including the Partnership, along with
McMachen, Prudential Securities, Inc. and other unidentified defendants,
transmitted false and misleading information to the plaintiff which was
used to entice the plaintiff into investing her money with the defendants.
The complaint also alleges that the defendants misrepresented speculative,
illiquid limited partnerships as safe, income-producing investments
suitable for safety-conscious and conservative investors. Although the
Partnership is included as a defendant, the plaintiff's allegations do not
specify in what way the Partnership was involved in improper conduct. The
complaint does not state, other than by broad allegations, that the
Partnership acted in an improper manner with regard to the operation or
management of the limited partnership. An answer was filed on behalf of the
Partnership in February 1994, and there has been no further action in this
matter. The ultimate outcome of this case cannot be determined at this
time.
For a discussion of the Southmark bankruptcy, see Item 1 - Business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP
- ------ --------------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
(A) There is no established public trading market for limited partnership
units, nor is one expected to develop.
(B) Title of Class Number of Record Unit Holders
-------------- -----------------------------
Limited partnership units 2,715 as of February 16, 1996
(C) No distributions were paid to the partners in 1995 or 1994.
Distributions have been suspended since the first quarter of 1992. See
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations, and Item 8 - Note 1 - "Organization and
Summary of Significant Accounting Policies - Distributions."
ITEM 6. SELECTED FINANCIAL DATA
- ------ -----------------------
The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in Item 8.
<PAGE>
<TABLE>
Years Ended December 31,
Statements of -----------------------------------------------------------------------
Operations 1995 1994 1993 1992 1991
- ------------------ ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Rental revenue............... $ 7,517,404 $ 7,234,070 $ 6,546,936 $ 5,220,555 $4,869,260
Interest income on mortgage
loan investments........... 440,658 451,841 674,118 207,757 180,424
Write-down for permanent
impairment of real estate.. - - - - (2,600,000)
Income (loss) before extra-
ordinary item.............. 3,268,110 1,355,563 1,306,745 (192,058) (3,512,345)
Extraordinary item........... (252,402) - - - 223,800
Net income (loss)............ 3,015,708 1,355,563 1,306,745 (192,058) (3,288,545)
Net income (loss) per weighted
average hundred limited
partnership units:
Income (loss) before extra-
ordinary item........... $ 60.93 $ 25.09 $ 24.00 $ (3.50) $ (63.52)
Extraordinary item......... (4.71) - - - 4.05
--------- ---------- ---------- ---------- ---------
Net income (loss).......... $ 56.22 $ 25.09 $ 24.00 $ (3.50) $ (59.47)
========= ========== ========== ========== =========
Distributions per weighted
average hundred limited
partnership units.......... $ - $ - $ - $ 4.43 $ 44.37
========= ========== ========== ========== =========
</TABLE>
<TABLE>
As of December 31,
-----------------------------------------------------------------------
Balance Sheets 1995 1994 1993 1992 1991
- -------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Real estate investments, net... $24,977,575 $25,921,989 $26,674,164 $26,633,500 $26,908,727
Mortgage loan investments,
net.......................... 3,597,673 4,679,929 5,718,144 4,685,107 1,667,107
Total assets................... 35,489,741 39,501,853 38,779,870 38,451,367 32,016,418
Long-term debt................. - 6,726,266 6,853,753 6,968,258 -
Partners' equity............... 34,630,930 31,948,150 30,925,518 29,951,706 30,717,568
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------ -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
FINANCIAL CONDITION
- -------------------
Under the original partnership agreement, the Partnership was formed to engage
in the business of making short-term nonrecourse mortgage or deed of trust loans
to affiliates of the Original General Partner and to partnerships or real estate
investment trusts sponsored by affiliates of the Original General Partner formed
for the purpose of acquiring income-producing real properties and reinvesting
the proceeds from repayment of such loans in additional affiliate loans. In
1989, the Partnership initiated foreclosure proceedings on the collateral
securing each of its mortgage loan investments. The Partnership acquired two
office buildings in 1989 and eight mini-storage warehouses in 1990 as a result
of the foreclosures. Also in 1990, one loan was collected in full when the
borrower sold the mini-storage warehouse securing the loan. The remaining
mortgage loan investment, secured by a mini-storage warehouse owned by an
unaffiliated limited partnership, was modified in 1994.
In October 1992, the Partnership received approximately $6.5 million of net
proceeds from a $7 million loan secured by five of the Partnership's
mini-storage warehouses located in Florida. A portion of the proceeds were used
for working capital and for general partnership purposes. The loan proceeds were
also used to make such loans to affiliates in accordance with the Amended
<PAGE>
Partnership Agreement as more fully described in Item 8 - Note 6 - "Mortgage
Loan Investments - Affiliates" and Item 13 - Certain Relationships and Related
Transactions. The mortgage note payable was paid in full in 1995 and a $5
million line of credit was obtained that will be used to fund any future loans
made to affiliates of the General Partner. See Item 8 - Note 7 - "Long-Term
Debt."
RESULTS OF OPERATIONS
- ---------------------
1995 compared to 1994
Revenue:
Total revenue increased by $1,676,557 in 1995 as compared to the prior year,
primarily due to a gain on legal settlement and an increase in rental revenue
and other interest income, as discussed below.
Rental revenue in 1995 increased by $283,334 as compared to 1994. Rental revenue
increased by approximately $65,000 and $16,000 at One Corporate Center I and III
office buildings, respectively, due to an increase in rental rates in 1995. In
addition, rental revenue increased at a majority of the mini-storage properties
as a result of an increase in rental rates in 1995. The largest increases
occurred at AAA Century Airport, AAA Sentry and Military Trail where rental
revenue increased by approximately $68,000, $52,000 and $41,000, respectively.
See Item 2 - Properties for a more detailed analysis of occupancy and rents per
square foot.
Other interest income increased by $115,445 in 1995 as compared to the prior
year. The increase was primarily the result of an increase in interest rates
earned on invested cash in 1995.
In 1995, the Partnership received a $30,515 refund of prior years' property
taxes for AAA Century Airport Mini-Storage as a result of an appeal filed on
behalf of the property. In 1994, the Partnership received a $43,878 refund of
prior years' property taxes for Burbank Mini-Storage.
As discussed in Item 1, in 1995 the Partnership received cash and common and
preferred stock in the reorganized Southmark in settlement of its bankruptcy
claims against Southmark. The Partnership recognized a $1,302,324 gain as a
result of this settlement. No such gain was recognized in 1994.
Expenses:
Total expenses decreased by $235,990 in 1995 as compared to the prior year,
mainly due to a decrease in interest expense, as discussed below.
Interest expense decreased by $380,381 in 1995 as compared to 1994. The decrease
was due to the repayment of the Partnership's mortgage note payable in the
second half of 1995, as further discussed in Item 8 - Note 7 - "Long-Term Debt."
General and administrative expenses decreased by $44,076 in 1995 as compared to
1994. The decrease was due to a decrease in legal expenses in 1995. A greater
amount of legal expenses were incurred in 1994 relating to a lawsuit against the
borrower on the A-Quality Mini-Storage loan and a suit against the officers and
directors of the Original General Partner and the Partnership's former auditors.
In 1995, the Partnership recognized a $252,402 extraordinary loss incurred in
connection with the repayment of its mortgage note payable as discussed in Item
8 - Note 7 - "Long-Term Debt." The loss consisted of $66,949 in prepayment
penalties and a $185,453 write off of deferred borrowing costs.
1994 compared to 1993
Revenue:
Total Partnership revenues increased by $77,457 in 1994 as compared to 1993. The
increase was primarily due to an increase in rental revenue, partially offset by
the recognition of a gain on involuntary conversion and an unusually large
property tax refund received in 1993, as discussed below.
Rental revenue increased by $687,134 in 1994 as compared to the previous year.
The increase was primarily attributable to an increase of approximately $406,000
at One Corporate Center III Office Building due to an increase in occupancy.
Rental revenue increased at all of the mini-storage properties as a result of an
increase in rental rates in 1994. The largest increases occurred at Burbank, AAA
Sentry and AAA Century Airport, where rental revenue increased by approximately
$122,000, $61,000 and $50,000, respectively. See Item 2 - Properties for a more
detailed analysis of occupancy and rents per square foot.
Interest income on the Partnership's mortgage loan investment to an unaffiliated
borrower (the A-Quality Mini-Storage loan) decreased by $22,648 in 1994 as
compared to 1993. As discussed in Item 8 - Note 5 "Mortgage Loan Investment,"
this loan was modified effective January 1, 1994. Prior to the modification,
interest on the note was received to the extent of excess cash flow from the
property securing the loan. At that time, interest was recorded as earned by the
Partnership when it was received. Under the modification, the principal balance
of the loan was reduced and principal and interest are paid monthly by the
borrower. One half of any excess cash flow from the property was used to reduce
the principal balance of the second lien loan.
Interest income on mortgage loan investments - affiliates decreased by $199,629
in 1994 as compared to the prior year. The decrease was the result of lower
average loan balances outstanding in 1994 than in 1993 due to the repayment of
loans at the end of 1993 and the beginning of 1994. Outstanding loans amounted
to approximately $3.2 million and $4.1 million at December 31, 1994 and 1993,
respectively.
Other interest income increased by $156,043 in 1994 as compared to 1993. The
increase was primarily the result of higher average cash balances available for
short-term investment in 1994, mainly due to the repayment of loans by
affiliates. The Partnership held approximately $7.2 million of cash and cash
equivalents at December 31, 1994 as compared to $4.6 million at December 31,
1993. In addition, there was an increase in interest rates earned on invested
cash in 1994.
In 1993, the Partnership received a $358,174 refund of prior years' property
taxes for One Corporate Center I and III office buildings. In 1994, the
Partnership received a $43,878 refund of prior years' property taxes for Burbank
Mini-Storage.
In 1993, the Partnership recognized a gain on involuntary conversion of $229,147
relating to hurricane damage suffered at two of the mini-storages warehouses.
(See Item 8 - Note 8 - "Gain on Involuntary Conversion"). No such gain was
recorded in 1994.
Expenses:
Total expenses increased by $28,639 in 1994 as compared to 1993.
Depreciation and amortization expense increased by $146,311 in 1994 as compared
to 1993. The increase was due to the addition of depreciable capital
improvements, primarily at One Corporate Center III Office Building, in 1994 and
1993.
Property taxes decreased by $153,800 in 1994 as compared to 1993. The decrease
was the result of a decrease in the assessed taxable value of One Corporate
Center I and III Office Buildings by taxing authorities as a result of an appeal
filed on behalf of the properties.
Property management fees - affiliates increased by $58,385 in 1994 as compared
to 1993. The increase was due to an increase in gross rental receipts in 1994,
on which the fees are based.
Electricity usage, resulting from an increase in occupancy at One Corporate
Center III Office Building, caused an increase in utilities expense in 1994.
Utilities increased by $28,209 in 1994 as compared to 1993.
Other property operating expenses increased by $43,880 as compared to the same
period in 1993. Approximately $24,000 of the increase was the result of One
Corporate Center III amortizing a greater amount of leasing commissions in 1994,
which were paid in an effort to increase the occupancy of the building. In
addition, there was an increase in the cost of property insurance at all of the
properties in 1994.
General and administrative expenses decreased by $144,298 in 1994 as compared to
1993, mainly due to an increase in legal expenses in 1993. The majority of these
expenses were attributable to a lawsuit against the borrower on the A-Quality
Mini-Storage loan and a suit against the officers and directors of the Original
General Partner and the Partnership's former auditors.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $5,157,580 of cash through operating activities in
1995 as compared to $2,730,364 in 1994 and $1,664,105 in 1993. The increase in
1995 was mainly due to cash received in 1995 from the settlement of bankruptcy
claims against Southmark as discussed in Item 1 - Southmark Bankruptcy and
Change in General Partner. In addition, there was an increase in cash received
from tenants and a decrease in interest paid. The increase in 1994 as compared
to 1993 was mainly due to an increase in cash received from tenants. See
discussion of the increase in rental revenue and the decrease in interest
expense above.
In 1993, the Partnership received $398,034 in net insurance proceeds from
hurricane damage suffered at two of the mini-storage properties in 1992. The
Partnership expended $563,333, $688,492 and $1,335,020 for capital improvements
to the properties in 1995, 1994 and 1993, respectively. The Partnership made
substantial improvements to its properties in 1993 in an effort to increase the
properties' occupancy.
In 1995 and 1994, the Partnership received $282,420 and $278,337, respectively,
in payments on its mortgage loan investment to an unaffiliated borrower. As more
fully discussed in Item 8 - Note 5 - "Mortgage Loan Investment," the loan was
modified in 1994. Prior to the modification, interest only from the excess cash
flow of the property was paid on the loan. The second lien loan was repaid in
full in the third quarter of 1995.
The Partnership collected (net of loans made) $972,000 and $843,135 of principal
on loans to affiliates in 1995 and 1994, respectively. The Partnership made
loans to affiliates (net of collections) of $1,033,037 in 1993.
In 1995, the Partnership expended a total of $6,726,266 to repay in full its
mortgage note payable and paid $66,949 in prepayment penalties associated with
such repayment. The Partnership also paid $195,059 in deferred borrowing costs
to secure a $5 million line of credit.
Short-term liquidity:
At December 31, 1995, the Partnership held cash and cash equivalents of
$5,718,657. This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its properties.
For the Partnership as a whole, management projects positive cash flow from
operations in 1996. The Partnership has budgeted $586,000 for necessary capital
improvements for all properties in 1996, which are expected to be funded from
available cash reserves or from operations of the properties.
One of the Partnership's mortgage loan investments to affiliates totaling
$952,538 was repaid subsequent to December 31, 1995 (see Item 8 - Note 6 -
"Mortgage Loan Investments - Affiliates").
Additional efforts to maintain and improve Partnership liquidity have included
continued attention to property management activities. The objective has been to
obtain maximum occupancy rates while holding expenses to levels necessary to
maximize cash flows. The Partnership has made capital expenditures on its
properties where improvements were expected to increase the competitiveness and
marketability of the properties.
In March 1996, the Partnership distributed $3,000,000 to the limited partners.
Long-term liquidity:
While the outlook for maintenance of adequate levels of liquidity is favorable,
should operations deteriorate and present cash resources be insufficient for
current needs, the Partnership would require other sources of working capital.
The Partnership acquired a $5 million line of credit in 1995 that may be used
for property operations. Other possible actions to resolve cash deficiencies
include refinancings, deferral of capital expenditures on Partnership properties
except where improvements are expected to increase the competitiveness and
marketability of the properties, arranging financing from affiliates or the
ultimate sale of the properties. Sales and refinancings are possibilities only,
and there are at present no plans for any such sales or refinancings.
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships, if certain
conditions are met. Borrowings under the facility may be used to fund deferred
maintenance, refinancing obligations and working capital needs. There is no
assurance that the Partnership will receive any funds under the facility because
no amounts are reserved for any particular partnership. As of December 31, 1995,
$2,662,819 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay existing
borrowings. This commitment will terminate on March 30, 1997.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
<TABLE>
Page
Number
------
INDEX TO FINANCIAL STATEMENTS
- -----------------------------
<S> <C>
Financial Statements:
Report of Independent Public Accountants....................................... 18
Balance Sheets at December 31, 1995 and 1994................................... 19
Statements of Operations for each of the three years in the period
ended December 31, 1995..................................................... 20
Statements of Partners' Equity (Deficit) for each of the three years
in the period ended December 31, 1995....................................... 21
Statements of Cash Flows for each of the three years in the period
ended December 31, 1995..................................................... 22
Notes to Financial Statements.................................................. 24
Financial Statement Schedule -
Schedule III - Real Estate Investments and Accumulated
Depreciation and Amortization............................................ 34
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of McNeil Real Estate Fund XXVII, L.P.:
We have audited the accompanying balance sheets of McNeil Real Estate Fund
XXVII, L.P. (a Delaware limited partnership) as of December 31, 1995 and 1994,
and the related statements of operations, partners' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements and the schedule referred to below are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McNeil Real Estate Fund XXVII,
L.P. 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states 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, LLP
Dallas, Texas
March 21, 1996
<PAGE>
MCNEIL REAL ESTATE FUND XXVII, L.P.
BALANCE SHEETS
<TABLE>
December 31,
------------------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
- ------
Real estate investments:
Land..................................................... $ 5,387,855 $ 5,387,855
Buildings and improvements............................... 26,635,813 26,072,480
---------- ----------
32,023,668 31,460,335
Less: Accumulated depreciation and amortization......... (7,046,093) (5,538,346)
---------- ----------
24,977,575 25,921,989
---------- ----------
Mortgage loan investment.................................... 1,538,932 1,821,352
Less: Allowance for impairment............................. (177,161) (349,325)
---------- ----------
1,361,771 1,472,027
Mortgage loan investments - affiliates...................... 2,235,902 3,207,902
Cash and cash equivalents................................... 5,718,657 7,196,410
Cash segregated for security deposits and
repurchase of limited partnership units.................. 407,565 404,312
Accounts receivable......................................... 299,835 525,287
Accrued interest receivable................................. 23,978 49,373
Deferred borrowing costs, net of accumulated
amortization of $48,764 and $91,612 at
December 31, 1995 and 1994, respectively................. 146,295 204,366
Prepaid expenses and other assets........................... 318,163 520,187
---------- ----------
$35,489,741 $39,501,853
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- -----------------------------------------
Long-term debt.............................................. $ - $ 6,726,266
Accounts payable and accrued expenses....................... 68,471 72,431
Payable to limited partners................................. 332,928 332,931
Payable to affiliates....................................... 253,044 227,189
Security deposits and deferred rental revenue............... 204,368 194,886
---------- ----------
858,811 7,553,703
---------- ----------
Partners' equity (deficit):
Limited partners - 10,000,000 limited partnership units
authorized; 5,273,885 and 5,310,877 limited partnership
units outstanding at December 31, 1995 and 1994,
respectively............................................. 34,758,220 32,105,597
General Partner.......................................... (127,290) (157,447)
---------- ----------
34,630,930 31,948,150
---------- ----------
$35,489,741 $39,501,853
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Rental revenue.......................... $7,517,404 $7,234,070 $6,546,936
Interest income on mortgage loan
investment............................ 149,334 159,337 181,985
Interest income on mortgage loan
investments - affiliates.............. 291,324 292,504 492,133
Other interest income................... 359,755 244,310 88,267
Property tax refund..................... 30,515 43,878 358,174
Gain on legal settlement................ 1,302,324 - -
Gain on involuntary conversion.......... - - 229,147
--------- --------- ---------
Total revenue......................... 9,650,656 7,974,099 7,896,642
--------- --------- ---------
Expenses:
Interest................................ 385,214 765,595 778,577
Depreciation and amortization........... 1,507,747 1,440,667 1,294,356
Property taxes.......................... 751,848 710,166 863,966
Personnel costs......................... 627,809 601,610 591,534
Repairs and maintenance................. 579,543 579,535 571,221
Property management fees -
affiliates............................ 426,203 405,746 347,361
Utilities............................... 444,526 442,680 414,471
Other property operating expenses....... 597,611 569,077 525,197
General and administrative.............. 56,416 100,492 244,790
General and administrative -
affiliates............................ 1,005,629 1,002,968 958,424
--------- --------- ---------
Total expenses........................ 6,382,546 6,618,536 6,589,897
--------- --------- ---------
Net income before extraordinary item....... 3,268,110 1,355,563 1,306,745
Extraordinary item......................... (252,402) - -
--------- --------- ---------
Net income................................. $3,015,708 $1,355,563 $1,306,745
========= ========= =========
Net income allocable to limited
partners................................ $2,985,551 $1,342,007 $1,293,678
Net income allocable to General
Partner................................. 30,157 13,556 13,067
---------- ---------- ---------
Net income................................. $3,015,708 $1,355,563 $1,306,745
========= ========= =========
Net income per weighted average hundred
limited partnership units:
Net income before extraordinary item.... $ 60.93 $ 25.09 $ 24.00
Extraordinary item...................... (4.71) - -
--------- --------- ---------
Net income................................. $ 56.22 $ 25.09 $ 24.00
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
Total
General Limited Partners'
Partner Partners Equity
--------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1992.............. $(184,070) $30,135,776 $29,951,706
Repurchase of 43,126 limited
partnership units...................... - (332,933) (332,933)
Net income................................ 13,067 1,293,678 1,306,745
-------- ---------- ----------
Balance at December 31, 1993.............. (171,003) 31,096,521 30,925,518
Repurchase of 37,408 limited
partnership units...................... - (332,931) (332,931)
Net income................................ 13,556 1,342,007 1,355,563
-------- ---------- ----------
Balance at December 31, 1994.............. (157,447) 32,105,597 31,948,150
Repurchase of 36,992 limited
partnership units...................... - (332,928) (332,928)
Net income................................ 30,157 2,985,551 3,015,708
-------- ---------- ----------
Balance at December 31, 1995.............. $(127,290) $34,758,220 $34,630,930
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, L.P.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants.............. $7,754,299 $ 7,316,836 $ 6,338,457
Cash paid to suppliers.................. (2,107,840) (2,308,783) (2,772,688)
Cash paid to affiliates................. (1,405,977) (1,508,428) (1,327,008)
Interest received....................... 336,925 339,729 259,401
Interest received from affiliates....... 316,719 280,611 495,854
Interest paid........................... (317,537) (723,313) (736,295)
Property taxes paid..................... (751,848) (710,166) (951,790)
Property tax refund..................... 30,515 43,878 358,174
Cash received from legal settlement..... 1,302,324 - -
--------- ---------- ----------
Net cash provided by operating
activities.............................. 5,157,580 2,730,364 1,664,105
--------- ---------- ----------
Cash flows from investing activities:
Proceeds received from insurance
company............................... - - 398,034
Additions to real estate investments.... (563,333) (688,492) (1,335,020)
Proceeds from collection of mortgage
loan investments...................... 282,420 278,337 -
Mortgage loan investments -
affiliates............................ - (1,008,000) (3,017,572)
Proceeds from collection of mortgage
loan investments - affiliates......... 972,000 1,851,135 1,984,535
--------- ---------- ----------
Net cash provided by (used in)
investing activities.................... 691,087 432,980 (1,970,023)
--------- ---------- ----------
Cash flows from financing activities:
Net (increase) decrease in cash
segregated for repurchase of
limited partnership units............. (5,215) (87,150) 80,618
Deferred borrowing costs paid........... (195,059) - -
Principal payments on mortgage
note payable.......................... (6,726,266) (127,487) (114,505)
Mortgage prepayment penalty paid........ (66,949) - -
Repurchase of limited partnership
units................................. (332,931) (332,933) (332,929)
---------- ---------- ----------
Net cash used in financing activities...... (7,326,420) (547,570) (366,816)
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents........................ (1,477,753) 2,615,774 (672,734)
Cash and cash equivalents at
beginning of year....................... 7,196,410 4,580,636 5,253,370
---------- ---------- ----------
Cash and cash equivalents at end
of year................................. $ 5,718,657 $ 7,196,410 $ 4,580,636
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, L.P.
STATEMENTS OF CASH FLOWS
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
<TABLE>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net income................................. $3,015,708 $1,355,563 $1,306,745
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 1,507,747 1,440,667 1,294,356
Gain on involuntary conversion.......... - - (229,147)
Amortization of deferred borrowing
costs................................. 67,677 42,282 42,282
Allowance for impairment of
mortgage loan investment.............. (172,164) (83,257) -
Extraordinary item...................... 252,402 - -
Changes in assets and liabilities:
Cash segregated for security
deposits............................ 1,962 (3,720) (11,417)
Accounts receivable................... 225,452 62,607 (231,715)
Accrued interest receivable........... 25,395 7,446 (47,092)
Prepaid expenses and other
assets.............................. 202,024 81,936 (143,586)
Accounts payable and accrued
expenses............................ (3,960) (97,325) (284,695)
Accrued property taxes................ - - (78,855)
Payable to affiliates................. 25,855 (99,714) 18,740
Security deposits and deferred
rental revenue...................... 9,482 23,879 28,489
--------- --------- ---------
Total adjustments................. 2,141,872 1,374,801 357,360
--------- --------- ---------
Net cash provided by operating
activities.............................. $5,157,580 $2,730,364 $1,664,105
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------ -----------------------------------------------------------
Organization
- ------------
McNeil Real Estate Fund XXVII, L.P. (the "Partnership"), formerly known as
Southmark Prime Plus, L.P., was organized by affiliates of Southmark Corporation
("Southmark") on January 16, 1987, as a limited partnership under the provisions
of the Delaware Revised Uniform Limited Partnership Act to make short-term loans
to affiliates of the general partner. The general partner of the Partnership is
McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership,
an affiliate of Robert A. McNeil ("McNeil"). The General Partner was elected at
a meeting of limited partners on March 30, 1992, at which time an amended and
restated partnership agreement (the "Amended Partnership Agreement") was
adopted. Prior to March 30, 1992, the general partner of the Partnership was
Prime Plus Corp. (the "Original General Partner"), a wholly-owned subsidiary of
McNeil. The Original General Partner was purchased from Southmark by McNeil on
March 13, 1991. The principal place of business for the Partnership and the
General Partner is 13760 Noel Road, Suite 700, Dallas, Texas 75240.
The sole limited partner of the Partnership was initially Southmark Depositary
Corp. (the "Depositary"), a wholly-owned subsidiary of Southmark. The Depositary
assigned the principal attributes of its aggregate limited partner interest in
the Partnership to the Depositary unit holders. The Depositary units were
subsequently converted to limited partnership units. The Depositary, Depositary
units or limited partnership units are referred to herein as "Units" and the
holders thereof as "Unitholders."
Under the original partnership agreement, the Partnership's primary business was
to make short-term nonrecourse mortgage or deed of trust loans to affiliates of
the Original General Partner and to partnerships or real estate investment
trusts sponsored by affiliates of the Original General Partner formed for the
purpose of acquiring income-producing real properties. Due to borrower defaults
and foreclosures on the properties securing all but one of these mortgages, the
Partnership's business also includes ownership and operation of real estate.
In 1992, the Partnership received the proceeds from a $7 million mortgage note
payable secured by five of the Partnership's mini-storage warehouses located in
Florida. A portion of the proceeds from the loan was used to make nonrecourse
mortgage loans to affiliates of the General Partner in accordance with the
Amended Partnership Agreement. The loans were secured by income-producing real
estate and were either junior or senior to other indebtedness as more fully
described in Note 6 - "Mortgage Loan Investments - Affiliates." The mortgage
note payable was repaid by the Partnership in 1995 and a $5 million line of
credit was obtained that will be used to fund any future loans made to
affiliates of the General Partner. See Note 7 - "Long-Term Debt."
The Partnership is engaged in the ownership, operation and management of
commercial real estate and other real estate related assets. At December 31,
1995, the Partnership owned one mortgage loan investment to an unaffiliated
borrower, three mortgage loan investments to affiliates of the General Partner,
and ten income-producing properties as described in Note 4 - "Real Estate
Investments."
Basis of Presentation
- ---------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP 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.
Real Estate Investments
- -----------------------
Real estate investments are generally stated at the lower of cost or net
realizable value. Real estate investments are monitored on an ongoing basis to
determine if the property has sustained a permanent impairment in value. At such
time, a write-down is recorded to reduce the basis of the property to its net
realizable value. A permanent impairment is determined to have occurred when a
decline in property value is considered to be other than temporary based upon
management's expectations with respect to projected cash flows and prevailing
economic conditions.
Improvements and betterments are capitalized and expensed through depreciation
charges. Repairs and maintenance are charged to operations as incurred.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This statement is effective for financial statements for fiscal
years beginning after December 15, 1995. The Partnership has not adopted the
principles of this statement within the accompanying financial statements;
however, it is not anticipated that adoption will have a material effect on the
carrying value of the Partnership's long-lived assets.
Depreciation and Amortization
- -----------------------------
Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 5 to 25 years. Tenant
improvements are capitalized and are amortized over the terms of the related
tenant lease, using the straight-line method.
Mortgage Loan Investments
- -------------------------
Mortgage loan investments are recorded at their original basis, net of any
allowance for uncollectible amounts. Interest income is recognized as it is
earned. Interest accrual is ceased at such time as management determines
collection is doubtful.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include cash on hand and cash on deposit in financial
institutions with original maturities of three months or less. Carrying amounts
for cash and cash equivalents approximate fair value.
Deferred Borrowing Costs
- ------------------------
Loan fees and other related costs incurred to obtain long-term financing on real
property are capitalized and amortized using a method that approximates the
effective interest method over the term of the related mortgage note payable or
line of credit agreement. Amortization of deferred borrowing costs is included
in interest expense on the Statements of Operations.
Rental Revenue
- --------------
The Partnership leases its mini-storage warehouses under short-term operating
leases. Lease terms generally are less than one year in duration. Rental revenue
is recognized as earned.
The Partnership leases its commercial properties under non-cancelable operating
leases. Certain leases provide concessions and/or periods of escalating or free
rent. Rental revenue is recognized on a straight-line basis over the term of the
related leases. The excess of the rental revenue recognized over the contractual
rental payments is recorded as accrued rent receivable and is included in
accounts receivable on the Balance Sheets.
Income Taxes
- ------------
No provision for Federal income taxes is necessary in the financial statements
of the Partnership because, as a partnership, it is not subject to Federal
income tax and the tax effect of its activities accrues to the partners.
Allocation of Net Income and Net Loss
- -------------------------------------
The Amended Partnership Agreement provides for net income and net losses of the
Partnership to be allocated 99% to the Unitholders and 1% to the General
Partner.
Federal income tax law provides that the allocation of loss to a partner will
not be recognized unless the allocation is in accordance with a partner's
interest in the partnership or the allocation has substantial economic effect.
Internal Revenue Code Section 704(b) and accompanying Treasury Regulations
establish criteria for allocation of Partnership deductions attributable to
debt. The Partnership's tax allocations for 1995, 1994, and 1993 have been made
in accordance with these provisions.
Distributions
- -------------
At the discretion of the General Partner, distributions to the partners are paid
from cash from operations available after payment of affiliate compensation.
Under the terms of the Amended Partnership Agreement, the General Partner is not
entitled to distributions from operations.
Cash from operations available for distribution is determined by provisions of
the Amended Partnership Agreement, and differs from the amount reported as net
cash provided by operating activities in the accompanying Statements of Cash
Flows. Cash from operations available for distribution consists of cash received
from operations of the Partnership during a given period of time less (1)
operational cash disbursements during the same period of time including capital
improvements, unscheduled mortgage principal reductions and repayment of
Partnership advances from affiliates, (2) a reasonable allowance for reserves,
contingencies and anticipated obligations as determined at the discretion of the
General Partner, (3) proceeds held pending investment in affiliate loans, and
(4) any monies reserved for repurchase of Units.
Liquidation proceeds will be distributed when the Partnership is dissolved and
wound up after taking into account all items of income, gain, loss or deduction.
Distribution of liquidation proceeds will then be made to the partners with
positive capital account balances.
No distributions were paid to the partners in 1995, 1994 or 1993. In March 1996,
the Partnership distributed $3,000,000 to the limited partners.
Net Income Per Hundred Limited Partnership Units
- ------------------------------------------------
Net income per one hundred Units is computed by dividing net income allocated to
the limited partners by the weighted average number of Units outstanding
expressed in hundreds. Per unit information has been computed based on 53,109,
53,483 and 53,914 (in hundreds) Units outstanding in 1995, 1994 and 1993,
respectively.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
- ------ ----------------------------
The Partnership pays property management fees equal to 5% of the gross rental
receipts for its mini-storage warehouses and 6% of gross rental receipts for its
commercial properties to McNeil Real Estate Management, Inc. ("McREMI"), an
affiliate of the General Partner, for providing property management services for
the Partnership's mini-storage warehouses and commercial properties and leasing
services for its mini-storage warehouses. McREMI may also choose to provide
leasing services for the Partnership's commercial properties, in which case
McREMI will receive property management fees from such commercial properties
equal to 3% of the property's gross rental receipts plus leasing commissions
based on the prevailing market rate for such services where the property is
located.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
Under the terms of the Amended Partnership Agreement, the Partnership is paying
an asset management fee to the General Partner. Through 1999, the asset
management fee is calculated as 1% of the Partnership's tangible asset value.
Tangible asset value is determined by using the greater of (i) an amount
calculated by applying a capitalization rate of 9 percent to the annualized net
operating income of each property or (ii) a value of $30 per gross square foot
for mini-storage warehouses and $50 per gross square foot for commercial
properties to arrive at the property tangible asset value. The property tangible
asset value is then added to the book value of all other assets excluding
intangible items. The fee percentage decreases subsequent to 1999.
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner or its affiliates are as follows:
<TABLE>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Property management fees................... $ 426,203 $ 405,746 $ 347,361
Charged to general and
administrative - affiliates:
Partnership administration.............. 432,998 405,528 410,923
Asset management fee.................... 572,631 597,440 547,501
--------- --------- ---------
$1,431,832 $1,408,714 $1,305,785
========= ========= =========
</TABLE>
Until March 13, 1991, the Original General Partner was entitled to receive, out
of cash from operations, a performance incentive fee equal to 20% of all points
received by the Partnership on mortgage loans if the Unitholders received
distributions of cash from operations equal to a 10% cumulative noncompounding
annual return on their original capital investment. Such fees were cumulative,
were accrued in the years earned and are to be paid when conditions were met.
Conditions for payment have not yet been met and, at December 31, 1995 and 1994,
$141,647 of amounts accrued in prior years are included in payable to affiliates
on the Balance Sheets.
Under the terms of the Amended Partnership Agreement, the Partnership is
expressly permitted to make loans to affiliates of the General Partner, so long
as such loans meet certain conditions. See Note 6 - "Mortgage Loan Investments -
Affiliates" for a discussion of these transactions.
Payable to affiliates at December 31, 1995 and 1994 consisted primarily of the
performance incentive fee of $141,647 accrued in prior years, property
management fees, Partnership general and administrative expenses, asset
management fees and prepaid interest as further discussed in Note 6 - "Mortgage
Loan Investments - Affiliates." Except for the performance incentive fee and
prepaid interest, all accrued fees are due and payable from current operations.
NOTE 3 - TAXABLE INCOME
- ------ --------------
McNeil Real Estate Fund XXVII, L.P. is a partnership and is not subject to
Federal and state income taxes. Accordingly, no recognition has been given to
income taxes in the accompanying financial statements of the Partnership since
the income or loss of the Partnership is to be included in the tax returns of
the individual partners. The tax returns of the Partnership are subject to
examination by Federal and state taxing authorities. If such examinations result
in adjustments to distributive shares of taxable income or loss, the tax
liability of the partners could be adjusted accordingly.
The Partnership's net assets and liabilities for financial reporting purposes
exceeded the net assets and liabilities for tax purposes by $11,258,459 in 1995,
$10,569,292 in 1994 and $10,682,379 in 1993.
NOTE 4 - REAL ESTATE INVESTMENTS
- ------ -----------------------
The basis and accumulated depreciation of the Partnership's real estate
investments at December 31, 1995 and 1994 are set forth in the following tables:
<TABLE>
Accumulated
Buildings and Depreciation Net Book
1995 Land Improvements and Amortization Value
---- --------- ---------- -------- ----------
<S> <C> <C> <C> <C>
AAA Century Airport
Inglewood, CA $ 361,535 $ 2,142,648 $(449,652) $ 2,054,531
AAA Sentry
N. Lauderdale, FL 70,337 525,535 (123,641) 472,231
Burbank
Burbank, CA 830,043 2,482,324 (531,179) 2,781,188
Forest Hill
W. Palm Beach, FL 510,780 1,952,030 (422,550) 2,040,260
Fountainbleau
Miami, FL 287,114 1,204,371 (228,724) 1,262,761
Kendall Sunset
Miami, FL 672,756 3,889,002 (815,954) 3,745,804
Margate
Margate, FL 233,575 1,297,803 (274,389) 1,256,989
Military Trail
W. Palm Beach, FL 571,715 1,806,036 (385,788) 1,991,963
One Corporate Center I
Edina, MN 925,000 5,477,168 (1,836,921) 4,565,247
One Corporate Center III
Edina, MN 925,000 5,858,896 (1,977,295) 4,806,601
--------- ---------- ---------- ----------
$5,387,855 $26,635,813 $(7,046,093) $24,977,575
========= ========== ========== ==========
Accumulated
Buildings and Depreciation Net Book
1994 Land Improvements and Amortization Value
---- --------- ---------- ----------- ----------
AAA Century Airport $ 361,535 $ 2,113,797 $ (358,173) $ 2,117,159
AAA Sentry 70,337 494,252 (87,694) 476,895
Burbank 830,043 2,468,892 (426,205) 2,872,730
Forest Hill 510,780 1,928,235 (338,769) 2,100,246
Fountainbleau 287,114 1,180,367 (171,856) 1,295,625
Kendall Sunset 672,756 3,857,005 (654,088) 3,875,673
Margate 233,575 1,261,191 (212,571) 1,282,195
Military Trail 571,715 1,753,408 (306,298) 2,018,825
One Corporate Center I 925,000 5,228,231 (1,486,109) 4,667,122
One Corporate Center III 925,000 5,787,102 (1,496,583) 5,215,519
--------- ---------- ---------- ----------
$5,387,855 $26,072,480 $(5,538,346) $25,921,989
========= ========== ========== ==========
</TABLE>
The Partnership leases its office buildings under non-cancelable operating
leases. Future minimum rents to be received as of December 31, 1995 are as
follows:
1996.................................... $2,242,000
1997.................................... 1,968,000
1998.................................... 1,157,000
1999.................................... 436,000
2000.................................... 232,000
Thereafter.............................. 125,000
---------
Total $6,160,000
Future minimum rents do not include expense reimbursements for common area
maintenance, property taxes and other expenses. These expense reimbursements
amounted to $130,560, $127,069 and $74,999 for the years ended December 31,
1995, 1994 and 1993, respectively.
NOTE 5 - MORTGAGE LOAN INVESTMENT
- ------ ------------------------
In 1987, the Partnership made a nonrecourse mortgage loan to an affiliate of
Southmark secured by A-Quality Mini-Storage. The property was subsequently sold
to an unaffiliated borrower subject to the Partnership's first priority mortgage
loan. On August 6, 1990, the Partnership was advised that Southmark Storage
Associates, the borrower on the A-Quality mortgage loan, had filed a petition
for bankruptcy in the United States Bankruptcy Court of Connecticut. This action
served to automatically stay foreclosure proceedings.
In April 1994, the borrower and the Partnership reached a settlement concerning
the loan. Under the settlement, the borrower paid the Partnership $150,000 in
cash and the loan was renewed for $1,453,194 (representing the original
$2,100,000 principal balance less all post bankruptcy petition payments made by
the borrower) effective January 1, 1994. An additional second lien loan was
executed in the amount of $134,397 at an interest rate of 6%, which was paid in
full in the third quarter of 1995. Principal and interest at a rate of prime
plus 2% are payable monthly on the first lien loan which matures in January
1997.
Effective January 1, 1994, the Partnership adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan"
("SFAS 114"). The impact of adopting SFAS 114 was immaterial to the
Partnership's financial statements. In accordance with SFAS 114, the measure of
impairment for a loan restructured in a troubled debt restructuring is based on
the present value of expected future cash flows discounted at the original
contractual rate. Accordingly, upon the April 1994 modification, the Partnership
measured the impairment of the mortgage loan investment and determined that an
allowance for impairment was still required. For the year ended December 31,
1993, there were no changes in the balance of the allowance for impairment. For
the years ended December 31, 1995 and 1994, the allowance for impairment
decreased by $172,164 and $83,257, respectively. The 1995 decrease in the
allowance was due to the passage of time (the allowance is measured based on
discounted cash flows) and the 1994 decrease was primarily due to the April 1994
modification which changed the expected future cash flows.
Since the April 1994 modification, interest income has been recorded at an
interest rate that equates the expected future cash flows to the mortgage loan
investment balance. The expected cash flows change slightly from year to year.
Additionally, any changes in the allowance for impairment that result from
changes in the discount rate or passage of time are also recorded as interest
income. This accounting treatment resulted in the recognition of $149,334 and
$159,337 of interest income for the years ended December 31, 1995 and 1994,
respectively. The effective interest rate of this interest income was 10.4% and
10.3% for 1995 and 1994, respectively. Interest income of $154,909 and $136,417
would have been recognized under the terms of the modification agreement for the
years ended December 31, 1995 and 1994, respectively, if the Partnership had not
adopted SFAS 114.
The following sets forth the Partnership's mortgage loan investment to an
unaffiliated borrower at December 31, 1995 and 1994.
<TABLE>
Mortgage Annual Monthly December 31,
Lien Interest Payments/ -----------------------------
Property Position Rate % Maturity 1995 1994
- -------- --------- -------- ---------------- --------- ---------
<S> <C> <C> <C> <C> <C>
A - Quality
Mini-Storage First (a)10.50 (a) 14,470 1/97 $1,538,932 $1,743,423
Second 6.00 (b) - 77,929
-------- ---------
1,538,932 1,821,352
Allowance for loss (177,161) (349,325)
--------- ---------
$1,361,771 $1,472,027
========= =========
</TABLE>
(a) Under the modification terms, interest accrues on the first mortgage loan
at a rate equal to the prime lending rate of Bank of America in effect as
of the first day of each calendar month plus 2%. The prime lending rate at
December 31, 1995 and 1994 was 8.5%. The monthly payment is based on a 240
month amortization, which changes as the interest rate changes.
(b) One half of the net cash flow of the property (after payments on the first
lien loan) was payable monthly on the second lien loan. The second lien
loan was paid in full in the third quarter of 1995.
Based on market lending rates for mortgage loan investments with similar terms,
risks and average maturities, the fair value of the mortgage loan investment was
approximately $1,407,000 at December 31, 1995.
The cost of the mortgage loan investment for Federal income tax purposes was
$1,416,547 at December 31, 1995.
On March 21, 1996, the mortgage loan investment plus accrued interest was paid
in full by the borrower.
NOTE 6 - MORTGAGE LOAN INVESTMENTS - AFFILIATES
- ------ --------------------------------------
Under the terms of the Amended Partnership Agreement, the Partnership is
expressly permitted to make nonrecourse mortgage loans to affiliates of the
General Partner so long as such loans meet certain conditions, including that
such loans bear interest at a rate equal to the prime lending rate of Bank of
America plus 2.5%, or plus 3.5% if the loan is junior to other indebtedness.
These loans are secured by income-producing real estate and may be either junior
or senior to other indebtedness secured by such property. At December 31, 1995,
the Partnership had outstanding loans receivable of $2,235,902, of which
$1,435,902 were first priority loans and $800,000 were junior priority loans.
For the year ended December 31, 1995, the Partnership recognized $291,324 of
interest income related to these loans. The following sets forth the
Partnership's mortgage loan investments to affiliates of the General Partner at
December 31, 1995 and 1994. Loans were funded by the proceeds from the mortgage
note payable entered into in October 1992 (see Note 7 - "Long-Term Debt") or
other available funds. Interest only is due monthly. The monthly payment varies
according to the prime lending rate.
<TABLE>
December 31,
Lien Interest Payments/ ----------------------------
Property Position Rate % (a) Maturity 1995 1994
- -------- --------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
McNeil Pension Investment
Fund, Ltd.:
Brice Road Office
Building First 11.00 05/98 $ 483,364 $ 483,364
McNeil Real Estate Fund X,
Ltd.:
Lakeview Plaza Shopping
Center Second 12.00 08/97 800,000 800,000
McNeil Real Estate Fund
XXI, L.P.:
Suburban Plaza Shopping
Center Third 12.00 05/95 - 972,000
McNeil Real Estate Fund
XXVI, L.P.:
Continental Plaza Office
Building First 11.00 03/96 952,538 952,538
--------- ---------
$2,235,902 $3,207,902
========= =========
</TABLE>
(a) The loans bear interest at the prime lending rate of Bank of America plus
2.5% for senior priority loans and prime plus 3.5% for junior priority
loans. The prime lending rate was 8.5% at December 31, 1995 and 1994.
On May 1, 1992, the Partnership agreed to loan an aggregate of $1.115 million to
McNeil Pension Investment Fund, Ltd. ("McPIF"), an affiliate of the General
Partner, at an interest rate of prime plus 1% per annum (the maximum rate
allowed to be incurred by McPIF in connection with borrowings from affiliates
pursuant to McPIF's partnership agreement). In 1994, 1993 and 1992, $88,000,
$330,364 and $65,000, respectively, was borrowed by McPIF pursuant to this
commitment. This loan is secured by a first lien on Brice Road Office Building
located in Reynoldsburg, Ohio. The original loan matured in May 1995, at which
time a new loan under substantially the same terms was executed. Interest on the
loan is payable monthly. Principal is payable on the third anniversary date of
issuance.
On August 15, 1994, the Partnership agreed to loan an aggregate of $1 million to
McNeil Real Estate Fund X, Ltd. ("Fund X"), at an interest rate of prime plus 1%
per annum (the maximum rate allowed to be incurred by Fund X in connection with
borrowings from affiliates pursuant to Fund X's partnership agreement). In 1994,
$800,000 was borrowed by Fund X pursuant to this commitment. This loan is
secured by a second lien on Lakeview Plaza Shopping Center located in Lexington,
Kentucky. Interest on the loan is payable monthly, with principal payable on the
third anniversary date of issuance.
On May 1, 1992, the Partnership agreed to loan an aggregate of $972,000 at an
interest rate of prime plus 3.5% to McNeil Real Estate Fund XXI, L.P. ("Fund
XXI"). In 1992, $972,000 was borrowed by Fund XXI pursuant to this commitment.
This loan was secured by a third lien on Suburban Plaza Shopping Center located
in Knoxville, Tennessee. Interest on the loan was payable monthly. The loan was
repaid in full in 1995.
On March 1, 1993, the Partnership agreed to loan an aggregate of $1.536 million
at an interest rate of prime plus 2.5% to McNeil Real Estate Fund XXVI, L.P.
("Fund XXVI"). In 1993, $952,538 was borrowed by Fund XXVI pursuant to this
commitment. This loan was secured by a first lien on Continental Plaza Office
Building located in Scottsdale, Arizona. Interest on the loan was payable
monthly, with principal payable on the third anniversary date of issuance. The
loan was paid in full in January 1996.
In order to induce the Partnership to lend funds to the foregoing affiliates of
the General Partner, the General Partner entered into agreements with the
Partnership whereby the General Partner agreed to pay: (i) the difference
between the interest rate required by the Partnership's Amended Partnership
Agreement to be charged to affiliates (either prime plus 2.5% or prime plus
3.5%) and the interest rate actually paid by Fund X and McPIF to the Partnership
(prime plus 1%), and (ii) all points (1.5% of the principal amount if a first
priority security interest is obtained and 2% of the principal amount if a
junior priority security interest is obtained), closing costs and expenses
required to be received by the Partnership pursuant to the Partnership's Amended
Partnership Agreement in connection with such affiliated financing arrangements.
At December 31, 1994 and 1993, the General Partner had paid, net of repayments,
$27,250 and $88,509, respectively, representing the aggregate amount of interest
which would be owed for one year pursuant to this arrangement. No such interest
was prepaid in 1995 since no funds were borrowed by Fund X or McPIF in 1995. In
addition, the General Partner paid $27,193, $28,249 and $114,889 of interest,
points, closing costs and expenses required to be received by the Partnership on
all affiliate loans during 1995, 1994 and 1993, respectively. All other
requirements for affiliated loans, as specified in the Partnership's Amended
Partnership Agreement, were met at December 31, 1995, 1994 and 1993, in
connection with these loans.
A summary of activity for the mortgage loan investments from affiliates is as
follows:
<TABLE>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year............... $3,207,902 $ 4,051,037 $ 3,018,000
Mortgage loans funded...................... - 1,008,000 3,017,572
Mortgage loans repaid...................... (972,000) (1,851,135) (1,984,535)
--------- ---------- ----------
Balance at end of year..................... $2,235,902 $ 3,207,902 $ 4,051,037
========= ========== ==========
</TABLE>
Based on the lending rates prescribed by the Amended Partnership Agreement for
affiliate mortgage loan investments, the fair value of mortgage loan
investments-affiliates approximated book value at December 31, 1995.
The cost of the mortgage loan investments for Federal income tax purposes is the
same as the carrying amount for financial statement purposes.
NOTE 7 - LONG-TERM DEBT
- ------ --------------
As more fully described below, the long-term debt of the Partnership was
converted from a mortgage note payable to a revolving credit agreement during
1995.
The following sets forth the mortgage note payable of the Partnership at
December 31, 1995 and 1994. The mortgage note payable was secured by the related
real estate investments.
<TABLE>
Mortgage Annual Monthly December 31,
Lien Interest Payments/ ---------------------------
Property Position Rate % Maturity 1995 1994
- -------- ---------- -------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Forest Hill,
Fountainbleau,
Kendall Sunset,
Margate, and
Military Trail First (a) 10.50 $70,900 10/99 $ - $6,726,266
=========== =========
</TABLE>
(a) In October 1992, the Partnership entered into a loan agreement to borrow an
aggregate of $7 million. Principal on this loan was due and payable seven
years following issuance, with interest payable annually at a rate of 10.5%
per annum for the first three years and prime plus 2% thereafter. The loan
was secured by certain mini-storage warehouses owned by the Partnership.
McNeil personally guaranteed up to $1.75 million of the aggregate loan
amount. The Partnership received net proceeds of approximately $6.5 million
from the loan, the balance of the loan amount being used to defray certain
closing costs and to establish an escrow account for real estate taxes. The
net loan proceeds were used to make loans to various affiliates of the
General Partner and to fund working capital needs. The balance of the
proceeds was invested, in accordance with the terms of the Amended
Partnership Agreement, in short-term interest-bearing accounts.
In May 1995, the Partnership paid down its mortgage note payable by $4,628,250.
In June 1995, the Partnership secured a $5 million line of credit that may be
used to fund any loans made to affiliates of the General Partner as well as for
working capital and general partnership purposes. In connection with obtaining
the line of credit, the Partnership paid off the remaining $2,019,844 balance of
its mortgage note payable. In connection with the repayments, the Partnership
paid prepayment penalties of $66,949 and wrote off $185,453 of deferred
borrowing costs, resulting in an extraordinary loss of $252,402 in 1995.
No amounts had been received by the Partnership under the $5 million line of
credit agreement as of December 31, 1995. Any borrowings under the line of
credit would bear interest at prime plus one half of one percent or a
LIBOR-based rate, if so elected by the Partnership. The Partnership is required
to pay a commitment fee equal to one quarter of one percent per annum on any
unused portion of the line of credit. Total commitment fees paid during 1995
were $3,542. The Partnership incurred loan costs of $195,059 related to the line
of credit. The line of credit expires in July 1997 and is secured by One
Corporate Center I and III office buildings and Kendall Sunset Mini-Storage.
NOTE 8 - GAIN ON INVOLUNTARY CONVERSION
- ------ ------------------------------
In September 1992, extensive hurricane damage occurred at Fountainbleau and
Kendall Sunset Mini-Storage warehouses. Although repairs were substantially
complete at the end of the year, reimbursements from the insurance company had
not yet been fully received. In 1993, the Partnership received $398,034 from the
insurance company and recognized a $229,147 gain on involuntary conversion,
which represents the amount of insurance reimbursements received in excess of
the basis of the properties damaged.
NOTE 9 - REPURCHASE OF LIMITED PARTNERSHIP UNITS
- ------ ---------------------------------------
Under the provisions of both the original partnership agreement and the Amended
Partnership Agreement, the Partnership is required to repurchase Units in
amounts totaling up to .6% of gross proceeds per year. The repurchase amount is
equal to the lesser of 90% of adjusted invested capital, or $9 per Unit.
Repurchase is based on written requests from Unitholders submitted between
October 1 and October 20 of each year. The requirement was first effective in
1989. In January 1996, $332,928 was used to repurchase 36,992 Units for requests
submitted in 1995. In January 1995, $332,931 was used to repurchase 37,408 Units
for requests submitted in 1994. In January 1994, $332,933 was used to repurchase
43,126 Units for requests submitted in 1993.
NOTE 10 - GAIN ON LEGAL SETTLEMENT
- ------- ------------------------
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark Corporation ("Southmark") for damages relating to improper
overcharges, breach of contract and breach of fiduciary duty. The Partnership
settled these claims in 1991, which totaled approximately $17,024,326, for the
full amount claimed and such settlement was approved by the Bankruptcy Court.
Pursuant to the settlement agreement, the Partnership released Southmark and its
affiliates and the Original General Partner from any further liability in
connection with the claims made with the Bankruptcy Court. In return, an
affiliate of McNeil agreed to waive payment on a dollar for dollar basis in an
amount equal to the settled claims against Partnership advances owed at that
time. In addition, the Partnership received Southmark bankruptcy plan assets in
respect to its claims which were not offset against the Partnership advances.
Because the Partnership's claims against Southmark were settled for $17,024,326,
the Partnership advances of $223,800 owed at that time were reduced in their
entirety and the claims had a remaining balance of $16,800,526. Although the
Partnership settled the claims against Southmark for the full amount claimed,
the settlement agreement provided that the Partnership receive a distribution of
Southmark bankruptcy plan assets based on a claim amount of approximately
$9,157,000.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995, the Partnership received in full satisfaction of its claims, $984,649
in cash, and common and preferred stock in the reorganized Southmark which was
subsequently sold for $317,675. These amounts represent the Partnership's
pro-rata share of Southmark assets available for Class 8 Claimants and were
recorded as a gain on legal settlement on the Statements of Operations.
NOTE 11 - LEGAL PROCEEDINGS
- ------- -----------------
The Partnership is not party to, nor are any of the Partnership's properties the
subject of, any material pending legal proceedings, other than ordinary, routine
litigation incidental to the Partnership's business, except for the following:
1) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young, BDO Seidman et
al. (Case #92-06560-A). This suit was filed on behalf of the Partnership
and other affiliated partnerships (the "Affiliated Partnerships") on May
26, 1992, in the 14th Judicial District Court of Dallas County. The
petition sought recovery against the Partnership's former auditors, Ernst &
Young, for negligence and fraud in failing to detect and/or report
overcharges of fees/expenses by Southmark, the former general partner. The
former auditors initially asserted counterclaims against the Affiliated
Partnerships based on alleged fraudulent misrepresentations made to the
auditors by the former management of the Affiliated Partnerships
(Southmark) in the form of client representation letters executed and
delivered to the auditors by Southmark management. The counterclaims sought
recovery of attorneys' fees and costs incurred in defending this action.
The counterclaims were later dismissed on appeal, as discussed below.
The trial court granted summary judgment against the Partnership based on
the statute of limitations; however, on appeal, the Dallas Court of Appeals
reversed the trial court and remanded for trial the Affiliated
Partnerships' fraud claims against Ernst & Young. The Texas Supreme Court
denied Ernst & Young's application for writ of error on January 11, 1996.
The Partnership is continuing to pursue vigorously its claims against Ernst
& Young; however, the final outcome of this litigation cannot be determined
at this time.
2) Robert Lewis v. McNeil Real Estate Fund XXVII, L.P. and McNeil Partners,
L.P., Civil Action No. 13287 (Del. Ch.). This complaint alleges, among
other things, that the General Partner caused the Partnership to loan money
to affiliated partnerships at rates lower than the Partnership's cost of
borrowing, which the plaintiff alleges constitutes a breach of the General
Partner's fiduciary duties. The complaint alleges that the affiliate loans
are designed to enable the affiliated partnerships to continue in business
so as to enable the General Partner to continue collecting fees from them.
An answer to the complaint was filed on February 3, 1994, denying the
material averments of wrongdoing and asserting affirmative defenses. In
1995, the plaintiff and the Partnership executed a Stipulation and Order of
Dismissal, which dismissed the action without prejudice.
3) Helen Pasco v. McNeil Real Estate Fund XXVII, L.P., Southmark Prime Plus
Corp., et al. and Does 1-50 Inclusive. This complaint alleges that several
limited partnerships and funds, including the Partnership, along with
McMachen, Prudential Securities, Inc. and other unidentified defendants,
transmitted false and misleading information to the plaintiff which was
used to entice the plaintiff into investing her money with the defendants.
The complaint also alleges that the defendants misrepresented speculative,
illiquid limited partnerships as safe, income-producing investments
suitable for safety-conscious and conservative investors. Although the
Partnership is included as a defendant, the plaintiff's allegations do not
specify in what way the Partnership was involved in improper conduct. The
complaint does not state, other than by broad allegations, that the
Partnership acted in an improper manner with regard to the operation or
management of the limited partnership. An answer was filed on behalf of the
Partnership in February 1994, and there has been no further action in this
matter. The ultimate outcome of this case cannot be determined at this
time.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1995
<TABLE>
Initial Cost (b) Cumulative Costs
--------------------------- Write-down Capitalized
Related (b) Buildings and and Permanent Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition
- ----------- --------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
MINI-STORAGE WAREHOUSES:
AAA Century Airport
Inglewood, CA $ - $ 359,820 $2,040,180 $ - $ 104,183
AAA Sentry
N. Lauderdale, FL - 69,890 380,110 - 145,872
Burbank
Burbank, CA - 825,918 2,394,082 - 92,367
Forest Hill
West Palm Beach, FL - 507,422 1,862,578 - 92,810
Fountainbleau
Miami, FL - 285,854 864,146 - 341,485
Kendall Sunset
Miami, FL (c) - 672,000 3,808,000 - 81,758
Margate
Margate, FL - 233,101 1,156,899 - 141,378
Military Trail
West Palm Beach, FL - 568,405 1,681,595 - 127,751
OFFICE BUILDINGS:
One Corporate Center I
Edina MN (c) - 925,000 5,250,000 (1,300,000) 1,527,168
One Corporate Center III
Edina, MN (c) - 925,000 5,255,000 (1,300,000) 1,903,896
--------- --------- ---------- ---------- ---------
$ - $5,372,410 $24,692,590 $(2,600,000) $4,558,668
========= ========= ========== ========== =========
</TABLE>
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1995
<TABLE>
Gross Amount at
Which Carried at Close of Period
----------------------------------------------- Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
--------- ---------- --------- -----------
<S> <C> <C> <C> <C>
MINI-STORAGE WAREHOUSES:
AAA Century Airport
Inglewood, CA $ 361,535 $2,142,648 $2,504,183 $ (449,652)
AAA Sentry
N. Lauderdale, FL 70,337 525,535 595,872 (123,641)
Burbank
Burbank, CA 830,043 2,482,324 3,312,367 (531,179)
Forest Hill
West Palm Beach, FL 510,780 1,952,030 2,462,810 (422,550)
Fountainbleau
Miami, FL 287,114 1,204,371 1,491,485 (228,724)
Kendall Sunset
Miami, FL 672,756 3,889,002 4,561,758 (815,954)
Margate
Margate, FL 233,575 1,297,803 1,531,378 (274,389)
Military Trail
West Palm Beach, FL 571,715 1,806,036 2,377,751 (385,788)
RETAIL CENTER
One Corporate Center I
Edina, MN 925,000 5,477,168 6,402,168 (1,836,921)
One Corporate Center III
Edina, MN 925,000 5,858,896 6,783,896 (1,977,295)
--------- ---------- ---------- ----------
$5,387,855 $26,635,813 $32,023,668 $(7,046,093)
========= ========== ========== ==========
</TABLE>
(a) For Federal Income tax purposes, the properties are depreciated over lives
ranging from 15-25 years using ACRS or MACRS methods. The aggregate cost of
real estate investments for Federal income tax purposes was $34,399,151 and
accumulated depreciation was $4,896,484 at December 31, 1995.
(b) The carrying values of One Corporate Center I and III Office Buildings
were each reduced by $1,300,000 in 1991.
(c) These properties secure a $5 million line of credit; however, no borrowings
were outstanding under the line of credit at December 31, 1995.
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1995
<TABLE>
Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- ------------
MINI-STORAGE WAREHOUSES:
<S> <C> <C> <C>
AAA Century Airport
N. Lauderdale, FL 1987 09/90 5-25
AAA Sentry
N. Lauderdale, FL 1987 10/90 5-25
Burbank
Burbank, CA 1987 09/90 5-25
Forest Hill
West Palm Beach, FL 1985 08/90 5-25
Fountainbleau
Miami, FL 1987 11/90 5-25
Kendall Sunset
Miami, FL 1986 10/90 5-25
Margate
Margate, FL 1985 10/90 5-25
Military Trail
West Palm Beach, FL 1986 08/90 5-25
OFFICE BUILDINGS:
One Corporate Center I
Edina, MN 1979 12/89 5-25
One Corporate Center III
Edina, MN 1980 12/89 5-25
</TABLE>
<PAGE>
McNEIL REAL ESTATE FUND XXVII, L.P.
Notes to Schedule III
Real Estate Investments and Accumulated Depreciation and Amortization
A summary of activity for the Partnership's real estate investments and
accumulated depreciation and amortization is as follows:
<TABLE>
For the Years Ended December 31,
------------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Real estate investments:
- -----------------------
Balance at beginning of year............... $31,460,335 $30,771,843 $29,436,823
Improvements............................... 563,333 688,492 1,335,020
---------- ---------- ----------
Balance at end of year..................... $32,023,668 $31,460,335 $30,771,843
========== ========== ==========
Accumulated depreciation and amortization:
Balance at beginning of year............... $ 5,538,346 $ 4,097,679 $ 2,803,323
Depreciation and amortization.............. 1,507,747 1,440,667 1,294,356
---------- ---------- ----------
Balance at end of year..................... $ 7,046,093 $ 5,538,346 $ 4,097,679
========== ========== ==========
</TABLE>
<PAGE>
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURES
---------------------
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
Neither the Partnership nor the General Partner has any directors or executive
officers. The names and ages of, as well as the positions held by, the officers
and directors of McNeil Investors, Inc., the general partner of the General
Partner, are as follows:
<TABLE>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C> <C>
Robert A. McNeil, 75 Mr. McNeil is also Chairman of the Board and Director of McNeil Real
Chairman of the Estate Management, Inc. ("McREMI") which is an affiliate of the General
Board and Director Partner. He has held the foregoing positions since the formation of such
entity in 1990. Mr. McNeil received his B.A. degree from Stanford
University in 1942 and his L.L.B. degree from Stanford Law School in
1948. He is a member of the State Bar of California and has been involved
in real estate financing since the late 1940's and in real estate
acquisitions, syndications and dispositions since 1960. From 1986 until
active operations of McREMI and McNeil Partners, L.P. began in February
1991, Mr. McNeil was a private investor. Mr. McNeil has been a member of
the international board of directors of the Salk Institute, which promotes
research in improvements in health care.
Carole J. McNeil 52 Mrs. McNeil is Co-Chairman, with husband Robert A. McNeil, of McNeil
Co-Chairman of the Investors, Inc. Mrs. McNeil has twenty years of real estate experience,
Board most recently as a private investor from 1986 to 1993. In 1982, she
founded Ivory & Associates, a commercial real estate brokerage firm in San
Francisco, CA. Prior to that, she was a commercial real estate agent and
analyst with Marcus and Millichap in San Francisco. In 1978, Mrs. McNeil
established the Escrow Training Company, California's first accredited
commercial training program for title company escrow officers and real
estate agents needing college credits to qualify for brokerage licenses.
She began in real estate as Manager and Marketing Director of Title
Insurance and Trust in Marin County, CA. Mrs. McNeil serves on the
international board of directors of the Salk Institute.
<PAGE>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
Donald K. Reed, 50 Mr. Reed is President, Chief Executive Officer and Director of McREMI
Director, President, which is an affiliate of the General Partner. Prior to joining McREMI in
and Chief Executive March 1993, Mr. Reed was President, Chief Operating Officer and Director
Officer of Duddlesten Management Corporation and Duddlesten Realty Advisors, Inc.,
with responsibility for a management portfolio of office, retail,
multi-family and mixed-use land projects representing $2 billion in asset
value. He was also Chief Operating Officer, Director and member of the
Executive Committee of all Duddlesten affiliates. Mr. Reed started with the
Duddlesten companies in 1976 and served as Senior Vice President and Chief
Financial Officer and as Executive Vice President and Chief Operating
Officer of Duddlesten Management Corporation before his promotion to
President in 1982. He was President and Chief Operating Officer of
Duddlesten Realty Advisors, Inc., which has been engaged in real estate
acquisitions, marketing and dispositions, since its formation in 1989.
Ron K. Taylor 38 Mr. Taylor is a Senior Vice President of McREMI and has been in this
Vice President capacity since McREMI commenced active operations in 1991. He also serves
as Acting Chief Financial Officer of McREMI since the resignation of
Robert C. Irvine on January 31, 1996. Mr. Taylor is primarily responsible
for Asset Management functions at McREMI, including property
dispositions, commercial leasing, real estate finance and portfolio
management. Prior to joining McREMI, Mr. Taylor served as an Executive
Vice President for a national syndication/property management company.
Mr. Taylor has been involved in the real estate industry since 1983.
</TABLE>
Each director shall serve until his successor shall have been duly elected and
qualified.
Section 16 (a) of the Securities Exchange Act of 1934 requires the Partnership's
General Partner and the directors and executive offers of the General Partner
(Including McNeil Investors, Inc. as the general partner of the General Partner
and the officers and directors of McNeil Investors, Inc.) to file, with the
Securities and Exchange Commission, reports of ownership and changes in
ownership of the Partnership's Units. The Partnership is required to identify
any of those persons who failed to file such reports on a timely basis.
During 1995, Mrs. McNeil inadvertently failed to file on a timely basis one
report relating to one transaction. In making this disclosure, the Partnership
has relied solely on written representations of these and other individuals and
on copies of the reports that they have filed with the Securities and Exchange
Commission.
ITEM 11. EXECUTIVE COMPENSATION
- ------- ----------------------
No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1995, nor was any direct compensation paid or payable by the
Partnership to directors or officers of the general partner of the General
Partner for the year ended December 31, 1995. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.
See Item 13 - Certain Relationships and Related Transactions for amounts of
compensation and reimbursements paid by the Partnership to the General Partner
and its affiliates.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
(A) Security ownership of certain beneficial owners.
No individual or group, as defined by Section 13(d)(3) of the
Securities Exchange Act of 1934, was known by the Partnership to own
more than 5% of the Units, other than the General Partner, as noted
in (B) below.
(B) Security ownership of management.
The General Partner and the officers and directors of its general
partner, collectively own 410,300 limited partnership units, which
represents approximately 7.78% of the outstanding limited partnership
units as of February 29, 1996.
(C) Change in control.
None
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The amendments to the Partnership compensation structure included in the Amended
Partnership Agreement provide for an asset management fee to replace all other
forms of general partner compensation other than property management fees and
reimbursements of certain costs. Through 1999, the asset management fee is
calculated as 1% of the Partnership's tangible asset value. Tangible asset value
is determined by using the greater of (i) an amount calculated by applying a
capitalization rate of 9 percent to the annualized net operating income of each
property or (ii) a value of $30 per gross square foot for mini-storage
warehouses and $50 per gross square foot for commercial properties to arrive at
the property tangible asset value. The property tangible asset value is then
added to the book value of all other assets excluding intangible items. The fee
percentage decreases subsequent to 1999. For the year ended December 31, 1995,
the Partnership paid or accrued $572,631 of such asset management fees.
Until March 13, 1991, the Original General Partner was entitled to receive, out
of cash from operations, a performance incentive fee equal to 20% of all points
received by the Partnership on mortgage loans if the Unit holders receive
distributions of cash from operations equal to a 10% cumulative noncompounding
annual return on their original capital investment. Such fees were cumulative
and were accrued in the years earned and are to be paid when conditions are met.
Conditions for payment have not yet been met and, at December 31, 1995, $141,647
of amounts accrued in prior years are included in payable to affiliates on the
Balance Sheets.
The Partnership pays property management fees equal to 5% of the gross rental
receipts of mini-storage properties (6% for commercial) to McREMI, an affiliate
of the General Partner, for providing property management services.
Additionally, the Partnership reimburses McREMI for its costs, including
overhead, of administering the Partnership's affairs. For the year ended
December 31, 1995, the Partnership paid or accrued $859,201 of such property
management fees and reimbursements. See Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations and Item 8 - Note 2 -
"Transactions With Affiliates."
Under the terms of the Amended Partnership Agreement, the Partnership is
expressly permitted to make loans to affiliates of the General Partner, so long
as such loans meet certain conditions, including that such loans bear interest
at a rate of either prime of Bank of America plus 2.5% or prime plus 3.5%,
depending on whether the security for such loans is first priority or junior
priority.
On May 1, 1992, the Partnership agreed to loan an aggregate of $1.115 million to
McNeil Pension Investment Fund, Ltd. ("McPIF"), an affiliate of the General
Partner, at an interest rate of prime plus 1% per annum (the maximum rate
allowed to be incurred by McPIF in connection with borrowings from affiliates
pursuant to McPIF's partnership agreement). In 1994, 1993 and 1992, $88,000,
$330,364 and $65,000, respectively, was borrowed by McPIF pursuant to this
commitment. This loan is secured by a first lien on Brice Road Office Building
located in Reynoldsburg, Ohio. The original loan matured in May 1995, at which
time a new loan under substantially the same terms was executed. Interest on the
loan is payable monthly. Principal is payable on the third anniversary date of
issuance.
On August 15, 1994, the Partnership agreed to loan an aggregate of $1 million to
McNeil Real Estate Fund X, Ltd. ("Fund X"), at an interest rate of prime plus 1%
per annum (the maximum rate allowed to be incurred by Fund X in connection with
borrowings from affiliates pursuant to Fund X's partnership agreement). In 1994,
$800,000 was borrowed by Fund X pursuant to this commitment. This loan is
secured by a second lien on Lakeview Plaza Shopping Center located in Lexington,
Kentucky. Interest on the loan is payable monthly, with principal payable on the
third anniversary date of issuance.
On May 1, 1992, the Partnership agreed to loan an aggregate of $972,000 at an
interest rate of prime plus 3.5% to McNeil Real Estate Fund XXI, L.P. ("Fund
XXI"). In 1992, $972,000 was borrowed by Fund XXI pursuant to this commitment.
This loan was secured by a third lien on Suburban Plaza Shopping Center located
in Knoxville, Tennessee. Interest on the loan was payable monthly. The loan was
repaid in full in 1995.
On March 1, 1993, the Partnership agreed to loan an aggregate of $1.536 million
at an interest rate of prime plus 2.5% to McNeil Real Estate Fund XXVI, L.P.
("Fund XXVI"). In 1993, $952,538 was borrowed by Fund XXVI pursuant to this
commitment. This loan was secured by a first lien on Continental Plaza Office
Building located in Scottsdale, Arizona. Interest on the loan was payable
monthly, with principal payable on the third anniversary date of issuance. The
loan was paid in full in January 1996.
In order to induce the Partnership to lend funds to affiliates of the General
Partner, the General Partner entered into agreements with the Partnership
whereby the General Partner agreed to pay: (i) the difference between the
interest rate required by the Partnership's Amended Partnership Agreement to be
charged to affiliates (either prime of Bank of America plus 2.5% or 3.5%) and
the interest rate actually paid by Fund X and McPIF to the Partnership (prime
plus 1%), and (ii) all points (1.5% of the principal amount if a first priority
security interest is obtained and 2% of the principal amount if a junior
priority security interest is obtained), closing costs and expenses required to
be received by the Partnership pursuant to the Partnership's Amended Partnership
Agreement in connection with such affiliated financing arrangements. In 1995,
the General Partner paid $27,193 of interest, points, closing costs and expenses
required to be received by the Partnership on all affiliate loans during 1995.
In connection with these loans, all other requirements for affiliated loans, as
specified in the Partnership's Amended Partnership Agreement, were met.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
- ------- -----------------------------------------------------------------
See accompanying Index to Financial Statements at Item 8.
(A) Exhibits
--------
Exhibit
Number Description
------- -----------
4.2 Amended and Restated Limited Partnership
Agreement of McNeil Real Estate Fund XXVII,
L.P. (incorporated by reference to the Current
Report of the registrant on Form 8-K dated
March 30, 1992, as filed on April 10, 1992).
10. Mutual Release and Settlement Agreement
between Southmark Storage Associates Limited
Partnership and McNeil Real Estate Fund XXVII,
L.P. (incorporated by reference to the
Quarterly Report of the registrant on form
10-Q for the period ended March 31, 1995, as
filed on May 15, 1995).
10.1 Assignment of Partnership Advances dated March
13, 1991 between Prime Plus Corp. and McNeil
Partners, L.P. (1)
10.2 Revolving Credit Agreement dated August 6,
1991, between McNeil Partners, L.P. and
various selected partnerships, including the
registrant (incorporated by reference to the
Annual Report of the registrant on Form 10-K
for the period ended December 31, 1993, as
filed on March 30, 1994).
10.5 Property Management Agreement dated March 30,
1992, between McNeil Real Estate Fund XXVII,
L.P. and McNeil Real Estate Management, Inc.
(2)
10.6 Amendment of Property Management Agreement
dated March 5, 1993, by McNeil Real Estate
Fund XXVII, L.P. and McNeil Real Estate
Management, Inc. (2)
10.7 Promissory Note dated October 23, 1992,
between Community Bank, N.A. and McNeil Real
Estate Fund XXVII, L.P. (2)
10.8 Loan Agreement dated October 23, 1992, between
Community Bank, N.A. and McNeil Real Estate
Fund XXVII, L.P. (2)
10.9 Guaranty Agreement dated October 23, 1992,
between Community Bank, N.A. and Robert A.
McNeil. (2)
10.10 Revolving Credit Loan Agreement dated June 21,
1995, between PNC Bank, National Association
and McNeil Real Estate Fund XXVII, L.P.
10.11 Consolidated, Amended and Restated Revolving
Credit Note dated June 21, 1995, between PNC
Bank, National Association and McNeil Real
Estate Fund XXVII, L.P.
11. Statement regarding computation of Net Income
(Loss) per Hundred Limited Partnership Units
(see Note 1 to Financial Statements).
(1) Incorporated by reference to the Annual
Report of the registrant on Form 10-K for the
period ended December 31, 1990, as filed on
March 29, 1991.
(2) Incorporated by reference to the Annual
Report of the registrant on Form 10-K for the
period ended December 31, 1992, as filed on
March 30, 1993.
(B) Reports on Form 8-K. There were no reports on Form 8-K filed by the
Partnership during the quarter ended December 31, 1995.
<PAGE>
McNEIL REAL ESTATE FUND XXVII, L.P.
A Limited Partnership
SIGNATURE PAGE
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.
<TABLE>
McNEIL REAL ESTATE FUND XXVII, L.P.
<S> <C>
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
April 1, 1996 By: /s/ Robert A. McNeil
- ---------------------------- ---------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
Principal Executive Officer
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.
April 1, 1996 By: /s/ Donald K. Reed
- ---------------------------- ---------------------------------------
Date Donald K. Reed
President and Director of McNeil Investors, Inc.
April 1, 1996 By: /s/ Ron K. Taylor
- ---------------------------- ---------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer
of McNeil Investors, Inc.
April 1, 1996 By: /s/ Carol A. Fahs
- ---------------------------- ---------------------------------------
Date Carol A. Fahs
Chief Accounting Officer of McNeil Real Estate
Management, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,718,657
<SECURITIES> 0
<RECEIVABLES> 323,813
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 32,023,668
<DEPRECIATION> (7,046,093)
<TOTAL-ASSETS> 35,489,741
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,489,741
<SALES> 7,517,404
<TOTAL-REVENUES> 9,650,656
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,997,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 385,214
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,268,110
<DISCONTINUED> 0
<EXTRAORDINARY> (252,402)
<CHANGES> 0
<NET-INCOME> 3,015,708
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
REVOLVING CREDIT LOAN AGREEMENT
THIS REVOLVING CREDIT LOAN AGREEMENT is dated as of June 21,
1995, and is made by and between McNEIL REAL ESTATE FUND XXVII, L.P., a Delaware
limited partnership (the "Borrower"), and PNC BANK, NATIONAL ASSOCIATION (the
"Lender").
WITNESSETH:
WHEREAS, the Borrower has requested the Lender to provide a
revolving credit facility to the Borrower in a principal amount not to exceed
$5,000,000; and
WHEREAS, the revolving credit facility shall be used for the
purposes of providing funds and Letters of Credit (as hereinafter defined) to
the Borrower for (i) making capital improvements to the Properties (as
hereinafter defined), (ii) making loans to Affiliates (as hereinafter defined)
of Borrower in accordance with the terms of Borrower's partnership agreement,
and (iii) Borrower's repayment of that certain mortgage loan made by the
Community Bank, N.A., now known as Bank Midwest, to Borrower in the original
principal amount of $7,000,000, and (iv) other general corporate purposes not to
include the payment of distributions; and
WHEREAS, the Lender is willing to provide such credit upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
1.01 Certain Definitions. In addition to words and terms
defined elsewhere in this Agreement, the following words and terms shall have
the following meanings, respectively, unless the context hereof clearly requires
otherwise:
Affiliate as to any Person shall mean any other
person which directly or indirectly controls, is controlled by, or is under
<PAGE>
common control with such person. Control, as used herein, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, whether through the
ownership of voting securities, by contract or otherwise, including the power to
elect a majority of the directors or trustees of a corporation or trust, as the
case may be.
Agreement shall mean this Revolving Credit Loan
Agreement as the same may be supplemented or amended from time to time including
all schedules and exhibits hereto.
Appraisal shall mean a written appraisal prepared
by an independent MAI appraiser engaged by Lender at Borrower's sole cost and
expense prepared in compliance with all applicable regulatory requirements,
being also subject to the Lender's customary independent appraisal requirements.
Assignment of Management Agreements shall mean the
three (3) Assignment of Management Agreements of even date herewith, with
respect to each of the Collateral Pool, executed and delivered by Borrower to
Lender, as the same may be amended, supplemented, reviewed or replaced from time
to time.
Authorized Officer shall mean those persons
designated by written notice to the Lender from the Borrower, authorized to
execute notices, reports and other documents required hereunder. The Borrower
may amend such list of persons from time to time by giving written notice of
such amendment to the Lender.
Borrower shall mean McNeil Real Estate Fund XXVII,
L.P., a Delaware limited partnership.
Borrowing Date shall mean the date for the making
of an advance of the Revolving Credit Loan or the renewal or conversion thereof
to the same or a differentInterest Rate Option, which must be a Pittsburgh
Business Day.
Borrowing Tranche shall mean (i) advances of the
Revolving Credit Loan to which a LIBO-Rate Option applies by reason of the
selection of, conversion to or renewal of such Interest Rate Option on the same
<PAGE>
day and having the same Interest Period, and (ii) advances of the Revolving
Credit Loan to which the Prime Rate Option applies by reason of the selection of
or conversion to such Interest Rate Option.
Closing Date shall mean the date of this Agreement.
Closing Fee shall have the meaning assigned to that
term in Section 2.02(a) hereof.
Collateral Pool shall mean collectively, the three
(3) Properties listed on Exhibit B attached hereto as Properties (A)(1), (A)(2)
and (A)(3) subject to the rights of Lender pursuant to the terms of this
Agreement to select, substitute, add or release the Other Properties listed on
Exhibit B attached hereto for inclusion in or exclusion from, as the case may
be, the Collateral Pool.
Commitment Fee shall have the meaning assigned to
that term in Section 2.02(b) hereof.
Consequential Loss shall mean an amount equal to
the present value (as determined by Lender) of the product of (a) the positive
difference resulting from subtracting the interest rate for the LIBO-Rate Option
which would be applicable to a similarly sized Borrowing Tranche determined on
the day of prepayment for a period of time commencing on the date of prepayment
and terminating on the last day of the Interest Period for the Borrowing Tranche
being prepaid from the interest rate for the LIBO-Rate Option actually in effect
for the Borrowing Tranche being prepaid; and (b) the amount of the prepayment;
and (c) a fraction with a numerator equal to the number of days remaining in the
Interest Period of the Borrowing Tranche being prepaid and a denominator of 360.
Any certificate of Lender delivered to Borrower setting forth the amount of
Consequential Loss as provided herein shall show the calculations required to
determine such Consequential Loss and shall be conclusive and binding, absent
manifest error, as to such amount and determination.
<PAGE>
Consolidated Net Worth for any period of
determination shall mean the Borrower's net worth as determined and consolidated
in accordance with GAAP.
Covenants shall have the meaning ascribed to such
term in Section 7.02(a) hereof.
Default Rate shall have the meaning ascribed to
such term in Section 3.01(b) hereof.
Dollar, Dollars, U.S. Dollars and the symbol $
shall mean lawful money of the United States of America.
Environmental Complaint shall mean any written
complaint setting forth a cause of action for personal or property damage or
equitable relief, order, notice of violation, citation issued pursuant to any
Environmental Laws by an Official Body, subpoena or other written notice of any
type relating to, arising out of, or issued pursuant to any of the Environmental
Laws or any Environmental Conditions, as the case may be.
Environmental Conditions shall mean any conditions
of the environment, including, without limitation, the work place, the ocean,
natural resources (including flora or fauna), soil, surface water, ground water,
any actual or potential drinking water supply sources, substrata or the ambient
air, relating to or arising out of, or caused by the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, emptying, discharging, injecting, escaping, leaching, disposal,
dumping, threatened release or other management or mismanagement of Regulated
Substances resulting from the use of, or operations on, the Properties.
Environmental Indemnification Agreements shall mean
the three (3) Hazardous Materials Certificate and Indemnity Agreements of even
date herewith, with respect to each of the Properties comprising the Collateral
Pool, executed and delivered by Borrower to Lender as the same may be amended,
supplemented, renewed or replaced from time to time.
<PAGE>
Environmental Laws shall mean all federal, state,
local and foreign laws and regulations, including permits, orders, judgments,
consent decrees issued, or entered into, pursuant thereto, relating to pollution
or protection of human health or the environment or employee safety in the work
place.
Environmental Report shall mean a written report of
the review and inspection of the Properties prepared by an environmental
consultant acceptable to Lender and engaged by Borrower at Borrower's sole cost
and expense.
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as the same may be amended or supplemented from time to
time, and any successor statute of similar import, and the rules and regulations
thereunder, as from time to time in effect.
Event of Default shall mean any of the Events of
Default described in Article VIII of this Agreement.
Financing Statements shall mean the UCC-1 Financing
Statements of even date herewith, with respect to each of the Properties
comprising the Collateral Pool, executed and delivered to Lender, as the same
may be amended, supplemented, renewed or replaced from time to time.
GAAP shall mean generally accepted accounting
principles as are in effect from time to time, and applied on a consistent basis
both as to classification of items and amounts.
Governmental Authority shall mean any foreign
governmental authority, the United States of America, any State of the United
States and any political subdivision of any of the foregoing and any agency,
department, commission, board, bureau or court which has jurisdiction over the
Lender or the Borrower or their respective assets or property, including the
amounts due hereunder.
Guaranty of any Person shall mean any obligation of
such Person guaranteeing or in effect guaranteeing any liability or obligation
of any other Person in any manner, whether directly or indirectly, including,
without limiting the generality of the foregoing, any agreement to indemnify or
hold harmless any other Person, any performance bond or other suretyship
<PAGE>
arrangement and any other form of assurance against loss, except endorsement of
negotiable or other instruments for deposit or collection in the ordinary course
of business.
Historical Statements shall have the meaning
assigned to that term in Section 5.01(9) (g) (A).
Indebtedness shall mean as to any Person at any
time, any and all indebtedness, obligations or liabilities (whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, or joint or several) of such Person for or in respect of: (i)
borrowed money, (ii) amounts raised under or liabilities in respect of any note
purchase or acceptance credit facility, (iii) reimbursement obligations under
any letter of credit, currency swap agreement, interest rate swap, cap, collar
or floor agreement or other interest rate management device, (iv) any other
transaction (including without limitation forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than thirty (30) days past due), or (v) any Guaranty of Indebtedness for
borrowed money.
Interbank Market Rate shall mean, for each Interest
Period, the rate of interest per annum (expressed as a percentage rounded, if
necessary, to the next highest 1/100th of 1%) quoted at approximately 11:00
o'clock a.m. London time on the date two (2) LIBO Business Days prior to the
first day of the applicable Interest Period for the offering by Lender to prime
banks in the Interbank Eurodollar market in London, England, of deposits in U.S.
dollars for a period of time equal to and commencing on the first day of such
Interest Period and equal or comparable to the length of such Interest Period
and in an amount equal or comparable to the Borrowing Tranche to which such
Interest Period applies.
<PAGE>
Interest Expense for any period of determination,
shall mean total interest expense, whether paid, accrued or capitalized
(including the interest component of capitalized leases), of the Borrower for
such period determined and consolidated in accordance with GAAP.
Interest Expense Coverage Ratio shall mean the
ratio of Net Operating Income Interest Expense.
Interest Period shall mean the term during which
any LIBO-Rate Option will apply, such period to be 1, 2, 3, 6, 9, or 12 months,
as Borrower may elect.
Interest Rate Option shall mean the Prime Rate
Option or the LIBO-Rate Option.
Internal Revenue Code shall mean the Internal
Revenue Code of 1986, as the same may be amended or supplemented from time to
time, and any successor statute of similar import, and the rules and regulations
thereunder, as from time to time in effect.
Kendall Property shall mean that certain Collateral
Pool Property known as Kendall Sunset Self-Storage located in the City of Miami,
Dade County, Florida.
Law shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance, opinion, release,
ruling, order, injunction, writ, decree or award of any Official Body.
Lease Assignments shall mean the three (3)
Assignment of Leases and Rents of even date herewith, with respect to each of
the Properties comprising the Collateral Pool, executed and delivered by the
Borrower to the Lender, as the same may be amended, supplemented, renewed or
replaced from time to time.
Letters of Credit shall have the meaning assigned
to that term in Section 2.07(a).
<PAGE>
Letter of Credit Fee shall have the meaning
assigned to that term in Section 2.0 (7)(b).
Letter of Credit Outstanding shall mean at any time
the sum of (i) the aggregate undrawn face amount of outstanding Letters of
Credit and (ii) the aggregate amount of all unpaid and outstanding Reimbursement
Obligations.
LIBO Business Day shall mean a day on which
transactions in U.S. dollars are conducted in the Interbank Eurodollar Market in
London, England at 11:00 o'clock a.m. London time and on which Lender is open to
conduct normal banking business in Pittsburgh, Pennsylvania, but not including
any Saturday or Sunday.
LIBO-Based Rate shall mean interest at a rate per
annum equal to two percent (2%) above the LIBO-Rate.
LIBO-Rate shall be calculated (based on a year of
360 days and actual days elapsed), for each Interest Period, by dividing the
Interbank Market Rate with respect to such Interest Period by the remainder of
100% minus the LIBO Reserve Requirement in effect for the Lender on the date two
(2) LIBO Business Days prior to the first day of such Interest Period, and
rounding such quotient upward, if necessary, to the next highest 1/100th of 1%,
and may be determined pursuant to the following formula:
Interbank Market Rate
LIBO-Rate = 100% - LIBO Reserve
Requirement
Each determination by Lender of its LIBO-Rate or of any Interbank Market Rate,
in the absence of manifest error, shall be conclusive and binding.
LIBO-Rate Option shall have the meaning assigned to
that term in Section 3.01 (a).
LIBO Reserve Requirement shall mean, for Lender and
for computation of each of its LIBO-Rates, that percentage (expressed as a
decimal fraction) which is in effect on the date two (2) LIBO Business Days
<PAGE>
prior to the first day of the Interest Period applicable to such LIBO-Rate, as
specified by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirement (including, without
limitation, basic, supplemental, marginal and emergency reserves) under
Regulation D with respect to "Eurocurrency Liabilities" as defined in Regulation
D rounded, if necessary, to the next highest 1/100th of 1%. Each determination
by Lender of a LIBO Reserve Requirement, in the absence of manifest error, shall
be conclusive and binding.
Lien shall mean any mortgage, deed of trust,
pledge, lien, security interest, charge or other encumbrance or security
arrangement of any nature whatsoever, whether voluntarily or involuntarily
given, including but not limited to any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security and any filed financing statement or other notice
of any of the foregoing (whether or not a lien or other encumbrance is created
or exists at the time of the filing).
Loan to Value shall mean the collective loan to
value ratio expressed as a percentage, with respect to the Collateral Pool, as
determined by the most recent Appraisals of the Collateral Pool.
Loan Documents shall mean this Agreement, the Note,
the Mortgages, the Financing Statements, the Environmental Indemnification
Agreements, the Lease Assignments, the Assignment of Management Agreements, the
Negative Pledges, and any other instruments, certificates or documents delivered
or contemplated to be delivered hereunder or thereunder or in connection
herewith or therewith, as the same may be supplemented or amended from time to
time in accordance herewith or therewith, and Loan Document shall mean any of
the Loan Documents.
Loan Request shall mean a request for advances of
the Revolving Credit Loan made in accordance with Section 2.04 hereof or a
request to select, convert to or renew a LIBO-Rate Option in accordance with
Section 3.02 hereof.
<PAGE>
Loans shall mean collectively and Loan shall mean
separately all advances of the Revolving Credit Loan or any advance of the
Revolving Credit Loan.
Major Leases shall mean leases of any or all of the
Properties under which the respective tenants occupy in excess of 7,500 square
feet of rental space in the applicable Property.
Material Adverse Change shall mean any set of
circumstances or events which (a) has or could reasonably be expected to have
any material adverse effect whatsoever upon the validity or enforceability of
this Agreement or any other Loan Document, (b) is or could reasonably be
expected to be material and adverse to the business, properties, assets,
financial condition, results of operations or prospects of the Borrower,
Partner, (c) impairs materially or could reasonably be expected to impair
materially the ability of the Borrower or any of its Affiliate to duly and
punctually pay or perform its Indebtedness, or (d) impairs materially or could
reasonably be expected to impair materially the ability of the Lender, to the
extent permitted, to enforce its legal remedies pursuant to this Agreement or
any other Loan Document.
Maturity Date shall have the meaning ascribed to
such term in Section 3.03 hereof.
Month, with respect to an Interest Period, shall
mean the interval between the days in consecutive calendar months numerically
corresponding to the first day of such Interest Period. The last day of a
calendar month shall be deemed to be such numerically corresponding day for such
calendar month (i) if there is no such numerically corresponding day in such
calendar month, or (ii) if the first day of such Interest Period is the last
Business Day of a calendar month.
Mortgages shall mean the three (3) Mortgage and
Security Agreements of even date herewith, with respect to the Collateral Pool,
executed and delivered by Borrower to the Lender, as the same may be amended,
supplemented, renewed or replaced from time to time.
<PAGE>
Negative Pledge Agreements shall mean the seven (7)
Negative Pledge Agreements of even date herewith with respect to each of the
Other Properties executed and delivered by the Borrower to the Lender, as the
same may be amended, supplemented, renewed or replaced from time to time.
Net Operating Income shall mean Operating Income
less Operating Expenses.
OCC I shall mean that certain Collateral Pool Property known
as One Corporate Center I located in the City of Edina, Hennepin County,
Minnesota.
OCC III shall mean that certain Collateral Pool Property known
as One Corporate Center III located in the City of Edina, Hennepin County,
Minnesota.
Obligation shall mean any obligation or liability of Borrower
to the Lender, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to become
due, under or in connection with this Agreement, the Revolving Credit Note, the
Letters of Credit or any other Loan Document.
Official Body shall mean any national, federal, state, local
or other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Operating Expenses shall mean all expenses (determined in
accordance with GAAP) incurred in the normal course of owning, using and
operating the Properties (excluding depreciation and amortization and debt
service on any indebtedness of Borrower, including, without limitation, the
Revolving Credit Note), and shall include but not be limited to maintenance
fees, real estate taxes and insurance premiums, expenses related to the repair
and maintenance of the Properties, expenses related to the management (excluding
tenant finish costs, commercially reasonable brokerage commissions payable to
third parties as the same are required pursuant to leases approved in writing by
<PAGE>
Lender and capital expenditures and partnership expenses incurred in accordance
with Borrower's partnership agreement, excluding the payment of distributions.)
Operating Income shall mean the gross income and revenues
(determined in accordance with GAAP) derived in any manner whatsoever from the
operation of the Properties, including, but not limited to, rents (fixed,
minimum, guaranteed, additional, overage, percentage, participation, or any
other type or kind), fees, charges (including, without limitation, escalation or
contribution charges) or any other income or revenues generated from the use or
occupancy of all or any part of the Properties, or for any services, equipment
or furnishings provided in connection with such use or occupancy, including,
without limitation, forfeited deposits, utility income, and reimbursement for
Operating Expenses; provided, however, that "Operating Income" shall
specifically exclude any unearned income (such as dividends and interest),
proceeds from hazard insurance or condemnation awards (except to the extent that
such hazard insurance and/or condemnation awards are paid as reimbursement for
rental obligations or business interruption) and security deposits (except to
extent the same have been forfeited).
Other Properties shall mean the seven (7) Properties listed on
Exhibit B attached hereto as Properties (B) 4-10, subject to the rights of
Lender pursuant to the terms of this Agreement to select, substitute, add or
release any or all of the Other Properties for inclusion in or exclusion from,
as the case may be, the Collateral Pool.
PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.
Partner shall mean McNeil Partners, L.P., a Delaware limited
partnership, being the sole general partner in Borrower.
Permitted Liens shall mean:
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
<PAGE>
(ii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default;
(iv) Good faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(v) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property or the value thereof, and none of
which is violated in any material respect by existing or proposed structures or
land use;
(vi) Liens, security interests and mortgages in favor of
the Lender;
(vii) Capital and operating leases in the ordinary course
of Borrower's business;
(viii) Purchase Money Security Interests in the ordinary
course of Borrower's business; and
(ix) The following, (A) if the validity or amount thereof
is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed or (B) if a final judgment is entered and such judgment is
<PAGE>
discharged within thirty (30) days of entry, and in either case they do not
affect the Property or, in the aggregate, materially impair the ability of the
Borrower to perform its obligations hereunder or under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or
charges due and payable and subject to interest or penalty,
provided that the Borrower maintains such reserves or other
appropriate provisions as shall be required by GAAP and pays
all such taxes, assessments or charges forthwith upon the
commencement of proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects
of title to, real or personal property, other than the
Properties including any attachment of personal or real
property other than the Properties or other legal process
prior to adjudication of a dispute on the merits; or
(3) Claims or Liens of mechanics, materialmen,
warehousemen, carriers, or other statutory nonconsensual
Liens.
Person shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, government or political subdivision or agency
thereof, or any other entity.
Pittsburgh Business Day shall mean a day that the
Lender is open to conduct normal banking business in Pittsburgh, Pennsylvania,
but not including any Saturday or Sunday.
Potential Default shall mean any event or condition
which with notice, passage of time or a determination by the Lender, or any
combination of the foregoing, would constitute an Event of Default.
Prime-Based Rate shall mean, with respect to
advances of the Revolving Credit Loan comprising any Borrowing Tranche to which
the Prime Rate Option applies, interest at a rate per annum (based on a year of
<PAGE>
360 days and actual days elapsed) equal to one-half of one percent (1/2%) above
the Prime Rate.
Prime Rate shall mean the interest rate announced
from time to time by the Lender at its Principal Office as its "prime rate."
Borrower acknowledges that the Prime Rate is not necessarily the lowest interest
rate charged by the Lender on other credit and that such term does not imply or
indicate that the interest rate designated from time to time by the Lender as
its "prime rate" is equal to or lower than other credit extended by the Lender.
Each interest rate referred to and determined by reference to the Prime Rate
shall change automatically from time to time, effective as of the effective date
of each change in the Prime Rate.
Prime Rate Option shall have the meaning assigned
to that term in Section 3.01(a) hereof.
Principal Office shall mean the main banking office
of the Lender in Pittsburgh, Pennsylvania.
Properties shall mean the ten (10) parcels of real
property owned by Borrower as set forth on Exhibit B attached hereto. Property
shall mean any of the Properties.
Purchase Money Security Interest shall mean Liens
upon tangible personal property securing loans to the Borrower or deferred
payments by the Borrower for the purchase of such tangible personal property.
Regulated Substances shall mean any substance,
including without limitation Solid Waste, the generation, manufacture,
processing, distribution, treatment, storage, disposal, transport, recycling,
reclamation, use, reuse or other management or mismanagement of which is
regulated by the Environmental Laws.
Regulation D shall mean Regulation D of the Board
of Governors of the Federal Reserve System from time to time in effect and shall
include any successor or other regulation relating to reserve requirements
applicable to member banks of the Federal Reserve System.
<PAGE>
Regulation K shall mean Regulation K of the Board
of Governors of the Federal Reserve System from time to time in effect and shall
include any successor or other regulation relating to reserve requirements
applicable to member banks of the Federal Reserve System.
Reimbursement Obligation shall have the meaning
assigned to such term in Section 2.07(c)(i).
Revolving Credit Commitment shall mean as to
Lender, at any time, an amount not to exceed Five Million Dollars ($5,000,000).
Revolving Credit Loan shall mean all advances of
the Revolving Credit Loan made by the Lender to the Borrower pursuant to Section
2.03 hereof.
Revolving Credit Note shall mean the Consolidated,
Amended and Restated Revolving Credit Note of the Borrower of even date herewith
in the principal amount not to exceed $5,000,000 evidencing the Revolving Credit
Loan together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.
Revolving Facility Usage shall mean at any time the
sum of the dollar amount of the Revolving Credit Loan outstanding and the Letter
of Credit Outstandings.
Solid Waste shall mean any garbage, refuse or
sludge from any waste treatment plant, water supply treatment plant or air
pollution control facility generated by activities on the Property, and any
unpermitted release into the environment or the work place of any material as a
result of activities on the Property, including without limitation, baghouse
dust, dross, scrap and used Regulated Substances.
Subsidiary of any Person at any time shall mean (i)
any corporation or trust of which 50% or more (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
<PAGE>
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, or any partnership of which such Person is a
general partner or of which 50% or more of the partnership interests is at the
time directly or indirectly owned by such Person or one or more of such Person's
Subsidiaries, and (ii) any corporation, trust, partnership or other entity which
is controlled or capable of being controlled by such Person or one or more of
such Person's Subsidiaries.
Title Policy shall mean a title insurance policy
issued by a title insurance company acceptable to Lender, pursuant to which said
title insurance company will issue an ALTA 1970 Lender's policy of title
insurance, or, if such form of policy is not authorized in the state in which
the Property is located, a form of Lender's policy of title insurance acceptable
to Lender, insuring a Mortgage in the principal sum secured thereby, and such
portion thereof as shall be advanced from time to time, as a first lien upon fee
simple title to the Property, and all appurtenances thereto (including such
easements and appurtenances as may be required by Lender), subject only to the
exceptions as may be approved in writing by Lender, with endorsements thereto as
to such matters as Lender may designate and as shall by available in the state
where the particular Property is located.
Uniform Commercial Code shall mean the Uniform
Commercial Code as in effect on the date hereof in the Commonwealth of
Pennsylvania, provided, however, that if by reasons of mandatory provisions of
Law, the availability of any remedy hereunder is governed by the Uniform
Commercial Code as in effect on or after the date hereof in any other
jurisdiction, "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in such other jurisdiction for purposes of the provisions hereof
relating to the availability of such remedy.
1.02 Interpretation. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the whole, "or" has the inclusive meaning
represented by the phrase "and/or," and "including" has the meaning represented
<PAGE>
by the phrase "including without limitation." References in this Agreement to
"determination" of or by the Lender shall be deemed to include good faith
estimates by the Lender (in the case of quantitative determinations) and good
faith beliefs by the Lender (in the case of qualitative determinations).
Whenever the Lender is granted the right herein to act in its sole discretion or
to grant or withhold consent such right shall be exercised in good faith. The
words "hereof," "herein," "hereunder" and similar terms in this Agreement refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The section and other headings contained in this Agreement and the
Table of Contents preceding this Agreement are for reference purposes only and
shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified.
1.03 Accounting Principles. Except as otherwise provided in
this Agreement, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered pursuant to this
Agreement shall be made and prepared in accordance with GAAP (including
principals of consolidation where appropriate), and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP.
<PAGE>
ARTICLE II
REVOLVING CREDIT FACILITY
-------------------------
2.01 Revolving Credit Commitment. Subject to the terms and
conditions hereof and relying upon the representations and warranties herein set
forth, the Lender agrees to make advances of the Revolving Credit Loan to the
Borrower at any time or from time to time on or after the Closing Date to, but
not including, the Maturity Date in an outstanding aggregate principal amount
not to exceed at any one time the Lender's Revolving Credit Commitment. Within
such limits of time and amount and subject to the other provisions of this
Agreement, the Borrower may borrow, repay and reborrow portions of the Revolving
Credit Loan from time to time pursuant to this Section 2.01. The Lender shall
have no obligation to make advances of the Revolving Credit Loan hereunder on or
after the Maturity Date.
2.02 Loan Fees.
(a) Closing Fee. The Borrower agrees to pay to the
Lender as consideration for the Lender's Revolving Credit Commitment, a
nonrefundable fee (the "Closing Fee") in the amount of $50,000, to be due and
payable on or before the Closing Date.
(b) Commitment Fee. Accruing from the date hereof until
the Maturity Date, the Borrower agrees to pay to the Lender as consideration for
such Lender's Revolving Credit Commitment hereunder, a nonrefundable commitment
fee (the "Commitment Fee") equal to one-quarter of one percent (1/4%) per annum
(computed on the basis of a year of 360 days and actual days elapsed) on the
average daily difference between the amount of such Bank's Revolving Credit
Commitment as the same may be constituted from time to time and the Revolving
Facility Usage. All Commitment Fees shall be payable in arrears on the first
Business Day of each calendar quarter after the date hereof and on the Maturity
Date or upon acceleration of the Revolving Credit Note.
2.03 Revolving Credit Loan Requests. Except as otherwise
provided herein, the Borrower may from time to time prior to the Maturity Date
request the Lender to make advances of the Revolving Credit Loan, or renew or
<PAGE>
convert the Interest Rate Option applicable to existing Revolving Credit Loans,
by the delivery to the Lender, not later than 12:00 noon Pittsburgh time (i) two
(2) Business Days prior to the proposed Borrowing Date with respect to the
advances of a portion of the Revolving Credit Loan to which the LIBO-Rate Option
applies or the conversion to or the renewal of the LIBO-Rate Option for any
advance of the Revolving Credit Loan; and (ii) one (1) Business Day prior to
either the proposed Borrowing Date with respect to the advance of a portion of
the Revolving Credit Loan to which the Prime Rate Option applies or the last day
of the preceding Interest Period with respect to the conversion to the Prime
Rate Option for any advance of the Revolving Credit Loan, of a duly completed
request therefor substantially in the form of Exhibit C hereto or a request by
telephone immediately confirmed in writing by letter, facsimile or telex in such
form (each, a "Loan Request"), it being understood that the Lender may rely on
the authority of any person making such a telephonic request without the
necessity of receipt of such written confirmation. Each Loan Request shall be
irrevocable and shall specify (i) the proposed Borrowing Date; (ii) the
aggregate amount of the proposed advances of the Revolving Credit Loan
comprising the Borrowing Tranche, which shall not be less than $100,000 for
advances of the Revolving Credit Loan to which the LIBO-Rate Option applies and
not more than the maximum amount available for advances of the Revolving Credit
Loan to which the Prime Rate Option applies; (iii) whether the LIBO-Rate Option
or Prime Rate Option shall apply to the proposed advances of the Revolving
Credit Loan comprising the Borrowing Tranche; and (iv) in the case of advances
of the Revolving Credit Loan to which the LIBO-Rate Option applies, an
appropriate Interest Period for the proposed advance of the Revolving Credit
Loan comprising the Borrowing Tranche.
2.04 Making Advances of the Revolving Credit Loan. The Lender
shall, after approval by it of a Loan Request pursuant to Section 2.03, fund
such advances of the Revolving Credit Loan to the Borrower in U.S. Dollars and
immediately available funds at the Principal Office prior to 2:00 P.M.
Pittsburgh time on the Borrowing Date.
<PAGE>
2.05 Revolving Credit Note. The obligation of the Borrower to
repay the aggregate unpaid principal amount of all advances of the Revolving
Credit Loan made to it by the Lender, together with interest thereon, shall be
evidenced by the Revolving Credit Note.
2.06 Use of Proceeds. The proceeds of the Revolving Credit
Loan shall be used for the purposes of providing funds and Letters of Credit to
the Borrower for (i) making capital improvements to the Properties, (ii) making
loans to Affiliates of Borrower in accordance with the terms of Borrower's
partnership agreement, and (iii) Borrower's repayment of that certain mortgage
loan made by the Community Bank, N.A., now known as Bank Midwest, to Borrower in
the original principal amount of $7,000,000, and (iv) other general corporate
purposes not to include the payment of distributions.
2.07 Letter of Credit Subfacility.
(a) Issuance of Letters of Credit. Borrower may request
the issuance of a letter of credit (a "Letter of Credit") on behalf of itself by
delivering to the Lender a completed application and agreement for letters of
credit in such form as the Lender may specify from time to time by no later than
10:00 A.M. Pittsburgh time at least five(5) Pittsburgh Business Days, or such
shorter period as may be agreed to by the Lender, in advance of the proposed
date of issuance. Subject to the terms and conditions hereof, the Lender will
issue a Letter of Credit provided that each Letter of Credit shall (A) have a
maximum maturity of twelve(12) months from the date of issuance and(B)in no
event expire later than one Pittsburgh Business Day prior to the Maturity Date.
In no event shall the Letter of Credit Outstandings exceed, at any one time,
$1,000,000, or the Revolving Facility Usage exceed, at any one time, the
Revolving Credit Commitment.
(b) Letter of Credit Fees. The Borrower shall pay to the
Lender a fee (the "Letter of Credit Fee") equal to two percent (2%) per annum,
which fee shall be computed on the daily average Letter of Credit Outstandings
and shall be payable quarterly in arrears commencing with the first Pittsburgh
<PAGE>
Business Day of each April, July, October and January following issuance of each
Letter of Credit and on the Maturity Date.
(c) Disbursements, Reimbursement.
(i) Borrower shall be obligated to reimburse Lender
for all amounts which Lender is required to advance pursuant to the Letters of
Credit (the "Reimbursement Obligation") in accordance with the terms hereof.
Such amounts advanced shall become, at the time the amounts are advanced,
Revolving Credit Loans from the Lender. Such Revolving Credit Loans shall bear
interest at the rate applicable under the Prime Rate Option unless the Borrower
elects to have a different Interest Rate Option apply to such Revolving Credit
Loans pursuant to and in accordance with the provisions contained in, Section
3.01.
(ii) The Lender will notify the Borrower of each
demand or presentment for payment or other drawing under each Letter of Credit.
(d) Documentation. Borrower agrees to be bound by the
terms of the Lender's application and agreement for Letters of Credit and the
Lender's written regulations and customary practices relating to Letters of
Credit, each of which gave been provided to Borrower in writing though such
interpretation may be different from the Borrower's own. In the event of a
conflict between such application or agreement and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct, the Lender shall not be liable for any
error, negligence and/or mistakes, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments or supplements thereto.
(e) Determinations to Honor Drawing Requests. In
determining whether to honor any request for drawing under any Letter of Credit
by the beneficiary thereof, the Lender shall be responsible only to determine
that the documents and certificates required to be delivered under such Letter
<PAGE>
of Credit have been delivered and that they comply on their face with the
requirements of such Letter of Credit.
(f) Nature of Reimbursement Obligations. The obligation
of the Borrower to reimburse the Lender upon a draw under Letter of Credit
pursuant to this Section 2.07 shall be absolute unconditional, and irrevocable
and shall be performed strictly in accordance with the terms of this Section
under all circumstances.
(g) Indemnity. In addition to amounts payable as
provided in Section 9.02, the Borrower hereby agrees to protect, indemnify, pay
and save harmless the Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which the Lender may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of any Letter of Credit, other than as a result of
the gross negligence or willful misconduct of the Lender as determined by a
final judgment of a court of competent jurisdiction or (ii) the failure by the
Lender to honor a drawing under any such Letter of Credit as a result of any act
or omission, whether rightful or wrongful, of any present or future de jure or
de facto government or governmental authority (all such acts or omissions herein
called "Governmental Acts").
2.08 Extension by Lender of the Maturity Date. Upon or
promptly after delivery by the Borrower of the annual financial statements to be
provided under Section 7.04, the Borrower may request a one-year extension of
the Maturity Date by written notice to the Lender, and the Lender agrees to
respond to the Borrower's request for an extension within ninety (90) days
following receipt of the request; provided, however, that (i) the failure of the
Lender to respond within such time period shall not in any manner constitute an
extension of the Maturity Date, (ii) together with its request for extension for
any year, Borrower shall deliver to Lender a non-refundable extension fee of
$6,250, and (iii) at the time Lender receives Borrower's request for an
extension, Lender may at its discretion order Appraisals of the Collateral Pool,
which Appraisals shall be satisfactory to Lender in all respects and shall be
<PAGE>
performed at Borrower's sole cost and expense. Lender shall use reasonable
efforts to request or obtain updates of existing Appraisals in lieu of new
Appraisals whenever practical.
ARTICLE III
INTEREST RATES
--------------
3.01 General Interest Provisions.
(a) The Borrower shall pay interest in respect of the
outstanding unpaid principal amount of the Revolving Credit Loan from the date
hereof until the Maturity Date on outstanding balances of principal at a
fluctuating rate per annum (computed on the basis of a year of 360 days and
actual days elapsed) equal to the Prime Based Rate, such interest rate to change
automatically from time-to-time effective as of the effective date of a change
in the Prime Based Rate (the "Prime Rate Option"), except as Borrower shall have
elected the LIBO-Rate pursuant to Paragraph 3.02 hereof (the "LIBO-Rate
Option"). During any period in which Lender is no longer obligated to accept or
implement Loan Requests in accordance with Section (g) of Paragraph 3.02 hereof,
or in which any Borrowing Tranche to which the LIBO-Rate Option applies would be
terminable in accordance with Section (h) or Section (i) of Paragraph 3.02
hereof, the outstanding balance of the Revolving Credit Loan shall bear interest
at the Prime Based Rate. In the absence of an election in accordance with
Section (a) of paragraph 3.02 hereof for a new Borrowing Tranche to which the
LIBO-Rate Option applies at the end of each Interest Period applicable to a
Borrowing Tranche to which the LIBO-Rate Option applies, the amount allocated to
such Borrowing Tranche shall become subject to the Prime Based Rate.
(b) Upon the occurrence of an Event of Default, any
principal, interest, fee or other amount payable hereunder shall bear interest
for each day thereafter until paid in full (before and after judgment) at a rate
per annum which shall be equal to four percent (4%) above the Prime Rate (the
"Default Rate"). The Borrower acknowledges that such increased interest rate
reflects, among other things, the fact that such Loans or other amounts have
<PAGE>
become a substantially greater risk given their default status and that the
Lender is entitled to additional compensation for such risk.
(c) If any interest, principal, Consequential Loss or
other charge payable hereunder shall become overdue in excess of ten (10) days,
a "late charge" by way of damages shall be due and payable upon demand. Borrower
recognizes that default by Borrower in making the payments herein agreed to be
paid when due will result in Lender incurring additional expense in servicing
the Revolving Credit Loan and such delinquent payment and in loss to Lender of
the use of money due. Borrower agrees that such damages for such detriment
caused shall be difficult to ascertain. Borrower therefore agrees that a sum
equal to five percent (5%) of each payment more than ten (10) days in arrears is
a reasonable estimate of and a liquidated amount of such damages to Lender,
which sum Borrower agrees to pay on demand. This charge shall be in addition to,
and not in lieu of, any other remedy Lender may have and any reasonable fees and
charges of any agents or attorneys Lender may employ on any default hereunder.
(d) Each Interest Rate Option referred to herein shall
be calculated on the principal balance hereof to which such rate is applicable
from time to time, based on a year of 360 days and actual days elapsed in each
calendar year.
(e) Interest on the unpaid outstanding principal balance
of the Revolving Credit Loan at the respective interest rates applicable thereto
shall be due and payable on the first (1st) day of each calendar month following
the first full month after the Closing Date and on the Maturity Date or earlier
payment in full hereof.
3.02 LIBO-Based Rate Interest.
(a) LIBO-Based Rate Elections. At any time prior to the
Maturity Date, Borrower may elect to have the LIBO-Rate apply to a portion of
the outstanding unpaid principal amount of the Revolving Credit Loan for a
specified Interest Period by delivering to Lender a Loan Request pursuant to
<PAGE>
paragraph 2.03 hereof; provided that in no event may Borrower elect an Interest
Period which extends beyond the Maturity Date pursuant to Paragraph 3.03 hereof.
(b) Rates, Quotes and Business Days List. If the
Borrower requests quotes of the LIBO-Based Rate for different Interest Periods
being considered by the Borrower, the Lender will use reasonable efforts to
promptly provide such quotes to the Borrower and if the Borrower requests a list
of the LIBO Business Days in any calendar month, the Lender will use reasonable
efforts to promptly provide such list. However, any such quotes provided shall
be representative only and shall not be binding on the Lender, nor shall they be
determinative, directly or indirectly, of any LIBO-Based Rate or any component
of any such rate, nor will the Borrower's failure to receive or the Lender's
failure to provide any requested quote or quotes either (i) excuse or extend the
time for performance of any of the Borrower's obligations or for exercise of any
of the Borrower's rights, options or elections, or (ii) impose any duty or
liability on the Lender; and any such list provided shall be understood to
identify only those calendar days which the Lender believes in good faith at the
time such list is prepared will be the Business Days for the month in question.
The Lender shall have no liability for any failure to provide, delay in
providing, error or mistake in omission from, any such quote or list.
(c) Interest on Borrowing Tranches Subject to a
LIBO-Rate Option. Each Borrowing Tranche subject to LIBO-Rate Option shall bear
interest on its unpaid principal balance during the Interest Period applicable
to it at the LIBO-Rate in effect on the date two (2) LIBO Business Days prior to
the first day of the applicable Interest Period for such Borrowing Tranche. Each
determination of a LIBO-Based Rate by the Lender, in the absence of manifest
error, shall be conclusive and binding.
(d) Limitation on Option to Elect LIBO-Rate.
Notwithstanding any other provision hereof, Borrower may not elect the
LIBO-Based Rate when an Event of Default or a Potential Default has occurred and
is continuing.
(e) Limitation on Number and Amount of Borrowing
Tranches Subject to a LIBO-Rate Option. The Borrower may allocate the
outstanding principal balance of the Revolving Credit Loan to separate Borrowing
<PAGE>
Tranches with each Borrowing Tranche being subject to a different LIBO-Based
Rate or the Prime Based Rate, provided, however, that (i) no more than four
(4)such Borrowing Tranches subject to a LIBO-Based Rate Option shall be in
existence at any one time, and (ii) the minimum amount allocated to each
Borrowing Tranche subject to a LIBO-Rate Option shall be $100,000.
(f) Computation of Interest. Interest payable with
respect to each Borrowing Tranche subject to a LIBO-Rate Option shall be
calculated on the basis of the actual days elapsed in a year consisting of 360
days.
(g) Inadequacy of Borrowing Tranche Pricing. If with
respect to an Interest Period for any prospective Borrowing Tranche subject to a
LIBO-Rate Option, the Lender determines (which determination, in the absence of
manifest error, shall be conclusive and binding) that:
(i) for any reason, the Lender is unable, through
its customary general practices, to quote an offer to prime banks in the
Interbank Eurodollar market in London, England for U.S. dollar deposits in the
appropriate amounts for the appropriate period; or
(ii) by reason of circumstances affecting the
Interbank Eurodollar market in London, England, generally, the offer of Lender
to accept deposits in U.S. dollars (in the applicable amounts) will not be
accepted in the Interbank Eurodollar market for such Interest Period; or
(iii) the LIBO-Rate will not adequately and fairly
reflect the cost to the Lender of the establishment or maintenance of that
Borrowing Tranche subject to a LIBO-Rate Option for such Interest Period, and
the Lender gives notice thereof to the Borrower;
then the obligation of the Lender to accept or implement Loan Requests for
Borrowing Tranches subject to a LIBO-Rate Option shall be suspended, until the
Lender notifies the Borrower that the circumstances giving rise to such
suspension no longer exist.
<PAGE>
(h) Borrowing Tranches Subject to a LIBO-Rate Option
Unlawful. If, after the date hereof, the adoption of any applicable Law, rule or
regulation or any change in applicable Law, rule or regulation or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof or compliance by the Lender
with any request or directive (whether or not having the force of law) of any
such Governmental Authority, shall make it unlawful or impossible for the Lender
to establish any Borrowing Tranche Subject to a LIBO-Rate Option or to comply
with its obligations in connection with the maintenance of any Borrowing Tranche
Subject to a LIBO-Rate Option, the commitment of the Lender to accept or
implement any Loan Request intended to establish any Borrowing Tranche subject
to a LIBO-Rate Option shall be automatically canceled and terminated and if it
shall then be unlawful or impossible as a result thereof for the Lender to
permit or participate in the continuation of any then-existing Borrowing
Tranches subject to a LIBO-Rate Option, all Borrowing Tranches subject to a
LIBO-Rate Option then outstanding shall forthwith terminate upon notice being
given by the Lender to the Borrower and the Borrower shall pay to the Lender
promptly upon demand a cash amount equal to (a) all interest due with respect to
such Borrowing Tranches as of the date of such termination, (b) all
Consequential Loss, plus (c) the amount required to compensate the Lender for
all reasonable additional costs and expenses, if any, which it incurred in
connection with the Borrowing Tranches subject to a LIBO-Rate Option as a result
of such change in applicable Law or regulations or in the interpretation thereof
or as a result of the Lender's compliance with any such request or directive of
any such Governmental Authority. The Lender will promptly notify the Borrower of
any event of which it has knowledge which will make it unlawful or impossible to
establish or maintain Borrowing Tranches subject to a LIBO-Rate Option.
(i) Increased Cost of Borrowing Tranches Subject to a
LIBO-Rate Option. If the adoption of any applicable Law, rule or regulation or
any change after the date hereof, in any applicable Law, rule or regulation or
in the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by the
<PAGE>
Lender with any request or directive (whether or not having the force of law)
from any central bank or other Governmental Authority shall:
(i) subject the Lender (or make it apparent that it
is subject) to any tax (including without limitation any U.S. interest
equalization or other tax, however named), levy, impost, duty, charge, fee
(collectively "Taxes"), or any deduction or withholding for any Taxes on or from
any payment due from the Borrower with respect to any Borrowing Tranche subject
to a LIBO-Rate Option, other than income and franchise taxes of the United
States and its political subdivisions imposed on the Lender;
(ii) change the basis of taxation of payments due
from the Borrower to the Lender under any Borrowing Tranche subject to a
LIBO-Rate Option (other than by a change in the rate of taxation of the overall
net income of Lender);
(iii) impose, modify, increase or deem applicable
any reserve requirement (but excluding that portion of any reserve requirement
included in the calculation of the LIBO Reserve Requirement as the case may be),
special deposit requirement or similar requirement (including, but not limited
to, state Law requirements, Regulation D and Regulation K) imposed or deemed
applicable by any Governmental Authority charged with the interpretation or
administration of such requirements or deemed applicable against foreign assets
held by or against loans made by the Lender or against any other funds,
obligations or other property owned or held by the Lender;
(iv) affect the amount of capital required to be
maintained by the Lender or any corporation controlling the Lender and the
Lender determines the amount of capital required is increased by or based upon
the existence of the indebtedness evidenced hereby; or
(v) impose on the Lender any other condition
regarding any Borrowing Tranche subject to a LIBO-Rate Option;
and the result of any of the foregoing is to increase (by an amount deemed by
the Lender to be material) the cost to the Lender of establishing, maintaining
<PAGE>
or renewing any such Borrowing Tranche subject to a LIBO-Rate Option, as the
case may be, or to reduce the amount of principal or interest or other sum
received or receivable by the Lender (by an amount deemed by the Lender to be
material), then upon ten (10) days written notice from the Lender to the
Borrower, the Borrower shall pay to the Lender, from time to time as specified
by the Lender, such additional amount or amounts as will compensate the Lender
for such increased cost or reduced receipts or receivables. The Lender's
determination of the amount of any such increase in cost or reduction in amounts
received or receivable, in the absence of manifest error, shall be conclusive
and binding. The Lender will promptly notify the Borrower of any event of which
it has knowledge which will entitle the Lender to compensation pursuant to this
subsection. If the Lender demands compensation under this Section (i), Borrower
may at any time, upon at least two (2) LIBO Business Days' prior notice to
Lender, (a) give notice to the Lender that it is canceling such Borrowing
Tranches subject to a LIBO-Rate Option, whereupon each Borrowing Tranche so
canceled shall terminate and the Borrower shall be obligated to pay the Lender
upon demand an amount equal to all Consequential Loss, if any, resulting
therefrom, and (b) convert such Borrowing Tranches subject to a LIBO-Rate Option
to the Prime Based Rate. Any certificate of the Lender delivered to the Borrower
setting forth the determination of any additional amounts payable pursuant to
this Section (i) shall be conclusive and binding, absent manifest error, as to
such determination and amount.
<PAGE>
3.03 Maturity. The entire outstanding principal balance due
under the Revolving Credit Loan, together with all unpaid interest at the
aforesaid rate or rates, shall be payable on the date that is twenty-four (24)
months following the Closing Date, unless accelerated upon an Event of Default
or sooner terminated under the terms hereof or terminated by Borrower upon
payment of the outstanding principal balance of the Revolving Credit Loan and
payment of all Reimbursement Obligations and termination of all Letters of
Credit, together with all unpaid interest and fees which are due and payable as
of the date of termination (including but not limited to the Commitment Fee
accruing through and including the termination date) and upon written notice to
Lender, or extended as provided in Section 2.08 hereof (the date determined in
accordance herewith shall be called the "Maturity Date").
3.04 Interest Periods. At any time when the Borrower shall
select, convert to or renew a LIBO-Rate Option, the Borrower shall notify the
Lender thereof at least two (2) Pittsburgh Business Days prior to the effective
date of LIBO-Rate Option by delivering a Loan Request. The notice shall specify
an Interest Period during which such Interest Rate Option shall apply, provided,
that:
(a) any Interest Period which would otherwise end on a
date which is not a LIBO Business Day shall be extended to the next succeeding
LIBO Business Day unless such LIBO Business Day falls in the next calendar
month, in which case such Interest Period shall end on the next preceding LIBO
Business Day;
(b) any Interest Period which begins on the last day of
calendar month for which there is no numerically corresponding day in the
subsequent calendar month during which such Interest Period is to end shall end
on the last LIBO Business Day of such subsequent month;
(c) advances of the Revolving Credit Loan to which the
LIBO-Rate Option applies, for each Interest Period shall not be less than
$100,000;
<PAGE>
(d) the Borrower shall not select, convert to or renew
an Interest Period for any portion of the Revolving Credit Loan that would end
after the Maturity Date; and
(e) in the case of the renewal of a LIBO-Rate Option at
the end of an Interest Period, the first day of the new Interest Period shall be
the last day of the preceding Interest Period, without duplication in payment of
interest for such day.
3.05 Selection of Interest Rate Options. If the Borrower
fails to select an Interest Period in accordance with the provisions of Section
3.02 in the case of renewal of a portion of the Revolving Credit Loan to which a
LIBO-Rate Option applies, the Borrower shall be deemed to have converted such
portion of the Revolving Credit Loan to the Prime Rate Option otherwise
available with respect to the Revolving Credit Loan, commencing upon the last
day of that Interest Period. If an Event of Default shall occur and be
continuing, the Lender may in its discretion limit the Borrower to the Prime
Rate Option hereunder.
ARTICLE IV
PAYMENTS
--------
4.01 Payments. All payments and repayments to be made in
respect of principal, interest, the Commitment Fee, the Letter of Credit Fee, or
other fees or amounts due from the Borrower hereunder shall be payable prior to
1:00 p.m. (Pittsburgh time) on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by the
Borrower, and without setoff, counterclaim or other deduction of any nature, and
an action therefor shall immediately accrue. Such payments shall be made to the
Lender at the Principal Office in U.S. Dollars and in immediately available
funds.
4.02 Repayments. The Borrower may repay portions of the
Revolving Credit Loan in full or part from time to time. Any portion of the
Revolving Credit Loan subject to the Prime Based Rate may be repaid without
penalty; provided, however, that Borrower shall also pay all accrued and unpaid
interest. Any repayments shall be allocated, pro tanto, to the Borrowing
<PAGE>
Tranches subject to the Prime Based Rate; to the extent there are no remaining
Revolving Credit Loan funds outstanding in any Borrowing Tranche subject to the
Prime Based Rate, such repayment shall be allocated to Borrowing Tranches
subject to the LIBO-Based Rate as selected by Borrower. In the event that any
repayment shall be applied against a Borrowing Tranche subject to the LIBO-Based
Rate, Borrower will be responsible for any sums due under paragraphs 3.01 above
and for the payment of any Consequential Loss.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.01 Representations and Warranties. The Borrower represents
and warrants to the Lender as follows:
(a) Organization and Qualification. The Borrower is a
limited partnership, duly organized, validly existing and in good standing under
the Laws of its jurisdiction of organization; the Borrower has the lawful power
to own or lease its properties and to engage in the business it presently
conducts or proposes to conduct; and the Borrower is duly licensed or qualified
and in good standing in each jurisdiction where the property owned or leased by
it or the nature of the business transacted by it makes such licensing or
qualification necessary.
(b) Power and Authority. The Borrower has full power to
enter into, execute, deliver and carry out this Agreement and the other Loan
Documents to which it is a party, to incur the Indebtedness contemplated by the
Loan Documents and to perform its obligations under the Loan Documents to which
it is a party and all such actions have been duly authorized by all necessary
proceedings on its part.
(c) Validity and Binding Effect. This Agreement has been
and each other Loan Document will have been duly and validly executed and
delivered by the Borrower. This Agreement delivered by the Borrower pursuant to
the provisions hereof will constitute, legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with their
<PAGE>
respective terms, except to the extent that enforceability of any of the
foregoing Loan Documents may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the enforceability of
creditors' rights generally or limiting the right of specific performance.
(d) No Conflict. Neither the execution and delivery of
this Agreement or the other Loan Documents by the Borrower nor the consummation
of the transactions herein or therein contemplated or compliance with the terms
and provisions hereof or thereof by them will conflict with, constitute a
default under or result in any breach of (i) the terms and conditions of the
other organizational documents of the Borrower or (ii) of any Law or of any
material agreement or instrument or order, writ, judgment, injunction or decree
to which the Borrower is a party or by which it is bound or to which it is
subject, or result in the creation or enforcement of any Lien, charge or
encumbrance whatsoever upon any property (now or hereafter acquired) of the
Borrower (other than Liens granted under the Loan Documents).
(e) Litigation. There are no actions, suits, proceedings
or investigations pending or, to the knowledge of the Borrower, threatened
against the Borrower at law or equity before any Official Body which
individually or in the aggregate may result in any Material Adverse Change. The
Borrower is not in violation of any order, writ, injunction or any decree of any
Official Body which may result in any Material Adverse Change.
(f) Title to Properties. The Borrower has good and
marketable fee simple title to all the Properties, assets and other rights which
it purports to own or which are reflected as owned on its books and records,
free and clear of all Liens and encumbrances except Permitted Liens, and subject
to the terms and conditions of the applicable leases. All leases of property are
in full force and effect without the necessity for any consent which has not
previously been obtained upon consummation of the transactions contemplated
hereby.
(g) Financial Statements.
<PAGE>
(A) Historical Statements. The Borrower has
delivered to the Lender copies of its audited consolidated year-end financial
statements for and as of the end of the three fiscal years ended December, 1993
(the "Annual Statements"). In addition, the Borrower has delivered to the Lender
copies of its unaudited consolidated interim financial statements for the fiscal
year to date and as of the end of the fiscal quarter ended September 30, 1994
(the "Interim Statements") (the Annual and Interim Statements being collectively
referred to as the "Historical Statements"). The Historical Statements were
compiled from the books and records maintained by the Borrower's management, are
correct and complete and fairly represent the consolidated financial condition
of the Borrower as of their dates and the results of operations for the fiscal
periods then ended subject (in the case of the Interim Statements) to normal
year-end audit adjustments.
(B) Accuracy of Financial Statements. The Borrower
has no liabilities, contingent or otherwise, or forward or long-term commitments
that are not disclosed in the Historical Statements or in the notes thereto, and
except as disclosed therein there are no unrealized or anticipated losses from
any commitments of the Borrower which may cause a Material Adverse Change.
(h) Intentionally omitted.
(i) Margin Stock. The Borrower does not engage or
intends to engage principally, or as one of its important activities, in the
business of extending credit for the purpose, immediately, incidentally or
ultimately, of purchasing or carrying margin stock (within the meaning of
Regulation U). No part of the proceeds of the Revolving Credit Loan has been or
will be used, immediately, incidentally or ultimately, to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or to refund Indebtedness originally incurred for such
purpose, or for any purpose which entails a violation of or which is
inconsistent with the provisions of the regulations of the Board of Governors of
the Federal Reserve System. The Borrower does not hold or intend to hold margin
<PAGE>
stock in such amounts that more than 25% of the reasonable value of the assets
of the Borrower is or will be represented by margin stock.
(j) Full Disclosure. Neither this Agreement nor any
other Loan Document, nor any certificate, statement, agreement or other
documents furnished to the Lender in connection herewith or therewith, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein, in light
of the circumstances under which they were made, not misleading. There is no
fact known to the Borrower which is likely to result in a Material Adverse
Change with respect to the business, property, assets, financial condition,
results of operations or prospects of the Borrower, which has not been set forth
in the Agreement or in the certificates, statements, agreements or other
documents furnished in writing to the Lender prior to or at the date hereof in
connection with the transactions contemplated hereby.
(k) Taxes. All federal, state, local and other tax
returns required to have been filed with respect to the Borrower have been filed
and payment or adequate provision has been made for the payment of all taxes,
fees, assessments and other governmental charges which have or may become due
pursuant to said returns or to assessments received except to the extent that
such taxes, fees, assessments and other charges are being contested in good
faith by appropriate proceedings diligently conducted and for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made. There are no agreements or waivers extending the statutory
period of limitations applicable to any federal income tax return of the
Borrower for any period.
(l) Consents and Approvals. Except for the filing of the
Financing Statements, the Mortgages, the Lease Assignments and the Negative
Pledge Agreements in the state and county filing offices, no consent, approval,
exemption, order or authorization of, or a registration or filing with any
Official Body or any other person is required by any Law or any agreement in
connection with the execution, delivery and carrying out of this Agreement and
the other Loan Documents by the Borrower.
<PAGE>
(m) No Event of Default; Compliance with Instruments. No
event has occurred and is continuing and no condition exists or will exist after
giving effect to the borrowings to be made on the Closing Date under the Loan
Documents which constitutes an Event of Default or Potential Default. The
Borrower is not in violation of (i) any term of its organizational documents or
(ii) any material agreement or instrument to which it is a party or by which it
or any of its properties may be subject or bound where such violation would
constitute a Material Adverse Change.
(n) Patents, Trademarks, Copyrights, Licenses, Etc. The
Borrower owns or possesses all the material patents, trademarks, service marks,
trade names, copyrights, licenses, registrations, franchises, permits and rights
necessary to own and operate its properties and to carry on its business as
presently conducted and planned to be conducted by the Borrower, without known
conflict with the rights of others.
(o) Mortgage Liens. The Liens to be granted to the
Lender pursuant to the Mortgages, constitute valid first priority Liens under
applicable Law. All such action as will be necessary or advisable to establish
each such Lien of the Lender and its priority as described in the preceding
sentence will be taken at or prior to the time required for such purpose, and
there will be as of the date of execution, delivery and recording of the
Mortgages no necessity for any further action in order to protect, preserve and
continue such Liens and such priority.
(p) Insurance. All insurance policies and other bonds to
which the Borrower is a party, are valid and in full force and effect. No notice
has been given or claim made and no grounds exist to cancel or avoid any of such
policies or bonds or to reduce the coverage provided thereby. Such policies and
bonds provide adequate coverage from reputable and financially sound insurers in
amounts sufficient to insure the assets and risks of the Borrower in accordance
with prudent business practice in the industry of the Borrower.
(q) Compliance with Laws. The Borrower in compliance in
all material respects with all applicable Laws (other than Environmental Laws
which are specifically addressed in subsection (t)) in all jurisdictions in
<PAGE>
which the Borrower is presently or will be doing business except where the
failure to do so would not constitute a Material Adverse Change.
(r) Investment Companies. The Borrower is not an
"investment company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an "investment company"
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company" or under such "control."
(s) Employee Benefit Plans. The Borrower is not an
"employer" with respect to, nor does it maintain or contribute to, any "employee
benefit plan", as such terms are defined in ERISA ss.ss. 3(5) and 3(3),
respectively
(t) Environmental Matters.
(i) The Borrower has not received any Environmental
Complaint from any Official Body or private person alleging, with respect to the
Properties, that the Borrower, or any prior or subsequent owner of any of the
Properties is a potentially responsible party under the Comprehensive
Environmental Response, Cleanup and Liability Act, 42 U.S.C. ss. 9601, et seq.,
and the Borrower has no reason to believe that such an Environmental Complaint
might be received. There are no pending or, to the Borrower's knowledge,
threatened Environmental Complaints with respect to any of the Properties
relating to the Borrower or, to the Borrower's knowledge, any prior or
subsequent owner of any of the Properties pertaining to, or arising out of, any
Environmental Conditions.
(ii) Except for conditions, violations or failures
which individually and in the aggregate are not reasonably likely to result in a
Material Adverse Change, to the best of Borrower's knowledge, there are no
circumstances at, on or under any of the Properties that constitute a breach of
or non-compliance with any of the Environmental Laws, and there are no past or
present Environmental Conditions at, on or under any of the Properties or, to
the Borrower's knowledge, at, on or under adjacent property, that prevent
compliance with the Environmental Laws at any of the Properties.
<PAGE>
(iii) To the best of Borrower's knowledge, the
Properties and any structures, improvements, equipment, fixtures, activities or
facilities thereon or thereunder do not contain or use Regulated Substances
except in compliance with Environmental Laws. There are no processes,
facilities, operations, equipment or any other activities at, on or under any of
the Properties, or, to the Borrower's knowledge, at, on or under adjacent
property, that currently result in the release or threatened release of
Regulated Substances on to any of the Properties, except to the extent that such
releases or threatened releases are not a breach of or otherwise not a violation
of the Environmental Laws, or are not likely to result in a Material Adverse
Change.
(iv) To the best of Borrower's knowledge, there are
no underground storage tanks, or underground piping associated with such tanks,
used for the management of Regulated Substances at, on or under any of the
Properties that do not have a full operational secondary containment system in
place and are not in compliance with all Environmental Laws, and there are no
abandoned underground storage tanks or underground piping associated with such
tanks, previously used for the management of Regulated Substances at, on or
under any of the Properties that have not been either abandoned in place, or
removed, in accordance with the Environmental Laws.
(v) The Borrower has all material permits,
licenses, authorizations and approvals necessary under the Environmental Laws
for the conduct of the business of the Borrower as presently conducted. The
Borrower has submitted all material notices, reports and other filings required
by the Environmental Laws to be submitted to an Official Body which pertain to
past and current operations on any of the Properties.
(vi) Except for violations which individually and
in the aggregate are not likely to result in a Material Adverse Change, all past
(from the date of Borrower's ownership) and present on-site generation, storage,
processing, treatment, recycling, reclamation or disposal of Solid Waste at, on,
or under any of the Properties and all off-site transportation, storage,
<PAGE>
processing, treatment, recycling, reclamation or disposal of Solid Waste has
been done in accordance with the Environmental Laws.
5.02 Updates to ExhibitsSchedules. Should any of the
information or disclosures provided on any of the exhibits attached hereto
become outdated or incorrect in any material respect, the Borrower shall
promptly provide the Lender in writing with such revisions or updates to such
exhibits as may be necessary or appropriate to update or correct same; provided,
however that no exhibits shall be deemed to have been amended, modified or
superseded by any such correction or update, nor shall any breach of warranty or
representation resulting from the inaccuracy or incompleteness of any such
schedule be deemed to have been cured thereby, unless and until the Lender, in
its sole and absolute discretion, shall have accepted in writing such revisions
or updates to such exhibit.
ARTICLE VI
CONDITIONS OF LENDING
---------------------
The obligation of Lender to make any advance of the Revolving
Credit Loan and to issue Letters of Credit hereunder is subject to the
performance by the Borrower of its obligations to be performed hereunder at or
prior to the making of any such advance of the Revolving Credit Loan or issuance
of such Letters of Credit and to the satisfaction of the following further
conditions:
<PAGE>
6.01 First Advance of the Revolving Credit Loan. On the
Closing Date:
(a) The representations and warranties of the Borrower
contained in Article V hereof shall be true and accurate on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date (except representations and warranties
which relate solely to an earlier date or time, which representations and
warranties shall be true and correct on and as of the specific dates or times
referred to therein), and the Borrower shall have performed and complied with
all covenants and conditions hereof; no Event of Default or Potential Default
under this Agreement shall have occurred and be continuing or shall exist; and
there shall be delivered to the Lender a certificate of the Borrower, dated the
Closing Date and signed by an Authorized Officer of the Borrower, to each such
effect;
(b) There shall be delivered to the Lender a certificate
dated the Closing Date signed by an Authorized Officer of Borrower, certifying
as appropriate as to:
(i) all action taken by the Borrower in connection
with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers
authorized to sign this Agreement and the other Loan Documents and the true
signatures of such officer or officers and specifying the Authorized Officers
permitted to act on behalf of the Borrower for purposes of this Agreement and
the true signatures of such officers, on which the Lender may conclusively rely;
and
(iii) copies of its organizational documents, as in
effect on the Closing Date and copies of the organizational documents of the
Partner and the general partner of the Partner, certified by the appropriate
state official where such documents are filed in a state office together with
certificates from the appropriate state officials as to the continued existence
and good standing of the Borrower in each state where organized or qualified to
do business.
<PAGE>
(c) All Loan Documents required to be executed and
delivered to the Lender on the Closing Date shall have been duly executed and
delivered to the Lender.
(d) There shall be delivered to the Lender a written
opinion of (i) Barbara Smith, in-house attorney for Borrower, (ii) Campbell and
Levine, (iii) Oppenheimer, Wolffe, Donnelly and (iv) Broad and Cassell, counsel
for the Borrower (who may rely on the opinions of such other counsel as may be
acceptable to the Lender), dated the Closing Date and in form and substance
satisfactory to the Lender and its counsel:
(i) as to the matters set forth in Exhibit A,
subsection (i) attached hereto; and
(ii) as to such other matters incident to the
transactions contemplated herein as the Lender may reasonably request.
(e) All legal details and proceedings in connection with
the transactions contemplated by the Agreement and the other Loan Documents
shall be in form and substance satisfactory to the Lender and counsel for the
Lender, and the Lender shall have received all such other counterpart originals
or certified or other copies of such documents and proceedings in connection
with such transactions, in form and substance satisfactory to the Lender and
said counsel, as the Lender or said counsel may reasonably request.
(f) The Borrower shall pay or cause to be paid to the
Lender to the extent not previously paid the Closing Fee, all other commitment
and other fees accrued through the Closing Date and the costs and expenses for
which the Lender is entitled to be reimbursed.
(g) All material consents required to effectuate the
transactions contemplated hereby shall have been obtained.
(h) No Material Adverse Change in the Borrower shall
have occurred; prior to the Closing Date, there shall be no material change in
the management of the Borrower; and there shall be delivered to Lender a
<PAGE>
certificate dated the Closing Date and signed by the Chief Executive Officer of
the Borrower to each such effect.
(i) The making of the Revolving Credit Loan shall not
contravene any Law applicable to the Borrower or the Lender.
(j) No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of this Agreement or the consummation of the
transactions contemplated hereby or which, in the Lender's sole discretion,
would make it inadvisable to consummate the transactions contemplated by this
Agreement or any of the other Loan Documents.
(k) As conditions precedent to Lender's obligation to
close the Revolving Credit Loan and to disburse any of the proceeds of the Loan,
Borrower will at least fifteen (15) days prior to the Closing Date (unless
otherwise set forth below or waived in writing by Lender) furnish to Lender at
Borrower's sole cost and expense the items set forth on Exhibit A attached
hereto, all of which shall be in form and content satisfactory to Lender and its
counsel.
6.02 Each Additional Advance of the Revolving Credit Loan. At
the time of making any advance of the Revolving Credit Loan or issuing any
Letter of Credit, other than advances of the Revolving Credit Loan made or
Letters of Credit issued on the Closing Date hereunder and after giving effect
to the proposed borrowings: the representations and warranties of the Borrower
contained in Article V hereof shall be true on and as of the date of such
additional advance of the Revolving Credit Loan or Letter of Credit with the
same effect as though such representations and warranties had been made on and
as of such date (except representations and warranties which expressly relate
solely to an earlier date or time, which representations and warranties shall be
true and correct on and as of the specific dates or times referred to therein)
and the Borrower shall have performed and complied with all covenants and
conditions hereof; no Event of Default or Potential Default shall have occurred
<PAGE>
and be continuing or shall exist; the advances of the Revolving Credit Loan or
issuance of such Letter of Credit shall not contravene any Law applicable to the
Borrower or Lender; and the Borrower shall have delivered to the Lender a duly
executed and completed Loan Request or application for a Letter of Credit as the
case may be.
ARTICLE VII
COVENANTS
---------
7.01 Affirmative Covenants. The Borrower covenants and agrees
that until payment in full of all advances of the Revolving Credit Loan and
interest thereon, expiration or termination of all Letters of Credit,
satisfaction of all of the Borrower's other obligations hereunder and
termination of the Revolving Credit Commitment, the Borrower shall comply at all
times with the following affirmative covenants:
(a) Preservation of Existence, etc. The Borrower shall
maintain its existence as a limited partnership and its license or qualification
and good standing in each jurisdiction in which its ownership or lease of
property or the nature of its business makes such license or qualification
necessary.
(b) Payment of Liabilities, Including Taxes, etc. The
Borrower shall, duly pay and discharge all liabilities to which it is subject or
which are asserted against it, promptly as and when the same shall become due
and payable, including all Taxes, assessments and governmental charges upon it
or any of its properties, assets, income or profits, prior to the date on which
penalties attach thereto, except to the extent that such liabilities, including
Taxes, assessments or charges, are being contested in good faith and by
appropriate and lawful proceedings diligently conducted and for which such
reserve or other appropriate provisions, if any, as shall be required by GAAP
shall have been made, but only to the extent that failure to discharge any such
liabilities would not result in any additional liability which would adversely
affect to a material extent the financial condition of the Borrower which would
<PAGE>
affect the Properties, provided that, the Borrower will pay all such liabilities
forthwith upon the commencement of proceedings to foreclose any Lien which may
have attached as security therefor.
(c) Maintenance of Insurance. The Borrower shall, insure
its properties and assets, including the Properties, against loss or damage by
fire and such other insurable hazards as such assets are commonly insured
(including fire, extended coverage, property damage, workers' compensation,
public liability and business interruption insurance) and against other risks
(including errors and omissions) in such amounts as similar properties and
assets are insured by prudent companies in similar circumstances carrying on
similar businesses, and with reputable and financially sound insurers all as
reasonably determined by Lender. The Borrower shall deliver (x) the evidence of
insurance as set forth in Section (f) of Exhibit A attached hereto with respect
to the Properties on or before the Closing Date and periodically thereafter at
the request of Lender an original Accord Form 27 Evidence of Insurance signed by
the Borrower's independent insurance broker describing and certifying as to the
existence of the insurance on the Properties required to be maintained by this
Agreement and the other Loan Documents and (y) from time to time a summary
schedule indicating all insurance then in force with respect to the Borrower.
Such evidence or insurance shall provide that no cancellation or change in the
insurance policies applicable to the Properties shall be effective until at
least thirty (30) days after receipt by Lender of written notice of such
cancellation or change from the insurer. In the event that the Mortgages on any
of the Other Properties shall be recorded, the insurance provisions contained in
such Mortgages shall be deemed to supersede the insurance covenants contained in
this Agreement with respect to the Other Properties. The Borrower shall notify
the Lender promptly of any occurrence causing a material loss or decline in
value of the Properties and the estimated (or actual, if available) amount of
such loss or decline.
(d) Maintenance of the Properties, Other Real Properties
and Leases. The Borrower shall maintain in good repair, working order and
condition (ordinary wear and tear excepted) in accordance with the general
practice of other businesses of similar character and size, the Properties and
<PAGE>
all other real property useful or necessary to its business, and from time to
time, the Borrower will make or cause to be made all appropriate repairs,
renewals or replacements thereof.
(e) Maintenance of Patents, Trademarks, Etc. The
Borrower shall maintain in full force and effect all patents, trademarks, trade
names, copyrights, licenses, franchises, permits and other authorizations
necessary for the ownership and operation of the Properties and Borrower's
business if the failure so to maintain the same would constitute a Material
Adverse Change.
(f) Visitation Rights. The Borrower shall permit any of
the officers or authorized employees or representatives of the Lender to visit
and inspect any of the Properties examine and make excerpts from its books and
records and discuss its business affairs, finances and accounts with its
officers, all in such detail and at such times and as often as the Lender may
reasonably request, provided that Lender shall provide the Borrower with
reasonable notice prior to any visit or inspection.
(g) Keeping of Records and Books of Account. The
Borrower shall maintain and keep proper books of record and accounts which
enable the Borrower to issue financial statements in accordance with the GAAP
and as otherwise required by applicable Laws of any Official Body having
jurisdiction over the Borrower, and in which full, true and correct entries
shall be made in all material respects of all its dealings and business and
financial affairs.
(h) Intentionally omitted.
(i) Compliance with Laws. The Borrower shall comply with
all applicable Laws, including all Environmental Laws, in all respects provided
that it shall not be deemed to be a violation of this Section 7.01(i) if any
failure to comply with any Law would not result in fines, penalties, remediation
costs other similar liabilities or injunctive relief which in the aggregate
would constitute a Material Adverse Change.
<PAGE>
(j) Use of Proceeds. The Borrower will use the proceeds
of the Revolving Credit Loan only for lawful purposes in accordance with
Sections 2.06 hereof as applicable and such uses shall not contravene any
applicable Law or any other provision hereof.
(k) Further Assurances. The Borrower shall, from time to
time, at its expense, faithfully preserve and protect the Lender's Liens on the
Collateral Pool and, if applicable, on the Other Properties, as a continuing
first priority perfected Liens, subject only to Permitted Liens, and shall do
such other acts and things as the Lender in its sole discretion may deem
necessary or advisable from time to time in order to preserve, perfect and
protect the Liens granted under the Loan Documents, if applicable, and to
exercise and enforce its rights and remedies thereunder with respect to the
Properties.
(l) Subordination of Intercompany Loans, Other Loans and
Advances to the Borrower. The Borrower shall cause any intercompany
Indebtedness, loans or advances owed by the Borrower to any Affiliate to be
subordinated on terms satisfactory to the Lender.
(m) Execution and Delivery of the Loan Documents With
Respect to the Other Properties. At any time during the term of the Revolving
Credit Loan:
(i) upon the breach by Borrower of the Covenants
(as hereinafter defined) set forth in Section 7.02(a)(ii) or 7.02(a)(v) (with
respect to the sale of any of the Properties comprising the Collateral Pool
without Lender's prior written consent) below; or
(ii) upon the occurrence of any other Event of
Default under this Agreement or any of the other Loan Documents,
In addition to all other rights and remedies available to Lender under this
Agreement and the other Loan Documents, Borrower shall execute and deliver to
Lender, within thirty (30) days after demand by Lender, the following Loan
<PAGE>
Documents with respect to any of the Other Properties as Lender in its sole
discretion shall require:
(A) a Mortgage together with the Financing
Statements;
(B) a Lease Assignment;
(C) an Environmental Indemnification
Agreement; and
(D) an Assignment of Management Agreement.
All Loan Documents executed and delivered to Lender pursuant to this Section
7.01(m) shall be in substantially the same form as the Loan Documents executed
and delivered to Lender on the Closing Date with respect to the Properties
comprising the Collateral Pool. Upon the execution and delivery to Lender of the
Loan Documents referred to above, Lender shall thereupon be entitled to record
such Loan Documents. Borrower covenants and agrees that prior to the recording
of such Loan Documents, Lender shall be entitled to obtain at Borrower's expense
an Appraisal, Environmental Report, title report and a commitment for title
insurance with respect to the applicable Property or Properties. Simultaneously
with such recording, Borrower shall deliver to Lender, or Lender may obtain, a
Title Policy with respect to such Property or Properties, and Borrower shall pay
any and all recording fees, title insurance premiums, mortgage taxes and other
such charges in connection with Lender's recordation of such Loan Documents.
Notwithstanding the foregoing or anything else to the contrary
contained herein, Borrower agrees that during the term of the Revolving Credit
Loan Lender shall have the right at any time in its sole discretion, following
the occurrence of an Event of Default beyond any applicable grace or cure
periods, to select, substitute, add or release any of the Properties for
inclusion in or exclusion from the Collateral Pool.
<PAGE>
7.02 Loan Agreement Covenants.
(a) The Borrower covenants and agrees that until payment
in full of all advances of the Revolving Credit Loan and interest thereon,
expiration or termination of all Letters of Credit, satisfaction of all of
Borrowers other obligations hereunder and termination of the Revolving Credit
Commitment, the Borrower shall comply at all times with the following Covenants
(hereinafter collectively referred to as the "Covenants"):
(i) Borrower shall maintain a Consolidated Net
Worth of no less than $25,000,000;
(ii) the Loan to Value of the Collateral Pool shall
not exceed forty percent (40%);
(iii) in any calendar quarter during the term of
the Revolving Credit Loan the Interest Expense Coverage Ratio will never be less
than 3 to 1;
(iv) Borrower shall not incur any additional
Indebtedness other than refinancings of existing Mortgage Indebtedness limited
to the outstanding balance thereof and amounts currently available and committed
under an inter-Affiliate Line of Credit;
(v) Borrower shall not sell, convey or otherwise
transfer any of the Properties, without Lender's prior written consent, which
consent shall not be unreasonably withheld, provided that all terms and
conditions of this Agreement and the other Loan Documents continue to be met.
(b) Consequences of Covenant Violations. Borrower
covenants and agrees that the following shall be available to Lender in the
event of Borrower's violation of the Covenants set forth in 7.02(a)(i - v)
above:
(i) as previously described in Section 7.01(m)
above, upon a violation of the covenants set forth in Sections 7.02(a)(ii) above
or 7.02(a)(v) (with respect to the sale of any of the Properties comprising the
Collateral Pool without Lender's prior written consent) Borrower shall execute
<PAGE>
and deliver to Lender, and Lender shall be entitled to record, the Loan
Documents with respect to any of the Other Properties as Lender in its sole
discretion may elect;
(ii) Lender may declare an Event of Default under
this Agreement;
(iii) no further advances of the Revolving Credit
Loan shall be made except as approved by Lender in its sole discretion.
Notwithstanding the foregoing, in the event that Lender's consent shall be
obtained with respect to the sale, conveyance or other transfer of any of the
Properties comprising the Collateral Pool, as an additional condition precedent
to such sale, Borrower shall provide alternative collateral acceptable to the
Lender in its sole discretion.
7.03 Negative Covenants. The Borrower covenants and agrees
that until payment in full of all advances of the Revolving Credit Loan and
interest thereon, satisfaction of all of the Borrower's other obligations
hereunder and termination of the Revolving Credit Commitment, the Borrower shall
comply with the following negative covenants:
(a) Liquidations, Mergers, Consolidations, Acquisitions.
The Borrower shall not dissolve, liquidate or wind-up its affairs, or become a
party to any merger or consolidation, or acquire by purchase, lease or otherwise
all or substantially all of the assets or capital stock of any other Person.
(b) Liens. Borrower shall not at any time create, incur,
assume or suffer to exist any Lien on any of its property or assets, tangible or
intangible, now owned or hereafter acquired, or agree or become liable to do so,
except Permitted Liens.
(c) Guaranties. Borrower shall not at any time, directly
or indirectly, become or be liable in respect of any Guaranty, or assume,
guarantee, become surety for, endorse or otherwise agree, become or remain
<PAGE>
directly or contingently liable upon or with respect to any obligation or
liability of any other Person.
(d) Loans and Investments. Borrower shall not at any
time make or suffer to remain outstanding any loan or advance to, or purchase,
acquire or own any stock, bonds, notes or securities of, or any partnership
interest (whether general or limited) in, or any other investment or interest
in, or make any capital contribution to, any other Person, or agree, become or
remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary
terms in the ordinary course of business;
(ii) advances to employees to meet expenses
incurred by such employees in the ordinary course of business;
(iii) loans, advances and investments in Affiliates
of Borrower, only in accordance with the terms of Borrower's partnership
agreement.
(iv) repurchase of partnership units of the
Borrower by Borrower in accordance with terms of Borrower's partnership
agreement.
(e) Dividends and Related Distributions. Borrower shall
not use any of the proceeds of the Revolving Credit Loan to make or pay any
dividend or other distribution of any nature (whether in cash, property,
securities or otherwise) on account of or in respect of its partnership
interests or on account of the purchase, redemption, retirement or acquisition
of its partnership interests.
(f) Liquidations, Mergers, Consolidations, Acquisitions.
Borrower shall not dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person.
(g) Partnerships and Joint Ventures. The Borrower shall
not become or agree to become a general or limited partner in any general or
<PAGE>
limited partnership or a joint venturer in any joint venture.
(h) Continuation of or Change in Business. The Borrower
shall not engage in any business other than the acquisition, ownership,
management and leasing of commercial real estate, substantially as conducted and
operated by the Borrower during the present fiscal year, and the Borrower shall
not permit any material change in such business.
(i) Intentionally omitted.
(j) Changes in Organizational Documents. The Borrower
shall not amend in any respect its organizational documents without providing at
least thirty (30) calendar days' prior written notice to the Lender and, in
the event such change would be adverse to the Lender as determined by the in its
sole discretion, obtaining the prior written consent of the Lender.
Notwithstanding the foregoing, Lender has acknowledged and
consented to the acquisition by Robert A. McNeil (or a company in which Robert
A. McNeil maintains a controlling interest) of all or a portion of the limited
partnership interests of Borrower at any time during the term of the Loan.
7.04 Reporting Requirements. The Borrower covenants and
agrees that until payment in full of the Revolving Credit Loan and interest
thereon, expiration or termination of all Letters of Credit satisfaction of all
of the Borrower's other obligations hereunder and termination of the Revolving
Credit Commitment, the Borrower will furnish or cause to be furnished to the
Lender:
(a) As soon as available, but in no event later than one
hundred twenty (120) days of the end of each calendar year, annual audited
balance sheets, statements of income, Partner's equity and statement of cash
flow for Borrower. Such annual statements shall be prepared in accordance with
GAAP and shall be certified by an independent certified public accountant of
recognized standing chosen by Borrower and satisfactory to Lender.
<PAGE>
(b) At the time the audited financial statements
described in paragraph (a) above are due, management letters, if any, prepared
by such independent certified public accountant for Borrower.
(c) As soon as available, but in no event later than
forty-five (45) days after the end of each calendar quarter, balance sheets and
statements of income, Partner's equity and cash flow for Borrower. Such
unaudited quarterly statements shall be prepared in accordance with GAAP and
shall be certified by an Authorized Officer of Borrower or by an officer of
Borrower who is also a certified public accountant.
(d) As soon as available, but in no event later than
forty-five (45) days after the end of each calendar quarter, with respect to the
Properties comprising the Collateral Pool and no later than forty-five (45) days
after the end of each calendar year with respect to the Other Properties, income
and expense statements and rent rolls with respect to the Properties in form and
substance acceptable to Lender.
(e) As soon as available, but in no event later than
forty-five (45) days after payment due date, copies of all real estate tax
receipts.
(f) As soon as available, but in no event later than
forty-five (45) days after the end of each quarter, the calculation of an
Authorized Officer or by an officer of Borrower who is also a certified public
accountant of Borrower (i) evidencing that Borrower has complied with the
financial covenants contained in Sections 7.02(a) hereof and (ii) certifying
that the restrictions on partnership distributions contained in Section 7.03
hereof have not been violated.
(g) As soon as available, but in no event later than one
hundred and twenty (120) days after the end of each calendar year, the
calculation of an Authorized Officer or by an officer of Borrower who is also a
certified public accountant of Borrower evidencing that Borrower has complied
with the financial covenants contained in Sections 7.02(a)________ hereof.
<PAGE>
(h) Within five (5) Business Days after the filing
thereof, copies of all financial reporting statements filed with the Securities
Exchange Commission, including, without limitation, all 10-K and 10-Q
statements.
(i) Such other information and reports as reasonably
requested by Lender.
(j) Notice of Default. Promptly after any officer of
Borrower has learned of the occurrence of an Event of Default or Potential
Default, a certificate signed by an Authorized Officer of the Borrower setting
forth the details of such Event of Default or Potential Default and the action
which the Borrower proposes to take with respect thereto.
(k) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, proceedings or
investigations before or by any Official Body or any other person against the
Borrower which relate to the Properties, involve a claim or series of claims
which if adversely determined would constitute a Material Adverse Change with
respect to the Borrower.
(l) Certain Events. Written notice to the Lender within
the time limits set forth in Section 7.03(j), any amendment to the
organizational documents of the Borrower; and
(m) Intentionally Omitted.
(n) Title Searches, Environmental Audits and Appraisals.
(i) Subject to the limitations set forth in the
next sentence, Lender may request, and Borrower shall deliver within thirty (30)
days of such request, title searches and environmental audits of the Properties
comprising the Collateral Pool by consultants satisfactory to Lender. Prior to
an Event of Default or a Conditional Default, any such title searches will be
requested no more than once each year during the term of the Revolving Credit
Loan; after an Event of Default or a Conditional Default, and, in the case of an
environmental audit, at any time that Lender acting in good faith has reason to
<PAGE>
believe that there has been a violation of any of the Environmental
Indemnification Agreements with respect to the Properties comprising the
Collateral Pool, such title searches and environmental audits may be requested
at any time in Lender's reasonable discretion. All of the foregoing shall be in
form and substance satisfactory to Lender. Borrower shall be responsible for all
costs of any such title searches and environmental audits. Lender shall use
reasonable efforts to request or obtain updates of existing reports in lieu of
new reports whenever practical.
(ii) In the absence of an Event of Default no more
than once each calendar year, but at any time during the term of the Revolving
Credit Loan following an Event of Default, Lender may cause an Appraisal of the
Properties to be prepared at Borrower's sole cost and expense, which Appraisal
will be in form and substance acceptable to Lender and performed by a licensed
real estate appraiser engaged by Lender. Lender shall use reasonable efforts to
request or obtain updates of existing Appraisals in lieu of new Appraisals
whenever practical.
ARTICLE VIII
DEFAULT
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8.01 Events of Default. An Event of Default shall mean the
occurrence or existence of any one or more of the following events or conditions
(whatever the reason therefor and whether voluntary, involuntary or effected by
operation of Law):
(a) The Borrower shall fail to pay any principal of the
Revolving Credit Loan including the payment due at maturity or shall fail to pay
any interest on amounts advanced under the Revolving Credit Loan or any other
amount owing hereunder or under the other Loan Documents within ten (10) days
after such principal, interest or other amount becomes due in accordance with
the terms hereof or thereof;
(b) Any representation or warranty made at any time by
the Borrower herein or by the Borrower in any other Loan Document, or in any
certificate, other instrument or statement furnished pursuant to the provisions
hereof or thereof, shall prove to have been false or misleading in any material
respect as of the time it was made or furnished;
<PAGE>
(c) The Borrower shall default in the observance or
performance of the covenant contained in Section 7.01(m), any Covenant contained
in Section 7.02(a)(i - v) or any covenant contained in Section 7.03 hereof;
(d) The Borrower shall default in the observance or
performance of any other covenant, condition or provision hereof or of any other
Loan Document and such default shall continue unremedied for a period of ten
(10) days after any officer of the Borrower becomes aware of the occurrence
thereof (such grace period to be applicable only in the event such default can
be remedied by corrective action of the Borrower as determined by the Lender in
its sole discretion); provided, however, if such default cannot be cured within
ten (10) days Borrower shall have such longer time as may be reasonably
necessary but not to exceed sixty (60) days from the date of the occurrence of
the Event of Default, provided that Borrower commences such cure within said ten
(10) day period and diligently prosecutes such cure to completion;
(e) Any final judgments or orders for the payment of
money shall be entered against the Borrower by a court having jurisdiction in
the premises which judgment is not discharged, vacated, bonded or stayed pending
appeal within a period of thirty (30) days from the date of entry;
(f) Any of the Loan Documents shall cease to be legal,
valid and binding agreements enforceable against the party executing the same or
such party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be created thereby;
(g) There shall occur any material uninsured damage to
or loss, theft or destruction of the Properties or any of the Properties is
attached, seized, levied upon or subjected to a writ or distress warrant, or
comes within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors and the same is not cured within thirty (30) days
thereafter;
<PAGE>
(h) A notice of lien or assessment is filed of record
with respect to any of the Properties by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal or other
governmental agency, including, without limitation, the Pension Benefit Guaranty
Corporation, or if any taxes or debts owing at any time or times hereafter to
any one of these becomes payable and the same is not paid within thirty (30)
days after the same becomes payable;
(i) The Borrower ceases to be solvent or admits in
writing its inability to pay its debts as they mature;
(j) The Borrower ceases to conduct its business as
contemplated or the Borrower is enjoined, restrained or in any way prevented by
court order from conducting all or any material part of its business and such
injunction, restraint or other preventive order is not dismissed within thirty
(30) days after the entry thereof;
(k) A proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for relief in
respect of the Borrower in an involuntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect, or a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of the Borrower for any substantial part of its property,
or for the winding-up or liquidation of its affairs, and such proceeding shall
remain undismissed or unstayed and in effect for a period of thirty (30)
consecutive days or such court shall enter a decree or order granting any of the
relief sought in such proceeding; or
(l) The Borrower shall commence a voluntary case under
any applicable bankruptcy, insolvency, reorganization or other similar law now
or hereafter in effect, shall consent to the entry of an order for relief in an
<PAGE>
involuntary case under any such law, or shall consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or other similar official) of itself or for any
substantial part of its property or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing.
8.02 Consequences of Event of Default.
(a) If an Event of Default specified under subsections
(a) through (k) of Section 8.01 hereof shall occur and be continuing, the Lender
shall be under no further obligation to make advances of the Revolving Credit
Loan or issue Letters of Credit hereunder and the Lender may, (i) by written
notice to the Borrower, declare the unpaid principal amount of the Revolving
Credit Note then outstanding and all interest accrued thereon, any unpaid fees
and all other Indebtedness of the Borrower to the Lender hereunder and
thereunder to be forthwith due and payable, and the same shall thereupon become
and be immediately due and payable to the Lender without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived and (ii) require the Borrower to, and the Borrower shall thereupon,
deposit in a non-interest bearing account with the Lender, as cash collateral
for its Obligations under the Loan Documents, an amount equal to the maximum
amount currently or at any time thereafter available to be drawn on all
outstanding Letters of Credit, and the Borrower hereby pledges to the Lender,
and grants to the Lender a security interest in, all such cash as security for
such Obligations. Upon the curing of all existing Events of Default to the
satisfaction of the Lender, Lender shall return such cash collateral to the
Borrower; and
(b) If an Event of Default specified under subsections
(m) or (n) of Section 8.01 hereof shall occur, the Banks shall be under no
further obligations to make advances of the Revolving Credit Loan hereunder and
the unpaid principal amount of the Revolving Credit Note then outstanding and
all interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrower to the Lender hereunder and thereunder shall be immediately due and
<PAGE>
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived; and
(c) If an Event of Default shall occur and be
continuing, Lender (which for purposes of this provision only shall mean only
PNC Bank, National Association) and any branch, subsidiary or affiliate of
Lender anywhere in the world shall have the right, in addition to all other
rights and remedies available to it, without notice to the Borrower, to set-off
against and apply to the then unpaid balance of all advances of the Revolving
Credit Loan and all other Obligations of the Borrower hereunder or under any
other Loan Document any debt owing to, and any other funds held in any manner
for the account of, the Borrower by Lender or by such branch, subsidiary or
affiliate, including, without limitation, all funds in all deposit accounts
(whether time or demand, general or special, provisionally credited or finally
credited, or otherwise) now or hereafter maintained by the Borrower for its own
account (but not including funds held in custodian or trust accounts) with
Lender or such branch, subsidiary or affiliate. Such right shall exist whether
or not Lender shall have made any demand under this Agreement or any other Loan
Document, whether or not such debt owing to or funds held for the account of the
Borrower is or are matured or unmatured and regardless of the existence or
adequacy of any collateral, Guaranty or any other security, right or remedy
available to the Lender; and
(d) If an Event of Default shall occur and be
continuing, and whether or not the Lender shall have accelerated the maturity of
the Revolving Credit Loan of the Borrower pursuant to any of the foregoing
provisions of this Section 8.02, the Lender, if owed any amount with respect to
the Note, may proceed to protect and enforce its rights by suit in equity,
action at law and/or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement or the
Revolving Credit Note, including as permitted by applicable Law the obtaining of
the ex parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of the Lender; and
<PAGE>
(e) From and after the date on which the Lender has
taken any action pursuant to this Section 8.02 and until all Obligations of the
Borrower have been paid in full, any and all proceeds received by the Lender
from any sale or other disposition of the Properties, or any part thereof, or
the exercise of any other remedy by the Lender, shall be applied as follows:
(i) first, to reimburse the Lender for reasonable
out-of-pocket costs, expenses and disbursements, including without limitation
reasonable attorneys' fees and legal expenses, incurred by the Lender in
connection with realizing on the Properties or collection of any obligations of
the Borrower under any of the Loan Documents, including advances made by the
Lender for the reasonable maintenance, preservation, protection or enforcement
of, or realization upon, the Properties, including without limitation, advances
for taxes, insurance, repairs and the like and reasonable expenses incurred to
sell or otherwise realize on, or prepare for sale or other realization on, the
Properties;
(ii) second, to the repayment of all Indebtedness
then due and unpaid of the Borrower to the Lender incurred under this Agreement
or any of the Loan Documents, whether of principal, interest, fees, expenses or
otherwise, in such manner as the Lender may determine in its discretion; and
(iii) the balance, if any, as required by Law.
(f) In addition to all of the rights and remedies
contained in this Agreement or in any of the other Loan Documents (including the
Mortgages), the Lender shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code or other applicable Law, all of which
rights and remedies shall be cumulative and non-exclusive, to the extent
permitted by Law. The Lender may, exercise all post-default rights granted to
the Lender under the Loan Documents or applicable Law.
8.03 Notice of Sale. Subject to the provisions of applicable
Law, any notice required to be given by the Lender of a sale, lease, or other
<PAGE>
disposition of the Properties or any other intended action by the Properties, if
given ten (10) days prior to such proposed action, shall constitute commercially
reasonable and fair notice thereof to the Borrower.
8.04 Sale of Properties. In the exercise of the rights and
remedies granted to Lender pursuant to this Agreement and the other Loan
Documents with respect to the Properties comprising the Collateral Pool and the
Other Properties, Lender agrees that should it be entitled to sell or otherwise
dispose of any of the Properties, by foreclosure or otherwise, it shall first
proceed against OCC I, OCC III and the Kendall Property, either simultaneously
or in any such order Lender shall deem appropriate, provided, however, that, in
the event an Appraisal of OCC I, OCC III, and the Kendall Property(as performed
pursuant to the direction of Lender at Borrower's sole cost and expense)
indicates a collective appraised value (less the amount of any Liens having
priority over the Mortgages on OCC I, OCC III or the Kendall Property) of less
that $6,000,000 Lender shall have the right to proceed against all the
Properties in any order without limitation. To the extent that such Appraisal
indicates a collective value in excess of $6,000,000 and any sale or other
disposition of the Collateral Pool Properties described above is inadequate to
fully compensate Lender for amounts owing under this Agreement and the other
Loan Documents, Lender shall then be entitled to proceed against the Other
Properties and exercise all rights and remedies available to it pursuant to this
Agreement and the other Loan Documents, provided that (I) nothing herein
contained with respect to the order in which Lender may exercise remedies with
respect to the Properties, shall be construed to prohibit Lender from obtaining
a judgment lien on any of the Other Properties (should Borrower fail to execute
and deliver to Lender the Loan Documents with respect to the Other Properties as
required by Section 7.01(m) of this Agreement) provided further that, Lender
shall not execute on any judgment lien obtained with respect to the Other
Properties until it has first proceeded against OCC I, OCC III and the Kendall
Property as set forth above and (ii) in the exercise of its rights and remedies
with respect to the Properties pursuant to this Agreement and the other Loan
Documents, Lender shall not sell or otherwise dispose of any two or more of the
Properties as an integrated unit.
<PAGE>
ARTICLE IX
MISCELLANEOUS
-------------
9.01 No Implied Waivers; Cumulative Remedies; Writing
Required. No course of dealing and no delay or failure of the Lender in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof; nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Lender under this Agreement
and any other Loan Documents are cumulative and not exclusive of any rights or
remedies which it would otherwise have. Any waiver, permit, consent or approval
of any kind or character on the part of the Lender of any breach or default
under this Agreement or any such waiver of any provision or condition of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing.
9.02 Reimbursement and Indemnification of the Lender by the
Borrower; Taxes. The Borrower agrees unconditionally upon demand to pay or
reimburse to Lender and to save Lender harmless against (i) liability for the
payment of all reasonable out-of-pocket costs, expenses and disbursements
(including, but not limited to, fees and expenses of counsel, appraisers and
consultants, as applicable, for Lender), incurred by Lender (a) in connection
with the administration and interpretation of this Agreement, and other
instruments and documents to be delivered hereunder, (b) relating to any
amendments, waivers or consents pursuant to the provisions hereof, (c) in
connection with the enforcement of this Agreement or any other Loan Document, or
collection of amounts due hereunder or thereunder or the proof and allowability
of any claim arising under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (d) in any workout,
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings, or (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
<PAGE>
kind or nature whatsoever which may be imposed on, incurred by or asserted
against Lender, in its capacity as such, in any way relating to or arising out
of this Agreement or any other Loan Documents or any action taken or omitted by
Lender hereunder or thereunder, [provided that the Borrower shall not be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements if the same results
from Lender's gross negligence or willful misconduct The Borrower agrees
unconditionally to pay all stamp, document, transfer, recording, mortgage or
filing taxes or fees and similar impositions now or hereafter determined by the
Lender to be payable in connection with this Agreement, the Mortgages or any
other Loan Document, and the Borrower agrees unconditionally to save the Lender
harmless from and against any and all present or future claims, liabilities or
losses with respect to or resulting from any omission to pay or delay in paying
any such taxes, fees or impositions.
9.03 Holidays. Whenever any payment or action to be made or
taken hereunder shall be stated to be due on a day which is not a LIBO Business
Day, such payment or action shall be made or taken on the next following LIBO
Business Day (except as provided in Section 3.04 with respect to Interest
Periods), and such extension of time shall be included in computing interest or
fees, if any, in connection with such payment or action.
9.04 Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding. Lender shall have the right from
time to time, without notice to the Borrower, to deem any branch, subsidiary or
affiliate (which for the purposes of this Section 9.04 shall mean any
corporation or association which is directly or indirectly controlled by or is
under direct or indirect common control with any corporation or association
which directly or indirectly controls Lender) of Lender to have made, maintained
or funded any Loan to which a LIBO-Rate Option applies at any time, provided
that immediately following (on the assumption that a payment were then due from
the Borrower to such other office) and as a result of such change the Borrower
<PAGE>
would not be under any greater financial obligation pursuant to Section 3.02(i)
hereof than it would have been in the absence of such change. Notional funding
offices may be selected by Lender without regard to Lender's actual methods of
making, maintaining or funding advances of the Revolving Credit Loan or any
sources of funding actually used by or available to such Bank.
(b) Actual Funding. Lender shall have the right from
time to time to make advances of or maintain the Revolving Credit Loan by
arranging for a branch, subsidiary or affiliate of Lender to make advances of or
maintain the Revolving Credit Loan subject to the last sentence of this Section
9.04. If Lender causes a branch, subsidiary or affiliate to make advances of or
maintain any part of the Revolving Credit Loan hereunder, all terms and
conditions of this Agreement shall, except where the context clearly requires
otherwise, be applicable to such part of the Revolving Credit Loan to the same
extent as if advances of the Revolving Credit Loan were made or maintained by
Lender but in no event shall Lender's use of such a branch, subsidiary or
affiliate to make advances of the Revolving Credit Loan or maintain any part of
the Revolving Credit Loan hereunder cause Lender or such branch, subsidiary or
affiliate to incur any cost or expenses payable by the Borrower hereunder or
require the Borrower to pay any other compensation to Lender (including, without
limitation, any expenses incurred or payable pursuant to Section 3.02(i) hereof)
which would otherwise not be incurred.
9.05 Notices. All notices, requests, demands, directions and
other communications (collectively "Notices") given to or made upon any party
hereto under the provisions of this Agreement shall be by telephone or in
writing (including telex or facsimile communication) unless otherwise expressly
permitted hereunder and shall be delivered or sent by telex or facsimile to the
respective parties at the addresses and numbers set forth under their respective
names on the signature pages hereof or in accordance with any subsequent
unrevoked written direction from any party to the others. All notices shall,
except as otherwise expressly herein provided, be effective as set forth in the
Mortgage.
9.06 Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction such provision
<PAGE>
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
9.07 Governing Law. This Agreement shall be deemed to be a
contract under the Laws of the Commonwealth of Pennsylvania and for all purposes
shall be governed by and construed and enforced in accordance with the Laws of
the Commonwealth of Pennsylvania without regard to its conflict of Laws
principles.
9.08 Prior Understanding. This Agreement supersedes all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
9.09 Duration; Survival. All representations and warranties
of the Borrower contained herein or made in connection herewith shall survive
the making of the Revolving Credit Loan and issuance of the Letters of Credit
and shall not be waived by the execution and delivery of this Agreement, any
investigation by the Lender, the making of the Revolving Credit Loan, issuance
of the Letters of Credit or payment in full of the Revolving Credit Loan. All
covenants and agreements of the Borrower contained in Sections 7.01, 7.02 and
7.03 herein shall continue in full force and effect from and after the date
hereof so long as the Borrower may borrow or reborrow or request Letters of
Credit hereunder and until termination of the Revolving Credit Commitment and
expiration and termination of all Letters of Credit. All covenants and
agreements of the Borrower contained herein relating to the payment of
principal, interest, premiums, additional compensation or expenses and
indemnification, including those set forth in the Revolving Credit Note, Article
IV and Section 9.02 hereof, shall survive payment in full of the Revolving
Credit Loan, expiration and termination of the Letters of Credit and termination
of the Revolving Credit Commitment.
9.10 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Lender and the Borrower and their
respective successors and assigns, except that the Borrower may not assign or
<PAGE>
transfer any of its rights and obligations hereunder or any interest herein. The
Lender may, at its own cost, make assignments of or sell participations in all
or any part of the Revolving Credit Commitment and the Revolving Credit Loan
made by it to one or more banks or other entities upon notice to Borrower and
upon Borrower's approval, such approval not to be unreasonably withheld.
9.11 Confidentiality. The Lender agrees to keep confidential
all information obtained from the Borrower which is nonpublic and confidential
or proprietary in nature (including any information the Borrower specifically
designates as confidential), except as provided below, and to use such
information only in connection with its capacity under this Agreement and for
the purposes contemplated hereby. The Lender shall be permitted to disclose such
information (i) to outside legal counsel, accountants and other professional
advisors who need to know such information in connection with the administration
and enforcement of this Agreement, subject to agreement of such persons to
maintain the confidentiality thereof, (ii) assignees and participants as
contemplated by Section 9.10, subject to agreement by such persons to maintain
the confidentiality thereof, (iii) to the extent requested by any bank
regulatory authority or, with notice to the Borrower, as otherwise required by
applicable Law or by any subpoena or similar legal process, or in connection
with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
subject to confidentiality restrictions, or (v) the Borrower shall have
consented to such disclosure.
9.12 Counterparts. This Agreement may be executed by
different parties hereto on any number of separate counterparts, each of which,
when so executed and delivered, shall be an original, and all such counterparts
shall together constitute one and the same instrument.
9.13 Lender's Consent. Except as otherwise provided in the
Loan Documents, whenever the Lender's consent is required to be obtained under
this Agreement or any of the other Loan Documents as a condition to any action,
<PAGE>
inaction, condition or event, the Lender shall be authorized to give or withhold
such consent in its sole and absolute discretion and to condition its consent
upon the giving of additional collateral, the payment of money or any other
matter.
9.14 Exceptions. The representations, warranties and
covenants contained herein shall be independent of each other and no exception
to any representation, warranty or covenant shall be deemed to be an exception
to any other representation, warranty or covenant contained herein unless
expressly provided, nor shall any such exceptions be deemed to permit any action
or omission that would be in contravention of applicable Law.
9.15 CONSENT TO FORUM; WAIVER OF JURY TRIAL. THE BORROWER
HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURT OF
COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
CERTIFIED OR REGISTERED MAIL DIRECTED TO THE BORROWER AT THE ADDRESSES PROVIDED
FOR IN SECTION 9.05 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
UPON ACTUAL RECEIPT THEREOF. THE BORROWER WAIVES ANY OBJECTION TO JURISDICTION
AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT
TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. THE BORROWER AND
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR THE PROPERTY TO THE FULL EXTENT PERMITTED BY LAW.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and year
first above written.
<TABLE>
<S> <C>
WITNESS/ATTEST: McNEIL REAL ESTATE FUND XXVII, L.P.,
a Delaware limited partnership
By: McNEIL PARTNERS, L.P., a
Delaware limited partnership,
its general partner
By: McNEIL INVESTORS, INC., a
Delaware corporation, its
general partner
s/s Mary Kay Schwartz By: s/s Donald K. Reed
- ------------------------------- ---------------------------
Title: President
-------------------
Address for Notices:
McNeil Real Estate Fund XXVII, L.P.
13760 Noel Road, Suite 700
Dallas, Texas 75240
Telecopier No. (214)448-5711
Attn: Donald K. Reed
Telephone No. (214)448-5800
PNC BANK, NATIONAL ASSOCIATION,
a national banking association
By:
---------------------------
Title:
------------------------
<PAGE>
Address for Notices:
One PNC Plaza, 19th Floor
Fifth Avenue and Wood Street
Real Estate Banking
Pittsburgh, PA 15265
Telecopier No. (412) 762-6500
Attention: Theron D. Imbrie
Telephone No. (412) 762-4464__
</TABLE>
<PAGE>
EXHIBIT A
ITEMS TO BE SUPPLIED
(a) (i) new Appraisals of each of the Properties comprising the Collateral
Pool, subject to Lender's review and approval, from an MAI-designated
appraiser engaged by Lender at Borrower's sole cost and expenses; and
(ii) Borrower's most recent existing Appraisals of each of the Other
Properties, which shall be subject to Lender's review and approval;
(b) (i) current surveys of each of the Properties comprising the Collateral
Pool, certified by a registered surveyor approved by Lender, such
certifications to be addressed to Lender and the title company issuing
Lender's title insurance policies and (A) to show the location and area
covered by all building lines affecting the respective Properties, the
location and area of all easements encumbering and/or benefiting the
respective Properties, the relation of the respective Properties to
public thoroughfares for access purposes, the location of all physical
conditions on the respective Properties, the location of all
improvements located on the respective Properties and any encroachments
of such improvements or other physical conditions upon any easements,
building lines or property boundary lines, and (B) to state whether the
respective Properties or any portion thereof is located in any
federally designated flood prone area, and if so, to locate on the
survey such portion of the respective Properties so designated; (ii)
Borrower's most recent existing as-built surveys of each of the Other
Properties, which shall be subject to Lender's review and approval;
(c) a legal description of each of the Properties comprising the Collateral
Pool and the Other Properties and all easements, compatible with the
above-mentioned surveys and sufficient for the purpose of the Mortgages
and the Negative Pledge Agreements, as applicable;
(d) evidence in such form as Lender may require of (i) satisfactory
subdivision and zoning for the Properties comprising the Collateral
<PAGE>
Pool; (ii) the valid issuance of all necessary permits, licenses and
approvals to occupy and operate the Properties comprising the
Collateral Pool, including, without limitation, all certificates of
occupancy and all other permits, licenses and approvals required under
federal, state or local Laws or regulations with respect to
subdivision, zoning, safety, building, occupancy, fire protection,
environmental, energy and similar matters; and (iii) satisfactory soils
compaction conditions, structural, and sub-surface support reports for
the Properties comprising the Collateral Pool;
(e) evidence in such form as Lender may require, including Environmental
Reports with respect to the Properties comprising the Collateral Pool
and also including, without limitation, engineering, subsurface soils
reports, environmental assessment reports, reports and clearances from
governmental agencies, chain of title searches and certifications of
Borrower that the Properties comprising the Collateral Pool are free
from all hazardous waste and all other materials regulated by the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation Recovery Act, as amended,
or by any other federal, state or local law, statute, regulation,
ordinance, code or order;
(f) evidence in such form as Lender may require (including the Accord Form
27 Evidence of Insurance and evidence of payment of premiums) that all
types of hazard insurance (including loss of rents, malicious mischief
insurance and flood insurance if in a federal flood prone area)
available with respect to the Properties comprising the Collateral
Pool, public liability and property damage insurance with respect to
the Properties comprising the Collateral Pool, insurance are in force
and will continue in force so long as the Revolving Credit Loan or any
Letters of Credit are outstanding (the Accord Form 27 Evidence of
Insurance for such insurance to be for a period of at least twelve (12)
months, in form, in amounts and with companies satisfactory to Lender,
<PAGE>
and, with respect to the Properties comprising the Collateral Pool, all
such hazard policies shall have attached to them mortgagee, loss payee
and additional insured clauses, as applicable, in favor of Lender);
(g) (i) with respect to the Properties comprising the Collateral Pool,
title insurance binders, together with specimen policies issued by
title insurance companies acceptable to Lender (the "Title Companies"),
pursuant to which said title insurance companies will, on the Closing
Date, be irrevocably committed to issue an ALTA 1970 lender's policy of
title insurance insuring the Mortgages in the principal sum secured
thereby and such portion thereof as shall be advanced from time to time
as a first lien upon fee simple title to the respective Properties and
all appurtenances thereto (including such easements and appurtenances
as may be required by Lender), subject only to such exceptions as may
be approved in writing by Lender, with endorsements thereto as to such
matters as Lender may designate including, without limitation,
contiguity of the Land with all easements and public roads, and
compliance with Laws governing zoning, subdivision and land use,
together with such reinsurance and direct access agreements as Lender
shall, in its discretion, require; (ii) with respect to the Other
Properties, title reports on each of the Other Properties, prepared by
a Title Company which report shall be dated no earlier than thirty (30)
days prior to the Closing Date [and such additional assurance from the
Title Company as Lender shall require that if a Mortgage were recorded
the Title Company would issue a Title Policy insuring the lien of the
Mortgage in the principal amount secured thereby;
(h) Evidence in such form as Lender may require of payment of all real
estate taxes and municipal claims for the Properties comprising the
Collateral Pool;
(i) an opinion or opinions of counsel acceptable to Lender and its counsel
(including local counsel) to be delivered on the Closing Date in form
and scope reasonably satisfactory to Lender to the effect (in addition
to other matters which Lender may reasonably require to be favorably
<PAGE>
addressed) that (i) Borrower is duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its formation; (ii)
Borrower is duly qualified to do business in the jurisdiction in which
the Properties are located and Borrower has all requisite power and
authority to operate the Properties and to enter into, perform and
consummate all aspects of the transactions contemplated hereby; (iii)
all Loan Documents and other documents to be executed by or on behalf
of Borrower have been duly executed and are valid and binding upon and
enforceable against the parties thereto (other than Lender) in
accordance with the respective terms of each, except as the same may be
limited by bankruptcy, insolvency and similar Laws affecting the rights
of creditors generally; (iv) to the best knowledge of counsel after due
and diligent investigation and inquiry, there is no action, proceeding
or investigation pending or threatened (or any basis therefor) which
questions the validity of the Revolving Credit Loan or the transactions
contemplated hereby or the ability of Borrower from performing its
obligations under the Loan Documents; (v) to the best knowledge of
counsel after due and diligent investigation and inquiry, the
performance of and compliance with the provisions hereof and the other
documents referred to herein will not result in or be in conflict with
or constitute a default under any agreement, instrument, document,
decree, order or any federal, state or local Law, statute, rule,
regulation or ordinance applicable to or affecting Borrower; (vi) no
consent, approval, order or authorization of, or registration or filing
with, any governmental or public body or authority is required in
connection with the acceptance hereof, the Revolving Credit Loan or the
matters contemplated hereby; (vii) the Revolving Credit Loan shall not
violate the usury or other Laws of the Commonwealth of Pennsylvania or
any other jurisdiction relating to the maximum rate of interest; (viii)
that the Properties comprising the Collateral Pool are in compliance
with all applicable Laws relating to zoning, use and subdivision and
that the permits, licenses and approvals referred to in (d)(ii) have
been obtained;
(j) a copy of the limited partnership agreements of Borrower and the
Partner, certified as of the Closing Date by the general partner of
each entity in a manner designated by Lender, and in addition, a copy
<PAGE>
of the filed certificates of limited partnership, certified as of a
recent date by the Secretary of State of the respective jurisdictions
in which Borrower and Partner were formed;
(k) if the general partner of the Partner is a corporation, a copy of the
articles of incorporation, bylaws and resolutions of such entity, such
articles of incorporation to be certified as of a recent date by the
Secretary of State of the jurisdiction in which such entity was formed,
and such bylaws and resolutions to be certified as of the Closing Date
by the secretary of such entity;
(l) if the general partner of the Partner is a corporation, good standing
certificates with respect to such entity, such certificates to be of a
recent date and to be made by the Secretary of State of the
jurisdiction in which such entity was formed;
(m) a certificate, to be dated as of the Closing Date of the Partner of
Borrower as to the incumbency of officers and partners;
(n) rent rolls setting forth all of the tenants and other occupants of
portions of the Properties comprising the Collateral Pool (the
"Tenants") and summarizing the terms of their respective leases (the
"Leases");
(o) copies of any and all Major Leases, with respect to the Properties
comprising the Collateral Pool;
(p) estoppel letters from all Tenants under Major Leases, with respect to
each of the Properties comprising the Collateral Pool, which letters
shall confirm that no defaults exist under the terms of the respective
Leases, and such other information as shall be required by Lender;
(q) subordination, non-disturbance and attornment agreements from all
Tenants under Major Leases with respect to each of the Properties
comprising the Collateral Pool, which agreements shall subordinate the
Leases to the Lien of the respective Mortgages;
(r) copies of any and all Management Agreements with respect to the
Properties comprising the Collateral Pool;
(s) notices to tenants regarding the consummation of the Revolving Credit
Loan as may be contemplated pursuant to the Major Leases;
(t) such other instruments and documents as Lender shall reasonably require
to evidence and secure the Revolving Credit Loan and to comply with the
provisions hereof and the requirements of regulatory authorities to
which Lender is subject, all of which shall be satisfactory in form,
content and substance to Lender.
CONSOLIDATED, AMENDED AND RESTATED
REVOLVING CREDIT NOTE
(City of Miami, Dade County, Florida)
$5,000,000 Dated: June 21, 1995
Pittsburgh, Pennsylvania
FOR VALUE RECEIVED, MCNEIL REAL ESTATE FUND XXVII, L.P., a Delaware
limited partnership ("Borrower"), promises to pay to the order of PNC BANK,
NATIONAL ASSOCIATION, a national banking association or any subsequent holder
hereof ("Lender") at its principal offices located at One PNC Plaza, 19th Floor,
Fifth Avenue and Wood Street, Real Estate Banking, Pittsburgh, Pennsylvania
15265 (or at such other place or places as Lender may designate) the lesser of
(i) the principal sum of $5,000,000, or (ii) the aggregate unpaid principal
balance of all advances of the Revolving Credit Loan (as hereinafter defined)
made by Lender to Borrower pursuant to Section 2.01 of the Revolving Credit Loan
Agreement (as hereinafter defined), plus interest thereon at the interest rates
specified, in Section 2.01 of that certain Revolving Credit Loan Agreement (the
"Loan Agreement") of even date herewith executed by Borrower and Lender, in
accordance with the terms and conditions of this Consolidated, Amended and
Restated Revolving Credit Note (the "Note"). This Note is secured, inter alia,
by (i) a Mortgage, Assignment of Rents, Security Agreement and Financing
Statement dated as of October 23, 1992 in favor of Community Bank, N.A., the
predecessor in interest to Bank Midwest, N.A. ("Midwest"), as assigned by
Midwest to Lender by Assignment of Note, Mortgage and Related Documents dated
June 22, 1995, and modified by a Notice of Future Advance and Mortgage
Modification Agreement executed by Borrower and Lender dated of even date
herewith and as modified
THIS NOTE CONSOLIDATES, AMENDS, REPLACES AND RESTATES (1) THAT CERTAIN
PROMISSORY NOTE OF BORROWER IN FAVOR OF COMMUNITY BANK, N.A., THE PREDECESSOR IN
INTEREST TO BANK MIDWEST, N.A. ("MIDWEST"), DATED OCTOBER 23, 1992 IN THE
ORIGINAL PRINCIPAL AMOUNT OF $7,000,000, AS ASSIGNED BY MIDWEST TO PNC BANK,
NATIONAL ASSOCIATION (THE "ORIGINAL NOTE") AND (2) THAT CERTAIN FUTURE ADVANCE
REVOLVING PROMISSORY NOTE OF BORROWER TO PNC BANK, NATIONAL ASSOCIATION DATED OF
EVEN DATE HEREWITH IN THE PRINCIPAL AMOUNT OF $3,000,000 (THE "FUTURE ADVANCE
NOTE"). THE ORIGINAL NOTE AND THE FUTURE ADVANCE NOTE ARE ATTACHED HERETO. THE
TERMS AND CONDITIONS SET FORTH HEREIN SHALL CONTROL THE OBLIGATIONS OF BORROWER
WITH RESPECT TO THE INDEBTEDNESS EVIDENCED BY THE ORIGINAL NOTE AND THE FUTURE
ADVANCE NOTE. THIS NOTE DOES NOT EVIDENCE ANY INDEBTEDNESS OF BORROWER IN EXCESS
OF THE ORIGINAL NOTE AND THE FUTURE ADVANCE NOTE CONSOLIDATED, AMENDED, REPLACED
AND RESTATED HEREBY. ALL REQUIRED INTANGIBLE AND DOCUMENTARY STAMP TAXES HAVE
BEEN PAID IN CONNECTION WITH THE ORIGINAL NOTE AND THE FUTURE ADVANCE NOTE.
further by an Amended and Restated Mortgage and Security Agreement dated of even
date herewith executed by Borrower and Lender (collectively, the "Mortgage");
and (ii) an Amended and Restated Assignment of Leases and Rents of even date
herewith executed by Borrower and Lender, all encumbering property located in
Dade County, Florida. To the extent not inconsistent or in conflict with the
provisions of this Note, all of the terms, definitions, conditions and covenants
of the Mortgage are expressly made a part of this Note by reference in the same
manner and with the same effect as if set forth herein at length, and any holder
of this Note is entitled to the benefits of and remedies provided in the
Mortgage.
The Original Note and the Future Advance Note are hereby
consolidated, amended and restated as follows:
FOR VALUE RECEIVED, the undersigned, McNEIL REAL ESTATE FUND
XXVII, L.P., a Delaware limited partnership (herein called the "Borrower"),
whose address is 13760 Noel Road, Suite 700, Dallas, Texas 75240, hereby
promises to pay to the order of PNC BANK, NATIONAL ASSOCIATION (the "Lender")
the lesser of (i) the principal sum of Five Million U.S. dollars (U.S.
$5,000,000), or (ii) the aggregate unpaid principal balance of all advances of
the Revolving Credit Loan made by the Lender to the Borrower pursuant to Section
2.01 of the Revolving Credit Loan Agreement dated as of the date hereof between
the Borrower and the Lender (the "Loan Agreement"), payable on the Maturity
Date.
All capitalized terms used herein shall, unless otherwise
defined herein, have the same meanings given to such terms in the Loan
Agreement.
The borrower shall pay interest on the unpaid principal
balance hereof from time to time outstanding from the date hereof at the rate or
rates per annum specified by the Borrower pursuant to Article III of, or as
other wise provided in, the Loan Agreement.
Upon the occurrence of an Event of Default under the Loan
Agreement, following the expiration of any applicable grace period, the Borrower
shall pay interest on the entire principal amount of the then outstanding
advances of the Revolving Credit Loan evidenced by this Revolving Credit Note at
a rate per annum (based on a year of 360 days and actual days elapsed) equal to
four percent (4%) above the Prime Rate (the "Default Rate"). Such interest rate
will accrue before and after any judgment has been entered and shall continue
until the date paid.
Borrower shall pay to Lender, upon demand, a late payment
charge equal to five percent (5%) of the amount of any payment not received
within ten (10) days of the date such payment is due.
Subject to the provisions of the Loan Agreement, interest on
this Revolving Credit Note will be payable on the first Business Day of each
calendar month after the date hereof up to and including the Maturity Date.
If any payment or action to be made or taken hereunder shall
be stated to be or become due on a day which is not a Business Day, such payment
or action shall be made or taken on the next following Business Day and such
extension of time shall be included in computing interest or fees, if any, in
connection with such payment or action.
Subject to the provisions of the Loan Agreement, payments of
both principal and interest shall be made without setoff, counterclaim or other
deduction of any nature at the office of the Lender located at One PNC Plaza,
19th Floor, Real Estate Banking, Fifth Avenue and Wood Street, Pittsburgh,
Pennsylvania 15265, in lawful money of the United States of America in
immediately available funds, which may include payment by check drawn on a
lending institution located within the United States of America.
This Revolving Credit Note is the Revolving Credit Note
referred to in, and is entitled to the benefits of, the Loan Agreement and other
Loan Documents, including the representations, warranties, covenants,
conditions, security interests or Liens contained or granted therein. The Loan
Agreement among other things contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayment, in certain circumstances, on account of principal hereof prior to
maturity upon the terms and conditions therein specified.
The Borrower waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Revolving Credit Note and the Loan
Agreement except as may be otherwise expressly set forth therein.
This Revolving Credit Note shall bind the Borrower and its
successors and assigns, and the benefits hereof shall inure to the benefit of
the Lender and its successors and assigns. All references herein to the
"Borrower" and the "Lender" shall be deemed to apply to the Borrower and the
Lender, respectively, and their respective successors and assigns.
WARRANT OF ATTORNEY TO ENTER JUDGMENT BY CONFESSION.
(i) THE BORROWER ACKNOWLEDGES THAT (a) IT HAS READ AND
UNDERSTANDS, AFTER CONSULTATION WITH ITS COUNSEL, THAT THE PROVISIONS OF
PARAGRAPH (ii) BELOW COULD ENABLE THE LENDER TO OBTAIN A JUDGMENT AGAINST THE
BORROWER AND COMMENCE EXECUTION PROCEEDINGS THAT RESULT IN THE SEIZURE OF ASSETS
OF THE BORROWER, IN EITHER CASE, WITHOUT THE BORROWER HAVING THE BENEFIT OF
PRIOR NOTICE OR A HEARING; AND (b) THE BORROWER NEVERTHELESS KNOWINGLY AND
VOLUNTARILY AGREES TO SUCH POSSIBLE CONSEQUENCES AND THE PROVISIONS OF PARAGRAPH
(ii) BELOW.
(ii) FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT BORROWER
DOES HEREBY EMPOWER ANY ATTORNEY OF ANY COURT OF RECORD AND, WITH OR WITHOUT A
COMPLAINT OR DECLARATION FILED, CONFESS A JUDGMENT OR JUDGMENTS AGAINST BORROWER
AND IN FAVOR OF LENDER OR LENDER'S SUCCESSORS OR ASSIGNS IN ANY COURT OF RECORD
WITHIN THE COMMONWEALTH OF PENNSYLVANIA FOR THE UNPAID PRINCIPAL BALANCE HEREOF,
AND ALL INTEREST HEREON, TOGETHER WITH COSTS OF SUIT AND AN ATTORNEY'S
COMMISSION OF 10% FOR COLLECTION. THE AUTHORITY AND POWER TO APPEAR FOR AND
ENTER JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF, AND MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS LENDER OR ITS
SUCCESSORS OR ASSIGNS SHALL DEEM NECESSARY OR DESIRABLE. ANY SUCH JUDGMENT SHALL
BE FULLY ENFORCEABLE UP TO THE AMOUNT DUE FROM BORROWER AT THE TIME ENFORCEMENT
OF THE JUDGMENT IS SOUGHT, PLUS AN ATTORNEY'S COMMISSION OF 10% FOR COLLECTION.
BORROWER HEREBY FOREVER WAIVES AN RELEASES ANY AND ALL ERRORS IN SAID
PROCEEDINGS, WAIVES STAY OF EXECUTION, STAY, CONTINUANCE OR ADJOURNMENT OF SALE
ON EXECUTION, THE RIGHT TO PETITION TO SET ASIDE OR ORDER A RESALE, THE RIGHT TO
EXCEPT TO THE SHERIFF'S SCHEDULE OF PROPOSED DISTRIBUTION, THE RIGHT OF
INQUISITION AND EXTENSION OF TIME OF PAYMENT, AND AGREES TO CONDEMNATION OF ANY
PROPERTY LEVIED UPON BY VIRTUE OF ANY EXECUTION ISSUED ON ANY SUCH JUDGMENT, AND
BORROWER SPECIFICALLY WAIVES ALL EXEMPTIONS FROM LEVY AND SALE OF ANY PROPERTY
THAT NOW IS OR MAY HEREAFTER BE EXEMPT UNDER ANY EXISTING OR FUTURE LAWS OF THE
UNITED STATES OF AMERICA OR THE COMMONWEALTH OF PENNSYLVANIA OR OF ANY OTHER
JURISDICTION.
Borrower agrees that this Revolving Credit Note shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania (without giving effect to Pennsylvania's principles of conflicts of
law). Borrower agrees that the Courts of Common Pleas of Allegheny County,
Pennsylvania and the United States District Court for the Western District of
Pennsylvania shall have exclusive jurisdiction and venue with respect to all
actions by or against Borrower under or pursuant to this Revolving Credit Note
and hereby consents to the jurisdiction of such courts and to service of
process, effective upon receipt by personal service, overnight express delivery
or registered or certified mail to Borrower at the address given in the first
paragraph hereof. Borrower shall promptly notify Lender in writing of any change
in Borrower's address.
BORROWER WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON OR RELATED TO THE SUBJECT MATTER OF THIS NOTE OR ANY OF
THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE LOAN
DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
BORROWER AND BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON
BEHALF OF LENDER HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. BORROWER
FURTHER ACKNOWLEDGES THAT BORROWER HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT BORROWER HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL. BORROWER AGREES THAT THE OBLIGATIONS EVIDENCED BY THIS NOTE ARE
EXEMPTED TRANSACTIONS UNDER THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION 1061, ET
SEQ.
This is a sealed instrument.
Borrower has executed this consolidated, Amended and Restated
Revolving Credit Note as of the day and year first above written.
McNEIL REAL ESTATE FUND XXVII,
L.P., a Delaware limited partnership
By: McNeil Partners, L.P., a
Delaware limited partnership,
its general partner
By: McNeil Investors, Inc.,
a Delaware Corporation,
its general partner
By: s/s Donald K. Reed
----------------------------
Name: Donald K. Reed
----------------------------
Title: President
----------------------------
