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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amended Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) February 27, 1998
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Realty ReFund Trust
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(Exact Name of Registrant as Specified in its Charter)
Ohio
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(State or Other Jurisdiction of Incorporation)
001-07062 34-6647590
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(Commission File Number) (I.R.S. Employer Identification No.)
925 Euclid Avenue, Suite 1750, Cleveland, Ohio 44115
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(Address of Principal Executive Offices) (Zip Code)
(216) 622-0046
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets.
On February 27, 1998, RRF Limited Partnership ("RRFLP"), a Delaware limited
partnership controlled by its 13% sole general partner, Realty ReFund Trust
("RRF"), acquired all of the membership interests in Tucson St. Mary's Suite
Hospitality LLC, an Arizona limited liability company ("Tucson St. Mary's LLC"),
which owns the InnSuites Hotel Tucson St. Mary's, a 297-suite hotel located in
Tucson, Arizona. The acquisition occurred pursuant to the terms of the
Contribution Agreement, dated as of February 1, 1998, among James F. Wirth,
Chairman, President, Chief Executive Officer and Trustee of RRF, Gail J. Wirth,
his wife, and RRFLP.
Pursuant to the terms of the Contribution Agreement, Mr. and Mrs. Wirth
contributed their respective 50% membership interests in Tucson St. Mary's LLC
to the capital of RRFLP. The total consideration under the Contribution
Agreement was Ten Million Eight Hundred Twenty Thousand Dollars ($10,820,000),
paid by RRFLP as follows: RRFLP assumed a Six Million Dollar ($6,000,000)
mortgage on the Tucson St. Mary's LLC property payable to JDI Tucson, L.L.C.;
RRFLP delivered a One Million Dollar ($1,000,000) promissory note to Hospitality
Corporation International, an Arizona corporation owned by Mr. and Mrs. Wirth;
and the balance of the consideration consisted of 407,703 Class B Limited
Partnership Units in RRFLP delivered to Mr. and Mrs. Wirth, 26,589 Class A
Limited Partnership Units in RRFLP delivered to Mr. Marc Berg, a Trustee of RRF,
and 8,863 Class A Limited Partnership Units in RRFLP delivered to Mr. Kenneth
Sliwa as advisory fees, and 443,155 Class B Limited Partnership Units in RRFLP
issued to Mr. and Mrs. Wirth to be held in escrow by RRFLP and released to Mr.
and Mrs. Wirth pursuant to formulas measuring the achievement of projected
operational results by Tucson St. Mary's LLC. The total consideration received
pursuant to the Contribution Agreement was determined based upon an appraisal
conducted by an independent third party. RRF intends to utilize the assets
acquired by it pursuant to the Contribution Agreement in accordance with their
use prior to the acquisition.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
The following are filed as exhibits to this Form 8-K/A Amended
Report:
Report of Independent Public Accountant.
Balance Sheet as of December 31, 1997.
Statements of Operations and Members' Deficit for the year
ended December 31, 1997.
Statement of Cash Flows for the year ended December 31, 1997.
Notes to the Financial Statements.
(b) Pro Forma Financial Information.
The following are filed as exhibits to this Form 8-K/A
Amended Report:
Pro Forma Consolidated Balance Sheet as of January 31, 1998
and 1997.
Notes to the Pro Forma Consolidated Balance Sheet as of
January 31, 1998.
Pro Forma Consolidated Statement of Operations for the year
ended January 31, 1998.
Notes to the Pro Forma Consolidated Statement of Operations
for the year ended January 31, 1998.
(c) Exhibits.
Contribution Agreement, dated as of February 1, 1998, by and
among RRF Limited Partnership, James F. Wirth and Gail J.
Wirth.
Financial Statements of Business Acquired and Pro Forma
Financial Statements of Realty Refund Trust.
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Exhibit
No. Document Description
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2.1 Contribution Agreement, dated as of February 1, 1998,
by and among RRF Limited Partnership, James F.
Wirth and Gail J. Wirth.
7.1 Financial Statements of Business Acquired.
7.2 Pro Forma Financial Statements of Realty Refund
Trust.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Realty ReFund Trust
(Registrant)
Dated: May 15, 1998 By: /s/ Gregory D. Bruhn
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Name: Gregory D. Bruhn
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Title: Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary
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INDEX TO EXHIBITS
Exhibit
No. Document Description
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2.1 Contribution Agreement, dated as of February 1, 1998,
by and among RRF Limited Partnership, James F. Wirth
and Gail J. Wirth.
7.1 Financial Statements of Business Acquired.
7.2 Pro Forma Financial Statements of Realty Refund
Trust.
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EXHIBIT 2.1
CONTRIBUTION AGREEMENT
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CONTRIBUTION AGREEMENT, dated as of February 1,
1998, among JAMES F. WIRTH and GAIL J. WIRTH (collectively, the "Wirths") and
RRF LIMITED PARTNERSHIP, a Delaware limited partnership (the "Operating
Partnership").
W I T N E S S E T H
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WHEREAS, the Wirths each own fifty percent
(50%) membership interests (collectively, the "Interests") in Tucson St. Mary's
Suite Hospitality LLC, an Arizona limited liability company (the "Company") that
owns the real property identified on the Property Schedule attached hereto as
SCHEDULE I (the "Hotel"); and
WHEREAS, on the terms and subject to the
conditions set forth herein, the Wirths desire to contribute the Interests as a
contribution to the capital of the Operating Partnership, and the Operating
Partnership desires to accept such contributions in exchange for admitting the
Wirths as a limited partner in the Operating Partnership in accordance with the
terms and subject to the conditions set forth in the First Amended and Restated
Limited Partnership Agreement of the Operating Partnership (as the same may be
amended, modified or supplemented from time to time in accordance with its
terms, the "OP Agreement").
NOW, THEREFORE, in consideration of the
premises, mutual agreements, provisions and covenants contained herein, and for
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby expressly acknowledged, the Wirths and the Operating
Partnership do hereby covenant and agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
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Section 1.1. CERTAIN DEFINITIONS. Capitalized
terms used but not otherwise defined herein shall have the meanings specified in
the OP Agreement.
ARTICLE II
CONTRIBUTION AND ADMISSION; APPORTIONMENTS
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Section 2.1. CONTRIBUTION AND ASSIGNMENT.
Subject to the satisfaction of the conditions specified in Sections 5.2 and 5.4,
the Wirths shall contribute the Interests ("Contributed Interests") to the
Operating Partnership by assigning all of the Wirths' right, title
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and interest in and to (i) the Company, together with any and all rights,
privileges, benefits, obligations and liabilities appertaining thereto,
including but not limited to all of the Wirths' right, title and interest as a
member of the Company in and to, subject to Section 2.3 hereof, the profits,
surplus, losses, capital, cash flow, rentals, contract rights, cash, accounts,
receivables, escrows, claims, chooses in action and other assets of such
Company, and (ii) all partner loans made by the Wirths to such Operating
Partnership except for the HCI Note (as hereinafter defined). The assignment and
transfer of Contributed Interests shall be accomplished by the execution and
delivery of an Assignment of Membership Interest, substantially in the form
attached hereto as EXHIBIT A, with respect to the Contributed Interests (the
"Assignment").
Section 2.2. ADMISSION AS A LIMITED PARTNER;
LIMITED PARTNERSHIP INTEREST. Subject to the satisfaction of the conditions
specified in Sections 5.2 and 5.3 and in consideration of the contribution of
the Contributed Interests to the Operating Partnership pursuant to the terms of
the OP Agreement, the Operating Partnership shall admit the Wirths as a limited
partner in the Operating Partnership in accordance with the terms and subject to
the conditions set forth in the OP Agreement. The Percentage Interest of the
aggregate Partnership Interest in the Operating Partnership to be received by
the Wirths in the Operating Partnership in respect of the Contributed Interests
shall be calculated and determined as specified on SCHEDULE II attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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Section 3.1. REPRESENTATIONS AND WARRANTIES OF
THE WIRTHS. The Wirths hereby represent and warrant,
jointly and severally, to the Operating Partnership that:
(a) the Company is a limited liability company
validly existing and in good standing under the laws of the
State of Arizona;
(b) they have all necessary right, power and
authority to enter into this Agreement and to perform their
obligations hereunder;
(c) they have duly executed and delivered this
Agreement and this Agreement constitutes a legal, valid and binding obligation
of the Wirths, enforceable against the Wirths in accordance with the terms
hereof, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium and other laws affecting
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enforceability of creditors' rights generally and general
principles of equity;
(d) the Wirths will acquire the limited
partnership interests in the Operating Partnership on the Closing Date for
investment and not with a view to the distribution (within the meaning of
section 2(11) of the Securities Act of 1933, as amended (the "Securities Act"))
thereof;
(e) as of the date hereof, the Wirths are the
sole owners of the Interests in the Company and have good
title to such Interests, free and clear of all liens and
encumbrances;
(f) except as may be set forth in this
Agreement, there are no rights, subscriptions, options, warrants, conversion
rights or agreements of any kind outstanding (including rights of first offer
and rights of first refusal) to purchase or to otherwise acquire the Interests;
(g) the execution, delivery and performance of
this Agreement by the Wirths will not, with or without the giving of notice,
lapse of time or both, (i) violate, conflict with or constitute a default under
any term or condition of any term or provision of any judgment, decree, order,
statute, injunction, rule or regulation of a governmental unit applicable to the
Wirths, or of any material contract, agreement or instrument to which the Wirths
are a party or by which any of their properties or assets may be bound (the
violation of which would have a material adverse effect upon the Wirths or the
Operating Partnership) or (ii) result in the creation of any lien upon the
Interests other than in favor of the Operating Partnership.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF
THE OPERATING PARTNERSHIP. The Operating Partnership
hereby represents and warrants to the Wirths that:
(a) it is duly organized as a limited
partnership and validly existing under the laws of the State of Delaware and is,
or at the Closing will be, duly qualified in each state in which it conducts
business;
(b) it has all necessary legal and contractual
right, power and authority to enter into this Agreement and to perform its
obligations hereunder, including the execution, delivery and performance of all
other Documents;
(c) it has duly authorized, executed and
delivered this Agreement and will have at the Closing duly authorized, executed
and delivered the other Documents and this Agreement constitutes, and at the
Closing, each of the
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other Documents will constitute, a legal, valid and binding obligation of the
Operating Partnership, enforceable against the Operating Partnership in
accordance with the terms hereof and thereof, except as such enforceability may
be limited by applicable bankruptcy, insolvency, moratorium and other laws
affecting enforceability of creditors' rights generally and general principles
of equity;
(d) none of the execution, delivery or
performance of this Agreement or the other Documents by the Operating
Partnership will, with or without the giving of notice, lapse of time or both,
violate, conflict with or constitute a default under any term or condition of
(A) the OP Agreement or (B) any term or provision of any judgment, decree,
order, statute, injunction, rule or regulation of a governmental unit applicable
to the Operating Partnership or any material contract, agreement or instrument
to which the Operating Partnership is a party or by which its properties or
assets may be bound (the violation of which, in the case of either (A) or (B),
would have a material adverse effect upon the Operating Partnership);
(e) upon execution of the OP Agreement by the
Wirths, the Wirths will be duly admitted as a limited
partner of the Operating Partnership; and
(f) the Operating Partnership will acquire the
Contributed Interests in the Company for investment and not with a view to the
distribution (within the meaning of section 2(11) of the Securities Act)
thereof.
ARTICLE IV
COVENANTS
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Section 4.1. RESTRICTIONS ON TRANSFER. The
Wirths shall not pledge, encumber, hypothecate, transfer, assign or convey any
Interest in any way prior to the Closing Date (or the termination of this
Agreement pursuant to Section 5.1 in the absence of a Closing).
Section 4.2. TRANSFER TAXES. The Operating
Partnership and, upon the specific request of the Operating Partnership, the
Wirths shall take any and all actions necessary in order to comply with the
provisions of any transfer tax laws and regulations applicable to this Agreement
or the conveyance of any Contributed Interest, including, without limitation,
the payment of any transfer tax which may be determined to be due in respect of
such Contributed Interest under any such law or regulation and the preparation,
execution and filing of any and all affidavits and questionnaires required by
any such law or regulation. The Wirths shall cooperate with the Operating
Partnership in the preparation of any such affidavits or questionnaires and
shall make available to the Operating
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Partnership any books and records of the Wirths used in the preparation of any
such affidavits or questionnaires. The Wirths shall pay any such tax which may
be determined to be due under any such law or regulation and, in the event any
such tax is paid by the Wirths, the Wirths shall be reimbursed at the Closing by
the Operating Partnership.
Section 4.3. FURTHER ASSURANCES. The Wirths
and the Operating Partnership agree, at any time and from time to time after the
Closing, to execute, acknowledge where appropriate and deliver such further
instruments and documents and to take such other action as any other party to
this Agreement may reasonably request in order to carry out the intents and
purposes of this Agreement.
Section 4.4. CLOSING COSTS; FEES AND EXPENSES.
Except as expressly provided herein, each party hereto shall bear all costs and
expenses incurred by such party in connection with the negotiation, preparation
and/or review of this Agreement and the OP Agreement and any other agreement or
instrument contemplated hereby and thereby, including the fees and expenses of
their respective auditors and attorneys. The Operating Partnership shall bear
all closing costs, including all filing and recordation fees, title insurance
premiums and charges, costs of legal opinions (other than those of the Wirths'
counsel), transfer taxes, all Hart-Scott costs whether incurred by the Wirths or
the Operating Partnership, costs incurred in connection with obtaining the
consent of any third parties, document production, duplication costs and other
similar costs and expenses incurred by them in connection with the Closing and
shall pay and reimburse the Wirths for all reasonable closing costs, including
all filing and recordation fees, document production, duplication costs and
other similar costs directly incurred by them (other than attorneys' fees,
except for attorneys' fees in the event that it is determined that the Wirths
shall be required to make a filing under Hart-Scott with respect to the
transactions contemplated by this Agreement) in connection with the Closing.
ARTICLE V
CLOSING
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Section 5.1. CLOSING. The closing of the
transactions contemplated hereby (the "Closing") shall occur as of 12:01 a.m.
(MST) on February 1, 1998, or such later date as the Operating Partnership shall
specify (the "Closing Date"), at the offices of Thompson Hine & Flory LLP, 3900
Key Center, 127 Public Square, Cleveland, Ohio 44114, or at such other location
as the Operating Partnership shall specify. The Operating Partnership agrees
that any such notice of a change in the Closing Date or in the proposed location
of the Closing shall be
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effective only if given in writing and delivered to Wirths not less that the
second business day prior to (a) the date on which the Closing was to have
occurred, in the case of a change in the proposed Closing Date, and (b) the
Closing Date, in the case of a change in the proposed location of the Closing.
Section 5.2. CONDITIONS TO ALL OBLIGATIONS.
The obligations of the Wirths and the Operating Partnership to consummate the
transactions contemplated hereby are subject to fulfillment or waiver (by means
of a written instrument signed by each of the Operating Partnership and the
Wirths) of all of the following conditions on or prior to the Closing Date:
(a) all consents and waivers of third parties
requisite to the consummation of the Closing and the effectiveness of the OP
Agreement (including waivers of requirements, puts, options, rights of first
refusal and other similar rights, if any), shall have been obtained by the
Operating Partnership.
Section 5.3. CONDITIONS TO OBLIGATIONS OF THE
OPERATING PARTNERSHIP. The obligations of the Operating Partnership to
consummate the transactions contemplated hereby is subject to fulfillment or
waiver (by means of a written instrument signed by the Operating Partnership) of
all of the following conditions on or prior to the Closing Date:
(a) the Wirths shall have executed and
delivered to the Operating Partnership one fully completed
Assignment with respect to all of the Contributed
Interests;
(b) the REIT shall have received an original
OP Agreement executed and delivered by each other party
thereto;
(c) The Operating Partnership shall have
received a certificate, dated the Closing Date, to the effect that all of the
representations and warranties of the Wirths set forth in Section 3.1 are true
and correct as of the Closing Date as if made again on and (except to the extent
any such representation and warranty expressly specifies otherwise) as of such
date.
Section 5.4. CONDITIONS TO OBLIGATIONS OF THE
WIRTHS. The obligations of Wirths to consummate the transactions contemplated
hereby are subject to fulfillment or waiver (by means of a written instrument
signed by the Wirths) of all of the following conditions on or prior to the
Closing Date:
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(a) the Wirths shall have received an original,
fully completed Assignment with respect to each of the Contributed Interests
executed by each party thereto other than the Wirths;
(b) the Wirths shall have received an original
OP Agreement executed and delivered by each party thereto
other than the Wirths;
(c) the Wirths shall have received a
certificate, dated the Closing Date, of an authorized officer of the REIT to the
effect that (i) all of the conditions set forth in Sections 5.2 and 5.3 have
been satisfied or waived as provided therein, and (ii) all of the
representations and warranties of the Operating Partnership set forth in Section
3.2 are true and correct as of the Closing Date as if made again on and (except
to the extent any such representation and warranty expressly specifies
otherwise) as of such date. Upon delivery thereof, such certificate shall
constitute the representation and warranty with respect to the matters stated
therein of the Operating Partnership to the Wirths for the purposes of this
Agreement;
ARTICLE VI
MISCELLANEOUS
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Section 6.1. TIME OF THE ESSENCE. Time of
performance is of the essence of this Agreement.
Section 6.2. SUCCESSORS AND ASSIGNS. This
Agreement shall be binding on the parties hereto and their respective heirs,
executors, administrators, successors and assigns. The Operating Partnership may
not assign this Agreement without the prior written consent of the Wirths.
Section 6.3. GOVERNING LAW. This Agreement
shall be governed by and construed in accordance with the
internal laws of the State of Arizona.
Section 6.4. NOTICES. All notices, demands or
requests made pursuant to, under or by virtue of this Agreement must be in
writing and mailed to the party to which the notice, demand or request is being
made by certified or registered mail, return receipt requested, postage prepaid,
as follows:
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To the Wirths:
James F. Wirth and
Gail J. Wirth
c/o InnSuites Hotels LLC
1615 East Northern Avenue
Suite 105
Phoenix, Arizona 85020-3998
To the Operating Partnership:
c/o Realty ReFund Trust
1750 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44114
Attn: Executive Vice President
With a copy to:
James B. Aronoff, Esq.
Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114
Any notice given in accordance with the provisions of this Section 6.4 shall be
deemed given when actually delivered or when proper delivery is refused by the
addressee.
Section 6.5. EXCULPATION. No partner (other
than any party hereto and the REIT in its capacity as general partner of the
Operating Partnership), shareholder, officer, director, agent or employee of a
party hereto, shall have any individual or personal liability hereunder.
Section 6.6. ENTIRE AGREEMENT; MODIFICATION OR
AMENDMENT. This Agreement together with the exhibits hereto and all agreements
referred to herein and therein, contains the entire understanding of the parties
with respect to its subject matter, and the parties hereto may amend this
Agreement only by a writing signed by each party against whom such amendment may
be enforced.
Section 6.7. CAPTIONS. The Article and
Section captions herein are for convenience of reference only, do not constitute
part of this Agreement and shall not be deemed to limit or otherwise affect any
of the provisions hereof.
Section 6.8. COUNTERPARTS. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same Agreement, and shall become effective when one or more counterparts
have been signed by
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each of the parties hereto and delivered to each of the
other parties.
Section 6.9. SURVIVAL. This Agreement will
survive the Closing.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed and delivered on the
day and year first above written.
/S/ JAMES F. WIRTH
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James F. Wirth
/S/ GAIL J. WIRTH
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Gail J. Wirth
RRF LIMITED PARTNERSHIP
By: Realty ReFund Trust, its general
partner
By: /S/ GREGORY D. BRUHN
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Gregory D. Bruhn,
Executive Vice President
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SCHEDULE I
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Legal Description of the Hotel
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Schedule I
Those parts of Blocks 3, 4, 7 and 8 of Goldschmidt's Addition, to the City of
Tucson, Pima County, Arizona, according to the Plat of record in the Office of
the Pima County Recorder in Book 1 of Maps, Page 3 and of Lots 16 and 17 of
Section 11, Township 14 South, Range 13 East, Gillla and Salt River Base and
Meridian, Pima County, Arizona, described as follows:
Beginning at the Southeast corner of Lot 10, Block 7 of said
Goldschmidt's Addition;
Thence South 73 degrees 36 minutes 40 seconds West (South 73 degrees 36 minutes
38 seconds West, measured), along the North right of way of Franklin Street, a
distance of 743.97 feet (744.29 feet measured) to the East right of way of the
Tucson Controlled Access Highway, Arizona State Highway Project F. I. 141,
according to the map filed in the Pima County Recorder's Office on March 3, 1949
in instrument No. 6675;
Thence Northerly along said East right of way on a Spiral Curve, a distance of
442.05 feet (441.74 feet measured);
Thence along a curve to the right having a central angle of 47 degrees 30
minutes 00 seconds a radius of 641.20 feet, a distance of 531.58 feet;
Thence Northeasterly along a spiral curve, a distance of 158.87 feet (158.55
feet measured) to the West right of way of the alley running North and South
through said Blocks 3, 4 and 7 of Goldschmidt's Addition;
Thence South 14 degrees 32 minutes 18 seconds East (South 14 degrees 33 minutes
24 seconds East, measured), along the West line of said alley, a distance of
695.11 feet (695.23 feet measured) to the Point of Beginning;
and
Those parts of Blocks 3 and 4 of Goldschmidt's Addition to the City of Tucson,
Pima County, Arizona, according to the plat of record in the office of the Pima
County Recorder in Book 1 of Maps, Page 3, described as follows:
Beginning at a point on the East line of said Block 4, said point being 42.00
feet Southerly from the Northeast corner of Lot 1, Block 4;
Thence South 75 degrees 17 minutes 00 seconds West (South 75 degrees 34 minutes
37 seconds West, measured), a distance of 170.09 feet (170.13 feet measured) to
the West line of Block 4;
Thence North 14 degrees 32 minutes 18 seconds West (North 14 degrees 30 minutes
16 seconds West, measured), along the West line of said Block 4, a distance of
37.00 feet to the Northwest corner of Lot 1, Block 4;
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Thence continue North 14 degrees 32 minutes 18 seconds West (North 14 degrees 30
minutes 77 seconds West measured), along the West line of Block 3, a distance of
93.84 feet (93.77 feet measured) to the South right of way of the Tucson
Controlled Access Highway, Arizona State Highway Project F.I. 141, according to
the map filed in the Pima County Recorder's Office on March 3, 1949 as
instrument No. 6675;
Thence Easterly along said South right of way on a spiral curve, a distance of
124.62 feet (124.57 feet measured);
Thence North 77 degrees 23 minutes 51 seconds East (North 77 degrees 45 minutes
26 seconds East measured), a distance of 45.51 feet (45.54 feet measured) to the
East line of Block 3;
Thence South 14 degrees 32 minutes 26 seconds East (South 14 degrees 32 minutes
59 seconds East, measured), along the East line of said Blocks 3 and 4, a
distance of 126.25 feet (126.75 feet measured) to the Point of Beginning.
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SCHEDULE II
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Calculation of Units
1. The consideration payable by the Operating
Partnership for the Hotel shall be Ten Million
Eight Hundred Twenty Thousand Dollars
($10,820,000).
2. The Consideration shall be payable as follows:
a. The Operating Partnership shall assume a
$6,000,000 mortgage loan payable to JDI
Tucson, L.L.C.
b. The Operating Partnership shall deliver to
Hospitality Corporation International, or an
affiliate corporation wholly-owned by James F.
Wirth, a promissory note (the "HCI Note") in
the principal amount of $1,000,000. The
principal balance of the Note shall be due and
payable on February 1, 1999. Interest only
shall be paid monthly at seven percent (7%).
c. The balance of Consideration shall consist of
Class B Partnership Units in the Operating
Partnership. The number of Class B
Partnership Units to be delivered at closing
shall be equal to 50% of the above-calculated
balance of the Consideration, less 3% of such
balance to be delivered to Marc Berg and 1% of
such balance of the consideration to be
delivered to Kenneth Sliwa pursuant to
paragraph 2(d) below, divided by 4.31. The
balance of the Class B Partnership Units shall
be issued and held in escrow by the Operating
Partnership, provided, that such Units shall
not be entitled to distributions from the
Operating Partnership so long as they are held
in escrow. The terms of this escrow shall
provide that on the 90th day following the
close of the first and second fiscal years
(1998 & 1999) following the Closing: (i) the
number of Units held in escrow shall be
reduced by any amount, if any, by which the
Hotel's Net Operating Income is less than the
amount projected for that year times the
discount factor used in the in the Appraisal
of the Hotel prepared by Charles V. Singleton,
dated January 19, 1998 (the "Appraisal")
divided by 4.31 or (ii) in each case, one-
third (1/3) of the Units held in escrow shall
be released by the Operating Partnership in
the event that for such fiscal year, the
Hotel's Net Operating Income meets or exceeds
the amount projected for such year in the
Appraisal and provided further that if the
Hotel shall produce sufficient Net Operating
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Income for such fiscal year to exceed the amount of Net
Operating Income projected by the Appraisal for the
following fiscal year then an additional one-third (1/3)
of the Units held in escrow shall be released at such
time. Ninety (90) days after the close of the third fiscal
year, the number of Units held in escrow shall be reduced
by the sum of: (i) any amount, if any, by which the
Hotel's Net Operating Income is less than the amount
projected for that year, times the discount factor used in
the Appraisal for that year divided by 4.31, and (ii) any
amount, if any, by which a recalculation of the Appraisal
using the first three years' actual Net Operating Income
would be less than the total consideration furnished for
the Hotel ($10,820,000), divided by 4.31.
d. James F. and Gail Wirth shall direct that
three percent (3%) and one percent (1%),
respectively, of the balance of the
consideration shall be paid by the issuance to
Marc Berg and Kenneth Sliwa of Class A
Partnership Units, as an advisory fee. The
number of Class A Partnership Units to be
delivered shall be equal to the 4% balance
divided by 4.31.
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EXHIBIT A
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Form of Assignment and Assumption of Membership Interest
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ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTEREST
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Tucson Saint Mary's Suite Hospitality L.L.C.
THIS ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP
INTEREST ("Assignment") is made as of the 1st day of February, 1998 by and
between ______________ (the "Assignor") and RRF LIMITED PARTNERSHIP, a Delaware
limited partnership ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Assignor holds a fifty percent (50%)
membership interest in Tucson Saint Mary's Suite Hospitality L.L.C., an Arizona
limited liability company (the "Company"), which is governed by the certain
Operating Agreement of Tucson Saint Mary's Suite Hospitality L.L.C. dated as of
April 29, 1997 (the "Operating Agreement");
WHEREAS, the Company and Assignee have entered
into that certain option agreement dated as of January 30, 1998 (the "Option
Agreement") pursuant to which the Company has agreed to sell to Assignee the
InnSuites Hotel located in Tucson, Arizona owned by the Company (the "Hotel") in
consideration of the delivery to Assignee of, among other things, limited
partnership units in Assignee; and
WHEREAS, the Option Agreement provides for the
sale of the Hotel through the transfer of the membership
interests in the Company to Assignee;
NOW, THEREFORE, Assignor and Assignee hereby agree
as follows:
1. ASSIGNMENT. The Assignor hereby sells,
conveys and assigns to Assignee, without recourse, all of Assignor's right,
title and interest in the Company and the Operating Agreement.
2. ASSUMPTION. Assignee, by its execution
hereof, agrees to accept the foregoing assignment and to assume, subject to the
terms of the Operating Agreement, all of Assignor's rights, title and
obligations of Assignor under the Operating Agreement.
3. INDEMNIFICATION. Assignee indemnifies and
agrees to defend and hold Assignor harmless from and against any and all costs,
expenses (including, without limitation, reasonable attorneys' fees and
expenses) damages, claims or liabilities that Assignor may suffer or incur and
that arise out of this Company from and after the date of this Assignment.
4. GOVERNING LAW. This Assignment shall be
governed by and construed in accordance with Arizona law.
<PAGE> 17
5. SUCCESSORS AND ASSIGNS. This Assignment
shall be binding upon and inure to the benefit of, the parties hereto and their
respective successors and assigns.
6. COUNTERPARTS. This Assignment may be
executed in multiple counterparts each of which shall be deemed an original and
all of which shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have
executed this Assignment and Assumption of Membership Interest as of the date
first above written.
ASSIGNOR:
-------------------------------
------------------
ASSIGNEE:
RRF LIMITED PARTNERSHIP, a
Delaware limited partnership
By: REALTY REFUND TRUST, an
unincorporated Ohio business
trust, its general partner
By: ________________________
Title: __________________
<PAGE> 1
Exhibit 7.1
MICHAEL MAASTRICHT, C.P.A.
Certified Public Accountant
10640 North 28th Drive, Suite C-209 (602) 375-2926 - ofc
Phoenix, Arizona 85029 (602) 375-2761 - fax
Independent Auditor's Report
----------------------------
The Members
Tucson Saint Mary's Suite Hospitality, LLC:
We have audited the accompanying balance sheet of Tucson Saint Mary's Suite
Hospitality, LLC (An Arizona Limited Liability Company) as of December 31, 1997,
and the related statements of operations and members' deficit and cash flows for
the year ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tucson Saint Mary's Suite
Hospitality, LLC as of December 31, 1997, and the results of its operations and
cash flows for the year ended in conformity with generally accepted accounting
principles.
February 27, 1998 Michael Maastricht, C.P.A.
Phoenix, Arizona
Member
American Institute of Certified Public Accountants
Arizona Society of Certified Public Accountants
<PAGE> 2
TUCSON SAINT MARY'S SUITE HOSPITALITY, LLC
Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Cash $ 16,617
Accounts receivable 51,999
Inventory 95,643
Land 900,000
Buildings and equipment pledged, at cost, net of
accumulated depreciation 5,415,062
Deferred loan fees, net of accumulated amortization 85,000
Cash held in escrow 90,452
Other assets 11,277
-----------
$ 6,666,050
===========
LIABILITIES AND MEMBERS' DEFICIT
--------------------------------
Accounts payable $ 391,484
Accrued expenses 298,403
Deed of trust 6,000,000
Line of credit 50,000
Advances from affiliates 1,140,428
-----------
7,880,315
-----------
Members' deficit:
Members' capital 25,000
Distributions to prior owners (788,256)
Accumulated losses (451,009)
-----------
(1,214,265)
-----------
$ 6,666,050
===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 3
TUCSON SAINT MARY'S SUITE HOSPITALITY, LLC
Statements of Operations and Members' Deficit
For the year ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Room rentals $2,562,155
Restaurant and banquet 813,651
Telephone 100,698
Other 65,144
----------
3,541,648
----------
Department costs:
Wages and salaries:
Salaries 206,457
Front desk 139,182
Housekeeping 224,374
Laundry and houseman 85,297
Maintenance and other 146,069
Taxes and benefits 129,684
----------
931,063
----------
Rooms department:
Guest supplies 60,305
Complimentary items 92,692
Telephone 65,824
Cleaning supplies 36,776
Office and desk supplies 11,707
Linen 18,952
Travel agent commissions 25,217
Reservations 4,147
Other rooms department 18,357
----------
334,157
----------
Other operating expenses:
Administrative and general:
Professional services 83,054
Licenses, dues and subscriptions 12,274
Bank charges and credit card discount 51,045
Management fees 58,372
Trademark license fees 100,414
Other administrative 21,767
----------
326,926
----------
Advertising and sales promotion:
Travel and promotion 18,434
Advertising trust fees 14,189
Publications and newspapers 48,458
Billboards 18,949
Guest mail and postage 6,685
Supplies and sales printing 13,608
----------
120,323
----------
</TABLE>
(continued)
<PAGE> 4
TUCSON SAINT MARY'S SUITE HOSPITALITY, LLC
Statements of Operations and Members' Deficit
For the year ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Repairs and maintenance:
Landscaping and pool $ 55,229
Mechanical and electrical 42,611
Supplies 31,544
Refurbishing 181,658
-----------
311,042
-----------
Restaurant and banquet:
Food and beverage 224,016
Wages 292,261
Benefits and taxes 51,500
Supplies 28,893
Other 14,404
-----------
611,074
-----------
Utilities:
Electric 242,926
Gas 35,433
Water and sewer 71,940
-----------
350,299
-----------
Other fixed charges:
Property insurance 35,165
Property taxes 168,872
Depreciation 247,548
Interest 556,188
-----------
1,007,773
-----------
Total expenses $ 3,992,657
-----------
Net loss (451,009)
Members' capital contributions 25,000
Distributions to prior owners (788,256)
Members' deficit, beginning of year --
-----------
Members' deficit, end of year $(1,214,265)
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
TUCSON SAINT MARY'S SUITE HOSPITALITY, LLC
Statements of Operations and Members' Deficit
For the year ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income $ (451,009)
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 247,548
Amortization 35,000
(Increase) decrease in:
Accounts receivable (51,999)
Inventories (95,643)
Cash held in escrow (90,452)
Other assets (11,277)
Increase (decrease) in:
Accounts payable 391,484
Accrued expenses 298,403
------------
Net cash provided by operating activities 272,055
------------
Cash flows from investing activities:
Acquisition of land, buildings and equipment (6,562,610)
------------
Net cash used by investing activities (6,562,610)
------------
Cash flows from financing activities:
Deferred loan fees (120,000)
Increase in line of credit 50,000
Increase in advances from affiliates 1,140,428
Addition of deed of trust: payable 6,000,000
Members' capital contributions 25,000
Distributions to prior owners (788,256)
------------
Net cash provided by financing activities 6,307,172
------------
Net increase in cash 16,617
Cash, beginning of period --
------------
Cash, end of period $ 16,617
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
Notes to Financial Statements
Year ended December 31, 1997
1. Operations and Summary of Significant Policies.
Tucson Saint Mary's Suite Hospitality, LLC ("The Company") (An Arizona
Limited Liability Company) was organized in May 1997 to purchase and
operate a hotel property in Tucson, Arizona. The financial statements
are presented for the purpose of presenting the property's operations
for a full year and include operations of the prior owners for the
period January 1 to May 20, 1997. The property is operated under the
InnSuites trademark ("InnSuites") of Hospitality Corporation
International ("Hospitality"). An affiliate, InnSuites Hotels, LLC
provides management services to the Company. The property is located in
a developed area that includes other hotel properties some of which may
have greater financial resources than the Company.
Significant accounting policies of the Company follow:
Property and Equipment.
Buildings and equipment are stated at cost. Depreciation is provided
principally using the straight-line method for financial reporting and
income tax purposes over the estimated useful lives of the assets which
range from 7 years for equipment to 40 years for the buildings.
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to expense including regular guest
room refurbishing. Loan fees are amortized over the term of the note.
Property accounts consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Buildings $ 3,780,087
Equipment and furnishings 1,882,523
------------
5,662,610
Accumulated depreciation 247,548
------------
$ 5,415,062
===========
</TABLE>
Management of the Company reviews the hotel property for impairment
when events or changes in circumstances indicate the carrying amounts
of the hotel properties may not be recoverable. When such conditions
exist, management estimates the future cash flows from operations and
disposition of the hotel property. If the estimated undiscounted future
cash flows from operations and disposition of the hotel property are
less than the carrying amount of the asset, an adjustment to reduce the
carrying amount to the related hotel property's estimated fair market
value would be recorded and an impairment loss would be recognized. No
such impairment losses have been recognized.
Cash and Cash Equivalents.
All highly liquid investments with an original maturity date of three
months or less when purchased are considered to be cash equivalents.
Cash Held in Escrow.
Cash held in escrow consists of amounts for real estate taxes remitted
to the lender which holds the deed of trust on the hotel property and
amounts deposited for the replacement of hotel real and personal
property pursuant to the terms of the loan agreement.
<PAGE> 7
Notes to Financial Statements
Year ended December 31, 1997
Deferred Loan Fees.
Deferred loan fees are amortized over the terms of the related loan
agreement. Amortization expense of $35,000 for the period ended
December 31, 1997 is included in interest expense in the accompanying
statements of operations. Accumulated amortization of deferred expenses
was $35,000 at December 31, 1997.
Revenue Recognition.
Revenue is recognized as earned. Ongoing credit evaluations are
performed and credit losses are charged off when deemed to be
uncollectible. Such losses have been minimal and within management's
expectations.
Inventories.
Inventories, which consist primarily of linen, operating supplies, and
food and beverage, are stated at the lower of cost or market. Cost is
determined by the first in, first out method.
Income Taxes.
All income and expense is passed through the Company for tax purposes
and reported on the income tax returns of the individual members.
Accordingly, the financial statements include no provision or
liabilities for income taxes.
Use of Estimates.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
<PAGE> 8
Notes to Financial Statements
Year ended December 31, 1997
2. Related Party Transactions
The Company, Hospitality and its affiliates are related through common
ownership and management. The Company accrued fees to Hospitality or
its affiliates during 1997 for services rendered as follows (fees in
excess of these amounts were paid by the property to the prior
management company and trademark owner):
<TABLE>
<S> <C>
Management fees (2.5% of total revenues) $ 35,472
Trademark license fees (2.5% of total revenues) 35,472
InnSuites Trust - advertising (1% of total revenues) 14,189
Advances from affiliates are as follows:
Hospitality Corporation International $ 825,000
Rare Earth Development Company 52,500
Managing member 262,928
----------
$1,140,428
==========
</TABLE>
Advances from affiliates are working capital advances generally
advanced during slower periods and repaid by the property during the
busy season and advances connected with guest room refurbishing and
improvements. There are no terms or covenants connected with the
advances.
3. Deed of Trust
The deed of trust payable matures in May of 1999. Monthly payments of
interest only of $70,000 are at a rate of 14%. The note is secured by
all property and equipment of the Company and collateral assignment of
all operating agreements. Interest paid in 1997 was $521,188. Annual
principal payment requirements of the mortgage are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ --
1999 6,000,000
------------
$ 6,000,000
============
</TABLE>
<PAGE> 1
Exhibit 7.2
PRO FORMA FINANCIAL INFORMATION
The Pro Forma Consolidated Balance Sheet of Realty Refund Trust (the Trust) (i)
is presented as if the acquisition of the membership interests in Tucson St.
Mary's Suite Hospitality LLC (St. Mary's) as discussed in Item 2 of this Form
8-K had occurred on January 31, 1998; and (ii) adjusts the historical balance
sheet of the Trust as of January 31, 1998 for the effects of the acquisition.
The Pro Forma Consolidated Statement of Operations for the Trust for the year
ended January 31, 1998 (i) is presented as if the acquisition of St. Mary's had
occurred on February 1, 1997; (ii) the formation transactions, (previously
reported on Form 8-K dated February 17, 1998) had occurred on February 1, 1997;
and (iii) adjusts the historical operating results of the Trust for the year
ended January 31, 1998 for the effects of the acquisition and formation
transactions. The pro forma information is not necessarily indicative of what
the actual financial position and results of operations of the Trust would have
been, assuming these transactions had been consummated as of January 31, 1998 or
as the beginning of the period presented, nor does it purport to represent the
future financial position or results of operations of the Trust.
<PAGE> 2
REALTY ReFUND TRUST
PRO FORMACONSOLIDATED BALANCE SHEET
JANUARY 31, 1998 AND 1997
(Unaudited, dollar amounts in thousands)
<TABLE>
<CAPTION>
Trust St. Mary's Pro Forma Pro
ASSETS Historical Historical Adjustment Forma
------ ---------- ---------- ---------- -----
(A) (A) (B)
<S> <C> <C> <C> <C>
INVESTMENTS IN HOTEL PROPERTY, net $41,241 $6,315 $47,627
CASH AND CASH EQUIVALENT 2,379 106 (16) (C) 2,469
------- ------ ------- -------
ACCOUNT RECEIVABLES - 52 (52) (C) -
INVENTORY - 97 (97) (C) -
OTHER ASSETS - 96 (96) (C) -
------- ------ ------- -------
TOTAL ASSETS $43,620 $6,666 $ (261) $43,359
======= ====== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
MORTGAGE NOTES PAYABLE $17,710 $6,000 $23,710
NOTES PAYABLE TO BANKS 155 50 205
OTHER NOTES PAYABLE 2,865 - 2,865
ADVANCES PAYABLE TO RELATED PARTIES 1,700 1,140 2,840
DUE TO LESSEE 944 - 130 (C) 1,074
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
572 690 (391) (C) 871
MINORITY INTEREST IN LIMITEDPARTNERSHIP 14,075 - (1,214) (D) 12,861
EQUITY:
Shares of beneficial interest without par value;
unlimited authorization; 1,667,817 and 1,020,586
shares issued and outstanding in 1998 5,599 (1,214) 1,214 (D) 5,599
------- ------ ------- -------
TOTAL EQUITY 5,599 (1,214) 1,214 5,599
------- ------ ------- -------
TOTAL LIABILITIES AND EQUITY $43,620 $6,666 $ (261) $43,359
======= ====== ======= =======
The accompanying notes to pro forma consolidated
balance sheet are an integral part of this balance
sheet.
</TABLE>
<PAGE> 3
REALTY REFUND TRUST
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JANUARY 31, 1998
(Unaudited, dollar amounts in thousands)
(A) Derived from the historical balance sheet of the Trust as of January 31,
1998 and the historical balance sheet of St. Mary's as of
December 31, 1997.
(B) Reflects the acquisition of St. Mary's membership interest by RRF Limited
Partnership (RRFLP). The Trust is a 12.4% sole general in RRFLP. As James
F. Wirth, Chairman of the Trust and holder of limited partnership units
representing 53% of RRFLP, together with his spouse own 100% of St. Mary,
no adjustment to historical carrying amounts of St. Mary's assets and
liabilities have been made.
(C) Represents the elimination of working capital assets and liabilities due to
lessee.
(D) Represents equity of St. Mary's being reflected as minority in limited
partnership.
<PAGE> 4
REALTY ReFUND TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JANUARY 31, 1998
(Unaudited, dollar amounts in thousands)
<TABLE>
<CAPTION>
St. Mary's
Trust Formation Pro Forma
Historical Transactions Adjustments Pro Forma
---------- ------------ ----------- ---------
(A) (B) (B)
<S> <C> <C> <C> <C>
PERCENTAGE LEASE REVENUE $ $ 7,902 $ 1,147 $ 9,049
OTHER RENTAL REVENUE 1,367 (1,367) -- --
---------- ----------- ------- ----------
INTEREST INCOME 55 -- -- 55
---------- ----------- ------- ----------
1,422 6,535 1,147 9,104
LOSS ON SALE OF REAL ESTATE 36 (36) -- --
INTEREST EXPENSE ON MORTGAGE AND OTHER
NOTES PAYABLE 118 1,492 630 2,240
ADVISORY FEE TO RELATED PARTY ADVISOR
-- 576 112 688
OPERATING EXPENSES OF REAL ESTATE HELD FOR
SALE 1,379 (1,379) -- --
DEPRECIATION AND AMORTIZATION 21 1,689 360 2,070
GENERAL AND ADMINISTRATIVE 441 137 70 648
REAL ESTATE AND PERSONAL PROPERTY TAXES AND
CASUALTY INSURANCE AND GROUND RENT
-- 820 230 2,122
MINORITY INTEREST -- 2,396 (223) 2,173
---------- ----------- ------- ----------
TOTAL EXPENSES AND MINORITY INTEREST
1,995 5,695 1,179 8,869
NET INCOME (LOSS) ATTRIBUTABLE TO SHARES OF
BENEFICIAL INTEREST
$ (573) $ 840 $ (32) $ 235
---------- ----------- ------- ----------
NET INCOME (LOSS) PER SHARE $ (0.30) $ 0.14
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 1,667,817 1,667,817
The accompanying notes to pro forma consolidated statement of operations
are an integral part of this statement.
</TABLE>
<PAGE> 5
REALTY REFUND TRUST
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1998
(Unaudited, amounts in thousands)
(A) Derived from the historical statement of operations for the Trust for the
year ended January 31, 1998.
(B) Represents pro forma adjustments to reflect the (i) formation transaction
and (ii) the acquisition of St. Mary's as of February 1, 1997. The pro
forma adjustments include the following:
1. Pro Forma percentage rent for RRFLP as calculated pursuant to the
terms of the percentage leases between RRFLP and the hotels acquired
in the formation transactions and St. Mary's.
2. Pro Forma adjustments to other rental revenue, loss on sale of real
estate and operating expense of real estate held for sale assume the
sale of the related real estate occurred as of February 1, 1997.
The real estate was sold on September 4, 1997 for $6,000.
3. Pro Forma interest expense includes interest on existing mortgage
indebtedness assumed by RRFLP. The interest rates on the mortgage debt
range from 8.0% to 9.25%. Historical interest expense on $2,300 is
eliminated as that loan from related party was retired with proceeds
from the sale of the real estate.
4. Pro Forma advisory fee to related party advisor (equal to 1% of the
Trust's invested assets) reflects increase related to increase in
assets under management having a total appraised value of $68,485.
5. Pro Forma depreciation and amortization represents (i) the elimination
of historical amortization of the Trust related to the real estate
held for sale, and (ii) depreciation of the properties owned and
acquired by RRFFLP. Depreciation is computed using the straight-line
method and is based upon the estimated useful live of 40 years for
building and improvements and 7 years furniture and equipment. These
estimated useful lives are based on management's knowledge of the
properties and hotel industry in general.
The Trust's pro forma investment in hotel properties, at cost, consist
of the following:
<TABLE>
<CAPTION>
St. Mary's
Formation Pro Forma
Transactions Adjustments
------------ -----------
<S> <C> <C>
Land $ 3,440 $ 900
Building and improvements 31,395 3,615
Furniture, fixtures and equipment 6,406 1,800
------- ------
$41,241 $6,315
======= ======
</TABLE>
6. Pro Forma general and administrative expense reflects expenses related
to salaries and wages, professional fees, directors expenses and other
operating expenses of the properties assumed by RRFLP and the Trust.
<PAGE> 6
7. Pro Forma real estate and personal property taxes, property and
casualty insurance and ground rent expense paid by RRFLP based on
historical amounts.
8. Pro Forma minority interest represents 87.6% of net income of RRFLP
attributable to minority interest holders who holds 7,191,845 limited
partnership units. The Trust holds 1,020,586 units or 12.4% of the
total
<TABLE>
<CAPTION>
St. Mary's
Formation Pro Forma
Transactions Adjustments
------------ -----------
<S> <C> <C>
Pro Forma income before minority interest:
Trust $ 55 $ --
Scottsdale (128) --
RRFLP 2,736 (255)
------- -----
2,663 (255)
Minority interest in Pro Forma of RRFLP at 87.6% 2,396 (223)
------- -----
$ 267 $ (32)
======= =====
</TABLE>
