<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] For the fiscal year ended December 31, 1997
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the Transition period from to
Commission File Number 33-16973
NET 1 L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3421566
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Lexington Corporate Properties Trust
355 Lexington Avenue
New York, NY 10017
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 692-7200
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of
Limited Partnership
Interests
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
State the aggregate market value of the voting stock held by non-affiliates of
the registrant.
There is no active public market for the units of limited partnership interests
issued by the Registrant.
Not Applicable.
Page 1 of 31
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K into which the document is incorporated: (1) Any annual report
to security holders; (2) Any proxy or information statement; and (3) Any
prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of
1933. The listed documents should be clearly described for identification
purposes.
None.
2
<PAGE> 3
PART I.
Forward-Looking Statements
When used in this Form 10-K Report, the words "believes", "expects", "estimates"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could cause
actual results to differ materially. In particular, among the factors that could
cause actual results to differ materially are continued qualification as a real
estate partnership, general business and economic conditions, competition,
increases in real estate construction costs, interest rates, accessibility of
debt and equity capital markets and other risks inherent in the real estate
business including tenant defaults, potential liability relating to
environmental matters and illiquidity of real estate investments. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Partnership undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements which may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
ITEM 1. BUSINESS
The registrant, Net 1 L.P. (the "Partnership"), is a limited partnership formed
on August 25, 1987 under the Uniform Limited Partnership Act of the State of
Delaware for the purpose of investing primarily in existing commercial
properties which are then triple net leased to corporations or other entities.
The Partnership Agreement was amended and restated on September 30, 1994, which
enables the Partnership to make additional real estate investments.
The General Partner of the Partnership is Lepercq Net 1 L.P., a Delaware limited
partnership (the "General Partner"). Lepercq Net 1 Inc. is the general partner
of the General Partner. The directors and executive officers of Lepercq Net 1
Inc. are discussed in PART III, Item 10 (Directors and Executive Officers of the
Registrant). Leased Properties Management, Inc., an affiliate of Lepercq Net 1
Inc., performs certain property management services in connection with the
operation of the Partnership's business.
The Partnership commenced an offering to the public of 50,000 units at $1,000
per unit of limited partnership interests (the "Units") on November 20, 1987
pursuant to a Prospectus. The Prospectus was filed with the Securities and
Exchange Commission as part of the Partnership's Registration Statement on Form
S-11 (No. 33-16973). On January 17, 1989, the Partnership held the final
admission of Limited Partners, and the offering was terminated after a total of
31,001 Units had been sold, equaling $31.001 million in capital contributions.
As of December 31, 1997, the Partnership had invested $30.827 million of the
proceeds of the offering in the properties, which are described in Item 2 below.
3
<PAGE> 4
The Partnership invests in net leased real properties (or interests therein)
located throughout the United States, which offer the potential for (i)
preservation and protection of the capital of the limited partners of the
Partnership, (ii) providing increasing cash distributions from operations during
the term of the Partnership, (iii) providing tax benefits so that a portion of
the cash distributions is sheltered from current income taxation, and (iv)
appreciation in value of the Partnership's investments.
Investments are made in various types of commercial real properties and
interests therein. Such investments may include, but are not limited to: fitness
centers, warehouses, distribution centers, office buildings, retail stores,
hotels, motels, nursing homes and congregate care facilities. The Partnership
does not invest in restaurant properties. Investments are not restricted as to
specific geographical areas; however, all of the Partnership's investments are
made within the United States. The Partnership acquired its original portfolio
of properties without acquisition financing, but it borrowed an amount through a
closing loan sufficient to pay all or a portion of the Partnership's
organization, offering and acquisition expenses. The closing loan was paid in
1994. The real estate investments made between 1994 and 1997 were acquired with
a combination of acquisition financing and cash balances.
Each of the following properties (as hereinafter defined) accounted for 10% or
more of consolidated rental revenues for the years ended December 31, follow:
<TABLE>
<CAPTION>
Property 1997 1996 1995
-------- ---- ---- ----
<S> <C> <C> <C>
Phoenix, AZ 25% 25% 36%
Autozone (*) 26% 29% 40%
California (**) 12% 13% 18%
Sumter, SC 17% 18% -
Gainesville, GA 11% 12% -
</TABLE>
* These properties consist of 16 retail stores located as follows: two in
Alabama, two in Florida, one in Georgia, five in New Mexico, and six in
Texas.
** These properties consist of three bus terminals located in California.
At December 31, 1997, the Phoenix, Arizona Property accounted for 18%, the
Autozone Properties accounted for 24%, the Sumter, South Carolina Property
accounted for 14%, the Gainesville, Georgia Property accounted for 11% and the
Brownsville, Texas Property accounted for 14% of total assets.
The Partnership attempts to maintain a working capital cash reserve in an amount
equal to 3% of the gross proceeds of the offering, which is anticipated to be
sufficient to satisfy liquidity requirements. Liquidity of the Partnership could
be adversely affected by unanticipated costs, particularly costs relating to the
vacancy of properties, tenants experiencing financial difficulties, and greater
than anticipated operating expenses. To the extent that such working capital
reserves are insufficient to satisfy the cash requirements of the Partnership,
additional funds may be obtained either through short-term or permanent loans or
by reducing distributions to limited partners.
The Partnership operates in one industry segment, investment in net leased real
property.
4
<PAGE> 5
Competition
The real estate business is highly competitive and the Partnership competes with
numerous established companies having significantly greater resources and
experience. Competition may also come from other partnerships which have been or
may be formed by the General Partner or its affiliates.
Environmental Matters
Under various federal, state and local environmental laws, statutes, ordinances,
rules and regulations, an owner of real property may be liable for the costs of
removal or redemption of certain hazardous or toxic substances at, on, in or
under such property as well as certain other potential costs relating to
hazardous or toxic substances (including government fines and penalties and
damages for injuries to persons and adjacent property). Such laws often impose
liability without regard to whether the owner knew of, or was responsible for,
the presence or disposal of such substances. Although the Partnership's tenants
are responsible for any environmental damage and claims related to the leased
premises, in the event of the bankruptcy or inability of the tenant of such
premises to satisfy any obligations with respect thereto, the Partnership may be
required to satisfy such obligations. In addition, under certain environmental
laws, the Partnership, as the owner of such properties, may be held directly
liable for any such damages or claims irrespective of the provisions of any
lease.
From time to time, in connection with the conduct of the Partnership's business,
and prior to the acquisition of any property from a third party or as required
by the Partnership's financing sources, the Partnership authorizes the
preparation of Phase I environmental reports with respect to its properties.
Based upon such environmental reports and management's ongoing review of its
properties, as of the date of this report, management was not aware of any
environmental condition with respect to any of the Partnership's properties
which management believed would be reasonably likely to have a material adverse
effect on the Partnership. There can be no assurance, however, that (i) the
discovery of environmental conditions, the existence or severity of which were
previously unknown, (ii) changes in law, (iii) the conduct of tenants or (iv)
activities relating to properties in the vicinity of the Partnership's
Properties will not expose the Partnership to material liability in the future.
Changes in laws increasing the potential liability for environmental conditions
existing on properties or increasing the restrictions on discharges or other
conditions may result in significant unanticipated expenditures or may otherwise
adversely affect the operations of the Partnership's tenants, which would
adversely affect the Partnership's funds from operations.
Employees
The Partnership has no employees. All necessary personnel are provided by the
General Partner or its affiliates or agents. See Part III Item 10, "Directors
and Executive Officers of the Registrant" and Item 13, "Certain Relationships
and Related Transactions."
5
<PAGE> 6
ITEM 2. PROPERTIES
<TABLE>
<CAPTION>
Annualized
Acquisition Base Rent at
Date of Cost 12/31/97 Lease(s) Square
Acquisition Tenant Location ($000's) ($000's) Expires Feet
- ----------- ------------------------- ----------------------- -------- -------- ------- ----
<C> <S> <C> <C> <C> <C> <C>
07-18-88 Scandinavian
US Swim & Fitness Phoenix, AZ $ 5,860 $ 677 07-08 36,600
08-26-88 Autozone Stores, Inc. Various (16 properties) 6,980 736 08-08 104,600
02-28-89 Greyhound Lines, Inc. Various (3 properties) 2,470 355 02-09 195,200
08-22-94 Circuit City Stores, Inc. Lynchburg, VA 751 86 11-06 9,300
11-27-95 Wal-Mart Stores, Inc. Sumter, SC 3,850 328 01-08 103,400
12-28-95 Wal-Mart Stores, Inc. Gainesville, GA 2,960 218 01-09 89,200
05-30-97 Wal-Mart Stores, Inc. Brownsville, TX 3,569 321 01-08 85,300
-------- -------- -------
$ 26,440 $ 2,721 623,600
======== ======== =======
</TABLE>
Minimum future rental payments receivable under the leases during the base terms
for the properties owned by the Partnership at December 31, 1997, are as follows
($000):
<TABLE>
<CAPTION>
Year Total
---- -----
<S> <C>
1998 $ 2,755
1999 2,803
2000 2,803
2001 2,804
2002 2,818
2003-2007 14,362
2008-2009 1,727
---------
Total $ 30,072
=========
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership nor its properties are subject to any pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year ended
December 31, 1997 to a vote of Unit holders.
6
<PAGE> 7
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
An established public trading market for the Units does not exist, and it is not
anticipated that such a market will develop in the near future. Further, the
transfer of Units is subject to substantial restrictions. Accordingly,
information as to the market value of a Unit at any given date is not available.
As of December 31, 1997, there were 1,532 investors holding 30,772 limited
partnership units.
The Partnership is a limited partnership and accordingly, does not pay
dividends. However, the Partnership makes quarterly cash distributions. Cash
distributions paid per Unit of limited partnership interest for each of the
years in the three-year period ended December 31, 1997 were $50.04, $50.04 and
$93.40, respectively.
7
<PAGE> 8
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of selected financial data for the
Partnership for the years ended December 31, ($000 except per unit data):
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental revenue $ 2,992 $ 2,707 $ 1,903 $ 1,884 $ 2,977
=========== =========== =========== =========== ========
Income (loss) before
extraordinary item $ 1,855 $ 1,547 $ 1,093 $ 2,592 $ (608)
=========== =========== =========== =========== ========
Income (loss) before
extraordinary item per Unit
of partnership interest (*) $55.85 to $46.39 to $32.59 to $76.23 to $(20.35) to
61.00 51.03 36.16 86.34 (17.71)
=========== =========== =========== =========== ========
Extraordinary item $ -- $ -- $ -- $ 1,200 $ --
=========== =========== =========== =========== ========
Extraordinary item per Unit
of partnership interest (*) $35.31 to
$ -- $ -- $ -- 39.98 $ --
=========== =========== =========== =========== ========
Net income (loss) $ 1,855 $ 1,547 $ 1,093 $ 3,792 $ (608)
=========== =========== =========== =========== ========
Net income (loss) per Unit
of partnership interest (*) $55.85 to $46.39 to $32.59 to $111.54 to $(20.35) to
61.00 51.03 36.16 126.32 (17.71)
=========== =========== =========== =========== ========
Total assets $ 25,663 $ 23,179 $ 23,412 $ 21,420 $ 26,323
=========== =========== =========== =========== ========
Mortgage notes payable
and long-term debt (including
accrued interest added to
principal) $ 5,676 $ 3,552 $ 3,687 $ -- $ 6,995
=========== =========== =========== =========== ========
Cash distributions -
limited partners (per Unit) $ 50.04 $ 50.04 $ 93.40 $ 50.04 $ 65.67
=========== =========== =========== =========== ========
</TABLE>
(*) Amounts allocated to and received by unit holders vary depending on the
dates they became unit holders.
The above financial data should be read in conjunction with the Consolidated
Financial Statements and the related notes appearing elsewhere in this report.
8
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
On November 20, 1987, the Partnership commenced the sale of up to 50,000 Units
of limited partnership interests at $1,000 per Unit with the option to offer an
additional 50,000 Units. As of January 17, 1989, the Partnership had raised a
total of $31.001 million in capital contributions (31,001 Units) and the
offering was terminated. The net offering proceeds consisting of aggregate gross
offering proceeds of $31.001 million less related offering costs of $3.781
million, along with the proceeds from the closing loan and other mortgage debt,
have been utilized by the Partnership to invest in triple net leased real estate
properties (or interests therein); to pay for related property acquisition
expenses, financing and acquisition fees; and to provide for a working capital
reserve.
Pursuant to the Partnership Agreement, limited partnership Units may be
repurchased at 90% of the net asset value 60 days after the offer to repurchase
has been made. No Units have been repurchased since 1990.
The Partnership attempts to maintain a working capital reserve in an amount
equal to 3% of the gross proceeds of its offering, an amount which is
anticipated to be sufficient to satisfy liquidity requirements. Liquidity of the
Partnership could be adversely affected by unanticipated costs, lessees
experiencing financial difficulties and greater than anticipated operating
expenses. To the extent that such working capital reserves are insufficient to
satisfy the cost requirements of the Partnership, additional funds may be
obtained through short-term or permanent loans or by reducing distributions to
limited partners.
On May 30, 1997, the Partnership acquired a property located in Brownsville,
Texas (the "Brownsville Property") from an unrelated party. The Brownsville
Property consists of an 85,334 square foot warehouse style retail store building
leased to Wal-Mart Stores, Inc. pursuant to a triple net lease. The lease has a
remaining term which expires on January 31, 2008. The lease provides for annual
base rental payments of $321,000 or $3.76 per square foot. In addition to net
rent, Wal-Mart is required to pay percentage rent equal to 1% of gross sales in
excess of base gross receipts as defined. The lease has five renewal terms of
five years each.
The purchase price of $3.525 million and related expenses of approximately
$44,000 were satisfied by a cash payment and by an assumption of an existing
note with a principal balance of $2.365 million. The note bears interest at a
rate of 7.35% per annum, with a monthly debt service payment of principal and
interest in the amount of $27,000 to fully amortize the note on January 15,
2008.
The unpaid cumulative preferred return at December 31, 1997 totaled $10.856
million ($349.57 to $353.37 per Unit, per close), and was reduced by $384,958
($12.51 per Unit) with the fourth quarter 1997 distribution paid in January
1998.
Except for the debt service requirements under the mortgages, there are no
material restrictions upon the Partnership's present or future ability to make
distributions in accordance with the provisions of its Partnership Agreement.
9
<PAGE> 10
Impact of Year 2000
The Partnership is evaluating its computer and communication systems that could
be affected by the "Year 2000" issue. The year 2000 problem is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the Partnership's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculation. The
Partnership presently believes that the year 2000 problem will not pose
operational problems for the Partnership's computer and communication systems
and will not have a material impact on the operations of the Partnership.
Results of Operations ($000)
<TABLE>
<CAPTION>
Increase (Decrease)
1997 1996 1995 1997-1996 1996-1995
---- ---- ---- --------- ---------
<S> <C> <C> <C> <C> <C>
Total revenues $ 3,080 2,824 2,184 $ 256 $ 640
------- ------- ------- ----- ------
Total expenses:
Interest 469 388 27 81 361
Depreciation 439 393 275 46 118
General & administrative 317 496 464 (179) 32
------- ------- ------- ----- ------
1,225 1,277 766 (52) 511
------- ------- ------- ----- ------
Income before loss on sale
of property 1,855 1,547 1,418 308 129
Loss on sale of property -- -- (325) -- 325
------- ------- ------- ----- ------
Net income $ 1,855 1,547 1,093 $ 308 $ 454
======= ======= ======= ===== ======
</TABLE>
The changes in results of operations with respect to revenues, interest and
depreciation for the years ended December 31, 1997, 1996, and 1995 are primarily
attributable to the operations of the real property investments acquired in 1995
and 1997 as described in Item 2 and above.
General and administrative expenses decreased in 1997 due to non-recurring
transactional expenses incurred in 1996.
On March 15, 1995, the Partnership sold its property located in Bloomingdale,
Illinois for approximately $3 million and received proceeds of $2.649 million.
The book value at the time of sale was $2.974 million. The Partnership incurred
a loss of $325,000.
Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income" and SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 130 and 131 are effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods, provided for comparative purposes, is required.
The adoption of SFAS 130 and 131 in 1998 will have no effect on the financial
statements of the Partnership.
10
<PAGE> 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
INDEX
Page
Independent Auditors' Report 12
Consolidated Balance Sheets at December 31, 1997 and 1996 13
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995 14
Consolidated Statements of Changes in Partners' Capital (Deficit)
for the years ended December 31, 1997, 1996 and 1995 15
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 16
Notes to Consolidated Financial Statements 17 - 24
Consolidated Financial Statement Schedule*
- ------------------------------------------
*Real Estate and Accumulated Depreciation Schedule III 25
- ----------
* All other schedules have been omitted because the required financial
information is not applicable or the information is shown in the financial
statements or notes thereto.
11
<PAGE> 12
Independent Auditors' Report
The Partners
Net 1 L.P.:
We have audited the consolidated financial statements of Net 1 L.P. and
consolidated partnerships as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and the financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements and the financial
statement 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Net 1 L.P. and
consolidated partnerships as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
New York, New York
February 12, 1998
12
<PAGE> 13
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED BALANCE SHEETS
($000)
December 31, 1997 and 1996
<TABLE>
<CAPTION>
Assets 1997 1996
---- ----
<S> <C> <C>
Real estate, at cost (notes 4 and 5):
Buildings $ 18,914 $ 15,725
Land 7,526 7,146
-------- --------
26,440 22,871
Less: accumulated depreciation 2,735 2,296
-------- --------
23,705 20,575
Cash and cash equivalents 1,312 2,123
Rent receivable (note 2) 400 315
Other assets 246 166
-------- --------
$ 25,663 $ 23,179
======== ========
Liabilities and Partners' Capital
Mortgage notes payable (note 5) 5,676 3,552
Accrued interest payable (note 5) 30 32
Accounts payable and other liabilities 165 87
-------- --------
5,871 3,671
-------- --------
Commitments and contingencies
Partners' capital (note 3):
General Partner (174) (180)
Limited Partners ($1,000 per Unit,
50,000 Units authorized, 30,772
Units issued and outstanding) 19,966 19,688
-------- --------
Total partners' capital 19,792 19,508
-------- --------
$ 25,663 $ 23,179
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 14
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF INCOME
($000 except per unit amounts)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental (notes 4 and 6) $ 2,992 $ 2,707 $ 1,903
Interest 88 101 254
Other income -- 16 27
------- ------- -------
3,080 2,824 2,184
------- ------- -------
Expenses:
Interest (note 5) 469 388 27
Depreciation 439 393 275
General, administrative and other (note 7) 317 496 464
------- ------- -------
1,225 1,277 766
------- ------- -------
Income before loss on
sale of property 1,855 1,547 1,418
Loss on sale of property (note 4) -- -- (325)
------- ------- -------
Net income $ 1,855 $ 1,547 $ 1,093
======= ======= =======
Net income per Unit of
partnership interest (*) $55.85 to $61.00 $46.39 to $51.03 $32.59 to $36.16
================ ================ ================
</TABLE>
(*) Amounts allocated to unit holders vary depending on the dates they became
unit holders.
See accompanying notes to consolidated financial statements.
14
<PAGE> 15
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CHANGES IN
PARTNERS' CAPITAL (DEFICIT)
($000)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
General Limited
Total Partner Partners
----- ------- --------
<S> <C> <C> <C>
Partners' capital (deficit) at December 31, 1994 $21,372 (143) 21,515
Net income 1,093 22 1,071
Cash distributions (2,933) (59) (2,874)
------- ---- ------
Partners' capital (deficit) at December 31, 1995 19,532 (180) 19,712
Net income 1,547 31 1,516
Cash distributions (1,571) (31) (1,540)
------- ---- ------
Partners' capital (deficit) at December 31, 1996 19,508 (180) 19,688
Net income 1,855 37 1,818
Cash distributions (1,571) (31) (1,540)
------- ---- ------
Partners' capital (deficit) at December 31, 1997 $19,792 (174) 19,966
======= ==== ======
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE> 16
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,855 1,547 1,093
------- ------ -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 439 393 275
Loss on sale of properties, net -- -- 325
Increase in rent receivable (85) (15) (17)
(Increase) decrease in other assets (80) 162 (172)
(Decrease) increase in accrued interest payable (2) (1) 33
Increase (decrease) in accounts payable
and other liabilities 78 (74) 112
------- ------ ------
Total adjustments 350 465 556
------- ------ ------
Net cash provided by operating activities 2,205 2,012 1,649
------- ------ ------
Cash flows from investing activities:
Acquisition of real estate (1,205) -- (3,115)
Proceeds from sale of properties -- -- 2,649
Principal payment received on note 1 1 1
------- ------ ------
Net cash (used in) provided by
investing activities (1,204) 1 (465)
------- ------ ------
Cash flows from financing activities:
Principal payments on mortgage notes (241) (135) (7)
Cash distributions to partners (1,571) (1,571) (2,933)
------- ------ ------
Net cash used in financing activities (1,812) (1,706) (2,940)
------- ------ ------
Net (decrease) increase in cash and
cash equivalents (811) 307 (1,756)
Cash and cash equivalents at beginning of year 2,123 1,816 3,572
------- ------ ------
Cash and cash equivalents at end of year $ 1,312 2,123 1,816
======= ====== ======
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 471 389 2
======= ====== ======
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
On May 30, 1997, in connection with the acquisition of the Texas Property, the
Partnership assumed approximately $2.4 million of first mortgage financing.
In 1995, in connection with the acquisition of the Sumter & Gainesville
Properties, the Partnership assumed approximately $3.7 million of first mortgage
financing.
See accompanying notes to consolidated financial statements.
16
<PAGE> 17
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
1. The Partnership
Net 1 L.P. (the "Partnership") was formed as a limited partnership on
August 25, 1987 under the laws of the State of Delaware to invest in real
estate or interests therein to be net leased to corporations or other
entities.
On November 20, 1987, the Partnership commenced the sale of up to 50,000
Units of limited partnership interests at $1,000 per Unit with the option
to offer an additional 50,000 Units. As of the last admission of Limited
Partners, which occurred on January 17, 1989, the Partnership had raised a
total of $31.001 million (31,001 Units) from 1,638 investors and the
offering was terminated.
Pursuant to the partnership agreement, limited partnership units may be
repurchased, beginning in 1990. On September 30, 1990, the Partnership
repurchased 229 limited partnership units for an aggregate purchase price
of $169,930. No additional Units have been repurchased.
As of December 31, 1997 there was a total of 1,532 investors holding
30,772 limited partnership units.
2. Summary of Significant Accounting Policies
The Partnership's financial statements are prepared on the accrual basis
of accounting for financial reporting purposes.
The financial statements reflect the accounts of the Partnership, Net 1
Sumter L.P. and Net 1 Gainesville L.P., on a consolidated basis. The
Partnership owns a 99% limited partnership interest in each of Net 1
Sumter L.P. and Net 1 Gainesville L.P. The minority interest is not
significant and is included in other liabilities and general,
administrative and other expenses in the accompanying consolidated
financial statements.
Real estate is carried at cost less accumulated depreciation. Acquisition
fees incurred in connection with the properties acquired have been
capitalized as a cost of the property. Depreciation for financial
reporting purposes is determined by the straight-line method over the
estimated economic useful lives of the properties. The Partnership
depreciates buildings over a 40-year period. Depreciation for tax purposes
is determined in accordance with the Modified Accelerated Cost Recovery
System.
(Continued)
17
<PAGE> 18
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
2., Continued
On January 1, 1996, the Partnership adopted the provisions of SFAS No.
121, Accounting for 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 be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If an asset is
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the asset exceeds the fair
market value of the asset. Assets to be disposed of are reported at the
lower of the carrying amount or fair market value less costs to sell.
Adoption of this Statement in 1996 and its application in 1997 did not
have any impact on the Partnership's financial position or results of
operations.
The leases relating to the properties are operating leases in accordance
with generally accepted accounting principles. Rental revenue is
recognized on a straight-line basis over the minimum lease terms. At
December 31, 1997 and 1996, rent receivable primarily consists of amounts
for the excess of rental revenues recognized on a straight-line basis over
the rents collectible under the leases.
For purposes of the statement of cash flows, the Partnership considers all
highly liquid instruments to be cash equivalents. The balance sheet
caption cash and cash equivalents includes $1.3 million and $2.1 million
of money market instruments at December 31, 1997 and 1996, respectively.
The Partnership uses the accrual basis of accounting for Federal income
tax purposes. No provision for income taxes has been made as the liability
for such taxes is that of the partners rather than the Partnership.
Income per Unit amounts were calculated by using the weighted average
number of Units outstanding for each period and allocating the income
attributable for that period to the Limited Partners. The weighted average
Units outstanding was 30,772 for the years ended December 31, 1997, 1996
and 1995.
Statement of Financial Accounting Standards No. 128 (SFAS 128) " Earnings
per Share" is effective for periods ending December 15, 1997. Application
of SFAS 128 had no effect on the Partnership's net income per unit for
1997, 1996 and 1995.
(Continued)
18
<PAGE> 19
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
2., Continued
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 107, Disclosures about Fair Value of Financial
Instruments, defines fair value of a financial instrument as the amount at
which the instrument could be exchanged at a current transaction between
willing parties. The Partnership's cash, mortgage notes payable, accounts
payable and accrued liabilities are considered to be financial instruments
and except for certain mortgage notes payable, as described in note 5, are
carried at cost, which approximates fair value.
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Certain amounts included in the prior years' financial statements have
been reclassified to conform with the current years' presentation.
3. The Partnership Agreement
Pursuant to the terms of the Partnership Agreement, the General Partner is
liable for all general obligations of the Partnership to the extent not
paid by the Partnership. The Limited Partners are not and will not be
liable for the debts of the Partnership beyond their contributed capital.
Distributable cash from operations, as defined in the Partnership
Agreement, is generally to be distributed 98% to the Limited Partners and
2% to the General Partner until each Limited Partner has received total
distributions from operations equal to an 11% cumulative non-compounded
preferred return. Thereafter, such distributions are to be made 90% to the
Limited Partners and 10% to the General Partner.
Distributable cash from capital transactions, as defined, is generally to
be distributed 99% to the Limited Partners and 1% to the General Partner
until each Limited Partner has received total distributions from capital
transactions equal to an 11%, cumulative non-compounded preferred return
plus a return of capital contributions. Thereafter, such distributions are
to be made 85% to the Limited Partners and 15% to the General Partner.
For financial statement reporting purposes, all items of income are
allocated in the same proportion as cumulative distributions of
distributable cash.
(Continued)
19
<PAGE> 20
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
3., Continued
Distributable cash attributed to a particular limited partner's Unit is
calculated from the date of admission to the Partnership. The unpaid
cumulative preferred return at December 31, 1997 totaled $10.856 million
($349.57 to $353.37 per Unit, per close). On January 31, 1998, the unpaid
cumulative preferred return at December 31, 1997 was reduced by a cash
distribution to the Limited Partners for the quarter ended December 31,
1997 totaling $384,958 ($12.51 per unit). The General Partner received a
cash distribution of $7,856 on February 11, 1998.
Cash distributions paid per Unit of limited partnership interest for each
of the years in the three-year period ended December 31, 1997 were $50.04,
$50.04, and $93.40, respectively.
The Partnership Agreement was amended and restated on September 30, 1994,
which enables the Partnership to make additional real estate investments.
Taxable income, as defined, before depreciation, generally is allocated in
the same proportion as cumulative distributions of distributable cash or
cumulative proceeds from capital transactions (other than the portion of
such proceeds constituting a return of capital). Depreciation and
amortization expense, to the extent that it does not exceed income before
depreciation for such year, shall be allocated in the same ratio as
taxable income. Any excess of such depreciation deductions shall be
allocated 98% to the Limited Partners and 2% to the General Partner. For
financial statement reporting purposes all items of income are allocated
in the same proportion as distributions of distributable cash or proceeds
from capital transactions.
4. Investments in Real Estate
The Partnership's real property portfolio as of December 31, 1997, consist
of twenty-four properties (or interest therein) located in nine states,
including health and tennis club facilities, retail stores and bus
terminals. All of the Partnership's properties are subject to triple net
leases, which are generally characterized as leases in which the tenant
bears all, or substantially all, of the costs and cost increase for real
estate taxes, insurance and ordinary maintenance.
(Continued)
20
<PAGE> 21
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
4., Continued
Following is a detailed schedule of the Partnership's real estate and
lease terms at December 31, 1997:
<TABLE>
<CAPTION>
Annualized
Acquisition Base Rent at
Date of Cost 12-31-97 Lease(s) Square
Acquisition Tenant Location ($000's) ($000's) Expires Feet
----------- ------------------------- ---------------------- -------- -------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
07-18-88 Scandinavian
US Swim & Fitness Phoenix, AZ $ 5,860 $ 677 07-08 36,600
08-26-88 Autozone Stores, Inc. Various (16 properties) 6,980 736 08-08 104,600
02-28-89 Greyhound Lines, Inc. Various (3 properties) 2,470 355 02-09 195,200
08-22-94 Circuit City Stores, Inc. Lynchburg, VA 751 86 11-06 9,300
11-27-95 Wal-Mart Stores, Inc. Sumter, SC 3,850 328 01-08 103,400
12-28-95 Wal-Mart Stores, Inc. Gainesville, GA 2,960 218 01-09 89,200
05-30-97 Wal-Mart Stores, Inc. Brownsville, TX 3,569 321 01-08 85,300
--------- --------- -------
$ 26,440 $ 2,721 623,600
========= ========= =======
</TABLE>
The following unaudited pro forma consolidated operating information for
the years ended December 31, 1997 and 1996, were prepared as if the
acquisition of the Brownsville, Texas Property had been consummated as of
January 1, 1996 and was carried forward through December 31, 1996 and
1997. The information provided does not purport to be indicative of what
the operating results of the Partnership would have been had the
acquisition been consummated on the date assumed. The pro forma amounts
($000) follow:
<TABLE>
<CAPTION>
Unaudited Pro Forma Unaudited Pro Forma
Year Ended Year Ended
December 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Revenues $ 3,212 $ 3,145
Net income $ 1,883 $ 1,616
Net income per Unit of
partnership interest $56.70 to $61.93 $48.45 to $53.29
================ ================
</TABLE>
On November 30, 1994, the Partnership entered into an agreement to sell
its property in Bloomingdale, Illinois (the "Bloomingdale Property") for
$3 million. The Bloomingdale Property was sold on March 15, 1995, for
approximately $3 million and the Partnership received proceeds of $2.649
million. The Partnership incurred a loss of approximately $325,000 from
the sale.
21
<PAGE> 22
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
5. Mortgage Notes Payable
On July 14, 1995, the Partnership acquired a 99% limited partnership
interest in Net 1 Sumter L.P. and in Net 1 Gainesville L.P., Delaware
special purpose limited partnerships. On November 27, 1995, Net 1 Sumter
L.P. acquired the property located in Sumter, South Carolina for
approximately $3.85 million by a cash payment and by an assumption of a
20-year, 10.375% secured note. The balance of the note on the date of
acquisition was $2.110 million. The debt service of $25,500, to fully
amortize the note by maturity on January 1, 2008, is payable monthly in
arrears.
On December 28, 1995, Net 1 Gainesville L.P. acquired the property located
in Gainesville, Georgia by a cash payment and assumption of a 116-month,
13% first mortgage note and a 176-month, 7.5% second mortgage note. The
balances of the mortgage notes on the date of acquisition were $1.197
million and $440,476. The first mortgage note provides for debt service
payments of $18,182, to fully amortize the note by maturity on January 1,
2004, is payable monthly in arrears while interest on the second note is
accruing and being added to principal.
On May 30, 1997, the Partnership acquired the property located in
Brownsville, Texas for approximately $3.6 million by a cash payment and by
an assumption of an existing note with a principal balance of
approximately $2.365 million. The note bears interest at a rate of 7.35%
per annum, with a monthly debt service payment of principal and interest
in the amount of $26,709 to fully amortize the note by maturity on January
15, 2008.
Principal paydowns of the mortgage notes payable for the succeeding five
years are as follows ($000):
<TABLE>
<CAPTION>
Year ending December 31, Amount
------------------------ ------
<S> <C>
1998 $ 377
1999 416
2000 459
2001 507
2002 560
===
</TABLE>
The estimated fair value of the mortgage notes payable at December 31,
1997 is $6.077 million, and is based on a valuation of these debts using
market rates of interest (approximately 7.5%) as of December 31, 1997. At
December 31, 1996, the carrying value of the mortgage notes payable was
not substantially different than the fair value.
22
<PAGE> 23
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
6. Leases
Minimum future rental payments receivable under noncancelable operating
leases for the properties as of December 31, 1997, are as follows ($000):
<TABLE>
<CAPTION>
Year Ending December 31, Amount
------------------------ ------
<S> <C> <C>
1998 $ 2,755
1999 2,803
2000 2,803
2001 2,804
2002 2,818
2003-2007 14,362
2008-2009 1,727
---------
$ 30,072
=========
</TABLE>
The leases are triple net leases requiring the lessees to pay all taxes,
insurance, maintenance, and all other similar charges and expenses
relating to the properties and their use and occupancy.
Each of the following properties accounted for 10% or more of rental
revenues shown for the years ended December 31,:
<TABLE>
<CAPTION>
Property 1997 1996 1995
-------- ---- ---- ----
<S> <C> <C> <C>
Phoenix, AZ 25% 25% 36%
Autozone (*) 26% 29% 40%
California (**) 12% 13% 18%
Sumter, SC 17% 18% -
Gainesville, GA 11% 12% -
</TABLE>
* These properties consist of 16 retail stores located as follows: two in
Alabama, two in Florida, one in Georgia, five in New Mexico, and six in
Texas.
** These properties consist of three bus terminals located in California.
At December 31, 1997, the Phoenix, Arizona Property accounted for 18%, the
Autozone Properties accounted for 24%, the Sumter, South Carolina Property
accounted for 14%, the Gainesville, Georgia Property accounted for 11%,
and the Brownsville, Texas Property accounted for 14% of total assets.
23
<PAGE> 24
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
7. Related Parties
Leased Properties Management, Inc., an affiliate of the General Partner,
is entitled to receive a fee for managing the Partnership's properties in
the amount of 1% of gross annual rental receipts (or a greater amount in
certain circumstances). For the years ended December 31, 1997, 1996 and
1995, management fees totaled $29,000, $27,000 and $18,000, respectively.
Two officers of affiliates of the General Partner received acquisition
fees totaling $35,000 for the year ended December 31, 1997 and $67,000 for
the year ended December 31, 1995.
Beginning in October 1996, Lexington Corporate Properties Trust, whose
chairman is chairman of the General Partner, has been reimbursed by the
Partnership for various administrative services performed. For the years
ended December 31, 1997 and 1996, such reimbursements totaled $109,000 and
$88,000, respectively.
24
<PAGE> 25
Schedule III
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
Real Estate and Accumulated Depreciation
December 31, 1997, 1996 and 1995
($000)
Initial cost to Partnership and gross amount at which carried at end of
period (A)
<TABLE>
<CAPTION>
Life on which
depreciation
in latest income
Accumulated Date Date of statements
Description Encumbrances (B) Land Buildings Total (C) Depreciation (D) Acquired Construction is computed
----------- ---------------- ---- --------- --------- ---------------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Health and tennis club
facility, Phoenix, AZ $ - 1,117 4,743 5,860 1,121 July 1988 July 1988 40 years
Retail stores (E) - 2,991 3,989 6,980 935 Aug. 1988 1986 & 1987 (F) 40 years
Bus terminals (G) - 1,086 1,384 2,470 325 Feb. 1989 (G) 40 years
Retail store, Lynchburg, VA - 300 451 751 38 Aug. 1994 1986 40 years
Retail store, Sumter, SC 1,908 850 3,000 3,850 159 Nov. 1995 1983 40 years
Retail store, Gainesville, GA 1,490 802 2,158 2,960 110 Dec. 1995 1984 40 years
Retail store, Brownsville, TX 2,278 380 3,189 3,569 47 May 1997 1985 40 years
------ ----- ------ ------ -----
$5,676 7,526 18,914 26,440 2,735
====== ===== ====== ====== =====
</TABLE>
(A) The initial cost includes the purchase price paid by the Partnership and
acquisition fees and expenses. There is no difference between the initial
cost for financial reporting purposes and the initial cost for Federal
income tax purposes.
(B) See note 5 of Notes to Consolidated Financial Statements - Mortgage Notes
Payable.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(C) Reconciliation of real estate owned:
<S> <C> <C> <C>
Balance at beginning of year $22,871 22,871 17,650
Sale of property -- -- (1,589)
Acquisition of properties 3,569 -- 6,810
------- ------- -------
Balance at end of year $26,440 22,871 22,871
======= ======= =======
(D) Reconciliation of accumulated depreciation:
Balance at beginning of year $ 2,296 1,903 3,217
Sale of property -- -- (1,589)
Depreciation expense 439 393 275
------- ------- -------
Balance at end of year $ 2,735 2,296 1,903
======= ======= =======
</TABLE>
(E) These properties consist of 16 retail stores, which are located as
follows: two in Alabama, two in Florida, one in Georgia, five in New
Mexico and six in Texas.
(F) The 16 retail stores were constructed in different years.
(G) These properties consist of three bus terminals, located and constructed
as follows:
San Bernardino, CA, constructed in 1987; Stockton, CA, constructed in
1967, San Luis Obispo, CA, constructed in 1963.
25
<PAGE> 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
<PAGE> 27
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership and has no directors or officers.
The General Partner of the Partnership is Lepercq Net 1 L.P., a Delaware limited
partnership. Lepercq Net 1 Inc., a Delaware corporation, is the general partner
of the General Partner. The directors and executive officers of Lepercq Net 1
Inc. are discussed below. The directors and executive officers of Lepercq Net 1
Inc. are responsible for the management of the Partnership's business including,
but not limited to, the acquisition of, sale of, financing or refinancing of,
making certain major capital improvements to or leasing of Partnership
properties.
The LCP Group, L. P. ("LCP") has granted Lexington Corporate Properties Trust,
whose chairman is chairman of the General Partner, an option to acquire the
general partnership interest currently owned by LCP in the Partnership. The
option is exercisable at any time.
The directors and executive officers of Lepercq Net 1 Inc. are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
E. Robert Roskind President and Secretary
Denise E. DeBaun Vice President
David J. Walsh Vice President and Treasurer
Dianne R. Smith Assistant Secretary
</TABLE>
Certain biographical information relating to the directors and executive
officers of Lepercq Net 1 Inc. is set forth below.
E. Robert Roskind, age 53, has been associated with LCP since 1973 and has been
Chairman of LCP since September 1976. He also serves as Chairman of the Board
and Co-Chief Executive Officer of Lexington Corporate Properties Trust, a Real
Estate Investment Trust traded on the New York Stock Exchange. Mr. Roskind is a
graduate of the University of Pennsylvania and Columbia Law School, and has been
a member of the New York Bar since 1970. Mr. Roskind is a director of Berkshire
Realty Company, Inc., Krupp Government Income Trust I and Krupp Government
Income Trust II.
Denise E. DeBaun, age 47, has been employed by LCP since 1981. She was a member
of the marketing department from 1986 to 1990. She also serves as an
Administrative Assistant of Lexington Corporate Properties Trust, a Real Estate
Investment Trust traded on the New York Stock Exchange. Ms. DeBaun is a graduate
of Hunter College of the City of New York.
David J. Walsh, age 31, has been associated with LCP since 1993. He has served
as Senior Vice President of LCP since January 1997 and as Director of
Acquisitions since June 1993. Prior to joining LCP, Mr. Wash was associated with
Glaxo Inc., a Fortune 500 pharmaceutical company, as a Pharmaceutical Sales
Representative. Mr. Walsh received his bachelor's degree from Western New
England College in 1989.
Dianne R. Smith, age 51, has been associated with LCP since 1988 as their
paralegal. Ms. Smith also serves as the Paralegal to Lexington Corporate
Properties Trust, a Real Estate Investment Trust traded on the New York Stock
Exchange. Ms. Smith is a graduate of New York University where she received her
Paralegal degree.
27
<PAGE> 28
ITEM 11. EXECUTIVE COMPENSATION
The General Partner is entitled to receive a share of cash distributions when
and as cash distributions are made to the Limited Partners, and a share of
taxable income or loss. Cash distributions of $31,425 were made to the General
Partner in 1997.
The directors and executive officers of Lepercq Net 1 Inc. received no
remuneration from the Partnership.
The General Partner and its affiliates were paid certain fees and commissions
and reimbursed for certain expenses.
Information concerning the cash distributions to the General Partner, and fees,
commissions and reimbursements paid to it or its affiliates, is contained in the
Consolidated Statements of Changes in Partners' Capital (Deficit) and in notes 3
and 7 of Notes to Consolidated Financial Statements in Item 8 above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person is known to the Partnership to be the beneficial owner of
more than 5% of the Units.
(b) Directors and executive officers of Lepercq Net 1 Inc. and
affiliated entities own 99 Units as of December 31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership reimburses the General Partner or its affiliates for expenses
incurred and may pay interest on loans made in connection with acquisitions.
Leased Properties Management, Inc., an affiliate of the General Partner, is
entitled to receive a fee for managing the Partnership's Properties in the
amount of 1% of gross annual rental receipts (or a greater amount in certain
circumstances). Such fees totaled $29,000, $27,000 and $18,000 in 1997, 1996,
and 1995, respectively.
Beginning in October 1996, Lexington Corporate Properties Trust, whose chairman
is chairman of the General Partner, has been reimbursed by the Partnership for
various administrative services performed. For the years ended December 31, 1997
and 1996, such reimbursements totaled $109,000 and $88,000, respectively.
Two officers of affiliates of the General Partner received acquisition fees
totaling $35,000 for the year ended December 31, 1997 and $67,000 for the year
ended December 31, 1995.
Additional information with respect to the directors and officers and
compensation of the General Partner and affiliates is contained in Items 8, 10
and 11 above.
28
<PAGE> 29
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see index to Financial Statements filed
as part of Item 8 of this Annual Report).
2. Financial Statement Schedule (see Index to Financial
Statements filed as part of Item 8 of this Annual Report).
3. Exhibits.
(3) Amended and Restated Agreement of Limited Partnership dated as
of November 20, 1987 set forth as Exhibit A to the Prospectus
included in Registration Statement Number 33-16973 is incorporated
herein by reference.
Second Amended and Restated Agreement of Limited Partnership dated
as of September 30, 1994 is incorporated herein by reference.
(10) Material contracts
(i) Sale-Purchase Agreement for the Greyhound Properties
dated February 27, 1989.*
(ii) Lease Agreement for the Greyhound Properties dated
February 27, 1989.*
(iii) Sale-Purchase Agreement for the Nichols Property dated
February 1, 1989.**
(iv) Lease Agreement for Nichols Property dated February 1,
1989.**
(v) Loan Modification Agreement with the Dollar Dry Dock
Bank dated September 28, 1990.***
(vi) Purchase Agreement for the Sumter Property dated June 8,
1995.****
(vii) Partnership Agreement for Net 1 Sumter L.P. dated July
14, 1995.****
29
<PAGE> 30
(viii) Purchase Agreement for Gainesville Property dated
October 27, 1995.****
(ix) Partnership Agreement for Net 1 Gainesville L.P. dated
November 14, 1995.****
(x) Purchase Agreement for Brownsville, Texas Property dated
April 21, 1997.
(28) Additional exhibits
(i) Appraisals for the Greyhound Properties dated November 1,
1988.*
(ii) Appraisal for the Nichols Property dated September 7,
1988.*
(b) Reports on Form 8-K filed during the fourth quarter of 1997.
None.
(c) Exhibits. See (a)3 above.
Exhibit No. 27 Financial Data Schedule
(d) Financial Statement schedules excluded from the Annual Report to
Unit holders. None.
- ----------
* Filed with the Partnership's Form 10-Q for the quarter ended March
31, 1989. These documents are incorporated herein by reference.
** Filed with the Partnership's Form 10-Q for the quarter ended June
30, 1989. These documents are incorporated herein by reference.
*** Filed with the Partnership's Form 10-K for the year ended December
31, 1990. This document is incorporated herein by reference.
**** Filed with the Partnership's Form 10-K for the year ended December
31, 1995. These documents are incorporated herein by reference.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NET 1 L. P.
By: Lepercq Net 1 L. P.,
its general partner
By: Lepercq Net 1 Inc.,
its general partner
By: /s/ E. Robert Roskind By: /s/ E. Robert Roskind
--------------------------- ----------------------------------
President Principal Financial & Accounting
Officer
Pursuant to the requirements of the Securities Act of 1934, this annual report
has been signed below by the following persons on behalf of the Partnership and
in the capacities and on the date indicated.
Signature Title
--------------------------- ----------------------------------
/s/ E. Robert Roskind
--------------------------- President and Secretary
E. Robert Roskind
/s/ Denise E. DeBaun
--------------------------- Vice President
Denise E. DeBaun
/s/ David J. Walsh
--------------------------- Vice President and Treasurer
David J. Walsh
/s/ Dianne R. Smith
--------------------------- Assistant Secretary
Dianne R. Smith
Date: March 24, 1998
31
<PAGE> 1
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (the "Agreement") is made as of the 21st day of
April, 1997 (the "Execution Date") by and between BROWNSVILLE ASSOCIATES LIMITED
PARTNERSHIP, a New Jersey limited partnership, having an office at 24 River
Road, P. 0. Box 408, Bogota, New Jersey 076O3 (the "Seller") and NET 1 L.P., a
Delaware limited partnership, or its assignee having an office at 355 Lexington
Avenue, New York, NY 10017 (the "Buyer").
W I T N E S S E T H
ARTICLE 1. RECITALS
1.01. The Property. Seller is the owner of certain real property
consisting of approximately 7.927 acres of land and the buildings and
improvements constructed thereon, situated in the County of Cameron, State of
Texas, as more particularly described in Exhibit "A" attached hereto and made a
part hereof. The aforesaid real property, buildings and improvements, together
with the fixtures and mechanical and utility systems thereon, are hereinafter
collectively called the "Property". The Property is subject to a lease with
Wal-Mart Stores, Inc. ("Wal-Mart") pursuant to the terms of the following
documents and agreements which are hereinafter collectively called the "Lease":
a. Lease dated January 19, 1983 between State of California Public
Retirement Systems ("Cal/Pers") as Lessor and Wal-Mart as Lessee;
<PAGE> 2
b Memorandum of Lease dated January 19, 1983 between Cal/Pers and
Wal-Mart, filed for record January 19, 1983 in Volume 120, page 227
in the Miscellaneous Deed Records of Cameron County, Texas.
c. Lease Assignment and Assumption Agreement dated September 23, 1985
from Cal/Pers to Seller filed for record September 30, 1985 in
Volume 136, page 738 in the aforesaid records.
d. Amendment to Lease dated January 19, 1983 by and between Cal/Pers
and Walmart.
e. Second Amendment to Lease dated January 19, 1983 by and between
Cal/Pers and Walmart.
The Property is subject to a Deed of Trust Note dated January 27, 1997 in
the original principal amount of $2,413,106.05 (the "Note") from Seller to
Principal Mutual Life Insurance Company ("Principal") secured by Deed of Trust,
Security Agreement and Assignment of Rents (the "Mortgage") of even date
therewith and further secured by an Assignment of Leases and Rents (collectively
referred to herein as the "Obligations").
True and correct photocopies of all of the documents constituting the
Lease and the obligations have been delivered by Seller to Buyer and Buyer
hereby acknowledges receipt thereof.
1.02. Purpose. Seller desires to sell or cause the Property to be sold to
Buyer and Buyer desires to purchase the same, subject to the Lease and, subject
to the provisions of Section 3.03, the Obligations.
2
<PAGE> 3
NOW, THEREFORE, in consideration of the Property and of the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the mutual receipt and legal sufficiency of which is hereby
acknowledged, Buyer and Seller hereby covenant and agree as follows:
ARTICLE 2. SALE AND PURCHASE
2.01. Sale and Purchase. Seller agrees to sell and convey and Buyer agrees
to purchase all of Seller's right, title and interest in and to the Property
together with (i) all right, title and interest in and to the Lease, (ii) all
right, title and interest, if any, in and to any land lying in the bed of any
street, road, or avenue, open or proposed, in front of or adjoining the
Property, to the centerline thereof, (iii) rights of way or passageways
appurtenant to or benefiting the Property, (iv) any award made or to be made on
account of any taking of any portion of the Property by any public purpose
organization or entity and any award made for damages to the Property or any
part thereof by reason of change of grade or the closing of any street, road or
avenue, (v) all strips and gores, if any, abutting or adjoining the Property,
and (vi) all other rights, benefits and privileges appurtenant to or benefiting
the Property. Seller shall execute, acknowledge and deliver to Buyer, at Closing
as hereinafter defined, all proper instruments for the assignment and collection
of any award covered by (iv) above.
2.02. Purchase Price. The purchase price for the Property shall be equal
to the sum of THREE MILLION FIVE HUNDRED AND TWENTY-
3
<PAGE> 4
FIVE THOUSAND and 00/100 DOLLARS ($3,525,000.00) (the "Purchase Price"). The
Purchase Price shall be paid to Seller by Buyer in the following manner:
a) The Independent Consideration and-the Deposit.
Buyer shall deliver to Seller upon execution of this Agreement a
non-refundable payment in the amount of ONE HUNDRED DOLLARS ($100.00) (the
"Independent Consideration") as Buyer's independent consideration for the
execution and delivery of this Agreement, which Independent Consideration shall
be retained by Seller in the event the Closing (hereinafter defined) fails to
occur for any reason or for no reason. In no event shall the Independent
Consideration be returned to Buyer or be included in the Deposit.
A ONE HUNDRED THOUSAND and 00/100 DOLLAR ($100,000.00) earnest money
deposit shall be delivered by Buyer to Commonwealth Land Title Insurance
Company, 8 Penn Center, Philadelphia, Pennsylvania 19103, Attention: Gary
Sternick (the "Escrow Agent") or to such other Escrow Agent mutually agreed upon
by Buyer and Seller upon the execution of this Agreement, to be held in an
interest bearing account pending the Closing, which deposit shall be
non-refundable except as hereinafter described (the "Deposit").
(i) The Escrow Agent shall hold the deposit in direct obligations of the
United States of America or any instrumentality or agency of the United States
of America, or obligations guaranteed as to the payment of principal and
interest by the United States of America, or interest bearing certificates of
4
<PAGE> 5
deposit or money market deposit account insured as to the payment of principal
and interest by the FDIC. The Deposit shall be distributed as follows:
(aa) In the event the purchase and sale of the Property closes as
contemplated by this Agreement, the Escrow Agent shall pay the Deposit plus any
accrued interest to Seller at Closing and the entire sum shall be credited
against the Purchase Price.
(bb) In the event that (i) Seller has performed all of its
obligations hereunder and all of the preconditions to Closing have been
satisfied or waived (including but not limited to those set forth in Article 3)
and the Closing does not occur because Buyer violates or fails to perform any of
the terms or conditions of this Agreement, or (ii) in the event Buyer willfully
violates or fails to perform its obligations hereunder, then, after not less
than five (5) business days notice to Buyer, the Deposit plus any accrued
interest shall be paid to and retained by Seller as liquidated damages, which
shall be the sole remedy of Seller for such breach, and this Agreement shall be
null and void and neither party shall have any further obligation to the other
hereunder.
(cc) If Seller shall be unable to sell and convey the Property in
accordance with the terms, covenants and conditions of this Agreement for any
reason whatsoever (other than the exercise by Wal-Mart of its Preferential Right
to Purchase pursuant to Section 20 of the Lease and other than Seller's willful
refusal to convey title to the Property), then the Deposit plus any accrued
interest shall be returned to Buyer together with an amount equal
5
<PAGE> 6
to Buyer's third party due diligence and legal expenses, not to exceed $5,000.00
in the aggregate and thereafter neither party shall have any further obligations
hereunder, other than those, if any, which specifically survive the termination
of this Agreement.
(dd) If Seller shall be unable to sell and convey the Property in
accordance with the terms, covenants and conditions of this Agreement because of
the exercise by Wal-Mart of its Preferential Right to Purchase pursuant to
Section 20 of the Lease, then the Deposit plus any accrued interest shall be
returned to Buyer together with an amount equal to Buyer's third party due
diligence and legal expenses, not to exceed $15,000.00 in the aggregate and
thereafter neither party shall have any further obligations hereunder, other
than those, if any, which specifically survive the termination of this
Agreement.
(ee) In the event that Seller willfully refuses to convey title (as
distinguished from its inability to satisfy conditions for which it is
responsible), Buyer shall have the right to either (i) require the Deposit plus
any accrued interest to be returned to it together with an amount equal to
Buyer's third party due diligence and legal expenses not to exceed $5,000.00 in
the aggregate or (ii) pursue its remedies in law and equity, including without
limitation, a suit for specific performance and/or monetary damages.
b) The Cash Purchase Price or the remainder of the Purchase Price, as the
case may be, shall be paid by cash, wire transfer or any other immediately
available funds at Closing.
6
<PAGE> 7
ARTICLE 3. CONDITIONS PRECEDENT TO CLOSE
The obligation of the parties hereto to each other and to otherwise
perform their respective obligations hereunder shall be subject to the following
being completed at or prior to Closing or within such time frame as is
specifically designated below:
3.1. Limited Partner Consent. Buyer acknowledges that it understands that
Seller is a limited partnership and that under its Partnership Agreement, the
general partner is required to obtain the consent of a majority-in-interest of
the limited partners of Seller for the Partnership to proceed with the
transaction contemplated by this Agreement. Therefore, all of Seller's
obligations under this Agreement are entirely subject to its obtaining the
consent of a majority-in-interest of the limited partners of Brownsville
Associates Limited Partnership. Seller shall use its best efforts to obtain such
consent within twenty-one (21) days of the full execution and delivery of this
Agreement. If Seller is unable to obtain such consent this Agreement shall be
deemed cancelled in which event the provisions of Section 2.02(a)(i)(cc) shall
apply and this Agreement shall be null and void and neither party shall have any
further obligations to the other hereunder.
3.02. Wal-Mart Waiver. The obligations of Buyer to buy and of Seller to
sell the Property are subject to Wal-Mart's Preferential Right to Purchase
Option contained in Section 20 of the Lease. Immediately upon execution and
delivery of this Agreement to Seller, Wal-Mart's waiver of this right will be
sought
7
<PAGE> 8
by delivery to Wal-Mart of the letter attached hereto as Exhibit C. In the event
Wal-Mart exercises its Preferential Right to Purchase Option, then this
Agreement shall be null and void, of no further force and effect, the provisions
of Section 2.02(a)(i)(dd) shall apply and all obligations of the parties hereto
to each other shall cease.
3.03. Assumption or Payoff of Obligations/Mortgagee Consent. On or before
20 days after the full execution and delivery of this Agreement, Buyer shall
notify Seller in writing whether Buyer elects (1) to assume the obligations at
the Closing, or (2) to require Seller to pay off the obligations at the Closing.
In the event that Buyer falls to timely send written notice to Seller with
respect to such option, then Buyer shall have elected to require Seller to pay
off the Obligations at the Closing for all purposes. If Buyer elects (or is
deemed to have elected) that Seller pay off the obligations pursuant to this
Section 3.03, then, at the Closing, Seller shall cause the obligations to be
paid in full and the Mortgage and all other documents evidencing and securing
the obligations to be released and discharged of record.
In the event that Buyer sends written notice to Seller electing to assume
the Obligations on the Closing Date (if, and only if, the Closing occurs), then,
Seller shall deliver to Buyer a writing in recordable form which, to the
satisfaction of Buyer, indicates (a) that Mortgagee consents to this transfer;
(b) that all references to Seller and its affiliates shall be deemed deleted
from the Mortgage and Buyer or its Assignee shall be substituted in
8
<PAGE> 9
its place; (c) the outstanding principal balance due under the Note; (d) that
there are no events of default outstanding with respect to the Obligations and
no event which with the passage of time or giving of notice or both would
constitute an event of default under any of the obligations; and (e) that upon
the Closing, Seller shall assign to Buyer or its Assignee and, Buyer or its
Assignee shall assume, all of Seller's rights, duties and obligations under the
obligations as modified pursuant to this section with respect to the Property
from and after the Closing. The foregoing instrument is hereinafter referred to
as the Mortgage Consent and Assignment and Assumption Agreement or "Mortgage
Agreement" in substantially the form attached hereto as Exhibit E. Subject to
Section 3.09, any fees or expenses related to obtaining the Mortgage Agreement
from the Mortgagee of the Mortgage or otherwise incurred in obtaining the
consent of the holders shall be borne by Seller. In the event Buyer is not
satisfied with the form of Mortgage Agreement that Mortgagee is willing to
deliver then Seller shall have the right to satisfy its debt to Mortgagee at
Closing.
3.4. Title. Title to the Property shall be (a) good and marketable and
free of all liens, encumbrances, restrictions, easements and rights of others of
record but shall be subject to the permitted title exceptions, shown of record
and approved by Buyer, none of which shall inhibit or prohibit the use and
operation of the Property as it is being used and operated on the Closing Date
(collectively the "Permitted Encumbrances"), and (b) insurable as aforesaid at
regular standard rates pursuant to a Form
9
<PAGE> 10
insurable as aforesaid at regular standard rates pursuant to a Form T-1 Owner's
Policy of Title Insurance with the survey deletion endorsement and in an amount
equal to the Purchase Price (such policy with such endorsement, the "Title
Policy").
Without in any way limiting the generality of the foregoing, Seller
covenants and agrees to satisfy, release and discharge of record that certain
Deed of Trust, dated September 27, 1985 and recorded in Volume 1210, page 705 in
the County Clerk's Office of Cameron County, Texas, as modified by (i) Note and
Deed of Trust Modification Agreement dated September 27, 1985 recorded in Volume
1210, page 738 of such office, (ii) Second Note Modification Agreement dated
October 14, 1985 and (iii) Wraparound Note and Mortgage Assignment, Assumption
and Modification Agreement, dated January 1, 1992, recorded in Volume 2353, page
286 of such office.
If title to the Property cannot be conveyed to Buyer at the time of
Closing in accordance with the requirements of this Agreement, then Buyer shall
have the option:
a) of taking such title as Seller can cause to be conveyed and/or
waiving the unfulfilled condition, without abatement of the Purchase Price
(except that any existing encumbrance on the Property securing a monetary
obligation created or incurred by Seller or Tenant shall be required to be
removed forthwith by the payment of the precise amount due and owing, not
including any premium, and discharged by Seller from the proceeds of the
Purchase Price), whereupon the parties hereto shall consummate the transaction
as contemplated and the provisions
10
<PAGE> 11
relating to the condition of title shall be deemed waived by Buyer; or
b) of terminating this Agreement by written notice to Seller,
whereupon this Agreement shall be deemed terminated as of the date of such
notice, the provisions of Section 2.02(a)(i)(cc) shall apply, and neither Seller
nor Buyer shall be further obligated to the other.
3.05. Survey. Seller shall deliver to Buyer an ALTA survey of the Property
dated after the effective date of this Agreement, certified to Buyer and Escrow
Agent showing metes and bounds of the Property and describing and locating the
Permitted Encumbrances.
3.06. Environmental Compliance. Seller shall provide Buyer with evidence,
in the form of a Phase I Environmental Assessment dated after the date hereof
and made for Buyer's direct benefit, that the Property is not subject to the
presence of any hazardous substance, material or waste which would render the
Property environmentally defective. In the event the Phase I Environmental
Assessment is not satisfactory to Buyer, Buyer shall have the right, at its sole
cost and expense to order a Phase II Environmental Assessment. In the event
Buyer determines that the Phase II Environmental Assessment is unsatisfactory,
Buyer shall immediately notify Seller, whereupon this Agreement shall be
terminated, the Deposit and any interest earned thereon shall be returned to
Buyer and neither party shall be further obligated to the other.
11
<PAGE> 12
3.07. Deed. The deed conveying the Property to Buyer shall be a special
warranty deed in proper form for recording in the State of Texas and shall be
duly executed and acknowledged so as to convey to Buyer fee simple title to the
Property subject only to the Permitted Encumbrances (the "Deed").
3.08. Contingency Date. Seller shall deliver to Buyer the Wal-Mart Waiver
Title Commitment (which shall include complete and legible copies of all
recorded and unrecorded documents referenced therein), Survey, Environmental
Assessment and notice of receipt of the limited partner's consent in accordance
with Sections 3.01, 3.02, 3.04, 3.05 and 3.06 hereof. If Buyer shall consider
any of such items as unsatisfactory, then Buyer must notify Seller of its
specific objection within seven (7) days of receipt thereof provided that with
respect to title, it shall be seven (7) days after Buyer's receipt of the later
of the Survey or the Title Commitment. Seller shall then have fifteen (15) days
to cure such objection to the reasonable satisfaction of Buyer, unless Seller
notifies Buyer that it will require additional time to cure the objection, which
additional time cannot exceed fifteen (15) days, unless otherwise agreed by the
parties, at the end of which period the specific condition precedent will be
satisfied, unless waived without any adjustment to the Purchase Price or deemed
unsatisfied by Buyer. In the event any condition is unsatisfied, the provisions
of Section 2.02(a)(i)(cc) shall apply, this Agreement shall be null and void and
neither party shall have any further obligations to the other hereunder. The
date by which all such
12
<PAGE> 13
items listed above shall be delivered to Buyer shall be hereinafter referred to
as the "Contingency Date" which the parties hereto agree shall be on or before
thirty (30) days after the Execution Date.
3.09. Transfer Fee/Yield Maintenance Fee.
(a) In the event Buyer timely elects to assume the obligations in
accordance with Section 3.03, then, at the Closing (1) seller shall pay to the
Mortgagee the lesser of (i) an amount equal to the one percent (1%) transfer and
assumption fee set forth in the Mortgage (the "Transfer Fee Amount"), and (ii)
the amount which would have been payable by Seller under the Mortgage as a yield
maintenance fee if Seller had paid off the Obligations at the Closing (such
amount, the "Yield Maintenance Amount"), and (2) Buyer shall pay to the
Mortgagee the amount by which the Transfer Fee Amount exceeds the Yield
Maintenance Amount, if any.
(b) In the event that the Yield Maintenance Amount exceeds the
Transfer Fee Amount (the amount of such excess, the "Yield Amount Excess"), then
Seller shall retain such Yield Amount Excess.
ARTICLE 4. CLOSING AND ESCROW
4.1. Escrow Instructions. This Agreement, together with any "General
Provisions" on Escrow Agent's standard preprinted form of escrow instructions,
shall serve as the instructions to Escrow Agent for consummation of the purchase
and sale contemplated hereby. In the event Escrow Agent fails to timely execute
and deliver counterparts of this Agreement and any supplemental
13
<PAGE> 14
instructions in a timely manner, either Buyer or Seller may substitute as Escrow
Agent hereunder any other title or escrow company reasonably acceptable to the
other which is willing to so execute and deliver this Agreement. Seller and
Buyer agree to execute such additional and supplemental escrow instructions as
may be appropriate to enable the Escrow Agent to comply with the terms of this
Agreement; provided, however, that in the event of any conflict between the
provisions of this Agreement and any supplemental escrow instructions, including
such General Provisions, the terms of this Agreement shall control, unless the
parties hereto specifically state that the same is meant to modify this
Agreement. The date that Escrow Agent accepts this Agreement shall be deemed the
date of "Opening of Escrow".
4.02. Closing. The Closing shall occur by mail through the Escrow Agent or
at such offices and in such manner as the parties may mutually agree. Subject to
Section 6.01(i), the Closing shall occur on the later to occur of (a) fourteen
(14) days after the Contingency Date, and (b) subject to Section 6.01(l), two
(2) business days after the delivery by Mortgagee of the executed Mortgage
Agreement. The words "Close", "Closing Date" or "Closing" shall mean the time of
recordation of the Deed, Lease Assignment and Assumption Agreement and the
Mortgage Agreement, if Buyer timely elects to assume the Obligations.
ARTICLE 5. PROPATIONS AND APPORTIONMENTS
5.1. Any rents paid or payable under the Lease and, if the Obligations are
timely assumed by Buyer, interest on the
14
<PAGE> 15
Obligations paid by Seller shall be prorated or adjusted as of the date of
Closing. Notwithstanding the foregoing, Buyer and Seller agree that the entire
percentage rent due to Seller for the Wal-Mart fiscal year ending January 31,
1998 shall be paid to Buyer. This Article 5.01 shall survive Closing.
5.02. Seller shall pay for all transfer and deed taxes, recording charges,
documentary stamps, survey preparation, Phase I Environmental Assessment, title
search and examination fees, premium for the Title Policy and, subject to
Section 3.09, any transfer fees due the Mortgagee. Buyer and Seller shall each
pay its own legal fees.
ARTICLE 6. DELIVERY OF DOCUMENTS
6.01. Additional Documents to be Delivered by Seller. Seller shall deliver
the following documents to Buyer at or prior to Closing as a condition of
Buyer's obligation to complete Closing hereunder:
a) Estoppel Letter;
(i) An Estoppel Letter dated no earlier than thirty (30) days
prior to Closing and Waiver of Preferential Right to Purchase from Wal-Mart
signed by an authorized officer, substantially in the form attached hereto as
Exhibits "B" and "C".
(ii) If Buyer timely elects to assume the Obligations, an
Estoppel Letter dated no earlier than thirty (30) days prior to Closing and
consents from Mortgagee signed by authorized officers, substantially in the form
attached hereto as Exhibit D.
15
<PAGE> 16
(b) Plans and Specifications; Any set of plans and/or working
drawings pertaining to the construction of the building and improvements which
are in possession of Seller.
c) Title Policy; The Title Policy dated the Closing Date issued by
the Escrow Agent, showing title to be as described in Section 3.04 above.
d) Cash, Deed, Assignment and Assumption of Lease; At Closing, Buyer
shall wire transfer the Cash Purchase Price or the remainder of the Purchase
Price, as the case may be, to Escrow Agent. At that time, Seller shall cause
Escrow Agent to record and deliver to Buyer (i) the Deed; (ii) the Lease
Assignment and Assumption Agreement; and (iii) if Buyer timely elects to assume
the obligations, the Mortgage Agreement. Upon recordation of the aforesaid
documents, Escrow Agent shall be authorized and directed to release the Cash
Purchase Price, as adjusted, to or at the direction of Seller and in accordance
with the provisions of this Agreement.
e) Warranties and Guarantees; An assignment (subject to any rights
of Wal-Mart therein) by Seller to Buyer of any remaining warranties or
guarantees of any general contractors, subcontractors, materialmen and equipment
suppliers performing any work on, or supplying any material to, the Property,
together with the original, executed copies of any such warranties and
guarantees in possession of Seller.
f) Licenses and Permits; An assignment of all transferable licenses,
permits, certificates and approvals, if any,
16
<PAGE> 17
existing in connection with the Property, to the extent that any such items have
not already been assigned to Wal-Mart pursuant to the Lease.
g) Environmental Compliance; Evidence in the form of a Phase I
Environmental Assessment dated after the date hereof and made for Buyer's direct
benefit that the Property is not subject to the storage, disposition or presence
of any hazardous substance, material or waste which would render the Property
environmentally defective.
h) Lease; The original executed documents, or if unavailable,
certified copies constituting the Lease, together with a Lease Assignment and
Assumption Agreement substantially in the form attached hereto as Exhibit "E".
i) Survey; An ALTA As-Built Survey dated December 16, 1996, redated,
revised and certified to Buyer and the title company.
j) FIRPTA Certificate; An executed FIRPTA Certificate.
k) Tenant Notice; Seller will deliver an executed notice to Wal-Mart
of the completion of the sale and directing Wal-Mart to pay all rent and other
payments thereafter due under the Lease at the direction of Buyer, including
percentage rents due under the Lease for the fiscal year ending January 31,
1998.
l) Mortgage Agreement; In the event Buyer timely elects to assume
the Obligations pursuant to Section 3.03, then, if Seller has received the
executed Mortgage Agreement from the Mortgagee, Seller shall deliver such
document, together with originals of, or
17
<PAGE> 18
certified copies of, all of the documents evidencing or securing the obligations
to the Closing. In the event the Mortgage Agreement is not received by Seller on
or before fourteen (14) days after the Contingency Date, then Seller shall have
the option to adjourn or postpone the Closing for up to sixty (60) days after
the Contingency Date. If the Mortgage Agreement is not received by Seller on or
before the date designated by Seller, from time to time, as the final Closing
Date (which date shall not extend beyond sixty (60) days after the Contingency
Date) then, Section 2.02(a)(i)(cc) shall apply for all purposes. If Buyer elects
(or is deemed to have elected) for Seller to payoff the Obligations pursuant to
Section 3.03, then, Seller shall deliver evidence that the Mortgage will be
released on the Closing Date.
6.02. Documents to be Delivered by Buyer. Buyer shall deliver to Seller at
closing:
a) An executed Lease Assignment and Assumption Agreement
substantially in the form attached hereto as Exhibit "E".
b) An executed Mortgage Agreement, if Buyer timely elects to assume
the Obligations.
c) Such other documents as the Holders may reasonably require.
ARTICLE 7. REPRESENRATIONS
7.1 Seller's Warranties. Seller warrants, covenants and represents to
Buyer as follows, all of which warranties, covenants
18
<PAGE> 19
and representations are and shall be true and correct as of the date of this
Agreement and shall be true and correct as of the Closing:
a) Seller is a limited partnership duly organized and existing under
and by virtue of the laws of the State of New Jersey, and has full power and
authority to enter into this Agreement and to perform its obligations hereunder.
The limited partnership agreement of Seller provides the general partner, DVL,
Inc., with authority to execute any and all documents necessary for this
transaction assuming limited partner consent in accordance with Section 3.01
hereof is obtained. DVL, Inc. is a corporation duly organized, existing and in
good standing under and by virtue of the laws of the State of Delaware and has
full power and authority to enter into this Agreement as general partner of
Seller and to perform its obligations hereunder.
b) (i) Except for those documents constituting the Lease, there
are no other agreements, understandings or promises, oral or written, between
Seller and Wal-Mart relating to the Property, and no outstanding contracts or
leases entered into by Seller relating to the use, occupancy, maintenance or
otherwise relating to the Property.
(ii) The copy of the Lease delivered by Seller to Buyer is a
true, accurate and complete copy of the Lease and has not been further modified
or amended. Seller will not modify the Lease after the date of this Agreement
without the prior written consent of Buyer. The Lease is in full force and
effect other
19
<PAGE> 20
than Wal-Mart, there are no tenants, occupants or other parties having any right
or option to occupy the Property or any portion thereof.
(iii) There has been no default by Wal-Mart in the payment of
rent or any other sum of money under the Lease, nor to the knowledge of Seller
has there been any default by Wal-Mart in the performance of any other covenant,
agreement or condition contained in the Lease. There are no sums to be credited
to Walmart or any setoffs against rent which may be claimed by Wal-Mart by
reason of any alterations, rental allowances, repairs, free rent or otherwise,
and Wal-Mart has not paid Seller any deposit or sum as security under the Lease.
Wal-Mart has no renewal options, purchase options or rights of first refusal
with respect to the Property except as shown in the Lease. No rents under the
Lease have been prepaid other than for the current month and Seller will not
accept any prepayment of rent, other than for the then current month, after the
date hereof. Except for the obligations, neither the Lease nor the rents payable
thereunder have been assigned, pledged or otherwise encumbered that will not be
removed prior to the Closing. No broker or other intermediary is entitled to
receive any leasing, brokerage or other compensation cut out of, or with respect
to, rents under the Lease.
(iv) All obligations of Seller as lessor under the Lease which
shall have accrued at or prior to the Closing will have been performed at or
prior to the Closing. Seller has taken no action which would constitute a
default under the Lease or which,
20
<PAGE> 21
with notice or passage of time or both, would constitute a default under the
Lease.
c) (i) The copies of the Obligations delivered by Seller to Buyer
are true, correct and complete copies thereof and have not been further modified
or amended. Seller will not modify or amend the Obligations after the date of
this Agreement without the prior written consent of Buyer.
(ii) Seller has taken no action which would constitute a
default under the Obligations, or which, with notice or passage of time or both,
would constitute a default under the obligations. Seller shall, between the date
hereof and the date of closing, fully comply with all of the terms and
conditions to be performed under the Obligations. All duties, responsibilities
and agreements of Seller under the Obligations which shall have accrued at or
prior to the Closing shall have been performed at or prior to the Closing. To
the best of Seller's knowledge, there has occurred no default by the Mortgagee
in the performance of any of their respective obligations under the obligations.
d) No assessments for public improvements have been made against the
Property which remain unpaid and Seller has no knowledge and has received no
notice of any proposed assessment for public improvements.
e) Seller has no knowledge of any action, suit or proceeding
pending, threatened against or affecting the Property or any portion thereof
(including but not limited to a pending or threatened, or contemplated
condemnation of the Property), or
21
<PAGE> 22
relating to or arising out of, the ownership, management or operation of the
Property.
f) There are no outstanding, uncured notices issued by any municipal
or other governmental authority, or by any insurance carrier which has issued a
policy with respect to the Property, requiring or calling attention to the need
for any work, repairs, construction or installation on, about, or in connection
with the Property.
g) The Property is properly zoned (or any variances required have
been properly obtained) for the operation of the building and improvements
presently being operated thereon, and all necessary governmental consents,
permits and approvals for such use and operation have been obtained. Neither the
execution of this Agreement nor the conveyance to be made pursuant hereto
constitute a subdivision or require any consent, approval or permit of any
governmental authority.
h) To the best of Seller's knowledge without conducting any
independent investigation, the building and improvements constructed on the
Property are presently in good order and repair, the roof is free from leaks and
there currently are no maintenance or repair contracts pending or in progress
relating to the Property.
i) At the Closing, Buyer (as to the Property) and the Property will
be free of any employment, management, equipment, supply or maintenance
contracts which in any way affect the Property and Buyer shall be under no
obligations to hire, or
22
<PAGE> 23
recognize any responsibility to, any person, persons or companies employed by
Seller in connection with the operation of the Property. Notwithstanding the
aforesaid, Seller makes no representation or warranty with respect to any
contracts made by Wal-Mart.
j) At the Closing, there will be no debts, liabilities or
obligations of Seller arising from the ownership and operation of the Property,
including, but not limited to, salaries, taxes, rates, levies and assessments
which may entitle any third party to file any lien(s) or charge(s) against the
Property.
k) To the best of Seller's knowledge, without any independent
investigation, all water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by law or by the normal operation
of the Property are installed to the Property lines and connected to the
Property with valid permits and are adequate to service the Property so as to
permit full compliance with all existing requirements of law and normal usage of
the improvements. To the best of Seller's knowledge, without any independent
investigation, all electrical, mechanical, plumbing and similar systems on the
Property are in good repair and working order.
l) The Closing contemplated by this Agreement will not constitute or
result in any default or event that with notice or lapse of time, or both, would
be a default, breach or violation of any lease, mortgage, deed of trust,
covenant or other agreement, instrument or arrangement by which Seller or the
Property is bound.
23
<PAGE> 24
Seller is not in default under any notice, evidence of indebtedness, lease,
contract, license, undertaking or other agreement where the liability thereunder
might adversely affect Seller's liability to perform its obligations under this
Agreement.
m) Seller will pay all bills and claims in connection with the
construction or any repair of any improvements for work done prior to Closing.
Seller shall have the right to contest the same, but shall not allow any lien
foreclosure to be consummated on the Property or any part thereof or interest
therein with respect to any such bill or claim. If any claim is contested,
Seller shall deposit cash, bond, or letter of credit with the Title Company,
sufficient to satisfy such lien and to cause the Title Company to affirmatively
insure against collection thereon, and the closing will proceed as though the
lien(s) was (were) satisfied.
n) To the best of Seller's knowledge without conducting any
independent investigation, Seller has all of the necessary licenses, permits,
easements and rights-of-way for the conduct and operation of the Property for
the purposes for which they will be conducted and operated pursuant to the
Lease.
o) If prior to Closing, Seller becomes aware of any fact or
circumstance which would change a representation or warranty, then Seller will
immediately give notice of such changed fact or circumstance to Buyer, but such
notice shall not relieve Seller of its liabilities or obligations with respect
thereto. At Closing, Seller shall be deemed to state that all of the
representations and warranties contained in this Section 7.01 are true and
correct as
24
<PAGE> 25
of the Closing, except as to facts, if any, concerning which Buyer was notified.
ARTICLE 8. MISCELLANEOUS
8.01 Brokers. Seller and Buyer each warrant and represent to the other
that the only brokers they have dealt with in connection with this transaction
are Progressive Properties, Inc., 487 Woodmen Road, Suite 105, Colorado Springs,
CO 80919, Atty: Pichard M. Terzian (the "Broker"). A total commission of $15,000
shall be paid to the Broker by Seller at Closing, subject however to a separate
agreement by and between Seller and Broker. In the event that any other claim is
asserted by any other person, firm or corporation, whether a broker or
otherwise, claiming a commission and/or finder's fee in respect to this
transaction resulting from any act, representation or promise of Buyer or
Seller, as the case may be, the party making such representation or promise or
committing such act shall indemnify and save harmless the other from all loss,
costs or expenses caused by any such claim.
8.02. Damage or Destruction. Between the date hereof and Closing, Seller
assumes the full risk for any damage or destruction to the Property by fire or
the elements. The cost of the work of restoring, rebuilding, repairing and
replacing shall be borne by Seller, at its sole cost and expense, prior to the
Closing. Seller shall have an affirmative obligation to repair or cause the
repair of the damage or destruction referred to herein, but, in the event that
any damage or destruction to the Property cannot be repaired by the Closing,
Buyer may, at its election: a) consummate the
25
<PAGE> 26
purchase contemplated hereunder by paying the Purchase Price herein set forth
less only the amount of any deductible under Seller's policy of insurance, with
Buyer either (i) receiving the proceeds of any insurance paid in connection with
such damage or (ii) receiving the affirmative undertaking of Wal-Mart that it is
repairing and restoring the Property at its sole cost and expense; or b) cancel
this Agreement by written notice to Seller, in which case the Deposit plus any
accrued interest shall be immediately returned to Buyer without offset and
neither of the parties hereto shall have any further liability or obligation
hereunder.
8.03. Condemnation. If, prior to Closing, all or any part of the Property
shall be condemned by governmental or other lawful authority, then this
Agreement shall be null and void, the deposit and interest accrued thereon shall
be returned to Buyer, and neither party shall have any further liability
hereunder. If prior to Closing, all or any part of the Property shall be subject
to a threat of condemnation by governmental or other lawful authority, then
Buyer may, at its election, cancel this Agreement, in which event the Deposit
plus any accrued interest shall be returned to Buyer without offset and neither
party shall have any further liability hereunder.
8.04. Notices. All notices, demands or other communications which are
required or permitted to be given hereunder shall be in writing and shall be
personally delivered or sent by registered or certified mail, postage prepaid,
return receipt requested, or by
26
<PAGE> 27
telecopy or Federal Express or similar delivery service, addressed to the
respective parties as follows:
If to Seller:
Brownsville Associates Limited Partnership
24 River Road
P. 0. Box 408
Bogota, New Jersey 07603
Attention: Peter Gray
with a copy to:
c/o DVL, Inc.
24 River Road
P. 0. Box 408
Bogota, New Jersey 07603
Attention: General Counsel
If to Buyer:
Net 1 L.P.
c/o The LCP Group
355 Lexington Avenue
New York, NY 10017
Attention: Richard Rouse, President
with a copy to:
Paul, Hastings, Janofsky & Walker
399 Park Avenue
New York, New York 10022
Attention: Richard C. Hamlin, Esq.
or to such other address as either party may from time to time designate by
notice to the other given in accordance with this section. Notice shall be
deemed to have been given upon the receipt thereof in the case of personal
delivery, or upon deposit in the U.S. mail in the case of mailing, or upon
delivery to the delivery service in the case thereof.
8.05. Right to Assign Agreement. Buyer shall assign its rights under this
Agreement to a single purpose entity which may be a subsidiary of Buyer or
Lexington Corporate Properties, The LCP Group, East Wells Corporation or Net 2
L.P. without the consent of
27
<PAGE> 28
Seller. The term "Buyer" as used herein shall be deemed to include any assignee
of Buyer.
8.06. Exculpation. This Agreement is executed by the authorized
representatives of Buyer and Seller, not individually. All persons dealing with
Buyer or Seller must look solely to the assets of Buyer or of Seller for the
enforcement of any claim against it. The obligations hereunder are not binding
upon, nor shall resort be had to, the private property of any of the partners,
directors, officers, advisors, employees or agents of Buyer or Seller.
8.07. Interpretation. This Agreement shall be governed by the laws of the
State of Texas. The captions of articles, sections and subsections used in this
Agreement are for convenience only. The singular shall include the plural, and
the masculine, feminine and neuter genders shall include the others. The
provisions hereof shall be binding upon and inure to the benefit of the
successors and assigns of Seller and Buyer. In the event any portion of this
Agreement shall be declared by any court of competent jurisdiction to be
invalid, illegal or unenforceable, such portion shall be deemed severed from
this Agreement, and the remaining parts hereof shall remain in full force and
effect, as fully as though such invalid, illegal or unenforceable portion had
never been part of this Agreement.
8.08. Additional Documents. From time to time prior to and at the Closing,
each party shall execute and deliver such instruments of transfer and other
documents as may be reasonably
28
<PAGE> 29
requested by the other party to carry out the purpose and intent of this
Agreement. Any amendments to this Agreement must be in writing signed by all
parties hereto. Any waivers provided for in this Agreement must be made in
writing by the party to be bound thereby.
8.09. No Recording. This Agreement shall not be lodged for record in any
place or office of public record. If Buyer records this Agreement, Seller, at
its option, may cancel this Agreement and retain the deposit as liquidated
damages; provided, however, the filing or recording of this Agreement as part of
any proceedings instituted in any court of proper jurisdiction to enforce the
provisions of this Agreement shall not be deemed a breach of this Section 8.09.
8.10. Property Sold "As Is". Except as otherwise provided herein, Buyer is
purchasing the Property "as is, where is, with all faults".
8.11. Binding Effect. This Agreement shall be binding upon and shall
benefit the parties hereto and their respective heirs, successors and assigns.
8.12. Attorney's Fees. In the event the Closing fails to occur and either
Seller or Buyer shall commence legal proceedings for the purpose of enforcing
Section 2.02(a) and/or Section 8.01, then the successful party in such
proceeding shall be entitled to reasonable attorney's fees and costs as
determined by the court. In the event the Closing occurs and either Seller or
Buyer shall commence legal proceedings with respect to a breach of any term or
29
<PAGE> 30
provision of Article 7 or Section 8.01, then the successful party in such
proceeding shall he entitled to reasonable attorney's fees and costs as
determined by the court.
8.13. Dependency and Survival of Provisions. The respective warranties,
representations, covenants, agreements, obligations and undertakings of Seller
and Buyer hereunder shall be construed as dependent upon and given in
consideration of those of the other party, and shall survive the Closing and the
delivery of the Deed.
8.14. Publicity. Prior to Closing, Buyer and Seller agree that no press
release or other public disclosure shall be made by it or any of its agents
concerning this transaction without the prior written consent of the other
party. This provision shall not be deemed to prohibit governmentally required
disclosures.
8.15. Entire Agreement. This Agreement, including the Exhibits annexed
hereto, represents the entire agreement between the parties with respect to the
Property, and may not be modified or terminated except by agreement, in writing,
signed by the parties. There are no representations, agreements, arrangements,
or understandings, oral or written, relating to the subject matter which are not
fully expressed herein.
30
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Sale the day and year first above written.
SELLER:
BROWNSVILLE ASSOCIATES LIMITED PARTNERSHIP
By: DVL, Inc.,
general partner
WITNESS:
By:
--------------------------------------
- ---------------------- Joyce Helman,
(Corporate Seal) Asst. Vice President
BUYER:
NET 1 L.P.
By: Lepercq Net I L.P.
By: Lepercq Net I Inc.
ATTEST:
By:
--------------------------------------
- ---------------------- Name: Antonia G. Trigiani
(Corporate Seal) Title: Vice President
31
<PAGE> 32
STATE OF NEW JERSEY )
) ss.:
COUNTY OF BERGEN )
Before me, a Notary Public, in and for said State and County, personally
appeared Joyce Helman, known to me to be the person, who, as an Asst. Vice
President of DVL, INC., general partner of BROWNSVILLE ASSOCIATES LIMITED
PARTNERSHIP, the corporation which executed the foregoing instrument, signed the
same, and acknowledged to me that he signed said instrument in the name and upon
behalf of said corporation, as his free act and deed; that he was duly
authorized by the board of directors of said corporation.
In witness whereof, I have subscribed my name this 21st day of April,
1997.
----------------------------------------
Notary Public
(Seal)
My commission expires:__________________
JODY L. WINSICK-SOLURI
Notary Public. State of New Jersey
No. 2193991
Qualified in Bergen County
Commission Expires September 15.2001
STATE OF NEW York )
) ss.:
COUNTY OF NEW YORK )
Before me, a Notary Public, in and for said State and County, personally
appeared Antonia G. Trigiani, known to me to be the person who as Vice President
of Lepercq Net 1 Inc., the corporation which executed the foregoing instrument,
signed his name, and acknowledged to me that he signed said instrument in the
name and on behalf of said corporation, as his free act and deed, that he was
duly authorized by the board of directors of said corporation.
In witness whereof, I have subscribed my name this 18th day of April,
1997.
----------------------------------------
Notary Public
(Seal)
My commission expires:__________________
DAWN M. SCHOENIG
Notary Public, State of New York
No. 52-4900811
Qualified in Suffolk County
Commission Expires August 3, 1997
32
<PAGE> 33
EXHIBITS
A. Legal Description
B. Tenant Estoppel
C. Tenant Waiver
D. Assignment and Assumption of Lease
E. Mortgage Agreement
<PAGE> 34
-1-
EXHIBIT A
D-751340
Being a tract or parcel of land containing 7.9264 acres (called 7.927 acres)
more or less, located in the Trevino Canales Banco, Number 5 in Share 22,
Espiritu Santo Grant, Cameron County, Texas and being Lot 1, Block 4, Wal-Mart
Addition No. 456 of record in Cabinet 1, Page 263-A of the Map Records of
Cameron County, Texas which is out of and a part of Block 4 of Amigoland Unit
"B" of Section II of record in Volume 26, Page 44 of the Map Records of Cameron
County, Texas, said 7.9264 acres being that same tract from the State of
California Public Employees' Retirement System to Brownsville Associates Limited
Partnership by General Warranty Deed dated October 1, 1985, of record in Volume
1431, Page 176 in the Deed Records of Cameron County, Texas, and being more
particularly described by metes and bounds as follows (bearings based on the
plat of Wal-Mart Addition No. 456):
BEGINING at a 1 inch disk in concrete found at the intersection of the southeast
right-of-way line of East 6th Street (200 feet wide) as shown on the plat of
AmigoLand Unit "A", Section II of record in Volume 25, Page 24 of the Map
Records of Cameron County, Texas, with the southwest right-of-way line of Calle
Amistosa (60 feet wide) as shown on aforesaid plat of Amigoland Unit "B",
Section II;
THENCE, South 43 degrees 51 minutes 41 seconds East, along the southwest
right-of-way line of aforesaid Calle Amistosa, a distance of 369.46 feet to a
5/8 inch iron rod found marking the beginning of a curve to the right;
THENCE, along the arc of aforesaid curve to the right and the southwest
right-of-way line of Calle Amistosa, thru a central angle of 43 degrees 35
minutes 08 seconds, having a radius of 340.00 feet, an arc length of 258.64 feet
and a long chord bearing South 22 degrees 04 minutes 07 seconds East, a distance
of 252.45 feet to the end of said curve and the most north and east corner of
Lot 2 as shown on the aforesaid plat of Wal-Mart Addition No. 456, from which a
1/2 inch iron rod found bears South 48 degrees 02 minutes East, a distance of
0.26 foot, and also a 1/2 inch iron rod found marking the end of the overall
curve for said Calle Amistosa, bears along the arc of said curve to the right,
thru a central angle of 25 degrees 18 minutes 23 seconds, an arc length of
150.17 feet and a long chord bearing South 12 degrees 22 minutes 38 seconds
West, a distance of 148.95 feet.
THENCE, South 89 degrees 43 minutes 27 seconds West, along the common line of
Lots 1 and 2 of aforesaid Wal- Addition No. 456 a distance of 95.55 feet to an
interior corner of said Lot 1, from which a 5/8 inch iron rod found bears South
43 degrees 51 minutes 41 seconds East, a distance of 0.19 foot;
<PAGE> 35
-2-
THENCE, North 43 degrees 51 minutes 41 seconds West. along the common line of
aforesaid Lots 1 and 2 a distance of 35.00 feet to an interior corner of said
Lot 1;
THENCE, South 46 degrees 08 minutes 19 seconds West, along the common line of
aforesaid Lots 1 and 2, at a distance of 0.31 foot pass a 518 inch iron rod
found disturbed and continue for an overall distance of 515.00 feet to a 1/2
inch iron rod found in the northeast right-of-way line of Mexico Street (200
foot right-of-way) as shown in Volume 93, Page 343 of the Deed Records of
Cameron County, Texas, in the arc of a curve to the left, from which a radial
line bears, South 53 degrees 05 minutes 58 seconds West;
THENCE, along the arc of aforesaid curve to the left and the northeast
right-of-way line of aforesaid Mexico Street, thru a central angle of 06 degrees
58 minutes 36 seconds, a radius of 881.54 feet, an arc length of 107.34 feet and
a long chord bearing North 40 degrees 23 minutes 20 seconds West, a distance of
107.28 feet to the end of said curve, from which a PK nail found bears, South 46
degrees 07 minutes 22 seconds West, a distance of 1.80 feet;
THENCE, North 43 degrees 52 minutes 38 seconds West, along the northeast
right-of-way line of aforesaid Mexico Street a distance of 395.92 feet to a 1
inch disk in concrete found at the intersection with the southeast right-of-way
line of aforesaid East 6th Street, from which a 1/2 inch iron rod found at the
south most corner of aforesaid Amigoland Unit "A", Section II bears, South 46
degrees 08 minutes 19 seconds West, a distance of 200.00 feet;
THENCE, North 46 degrees 08 minutes 19 seconds East, along the southeast
right-of-way line of aforesaid East 6th Street a distance of 671.54 feet to the
POINT OF BEGINNING and containing 7.9264 acres of land, more or less.
Note for information: Account # 07-6462-0000-0010-00.
<PAGE> 36
EXHIBIT B
Subject: Wal-Mart Store #456
Gentlemen:
Wal-Mart Stores, Inc. is a tenant of Brownsville Associates Limited Partnership
by virtue of a lease dated August 26, 1983 with respect to certain real property
located in Brownsville, Texas (the "Property").
We understand this letter and the information contained herein is a necessity to
your determination of whether or not you will acquire the Property.
Except as noted herein below, Wal-Mart certifies and affirms to the best of
knowledge that:
a. The Lease has not been modified and is in full force and effect as
written.
b. The Leased Premises at ______________ have been accepted for
possession by Wal-Mart on or about ______________.
c. Wal-Mart has no charge, lien, claim or off-set under the Lease, or
otherwise, against the rents required thereunder.
d. No rentals required under the Lease have been paid for more than 30
days in advance of their due date.
The following requirements, representations, conditions and obligations of
Brownsville Associates Limited Partnership and, pursuant to the terms of the
Lease, have been satisfied and complied with to the satisfaction of Wal-Mart:
1. Any lien or claim against the property which is of record: a. To the
best of our knowledge, none at this time.
2. Maintenance required to repair the following items: a. To the best
of our knowledge, none at this time.
<PAGE> 37
Page 2
Estoppel Certificate
Wal-Mart Store #456
The information provided and the representations made herein are intended only
for the use of . Other parties having information and knowledge to the contrary
should not rely on representations made herein as a waiver of any rights,
warranties, or credits of Wal-Mart-Stores, Inc.
Wal-Mart Stores, Inc. requires written notification of any change of address
necessitated by the above contemplated change of ownership. The representations
made herein are hereby made specifically contingent upon receipt by Wal-Mart of
copy of the document evidencing change of ownership, the assignment of lease,
along with a cover letter from the Lessor or previous Lessor acknowledging the
changes. Wal-Mart will not be responsible for untimely payment of rent that
results from the failure of the parties to follow the procedures.
-------------------
Property Management
Wal-Mart Stores, Inc.
<PAGE> 38
EXHIBIT C
BROWNSVILLE ASSOCIATES LIMITED PARTNERSHIP
Wal-Mart Stores, Inc.
ATTN: Charlene Lyon, Property Manager
702 S. W. Eighth St.
P. 0. Box 116
Bentonville, AR 72712
Re: Wal-Mart Store #456
Brownsville, TX
Dear Charlene:
Brownsville Associates Limited Partnership, Landlord of the above
referenced Store, has received a bona fide third party offer to purchase the
Store pursuant to the terms of the Agreement of Sale annexed hereto.
Pursuant to Paragraph 20 of the above mentioned Lease, Wal-Mart has the
right to purchase the Store at the terms described in said offer. Please sign
the enclosed copy of this letter indicating your intentions to waive or exercise
this option within thirty (30) days of receipt of this letter.
Very truly yours,
BROWNSVILLE ASSOCIATES
LIMITED PARTNERSHIP
By: DVL, Inc., general partner
By:
---------------------------
Name:
Title:
Wal-Mart Stores, Inc. hereby chooses to
waive its Preferential Right to Purchase
- ----------------------------------------
Name:
Title:
Wal-Mart Stores, Inc. hereby chooses to
exercise its Preferential Right to Purchase
- ----------------------------------------
Name:
Title:
<PAGE> 39
EXHIBIT D
LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT made this day of , 1997 by
and between BROWNSVILLE ASSOCIATES LIMITED PARTNERSHIP, a New Jersey limited
partnership, having an address at 24 River Road, Bogota, New Jersey 07603 (the
"Assignor"), and ____________________ , ____________________ a
____________________ , having an address at ______________________________ (the
"Assignee).
W I T N E S S E T H
Contemporaneously with the execution and delivery hereof, Assignor has
sold to Assignee certain land and the buildings and improvements thereon,
located in Cameron County, Texas, and more particularly described in Exhibit "A"
attached hereto and made a part hereof (the "Property"). In connection with the
sale of the Property, Assignor has agreed to assign all leases affecting the
Property to Assignee.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the sufficiency and receipt of which, prior to the
execution hereof, is hereby acknowledged, the parties hereto, intending to be
legally bound, do hereby agree as follows:
1. Assignor hereby conveys, assigns, transfers and sets over to Assignee
all of its right, title and interest in, under and to the following documents
and agreements which are hereinafter collectively called the "Lease":
a. Lease dated January 19, 1983 between State of California
Public Retirement Systems ("Cal/Pers") as Lessor and Wal-Mart
Stores, Inc. ("Wal-Mart") as Lessee;
b. Memorandum of Lease dated January 19, 1983 between Cal/Pers
and Wal-Mart, filed for record January 19, 1983 in Volume 120,
page 227 in the Miscellaneous Deed Records of Cameron County,
Texas.
c. Lease Assignment and Assumption Agreement dated September 23,
1985 from Cal/Pers to Seller filed for record September 30,
1985 in Volume 136, page 738 in the aforesaid records.
d. Amendment to Lease dated January 19, 1983 by, and between
Cal/Pers and Wal-Mart.
e. Second Amendment to Lease dated January 19, 1983 by and
between Cal/Pers and Wal-Mart.
<PAGE> 40
2. Assignee hereby accepts the conveyance, transfer and assignment of the
Lease and assumes, from and after the date hereof, the obligations of Assignor
under the Lease.
3. All of the documents constituting the Lease have been delivered to
Assignee simultaneously with the execution hereof. Assignor represents and
warrants that the Lease has not been modified, altered or amended and that other
than the Lease, there are no contracts or agreements with tenants or occupants
affecting the Property.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first written above.
ASSIGNOR:
BROWNSVILLE ASSOCIATES
LIMITED PARTNERSHIP
By: DVL, INC.,
General Partner
Attest:
By:
- --------------------------- ---------------------------------------
Joyce K. Helman Name:
Asst. Secretary Title:
ASSIGNEE:
Attest:
By:
- --------------------------- ---------------------------------------
Name: Name:
Title: Title:
<PAGE> 41
STATE OF NEW JERSEY )
) ss.:
COUNTY OF BERGEN )
Before me, a Notary Public, in and for said State and County, personally
appeared , ________________ known to me to be the person, who as _______________
of DVL, Inc., general partner of Brownsville Associates Limited Partnership, the
corporation which executed the foregoing instrument, signed the same, and
acknowledged to me that he signed said instrument in the name and upon behalf of
said corporation, as his free act and deed; that he was duly authorized by the
board of directors of said corporation.
In witness whereof, I have subscribed my name this _____ day of ____ ,
1997.
-------------------------------
Notary Public
(Seal) My commission expires: _______
STATE OF )
) ss.:
COUNTY OF )
Before me, a Notary Public, in and for said State and County, personally
appeared ________________ , known to me to be the person, who as
________________ of ________________ , executed the foregoing instrument, signed
the same, and acknowledged to me that he signed said instrument in the name and
upon behalf of said corporation, as his free act and deed on behalf of said
corporation.
In witness whereof, I have subscribed my name this _____ day of ____ ,
1997.
-------------------------------
Notary Public
(Seal) My commission expires: _______
<PAGE> 42
-1-
EXHIBIT A
D-751340
Being a tract or parcel of land containing 7.9264 acres (called 7.927 acres)
more or less, located in the Trevino Canales Banco, Number 5 in Share 22,
Espiritu Santo Grant, Cameron County, Texas and being Lot 1, Block 4, Wal-Mart
Addition No. 456 of record in Cabinet 1, Page 263-A of the Map Records of
Cameron County, Texas which is out of and a part of Block 4 of Amigoland Unit
"B" of Section II of record in Volume 26, Page 44 of the Map Records of Cameron
County, Texas, said 7.9264 acres being that same tract from the State of
California Public Employees' Retirement System to Brownsville Associates Limited
Partnership by General Warranty Deed dated October 1, 1985, of record in Volume
1431, Page 176 in the Deed Records of Cameron County, Texas, and being more
particularly described by metes and bounds as follows (bearings based on the
plat of Wal-Mart Addition No. 456):
BEGINING at a 1 inch disk in concrete found at the intersection of the southeast
right-of-way line of East 6th Street (200 feet wide) as shown on the plat of
AmigoLand Unit "A", Section II of record in Volume 25, Page 24 of the Map
Records of Cameron County, Texas, with the southwest right-of-way line of Calle
Amistosa (60 feet wide) as shown on aforesaid plat of Amigoland Unit "B",
Section II;
THENCE, South 43 degrees 51 minutes 41 seconds East, along the southwest
right-of-way line of aforesaid Calle Amistosa, a distance of 369.46 feet to a
5/8 inch iron rod found marking the beginning of a curve to the right;
THENCE, along the arc of aforesaid curve to the right and the southwest
right-of-way line of Calle Amistosa, thru a central angle of 43 degrees 35
minutes 08 seconds, having a radius of 340.00 feet, an arc length of 258.64 feet
and a long chord bearing South 22 degrees 04 minutes 07 seconds East, a distance
of 252.45 feet to the end of said curve and the most north and east corner of
Lot 2 as shown on the aforesaid plat of Wal-Mart Addition No. 456, from which a
1/2 inch iron rod found bears South 48 degrees 02 minutes East, a distance of
0.26 foot, and also a 1/2 inch iron rod found marking the end of the overall
curve for said Calle Amistosa, bears along the arc of said curve to the right,
thru a central angle of 25 degrees 18 minutes 23 seconds, an arc length of
150.17 feet and a long chord bearing South 12 degrees 22 minutes 38 seconds
West, a distance of 148.95 feet.
THENCE, South 89 degrees 43 minutes 27 seconds West, along the common line of
Lots 1 and 2 of aforesaid Wal- Addition No. 456 a distance of 95.55 feet to an
interior corner of said Lot 1, from which a 5/8 inch iron rod found bears South
43 degrees 51 minutes 41 seconds East, a distance of 0.19 foot;
<PAGE> 43
-2-
THENCE, North 43 degrees 51 minutes 41 seconds West. along the common line of
aforesaid Lots 1 and 2 a distance of 35.00 feet to an interior corner of said
Lot 1;
THENCE, South 46 degrees 08 minutes 19 seconds West, along the common line of
aforesaid Lots 1 and 2, at a distance of 0.31 foot pass a 518 inch iron rod
found disturbed and continue for an overall distance of 515.00 feet to a 1/2
inch iron rod found in the northeast right-of-way line of Mexico Street (200
foot right-of-way) as shown in Volume 93, Page 343 of the Deed Records of
Cameron County, Texas, in the arc of a curve to the left, from which a radial
line bears, South 53 degrees 05 minutes 58 seconds West;
THENCE, along the arc of aforesaid curve to the left and the northeast
right-of-way line of aforesaid Mexico Street, thru a central angle of 06 degrees
58 minutes 36 seconds, a radius of 881.54 feet, an arc length of 107.34 feet and
a long chord bearing North 40 degrees 23 minutes 20 seconds West, a distance of
107.28 feet to the end of said curve, from which a PK nail found bears, South 46
degrees 07 minutes 22 seconds West, a distance of 1.80 feet;
THENCE, North 43 degrees 52 minutes 38 seconds West, along the northeast
right-of-way line of aforesaid Mexico Street a distance of 395.92 feet to a 1
inch disk in concrete found at the intersection with the southeast right-of-way
line of aforesaid East 6th Street, from which a 1/2 inch iron rod found at the
south most corner of aforesaid Amigoland Unit "A", Section II bears, South 46
degrees 08 minutes 19 seconds West, a distance of 200.00 feet;
THENCE, North 46 degrees 08 minutes 19 seconds East, along the southeast
right-of-way line of aforesaid East 6th Street a distance of 671.54 feet to the
POINT OF BEGINNING and containing 7.9264 acres of land, more or less.
Note for information: Account # 07-6462-0000-0010-00.
<PAGE> 44
EXHIBIT E
Record and Return To:
Richard C. Hamlin Esq.
Paul, Hastings, Janofsky & Walker
399 Park Avenue
New York, NY 10022
DEED OF TRUST, SECURITY AGREEMENT AND
ASSIGNMENT OF RENTS
MODIFICATION, CONSENT AND
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS
MODIFICATION, CONSENT AND ASSIGNMENT AND ASSUMPTION AGREEMENT is made as of the
day of , 1997 by and among PRINCIPAL MUTUAL LIFE INSURANCE COMPANY ("Lender"),
BROWNSVILLE ASSOCIATES LIMITED PARTNERSHIP ("Seller"), and NET 1 L.P. ("Buyer").
W I T N E S S E T H:
WHEREAS, Lender is the owner and holder of a certain Deed of Trust Note
dated January 27, 1997 in the original principal amount of $2,413,106.05 made by
Seller (the "Note").
WHEREAS, the Note is secured by a certain Deed of Trust, Security
Agreement and Assignment of Rents dated January 27, 1997 (the "Mortgage")
recorded in Book ____ Page _____ in the Deed Records of Cameron County, Texas
which Mortgage encumbers certain real property in Cameron County, Texas more
particularly described in Exhibit "A" annexed hereto and incorporated herein by
reference (the "Property");
WHEREAS, the Note is also secured by a certain Assignment of Lease and
Rents dated January 27, 1997 (the "Assignment") recorded in Volume _____ page
_____ , in the Deed Records of the aforesaid office; and
WHEREAS, Lender is willing to consent to the conveyance of title to the
Property by Seller to Buyer, the assignment by Seller and assumption by Buyer of
Seller's obligations under the Note, the Mortgage and the Assignment
(collectively the "Loan Documents") and the modification and amendment of the
Mortgage and the other Loan Documents subject to and in accordance with the
terms and
<PAGE> 45
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
and agreements of the parties hereinafter set forth, the parties agree as
follows:
1. Consent. Lender hereby consents to the conveyance and transfer of title
to the Property by Seller to Buyer and the assumption by Buyer of Seller's
obligations under the Loan Documents.
2. Assignment. Seller hereby assigns to Buyer all of Seller's right, title
and interest in and to the Note, the Mortgage and the Assignment, and all other
documents securing the Note, to have and to hold the same unto Buyer, its
successors and assigns, provided however, Seller shall remain liable for any and
all obligations under the Loan Documents (other than the principal amount due
under the Note) arising or accruing prior to the date hereof and which have not
been performed or discharged by Seller as of the date hereof.
3. Assumption. Buyer hereby accepts the assignment of Seller's interest in
the Loan Documents and, from and after the date hereof, hereby assumes and
agrees to be bound by the provisions of the Loan Documents, as herein modified
and amended, including, but not limited to, the obligation to make all payments
due under the Note and to perform and observe all of the covenants and
agreements under the Loan Documents in accordance with their terms and
conditions as herein modified and amended.
4. Status of Loan Documents.
(a) As of _______________ , 1997, the outstanding principal balance due
under the Note is $ _________________ .
(b) As of the date hereof, Seller represents and warrants, and Lender
represents and warrants to the best of its knowledge without inquiry, there are
no events of default outstanding under any of the Loan Documents and there is no
event which with the giving of notice or the passage of time or both would
constitute an event of default under any of the Loan Documents.
5. Modification and Amendment.
(a) As of the date hereof, all references to the Seller and
2
<PAGE> 46
its affiliates set forth in the Note, the Mortgage and the Assignment are hereby
deleted and Buyer and its affiliates are substituted in their place.
(b) For purposes of Paragraph 33 of the Mortgage, Grantor's address is:
Net 1 L.P.
355 Lexington Avenue
New York, NY 10017
Attention: Richard J. Rouse
6. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original regardless of date of execution or delivery
and together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date and year first above written.
LENDER:
ATTEST: PRINCIPAL MUTUAL LIFE INSURANCE
Company
- --------------------------- ---------------------------------------
Name:
Title:
SELLER:
ATTEST: BROWNSVILLE ASSOCIATES
LIMITED PARTNERSHIP
By: DVL, INC., General Partner
By:
- --------------------------- ------------------------------------
NAME:
TITLE:
BUYER,:
ATTEST: NET 1 L.P.
By: ________________ General Partner
By:
- --------------------------- ------------------------------------
NAME:
TITLE:
3
<PAGE> 47
STATE OF )
) ss.:
COUNTY OF )
On the _________ day of ___________ 1996, before me came
________________________ to me known, who being by me duly sworn, did depose and
say that (s)he is the _________________ of Principal Mutual Life insurance
Company, which executed the foregoing instrument, that he/she signed his/her
name thereto as a duly authorized representative of said group.
----------------------------------
Notary Public
(Seal)
My commission expires:_________
STATE OF NEW JERSEY )
) ss.:
COUNTY OF BERGEN )
On the _______ day of ______________ 1996, before me, a Notary Public, in
and for said State and County, personally appeared, _______________________
known to me to be the person, who as ____________________ of DVL, Inc., general
partner of Brownsville Associates Limited Partnership, the corporation which
executed the foregoing instrument, signed the same, and acknowledged to me that
he signed said instrument in the name and upon behalf of said corporation, as
his free act and deed; that he was duly authorized by the board of directors of
said corporation.
1 ----------------------------------
Notary Public
(Seal)
My commission expires:_________
4
<PAGE> 48
STATE OF )
) ss.:
COUNTY OF )
Before me, a Notary Public, in and for said State and County,
personally appeared ___________________ , known to me to be the person, who as
__________________ of Net 1 L.P., which executed the foregoing instrument,
signed the same, and acknowledged to me that he signed said instrument as his
free act and deed.
----------------------------------
Notary Public
(Seal)
My commission expires:_________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,312,416
<SECURITIES> 0
<RECEIVABLES> 399,544
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 26,440,197
<DEPRECIATION> (2,735,454)
<TOTAL-ASSETS> 25,662,912
<CURRENT-LIABILITIES> 0
<BONDS> 5,676,269
0
0
<COMMON> 0
<OTHER-SE> 19,791,683
<TOTAL-LIABILITY-AND-EQUITY> 25,662,912
<SALES> 0
<TOTAL-REVENUES> 2,991,548
<CGS> 0
<TOTAL-COSTS> 439,055
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 468,995
<INCOME-PRETAX> 1,854,524
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,854,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,854,524
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
