UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 33-24129
Historic Preservation Properties 1989 Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 04-3021042
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
Batterymarch Park II, Quincy, Massachusetts
02169
(Address of principal executive offices) (Zip
Code)
Registrant's telephone number, including area code: (617) 472-1000
Former Address: One Liberty Square, Boston, MA 02109
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
None.
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 (229.405 of this chapter)
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. [
]
Voting stock held by non-affiliates of the registrant: Not
Applicable.
This Form 10-K does not include an independent auditors' report
for the year ended December 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Part of the Form 10-K Document
into which Incorporated Incorporated by Reference
I Prospectus of the registrant
dated December 19, 1988 (the
"Prospectus").
III The Prospectus.
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Sequential
Page No. Page No.
PART I
Item 1 Business K-3 4
Item 2 Properties K-5 6
Item 3 Legal Proceedings K-5 6
Item 4 Submission of Matters to a
Vote of Unit Holders K-6 7
PART II
Item 5 Market for the Registrant's
Units and Related Unit
Holder Matters K-7 8
Item 6 Selected Financial Data K-7 8
Item 7 Management's Discussion and
Analysis of Financial
Condition and Results of
Operations K-8 9
Item 8 Financial Statements and
Supplementary Data K-16 17
Item 9 Changes In and Disagreements
with Accountants on Accounting
and Financial Disclosure K-16 17
PART III
Item 10 Director and Executive
Officer of the Registrant K-16 17
Item 11 Executive Compensation K-18 19
Item 12 Unit Ownership of Certain
Beneficial Owners and
Management K-18 19
Item 13 Certain Relationships and
Related Transactions K-19 20
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on
Form 8-K K-19 20
SIGNATURE K-20 21
SUPPLEMENTAL INFORMATION K-21 22
PART I
Item 1. Business
Historic Preservation Properties 1989 Limited Partnership (HPP'89,
also referred to as "the Partnership"), a Delaware limited
partnership, was organized under the Delaware Revised Uniform Limited
Partnership Act on September 1, 1988, for the purpose of investing in
a diversified portfolio of real properties which qualified for
rehabilitation tax credits (Rehabilitation Tax Credits) afforded by
Section 47 of the Internal Revenue Code of 1986, as amended (the
Code), and rehabilitating such properties (or acquiring such
properties in the process of rehabilitation and completing such
rehabilitation) in a manner intended to render the cost of such
rehabilitation eligible for classification as "Qualified
Rehabilitation Expenditures", as such term is defined in the Code,
and thus eligible for Rehabilitation Tax Credits. The Partnership
was initially capitalized with contributions of $100 from its general
partner and $100 from each of three initial limited partners. On
September 2, 1988, the Partnership filed a Registration Statement on
Form S-11, File Number 33-24129 (the Registration Statement), with
the Securities and Exchange Commission (the Commission) with respect
to the public offering of units of limited partnership interest
(Units) in the Partnership. The Registration Statement, covering the
offering of up to 100,000 Units at a purchase price of $1,000 per
Unit (an aggregate of $100,000,000), was declared effective on
December 19, 1988. The offering of Units terminated on December 29,
1989, at which time the Partnership had received gross offering
proceeds of $26,588,000 from 2,505 investors.
The general partner of the Partnership is Boston Historic Partners
Limited Partnership (the General Partner), a Massachusetts limited
partnership. The general partners of the General Partner are (i)
Portfolio Advisory Services, Inc. (PAS), a Massachusetts corporation
organized for the purpose of acting as a general partner of the
General Partner, and (ii) Terrence P. Sullivan (Sullivan). Limited
partnership interests in the General Partner are held by investors
unaffiliated with the General Partner (except for an approximately
one-third limited partnership interest which is owned by Sullivan).
The Partnership does not have any employees. For the period January
1, 1995 through September 30, 1995, accounting, asset management and
investor services for the Partnership were performed by PAS who
received no fee but was reimbursed for operating costs of providing
such services. The original contract with PAS was for one year,
commencing July 1, 1993, and was extended through September 30, 1995.
On October 1, 1995, HPP'89 engaged Claremont Management Corporation
(CMC), an unaffiliated Massachusetts Corporation, to provide asset
management, accounting and investor services for an annual fee of
$76,800 and reimbursement of all operating expenses of providing such
services. The contract with CMC expires June 30, 1997 and is
automatically renewed on a yearly basis unless otherwise terminated
as provided for in the agreement.
The Partnership's only business is investing in real properties which
have qualified for Rehabilitation Tax Credits. A presentation of
information about industry segments is not applicable and would not
be helpful in understanding the Partnership's business taken as a
whole. The Partnership's investment objectives and policies are
described on pages 28-36 of its Prospectus dated December 19, 1988
(the Prospectus) under the caption "Investment Objectives and
Policies", which description is incorporated herein by this
reference. The Prospectus was filed with the Commission pursuant to
Rule 424 (b) on January 5, 1989.
As of December 31, 1995, the Partnership had invested an aggregate of
$11,158,064 in three limited partnerships (collectively, the
"Investee Partnerships"), each of which owned or acquired real
properties, the rehabilitation of which has qualified for
Rehabilitation Tax Credits. The Partnership has also invested
$5,000,000 in a real property that the Partnership purchased
directly. In conjunction with this direct purchase, the Partnership
had placed a total of $2,000,000 in an escrow account with the
mortgage lender for such property for the purpose of funding
operating deficits until such time as there is sufficient cash flow
from operations to do so.
As further discussed in Item 7, in January 1995 the Partnership
consummated an agreement with the current holder of the mortgage to
resolve a dispute regarding this escrow account and in March 1996,
the Partnership completed a transaction to purchase the mortgage
note, transfer the property to an entity which the Partnership has a
50% ownership interest, and refinance the property.
Each of the above mentioned properties was placed in service in
December 1989. These properties are located in Jenkintown,
Pennsylvania (Jenkins Court); Portland, Oregon (Portland Lofts); New
Orleans, Louisiana (402 Julia); and St. Paul, Minnesota (the
Cosmopolitan). As of December 31, 1995, 100% of the Limited
Partners' capital contributions (net of selling commissions,
organizational and sales costs, acquisition fees and reserves) had
been invested in real property investments.
The Partnership invested in three of its properties through the
acquisition of general partnership interests in the Investee
Partnerships. In each of these cases (except for Jenkins Court, as
discussed in Section 7), the Investee Partnership owns the fee
interest in the property. Significant Investee Partnership decisions
require the approval of both the Partnership and the other
participating general partners. The Partnership has also directly
invested and owns the fee interest in one additional property. All
decisions with respect to the ownership and operating of such
property are made by the Partnership. All the Investee Partnerships
are subject to first mortgage loans (except for Jenkins Court, as
discussed in Section 7). See Management's discussion and Analysis of
Financial Condition and Results of Operations included as part of
this Annual report on Form 10-K for further detail.
The Investee Partnerships are, and will continue to be, subject to
competition from existing and future projects in the same areas. The
success of the Partnership will depend on factors, many of which are
beyond the control of the Partnership and which cannot be predicted
at this time. Such factors include general economic and real estate
market conditions, both on a national basis and in those areas where
the projects are located, the availability and cost of borrowed
funds, real estate tax rates, operating expenses, energy costs and
government regulations. In addition, other risks inherent in real
estate investment may influence the ultimate success of the
Partnership, including (i) possible reduction of rental income due to
an inability to maintain high occupancy levels or adequate rental
levels, or (ii) possible adverse changes in general economic
conditions and adverse local conditions, such as competitive
overbuilding, or a decrease in employment or adverse changes in real
estate laws, including building codes. In particular, changes in
federal and state income tax laws affecting real estate ownership or
limited partnerships could have a material and adverse affect on the
business of the Partnership.
Item 2. Properties
See Item 1 above.
Item 3. Legal Proceedings
The Partnership is not a party to, to the best knowledge of the
General Partner, any material pending legal proceedings. The
Investee Partnerships are subject to the following legal proceedings.
As discussed in Item 7, on November 23, 1994, the current holder of
the Jenkins Court mortgage notes presented a demand for payment in
full of the balance of the notes and accrued interest thereon. On
November 23, 1994, Jenkins Court filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in United States Bankruptcy
Court for the jurisdiction of the Eastern District of Pennsylvania.
On August 31, 1995, Jenkins Court and the mortgage holder entered
into a settlement agreement to resolve the bankruptcy litigation. As
part of the settlement agreement, Jenkins Court transferred the deed
and title to the property to the mortgage holder in lieu of
foreclosure proceedings. The mortgage holder agreed to release
Jenkins Court and its guarantors for the entire indebtedness and
Jenkins Court received $25,000 to pay certain professional fees
incurred during the bankruptcy proceedings.
Although Jenkins Court no longer owns its investment property and
will no longer have property operations, the Jenkins Court
partnership will remain in existence until the resolution of certain
partnership assets and liabilities.
Also, as mentioned in Item 7, on November 11, 1994 the current holder
of the mortgage note and an unsecured note of Portland Lofts filed
judicial foreclosure proceedings against Portland Lofts for non-
payment of the unsecured note. Portland Lofts' successfully
contested through the court the right of the current holder to
foreclose on the property. Portland Lofts' position was that the
default claimed on the unsecured note does not constitute a default
on the mortgage note. On August 25, 1995, the court issued a summary
judgment in favor of Portland Lofts.
However, the current holder continues to pursue the payment of the
$550,000 unsecured note through litigation. While this case is still
in the discovery phase, debt service payments on the unsecured note
have been paid by Portland Lofts and accepted by the current holder.
The current holder maintains that acceptance of debt service payments
does not constitute a waiver of its rights under the note. Portland
Lofts continues to negotiate with the current holder to resolve the
dispute out of court. The result of such negotiations or a court
decision cannot be determined at this time.
To the best knowledge of the General Partner, neither 402 Julia nor
the Cosmopolitan is subject to any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Unit Holders.
No matters were submitted to a vote of Unit holders.
PART II
Item 5. Market for Registrant's Units and Related Unit Holder
Matters.
(a) There is no active market for the Units and no such market is
expected to develop. Trading in the Units is sporadic and
occurs solely through private transactions.
(b) As of March 20, 1996, there were 2,519 holders of Units.
The Amended and Restated Agreement of Limited Partnership (the
Partnership Agreement) requires that any Cash Flow (as defined
therein) be distributed quarterly to the investor limited partners
(Limited Partners) in specified proportions and priorities and that
Sale or Refinancing Proceeds (as defined therein) be distributed as
and when available. There are no restrictions on the Partnership's
present or future ability to make distributions of Cash Flow or Sale
or Refinancing Proceeds. For the years ended December 31, 1995 and
1994, no distributions of Cash Flow or Sale or Refinancing Proceeds
were paid or accrued to the Limited Partners.
Item 6. Selected Financial Data.
Periods Ended December 31,
1995 1994 1993
(Unaudited) (Unaudited) (Unaudited)
Revenues $ 2,164,691 $ 2,187,421 $ 2,074,655
Net Loss $(1,928,010) $(1,391,927) $(1,476,662)
Net Loss per weighted
average Unit outstanding $ (71.79) $ (51.83) $ (54.98)
Total Assets as of
December 31 $17,160,719 $19,092,470 $19,495,840
Long Term Debt, excluding
discount as of Dec. 31, $17,579,606 $18,496,144 $17,884,892
Cash Distributions per
weighted average Unit $ 0.00 $ 0.00 $ 0.00
outstanding
______________________________________________________
See Item 7 for a discussion of the factors that may materially affect
the foregoing information in future years.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources. The Partnership terminated its
offering of Units on December 29, 1989, at which time Limited
Partners had purchased 26,588 Units, representing gross capital
contributions of $26,588,000. As of December 31, 1995, the
Partnership had invested an aggregate of $11,158,064 in three
Investee Partnerships which owned or acquired real properties, the
rehabilitation of which has qualified for Rehabilitation Tax Credits.
The Partnership has also invested $5,000,000 in real property that
the Partnership has purchased directly and was required to place a
total of $2,000,000 in an escrow account with the mortgage lender for
this property for the purpose of funding operating deficits. The
disposition of this escrow account in January 1995 is discussed
below. In August 1995, the title and deed to the Jenkins Court
property was transferred to mortgage holder. The Partnership had
invested $6,563,064 in Jenkins Court.
Such amounts contributed represent approximately 100% of the Limited
Partners' capital contributions after deduction of selling
commissions, organizational and sales costs, acquisition fees and
reserves. The Partnership does not expect to make any additional
investments in new real estate.
In December 1992, the Cosmopolitan's original mortgage lender was
purchased by Mellon Bank, N.A., the current holder of the mortgage,
which continues to service the mortgage loan and hold the escrowed
funds.
On January 5, 1995, the Partnership consummated The Second Amendment
to Loan Agreement (Second Amendment) with the holder of the
Cosmopolitan's mortgage to resolve a dispute over the funds of the
escrow account. The Partnership maintained that the interest earned
from the escrow account and the overfunding should be paid to the
Partnership. The holder maintained that interest earned was
additional security on the mortgage note. The terms of the Second
Amendment allow the Partnership to be paid the overfunded amount and
the interest earned on the escrow account, (totaling approximately
$421,000). Also, the Partnership received an option to purchase the
mortgage note for the fair market value of the property. In
exchange, the Partnership released the principal funds in the escrow
account (approximately $1,311,000) as a payment to the outstanding
mortgage balance and agreed to reduce the maturity date from December
18, 1999 to December 18, 1996. In summary, at the January 1995
closing of the Second Amendment, the Partnership received
approximately $286,000 and released funds of approximately $1,311,000
for payment of mortgage principal and approximately $15,000 for
payment of finance fees. As discussed below, the Partnership was
paid the approximately $123,000 remaining in the escrow account in
March 1996 when the mortgage note was purchased.
Subsequently, on March 20, 1996, the Partnership completed a
transaction by which, simultaneously, the mortgage note was
purchased, the property was transferred to an entity which the
Partnership was a 50% owner, and the property was refinanced. As
part of the transaction, the Partnership contributed title and deed
of the property to the Cosmopolitan at Mears Park, LLC (CMP), a
Delaware limited liability company, for a 50% ownership interest in
CMP. An affiliate of CMC contributed $650,000 in cash to CMP for a
50% ownership interest in CMP. CMP obtained a $7,000,000 mortgage
note on the property from a new lender. On the March 20, 1996
transaction date, the previous holder of the Cosmopolitan's mortgage
was paid $7,650,000, the agreed upon purchase price of the mortgage
note. In 1996, the transaction will result in a gain on forgiveness
of debt of approximately $10,000,000 and a loss on transfer of the
property of approximately $9,100,000 to the Partnership. Also, the
transaction will not generate any recapture of Rehabilitation Tax
Credits to the Partnership in 1996. The new mortgage note on the
property: bears interest at 9.14%; amortizes over a 25 year
schedule; requires monthly payments of principal and interest, real
estate tax escrow and replacement reserve payments of $59,416,
$28,069 and $4,250, respectively; and matures in April 2003, at which
time all unpaid principal and accrued interest is due. The
Partnership will account for its investment in CMP on the equity
method of accounting.
As of December 31, 1995, the Partnership had approximately $788,600
of total cash, of which approximately $526,000 was not insured by the
Federal Deposit Insurance Corporation.
As of December 31, 1995, the Partnership had reserved approximately
$202,200 for the property operations, approximately $94,200 for
security deposits, and approximately $123,100 for working capital of
the Cosmopolitan. Also, as of December 31, 1995, the Partnership had
approximately $246,500 of unrestricted cash allocated for Partnership
reserves and administrative operating expenses, as well as
approximately $122,600 of restricted reserves which the Partnership
will receive as part of the purchase of the mortgage note and
refinancing of March 1996, as discussed above.
The Partnership does not expect to further strengthen its short term
liquidity position through cash flow from the Investee Partnerships.
Based on preliminary budgetary analysis, the Partnership does expect
to receive some cash flow distributions from CMP.
As further discussed later under Results of Operations, Jenkins Court
transferred deed and title of its investment property to the holder
of the mortgage on August 31, 1995. Also, the holder of the mortgage
note and an unsecured note on Portland Lofts continues to pursue
payment of the $500,000 unsecured note through litigation.
Portland Lofts and 402 Julia have reached stabilized occupancy levels
which currently allow each of these Investee Partnerships to pay
respective operating and debt service obligations. However, until
market conditions improve allowing for increased rental rates, these
Investee Partnerships will not generate any additional cash flow to
distribute to the Partnership. The Cosmopolitan, which, through
March 20, 1996, the date of refinancing, was financed with a mortgage
which requires payment of the lesser of cash flow or a 7% fixed
interest rate, will not generate cash flow in excess of the 7% fixed
interest rate and consequently, will not distribute cash flow to the
Partnership through March 20, 1996. After refinancing, the
Partnership expects to receive some cash flow distribution from CMP
in 1996.
On September 16, 1993, the Partnership sold one-third of its general
partnership interest in 402 Julia to the developer general partner
for $185,000. The Partnership's percentage of interest in 402 Julia
was thereby reduced from 98% to 65%. The terms of the sale require
an initial payment of $100,000 which was paid in September 1993,
followed by annual payments of $3,500 from 1994 to 2016 and a final
payment of $4,500 in 2017. In 1993, the Partnership recognized a
loss of $56,620 on the sale of one-third of its interest in 402
Julia. As of December 31, 1995, one-third of the Investment Tax
Credits earned and fully vested from 402 Julia by the Partnership
equals $83,770. The sale transaction did not generate any Investment
Tax Credit recapture.
The Partnership is seeking other alternatives to build its reserves
which include, but are not limited to, the sale of the remaining
interest in 402 Julia. If the Partnership fails to secure additional
reserves, it may result in significant adverse consequences to the
Partnership including its inability to continue in business.
Cash flow generated from the Partnership's investment properties and
the Partnership's share of the proceeds from the sale of such
properties is expected to be the source of future long-term
liquidity.
Results of Operations. The Partnership's allocable share of
operating losses in the Investee Partnerships ranges from 65% to 99%.
Losses allocated from the Investee Partnerships to the Partnership
totaled approximately $16,000 in 1995 which represents the loss from
402 Julia of approximately $13,000 and includes amortization of
approximately $3,000. Generally, under the equity method of
accounting, an investment may not be carried below zero.
Accordingly, since the Jenkins Court and Portland Lofts investments
were fully reserved for in 1990, the Partnership has not recorded
it's share of losses beyond its 1992 investment in and advances to
these Investee Partnerships. At December 31, 1995, $1,330,000 of
losses are unrecorded for Portland Lofts, respectively. In the
future, income from Portland Lofts will not be recorded until all the
unrecorded losses have been offset.
The Partnership incurred total losses under generally accepted
accounting principles of approximately $1,928,000 in 1995, including
its allocable share of loss from an Investee Partnership of
approximately $16,000. Since inception, the Partnership has received
$4,351,001 of Rehabilitation Tax Credits from its direct interest in
the St. Paul, Minnesota property and was allocated an additional
$4,861,910 from its Investee Partnerships. Such amounts were in turn
allocated to the Partnership's partners.
In general, the Investee Partnerships and the real property directly
owned have completed the lease-up phase. Three properties have
essentially met leasing expectations albeit, in some cases at rents
below original expectations, while one had slower leasing than was
originally projected.
402 Julia has had better than 90% occupancy levels since July 1990
and was approximately 92% leased at December 31, 1995. This 24 unit
residential building has benefited from a relatively strong New
Orleans market.
The Cosmopolitan had leased approximately 98% of its units at
December 31, 1995, and has met occupancy projections. This 255 unit
property operates in a very competitive lowertown St. Paul market and
has steadily leased up since 1992. Consequently, rental income of
the Partnership increased from $1,941,548 in 1993 to $1,975,795 in
1994 to $2,043,735 in 1995. Also, increased rental operations
resulted in increased expenses, particularly expenses associated with
utilities and real estate taxes. This property was financed through
March 20, 1996 (date of refinancing) with a long term, favorable rate
mortgage which included required debt service payments of cash flow
only during the first three years and the lesser of cash flow or a 7%
fixed interest rate, and during the fourth year through maturity, if
amounts paid for debt service were less than the contract interest
rate, the unpaid amount was added to the mortgage balance. Debt
service required in 1995 under the cash flow mortgage was
approximately $1,233,000, of which approximately $865,000 has been
paid and approximately $368,241 has been added to the principal of
the mortgage note.
As noted in the Liquidity and Capital Resources section, on January
5, 1995, the Partnership resolved a dispute with the holder of the
Cosmopolitan's mortgage over certain amounts in an escrow account.
As a result, the Partnership was provided with certain funds from the
escrow account and the opportunity to purchase the mortgage note at
the fair market value of the property, in exchange for the release of
the principal funds from the escrow account as a payment toward the
mortgage principal and a reduction of the mortgage term by three
years.
Also, as noted in the Liquidity and Capital Reserves section, on
March 20, 1996 the Partnership completed a transaction whereby it
paid the purchase price of the mortgage note with the previous
holder, transferred deed and title to the Cosmopolitan property to a
new entity for a 50% ownership interest, and secured new financing on
the property. There was no recapture of Rehabilitation Tax Credits as
a result of this transaction.
Jenkins Court, a 174,000 square foot property, like many commercial
buildings throughout the country, has had slower leasing results and
received lower rents than originally projected. As a result, this
property had difficulty meeting the obligations on its construction
loan and did not have the necessary funds to complete tenant fitout
for the remainder of the building.
On July 2, 1992, Jenkins Court entered into the Second Amended and
Restated Agreement (the Amended Agreement) with the lender which in
summary, forgave approximately $4,033,000 of accrued interest, late
fees and extension fees, divided the construction loan into two
separate promissory notes (Promissory Notes A and B), and required
Jenkins Court to set up escrow accounts for debt service shortfall
and for real estate taxes and contractual lease buyouts of
obligations to former landlords of existing tenants.
Both Promissory Note A and Promissory Note B had a maturity date of
June 15, 1993. However, upon the lender's satisfaction that certain
terms and conditions have been fulfilled, the lender shall have the
right to extend the maturity date for two periods of one year each.
The extension terms and conditions included, but were not limited to:
1) compliance with all covenants in the Amended Agreement, and 2) a
payment of $250,000 for each one year extension period which will be
deposited into a restricted replacement account held by the lender
for future use by Jenkins Court. As discussed later in this section,
the lender extended the maturity date of Promissory Notes A and B on
June 15, 1993.
Promissory Note A originally consisted of $12,200,000 of principal
outstanding under the original loan plus up to $1,478,171 which may
be advanced by the lender to Jenkins Court for new tenant
improvements as required. Monthly payments of principal and interest
are based upon a 25 year amortization period. The note bore interest
at 7.25% for the first year, and was to bear interest at the lender's
cost of funds rate, as defined, plus 2% for each extension period, if
applicable. As discussed later in detail in this section, the
interest rate for the first extension period was amended in June
1993.
Promissory Note B originally consisted of the remaining $9,260,092 of
outstanding principal due under the original construction loan.
Monthly payments will be calculated based on Net Operating Income, as
defined in the Amended Agreement, reduced by debt service payments
made pursuant to Promissory Note A and replenishments to the escrow
accounts. This note provides for an interest rate of 7.75% for the
first year, 8.75% for the second year and 9.75% for the third year,
if applicable. Any shortfall between all interest and other debt
service payments due for any month and the actual monthly payment
received by the lender shall accrue and be added to the outstanding
principal balance of Promissory Note B.
On June 15, 1993, the lender extended the maturity date of the notes
until June 15, 1994 under the following conditions. The required
deposit of $250,000 to the restricted replacement account was
deferred until maturity and shall be recorded and recognized as due
and payable at that time. The interest rate of the outstanding
balance of Promissory Note A was adjusted to 5.5%. The interest rate
of any additional borrowings for Promissory Note A was adjusted to
1.5% above the lender's commercial lending rate.
The lender retained the option to rescind the entire Amended
Agreement if Jenkins Court commenced or participated as an adverse
party in any suit or proceeding against the lender relating to the
original loan or the Amended Agreement. If such rescission took
effect, all amounts previously forgiven and all amounts due would
have been payable upon the lender's demand. In addition, subject to
the provisions of the Amended Agreement, the lender reserved any and
all rights and remedies which it may have had against any party
pursuant to the original loan documents.
At any time after a Future Default Event or Maturity Date (both terms
defined in the Amended Agreement), whichever first occurred, the
lender may have requested that Jenkins Court deed the property to the
lender in lieu of foreclosure.
Management of Jenkins Court was negotiating with the lender to extend
the Notes to June 15, 1995. On September 30, 1994, the lender sold
Notes A and B to a real estate investment entity, the current holder
of the notes. Management of Jenkins Court entered negotiations with
the current holder to extend or restructure the notes. On November
23, 1994, the current holder presented a demand for payment in full
of the balance of the Notes and accrued interest thereon. On
November 23, 1994, Jenkins Court filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in United States Bankruptcy
Court for the jurisdiction of the Eastern District of Pennsylvania.
Under Chapter 11, certain claims against the Partnership in existence
prior to the filing of the petition for relief under federal
bankruptcy laws were stayed while Jenkins Court continued business
operations as Debtor-in-Possession. The acceptance of a plan of
reorganization through the bankruptcy proceeding was highly unlikely
and Jenkins Court had maximized the vesting of its remaining tax
credits for 1995 on June 30, 1995.
As discussed in Item 3, Jenkins Court and the mortgage holder entered
into a settlement agreement on August 31, 1995, to resolve the
bankruptcy litigation. As part of the settlement agreement, Jenkins
Court transferred the deed and title to the property to the mortgage
holder in lieu of foreclosure proceedings. The transaction resulted
in a loss on transfer of property of $1,142,247 in 1995. The
mortgage holder agreed to release Jenkins Court and its guarantors
for the entire indebtedness, Jenkins Court received $25,000 to pay
certain professional fees incurred during the bankruptcy proceedings,
and the case was dismissed from Federal Banckruptcy Court.The transfer
of the deed and title resulted in the recapture of $44,451 of
Rehabilitation Tax Credits in 1995.
Although Jenkins Court no longer owns its investment property and
will no longer have property operations, the Jenkins Court
partnership will remain in existence until the resolution of certain
partnership assets and liabilities. These liabilities include
approximately $94,000 of trade payables, as well as a $250,000
default loan and accrued interest thereon, which has been provided by
HPP'89 and secured by the developer's interest in an unaffiliated
limited partnership.
In 1990, HPP'89 reserved against its investment in Jenkins Court in
the accompanying financial statements, reducing such investment to
zero due to the substantial doubt that Jenkins Court would continue
as a going concern.
HPP'89 might be liable as a general partner of Jenkins Court for
certain creditor claims, with recourse to HPP'89, that cannot be
satisfied by Jenkins Court or the developer general partner, and
there might be adverse tax consequences to the Limited Partners of
HPP'89. Rehabilitation Tax Credits relating to Jenkins Court, which
are subject to recapture due to the transfer of the property to the
mortgage holder, totaled $44,451 or 1.5% of the total $2,828,201
Rehabilitation Tax Credits allocated to HPP'89 from Jenkins Court.
Despite a residential market that is still recovering from the recent
soft real estate market, at December 31, 1995, Portland Lofts reached
94% occupancy of residential units and approximately 96% occupancy of
net rentable commercial space. Two new first class buildings that
compete for tenants with our property had reduced their rents
significantly in an effort to lease-up their buildings. These
competitor actions had caused a review and the eventual reduction of
Portland Loft's rents which had resulted in an increase in occupancy
but at lower rents than originally projected. Construction was
completed on the building's final phase in April 1991.
Portland Lofts' $6,800,000 construction loan matured on March 1,
1992. On June 30, 1992, Portland Lofts refinanced the construction
loan through a variable rate mortgage note maturing on April 1, 1997.
The note is collateralized by the property, rents and other income,
and guaranteed by the developer general partner.
In July 1993, the mortgage loan and a $550,000 unsecured note were
purchased by a real estate investment entity (the current holder of
the mortgage and unsecured notes). The current holder claims that
the unsecured note matured on March 1, 1992 and is in technical
default. It is Portland Lofts' position that the maturity date of the
unsecured note had been effectively extended to correspond to the
maturity date of the mortgage note. Also, the current holder claims
that a default for non-payment of the unsecured note constitutes a
default of the mortgage note.
On October 7, 1994, the current holder demanded full payment of the
unsecured note by November 10, 1994. The guarantors of the note
maintained that they were unable to make full payment on the note.
On November 11, 1994, the current holder filed judicial foreclosure
proceedings against Portland Lofts for non-payment of the unsecured
note. Portland Lofts successfully contested through the court the
right of the current holder to foreclose on the property. Portland
Lofts' position was that the default claimed on the unsecured note
does not constitute a default on the mortgage note. On August 25,
1995, the court issued a summary judgment in favor of Portland Lofts.
However, the current holder continues to pursue the payment of the
$550,000 unsecured note through litigation. While this case is still
in the discovery phase, debt service payments on the unsecured note
have been paid by Portland Lofts and accepted by the current holder.
The current holder maintains that acceptance of debt service payments
does not constitute a waiver of its rights under the note. Portland
Lofts continues to negotiate with the current holder to resolve the
dispute out of court. The result of such negotiations or a court
decision cannot be determined at this time.
On June 30, 1995, Portland Lofts extended the maturity date of a
$400,000 note payable which matured on February 28, 1994, and which
is secured by the developer general partner's interest in an
unrelated property. The note payable was originally extended until
December 31, 1995, with the option to extend for five additional
successive one year periods, and was further extended until December
31, 1996.
As mentioned above, court proceedings have been filed against
Portland Lofts for nonpayment of the $550,000 unsecured note which
the current holder maintains matured on March 1, 1992, and is in
technical default. These factors, among others, continue to raise
substantial doubt about Portland Lofts' ability to continue as a
going concern. In 1990, HPP'89 reserved against its investment in
Portland Lofts, reducing such investment to zero due to the
substantial doubt about the Portland Lofts' ability to continue as a
going concern. At December 31, 1995 and December 31, 1994, HPP'89 had
unrecorded losses of approximately $1,330,000 and $1,089,000,
respectively, associated with Portland Lofts.
In addition, if Portland Lofts were no longer able to continue as a
going concern, HPP'89 might be liable as a general partner of
Portland Lofts for certain creditor claims, with recourse to HPP'89,
that cannot be satisfied by Portland Lofts or the developer general
partner and there might be adverse tax consequences to the Limited
Partners of HPP'89.
Inflation and Other Economic Factors
Recent economic trends have kept inflation relatively low, although
the Partnership cannot make any predictions as to whether recent
trends will continue. The assets of the Partnership are highly
leveraged in view of the fact that each property is subject to a
large construction or long-term first mortgage loan. Operating
expenses and rental revenues of each property are subject to
inflationary factors. Low rates of inflation could result in slower
rental rate increases, and to the extent that these factors are
outpaced by increases in property operating expenses (which could
arise as a result of general economic circumstances such as an
increase in the cost of energy or fuel, or from local economic
circumstances), the operations of the Partnership could be adversely
affected. Actual deflation in prices generally would, in effect,
increase the economic burden of the mortgage debt service with a
corresponding adverse effect.
High rates of inflation, on the other hand, raise the operating
expenses for projects, and to the extent they cannot be passed on to
tenants through higher rents, such increases could also adversely
affect Partnership operations. Although, to the extent rent
increases are commensurable, the burden imposed by the mortgage
leverage is reduced with a favorable effect. Low levels of new
construction of similar projects and high levels of interest rates
may foster demand for existing properties through increasing rental
income and appreciation in value.
Item 8. Financial Statements and Supplementary Data.
See the Financial Statements of the Partnership included as part of
this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Previously disclosed in the Partnership's Report on Form 8-K which
was filed on December 17, 1991.
PART III
Item 10. Director and Executive Officer of the Registrant.
(a) and (b) Identification of Director
and Executive Officer.
The following table sets forth the name and age of the director and
executive officer of PAS and the offices held by such person.
Name Office Age
Terrence P. Sullivan President and Director 49
Mr. Sullivan has served as a director and executive officer of PAS,
which is a general partner of the General Partner since November
1986. Since that time, he has also been a general partner of the
General Partner. He will continue to serve in the capacity indicated
above until his successor is elected and qualified. Mr. Sullivan is
also an executive officer of Boston Capital Planning Group, Inc.
(Boston Capital Planning), a Massachusetts corporation.
(c) Certain Significant Employees.
None.
(d) Family Relationships.
None.
(e) Business Experience.
The background and experience of the executive officer and director
of PAS and Boston Capital Planning identified above in Items 10(a)
and 10(b) is as follows:
Terrence P. Sullivan, 49, is the founder and sole shareholder of
Boston Capital Planning, a financial consulting and real estate
syndication firm, and its wholly-owned subsidiary, Boston Bay
Capital, Inc. (Boston Bay Capital). Founded in 1979, Boston Bay
Capital was an NASD-Registered broker/dealer specializing in
placement of interests in real estate limited partnerships which own
historic and restoration properties. From 1979 through December 31,
1986, Boston Bay Capital participated in the placement of limited
partnership interests in 98 real estate programs, over 60 of which
were historic rehabilitation or restoration partnerships, placing a
total of approximately $140,000,000 in equity. In addition, Boston
Bay Capital served as dealer manager in connection with the sale of
Units of limited partnership interest in Historic Preservation
Properties Limited Partnership, Historic Preservation Properties 1988
Limited Partnership, the Partnership, and Historic Preservation
Properties 1990 L.P. Tax Credit Fund, four public programs sponsored
by the General Partner and an affiliate of the General Partner. Such
public programs sold an aggregate of approximately $82 million of
Units of limited partnership interest. From 1972 to 1978, Mr.
Sullivan was Tax Shelter coordinator for the Boston office of White,
Weld & Co., Inc., an investment banking firm. Mr. Sullivan graduated
from Worcester Polytechnic Institute in 1968 with a Bachelor of
Science degree in mechanical engineering.
He received a Masters in Business Administration from the University
of Massachusetts (Amherst) in 1971. Mr. Sullivan serves as a general
partner of BBC Restoration Properties Limited Partnership and BBC
Restoration Properties II Limited Partnership. In addition, an
entity controlled by Mr. Sullivan serves as the general partner of
Institutional Credit Partners Limited Partnership (ICP), a
partnership organized to invest in a diversified portfolio of
properties which qualify for low-income housing tax credits,
Rehabilitation Tax Credits, or both. In 1989, ICP completed a
private placement of $5,790,000 of limited partnership interest to
corporations and other institutional investors.
(f) Involvement in Certain Legal Proceedings.
None.
Item 11. Executive Compensation.
The director and executive officer of PAS and Boston Capital Planning
receives no remuneration from the Partnership.
Under the Partnership Agreement, the General Partner and its
affiliates are entitled to receive various fees, expense
reimbursements, commissions, cash distributions, allocations of
taxable income or loss and tax credits from the Partnership. The
amounts of these items and the times at which they are payable to the
General Partners and their affiliates are described on pages 13-15
and 36-39 of the Prospectus under the captions "Management
Compensation" and "Cash Distributions and Net Profits and Net
Losses", respectively, which descriptions are incorporated herein by
this reference.
The following table sets forth the amount of expense reimbursements
which the Partnership paid to or accrued for the account of the
General Partner and its affiliates for the years ended December 31,
1995, 1994 and 1993:
Receiving Type of Amount of Compensation
Entity Compensation 1995 1994 1993
(Unaudited) (Unaudited)(Unaudited)
General Reimbursement of
Partner Administrative
and/or Expenses $ 67,955 $ 92,126 $ 47,688
Affiliates
Total $ 67,955 $ 92,126 $ 47,688
For the years ended December 31, 1995, 1994 and 1993, the Partnership
allocated to the General Partner unaudited taxable income loss of
$20,545, $13,919 and $14,767, respectively. See Note 7 of Notes to
Financial Statements for additional information about transactions
between the Partnership and the General Partner and its affiliates.
Item 12. Unit Ownership of Certain Beneficial Owners and
Management.
(a) Unit Ownership of Certain Beneficial Owners.
No person or group is known by the Partnership to be the beneficial
owner of more than 5% of the outstanding Units at March 20, 1996.
Pursuant to the Partnership Agreement, the voting rights of the
Limited Partners are limited and, in some circumstances, are subject
to the prior receipt of certain opinions of counsel or judicial
decisions.
Under the Partnership Agreement, the right to manage the business of
the Partnership is vested solely in the General Partner, although the
consent of a majority in interest of the Limited Partners is required
for the sale at one time of all or substantially all of the
Partnership's assets and with respect to certain other matters. See
Item 1 above for a description of the General Partner and its general
partners.
(b) Unit Ownership of Management.
No director or executive officer of PAS, Boston Capital Planning or
their affiliates had any beneficial ownership of Units as of March
20, 1996. However, a former Vice President of Boston Capital
Planning purchased 20 Units ($20,000) in the Partnership during 1989.
No officer or director of PAS or Boston Capital Planning, nor any
general partner of the General Partner, nor any of their respective
affiliates, possesses the right to acquire Units.
(c) Change in Control.
There exists no arrangement known to the Partnership which may at a
subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
See Note 7 of Notes to Financial Statements for information about
transactions between the Partnership and the General Partner and its
affiliates. See Item 11 above for information concerning the
reimbursements which the Partnership paid to or accrued for the
account of the General Partner and its affiliates for the years ended
December 31, 1995, 1994 and 1993.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements - The Financial Statements listed
on the accompanying Index to Financial Statements and
Schedules are filed as part of this Annual Report.
2. Financial Statement Schedules - The Financial Statement
Schedules listed on the accompanying Index to Financial
Statements is filed as part of this Annual Report.
3. Exhibits - The Exhibits listed on the accompanying
Index to Exhibits are filed as part of this Annual Report
and incorporated in this Annual Report as set forth in
said Index.
(b)Reports on Form 8-K - The Partnership did not file any
Current Reports on Form 8-K during the fourth quarter of
1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
HISTORIC PRESERVATION PROPERTIES 1989
LIMITED PARTNERSHIP
By: Boston Historic Partners Limited
Partnership, General Partner
By: Portfolio Advisory Services,
Inc., General Partner
Date: March 29, 1996 By:
Terrence P. Sullivan,
President
and
Date: March 29, 1996 By:
Terrence P. Sullivan,
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title
Individual General Partner of Boston
Historic Partners Limited
Partnership and President, Principal
Terrence P. Sullivan Executive Officer and Director of
Portfolio Advisory Services, Inc.,
Date: March 29, 1996 General Partner of Boston Historic
Partners Limited Partnership.
Principal Financial and Principal
Accounting Officer of Portfolio
Advisory Services, Inc., General
Terrence P. Sullivan Partner of Boston Historic Partners
Limited Partnership
Date: March 29, 1996
Supplemental Information to be Furnished with Reports Filed Pursuant
to Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act.
An annual report will be furnished to Unit holders subsequent to
filing of this Form 10-K.
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
ANNUAL REPORT ON FORM 10-K
Items 14 (a) (1) and (2) and 14 (d)
INDEX TO FINANCIAL STATEMENTS
Page
Financial Statements of Historic Preservation
Properties 1989 Limited Partnership
Balance Sheets as of December 31, 1995 and 1994 F-3
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 F-4
Statements of Partners' Equity (Deficiency) for the
Years Ended December 31, 1995, 1994 and 1993 F-5
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-6
Notes to Financial Statements F-8
Financial Statement Schedule
Schedule III - Real Estate and Accumulated
Depreciation Held Directly
and by Investee Partnerships F-24
Financial Statements of Jenkins Court Associates
Limited Partnership (the Jenkintown, Pennsylvania
Investee Partnership)
Balance Sheets as of December 31, 1995 and 1994 F-26
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 F-27
Statements of Partners' Equity (Deficiency) for the
Years Ended December 31, 1995, 1994 and 1993 F-28
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-29
Notes to Financial Statements F-30
Page
Financial Statements of Portland Lofts Associates
Limited Partnership (the Portland, Oregon
Investee Partnership)
Balance Sheets as of December 31, 1995 and 1994 F-41
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 F-42
Statements of Partners' Equity (Deficiency) for the
Years Ended December 31, 1995, 1994 and 1993 F-43
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-44
Notes to Financial Statements F-45
Financial Statement Schedule
Schedule III - Real Estate and Accumulated
Depreciation F-55
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(UNAUDITED)
ASSETS
1995 1994
INVESTMENT IN REAL ESTATE
Building and improvements $ 15,922,298 $ 15,905,929
Land and land improvements 1,171,079 1,171,079
Furniture and equipment 526,875 514,466
$ 17,620,252 $ 17,591,474
Accumulated depreciation (2,853,348) (2,369,351)
14,766,904 15,222,123
INVESTMENTS IN INVESTEE
PARTNERSHIPS 3,923,802 9,411,043
Less reserve for realization
of investments in Investee
Partnerships (3,469,267) (8,940,322)
454,535 470,721
CASH, of which $542,088 and $1,964,586
was restricted in 1995 and 1994,
respectively 788,602 2,213,934
DUE FROM INVESTEE PARTNERSHIPS - 3,000
DEFERRED EVALUATION AND
ACQUISITION COSTS, net of
accumulated amortization
(1995, $186,640;
1994, $155,530) 1,057,739 1,088,849
OTHER ASSETS 92,939 93,843
$17,160,719 $19,092,470
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgage payable $ 17,579,606 $ 18,496,144
Less discount on mortgage
payable (1,059,719) (1,990,161)
$ 16,519,887 $ 16,505,983
Accounts payable 5,366 23,476
Accrued expenses and
other liabilities 262,618 262,153
Total liabilities $ 16,787,871 16,791,612
COMMITMENTS AND CONTINGENCIES
(Notes 4, 6 and 7)
PARTNERS' EQUITY:
Limited Partners' equity - Units of Investor Limited
Partnership interest, $1,000 stated value per
Unit - Issued and
outstanding 26,588 units 600,455 2,509,185
General Partner's equity
(deficiency) (227,607) (208,327)
Total partners' equity 372,848 2,300,858
$ 17,16O,719 $ 19,092,470
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
1995 1994 1993
REVENUES:
Rental income $ 2,043,734 $ 1,975,795 $ 1,941,548
Interest and other income 120,957 212,626 133,107
2,164,691 2,188,421 2,074,655
EXPENSES:
Operating and administrative
(Notes 4 and 8) 120,242 101,985 224,647
Professional fees 11,549 70,556 16,822
Depreciation and amortization 524,903 513,745 516,090
Property operating expenses:
Payroll services 200,839 204,169 192,670
Utilities 302,788 309,112 281,679
Real estate taxes 330,492 322,640 309,127
Other operating 422,025 404,648 343,305
1,912,838 1,926,855 1,884,340
INCOME (LOSS) FROM OPERATIONS, BEFORE
INTEREST EXPENSE, LOSS ON SALE OF
INTEREST IN INVESTEE PARTNERSHIP AND
EQUITY IN LOSS OF INVESTEE PARTNERSHIP 251,853 261,566 190,315
INTEREST EXPENSE (2,163,677) (1,638,696) (1,573,232)
LOSS ON SALE OF INTEREST
IN INVESTEE PARTNERSHIP - - (56,620)
EQUITY IN LOSS OF INVESTEE
PARTNERSHIPS (16,186) (14,797) (37,125)
NET LOSS $ (1,928,010) (1,391,927) $(1,476,662)
NET LOSS ALLOCATED TO GENERAL
PARTNER $ (19,280) $ (13,919) $ (14,767)
NET LOSS ALLOCATED TO LIMITED
PARTNERS $ (1,908,730) $1,378,008) $(1,461,895)
NET LOSS PER UNIT OF INVESTOR
LIMITED PARTNERSHIP INTEREST
BASED ON 26,588 UNITS OUTSTANDING $ (71.79) $ (51.83) $ (54.98)
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
Units of
Investor Investor General
Limited Limited Partner's
Partnership Partners' Equity
Interest Equity (Deficiency) Total
BALANCE,
December 31, 1992 26,588 $ 5,349,088 $ (179,641) $ 5,169,447
Net loss
(Unaudited) - (1,461,895) (14,767) (1,476,662)
BALANCE,
December 31, 1993
(Unaudited) 26,588 3,887,193 (194,408) 3,692,785
Net loss
- (1,378,008) (13,919) (1,391,927)
(Unaudited)
BALANCE,
December 31, 1994 26,588 2,509,185 (208,327) 2,300,858
(Unaudited)
Net loss
(Unaudited) - (1,908,730) (19,280) (1,928,010)
BALANCE
December 31, 1995
(Unaudited) 26,588 $ 600,455 $ (227,607) $ 372,848
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,928,010) $ (1,391,927) $ (1,476,662)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 524,903 513,745 516,090
Amortization of discount on note
payable 930,442 296,356 279,464
Deferred interest expense added to
principal of mortgage payable 394,087 611,252 384,892
Equity in loss of investee
partnerships 16,186 14,797 37,125
Loss on sale of interest in
investee partnership - - 56,620
Increase (decrease) in accrued
expenses and other liabilities (9,595) 60,331 105,046
Increase (decrease) in
accounts payable (18,110) 20,618 (8,620)
Decrease in other assets 10,701 4,807 16,331
Net cash provided by (used in)
operating activities (79,396) 129,979 (89,714)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to building and improvements(16,369) - (6,702)
Purchase of furniture and equipment (2,349) - -
Decrease (increase) in due from
investee partnerships 3,000 1,522 5,625
Payment of deferred financing fees (19,593) - -
Proceeds from sale of interest in
investee partnership - - 100,000
Net cash provided by (used in)
investing activities (35,311) 1,522 98,923
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payment on mortgage
note payable (1,310,625) - -
Net cash used in
financing activities (1,310,625) - -
NET INCREASE (DECREASE) IN CASH (1,425,332) 131,501 9,209
CASH, BEGINNING OF YEAR 2,213,934 2,082,433 2,073,224
CASH, END OF YEAR $ 788,602 $ 2,213,934 $ 2,082,433
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
1995 1994 1993
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 832,170 $ 731,291 $ 809,686
NONCASH FINANCING ACTIVITY
During 1995 and 1994, interest expense
not paid from net cash flow was added
to the mortgage payable (Note 6). $ 394,087 $ 611,252 $ 384,892
(1) Organization
Historic Preservation Properties 1989 Limited Partnership (HPP'89)
was formed on September 1, 1988 under the Delaware Revised Uniform
Limited Partnership Act. The purpose of HPP'89 is to invest in a
diversified portfolio of real properties, for which certain costs of
rehabilitation have qualified for rehabilitation tax credits
(Rehabilitation Tax Credits).
Boston Historic Partners Limited Partnership (BHP), a Massachusetts
limited partnership, is the general partner of HPP'89, and officers of
Boston Capital Planning Group, Inc. (BCPG), an affiliate of BHP, were the
initial limited partners of HPP'89. The initial limited partners
withdrew as limited partners upon the first admission of Investor Limited
Partners (Limited Partners). Prior to admission of the Limited Partners,
all costs incurred by HPP'89 were paid by BHP. On May 3, 1989, the first
Limited Partners were admitted to HPP'89 and operations commenced.
The Amended and Restated Agreement of Limited Partnership
(Partnership Agreement) of HPP'89 generally provides that all net
profits, net losses, tax credits and cash distributions of HPP'89 from
normal operations subsequent to admission of Limited Partners shall be
allocated 99% to the Limited Partners and 1% to BHP. Proceeds from sales
or refinancings generally will be distributed 100% to the Limited
Partners until they have received an amount equal to their Adjusted
Capital Contributions (as defined in the Partnership Agreement) plus,
priority returns and additional incentive priority returns for certain
Limited Partners admitted to HPP'89 on or prior to certain specified
dates.
(2) General Partner - BHP
BHP was formed in November 1986 for the purpose of organizing,
syndicating and managing publicly offered real estate limited
partnerships (Public Rehabilitation Partnerships). As of December 31,
1995, BHP had established three such partnerships, including HPP'89.
(3) Summary of Significant Accounting Policies
Investments in Investee Partnerships
HPP'89 accounts for its investments in its three limited
partnerships (the Investee Partnerships) under the equity method. In
general, under the equity method of accounting for investments, the
investment is recorded at cost and the current allocable portion of
earnings (losses) of an Investee Partnership is recorded as income (loss)
with a corresponding increase (decrease) to the investmen
(3) Summary of Significant Accounting Policies (Continued)
Investments in Investee Partnerships (Continued)
account. Distributions received are recorded as reductions to the
investment account. Expenditures attributable to HPP'89 investments
(primarily evaluation and acquisition fees and interest expense incurred
during construction periods) are treated as additional investment basis
and are amortized on a straight-line basis over the estimated life of the
investee assets (40 years).
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.
Depreciation
Investment in real estate is held for lease and stated at cost.
Depreciation is computed on a straight-line basis over 40 years for real
property and over seven years for personal property.
Cash
At December 31, 1995 and 1994, HPP'89 had approximately $526,000 and
$2,050,000, respectively, of cash in excess of amounts insured by the
Federal Deposit Insurance Corporation.
Deferred Evaluation and Acquisition Costs
Expenditures related to the direct purchase of real estate have been
capitalized and were being amortized on a straight-line basis over the
estimated life of real property (40 years).
Income Taxes
No provision (benefit) for income taxes is reflected in the
accompanying financial statements of HPP'89. Partners are required to
report on their tax returns their allocable share of income, gains,
losses, deductions and credits determined on a tax basis.
(3) Summary of Significant Accounting Policies (Continued)
Rental Income
As discussed in Note 5, HPP'89 has a direct ownership interest in a
property located in St. Paul, Minnesota. Revenues under short-term
operating leases from that property are recorded when due.
(4) Investments in Investee Partnerships, and Commitments and
Contingencies
During 1989, HPP'89 acquired a general partnership interest in the
Investee Partnerships, as well as a direct interest in a property located
in St. Paul, Minnesota (Note 5). Each Investee Partnership placed a
property in service in December 1989 and commenced initial leasing
activity. HPP'89's current allocable percentage of operating losses in
the Investee Partnerships ranges from 65% to 99%. The Investee
Partnerships incurred unaudited combined loss of ($1,328,853),
($1,252,947) and ($1,508,736) in 1995, 1994 and 1993, of which
($1,266,192),($1,190,951)and ($1,437,106) was allocated to HPP'89 in
1995, 1994 and 1993, respectively.
Each of the Investee Partnership agreements is different but, in
general, provides for a sharing of management duties and decisions among
HPP'89 and the respective local general partners and certain priorities
to HPP'89 with respect to return on and return of invested capital.
Significant Investee Partnership decisions require the approval of both
HPP'89 and the local general partners. In addition, each Investee
Partnership has entered into various agreements with its local general
partners, or their affiliates, to provide development, management and
other services, for which the local general partners (or their
affiliates) are paid fees by the respective Investee Partnership.
Following is summary information regarding the Investee Partnerships
and HPP'89's investments therein:
Jenkins Court Associates Limited Partnership (Jenkins Court) is a
Delaware limited partnership formed on December 20, 1988 to acquire,
construct, rehabilitate, operate and manage a 144,000 net rentable square
foot five-story building and 30,000 net rentable square feet of new
retail space, including storage areas and parking facilities, located at
Old York Road and Rydal Road, Jenkintown Borough, Pennsylvania.
HPP'89 contributed $6,563,064 through December 31, 1995, to the
capital of Jenkins Court and acquired a general partnership interest
therein. HPP'89's investment in Jenkins Court represented approximately
36% of the aggregate amount which HPP'89 has contributed to the capital
of its three
(4) Investments in Investee Partnerships, and Commitments and
Contingencies (Continued)
Partnerships and to purchase its direct interest in the Cosmopolitan
Building (Note 5).
On July 2, 1992, Jenkins Court and the lender entered into the
Second Amended and Restated Settlement Agreement (the Amended Agreement).
In summary, under the Amended Agreement: the lender forgave
approximately $4,033,000 of accrued interest, late fees and extension
fees; divided the construction loan into two separate promissory notes
(Promissory Notes A and B); and required Jenkins Court to set up escrow
accounts for debt service shortfall and real estate taxes and contractual
lease buyout obligations to former landlords of existing tenants.
Both Promissory Note A and Promissory Note B had a maturity date of
June 15, 1993. However, upon the lender's satisfaction that certain
terms and conditions have been fulfilled, the lender shall have the right
to extend the maturity date for two periods of one year each. The
extension terms and conditions included, but were not limited to:
1) compliance with all covenants in the Amended Agreement, and 2) a
payment of $250,000 for each one year extension period which will be
deposited into a restricted replacement account held by the lender for
future use by Jenkins Court. As discussed later in this footnote, the
lender extended the maturity date of Promissory Notes A and B on June 15,
1993.
Promissory Note A originally consisted of $12,200,000 of principal
outstanding under the original loan plus up to $1,478,171 which may be
advanced by the lender to Jenkins Court for new tenant improvements as
required. Monthly payments of principal and interest were based upon a
25 year amortization period. The note bore interest at 7.25% for the
first year, and was to bear interest at the lender's cost of funds rate,
as defined, plus 2% for each extension period, if applicable. As
discussed later in detail in this footnote, the interest rate for the
first extension period was amended in June 1993.
Promissory Note B originally consisted of the remaining $9,260,092
of outstanding principal due under the original construction loan.
Monthly payment requirements were calculated based on Net Operating
Income, as defined in the Amended Agreement, reduced by debt service
payments made pursuant to Promissory Note A and replenishments of the
escrow accounts. This note provided for an interest rate of 7.75% for the
first year, and 8.75% and 9.75% for the second and third years, if
applicable. Any shortfall between all interest and other debt service
payments due for any month and the actual monthly payment received by th
(4) Investments in Investee Partnerships, and Commitments and
Contingencies (Continued)
lender should have accrued and been added to the outstanding principal
balance of Promissory Note B.
On June 15, 1993, the lender extended the maturity date of the notes
until June 15, 1994 under the following conditions. The required deposit
of $250,000 to the restricted replacement account was deferred until
maturity and shall be recorded and recognized as due and payable at that
time. The interest rate of the outstanding balance of Promissory Note A
was adjusted to 5.5%. The interest rate of any additional borrowings for
Promissory Note A was adjusted to 1.5% above the lender's commercial
lending rate.
The lender retained the option to rescind the entire Amended
Agreement if Jenkins Court commenced or participated as an adverse party
in any suit or proceeding against the lender relating to the original
loan or the Agreement. If such rescission took effect, all amounts
previously forgiven and all amounts due would have been payable upon the
lender's demand. In addition, subject to the provisions of the Amended
Agreement, the lender reserves any and all rights and remedies which it
may have had against any party pursuant to the original loan documents.
At any time after a Future Default Event or Maturity Date (both
terms defined in the Amended Agreement), whichever first occurred, the
lender may have requested that Jenkins Court deed the property to the
lender in lieu of foreclosure.
The terms of the note not only secure the building, land and all
improvements, but also grant a security interest and rights to all leases
and rents upon an event of default under the notes. The notes are
guaranteed by the local general partner and limited partner.
Management of Jenkins Court was negotiating with the lender to
extend the Notes to June 15, 1995. On September 30, 1994, the lender
sold Notes A and B to a real estate investment entity, the current holder
of the notes. Management of Jenkins Court entered negotiations with the
current holder to extend or restructure the notes. On November 23, 1994,
the current holder presented a demand for payment in full of the balance
of the Notes and accrued interest thereon. On November 23, 1994, Jenkins
Court filed a petition for relief under Chapter 11 of the federal
bankruptcy laws in United States Bankruptcy Court for the jurisdiction of
the Eastern District of Pennsylvania. Under Chapter 11, certain claims
against the Partnership in existence prior to the filing of the petition
for relief under federal bankruptcy laws are stayed while Jenkins Court
continues business operations as Debtor-in-Possession. The acceptance of
4) Investments in Investee Partnerships, and Commitments and
Contingencies (Continued)
a plan of reorganization through the bankruptcy proceeding was highly
unlikely and Jenkins Court had maximized the vesting of the majority of
its remaining tax credits on June 30, 1995.
On August 31, 1995, Jenkins Court and the mortgage holder entered
into a settlement agreement to resolve the bankruptcy litigation. As part
of the settlement agreement, Jenkins Court transferred the deed and title
to the property to the mortgage holder in lieu of foreclosure
proceedings. The mortgage holder agreed to release Jenkins Court and its
guarantors for the entire indebtedness and Jenkins Court received $25,000
to pay certain professional fees incurred during the bankruptcy
proceedings. The transfer of deed and title of the property to the
mortgage holder resulted in a recapture of Rehabilitation Tax Credits in
1995 of $44,451 to HPP'89.
Although Jenkins Court no longer owns its investment property and
will no longer have property operations, the Jenkins Court partnership
will remain in existence until the resolution of certain partnership
assets and liabilities. These liabilities include approximately $94,000
of trade payables, as well as a $250,000 default loan and accrued
interest thereon which had been provided by HPP'89 and secured by the
developer's interest in an unaffiliated limited partnership.
In 1990, HPP'89 reserved against its investment in Jenkins Court in
the accompanying financial statements, reducing such investment to zero
due to the substantial doubt that Jenkins Court would continue as a going
concern.
If Jenkins Court were no longer able to continue as a going concern,
HPP'89 might be liable as a general partner of Jenkins Court for certain
trade creditor claims, with recourse to HPP'89, that cannot be satisfied
by Jenkins Court or the developer general partner and there might be
adverse tax consequences to the Limited Partners of HPP'89. The transfer
of the deed and title to the mortgage holder in August of 1995 resulted
in recapture of $44,451 of the Rehabilitation Tax Credits allocated to
HPP'89, of which $44,007 was allocated to the Limited Partners of HPP'89.
402 Julia Street Associates Limited Partnership (402 Julia) is a
Delaware limited partnership formed on July 25, 1989 to acquire,
construct, rehabilitate, operate and manage a 19,000 square foot site and
the building situated thereon and to rehabilitate the building into 24
residential units and approximately 3,500 net rentable square feet of
commercial space located thereon at 402 Julia Street, New Orleans,
Louisiana. At December 31, 1995, 402 Julia had leased approximately 92%
of its residential units and commercial space.
(4) Investments in Investee Partnerships, and Commitments and
Contingencies (Continued)
HPP'89 contributed $775,000 through December 31, 1995 to the capital
of 402 Julia and acquired a general partnership interest therein.
HPP'89's investment in 402 Julia represents approximately 4% of the
aggregate amount which HPP'89 has contributed to the capital of its three
Investee Partnerships and to purchase its direct interest in the
Cosmopolitan Building (Note 5).
On September 16, 1993, HPP'89 sold one-third of its general
partnership interest in 402 Julia to the developer general partner for
$185,000. HPP'89's percentage of interest in 402 Julia was thereby
reduced from 98% to 65%. The terms of the sale require an initial
payment of $100,000, which was received in September 1993, followed by
annual payments of $3,500 from 1994 to 2016 and a final payment of $4,500
in 2017. A total of $78,000 remains uncollected as of December 31, 1995
and is secured by the interest sold to the developer general partner. In
1993, HPP'89 recognized a loss of $56,620 on the sale of one-third of its
interest in 402 Julia. As of December 31, 1995, one-third of the
Investment Tax Credits earned from 402 Julia by HPP'89 equals $83,770.
The sale transaction did not generate any Investment Tax Credit
recapture.
Portland Lofts Associates Limited Partnership (Portland Lofts) is a
Delaware limited partnership formed on August 8, 1989 to acquire,
construct, rehabilitate, operate and manage three buildings containing
107 residential units including ground floor space useable as either
commercial space or as home/studio space for artists, located at 555
Northwest Park Avenue in Portland, Oregon. At December 31, 1995, Portland
Lofts had leased 94% of its residential units and approximately 96% of
its net rentable commercial space.
HPP'89 contributed $3,820,000 through December 31, 1995 to the
capital of Portland Lofts and acquired a general partnership interest
therein. HPP'89's investment in Portland Lofts represents
approximately 21% of the aggregate amount which HPP'89 has contributed
to the capital of its three Investee Partnerships and to purchase its
direct interest in the Cosmopolitan Building (Note 5).
Portland Lofts' $6,800,000 construction loan matured on March 1,
1992. On June 30, 1992, Portland Lofts refinanced the construction loan
through a variable rate mortgage note maturing on April 1, 1997. The note
is collateralized by the property, rents and other income, and guaranteed
by the developer general partner.
In July 1993, the mortgage loan and a $550,000 unsecured note were
purchased by a real estate investment entity (the current holder of th
(4) Investments in Investee Partnerships, and Commitments and
Contingencies (Continued)
mortgage and unsecured notes). The current holder claims that the
unsecured note matured on March 1, 1992 and is in technical default. It
is Portland Lofts' position that the maturity date of the unsecured note
had been effectively extended to correspond to the maturity date of the
mortgage note. Also, the current holder claims that a default for non-
payment of the unsecured note constitutes a default of the mortgage note.
On October 7, 1994, the current holder demanded full payment of the
unsecured note by November 10, 1994. The guarantors of the note
maintained that they were unable to make full payment on the note. On
November 11, 1994, the current holder filed judicial foreclosure
proceedings against Portland Lofts for non-payment of the unsecured note.
Portland Lofts successfully contested through the court the right of
the current holder to foreclose on the property. Portland Lofts'
position was that the default claimed on the unsecured note does not
constitute a default on the mortgage note. On August 25, 1995, the
court issued a summary judgment in favor of Portland Lofts.
However, the current holder continues to pursue the payment of the
$550,000 unsecured note through litigation. While this case is still
in the discovery phase, debt service payments on the unsecured note
have been paid by Portland Lofts and accepted by the current holder.
The current holder maintains that acceptance of debt service payments
does not constitute a waiver of its rights under the note. Portland
Lofts continues to negotiate with the current holder to resolve the
dispute out of court. The result of such negotiations or a court
decision cannot be determined at this time.
On June 30, 1995, Portland Lofts extended the maturity date of a
$400,000 note payable which matured on February 28, 1994, and which is
secured by the developer general partner's interest in an unrelated
property. The note payable was originally extended until December 31,
1995, with options to further extend for five additional successive one
year periods, and has been further extended through December 31, 1996.
The unaudited financial statements of Portland Lofts for the years
ended December 31, 1995, 1994 and 1993, have been prepared assuming that
Portland Lofts will continue as a going concern. In 1990, HPP'89
reserved against its investment in Portland Lofts in the accompanying
financial statements, reducing such investment to zero due to the
substantial doubt that Portland Lofts would continue as a going concern.
At December 31, 1995, HPP'89 had unrecorded losses of approximately
$1,330,000 associated with Portland Lofts.
(4) Investments in Investee Partnerships, and Commitments and
Contingencies (Continued)
If Portland Lofts were no longer able to continue as a going
concern, HPP'89 might be liable as a general partner of Portland Lofts
for certain creditor claims, with recourse to HPP'89, that cannot be
satisfied by Portland Lofts or the developer general partner and there
might be adverse tax consequences to the Limited Partners of HPP'89.
HPP'89's investments in the Investee Partnerships at December 31,
1995 and 1994 are summarized as follows:
Cumulative: 1995 1994
(Unaudited) (Unaudited)
Investments and advances made in cash $ 4,845,000 $11,408,064
Evaluation and acquisition costs 835,709 2,055,566
Interest capitalization and other costs 39,615 343,237
Equity in losses of Investee Partnerships (1,514,930) (4,076,222)
Reserves for realization of investments (3,469,267) (8,940,322)
Amortization of certain costs (39,972) (77,982)
Sale of one third interest of Investee
Partnership (241,620) (241,620)
$ 454,535 $ 470,721
The above summary of HPP'89's investments in Investee Partnership
does not include the investment in Jenkins Court and accumulated activity
thereon as of December 31, 1995.
The equity in losses of Investee Partnerships reflected in the
accompanying statements of operations includes the unaudited allocated
loss from Investee Partnerships of $12,934, $11,545 and $33,873 and the
annual amortization of certain costs of $3,252, in 1995, 1994 and 1993,
respectively.
(4) Investments in Investee Partnerships, and Commitments and
Contingencies (Continued)
Summary combined balance sheets of the three Investee Partnerships
as of December 31, 1995 and 1994, and summary combined statements of
operations for the years ended December 31, 1995, 1994 and 1993 are as
follows:
COMBINED BALANCE SHEETS
ASSETS
1995 1994
(Unaudited) (Unaudited)
Buildings and improvements, net of accumulated
depreciation of $1,882,175 and $5,522,790 in
1995 and 1994, respectively $ 10,504,702 $ 26,931,712
Land 1,032,326 7,506,133
Other assets, net of accumulated amortization
of $ 55,591 and $770,767 in 1995 and 1994,
respectively 358,154 2,280,105
Cash 101,744 230,137
Total assets $ 11,996,926 $ 36,948,087
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage and construction notes payable $ 7,568,023 $ 7,647,844
Other liabilities 1,817,191 1,149,106
Liabilities subject to compromise* - 24,192,073
Total liabilities 9,385,214 32,989,023
Partners' equity:
HPP'89 1,748,575 3,021,959
Other partners 863,137 937,105
Total partners' equity 2,611,712 3,959,064
Total liabilities and partners' equity $ 11,966,926 $36,948,087
* Jenkins Court had $24,192,073 (unaudited) of liabilities as of
December 31, 1994 that were subject to compromise due to Jenkins Courts'
filing for protection through Chapter 11 federal bankruptcy proceedings.
This amount consisted of $23,460,356 of construction notes payable and
accrued interest and $731,717 of other liabilities. With the transfer of
the deed and title to the mortgage holder in August 1995, all liabilities
associated with the building were satisfied and the case was dismissed
from Federal Bankruptcy Court. Approximately $681,200 of partnership
liabilities, including approximately $94,000 of trade payables, has been
classified as other liabilities as of December 31, 1995.
(4) Investments in Investee Partnerships, and Commitments and
Contingencies (Continued)
COMBINED STATEMENTS OF OPERATIONS
1995 1994 1993
(Unaudited) (Unaudited) (Unaudited)
Revenues:
Rental revenue $ 2,635,084 $ 3,726,567 $ 3,262,101
Interest and other income 92,415 98,260 83,910
2,727,499 3,824,827 3,346,011
Expenses:
Interest expense 821,471 2,118,563 2,111,558
Depreciation and amortization 1,017,302 1,488,679 1,455,234
Operating expenses 1,075,333 1,527,662 1,287,955
2,914,106 5,134,904 4,854,747
Net loss before extraordinary gain
and loss on transfer of property (186,607) ( 1,310,077) (1,508,736)
Extraordinary gain on
settlement of liability - 57,130 -
Loss on transfer of property 1,142,247 - -
Net income (loss) $ (1,328,854) $ (1,252,947) $(1,508,736)
Net income (loss) allocated to
HPP'89 $ (1,266,194) $ (1,190,951) $(1,437,106)
Net income (loss) allocated to
other partners $ (62,660) $ (61,996) $ (71,630)
The net loss before extraordinary gain and loss on transfer of property
for 1995 includes operating income from Jenkins Court of $74,608 through
August 31, 1995, the date of transfer of the property.
(5) Investment in Real Estate
On December 18, 1989, HPP'89 acquired land and a building containing
255 residential units and approximately 1,700 square feet of commercial
space located at 250 6th Street and 366 Wacouta Street, St. Paul,
Minnesota (the Cosmopolitan). The building has been renovated, and
certain renovation costs have qualified for Rehabilitation Tax Credits.
HPP'89 purchased the Cosmopolitan for one dollar and assumed mortgage
indebtedness with a face value of $22,500,000. In accordance with the
terms of the Purchase and Sale Agreement, HPP'89 paid $5,000,000 at the
closing which was used to repay a portion of the outstanding mortgage
loan principal.
The building was recorded at the net purchase price of the net
indebtedness assumed (Note 6) plus the amount paid at the closing.
Subsequent improvements have been recorded at cost. HPP'89's investment
in the Cosmopolitan represents approximately 39% of the aggregate amount
which HPP'89 has contributed to the capital of its three Investee
Partnerships and to purchase its direct interest in the Cosmopolitan. At
December 31, 1995, the Cosmopolitan had leased approximately 98% of its
residential units.
(6) Mortgage Payable, Restricted Cash and Subsequent Event
The mortgage HPP'89 assumed relating to its purchase of the
Cosmopolitan had an original maturity date of December 18, 1999.
For the first 36 months, interest due was at the lesser of the
contract interest rate (principal outstanding at 7% interest) or net cash
flow, as defined under the note. During the 37th through the 120th
months of the note, interest is due at the contract interest rate. To
the extent that contract interest exceeds net cash flow during the 37th
(January 1993) through the 120th month, such amounts will accrue and be
added to the principal balance (Additional Principal). The entire unpaid
principal balance, including Additional Principal, contract interest and
Contingent Interest, as defined, will be due and payable at maturity.
Contract interest due for 1995 and 1994 totaled $1,233,236 and
$1,342,347, respectively, of which $394,088 and $611,258, respectively,
exceeded net cash flow and has been added to the principal balance. Net
cash flow due for the year ended December 31, 1995 totaled $864,995. As
of December 31, 1995 and 1994, interest payable totaled $105,957 and
$98,988.
In December 1992, the Cosmopolitan's original mortgage lender was
purchased by Mellon Bank, N.A., referred to as the holder of the mortgage
note. The holder, as of December 31, 1995, continued to service the
mortgage loan and hold the escrowed funds.
(6) Mortgage Payable, Restricted Cash and Subsequent Event (Continued)
In January 1995, HPP'89 consummated an agreement with the holder of
the mortgage note to amend certain provisions within the mortgage note
including the maturity date.
For financial reporting purposes, the discount on the mortgage note
payable has been recorded to reflect an effective interest rate of 10%
over the life of the loan. Due to the advancement of the maturity date,
as discussed below, the effective interest rate was amended on January 1,
1995 to 14.04% to amortize the remaining discount over the remaining life
of the mortgage note. Amortization of the discount amounted to $930,442,
$296,329 and $279,464 for 1995, 1994 and 1993 respectively, and is
reflected as interest expense.
The note is secured by a first mortgage encumbering the premises,
the assignment of HPP'89's rights, title and interest in the leases, and
the assignment of its depository accounts.
In accordance with the terms of the original mortgage agreement
related to the Cosmopolitan, HPP'89 was required to establish an interest
bearing operating account (Operating Account) with the mortgage lender
for the Cosmopolitan in the initial amount of $1,000,000. An additional
$1,000,000 was added to this account on January 15, 1990. Principal funds
could have been withdrawn from the operating account if the expenditures
were in accordance with the approved budget between the mortgage lender
and HPP'89, with the approval of the mortgage lender, or after HPP'89
makes six consecutive debt service payments. Any principal funds
remaining in this account may have been returned to HPP'89 under the
terms of the loan agreement.
As of December 31, 1994, the balance of HPP'89's Operating Account
consisted of $1,310,623 of principal funds, $121,770 of an initial
overfunding, and $299,729 of interest earned.
On January 5, 1995, HPP'89 consummated the Second Amendment to the
Loan Agreement (Second Amendment) with the holder of the mortgage note on
the Cosmopolitan to resolve a dispute over funds in the restricted escrow
account (which had a balance of approximately $1,732,000). HPP'89
maintained that the interest earned from the escrow account of
approximately $300,000 and a previous overfunding of approximately
$120,000 should be paid to HPP'89. The holder maintained that interest
earned was additional security on the mortgage note. The terms of the
Second Amendment allowed HPP'89 to be paid the interest earned on the
escrow account and overfunded amount. Also, HPP'89 received an option to
buy the mortgage note for the fair market value of the property. In
exchange, HPP'89 released the principal funds of the escrow account
(approximately $1,311,000) for payment to the outstanding mortgage
(6) Mortgage Payable, Restricted Cash and Subsequent Event (Continued)
and agreed to reduce the maturity date of the note from December 18, 1999
to December 18, 1996. In summary, at the closing of the Second
Amendment, HPP'89 received approximately $286,000 (consisting of the
overfunding, interest earned thereon, and one-half of interest earned on
principal funds of the original Operating Account) and released for
payment approximately $1,311,000 for mortgage principal and approximately
$15,000 for finance fees. As of December 31, 1995, $122,593 remained in
the escrow account. As discussed below, HPP'89 was paid the
approximately $123,000 remaining in the escrow account (one-half of
interest on principal funds of the original Operating Account and
interest thereon) on March 20, 1996, the date of purchase of the mortgage
note.
In accordance with the Second Amendment, HPP'89 established a tenant
security deposit account with the current holder of the mortgage note. As
of December 31, 1995, the security deposit account totaled $94,194.
Also in accordance with the Cosmopolitan's mortgage agreement,
HPP 1989 established a working capital reserve (Working Capital Account)
for apartment rollover expenses and working capital items. As of
December 31, 1995 and 1994, the balance of the Working Capital Account
totaled $123,129 and $120,214, respectively. Furthermore, due to HPP'89's
cash flow debt service mortgage agreement, the cash accounts maintained
for the daily operations of the Cosmopolitan are effectively reserved for
the Cosmopolitan only. As of December 31, 1995 and 1994, the balance of
Cosmopolitan's operating accounts equaled $202,172 and $269,500,
respectively.
Subsequently on March 20, 1996, the Partnership completed a
transaction by which the mortgage note was purchased and the property was
refinanced. As part of the transaction, the Partnership contributed
title and deed of the property to the Cosmopolitan at Mears Park, LLC
(CMP), a Delaware limited liability company, for a 50% ownership interest
in CMP. An affiliate of CMC contributed $650,000 in cash to CMP for a
50% ownership interest in CMP. CMP obtained a $7,000,000 mortgage note
on the property from a new lender. Simultaneously on March 20, 1996, the
previous holder of the Cosmopolitan's mortgage was paid $7,650,000, the
agreed upon purchase price of the mortgage note. In 1996, the
transaction will result in a gain on forgiveness of debt of approximately
$10,000,000, as well as a loss on the transfer of property of
approximately $9,100,000 to the Partnership. This transaction will not
generate any recapture of Rehabilitation Tax Credits to the Partnership.
The new mortgage note on the property: bears interest at 9.14%;
amortizes over a 25 year schedule; requires monthly payments of principal
and interest, real estate tax escrow and replacement reserve payments of
(6) Mortgage Payable, Restricted Cash and Subsequent Event (Continued)
$59,416, $28,069 and $4,250, respectively; and matures in April 2003, at
which time all unpaid principal and accrued interest is due.
The proforma effect of this transaction on the balance sheet of
HPP'89 had it occurred as of December 31, 1995 would be as follows:
BALANCE SHEET - PROFORMA
DECEMBER 31, 1995
ASSETS
Investment in Investee Partnerships, net $ 1,104,535
Cash 185,514
Other Assets 4,736
$ 1,294,785
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 5,366
Accrued expenses and other liabilities 19,900
Total liabilities 25,266
Limited Partners' equity 1,488,159
General Partner's equity (218,640)
Total partners' equity 1,269,519
$ 1,294,785
The transaction would have had no effect on operating revenues and
expenses, but would have resulted in a net gain on settlement of
debt/transfer of property of $896,671. Through December 31, 1995 and the
period through March 20, 1996, HPP'89 will record the operating activity
of the property directly on its financial statements. From March 20,
1996, the Partnership will record the activity of CMP on the equity
basis.
(7) Transactions With Related Parties and Commitments
In January 1992, HPP'89 hired Hillcrest Asset Management, Inc.
(Hillcrest), an unaffiliated Massachusetts corporation, to assist the
general partner in providing accounting, asset management and investor
services to HPP'89. Hillcrest provided such services for a monthly
management fee plus reimbursement of all its operating costs of providing
such services. For the period of January 1, 1993 to June 30, 1993,
HPP'89 paid management fees of $24,000 to Hillcrest and reimbursed
Hillcrest's operating expenses of approximately $88,400. This contract
expired on June 30, 1993.
In July 1993, HPP'89 engaged Portfolio Advisory Services, Inc.
(PAS), corporate general partner of BHP, to provide asset management,
accounting, and investor services to HPP'89. PAS performed such services
for no fee, but was reimbursed for all operating costs of providing such
services. This agreement extended until September 30, 1995. For the
period January 1, 1995 to September 30, 1995, the year ended December 31,
1994, and the period July 1, 1993 to December 31, 1993, PAS was
reimbursed approximately $68,000, $92,100 and $47,700, respectively, for
asset management, accounting and investor services to HPP'89.
On October 1, 1995, HPP 89 engaged Claremont Management Corporation
(CMC), an unaffiliated Massachusetts corporation, to provide asset
management, accounting and investor services. The initial term of the
contract with CMC extends until June 30, 1997, and is automatically
extended on a yearly basis unless otherwise terminated as provided for in
the agreement. According to the contract, CMC is reimbursed for all
operating costs and is paid an annual fee of $76,800. During 1995, CMC
was paid fees totaling $19,200 and was reimbursed for operating costs
totaling approximately $15,400.
HPP'89 paid accounting and other fees on behalf of certain Investee
Partnerships totaling $7,500 in 1995, 1994 and 1993, respectively.
Amounts unreimbursed to HPP'89 as of December 31, 1994 totaled $3,000.
(8) Fair Value of Financial Instruments
The carrying amounts of cash, escrows, rents receivable, accrued
expenses, accrued interest and security deposits approximate their fair
values due to their short maturities. The fair value of HPP'89's
mortgage note payable in the carrying amount of $16,519,896 is
approximately $7,650,000 based on the amount accepted by the holder in
full settlement of amounts due under the mortgage note payable on March
20, 1996. The mortgage note payable is held for nontrading purposes.
<TABLE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY AND
BY INVESTEE PARTNERSHIPS
DECEMBER 31, 1995
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Gross Amounts
Costs Capitalized Subsequent at December 31,
Initial Costs to Acquisition 1995 (Note 1) **
Accum-
-ulated
Building & Building & Deprec- Date of Date Deprec
Description and Encum- Improve- Improve- Carrying Improve- Total iation Construct int Life
Ownership Percentage brances Land ments ments Costs Land ments (Note 3) (Note 2) or Rehab Acq (Years)
Residential Building/Commercial Building
402 Julia Street Associates L.P.
New Orleans, Louisiana
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <c
65% 1,038 133 282 1,198 145 133 1,625 1,758 274 8/1/89 7/25/89 40
Residential Building/Commercial Building
Portland Lofts Associates L.P.
Portland, Oregon
99% 7,750 900 886 9,531 345 900 10,762 11,662 1,608 8/31/89 8/8/89 40
Residential Building/Commercial Building
The Cosmopolitan
St. Paul, Minnesota
100% 18,491 1,171 15,466 430 26 1,171 15,922 17,093 2,853 5/1/86 12/18/89 40
Total 27,279 2,204 $ 16,634 11,159 $ 516 $2,204 $ 28,309 $ 30,513 4,735
* Face value of debt, see Note 6 to financial statements for further information regarding discounting of debt for financial report
ing purposes, additional principal, and purchase of mortgage note through a subsequent event.
** Investments in two investee partnerships have been written down to zero due to transfer of property (Jenkins Court) and
continued net losses (Portland Lofts). See Note 4 for additional information.
F-24
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
SCHEDULE III (CONTINUED)
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY AND
BY INVESTEE PARTNERSHIPS
DECEMBER 31, 1995
(IN THOUSANDS)
(UNAUDITED)
Note 1: The aggregate cost of each property on a tax basis net of the reduction
due to the rehabilitation tax credit at December 31, 1995 and 1994 are
as follows:
1995 1994
Jenkintown, Pennsylvania $ - $ 23,578
New Orleans, Louisiana 1,458 1,458
Portland, Oregon 9,733 9,733
St. Paul, Minnesota 21,053 21,053
$ 32,244 $ 55,822
Note 2: The changes in accumulated depreciation for the years ended
December 31, 1995 and 1994 are as follows:
1995 1994
Balance at beginning
of period $ 7,892 $ 6,090
Depreciation during
the year 822 1,802
Write-off due to disposal
of property $ (3,979) -
$ 4,735 $ 7,892
Note 3: The changes intotal costs of land, building and improvements
for the years ended December 31, 1995, and 1994 are a follows:
1995 1994
Balance at beg of period $57,038 $56,984
Additional Building and
Improvements 76 76
Disposal of Building and
Improvements(Jenkins Ct) $(26,601) -
Balance at end of period $ 30,513 $57,038
</TABLE>
F-1
The accompanying notes are an integral part of these financial statements.
F-7
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
F-23
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Historic Preservation Properties 1989 Limited Partnership
EXHIBITS
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
Index to Exhibits
Exhibit No. Title of Documents
3(a) Certificate of Limited
Partnership of Historic Preservation
Properties 1989 Limited Partnership
dated as of August 30, 1988 (filed as an
exhibit to the Partnership's
Registration Statement of Form S-11,
File No. 33-24129, and incorporated
herein by this reference).
3(b) Agreement of Limited
Partnership of Historic Preservation
Properties 1989 Limited Partnership
dated as of August 30, 1988 (filed as an
exhibit to the Partnership's
Registration Statement on Form S-11,
File No. 33-24129, and incorporated
herein by this reference).
3(c) Amended and Restated Agreement
of Limited Partnership of Historic
Preservation Properties 1989 Limited
Partnership dated as of December 19,
1988, as currently in effect, other than
amendments thereto which provide solely
for the admission or withdrawal of
investors as limited partners of the
Partnership (filed as an exhibit to the
Partnership's Registration Statement of
Form S-11, File No. 33-2419, and
incorporated herein by this reference).
4(a) See Exhibits 3(a), 3(b) and
3(c).
10(a) Sales Agency Agreement between
Historic Preservation Properties 1989
Limited Partnership and Boston Bay
Capital, Inc., dated December 19, 1989
(filed as Exhibit No. 10(a) to the
Partnership;s Form 10-K as of December
31, 1989 and incorporated herein by this
reference).
10(b) Escrow Deposit Agreement
between Historic Preservation Properties
1989 Limited Partnership and Wainwright
Bank and Trust Company dated December
19, 1989 (filed as Exhibit No. 10(b) to
the Partnership's Form 10-K as of
December 31, 1989 and incorporated
herein by this reference).
10(c) Documents relating to the
acquisition of a general partnership
interest in Jenkins Court Associates
Limited Partnership (filed as part of
Post-Effective Amendment No. 1 to the
Partnership;s Registration Statement of
Form S-11, File No. 33-24129, and
incorporated herein by this reference).
10(d) Documents relating to the
acquisition of a general partnership
interest in Portland Lofts Associates
Limited Partnership (filed as part of
Post-Effective Amendment No. 2 to the
Partnership's Registration Statement on
Form S-11, File No. 33-24129, and
incorporated herein by this reference).
10(e) Documents relating to the
acquisition of a general partnership
interest in 402 Julia Street Associates
Limited Partnership (filed as a part of
Post-Effective Amendment No. 2 to the
Partnership's Registration Statement on
Form S-11, File No. 33024129, and
incorporated by this reference).
10(f) Documents relating to the
acquisition of the Cosmopolitan
Building, St. Paul, Minnesota.
I.
Purchase and Sale Agreement
between Historic Landmarks
Realty Growth Fund: The
Cosmopolitan (the "Seller"),
as Seller, and Historic
Preservation Properties 1989
Limited Partnership (the
"Partnership"), as Buyer,
dated as of July 14, 1989
(filed as part of Post-
Effective Amendment No. 2 to
the Partnership's Registration
Statement on Form S-11, File
No. 33-24129, and incorporated
herein by this reference).
II.
Amendment to Purchase and Sale
Agreement dated September,
1989, between the Seller and
the Partnership (filed as
Exhibit No. 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
III.
Loan Agreement dated December
18, 1989 between the
Partnership and Meritor
Savings Bank (filed as Exhibit
No. 10(f) to the Partnership's
Form 10-K as of December 31,
1989 and incorporated herein
by this reference).
IV.
Allonge to First Loan Note and
Second Loan Note dated
December 18, 1989, between the
Partnership and Meritor
Savings Bank (filed as Exhibit
No. 10(f) to the Partnership's
Form 10-K as of December 31,
1989 and incorporated herein
by this reference).
V.
Mortgage, Security Agreement,
Modification, Consolidation
and Amendment Agreement dated
December 18, 1989, between the
Partnership and Meritor
Savings Bank (filed as Exhibit
No. 10(f) to the Partnership's
Form 10-K as of December 31,
1989 and incorporated herein
by this reference).
VI.
Security Agreement dated
December 18, 1989 between the
Partnership and Meritor
Savings Bank (filed as Exhibit
No. 10(f) to the Partnership's
Form 10-K as of December 31,
1989 and incorporated herein
by this reference).
VII.
Assignment of Leases,
Consolidation and Modification
Agreement dated December 18,
1989 between the Partnership
and Meritor Savings Bank
(filed as Exhibit No. 10(f) to
the Partnership's Form 10-K as
of December 31, 1989 and
incorporated herein by this
reference).
VIII.
Assignment of Depository
accounts dated December 18,
1989 between the Partnership
and Meritor Savings Bank
(filed as Exhibit No. 10(f) to
the Partnership's Form 10-K as
of December 31, 1989 and
incorporated herein by this
reference).
IX.
Assignment and Subordination
of Management and Leasing
Consolidation and Modification
Agreement dated December 18,
1989 between the Partnership
and Meritor Savings Bank
(filed as Exhibit No. 10(f) to
the Partnership's Form 10-K as
of december 31, 1989 and
incorporated herein by this
reference).
X.
Management and Leasing
Agreement dated as of October
17, 1989 between the
Partnership and McKenna
Management Associates (filed
as Exhibit 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
10(g)Documents relating to $400,000 loan
to Portland Lofts Associated Limited
Partnership
I.
Promissory Note, dated
December 29, 1989, delivered
by Portland Lofts Associates
Limited Partnership to Capital
Consultants, Inc. (filed as
Exhibit 10(g) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
II.
Deed of Trust and Security
Agreement dated December 29,
1989, between Portland Lofts
Associates Limited Partnership
and Capital Consultants, Inc.
(filed as Exhibit No. 10(g) to
the Partnership's Form 10-K as
of December 31, 1989 and
incorporated herein by this
reference).
III.
Assignment of Surplus dated
December 29, 1989, delivered
by Joseph W. Angel II and
Lynne I. Angel to Capital
Consultants, Inc. (filed as
Exhibit No. 10(g) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
IV.
Guaranty of Note and Deed of
Trust dated December 29, 1989,
delivered by Joseph W. Angel
II and Dennis M. Gilman to
Capital Consultants, Inc.
(filed as Exhibit No. 10(g) to
the Partnership's Form 10-K as
of December 31, 1989 and
incorporated herein by this
reference).
10(h)Management Agreement dated August
20, 1989 between Portland Lofts
Associates Limited Partnership and Great
Northwest Management (filed as Exhibit
No. 10(h) to the Partnership's Form 10-K
as of December 31, 1989 and incorporated
herein by this reference).
10(i)Documents relating to Settlement of
Fleet National Bank Loan to Jenkins
Court Associates Limited Partnership
(all dated as of February 7, 1991).
I.
Settlement Agreement between
Fleet National Bank ("Fleet")
and Jenkins Court Associates
Limited Partnership ("Jenkins
Court") (filed as Exhibit No.
10(i) to the Partnership's
Form 10-K as of December 31,
1991 and incorporated herein
by this reference).
II.
Agreement between Fleet and
Jenkins Court (filed as
Exhibit No. 10(i) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
III.
$250,000 Promissory Note of
Jenkins Court (filed as
Exhibit No. 10(i) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
IV.
$20,820,000 Amended and
Restated Promissory Note of
Jenkins Court (filed as
Exhibit No. 10(i) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
V.
Open End Mortgage Modification
Agreement between Fleet and
Jenkins Court (filed as
Exhibit No. 10(i) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
VI.
Assignment Modification
Agreement between Fleet and
Jenkins Court (filed as
Exhibit No. 10(i) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
10(j)Documents relating to Amended
Settlement of Fleet Loan to Jenkins
Court (all dated as of January 29,
1992).
I.
First Amended and Restated
Settlement Agreement between
Fleet and Jenkins Court (filed
as Exhibit No. 10(j) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
II.
First Allonge to Amended and
Restated Promissory Note of
Jenkins Court (filed as
Exhibit No. 10(j) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
III.
Open End Mortgage Modification
Agreement between Fleet and
Jenkins Court (filed as
Exhibit No. 10(j) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
IV.
Assignment Modification
Agreement between Fleet and
Jenkins Court (filed as
Exhibit No. 10(j) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
V.
Closing Letter between Fleet
and Jenkins Court (filed as
Exhibit No. 10(j) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
10(k)Agreement for Extension of Debt and
Related Matters between Security Pacific
Bank Oregon, Portland Lofts Associates
Limited Partnership and Joseph W. Angel,
II dated May 7, 1991 (filed as Exhibit
No. 10(k) to the Partnership's Form 10-K
as of December 31, 1991 and incorporated
herein by this reference).
10(l)Documents related to the Second
Amended Settlement of Fleet Loan to
Jenkins Court dated as of July 2, 1992.
I.
Second Amended and Restated
Settlement Agreement between
Fleet and Jenkins Court (filed
as Exhibit No. 10(l) to the
Partnership's Form 10-K as of
December 31, 1992 and
incorporated herein by this
reference).
10(m) Documents relating to the Amended
$6,800,000 Construction Loan to Portland
Lofts Associates Limited Partnership
(all dated as of March 31, 1992).
I.
Promissory Note of Portland
Lofts to Security Pacific Bank
Oregon (Security Pacific) (now
Bank of America) (filed as
Exhibit No. 10(m) to the
Partnership's Form 10-K as of
December 31, 1992 and
incorporated herein by this
reference).
II.
Deed of Trust and Security
Agreement between Portland
Lofts and Security Pacific
(filed as Exhibit No. 10(m) to
the Partnership's Form 10-K as
of December 31, 1992 and
incorporated herein by this
reference).
III.
Assignment of Leases and
Conditional Assignment of
Rentals by Portland Lofts to
Security Pacific (filed as
Exhibit No. 10(m) to the
Partnership's Form 10-K as of
December 31, 1992 and
incorporated herein by this
reference).
IV.
Guarantees of Note and Deed of
Trust delivered by East Bank
Development, Inc., Joseph W.
Angel, II, Dennis M. Gilman
and Martin J. Soloway to
Security Pacific (filed as
Exhibit No. 10(m) to the
Partnership's Form 10-K as of
December 31, 1992 and
incorporated herein by this
reference).
V.
Arbitration Agreement between
Portland Lofts and Security
Pacific (filed as Exhibit No.
10(m) to the Partnership's
Form 10-K as of December 31,
1992 and incorporated herein
by this reference).
10(n)Management Agreement dated April 1,
1992 between Portland Lofts Associates
Limited Partnership and C & R Realty
(filed as Exhibit No. 10(n) to the
Partnership's Form 10-K as of December
31, 1992 and incorporated herein by this
reference).
10(o)Documents relating to the sale of a
portion of the general partnership
interest in 402 Julia Street Associates
Limited Partnership (all dated September
16, 1993)
I.
Second Amendment to the
Amended and Restated Agreement
of Limited Partnership of 402
Julia Street Associates
Limited Partnership (filed as
Exhibit No. 10(o) to the
Partnership's Form 10-K as of
December 31, 1993 and
incorporated herein by this
reference).
II.
Assignment and Assumption
Agreement between the
Partnership, and Henry M.
Lambert and R. Carey Bond.
(filed as Exhibit No. 10(o) to
the Partnership's Form 10-K as
of December 31, 1993 and
incorporated herein by this
reference).
III.
Security Agreement between the
Partnership, and Lambert and
Bond (filed as Exhibit No.
10(o) to the Partnership's
Form 10-K as of December 31,
1993 and incorporated herein
by this reference).
10(p)Agreement for Extension of Loan
from Fleet Bank to Jenkins Court
Associates Limited Partnership (dated as
of June 15, 1993) (filed as Exhibit No.
10(p) to the Partnership's Form 10-K as
of December 31, 1993 and incorporated
herein by this reference).
10(q)Agreement for Extension of Loan
from Capital Consultants, Inc. to
Portland Lofts Associates Limited
Partnership (dated January 3, 1994)
(filed as Exhibit No. 10(q) to the
Partnership's Form 10-K as of December
31, 1993 and incorporated herein by this
reference).
10(r)Documents relating to the $15,000
loan to Portland Lofts Associates
Limited Partnership (all dated March 2,
1992)
I.
Rehabilitation Loan Agreement
between Portland Lofts and the
City of Portland (acting by
and through the Portland
Development Commission) (filed
as Exhibit No. 10(r) to the
Partnership's Form 10-K as of
December 31, 1993 and
incorporated herein by this
reference).
II.
Promissory Note between
Portland Lofts and the City of
Portland (acting by and
through the Portland
Development Commission) (filed
as Exhibit No. 10(r) to the
Partnership's Form 10-K as of
December 31, 1993 and
incorporated herein by this
reference).
III. Trust
Deed between Portland Lofts
and the City of Portland
(acting by and through the
Portland Development
Commission) (filed as Exhibit
No. 10(r) to the Partnership's
Form 10-K as of December 31,
1993 and incorporated herein
by this reference).
10(s) Documents relating to the
settlement of amounts payable between
Portland Lofts and Richard E. Ragland,
AIA
I.
Letter of agreement signed by
Portland Lofts and Ragland
(dated March 17, 1994) (filed
as Exhibit No. 10(s) to the
Partnership's Form 10-K as of
December 31, 1993 and
incorporated herein by this
reference).
II.
Promissory Note between
Portland Lofts and Ragland
(dated February 22, 1994)
(filed as Exhibit No. 10(s) to
the Partnership's Form 10-K as
of December 31, 1993 and
incorporated herein by this
reference).
III.
Release of Claims between
Portland Lofts and Ragland
(dated February 22, 1994)
(filed as Exhibit No. 10(s) to
the Partnership's Form 10-K as
of December 31, 1993 and
incorporated herein by this
reference).
IV.
Release of All Claims between
Ragland and Portland Lofts
(dated March 1, 1994) (filed
as Exhibit No. 10(s) to the
Partnership's Form 10-K as of
December 31, 1993 and
incorporated herein by this
reference).
10(t)Documents relating to the amendment
of loan documents by and between
Historic Preservation Properties 1989
Limited Partnership and Mellon Bank,
N.A. (all dated December 28, 1994, but
executed January 4, 1995), (filed as
Exhibit 10(t) to the Partnership's Form
10-K as of December 31, 1994 and
incorporated herein by the reference).
I.
First Amendment to Note
Mortgage and Assignment of
Leases.
II.
Second Amendment to Loan
Agreement
III.
Letter Agreement on Payment of
Legal Fees
10(u)Letter Agreement on Management
Functions by and between Historic
Preservation Properties 1989 Limited
Partnership and Jenkins Court Investors
Limited Partnership (dated September 8,
1994), (filed as Exhibit 10(u) to the
Partnership's Form 10-K as of December
31, 1994 and incorporated herein by this
reference).
10(v) Stipulation of Settlement, dated August
31, 1995, by and among Jenkins Court
Associates Limited Partnership, Miles S.
Katzen, Jenkins Court Investors Limited
Partnership, MSK Associates, Inc., Jane
Katzen, Frank Seidman, the Jane II
Corporation and Jenkins Court
Pennsylvania L.P.
10(w) Asset Management Agreement, dated
October 1, 1995, by and among Historic
Preservation Properties Limited
Partnership, Historic Preservation
Properties 1988 Limited Partnership,
Historic Preservation Properties 1989
Limited Partnership, Historic
Preservation Properties 1990 L.P. Tax
Credit Fund and Claremont Management
Corporation.
10(x) Property Management Agreement, dated
November 1, 1995, by and between
Historic Preservation Properties 1989
L.P. and Claremont Management
Corporation.
10 (y)First Amendment to Loan Documents,
dated June 1, 1995, by and between
Portland Lofts Associates Limited
Partnership and Capital Consultants,
Inc.
22 List of Investee Partnerships
(filed as Exhibit No. 22 to the
Partnership's Form 10-K as of December
31, 1989 and incorporated herein by this
reference).
28(ii)(a) Pages 13-25, 28-36 and 36-39
of the Partnership's Prospectus dated
December 19, 1988 (filed with the
Commission pursuant to Rule 424(b) on
January 5, 1989 and incorporated herein
by this reference).
28(ii)(b) Supplement No. 1 to the
Partnership's Prospectus dated January
20, 1989 (filed as a part of Post-
Effective Amendment No. 1 to the
Partnership's Registration Statement on
Form S-11, File No. 33-24129, and
incorporated herein by this reference).
28(ii)(c) Supplement No. 2 to the
Partnership's Prospectus dated June 30,
1989 (filed as part of Post-Effective
Amendment No. 2 to the Partnership's
Registration Statement on Form S-11,
File No. 33-24129 and incorporated
herein by this reference).
28(ii)(d) Supplement No. 3 to the
Partnership's Prospectus dated July 25,
1989 (filed as a part of Post-Effective
Amendment No. 2 to the Partnership's
Registration Statement on Form S-11,
File No. 33-24129, and incorporated
herein by this reference).
28(ii)(e) Supplement No. 4 to the
Partnership's Prospectus dated September
13, 1989 (filed as a part of Post-
Effective Amendment No. 2 to the
Partnership's Registration Statement on
Form S-11, File No. 33-24129, and
incorporated herein by this reference).
28(ii)(f) Supplement No. 5 to the
Partnership's Prospectus dated September
19, 1989 (filed as a part of Post-
Effective Amendment No. 2 to the
Partnership's Registration Statement on
Form S-11, File No. 33-24129, and
incorporated herein by this reference).
UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
x In re:
CHAPTER 11, JENKINS COURT ASSOCIATES
LIMITED PARTNERSHIP, Debtor
. CASE NO. 94-17748 (SAR)
x
STIPULATION OF SETTLEMENT BY AND AMONG JENKINS
COURT ASSOCIATES LIMITED PARTNERSHIP, MILES S. KATZEN,
JENKINS COURT INVESTORS L.P., 1511 DEVELOPERS LIMITED
PARTNERSHIP, MSK ASSOCIATES, INC., JANE KATZEN, FRANK
SEIDMAN, THE JANE 11 CORPORATION AND JENKINS COURT
PENNSYLVANIA. L.P.
This Stipulation of Settlement (the "Stipulation")
is made this 11th day of August, 1995 by and among Jenkins
Court Associates Limited Partnership, debtor-in-possession
("the Debtor"), Miles S. Katzen ("Katzen"), Jenkins Court
Investors L.P ("JCI"), 1511 Developers Limited Partnership
("1511"), MSK Associates, Inc. ("MSK"), Frank Seidman
("Seidman"), the Jane II Corporation ("Jane II") (Katzen, JCI
and 1511, collectively, the "Original Guarantors"; MSK, J.
Katzen, Seidman and Jane II, collectively, the "Additional
Guarantors"; the Original Guarantors and the Additional
Guarantors together, the "Guarantors"), Jane Katzen ("J.
Katzen"), and Jenkins Court Pennsylvania, L.P. ("JCP").
BACKGROUND
A. The Construction Loan. Pursuant to a
Construction Loan Agreement dated January 9, 1989 (the
"Construction Loan Agreement"), JCP's predecessor in
interest, Fleet National Bank ("Fleet"), agreed to lend the
Debtor up to $17,820,000 (the "Construction Loan") in order
to acquire a parcel of land located on Old York Road in the
Borough of Jenkintown, Montgomery County, Pennsylvania and
for the purpose of rehabilitating and constructing certain
improvements thereon. The parcel, together with all
improvements and fixtures thereon, is hereinafter referred to
as the "Parcel" and is more particularly described on Exhibit
"A" attached hereto and made a part hereof.
B. Security for the Construction Loan. The
Construction Loan was evidenced by a promissory note in the
maximum principal amount of $17,820,000, the Guaranty of the
Original Guarantors and was secured by a Construction
Mortgage and Security Agreement (the "Mortgage") and
Assignment of Leases and Rents (the "Assignment,"), all
dated January 9, 1989 (with the Construction Loan
Agreement, collectively, the "Construction Loan
Documents"). The Mortgage was recorded in the Office of
the Recorder of Deeds for Montgomery County in Mortgage
Book 6397, page 1438. The Assignment was recorded in
the Office of the Recorder of Deeds for Montgomery County
in Deed Book 4899, page 2243.
C. Modifications and Extensions of Construction
Loan.
1. The Settlement Agreement. Pursuant to
a Settlement Agreement dated February 7, 1991 (the
"Settlement Agreement"), the Debtor's obligations under
the Construction Loan were amended to, among other things,
extend the maturity date and increase the amount of the
Construction Loan to $20,820,000. In connection with the
Settlement Agreement, and in order to effectuate the terms
thereof, the Debtor and the Original Guarantors executed,
among other things, various modifications and amendments
to the Construction Loan Documents, including, without
limitation, an Amended and Restated Note, an Amended and
Restated Guaranty, a Mortgage Modification Agreement (the
"First Mortgage Modification") and an Assignment
Modification Agreement (the "First Assignment
Modification"), all dated February 7, 1991 (with the
Settlement Agreement, collectively, the "Settlement
Documents"). The First Mortgage Modification was
recorded in the Office of the Recorder of Deeds for
Montgomery County in Mortgage Book 6677, page 1180. The
First Assignment Modification was recorded in the Office
of the Recorder of Deeds for Montgomery County in Deed
Book 4970, page 1025.
2. The First Amended Settlement Agreement.
Pursuant to a First Amended and Restated
Settlement Agreement dated January 29, 1992 (the "First
Amended Settlement Agreement"), the Debtor's obligations
under the Construction Loan, as amended by the
Settlement Agreement, were further amended to, among
other things, further extend the maturity date and
further increase the amount of the Construction Loan to
$22,820,000. In connection with the First Amended
Settlement Agreement, and in order to effectuate the
terms thereof, the Debtor, the Original Guarantors and
the Additional Guarantors executed, among other things,
various modifications and amendments to the Construction
Loan Documents, as amended by the Settlement Documents,
including, without limitation, a First Allonge to Amended
and Restated Note, a First Allonge to Amended and
Restated Guaranty, a Mortgage Modification Agreement
(the "Second Mortgage Modification") and an Assignment
Modification Agreement (the "Second Assignment
Modificationn), all dated January 29, 1992 (with the First
Amended Settlement Agreement, collectively, the "First
Amended Settlement Documents"). The Second Mortgage
Modification was recorded in the Office of the Recorder of
Deeds for Montgomery County in Mortgage Book 6826, page
741. The Second Assignment Modification was recorded in
the Office of the Recorder of Deeds for Montgomery County
in Mortgage Book 6826, page 736.
3. The Second Amended Settlement
Agreement.
Pursuant to a Second Amended and Restated
Settlement Agreement dated July 2, 1992 (the "Second
Amended Settlement Agreement"), the Debtor's obligations under
the Construction Loan, as amended by the Settlement
Agreement and the First Amended Settlement Agreement, were
further amended to, among other things, further extend the
maturity date, provide for an additional advance in the
amount of up to $1,498,171 and to restructure the
outstanding principal balance under the Construction Loan into
two segments evidenced by two promissory notes. In connection
with the Second Amended Settlement Agreement, and in order to
effectuate the terms thereof, the Debtor, the Original
Guarantors and the Additional Guarantors executed, among
other things, two promissory notes (the "Promissory Notes"),
and various modifications and amendments to the Construction
Loan Documents, as amended by the Settlement Documents and the
First Amended Settlement Documents, including, without
limitation, a Mortgage Modification Agreement (the "Third
Mortgage Modification") and an Assignment Modification
Agreement (the "Third Assignment Modification"), all dated
July 2, 1992 (with the Second Amended Settlement Agreement,
collectively, the "Second Amended Settlement Documents").
Hereinafter, all references to the Construction Loan shall
mean the Construction Loan as amended by the Settlement
Agreement, the First Amended Settlement Agreement and the
Second Amended Settlement Agreement, and all references to the
Construction Loan Documents, either collectively or
individually, shall mean the Construction Loan Documents as
amended by the Settlement Documents, the First Amended
Settlement Documents and the Second Amended Settlement
Documents. The Third Mortgage Modification was recorded in
the Office of the Recorder of Deeds for Montgomery County in
Mortgage Book 6942, page 1038. The Third Assignment
Modification was recorded in the Office of the Recorder of
Deeds for Montgomery County in Deed Book 5015, page 1014.
4. The Assignment and Assumption Agreement.
Pursuant to an Assignment and Assumption of Mortgage and
Related Loan Documents dated September 30, 1994 (the
"Assignment and Assumption Agreement"), Fleet assigned its
rights under the Construction Loan and the Construction Loan
Documents to JCP. The Assignment and Assumption Agreement
was recorded in the Office of the Recorder of Deeds for
Montgomery County in Mortgage Book 7492, page 1453.
(Hereinafter, all references to JCP are to JCP as successor to
Fleet). By virtue of the execution, delivery, filing and
recordation of the Mortgage and the Assignment and all
modifications thereto, and as more fully described in the
Mortgage and the Assignment, JCP holds valid,- perfected,
first priority mortgage liens on and security interests in,
inter alia, the Parcel and all leases and rents related
thereto (together with the Deposit Accounts, as hereinafter
defined, the "Property"). Pursuant to the Construction Loan
Documents, and as more fully set forth therein, JCP has
security interests in and set-off rights against certain
deposit accounts established under the terms of the
Construction Loan Documents and held and controlled by JCP
(the "Deposit Accounts").
D. Default Under the Construction Loan.
All of the outstanding amounts under the
Construction Loan and Construction Loan Documents matured
and became payable, in full, on June 15, 1994. The
Debtor defaulted in its obligations in connection with the
Construction Loan and under the Construction Loan
Documents, including, without limitation, its obligation to
pay all outstanding amounts on June 15, 1994. Pursuant to
the Second Amended Settlement Agreement, the Debtor agreed
to pay net operating income, as defined therein, ("NOI") to
JCP. The Debtor defaulted in its obligation to pay NOI to
JCP. JCP has received no payment in respect of the
Construction Loan since November, 1994 except payments of
Cash Collateral (as hereinafter defined) under the Interim
Orders (as hereinafter defined).
E. The Bankruptcy Case.
1, Filing of the Bankruptcy Case and the JCP Claim.
On November 23, 1994 (the "Filing Date"), the Debtor filed a
voluntary petition for relief (the Petition") under Chapter
11 of the United States Bankruptcy Code, as amended, 11
U.S.C. Section 101 et seq. (the "Bankruptcy Code") commencing
this case (the "Bankruptcy Case") in the United States
Bankruptcy Court for the Eastern District of Pennsylvania (the
"Bankruptcy Court"). The Debtor has continued in the
possession of its assets and the control of its business
pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
As of the Filing Date, and prior to deduction for any set-
off rights exercised pre-petition, the amount outstanding
in connection with the Construction Loan and under the
Construction Loan Documents was as follows:
$21,690,860.95 of principal, $2,071,038.91 of interest and
$1,188,095.00 of late charges, for a total due as of the
Filing Date of $24,949,994.86, exclusive of costs of
collection, attorneys fees and other additional charges that
have accrued or will accrue with the passage of time (the
"JCP Claim"). The value of the Property, as of the Filing
Date, was substantially below the said amount and the Debtor
has no equity in the Property.
2. Cash Collateral Motion.
On November 24, 1994, the Debtor filed a Motion
for Interim and Final Authority to Use Cash Collateral with
the Bankruptcy Court (the "Cash Collateral Motion"). Interim
orders of the Bankruptcy Court (including bench orders)
authorizing use of Cash Collateral, dated December 1, 1994,
December 14, 1994, December 15, 1994, January 4, 1995,
January 11, 1995, February 23, 1995, March 6, 1995, March 15,
1995 (the March 15 Order is specifically referred to herein as
the "March 15 Order"), May 2, 1995, and June 1, 1995
(collectively, the "Interim Orders") have been entered by the
Bankruptcy Court in the Bankruptcy Case. The Interim Orders
provide, inter alia, as follows:
a. All rents, security deposits and
revenue received by the Debtor with respect to the Property,
including but not limited to the rents and receipts (the
"Rents") derived from leases for premises at the Property
(the "Leases"), are segregated and deposited by the Debtors
in a Cash Collateral Account (the "Cash Collateral").
b. Expenses related solely to
operation of the Property are paid from Cash Collateral in
accordance with a procedure provided by the Interim Orders.
c . Cash Collateral not used for
payment of approved expenses is paid to JCP on a monthly
basis as provided by the Interim Orders.
d. The Debtor and JCP have reserved
their respective rights and remedies regarding application of
Cash Collateral paid to JCP against the JCP Claim, the JCP
Motion to Dismiss, and other matters in the Bankruptcy case.
3. The JCP Motion to Dismiss.
On February 2, 1995, JCP filed a Motion of
JCP to Dismiss the Bankruptcy Case, or in the Alternative,
for Relief from the Automatic Stay (the "JCP Motion to
Dismiss"). The Debtor has opposed the JCP Motion to Dismiss.
A hearing on the JCP Motion to Dismiss was scheduled for
May 24, 1995 at which time the parties advised the Court of
their intention to enter into the Stipulation.
4. Debtor Application for Appointment of
Appraiser.
The Debtor has filed an Application to Appoint
Appraiser in the Bankruptcy Case. JCP has opposed the
Application to the extent the Debtor requests that
compensation of Debtor's proposed appraiser be paid from Cash
Collateral. A hearing on the Application was scheduled for
May 24, 1995 and, upon approval of this Stipulation, the
Application shall bewithdrawn, with prejudice.
F. Purpose of this Stipulation.
The parties heretohave conducted negotiations with
respect to resolution of the JCPMotion to Dismiss, Cash
Collateral Motion, Application to AppointAppraiser,
allowance of the JCP Claim and disposition of theIndebtedness
and now desire to enter into this Stipulation toresolve those
matters and any and all other matters among them.As a
material inducement to JCP entering into this Stipulationand
subject to approval of this Stipulation by the
BankruptcyCourt, the Debtor has agreed to deliver to JCP a
deed and otherconveyance documents and instruments necessary
to deliver andconvey title to the Property, free and clear of
all liens,claims, and encumbrances, except permitted
exceptions. As amaterial inducement to Debtor, JCP has
agreed not to sue, andultimately to release, the Debtor and
Guarantors for anydeficiency or other matter as set forth
herein, all subject tothe terms and conditions of this
Stipulation.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration
ofthe mutual promises herein contained and other good and
valuableconsideration, the receipt and sufficiency of which
are herebyacknowledged, and intending to be legally bound
hereby, covenantand agree as follows:
1. Incorporation by Reference. The Construction
LoanDocuments and the recitals set forth above are
herebyincorporated herein by reference as if set forth in full
in thebody of this Stipulation.
2. Acknowledgment of Indebtedness. The Debtor
andthe Guarantors hereby acknowledge that as of the Filing
Date, thetotal outstanding balance of the indebtedness owing
by Debtor toJCP under the Construction Loan Documents
as$24,949,994.86(consisting of $21,690,860.95 in principal,
$2,071,038.91 ininterest and $1,188,095.00 in late charges)
plus any reimbursablecosts, fees and other expenses,
including attorneys, fees, thatmay have been incurred by JCP
prior to the date hereof but whichhave not yet been paid by
Debtor (collectively, the"Indebtedness"). The Debtor
expressly acknowledges that it hashad a full and fair
opportunity to review the accounting of theforegoing
amounts, that the foregoing accurately reflects allpayments
made by and credits owing to Debtor through the datehereof,
and that Debtor has no dispute, reservation,disagreement,
defense or offset of any kind or nature withrespect to all or
any part of the Indebtedness. Debtor furtheracknowledges
that interest will continue to accrue on theIndebtedness at
the applicable rate or rates set forth in theConstruction
Loan Documents, and that JCP may incur additional
reimbursable costs and expenses after the date of this
Stipulation, all of which would, absent the effect of this
Stipulation, constitute additions to the Indebtedness owing
by Debtor to JCP, and that the present fair market value of
the Parcel does not exceed the Indebtedness. The
Indebtedness due under the Construction Loan Documents which
comprises the JCP Claim is hereby adjudicated as an allowed
claim in the Bankruptcy Case under section 502 of the
Bankruptcy Code.
3. Validity of the Construction Loan Documents.
Debtor hereby (a) ratifies all provisions, terms,
covenants and conditions set forth in the Construction Loan
Documents, (b) agrees that the Construction Loan Documents
constitute the valid and binding obligations of Debtor to
JCP, enforceable against Debtor in accordance with their
respective terms, for which obligations there are no
offsets, counterclaims, rights of recoupment, disputes or
defenses of any kind or nature available to Debtor, except
for Debtor's entitlement, if any, to a fair market value
credit to the extent available under applicable law, (c)
acknowledges that JCP has a valid, perfected lien against
and security interest in the Parcel, all Rents, issues and
profits derived therefrom, the Deposit Accounts and certain
personal property owned by Debtor as provided under the
terms of the Construction Loan Documents in the amount of
the Indebtedness; and (d) acknowledges that all of the Rents
derived from the Leases, and all other income, receipts,
and funds received by the Debtor as a result of Debtor s
ownership of the Property constitute Cash Collateral of JCP
within the meaning of Sections 361 and 363 of the
Bankruptcy Code.
4. Delivery of Consents.
On the Effective Date of this Stipulation, the
Debtor shall deliver to JCP a Stipulation for Entry of
Judgment in the form attached hereto as Exhibit "B",
executed on behalf of Debtor, and a Consent Order
Appointing Receiver in the form attached hereto as Exhibit
"C", executed on behalf of Debtor.
5. Conveyance of the Parcel by Deed in Lieu
of Foreclosure.
(a) Subject to all of the terms and conditions of
this Stipulation, Debtor will, at Settlement (as hereafter
defined), execute and deliver to JCP or its designee a
special warranty deed with covenants as to grantor's acts
(the "Deed"), in the form attached hereto as Exhibit "D",
which upon delivery will convey and transfer to JCP in fee
simple absolute all of Debtor's right, title and interest
in and to the Parcel and all easements, rights,
hereditaments and appurtenances pertaining thereto, free
and clear of all liens and encumbrances subject to
permitted exceptions and the Mortgage and Construction Loan
Documents. At Settlement, Debtor will also deliver a
Resolution ("Resolution") authorizing the conveyance of the
Parcel in the form attached hereto as Exhibit "E" and such
other documents as JCP's title company reasonably may deem
necessary to convey all of Debtor's right, title and
interest in the Parcel to JCP (the Deed and Resolution are
together referred to herein as the "Conveyance Documents").
(b) Debtor hereby represents, warrants,
agrees and attests that (i) the Deed is intended to be, and
upon its release from escrow and delivery to JCP will be,
an absolute conveyance of all of Debtor's right, title and
interest in and to the Parcel and that the Deed is not
intended to be, and will not be, a mortgage, trust
conveyance or security for any future obligation; (ii) it is
the intention of Debtor as grantor in the Deed to convey,
and upon delivery of the Deed pursuant to this
Stipulation, Debtor will convey to JCP all of Debtor's
right, title and interest in and to the Parcel; (iii) in
agreeing to the execution and delivery of the Deed to JCP,
Debtor is acting after consultation with legal counsel of
its own choosing, has been fully and completely advised
with respect to the significance and effect thereof, and
is not acting under coercion or duress of any kind; and
(iv) Debtor will testify, declare, depose or certify
before any competent tribunal, officer or other person, in
any case or proceeding now pending or hereafter instituted,
to the truth of the particular facts described in this
subsection 4(b).
(c) Without waiving the right of JCP to
foreclose on the Mortgage, which rights are expressly
reserved, it is the intention of the parties hereto that
the Deed to be delivered hereunder shall be entitled to
all of the benefits of a deed in lieu of foreclosure.
The estate of JCP under the Mortgage and Loan Documents
shall not merge with the fee estate upon delivery of the
Deed.
6. Assignment of Leases and Other Rights,
Interests and Privileges.
(a) In addition to the Deed and in furtherance
of the purposes of this Stipulation, Debtor will, at
Settlement hereunder, deliver to JCP an Assignment of Leases
in the form attached hereto as Exhibit "F", to assign,
transfer and convey to JCP (the "Assignment") all of
Debtor's rights, titles, interests and privileges in, to
and under all of the leases to any portion of the Parcel
and all amendments thereto, all development rights of
Debtor with respect to the Parcel, including, without
limitation, all permits, approvals, consents and agreements
obtained by Debtor from any governmental or quasi-
governmental agency or authority with respect to the Parcel
(including, without limitation, all zoning, subdivision and
land development permits and approvals for the Parcel), all
plans and specifications heretofore obtained by Debtor with
respect to the development of the Parcel, all rights of
Debtor in and agreements by Debtor with any public or
private utility company with respect to the development
and use of the Parcel, all studies, tests, surveys,
environmental assessments, engineering reports, feasibility
studies, appraisals and other investigations pertaining to
the Parcel, all equipment, materials and building
supplies owned by Debtor and located on the Parcel, and all
other rights and property, whether similar or dissimilar to
the foregoing, of Debtor pertaining to the ownership,
development or use of the Parcel, all insurance proceeds or
claims, all condemnation awards or claims, and all real estate
tax rebates (collectively, the "Associated Property Rights").
(b) At Settlement hereunder Debtor will also deliver to
JCP a Bill Of Sale and Assignment in the form attached
hereto as Exhibit "G", to assign, transfer and convey to JCP
(the "Bill of Sale") all of Debtor's rights, titles,
interests and privileges in and to any and all personal
property in which the Debtor holds an interest at the Parcel
(the Conveyance Documents, the Assignment and the Bill of
Sale are collectively referred to herein as the "Transfer
Documents").
(c) At Settlement hereunder Debtor will
deliver payment to JCP in the amount of all funds on deposit
in the Cash Collateral Account, including all security
deposits which are part thereof; provided, however, at
Settlement, JCP shall approve payment of the amount of
$25,000 from Cash Collateral to Debtor's management
professionals. (d) Debtor hereby
confirms and agrees that the foregoing transfer and assignment
is and is intended to be a present, absolute and
unconditional assignment of the Associated Property Rights,
and the Assignment and Bill of Sale to be delivered at
Settlement shall be made and given by Debtor in accordance
with the same representations, warranties, agreements and
attestations as are set forth in subsection 4(b) above with
respect to the Deed. It is understood and agreed that the
Assignment of the Associated Property Rights specifically
includes all refunds, rebates and other payments, however
described, now or hereafter becoming due to the holder of
the Associated Property Rights.
(e) Debtor expressly confirms and agrees
that although the Assignment is, and is intended upon delivery
to JCP, to constitute a present transfer and assignment of
the Associated Property Rights, Debtor will, at JCP's
reasonable request and at JCP's sole cost and expense,
promptly execute and deliver such further assignments or other
instruments as JCP shall from time to time hereafter request
in order to properly and completely transfer and assign the
Associated Property Rights to JCP.
7. Consideration.
(a) In consideration for Debtor's delivery of the
Conveyance Documents pursuant to the terms of subsection
5(a) above, and the delivery of the Assignment and Bill of
Sale, pursuant to subsection 6(a) above, the delivery of the
Stipulation for Entry of Judgment pursuant to paragraph 4
above, the delivery of the Consent Order Appointing
Receiver pursuant to paragraph 4 above, and the covenants and
representations of Debtor contained herein, JCP hereby
agrees as follows:
(i) Covenant by JCP Not To Sue.
Effective upon completion of the Settlement under Section 12
herein, JCP, for itself, its predecessors, successors,
assigns, affiliates, co-venturers and partners (the
"Covenanting Parties"), covenants (and at Settlement
hereunder shall confirm such covenant) not to sue Debtor
and its Partners for any deficiency after the public sale
of the Property and Personal Property Rights, and further
covenants not to sue the Guarantors, their respective
officers, directors, employees, agents, successors, heirs
and assigns (the parties who are the beneficiaries of this
covenant Not To Sue are collectively referred to in this
paragraph (i) as "Debtor and Guarantors") on any claim,
demand, debt, liability, contract, obligation, account,
tort, cause of action or claim for relief of whatever kind
or nature, whether known or unknown, whether suspected or
unsuspected by Covenanting Parties, which the Covenanting
Parties may have or which hereafter arise, be asserted or
accrue against Debtor and Guarantors arising from, by
reason of, or in any way connected with any agreements,
transactions, occurrences, acts, or omissions whatsoever
that were commenced, done or committed, or occurred at any
time prior to the date of this Stipulation and/or the date
of Settlement hereunder arising or related to the Loans and
Loan Documents, including but not limited to any deficiency
or other monetary judgment with respect to the Construction
Loan Documents, the Parcel or the Associated Property
rights, except for (aa) any material breach of the
representations and warranties given by Debtor in this
Stipulation and specifically contained herein, and (bb)
any failure by Debtor to perform any of the Debtor's
covenants under this Stipulation. Notwithstanding the
provisions of the foregoing paragraph, the parties hereto
agree that the above-stated Covenant Not to Sue shall become
null and void and of no legal effect whatsoever, and shall
not be asserted by Debtor and Guarantors or any party
claiming by or through Debtor and Guarantors, if any of the
following conditions occurs at any time within two years
of the date of this Stipulation:
(a) Debtor or Guarantors contest or attach
or any person authorized to act on behalf of Debtor or
Guarantors contests or attacks the conveyance to be
effected by the Deed or the Assignment, or takes any action
that would result in a further encumbrance on the title
of the Property as of the Effective Date of this
Stipulation;
(b) Debtor or Guarantors or any parties
authorized to act on their behalf contest the public sale
of the Property by any holder thereof;
(c) Any Trustee, creditor of Debtor or any
third party avoids or sets aside the conveyance to JCP
effected by the Deed or Public Sale of the Property, the
Transfer Documents or this Stipulation; or
(d) Debtor files a further Petition for
Relief under the United States Bankruptcy Code. The parties
hereto further agree that the Covenant Not To Sue stated
above shall be null and void and entitled to no legal effect
whatsoever in the event that Debtor or Guarantors are
adjudged by any Court having jurisdiction to have defrauded
JCP with respect to the representations, covenants and
obligations of Debtor under the Stipulation. In the
event that none of the events described in the immediately
preceding paragraph of this subsection 7(a)(i) have occurred
by the date which is two (2) years from the date of
Settlement hereunder and provided there is no pending action
contesting the conveyance of the Property, including but not
limited to the Parcel to JCP (if JCP has acquired title by
release of the Deed from escrow to otherwise), at Debtor's
written request JCP shall deliver to the Debtor and
Guarantors a release of all claims JCP may have against the
Debtor and Guarantors (the "Release"), in the form annexed
hereto as Exhibit "H", executed by JCP. However, if there is
any pending action of any nature contesting or challenging the
conveyance from Debtor to JCP at the end of such two (2)
year period, the Release shall not be delivered to Debtor
unless and until such action(s) are resolved by a final
unappealable court determination or binding agreement
executed by the parties challenging the conveyance to the
effect that the conveyance is valid and shall not be set
aside. (ii) Payment of Realty Transfer
Taxes; Taxes and Assessments. It is the intention of the
parties hereto that the Deed to be delivered on the
Effective Date shall be exempt from any realty transfer taxes
as a deed-in-lieu of foreclosure as provided by the laws of
the Commonwealth of Pennsylvania. However, it any such taxes
are determined to be due, JCP shall pay the same and shall
also pay any other taxes or charges assessed by the
Commonwealth of Pennsylvania or any political subdivision
thereof in connection with the recordation of the Deed or
the conveyance effected thereby. (iii) Release of Claims by
JCP Against Debtor's Professionals. In addition to the
Release set forth in the foregoing paragraphs, JCP, its
successors, assigns, affiliates, co-venturers and partners
("Releasers")unconditionally releases any and all claims,
demands, debts andliabilities or claims for relief of
whatever kind and nature,whether based on tort, contract or
statute, that Releasorspresently have or may hereafter have
against the law firm ofConnolly, Epstein, Chicco, Foxman,
Engelmyer, and Ewing("Connolly"), counsel to Debtor in
connection with the Bankruptcycase, for return of sums
received by Connolly in connection withthe Bankruptcy Case,
as disclosed in the Statement underBankruptcy Rule 2016 filed
by Connolly with the Bankruptcy Courtin the Bankruptcy Case.
(b) The parties hereto hereby acknowledge andagree that each
has, and on the Effective Date each shall have,given and
received good and valuable consideration pursuant tothe terms
and conditions of this Stipulation, including,
withoutlimitation, the following:
(i) JCP's (aa) agreement, upon
theoccurrence of certain events set forth in subsection
7(a)(i)above to release certain obligations of Debtor and
Guarantors inaccordance with the terms thereof, and (bb)
agreement to make thepayments set forth in subsection
7(a)(ii) above; and
(ii) Debtor's agreement to convey
theParcel to JCP as set forth in Subsection 4(a) above and
Debtor'sassignment of the Associated Property Rights and
delivery of the Bill of Sale pursuant to subsection 5(b)
above.
8. Condition of Title and Title Insurance.
Upondelivery of the Transfer Documents to JCP, fee simple
title tothe Parcel shall be conveyed to JCP in accordance
with all of theprovisions of this Stipulation, and such title
shall be good andmarketable and free and clear of all liens
and encumbrancespursuant to section 363 of the Bankruptcy
Code subject topermitted exceptions and the mortgage and
Construction LoanDocuments. Prior to the delivery of the
Transfer Documents toJCP and recordation of the Deed,
nothing contained herein willconstitute a conveyance of the
Parcel to JCP or deem JCP a"mortgagee in possession". JCP
shall not take possession of theParcel unless and until the
Transfer Documents are delivered toJCP, and the Deed is
recorded. On the Effective Date, JCP shallreceive an
endorsement or commitment for title insurance from atitle
insurance company acceptable to JCP (at JCP's sole cost
andexpense), and JCP's election in form and substance
satisfactoryto JCP, confirming, among other matters, that upon
delivery ofthe Deed, JCP will own fee simple title to the
Parcel inaccordance with the provisions hereof. This
condition shall bedeemed satisfied upon JCP's acceptance of
the Deed in accordancewith the terms hereof.
9. JCP Due Diligence. Upon execution of
this Stipulation, JCP shall have the right to conduct such
due diligence as it may deem necessary and appropriate
related to the Parcel, including but not limited to Phase I
and Phase II environmental audits. Debtor shall cooperate
with JCP or its designees in conducting such due
diligence, at JCP's sole cost and expense. JCP and its
designee shall have access to the Parcel as necessary to
conduct tests, surveys or examination of the Parcel.
Notwithstanding anything herein to the contrary, JCP shall
have no obligation to demand or accept the Transfer
Documents and nothing herein shall create any constructive
ownership interest or possession of the Parcel unless and
until JCP demands and accepts the Transfer Documents.
Nothing contained herein shall be construed as making the JCP
a "mortgagee in possession" of the Parcel. 10.
Conditions Precedent to Settlement. Prior to, or at
Settlement (as hereafter defined), Debtor shall deliver, or
cause delivery to JCP the following:
(a)All keys for the Parcel in Debtor's
possession, custody or control;
(b)All books and records in Debtor's possession,
custody and control relating to the operation
(property related income and expense records) of the Parcel;
(c)Copies of insurance policies for the last
three years regarding both casualty0 and liability
coverage concerning the Parcel and all documents related to
any pending insurance claims and
certification of insurance;
(d) To the extent same are in Debtor's
possession, Custody or control: all records of
rentals of tenants; all records regarding governmental
approvals and/or compliance with zoning ordinances,
fire codes, etc.; all records relating to
inspections by municipal, county or state officials; all
records relating to taxes and other
municipal, state and federal tax liens; any and all contracts
or records of inspection for appliances,
maintenance, trash removal,
heating/cooling, etc.; all warranties for all machinery,
equipment or appliances on the Parcel; and all
other documents, contracts, and records relating
to the management or operation of the Parcel;
(e) All security deposits for any tenants
of the Parcel held by Debtor (the "Security Deposits"), such
Security, Deposits are presently part of the Cash Collateral
Account being transferred to JCP pursuant to paragraphs 5(c)
and 10 herein;
(f) All Rents, issues and profits or other
receivables of the Parcel that are currently in Debtor's
possession, to the extent such funds have not been delivered
to JCP; (g) Complete lease files,
including all original leases for any portion of the Parcel
with all amendments and correspondence relating thereto;
(h) All outstanding purchase orders
relating to the Parcel;
(i) All historical operating expense
billings to any existing tenants; (j)
A list of any proceedings and documents relating to any court
action with any occupant, guest, tenant or vendor arising
out of any services, property, interest or leases in
connection with the Parcel;
(k) A list of all leased equipment located
at the Parcel, if any;
(1) To the extent same are in Debtor's
possession, custody or control: all building plans, site
plans, architectural, engineering and electrical plans for
the Parcel, including final construction as-builts, current
as-builts of tenant space, and original construction
specifications;
(m) To the extent same are in Debtor's
possession, custody or control: all equipment operating and
maintenance manuals;
(n) To the extent same are in Debtor's
possession, custody or control: all Life Safety and Emergency
Procedures Manuals relating to the Parcel;
(o) To the extent same are in Debtor's
possession, custody or control: all marketing materials,
brochures, flyers, floor plans, site plans, and
advertisements, including camera ready original artwork for
same relating to the Parcel;
(p) To the extent same are in Debtor's
possession, custody or control: artboards, building standard
finish boards, renderings and other artwork relating to the
Parcel; (q) To the extent same are in
Debtor's possession, custody or control: all professional
(engineering, architectural, etc.) surveys or reports,
including without limitation, environmental, physical and ADA
surveys relating to the Parcel;
(r) All notices of violations from any governmental
authority relating to the Parcel; and
(s) All other documents or material in
Debtor's possession and custody pertaining to operation
of the Parcel as may be further reasonably requested by
JCP.
11. Covenant by Debtor to Pay Over Cash
Collateral. Debtor hereby covenants and agrees that prior
to Settlement it will pay the specifically designated
operating expenses approved by JCP in accordance with the
Interim Orders and that the entire balance of the
Cash Collateral actually received by Debtor from the
Property will be turned over at Settlement to JCP or
its designee, subject to the payment by JCP to the Debtor
pursuant to paragraph 6(c) herein.
12. Settlement. Settlement hereunder
("Settlement") shall take place on the Effective Date,
and, unless before said date the parties hereto shall
have agreed on a different time, date and place, at
10:00 a.m. on such date at the offices of Drinker
Biddle & Reath, 1345 Chestnut Street, Philadelphia, PA
19107. At Settlement the following deliveries shall be
made:
(a) The Debtor and JCP shall execute
and deliver the following documents to JCP or its designee
fully executed and acknowledged where appropriate:
i) the Deed;
ii) the Resolution;
iii) the Stipulation for Entry of
Judgment;
iv) the Consent Order Appointing
Receiver;
v) the Assignment;
vi) the Bill of Sale; and
vii) such other documents as reasonably
may be required by JCP's title company.
(b) The Debtor shall deliver the Security
Deposits and Cash Collateral as provided by the
Stipulation; and
(c) The Debtor at JCP shall deliver
and execute such other documents as may be necessary to
effectuate this Stipulation and the transactions contemplated
hereby. The foregoing documents shall be in
the forms attached hereto as exhibits and where no
form of document is attached hereto, the document shall
be consistent with the terms of this Stipulation and in
a form reasonably satisfactory to JCP and Debtor.
13. Representations and Warranties of Debtor. In
order to induce JCP to enter into this Stipulation, and in
addition to the other acknowledgments, representations,
warranties and agreements of Debtor set forth in this
Stipulation, Debtor represents and warrants to JCP that:
(a) Debtor is the owner of legal title to
the Parcel and the Associated Property Rights and possesses
the legal power and authority to convey the same to JCP
pursuant to the Deed and the Assignment, respectively;
(b) To the best of Debtor's knowledge,
neither the Parcel nor Debtor are in violation of any
applicable requirements of law in connection with the
disposal, storage, treatment, processing or other handling of
hazardous substances or wastes or the emission or discharge
of any effluent, contaminant, pollutant or other material at,
from or in connection with the Parcel;
(c) The Debtor has entered into no leases,
tenancies, licenses or other occupancy agreements, or any
other agreements with respect to or affecting the Parcel,
other than this stipulation, the Construction Loan
Documents, the Leases and all amendments thereto and the
instruments creating the Associated Property Rights;
(d) No work has been or will be
performed at, and no materials have been or will be
furnished to, the Parcel prior to Settlement hereunder,
which might give rise to any mechanics', materialmen's, or
other lien or claim against the Parcel, except work regarding
the AVS Tenant Improvements approved by JCP;
(e) Other than (i) the Bankruptcy Case, (ii)
Commonwealth of Pennsylvania vs. Jenkins Court Associates.
Limited Partnership, pending in the District Court for
Montgomery County, Pennsylvania (the "District Court") and
(iii) Tri-Temp, Inc. v. Jenkins Court Associates, Limited
Partnership, pending in the District Court, Case No. CV-
0000187-95, there is no action, suit, or proceeding,
judicial or administrative, pending or, to the knowledge of
Debtor, threatened, in or by any court or governmental body
or agency against or affecting the Parcel or the Associated
Property Rights or relating to the ownership or development
of the Parcel or the Associated Property Rights;
(f) All necessary partnership actions to be
taken on the part of Debtor in connection with the
execution, delivery and performance of this Stipulation, the
Deed, the Assignment and all other documents to be executed
and delivered by Debtor pursuant hereto have been duly and
effectively taken. This Stipulation, the Deed, the
Assignment and the other documents to be executed and
delivered by Debtor pursuant hereto constitute or will
constitute when executed the valid, binding and enforceable
obligations of Debtor;
(g) Debtor has (and JCP hereby acknowledges
that it has)made full and careful analyses of the value of
the Parcel and the Associated Property Rights, and Debtor
and JCP have each reached the conclusion, independently,
that the agreements set forth in this Stipulation constitute
good and sufficient consideration for the transfers effected
or contemplated by the provisions hereof; and
(h) The Associated Property Rights are in
full force and effect, all payments currently-due in
connection therewith have been made, and Debtor has no
knowledge of any claim affecting the validity or
transferability of any of the Associated Property Rights;
provided, however, the Debtor has advised JCP that
tenants are in default and/or have asserted claims with
respect to the following Leases: (i) Lease Agreement
between the Debtor and Linens Plus, Inc., dated February 22,
1991 and (ii) Lease Agreement between the Debtor and
Abington Psychological Associates, dated October 1, 1993.
14. Representations of JCP. JCP represents and
warrants that it is the holder of the Construction Loan
Documents as of the date of this Agreement.
15. Covenant by Debtor Not to Oppose JCP's Actions.
(a) Debtor covenants and agrees that from the date hereof
neither Debtor nor any person acting at Debtor's instance or
in Debtor's stead will interfere with or oppose JCP's actions
in accordance with this Stipulation. If Debtor or any
party acting on Debtor's behalf interferes with or opposes
JCP's actions in accordance with this Stipulation, then the
obligations of Debtor to JCP, as they existed prior to the
date of this Stipulation, shall be fully revived,
reinstated and continued in full force and effect as if
said payment or conveyance had not been made.
(b) Debtor hereby covenants and agrees that neither Debtor
nor any person acting at Debtor's instance or in Debtor's
stead, will interfere with or oppose JCP in any proceedings,
receiver, sheriff, or U.S. marshal public sale, or any
action to quiet title which may be brought by JCP to perfect
its right, title and interest to the Parcel and/or the
Associated Property Rights; provided, however, JCP shall be
under no obligation to cause any public sale of the Parcel to
be held under this Stipulation or otherwise.
16. Consent to Relief from Stay. Debtor hereby
covenants and agrees that in the event that Debtor shall,
after disposition of the instant Bankruptcy Case, (i) file a
further petition with any bankruptcy court of competent
jurisdiction or be the subject of any petition filed under
the Bankruptcy Code, (ii) be subject to any order for
relief issued under the Bankruptcy Code, (iii) file or be
the subject of any petition seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
federal or state act or law relating to bankruptcy,
insolvency or relief for debtors, (iv) have sought or
consented to or acquiesced in the appointment of any
trustee, receiver (other than a receiver appointed as
contemplated by this stipulation), conservator or
liquidator, or (v) be the subject of any order, judgment or
decree entered by any court of competent jurisdiction
approving a petition filed against Debtor for any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present
or future federal or State act or law relating to bankruptcy,
insolvency or relief for debtors; then, subject to court
approval, this Stipulation and the Construction Loan
Documents shall be deemed cash collateral agreements pursuant
to Section 363 of the Bankruptcy Code, binding on Debtor, and
JCP shall be entitled to relief from any automatic stay
imposed under Section 362 of the Bankruptcy Code, or
otherwise, on or against the exercise of the rights and
remedies otherwise available to JCP as provided in this
Stipulation and the Construction Loan Documents, or as
otherwise available at law, and Debtor hereby waives its
rights to object to such relief.
17. No Assumption of Liabilities. By entering
into this Stipulation, JCP and Debtor agree that JCP has not
assumed or promised to pay, in whole or in part, any debts,
liabilities or obligations of Debtor, whether arising with
respect to the Parcel, the Associated Property Rights or
otherwise. JCP shall not have any duty or obligation to
Debtor to indemnify or defend Debtor or any other party
against loss in connection with Debtor's debts, obligations,
liabilities, or contracts relating to the Parcel, the
Associated Property Rights or otherwise, and JCP shall not
have any duty or obligation to use, manage or sell the Parcel
in any particular manner that would or might minimize
Debtor's obligations to third parties.
18. Release Of All Claims by Debtor and
Guarantors. Debtor and Guarantors, for themselves and on
behalf of their respective successors and assigns, hereby
release, remise and forever discharge (and at Settlement
hereunder shall confirm such release, remise and discharge
of) JCP, its successors and assigns and all principals
thereof (hereinafter referred to, individually and
collectively, as the "Released Parties") from any and all
claims, demands, debts, liabilities, contracts, obligations,
accounts, torts, causes of action or claims for relief of
whatever kind or nature, whether known or unknown, whether
suspected or unsuspected by Debtor or Guarantors which Debtor
or Guarantors may have or which may hereafter arise, be
asserted or accrue against the Released Parties arising from,
by reason of, or in any way connected with any agreements,
transactions, occurrences, acts or omissions whatsoever that
were commenced, done or committed, or occurred at any time
prior to the date of this Stipulation in any way relating to
the Construction Loan, the Parcel or the Associated
Property Rights, including, without limitation, any such
claims in respect of: (a) any of the
Construction Loan Documents, any disbursements or failure
to disburse or to make advances under the Construction Loan
Documents, the negotiation of any of the Construction Loan
Documents or this Stipulation, the terms hereof or thereof,
or the approval, administration or servicing thereof;
(b) the manner of calculation, rate,
collecti- bility of, or entitlement to interest under the
Construction Loan Documents, including, without limitation,
any claims that interest charged under the Construction Loan
Documents is or at any time was, usurious under any
applicable law;
(c) any demands, notices of default, or
notices of acceleration in reference to any of the
Construction Loan Documents or any other matter pertaining to
the collection or enforcement by the Released Parties of the
Loan evidenced by the Construction Loan Documents;
(d) any oral agreements or understandings by
and between the Released Parties (or their predecessors-in-
interest) and Debtor and/or Guarantors in connection with the
Construction Loan Documents, this Stipulation, or any other
security instruments, indebtedness or any amendments,
modifications or warranties in relation thereto, Debtor and
Guarantors acknowledging and agreeing that the Construction
Loan Documents and all covenants therein, as executed and as
modified by the parties, remain in full force and effect
according to their terms without waiver, modification or
amendment other than as set forth in this Stipulation;
(e) any alleged obligation of or commitment
by the Released Parties, or any affiliate of the Released
Parties, at any time, whether oral or written, express or
implied, to make any additional advance of funds, reduce the
interest rate or otherwise alter the manner of paying or
accruing interest, or to refund, cancel, prorate or
otherwise adjust or abate any obligations arising out of or
respecting the Construction Loan Documents or this
Stipulation or any commitment fee, loan fee, advancement fee
or other fee or commission of any nature, or to forbear,
forgive, waive or delay the exercise of any right or remedy
of the Released Parties on any grounds or for any reason,
or otherwise amend, modify, extend, supplement, renew or
alter in any way any of the terms of such Construction Loan
Documents or this Stipulation;
(f) any other matter pertaining to the
adminis- tration, collection or enforcement by the Released
Parties of the Construction Loan Documents;
(g) any claim that the Released Parties andDebtor, or either
of them, have any partnership, joint venture orother kind of
relationship, other than that of creditor anddebtor,
pursuant to the Construction Loan Documents or
thisStipulation; and (h) any claim or
allegation that any ReleasedParty has acted precipitously or
in bad faith in its dealingswith Debtor and/or Guarantors,
or that any Released Party hasasserted or attempted to
assert control or undue or improperinfluence over Debtor
and/or Guarantors or over Debtor'soperations, financial
affairs or the Parcel.
19. Release Includes Unknown Claims. The
releasescontained in this Stipulation apply to all claims
which Debtorand/or Guarantors now have or which may hereafter
arise againstthe Released Parties, or any of them, as a
result of acts oromissions occurring before the date of
this Stipulation in anyway relating to the Construction
Loan, the Parcel, or theAssociated Property Rights, whether or
not known or suspected bythe parties hereto. Debtor and
Guarantors hereby expresslyacknowledge that although
ordinarily a general release does notextend to claims which
the releasing party does not know orsuspect to exist in its
favor, which if known to it might havematerially affected
its settlement with the party released, theDebtor and
Guarantors have carefully considered and taken intoaccount
in determining to enter into this release the
possibleexistence of such unknown losses or claims, the
release containedabove and in this Section, having been
bargained for between theparties with knowledge of the
possibility of such unknown claims,is given in exchange for
full accord, satisfaction and dischargeof all such claims.
20. Understandings of the Parties.
(a) ThisStipulation, together with the Construction
Loan Documents, theInterim Orders, and the Deed and other
instruments contemplatedherein, (i) constitutes the entire
understanding between theparties hereto, (ii) without
limiting the generality of theforegoing, supersedes all
letters, agreements in principle,outlines of terms or other
oral or written communications betweenthe parties hereto,
and (iii) may not be modified, amended orterminated, except
by a written agreement which is signed by eachof the parties
hereto.
(b) Each of the parties hereto stipulates
andagrees that such party has not relied upon any
representations,statements, covenants or warranties in
entering into this Stipulation and performing the respective
actions contemplatedhereby other than those actually set
forth in this Stipulation,incorporated by reference by this
Stipulation, or specificallyreferred to in this Stipulation.
All representations andwarranties contained herein shall be
true and correct as of Settlement, and the same shall
survive for 2 years after Settlement and delivery of the Deed
hereunder.
(c) This Stipulation is not intended to
replace or become a substitute for any of the Construction
Loan Documents, but is a modification thereof. Except to the
extent that the terms and conditions of the Construction Loan
Documents are expressly modified or amended by this
Stipulation, all terms of the Construction Loan Documents
shall survive the execution and performance of this
Stipulation and shall remain in full force and effect. In
the event there is any conflict or discrepancy between the
terms of this Stipulation and the terms of any of the
Construction Loan Documents, the terms of this Stipulation
shall govern.
(d) Each party represents that it has
received independent advice from legal counsel of its choosing
with respect to the advisability of entering into this
Stipulation and making the agreements and providing the
releases, waivers and expressions of intent contained in this
Stipulation.
(e) Each party represents that it has read
this Stipulation and understands the contents hereof.
21. No Third Party Beneficiaries. This
Stipulation is made for the sole benefit of the parties
hereto, except with respect to (a) sections above pertaining
to releases of additional parties referred to herein, who
shall receive the benefits of those releases even though they
may not be parties to this Stipulation in their individual
capacities, and (b) the representations, warranties,
agreements and attestations of Debtor as herein set forth,
which have been made for the protection and benefit of JCP,
its successors and assigns and all other parties hereafter
dealing with or who may acquire an interest in the Parcel
and/or the Associated Property Rights, and specifically
including any title insurance company that insures title to
the Parcel; but no other person or persons shall have any
rights or remedies under or by reason of this Stipulation.
22. Severability. Wherever possible, each
provision of this Stipulation shall be interpreted in such a
manner as to be effective and valid under applicable law.
In the event that one or more of the terms or provisions of
this Stipulation, or any portions thereof, is determined to
be illegal, unenforceable or prohibited by applicable law, the
remainder of this Stipulation shall not be affected thereby
and each remaining provision or portion thereof shall
continue to be valid and effective and shall be enforceable to
the fullest extent permitted by applicable law.
23. TIME IS OF THE ESSENCE. TIME IS OF THE
ESSENCE WITH RESPECT TO EACH AND EVERY TERM OF THIS
STIPULATION.
24. Authority. Each person executing this
Stipulation represents and warrants that such person is
lawfully authorized and empowered to execute this
Stipulation on behalf of the entity on whose behalf such
person is signing, and that upon execution, this stipulation
will be binding upon such entity, without any further
approval, ratification, or other action.
25. Binding on Successors and Assigns. This
Stipulation shall inure to the benefit of, and shall be
binding upon, JCP, the Debtor, the Guarantors and each of
their respective successor and assigns.
26. No Waiver. No delay or omission by JCP in
exercising any right or power arising under this Stipulation
or the Construction Loan Documents by reason of any default
hereunder or thereunder shall be construed as a waiver of
such default or as an acquiescence therein, nor shall any
single or partial exercise thereof preclude any further
exercise thereof. No waiver of any default shall be
construed as a waiver, acquiescence or consent to any
preceding or subsequent default.
27. Further Assurances. Debtor, the Guarantors
and JCP mutually covenant and agree to execute any
additional documents and to do all other acts reasonably
required to effect the intent and purposes of this
Stipulation. In furtherance and not in limitation of the
foregoing, Debtor and the Guarantors expressly agree, upon
receipt of JCP's reasonable written request and at JCP's
sole cost and expense, to execute such further instruments
and to take such other actions as may be required to
transfer the Associated Property Rights to JCP.
28. Bankruptcy Court Approval. On or before
1995, JCP will file a motion with the Bankruptcy Court
seeking approval of this Stipulation in accordance with
Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules")
2002, 4001 and 9019 in the Bankruptcy Case (the "Approval
Order"). The Debtor and the Guarantors shall use their
best efforts to assist in obtaining the Approval Order.
29. Effective Date. This Stipulation shall be
effective on the date the Approval Order becomes final and is
no longer subject to appeal and/or motion for
reconsideration; provided, however, JCP shall have the right
to terminate this stipulation upon written notice to the
Debtor in the event the Effective Date does not occur on or
before July 25, 1995.
30. Application for Appointment of Appraiser.
The Debtor's Application for Appointment of Appraiser shall
be deemed withdrawn upon entry of the Approval Order by the
Bankruptcy Court.
31. Interim Orders. The Interim Orders shall
remainin full force and effect until occurrence of the
Settlement underthis Stipulation.
32. Relief from Automatic Stay. The parties
agreethat the automatic stay of Section 362 of the Bankruptcy
Codeshall be deemed modified and vacated as to JCP to
consummate thetransactions contemplated by this Stipulation
and enforce anyrights and remedies JCP has or may have for
breach of thisStipulation by the Debtor.
33. JCP Motion to Dismiss. The Approval Order
shallconstitute resolution of the JCP Motion to Dismiss.
34. Notice. (a) All noticed, requests,
demands, andother communications under this Stipulation shall
be in writingand shall be given to each party hereto as
follows:
If to
Debtor: Jenkins Court Associates Limited Partnership
636 Old York Road
Jenkintown, PA 19046
Attn: Miles S. Katzen
with copies to:
Albert Bixler, Esquire
Connolly Epstein
Chicco Foxman
Engelmyer & Ewing
1515 Market Street, 9th Floor
Philadelphia, PA 19102
- and -
Terrence P. Sullivan
c/o Historic Preservation Properties 1989
One Liberty Square
Boston, MA 02109
If to JCP:
Jenkins Court Pennsylvania, L.P.
c/o Oaktree Capital Management, LLC
550 South Hope Street, 22nd Fl.
Los Angeles, CA 90071
Attn: Russel Bernard
with a copy to:
Andrew C. Kasoner, Esquire
DRINKER BIDDLE & REATH
1345 Chestnut Street
PNB Building, Suite 1100
Philadelphia, PA 19107-3496
(or at such other address as shall be designated by such
party in a notice to each other party complying with the
terms of this Section).
(b) All notices, requests, demands and other
communications provided for hereunder shall be effective (i)
if given by overnight delivery service, when placed for
delivery and by Certified Mail, Return Receipt Requested, and
(ii) if given by any other means (including telecopy), when
received at the aforesaid addresses.
35. No Partnership. Nothing herein shall be
deemed or construed to create a partnership or joint venture
between any of the parties hereto.
36. Applicable Law. This Stipulation shall be
governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
37. Remedies Supplemental. Except as provided
herein, the rights and remedies of JCP contained herein are in
addition to all other rights and remedies in favor of JCP at
law or in equity, and all such rights and remedies may be
pursued singly, together or in lieu of any other rights and
remedies.
38. Counterparts. This Stipulation may be executed
by each party in identical counterparts, each of which shall
be deemed to be an original and all of which, taken together,
shall constitute one agreement binding upon all parties.
IN WITNESS WHEREOF, the parties hereto have executed this
Stipulation, under seal, as of the date first written above.
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP, debtor-in-
possession
By : Jenkins Court Investors, L.P., its General Partner
By: Court Investors Corporation, its sole General Partner
By: Miles S. Katzen, President
By: Historic Preservation Properties 1989, Limited
Partnership, its general partner
By: Boston Historic Partners, Limited Partnership its sole general partner
By: Terrence P. Sullivan, its general partner
JENKINS COURT INVESTORS, L.P.
By: Court Investors Corporation, its sole General Partner
Miles S. Katzen, President
DEED THIS INDENTURE made the 31st day of August,
in the year of our Lord one thousand nine
hundred and ninety-five (1995),
BETWEEN JENKINS COURT ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership
(hereinafter called the Grantor), of the one part,
and JENKINS COURT PENNSYLVANIA, L.P., a Pennsylvania
limited partnership (hereinafter called the
Grantee), of the other part,
WITNESSETH that the said Grantor for and
in consideration of the sum of One Dollar ($1.00) and
other good and valuable consideration, unto it well and
truly paid by the said Grantee, at or before the
sealing and delivery hereof, the receipt whereof is
hereby acknowledged, has granted, bargained and
sold, released and confirmed, and by these presents does
grant, bargain and sell, release and confirm unto the
said Grantee, its successors and assigns,
ALL THAT CERTAIN lot or piece or tract of
land situate in the Borough of Jenkintown, County
of Montgomery, and Commonwealth of Pennsylvania
bounded and described according to a plan thereof
made January 4, 1989 and last revised January 9, 1989 by
Charles E. Shoemaker, Inc., Engineers and Surveyors
of Abington, Pennsylvania as follows:
BEGINNING at a point on the present easterly
PennDOT legal right-of-way line of Old York Road
(80' wide) said point being at the distance of one
hundred sixty-two and sixty-six one- hundredths feet
(162.66') measured North nine degrees fifty-four minutes
zero seconds East (N 09 degrees 54' 00" E) from the
point formed by the intersection which the said present
easterly PennDOT legal right-of-way line of Old York
Road makes with the northwesterly side of Rydal Road
(33' wide at this point);
THENCE extending from the place of beginning along
the present easterly PennDOT legal right-of-way line
of Old York Road North nine degrees fifty-four minutes
zero seconds East (N 09 degrees 54' 00" E) one thousand
ninety-one and four one- hundredths feet (1,091.04') to
a point;
THENCE North twenty-nine degrees four minutes
thirty seconds East (N 23 degrees 04' 30" E) thirty-
four and ninety-eight one- hundredths feet (34.98') to
a point;
THENCE extending northeastwardly on the arc of a
circle curving to the left with a radius of fifty-five and
no one- hundredths feet (55.00') the arc distance of
fifty and seventy- one one-hundredths feet (50.71') to a
point of compound curvature;
THENCE extending northeastwardly on the arc of a
circle curving to the left with a radius of one hundred
forty and no one-hundredths feet (140.00') the arc
distance of thirty-one and forty-nine one-hundredths feet
(31.49') to a point of reverse curvature, THENCE
extending northeastwardly, eastwardly, and southeastwardly
on the arc of a circle curving to the right with a radius of
five and no one-hundredths feet (5.00') the arc distance of
eleven and fifty-seven one-hundredths feet (11.57') to a
point on the southwesterly side of Spring Avenue (50, wide);
THENCE extending along the same South thirty-two
degrees thirty-six minutes forty-three seconds East (S 32
degrees 36' 43" E) two hundred thirty-nine and two one-
hundredths feet (239.02') to a point;
THENCE extending South fifty-seven degrees twenty-
three minutes seventeen seconds West (S 57 degrees 23' 17"
W) one hundred five and fourteen one-hundredths feet
(105.14') to a point;
THENCE extending South nineteen degrees forty-two
minutes six seconds East (S 19 degrees 42' 06" E) six
hundred and fifty- four one-hundredths feet (600.54') to a
point; THENCE extending South fifty-seven degrees
twenty-one minutes thirty-four seconds West (S 57 degrees
21' 34" W) fifty and six one-hundredths feet (50.06') to
a point; THENCE extending South nineteen degrees
forty-four minutes three seconds East (S 19 degrees 44' 03"
E) one hundred forty-one and twenty-four one-hundredths feet
(141.24') to a point on the aforementioned northwesterly
side of Rydal Road (40' wide at this point);
THENCE extending along the same South fifty-seven
degrees twenty-six minutes twenty seconds West (S 57
degrees 26' 20" W) four hundred seventy-seven and fifty
one-hundredths feet (477.50') to a point;
THENCE extending North fifty-five degrees twenty-
three minutes thirty-four seconds West (N 55 degrees 23'
34" W) one hundred thirty and twenty one-hundredths feet
(130.20') to a point on the aforementioned present easterly
PennDOT legal right- of-way line of Old York Road the first
mentioned point and place of beginning.
CONTAINING 344,682 square feet or 7.9128 acres.
TAX PARCEL NUMBER 10-00-05364-00-8
BEING the same premises which Positano Associates, a
Pennsylvania limited partnership, by Deed dated January 9,
1989 and recorded in the Office of the Recorder of Deeds for
Montgomery County on January 17, 1989 in Deed Book 4899,
Page 2239, granted and conveyed to GRANTOR.
UNDER AND SUBJECT, to the lien of a certain mortgage
created by GRANTOR in favor of Fleet National Bank-, a
national banking association organized under the laws of
the United States ("Fleet"), by Open-End Mortgage and
Security Agreement dated January 9, 1989 and recorded on
January 17, 1989 in the Office of the Recorder of Deeds
for Montgomery County in Mortgage Book 6397, Page 1438 in
the original principal amount of $17,820,000, as modified
by: (1) a Modification Agreement recorded on March 4, 1991
in the aforesaid Office in Mortgage Book 6677, Page 1180;
(2) an Assignment Modification Agreement recorded on February
12, 1992 in the aforesaid Office in Mortgage Book 6826, Page
736; (3) a Modification Agreement recorded on February 12,
1992 in the aforesaid Office in Mortgage Book 6826, Page
741; (4) a Modification Agreement recorded August 7, 1992 in
the aforesaid Office in Mortgage Book 6942, Page 1038;
and (5) an Assignment and Assumption of Mortgage dated
September 30, 1994 and recorded in the aforesaid Office on
October 7, 1994 in Mortgage Book 7492, Page 1453, whereby
Fleet assigned all of its right, title and interest in and
to the "Mortgage" (as hereinafter defined) to Grantee
(said mortgage as amended, modified and assigned, the
"Mortgage").
ALSO UNDER AND SUBJECT TO certain conditions and
restrictions of record to the extent such matters continue
to affect title to the above described premises.
IT BEING HEREBY ACKNOWLEDGED that (i) this instrument
of conveyance is intended to be, and is, an absolute
conveyance of Grantor's right, title and interest in and to
the Premises to Grantee, its successors and assigns, and
that this instrument is not intended to be, and is not, a
mortgage, trust conveyance or security for any future
obligation; and (ii) the Mortgage shall not be affected by
this conveyance and shall not be merged with the title
hereby granted, and the conveyance hereunder shall not
serve to inhibit or impair Grantee's right to conduct a
judicial or nonjudicial foreclosure sale pursuant to the
Mortgage following the delivery of this instrument to
Grantee.
TOGETHER with all and singular the buildings and
improvements, ways, streets, alleys, driveways, waters,
water- courses, rights, liberties, privileges, hereditaments
and appurtenances, whatsoever unto the hereby granted
premises belonging, or in any wise appertaining, and the
reversions and remainders, rents, issues, and profits
thereof; and all the estate, right, title, interest,
property, claim and demand whatsoever of it, the said
Grantor, as well at law as in equity, of, in, and to the
same.
TO HAVE AND TO HOLD the said lot or piece of ground
above described, with the messuage or tenement thereon
erected, hereditaments and premises hereby granted, or
mentioned and intended so to be, with the appurtenances,
unto the said Grantee its successors and assigns, to and
for the only proper use and behoof of the said Grantee,
its successors and assigns forever.
UNDER AND SUBJECT, as aforesaid.
AND the said Grantor, for itself, its successors and
assigns, does covenant, promise and agree, to and with the
said Grantee, its successors and assigns, by these presents,
that it, the said Grantor and its successors and assigns,
all and singular the hereditaments and premises hereby
granted or mentioned and intended so to be, with the
appurtenances, unto the said Grantee, its successors and
assigns, against it, the said Grantor and its successors
and assigns and against all and every person and persons
whomsoever lawfully claiming or to claim the same or any
part thereof, by, from or under them or any of them, shall
and will, subject as aforesaid, WARRANT and forever DEFEND.
IN WITNESS WHEREOF, the party of the first part
hereunto has caused these presents to be duly executed by
its authorized officers, with its corporate seal hereunto
affixed, the day and year first above written.
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP
By: JENKINS COURT INVEST0RS, L.P.,
its General Partner
By: COURT INVESTORS CORPORATION,
its General Partner
COMMONWEALTH OF
PENNSYLVANIA: : SS COUNTY OF
PHILADELPHIA
On this, the 31st day of August, 1995, before me, a
Notary Public in and for the State and County aforesaid, the
undersigned officer, personally appeared Miles S. Katzen, who
acknowledged himself to be the President of COURT INVESTORS
CORPORATION, a Pennsylvania corporation, the general partner
of JENKINS COURT INVESTORS L.P., a Delaware limited
partnership, the general partner of JENKINS COURT ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership, and that
he as such President, being authorized to do so, executed the
foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as President.
IN WITNESS
WHEREOF, I have hereunto set my hand and official seal.
NOTARY PUBLIC
My commission expires:
The address of the above named Grantee is:
Jenkins Court Pennsylvania, L.P.
c/o Oaktree Capital Management, LLC
550 South Hope Street, 22nd Floor
Los Angeles, California 90017
Attention: Scott Chernobf
On behalf of the Grantee.
ASSET MANAGEMENT AGREEMENT
THIS ASSET MANAGEMENT AGREEMENT (the "Agreement") is made and
entered into as of October 1, 1995, by and among HISTORIC PRESERVATION
PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership ("HPP 1987"),
HISTORIC PRESERVATION PROPERTIES 1988 LIMITED PARTNERSHIP, a Delaware
limited partnership ("HPP 1988"), HISTORIC PRESERVATION PROPERTIES 1989
LIMITED PARTNERSHIP, a Delaware limited partnership ("HPP 1989"), HISTORIC
PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND, a Delaware limited
partnership ("HPP 1990") and CLAREMONT MANAGEMENT CORPORATION, a
Massachusetts corporation ("Claremont").
RECITALS
A. HPP 1987, HPP 1988, HPP 1989 and HPP 1990 are sometimes individually
referred to herein as an "HPP Partnership" and collectively referred to as the
"HPP Partnerships."
B. The HPP Partnerships were formed to organized and invest in certain
joint ventures (the "Project Partnerships") which own real properties (the
"Properties") which qualify for the rehabilitation tax credit under Section
48 of the Internal Revenue Code of 1986, as amended (the "Code").
C. The general partner of HPP 1987 is Boston Historic Partners Limited
Partnership, a Massachusetts limited partnership ("BHP"). The business of
HPP 1987 is governed by its Amended and Restated Limited Partnership
Agreement dated as of May 15, 1987 (the "HPP 1987 Partnership Agreement").
HPP 1987 owns an interest in each of the Project Partnerships listed on
Exhibit A attached hereto.
D. The general partner of HPP 1988 is BHP. The business of HPP 1988 is
governed by its Amended and Restated Limited Partnership Agreement dated as
of February 24, 1988 (the "HPP 1988 Partnership Agreement"). HPP 1988 owns
an interest in each of the Project Partnerships listed on Exhibit B attached
hereto.
E. The general partner of HPP 1989 is BHP. The business of HPP 1989 is
governed by its Amended and Restated Limited Partnership Agreement dated as
of December 19, 1988 (the "HPP 1989 Partnership Agreement"). HPP 1989 owns
an interest in each of the Project Partnerships and the property listed on
Exhibit C attached hereto.
F. The general partner of HPP 1990 is Boston Historic Partners II Limited
Partnership, a Massachusetts limited partnership ("BHP II"). The business of
HPP 1990 is governed by its Amended and Restated Limited Partnership
Agreement dated as of May 30, 1990 (the "HPP 1990 Partnership Agreement").
HPP 1990 owns an interest in each of the Project Partnerships listed on
Exhibit D attached hereto.
G. The HPP 1987 Partnership Agreement, HPP 1988 Partnership Agreement,
HPP 1989 Partnership Agreement and HPP 1990 Partnership Agreement are sometimes
individually referred to as an "HPP Partnership Agreement" and collectively
referred to as the "HPP Partnership Agreements."
H. Each of the HPP Partnerships desire to engage Claremont to manage
certain of the business and affairs of the HPP Partnerships and provide the
services set forth in this Agreement on the terms and conditions hereinafter
set forth.
I. Claremont desires to perform such services on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Engagement of Claremont.
Each HPP Partnership hereby engages and designate Claremont as the
manager of certain of the business affairs of the HPP Partnerships as more
fully set forth herein. Claremont hereby accepts such engagement and
designation and hereby agrees to perform its obligations under this Agreement
in a businesslike and professional manner. Claremont shall at all times act
only at the specific direction of BHP or BHP II. Every act performed by
Claremont or any agent or employee of Claremont pursuant to the authority
granted by this Agreement shall be done as an independent contractor on
behalf of the HPP Partnerships and all obligations or expenses incurred
hereunder shall be for the account of and at the expense of the HPP
Partnerships, except as otherwise specifically provided hereunder.
Section 2. Duties of Claremont.
2.1 Duties. It shall be the obligation of Claremont to perform the
following duties on behalf of HPP Partnerships (the "Services"):
(a) Asset Management Services. Claremont shall assist BHP and BHP II
in monitoring the operations of the Properties to the extent specifically
directed by BHP and BHP II from time to time and shall periodically meet as
reasonably requested with representatives of BHP and BHP II to discuss
current property operations. Unless otherwise explicitly directed by BHP or
BHP II in writing, a representative of Claremont will visit and meet with the
independent third party property management company, where applicable, those
properties (the "Properties") indicated on Exhibits A through D, at least
once a year so long as such Properties are owned by an HPP Partnership or a
Project Partnership having an HPP Partnership as a partner. A representative
of Claremont will visit any other properties from time to time owned by an
HPP Partnership of a Project Partnership only on an as-needed basis as
specifically requested in writing by BHP or BHP II.
(b) Accounting Services. Claremont will assist BHP and BHP II in
maintaining all accounting records for the HPP Partnerships and
preparing work paper packages and quarterly and annual financial statements
for the HPP Partnerships as applicable, assist BHP and BHP II in the
preparation of tax returns and other reports to investors as applicable.
Claremont shall assist BHP and BHP II in keeping books and records relating
to the HPP Partnerships in accordance with generally accepted accounting
principles, uniformly and consistently applied from year to year, take all
reasonable steps to assist the HPP Partnerships in keeping records of all
transactions, make available for inspection by BHP and BHP II, at all
reasonable times the books and records relating to the HPP Partnerships, and
furnish such information concerning the HPP Partnerships to such persons as
BHP and BHP II may, in writing, reasonably request. In addition, Claremont
will assist BHP and BHP II in preparing and filing all reports required by
the Securities and Exchange Commission, including those items required by
Section 8.4 of each of the HPP 89 and HPP 90 Partnership Agreements. HPP 87
and HPP 88 do not file with the SEC based upon a hardship exemption but they
do provide investors and brokers with a complete unaudited Annual Report.
(c) Investor Services. Claremont will assist BHP and BHP II in
the preparation and distribution of (i) quarterly and annual reports to the
investors in HPP90 Partnership, annual reports for HPP 87, HPP 88, and HPP
89. (ii) the annual form K-1 that enables the investors to file their
respective tax returns, and (iii) responding to and serving investors and
their related broker/dealer and representatives as required. HPP 89 will
also provide copies of the quarterly 10-Q upon request. Copies of the above
correspondences shall be distributed to Brokers of Record and the
DueDiligence officers of selling broker dealer firms consistent with prior
levels of service.
(d) Personnel.In performing Services, Claremont will utilize its
staff and make available to the assignment, professional, competent
individuals who can effectively perform the Services at a level anticipated
by both Claremont and HPP. All employees shall be employees of Claremont,
but are subject to reimbursement pursuant to Section 3.2.
(e) Office Space. Claremont will provide allocable office space
for its personnel as may be necessary to perform the Services. The HPP
Partnerships hereby agree to pay the amount equal to allocable rent changes
as set forth in the operating budget.
(f) Support Staff. Claremont will provide or arrange for the
provision of appropriate office support to perform the Services, including
secretarial staff and office equipment, salaries of employees and other
general overhead of Claremont, costs of accounting, statistical or
bookkeeping services and computing on accounting equipment, travel,
telephone communications and other general and administrative expenses. All
costs are to be reimbursed pursuant to Section 3.2.
(g) Cooperation by HPP. The HPP Partnerships shall deliver to
Claremont copies of all documents in the possession of, or available to, the
HPP Partnerships which relate to the HPP Partnerships and/or the financing,
operation, management and leasing of each Property. The HPP Partnerships
acknowledge that the Services provided by Claremont will be based in large
part on information received from the HPP Partnerships. Claremont shall be
entitled to assume that all such information (including, without limitation,
financial statements and other financial data) received from the HPP
Partnerships shall be complete and accurate, and that such information will
not contain, or omit to contain, any statement of material fact known by the
HPP Partnerships to be false or misleading. Claremont will not (and shall
have no obligation to the HPP Partnerships to) undertake to make an
independent verification of any such information unless specifically
requested to do so by the HPP Partnerships in writing. The HPP Partnerships
hereby represent to Claremont that no information furnished or to be
furnished by the HPP Partnerships hereunder or in connection with the
consulting services to be provided by Claremont hereunder, contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make such information not misleading.
The HPP Partnerships hereby agree that they have an affirmative obligation
hereunder to disclose any material facts necessary to enable Claremont to
provide its Services hereunder.
2.2 Amount of Time, Etc., Required of the Designated Personnel. The
parties acknowledge that the officers, directors and employees of Claremont
may engage in significant real estate, financial and securities-related
businesses during the term of this Agreement in addition to those
contemplated by this Agreement. Some of these activities may be competitive
with the activities of the HPP Partnerships. The HPP Partnerships hereby
consent to the officers, directors and employees of Claremont engaging in
such competitive activities. Under no circumstances will Claremont or any
of its personnel or agents be required to devote all of their time, resources or
personnel to the performance of this Agreement but only will be required to
devote such time, resources and personnel as is necessary for them to fulfill
their obligations hereunder.
Section 3.Compensation and Reimbursement.
3.1 Base Fee. The HPP Partnerships shall pay to Claremont a base
monthly fee of $1,600 per property for each Property owned directly or
indirectly by such HPP Partnership, as noted on Exhibits A, B, C or D
(the "Base Fee"). The Base Fee shall be due and payable in monthly
installments on the tenth business day of each month throughout the term of
this Agreement. Such fee shall be prorated for any partial year for which
services are performed hereunder. The Base Fee shall be in the following
amounts through June 30, 1996 and will be adjusted at that time to properly
reflect the number of properties/investee partnerships in place at that time
for the next reporting period, ending June 30, 1997:
HPP 1987 - $76,800
HPP 1988 - $76,800
HPP 1989 - $76,800
HPP 1990 - $38,400
3.2 Reimbursement. The HPP Partnerships shall pay the directly
allocable costs incurred by Claremont in providing the Services and the
costs and expenses set forth in the budget for the period October 1, 1995
thru June 30, 1996 attached hereto as Exhibit E (the "Budget"). The Budget
has been approved by the HPP Partnerships. A new budget will be prepared for
the period July 1, 1996 through June 30, 1997. Total charges which are more
than 10% in excess of the Budget must be approved by the HPP Partnerships in
advance. Payments to Claremont under this Section 3.2 will be made monthly.
All such costs shall be allocated to and paid by the HPP Partnerships as
follows for the period October 1, 1995 thru June 30, 1996 fiscal year:
HPP 1987 -18.41 %
HPP 1988 -28.22 %
HPP 1989 -16.37 %
HPP 1990 -37.00 %
These allocations will be reviewed and reset if appropriate for the following
fiscal year.Claremont shall provide a new annual budget by May 15, 1996 for
fiscal year July 1,1996 - June 30, 1997. Expense allocations may change from
year to year based on various factors. The July 1, 1996 - June 30, 1997
budget must be approved in advance by the HPP Partnerships by June 15, 1996.
3.3 Extra Services. If requested in writing from BHP or BHP II from
time to time, in addition to the Services, Claremont shall provide extra
services. Claremont shall bill the relevant HPP Partnership at the market
rate for such services rendered. Bills for such extra services will be
rendered and paid monthly.
3.4 Miscellaneous. This Agreement shall in no way obligate Claremont
or any employee of Claremont to pay any costs or expenses of any HPP
Partnership if monies are not available for the payment of such costs or
expenses from the income or reserves established by or on behalf of such HPP
Partnership. In addition, in the event that any of the fees or
reimbursements described in this Section 3 are not paid when due, the accrued
amounts owed to Claremont will bear interest at the Fleet prime rate until
paid.
3.5 Allocation of Costs. In the event that any services are performed
both for HPP Partnership and for other entities, Claremont will make such
allocation of the expense of such services among the HPP Partnership and such
other entities as Claremont determines is appropriate, any such allocation
made in good faith by Claremont shall be final and binding on the parties
hereto.
Section 4.Indemnification.
4.1 Indemnification by Claremont. Claremont agrees to defend and hold
the HPP Partnerships harmless from and indemnify the HPP Partnerships against
any and all liability, loss, damages, court costs and reasonable expenses,
including reasonable attorney's fees (hereinafter collectively referred to
as "Liabilities") which the HPP Partnerships may incur or suffer, which
Liabilities result from the gross negligence, bad faith, fraud or willful
misconduct on the part of Claremont, its employees, agents or others under
the direction or control of Claremont in performing its obligations under
this Agreement. For purposes of this Section 4.1 only, the term "HPP
Partnerships" shall also include any partner, officer, director, employee or
agent of the HPP Partnerships in the event any such person incurs or suffers
any such Liability as a result of such gross negligence, bad faith, fraud,
or willful misconduct. This Section 4.1 shall survive any termination of the
Agreement.
4.2 Indemnification by HPP Partnership. Claremont and the HPP
Partnerships hereby acknowledge that the acts of Claremont hereunder are
solely as agent for the HPP Partnerships and Claremont shall not be liable
to the HPP Partnerships or any other person or entity for any of its actions
or services provided hereunder in relation to the management and operation of
the Properties or otherwise. Each HPP Partnership agrees to defend and
hold Claremont harmless from and indemnify Claremont against any and all
liabilities which Claremont may incur or suffer as a result of any claim
against Claremont arising out of any action taken, omitted, or suffered by
it in good faith and in accordance with general of specific instructions
from the HPP Partnerships of the General Partners, except where such
liabilities result from the negligence, bad faith, fraud or willful
misconduct on the part of Claremont, its employees, agents or others under
the direction or control of Claremont. For purposes of this Section 4.2
only, the term "Claremont" shall also include any officer, director, employee
or agent of Claremont in the event any such person incurs or suffers any
such liability as a result of activities undertaken on behalf of or under
the direction or control of Claremont in connection with its services
performed for the HPP Partnerships. Such indemnification shall include
payment by the HPP Partnerships of all reasonable expenses and reasonable
legal fees incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, receipt of an
undertaking by the party or person indemnified to repay such payment if it,
he or she shall be adjudicated to be not entitled to indemnification under
this Section 4.2; and provided further, that no indemnification shall be
provided for Claremont, its directors, officers, agents or employees with
resect to any matter as to which it shall have been finally adjudicated in
any action or proceeding that Insignia, its directors, officers, agents or
employees had acted with negligence, willful misconduct or fraud. This
Section 4.2 shall survive any termination of the Agreement.
Section 5.Term and Termination.
5.1 Term. The term of this Agreement shall commence on October 1, 1995
(the "Commencement Date"), and shall terminate on June 30, 1997, unless
previously terminated by the parties hereto pursuant to Section 5.2 or
extended pursuant to Section 5.3.
5.2 Termination. This agreement will expire on June 30, 1997, subject
to the following terms and conditions:
(a) If the HPP Partnerships elect to terminate this Agreement, they
must perform or cause to be performed all of the following items:
(i) Settlement to Claremont of all amounts due Claremont under
this Agreement by payment or documentation of a binding mutually agreed to
Note Agreement.
(ii) Effect the termination of any liability that Claremont
has entered into.
5.3 Extension. This Agreement shall automatically be extended from
year to year on the same terms and conditions unless terminated in
accordance with this Section 5 or unless any party provides notice no later
than sixty (60) days (May 1, 1997 for the initial term) in advance of the
expiration date of its intention not to extend the Agreement.
5.4 Breach. This Agreement may be terminated by the HPP Partnership or
Claremont upon the default by the other party of any of such other party's
material obligations hereunder; provided, however, that the non-defaulting
party shall have delivered to the other party a written notice specifying
such default in reasonable detail and that the defaulting party shall not
have cured such default within thirty (30) days after receipt of such notice.
5.5 Payment of Fees. Upon any termination pursuant to this Section 5,
Claremont shall have the right to receive any unpaid fees or unreimbursed
expense owed to it under Section 3. Any such amount shall be prorated on a
per diem basis from the date of the last monthly fee payment to the effective
date of any such termination. If any individual HPP Partnership is unable to
pay its share of liabilities because of a lack of cash, then such debts
shall be formally recognized in a binding mutually agreed to Note Agreement.
Section 6.Miscellaneous Provisions.
6.1 Notices. Any notice or communication hereunder must be in writing,
and shall be personally delivered or mailed postage prepaid, by registered or
certified mail, return receipt requested, and if given by registered or
certified mail same shall be deemed to have been given and received when
personally delivered or three (3) days after its mailing. Such notices or
communications shall be given to the parties hereto at their respective
following addresses:
If to the HPP Partnerships:c/o Boston Bay Capital, Inc.
One Liberty Square
Boston, MA 02109
Attn: Terrence P. Sullivan
If to Claremont: Charles M. Moran, Jr.
Claremont Management Corporation
Batterymarch Park III
Quincy, MA 02169
with a copy to: Sherburne, Powers and Needham
One Beacon Street
Boston, MA 02108
Attn: William Machen, Esq.
James E. McDermott, Esq.
Any party hereto may at any time by giving ten (10) days' written notice to
the other party hereto designate any other address in substitution of the
foregoing address to which such notice or communication shall be given.
6.2 Severability. If any term, covenant, or condition of this
Agreement or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Agreement or
the application of such term, covenant or condition to persons or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, covenant or condition of this
Agreement or such other documents shall be valid and shall be enforced to the
fullest extent permitted by law.
6.3 Applicable Law. This Agreement shall be governed and construed in
accordance with the law as of the Commonwealth of Massachusetts.
6.4 Successors and Assigns. No party hereto may assign any of its
rights or duties hereunder except with the prior written consent of the other
parties.
6.5 Captions. Captions in this Agreement are inserted for convenience
or reference only and do not define, describe or limit the scope or intent of
this Agreement or any of the terms hereof.
6.6 No Partnership. Nothing contained in this Agreement or in the
relationship of the HPP Partnerships and Claremont shall be deemed to
constitute a partnership, joint venture or any other relationship and
Claremont shall at all times be deemed an independent contractor for purposes
of this Agreement.
6.7 No Assignment. Claremont may not assign or in any way voluntarily
transfer this Agreement without the prior written approval of BHP and BHP II.
6.8 Modification or Amendment. This Agreement (including the exhibits
hereto) constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof, supersedes all prior agreements between
the parties relating to the matters contained herein and may not be modified,
waived or terminated orally and may only be amended by an agreement in
writing signed by the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
HISTORIC PRESERVATION PROPERTIES
LIMITED PARTNERSHIP, a Delaware
limited partnership, by its general partner,
BOSTON HISTORIC PARTNERS
LIMITED PARTNERSHIP, a
Massachusetts limited partnership, by its
general partners
PORTFOLIO ADVISORY SERVICES, INC., a
Massachusetts corporation
By
Terrence P. Sullivan, President
By
Terrence P. Sullivan, General Partner
HISTORIC PRESERVATION PROPERTIES
1988 LIMITED PARTNERSHIP, a
Delaware limited partnership, by its
general partner, BOSTON HISTORIC
PARTNERS LIMITED PARTNERSHIP, a
Massachusetts limited partnership, by its
general partners
PORTFOLIO ADVISORY SERVICES, INC., a
Massachusetts corporation
By
Terrence P. Sullivan, President
By
Terrence P. Sullivan, General Partner
HISTORIC PRESERVATION PROPERTIES
1989 LIMITED PARTNERSHIP, a
Delaware limited partnership, by its
general partner, BOSTON HISTORIC
PARTNERS LIMITED PARTNERSHIP, a
Massachusetts limited partnership, by its
general partners
PORTFOLIO ADVISORY SERVICES, INC. a
Massachusetts corporation
By
Terrence P. Sullivan, President
By
Terrence P. Sullivan, General Partner
HISTORIC PRESERVATION PROPERTIES
1990 L.P.TAX CREDIT FUND, a
Delaware limited partnership, by its
general partner, BOSTON HISTORIC
PARTNERS II LIMITED
PARTNERSHIP, a Massachusetts limited
partnership, by its general partners
PORTFOLIO ADVISORY SERVICES II, INC.,
a Massachusetts corporation
By
Terrence P. Sullivan, President
By
Terrence P. Sullivan, General Partner
BOSTON HISTORIC PARTNERS II LIMITED
PARTNERSHIP, a Massachusetts limited
partnership, by its general partner, BHP II
ADVISORS LIMITED PARTNERSHIP,
by its general partners
PORTFOLIO ADVISORY SERVICES II, INC.,
a Massachusetts corporation
By
Terrence P. Sullivan, President
By
Terrence P. Sullivan, General Partner
CLAREMONT MANAGEMENT CORPORATION
a Massachusetts Corporation
By
Patrick Carney, Chairman
By
Charles M. Moran, President
Exhibit A
LIST OF PROPERTIES - HPP 1987
Name of Project Partnership Name of Project Location
1027 Arch Street Associates Pitcairn Building Philadelphia,
PA
Limited Partnership
432 Julia Street Associates Gallery Row New Orleans, LA
Limited Partnership
Ceresota Mill Limited Ceresota Mill Minneapolis, MN
Partnership
Locke Mill Plaza Associates Locke Mill Plaza Concord, NC
Limited Partnership
Exhibit B
LIST OF PROPERTIES - HPP 1988
Name of Project Partnership Name of Project Location
Union Station Associates Union Station Providence, RI
330 Julia Street Associates The Rotunda New Orleans, LA
Limited Partnership
New Bedford Historic Stores CWT Building New Bedford, MA
Associates Limited Partnership
Coastline Associates Limited Coastline Center Wilmington, NC
Exhibit C
LIST OF PROPERTIES - HPP 1989
Name of Project Partnership Name of Project Location
Historic Preservation PropertiesThe Cosmopolitan St. Paul, MN
1989 L.P. Building
Jenkins Court Associates Jenkins Court Jenkintown,
PA
Limited Partnership
Portland Lost Associates Honeyman Hardware Portland, OR
Limited Partnership Lofts
402 Julia Street Associates The Lofts New Orleans, LA
Limited Partnership
Exhibit B
LIST OF PROPERTIES - HPP 1990
Name of Project Partnership Name of Project Location
Henderson's Wharf Baltimore, Henderson's Wharf Baltimore, MD
L.P. (Inn/Apartments)
Henderson's Wharf Marina, Henderson's Wharf Baltimore, MD
L.P. Marina
MANAGEMENT AGREEMENT
This Agreement is made this 20th day of March 1996, by
and between The Cosmopolitan at Mears Park, LLC (the
"Owner") and Claremont Management Corporation (the
"Agent").
Section 1 - APPOINTMENT OF MANAGING AGENT
1.1 APPOINTMENT OF MANAGING ACCEPTANCE
Owner hereby appoints Agent as sole and exclusive
agent of Owner to lease and manage the property
described in paragraph 1.2 upon the terms and
conditions provided herein. Agent accepts the
appointment and agrees to furnish the services of
its organization for the leasing and management of
the Premises; and Owner agrees to pay all expenses
in connection with those services.
1.2 DESCRIPTION OF PREMISE
The property to be managed by Agent under this
Agreement (the "Premises") is known as The
Cosmopolitan at Mears Park, LLC located at 250 E.
Sixth Street, St. Paul, MN, consisting of the land,
building, and other improvements described as a 255
unit residential community in the state of
Minnesota.
1.3 TERM
The terms of the Agreement shall be for an initial
period of 15 months (the "initial term") from the
20th day of March 1996, to including the 30th day of
June 1997; and thereafter shall be automatically
renewed from year to year unless terminated as
provided in sections 21 or 27 herein. Each of said
one-year renewal periods is referred to as a "term
year".
1.4 MANAGEMENT OFFICE
Owner shall provide adequate space on the Premises
for a management office. Owner shall pay all
expenses related to such office, including, but not
limited to, furnishings, equipment, postage and
office supplies, electricity and other utilities,
and telephone.
1.5 APARTMENT FOR ON-SITE STAFF
Owner shall provide a suitable apartment(s) on the
Premises, if deemed appropriate by mutual consent of
both parties, for the use of an on-site manager
and/or a resident janitor and their families, rent
free, except that such resident staff shall pay for
heat and utilities in the same manner as other
tenants. The specific apartment(s) shall be the
Owner's choice.
Section 2 - BANK ACCOUNTS
The various bank accounts established under this
Agreement shall at all times be established in
Owner's name but under Agent's control. Agent's and
Owner's designees shall be the only parties
authorized to draw upon such accounts. No amounts
deposited in any accounts established under this
Agreement shall in any event be commingled with any
other funds of Agent.
2.1 OPERATING (AND/OR) RESERVE ACCOUNT(S)
Agent shall establish a separate account(s) known as
The Cosmopolitan at Mears Park, LLC Operating
(and/or) Reserve Account(s), separate and apart from
Agent's corporate accounts, for the deposit of
receipts collected as described herein, in a bank or
other institution whose deposits are insured by the
federal government. Such depository shall be
selected by the Agent upon consent of the Owner.
However, Agent shall not be held liable in the event
of bankruptcy or failure of a depository. Funds in
the Operating (and/or) Reserve Account(s) remain the
property of Owner subject to disbursement of
expenses by Agent as described in the Agreement.
2.1.1 INITIAL DEPOSIT AND CONTINGENCY RESERVE
Upon refinancing/purchase of mortgage note of the
Premises currently held by Mellon Bank, N.A., and in
accordance with new mortgage note, Owner shall remit
to Agent an amount to be determined by the manager
to be deposited in the Operating (and/or) Reserve
Account(s) as an initial deposit representing the
estimated disbursements to be made in the first
month following the commencement of this Agreement,
plus an additional sum, also to be determined by the
manager, as a contingency reserve. Owner agrees to
maintain the contingency reserve stated above at all
times in the Operating (and/or) Reserve Account(s)
to enable Agent to pay the obligations of Owner
under this Agreement as they become due. Owner and
Agent shall review the amount of the contingency
reserve from time to time and shall agree in writing
on a new contingency reserve amount when such is
required.
2.2 SECURITY DEPOSIT ACCOUNT
Agent shall, if required by law, maintain a separate
interest bearing account for tenant security
deposits and advance rentals. Such account shall be
maintained in accordance with applicable state or
local laws, if any.
2.3 FIDELITY BOND
The Agent will furnish, at its own expense, a
fidelity bond in the principal sum of $1,000,000,
which is at least equal to the gross potential
income for two months and is conditioned to protect
the Owner and the Mortgagee against
misappropriation of funds of the Premises by the
Agent and its employees. The Agent will obtain a
bond of like kind to cover the on-site personnel
expressed in Section 9.1 and it shall be paid for
from Premises income. The other terms and
conditions of the bond, and the surety thereon, will
be subject to approval of the Owner and the
Mortgagee.
Section 3 - COLLECTION OF RENTS AND OTHER RECEIPTS
3.1 AGENT'S AUTHORITY
Agent shall collect (and give receipts for, if
necessary) all rents, charges and other amounts
receivable on Owner's account in connection with the
management and operation of the Premises. Such
receipts (except tenants' security deposits and
advance rentals, which shall be handled as specified
in paragraphs 2.2 and 3.3 hereof; and special
charges, which shall be handled as specified in
paragraph 3.2 hereof) shall be deposited in the
Operating (and/or) Reserve Account(s) maintained by
Agent for the Premises.
3.2 SPECIAL CHARGES
If permitted by applicable law, Agent may collect
from tenants any or all of the following: and
administrative charge for late payment of rent, a
charge for returned or non-negotiable checks, a
credit report fee, an administrative charge and/or
commission for subleasing.
3.3 SECURITY DEPOSITS
Agent shall collect, deposit, and disburse tenants'
security deposits in accordance with the terms of
each tenant's lease. Agent shall pay from
operations tenants interest upon such security
deposits only if required by law to do so. Agent
shall comply with all applicable state or local laws
concerning the responsibility for security deposits
and interest, if any.
Section 4 - DISBURSEMENT FROM OPERATING (AND/OR) RESERVE
ACCOUNT(S)
4.1 OPERATING EXPENSES
From the Operating (and/or) Reserve Account(s),
Agent is hereby authorized to pay or reimburse
itself for all expenses and costs of operating the
Premises in accordance with approved annual budget
under Section 6.2 and for all other sums due Agent
under this Agreement, including Agent's compensation
under section 17.
4.2 DEBT SERVICE
Owner shall give Agent advance written notice of at
least 10 days if Owner desires Agent to make any
additional monthly or recurring payments (such as
mortgage indebtedness, general taxes, or special
assessments, or fire, steam boiler, or other
insurance premiums) out of the proceeds from the
Premises. If Owner notifies Agent to make such
payments after the beginning of the term of this
Agreement, Agent shall have the authority to name a
new contingency, and Owner shall maintain this new
contingency reserve amount at all times in the
Operating (and/or) Reserve Account(s).
4.3 NET PROCEEDS
To the extent that funds are available, and after
maintaining the cash contingency reserve amount as
specified in paragraph 2.1.1, Agent shall transmit
cash balances to Owner periodically, as follows.
Such periodic cash balances shall be remitted to the
following person(s), in the percentage(s) specified,
address(es) shown: as directed from time to time by
Owner.
Section 5 - AGENT NOT REQUIRED TO ADVANCE FUNDS
In the event the balance in the Operating (and/or)
Reserve Account(s) is at any time insufficient to
pay disbursements due and payable under paragraphs
4.1 and 4.2, and paragraph 6.2. Owner shall
immediately upon notice, remit to Agent sufficient
funds to cover the deficiency and replenish the
contingency reserve. In no event shall Agent be
required to use its own funds to pay such
disbursements. Nor shall Agent be required to
advance any monies to Owner, to the Security Deposit
Account, or to the Operating (and/or) Reserve
Account(s).
If Agent elects to advance any money in connection
with the Premises to pay any expenses for Owner,
such advances shall be considered a loan subject to
repayment with interest, and Owner hereby agrees to
reimburse Agent, including interest as provided in
paragraph 17.7 and hereby authorizes Agent to deduct
such amounts from any monies due Owner.
Section 6 - FINANCIAL AND OTHER REPORTS
6.1 REPORTING REQUIREMENTS
By the 20th day of each month, Agent will provide to
the Owner the following schedules, which include,
but are not limited to: balance sheet, income
statement with comparisons to budget, general
ledger, rent roll, bank statements and cash
reconciliations, aged listing of accounts
receivables, listing of prepaids, additions to fixed
assets over $500, intercompany reconciliation,
listing of accruals and other prepaids, tenant
security deposit listing, and cash flow statement.
In addition, Agent shall, on a mutually acceptable
schedule, prepare and submit to Owner such other
reports as are agreed on by both parties.
6.2 BUDGETS
Annual operating budgets for the Premises will be
approved by the Owner. Except as permitted under
Section 10.1 below, annual disbursements for each
type of operating expenses itemized in the budget
shall not materially exceed the amount authorized by
the approved budget without prior consent of the
Owner. The Agent will prepare a recommended
operating budget for each fiscal year beginning
during the term of this Agreement, and will submit
the same to the Owner at least forty-five (45) days
before the beginning of the fiscal year. The Owner
will promptly inform the Agent of any changes
incorporated in the approved budget, and the Agent
will keep the Owner informed of any anticipated
deviation from the receipts or disbursements stated
in the approved budget.
6.3 OWNER'S RIGHT TO AUDIT
Owner shall have the right to request periodic
audits of all applicable accounts managed by Agent,
and the cost of such audit(s) shall be paid by
Owner.
6.4 TAX ASSESSMENTS
Agent will inform Owner of changes in the amount of
real or personal property tax assessments and assist
Owner in compiling all necessary information in
connection with any contest or appeal of any
assessments.
Section 7 - ADVERTISING
Agent is authorized to advertise the Premises or
portions thereof for rent using periodicals, signs,
plans, brochures, or displays, or such other means
as Agent may deem proper and advisable and in
accordance with Section 6.2. Agent is authorized to
place signs on the Premises advertising the Premises
for rent, provided such signs comply with applicable
laws. The cost of such advertising shall be paid
out of the Operating (and/or) Reserve Account(s).
All advertising shall make clear that Agent is the
manager and NOT the Owner of the Premises.
Newspaper ads that share space with other properties
managed by the Agent shall be prorated on a
reasonable basis.
Section 8 - LEASING AND RENTING
8.1 AGENT'S AUTHORITY TO LEASE PREMISES
Agent shall use all reasonable efforts to keep the
Premises rented by procuring tenants for the
Premises. Agent is authorized to negotiate,
prepare, and execute all leases, including all
renewals and extensions of leases (and expansions of
space in the Premises, if applicable) and to cancel
and modify existing leases. Agent shall execute all
leases as Agent for the Owner. All costs of leasing
shall be paid out of the Operating (and/or) Reserve
Account(s). No lease shall be in excess of two
year(s) without written approval of Owner. The form
of the lease shall be agreed upon by Owner and
Agent.
8.2 NO OTHER RENTAL AGENT
During the time of this Agreement. Owner shall not
authorize any other person, firm, or corporation to
negotiate or act as leasing or rental agent with
respect to any leases for space in the Premises.
Owner agrees to promptly forward all inquiries about
leases to Agent.
8.3 RENTAL RATES
Agent, with the consent of the Owner, is authorized
to establish and change or revise all rents, fees,
or deposits, and any other charges chargeable with
respect to the Premises.
8.4 ENFORCEMENT OF LEASES
Agent is authorized to institute, in Owner's name,
all legal actions or proceedings for the enforcement
of any lease term, for the collection of rent or
other income from the Premises or for the evicting
or dispossessing of tenants or other persons from
the Premises. Agent is authorized to sign and serve
such notices as Agent deems necessary for lease
enforcement, including the collection of rent or
other income. Agent is authorized, when expedient,
to settle, compromise, and release such legal
actions or suits or reinstate such tenancies. Any
monies for such settlements paid out by Agent shall
not exceed $5,000 without prior approval by Owner.
Attorney's fees, filing fees, court costs, and other
necessary expenses incurred in connection with such
actions and not recovered from tenants shall be paid
out of the Operating (and/or) Reserve Account(s) or
reimbursed directly to Agent by Owner. Agent may
select the attorney of its choice to handle such
litigation upon the advise and consent of Owner.
Section 9 - EMPLOYEES
9.1 AGENT'S AUTHORITY TO HIRE
Agent is authorized to hire, supervise, discharge,
and pay all servants, employees, contractors or
other personnel necessary to be employed in the
management, maintenance, and operation of the
Premises in accordance with approved budget
mentioned in Section 6.2. All employees shall be
deemed employees of the Agent.
9.2 OWNER PAYS EMPLOYEE EXPENSES
All wages and fringe benefits payable to such
employees hired per paragraph 9.1 above, and all
local, state, and federal taxes and assessment
(including but not limited to Social Security taxes,
unemployment insurance and workers' compensation
insurance) incident to the employment of such
personnel, shall be reimbursed to the Agent out of
the Operating (and/or) Reserve Account(s) in
accordance with the approved budget, and shall be
treated as operating expenses.
9.3 AGENT'S AUTHORITY TO FILE RETURNS
Agent shall do and perform all acts required of an
employer with respect to the Premises and shall
execute and file all tax and other returns required
under the applicable federal, state and local laws,
regulations, and/or ordinances governing employment,
and all other statements and reports pertaining to
labor employed in connection with the Premises and
under any similar federal or state law now or
hereafter in force. In connection with such filing,
Owner shall be responsible for all amounts required
to be paid under the foregoing laws, and Agent shall
pay the same from the Operating (and/or) Reserve
Account(s). Any penalties assessed to Owner and
incurred due to the negligence of Agent shall be
paid for by Agent.
9.4 WORKER'S COMPENSATION INSURANCE
Agent shall, at Owner's expense, maintain worker's
compensation insurance covering all liability of the
employer under established worker's compensation
laws.
9.5 HOLD HARMLESS, LABOR LAWS
Agent shall be responsible for compliance with all
applicable state or federal labor laws. Owner shall
indemnify, defend, and save Agent harmless from all
claims, investigations, and suites, or from Owner's
action or failures to act, with respect to any
alleged or actual violation of state or federal
labor laws. Conversely, Agent shall indemnify,
defend and save Owner harmless from all claims,
investigations, and suits, or from Agent's actions
or failure to act with respect to any alleged or
actual violations of state or federal labor laws.
Agent's or Owner's obligation with respect to such
violation(s) shall include payment of all
settlements, judgments, damages, liquidated damages,
penalties, forfeitures, back pay awards, court
costs, litigation expenses, and attorney's fees.
Section 10 - MAINTENANCE AND REPAIR
Agent is authorized to make or cause to be made,
through contracted services or otherwise, all
ordinary repairs and replacements reasonably
necessary to preserve the Premises in its present
condition and for the operating efficiency of the
Premises, and all alterations required to comply
with lease requirements, governmental regulations,
or insurance requirements. Agent is also authorized
to decorate the Premises and to purchase or rent, on
Owner's behalf, all equipment, tools, appliances,
materials, maintenance, or operation of the
Premises. Such maintenance and decorating expenses
shall be made in accordance to approved budget and
shall be paid out of the Operating (and/or) Reserve
Account(s). This section applies except where
decorating and/or maintenance are at tenants'
expense as stipulated in a lease.
10.1 APPROVAL FOR EXCEPTIONAL MAINTENANCE EXPENSE
The expense to be incurred for any one item of
maintenance alteration, refurbishing, or repair
shall not exceed the sum of $5,000 unless such
expense is specifically authorized by Owner or is
incurred under such circumstances as Agent shall
reasonable deem to be an emergency. In an emergency
where repairs are immediately necessary for the
preservation and safety of the Premises, or to avoid
the suspension of any essential service to the
Premises, or to avoid danger to life or property, or
to comply with federal, state, or local law, such
emergency repairs shall be made by Agent at Owner's
expense prior approval.
Section 11 - CONTRACTS, UTILITIES AND SERVICES
Agent is authorized to negotiate contracts for non-
recurring items of expense, not to exceed $5,000,
unless approved by Owner, and to enter into
agreements in Owner's name for all necessary
repairs, maintenance, minor alterations, and utility
services. Agent shall, in Owner's name and at
Owner's expense, make contracts on Owner's behalf
for electricity, gas, telephone, fuel, or water, and
such other services as Agent shall deem necessary or
prudent for the operation of the Premises. All
utility deposits shall be the Owner's
responsibility, except that Agent may pay same from
the Operating (and/or) Reserve Account(s) at Owner's
request.
Section 12 - RELATIONSHIP OF AGENT TO OWNER
The relationship of the parties to this Agreement
shall be that of Principal and Agent, and all duties
to be performed by Agent under this Agreement shall
be for and on behalf of Owner, in Owner's name and
for Owner's account. In taking any under the
Agreement, Agent shall be acting only as Agent for
Owner, and nothing in this Agreement shall be
construed as creating a partnership, joint venture,
or any other relationship between the parties to
this Agreement except that of Principal and Agent,
or as requiring Agent to bear any portion of losses
arising out of or connected with the ownership or
operation of the Premises. Nor shall Agent at any
time during the period of this Agreement to be
considered a direct employee of Owner. Neither
party shall have the owner to bind or obligate the
other except as expressly set forth in this
Agreement except that Agent is authorized to act
with such additional authority and power as may be
necessary to carry out the spirit and intent of this
Agreement.
Section 13 - SAVE HARMLESS
The Owner will indemnify the Agent harmless against
and hold the Agent harmless from and against any
liabilities, damages, costs and expenses (including
reasonable attorney's fees) sustained or incurred
for injury to any person or property in, about, and
in conjunction with the buildings, unless such
injury shall be caused by the Agent's own negligence
or willful misconduct; and any liability, damages,
penalties, costs and expenses (including reasonable
attorney's fees) statutory or otherwise, for all
acts performed by the Agent in accordance with the
terms of this Agreement or pursuant to the
instructions of the Owner, provided, in each of the
foregoing instances, that the Agent promptly advises
the Owner of its receipt of information concerning
any such injury and the amount of any such
liability, damages, penalties, costs and expenses.
The Agent will indemnify the Owner harmless against
and hold the Owner harmless from and against; any
liabilities, damages, costs and expenses (including
reasonable attorney's fees) sustained or incurred
for injury to any person or property in, about, and
in conjunction with the buildings caused by the
Agent's own negligence or willful misconduct; and
any liability, damages, penalties, costs and
expenses (including reasonable attorney's fees)
statutory or otherwise, for all acts performed by
the Agent not in accordance with the terms of this
Agreement or not pursuant to the instructions of the
Owners.
Section 14 - LIABILITY INSURANCE
Owner and Agent shall obtain and keep in force
adequate insurance against physical damage (e.g.
fire with extended coverage endorsement, boiler and
machinery, etc.) and against liability for loss,
damage, or injury to property or persons which might
arise out of the occupancy, management, operation,
or maintenance of the Premises. The amounts and
types of insurance shall be acceptable to both Owner
and Agent, and any deductible required under each
insurance policies shall be Owner's expense. Agent
shall be covered as additional insured on all
liability insurance maintained with respect to the
Premises. Liability insurance shall be adequate to
protect the interest of both Owner and Agent and in
form, substance, and amounts reasonable satisfactory
to Agent. Owner agrees to furnish Agent with
certificates evidencing such insurance or with
duplicate copies of such policies within 10 days of
the execution of this Agreement. If Owner fails to
do so, Agent may but shall not be obligated to place
said insurance and charge the cost thereof to the
Operating (and/or) Reserve Account(s). Said
policies shall provide that notice of default or
cancellation shall be sent to Agent as well as Owner
and shall require a minimum of 30 days written
notice to Agent before any cancellation of or
changes to said policies.
Section 15 - AGENT ASSUMES NO LIABILITY
Agent assumes no liability whatsoever for any acts
or omissions of Owner or any previous owners of the
Premises, or any previous management or other agent
of either. Agent assumes no liability for any
failure of or default by any tenant in the payment
of any rent or other charges due Owner or in the
performance of any obligations owned by any tenant
to Owner pursuant to any lease or otherwise. Nor
does Agent assume any liability for previously
unknown violations or environmental or other
regulations which may become unknown during the
period of this Agreement is in effect. Any such
regulatory violations or hazards discovered by
Agent shall be brought to the attention of the
Owner in writing and Owner shall promptly cure
them.
Section 16 - OWNER RESPONSIBLE FOR ALL EXPENSES OF
LITIGATION
Owner shall reimburse all reasonable expenses
incurred by Agent, including but not limited to,
reasonable attorneys' fee and Agent's costs and
time, any liability, fines, penalties or the like,
in connection with any claim, proceeding, or suit
involving an alleged violation by Agent or Owner, or
both, of any law pertaining to fair employment, fair
credit reporting, environmental protection, rent
control, taxes, or fair housing, including, but not
limited to, any law prohibiting or making illegal
discrimination on the basis or race, sex, creed,
color, religion, national origin, or mental or
physical handicap, provided, however, that Owner
shall not be responsible to Agent for any such
expenses in the event Agent is finally adjudged to
have personally, and not in a representative
capacity, violated any such law. Nothing contained
in this Agreement shall obligate Agent to employ
legal counsel to represent Owner in any such
proceeding or suit.
16.1 FEES FOR LEGAL ADVICE
Owner shall pay reasonable expenses incurred by
Agent in obtaining legal advice regarding compliance
with any law affecting the Premises or activities
related to them. If such expenditure also benefits
others for whom Agent in this Agreement acts in a
similar capacity, Owner agrees to pay an apportioned
amount of such expense.
Section 17 - AGENT'S COMPENSATION AND EXPENSES
As compensation for the services provided by Agent
under this Agreement (and exclusive of reimbursement
of expenses to which Agent is entitled hereunder).
Owner shall pay Agent as follows:
17.1 FOR MANAGEMENT SERVICES
The greater of (i) $5,200 per month or (ii) 4% of
the total monthly gross receipts from the premises,
payable by the 1st day of the current month for the
duration of this Agreement. Payments due Agent for
Periods of less than a calendar month shall be
prorated over the number of days for which
compensation is due. The percentage amount set
forth in (ii) above shall be based upon the total
gross receipts form the premises during the
preceding month.
The term "gross receipts" shall be deemed to include
all collected rents and other income and charges
from the normal operation of the Premises,
including, but not limited to, rents, parking fees,
laundry income, forfeited security deposits, pet
deposits, other fees and deposits, special charges
listed in paragraph 3.2, or excess interest on
security deposits (from paragraph 3.3), and other
miscellaneous income. Gross receipts shall NOT be
deemed to include the value of units provided to on-
site staff, nor the income arising out of the sale
of real property or settlement of fire or other
casualty losses and items of a similar nature.
17.2 FOR APARTMENT LEASING
N/A.
17.3 FOR COMMERCIAL LEASING
N/A.
17.4 FOR MODERNIZATION (REHABILITATION/CONSTRUCTION)
N/A.
17.5 FOR FIRE RESTORATION
10% of total restoration if Claremont Management
Corporation acts as general contractor.
17.6 FOR OTHER ITEMS OF MUTUAL AGREEMENT
To be determined if situation arises.
17.7 INTEREST ON UNPAID SUMS
Any sums due Agent under any provisions of this
Agreement, and not paid within 30 days after such
sums have become due, shall bear interest at the
rate of Fleet prime rate.
Section 18 - REPRESENTATIONS
Owner represents and warrants: That Owner has full
power and authority to enter this Agreement; that
there are no written or oral agreements affecting
the Premises other than tenant leases, copies of
which have been furnished to Agent; that there are
no recorded easements, restrictions, reservations,
or rights of way which adversely affect the use of
the Premises for the purposes intended under this
Agreement; that to the best of Owner's knowledge,
the property is zoned for the intended use; that all
leasing and other permits for the operation of the
Premises have been secured and are current; that the
building and its been secured and are current; that
the building and its construction and operation do
not violate any applicable statutes, laws,
ordinances, rules regulations, orders, or the like
(including, but not limited to, those pertaining to
hazardous or toxic substances); that the building
does not contain any asbestos, urea, formaldehyde,
radon, or other toxic or hazardous substance; and
that no unsafe conditions exists.
Section 19 - STRUCTURAL CHANGES
Owner expressly withholds from Agent any power or
authority to make any structural changes in any
building, or to make any other major alterations or
additions in or to any such building or to any
equipment to any such building, or to incur any
expense chargeable to Owner other than expenses
related to exercising the express powers vested in
Agent through this Agreement, without the consent of
the managers.
However, such emergency repairs as may be required
because of danger to life or property, or which are
immediately necessary for the preservation and
safety of the Premises or the safety of the tenants
and occupants thereof, or required to avoid the
suspension of any necessary service to the Premises,
or to comply with any applicable federal, state, or
local laws, regulations, or ordinances, shall be
authorized pursuant to paragraph 10.1 of this
Agreement, and Agent shall notify Owner
appropriately.
Section 20 - BUILDING COMPLIANCE
Agent does not assume and is given no responsibility
for compliance of the Premises or any building
thereon or any equipment therein with the
requirements of any building codes or with any
statue, ordinance, law, or regulation or any
governmental body or of any public authority or
official thereof having jurisdiction, except to
notify Owner promptly or forward to Owner promptly
any complaints, warnings, notices, or summons
received by Agent relating to such matters. Owner
represents that to the best of Owner's knowledge the
Premises and all such equipment comply with all such
requirements, and Owner authorizes Agent to disclose
the ownership of the Premises to any such officials
and agrees to indemnify and hold Agent, its
representatives, servants, and employees, harmless
of and from all loss, cost, expense, and liability
whatsoever which may be imposed by reason of any
present or future violation or alleged violation of
such laws, ordinances, statues, or regulations.
Section 21 - TERMINATION
21.1 TERMINATION BY EITHER PARTY
This Agreement may be terminated by either Owner or
Agent, with or without cause, at the end of the
initial term or of any following term year upon the
giving of 30 days' written notice prior to the end
of said initial term or following terming year.
21.2 TERMINATION FOR CAUSE
Notwithstanding the foregoing, the Agreement shall
terminate in any event, and all obligations of the
parties hereunder shall cease (except as to
liabilities or obligations which have accrued or
arisen prior to such termination, or which accrue
pursuant to paragraph 21.3 as a result of such
termination, and obligations to insure and
indemnify), upon the occurrence of any of the
following events:
a. BREACH OF AGREEMENT - Thirty (30) days after
the receipt of notice by either party to the other
specifying in detail a material breach of this
Agreement, if such breach has not been cured within
said thirty (30) day period; or if such breach is of
a nature that it cannot be cured within said (30)
day period but can not be cured with a reasonable
time thereafter, if efforts to cure such breach have
not commenced or/and such efforts are not proceeding
and being continued diligently both during and after
such thirty (30) day period prior to the breach
being cured. HOWEVER, the breach of any obligation
of either party hereunder to pay any monies to the
other party under the terms of this Agreement shall
be deemed to be curable within thirty (30) days.
21.2 TERMINATION FOR CAUSE (Cont.)
b. FAILURE TO ACT, ETC. - In the event that any
insurance required of Owner is not
maintained without any lapse, or it is alleged or
charged that the Premises, or any portion thereof,
or any act or failure to act by Owner, its agent and
employees with respect to the Premises, fails to
comply with any law or regulations, or any order or
ruling of any public authority, and Agent, in its
sole discretion, considers that the action or
position of Owner or its representatives with
respect thereto may result in damage or liability to
Agent, or disciplinary proceeding with respect to
Agent's license. Agent shall have the right to
terminate this Agreement at any time by written
notice to Owner of its election to do so, which
termination shall be effective upon the service of
such notice. Such termination shall not release the
indemnities of Owner set forth herein.
c. EXCESSIVE DAMAGE - Upon the destruction of or
substantial damage to the Premises by any cause, or
the taking of all or a substantial portion of the
Premise of the Premises by eminent domain, in either
case making it impossible or impracticable to
continue operation of the Premises.
d. INADEQUATE INSURANCE - If Agent deems that the
liability insurance obtained by Owner per section 14
is not reasonable satisfactory to protect its
interest under this Agreement, and if Owner and
Agent cannot agree as to adequate insurance. Agent
shall have the right to cancel this Agreement upon
the service of notice to Owner.
21.3 TERMINATION COMPENSATION
If (i) Owner terminates this Agreement before the
end of the initial term or any subsequent term year
as provided in paragraph 21.1 above for any reason
other than for a breach by Agent under paragraph
21.2 (a) above, or if (ii) Agent terminates this
Agreement for a breach by Owner under paragraph 21.2
(a) above or pursuant to the provisions of paragraph
21.2 (b) or 21.2 (d) above, then in any such event,
Owner shall be obligated to pay Agent as liquidated
damages an amount equal to the management fee earned
by Agent, as determined under paragraph 17.1 above,
for the calendar month immediately preceding the
month in which the notice of termination is given to
Agent or to Owner, multiplied by the number of
months and/or portions thereof remaining from the
termination date until the end of the initial term
or term year in which the termination occurred.
Such damages, plus any amounts accruing to Agent
prior to such termination, shall be due and payable
upon termination of this Agreement. To the extent
that funds are available, such sums shall be payable
from the Operating (and/or) Reserve Account(s). Any
amount due in excess of the funds available from the
Operating (and/or) Reserve Account(s) shall be paid
by Owner to Agent upon demand.
21.4 OWNER RESPONSIBLE FOR PAYMENTS
Upon Termination or withdrawal from this Agreement,
Owner shall assume the obligations of any contract
or outstanding bill executed by Agent under this
Agreement for and on behalf of Owner and
responsibility for payment of all unpaid bills. In
addition, Owner shall furnish Agent security, in an
amount satisfactory to Agent, against any
obligations or liabilities with Agent may have
properly incurred on Owner's behalf under this
Agreement.
Agent may withhold funds for ninety (90) days after
the end of the month in which this Agreement is
terminated, in order to pay bills previously
incurred by not yet invoiced and to close accounts.
Agent shall deliver to Owner, within ninety (90)
days after the end of the month in which this
Agreement is terminated, any balance of monies due
Owner or of tenant security deposits, or both which
were held by Agent with respect to the Premises, as
well as a final accounting reflecting the balance of
income and expenses with respect to the Premises as
of the date of termination or withdrawal, and all
records, contracts, leases, receipts for deposits,
and other papers or documents which pertain to the
Premises.
21.5 SALE OF PREMISES
In the event that the Premises are sold by Owner
during the period of this Agreement, Agent may, upon
agreement with Owner and in accordance with Owner's
partnership agreement, obtain rights of
representation in the sale as stated in a specific
sales agreement to be negotiated separately. Upon
transfer of ownership, this Agreement shall
terminate by mutual consent of Owner and Agent under
the term and conditions set forth below:
The agreement shall automatically terminate
upon sale of Premises to a bona fide Third
Party without penalty. A minimum of sixty days
notice is required.
Section 22 - INDEMNIFICATION SURVIVES TERMINATION
All representatives and warranties of the parties
contained herein shall survive the termination of
this Agreement. All provisions of this Agreement
that require Owner to have insured or to defend,
reimburse, or indemnify Agent (including, but not
limited to, paragraphs, 2.1, 2.3, 5, 8.4, 9.2, 13,
14, 15, 16, 17.7, 20, 21.3 and 21.4) shall survive
any termination; and if Agent is or becomes involved
in any proceedings or litigation by reason of having
been Owner's Agent, such provisions shall apply as
if this Agreement were still in effect.
Section 23 - HEADINGS
All headings and subheadings employed within this
Agreement and in the accompanying List of Provisions
are inserted only for convenience and ease of
reference and are not to be considered in the
construction or interpretation of any provision of
this Agreement.
Section 24 - FORCE MAJEUR
Any delays in the performance of any obligation of
Agent under this Agreement shall be excused to the
extent that such delays are caused by wars, national
emergencies, natural disasters, strikes, labor
disputes, utility failures, governmental
regulations, riots, adverse weather, and other
similar causes not within the control of Agent, and
any time periods required for performance shall be
extended accordingly.
Section 25 - COMPLETE AGREEMENT
This Agreement, including any specified attachments,
constitutes the entire agreement between Owner and
Agent with respect to the management and operation
of the Premises and supersedes and replaces any and
all previous management agreements entered into
or/and negotiated between Owner and Agent relating
to the Premises covered by this Agreement. No
change to this Agreement shall be valid unless made
by supplemental written agreement executed and
approved by Owner and Agent. Except as otherwise
provided herein, any and all amendments, additions,
or deletions to this Agreement shall be null and
void unless approved by Owner and Agent in writing.
Each party to this Agreement hereby acknowledges and
agrees that the other party has made no warranties,
representations, covenants, or agreements, express
or implied, to such party, other than those
expressly set forth herein, and that each party, in
entering into and executing this Agreement, has
relied upon no warranties, representations,
covenants, or agreement, express or implied, to such
party, other than those expressly set forth herein.
Section 26 - RIGHTS CUMULATIVE; NO WAIVER
No right or remedy herein conferred upon or reserved
to either of the parties to this Agreement is
extended to be exclusive of any other right or
remedy, and each and every right and remedy shall be
cumulative and in addition to any other right or
remedy given under this Agreement or now or
thereafter legally existing upon the occurrence of
an event or default under this Agreement. The
failure of either party to this Agreement to insist
at any time upon the strict observance or
performance of any of the provisions of this
Agreement, or to exercise any right or remedy as
provided in this Agreement, shall not impair any
such right or remedy with respect to subsequent
defaults. Every right and remedy given by this
Agreement to the parties to it may be exercised from
time to time and as often as may be deemed expedient
by those parties.
Section 27 - APPLICABLE LAW AND PARTIAL INVALIDITY
The Execution, interpretation, and performance of
this Agreement shall in all respects be controlled
and governed by the laws of the State of
Massachusetts. If any part of this Agreement shall
be declared invalid or unenforceable, Agent shall
have the option to terminate this Agreement by
notice to Owner.
Any notices, demands, consents, and report necessary
or provided for under this Agreement shall be in
writing and shall be addressed as follows, or at
such other address as Owner and Agent individually
may specify hereafter in writing:
Agent: Claremont Management Corporation
Batterymarch Park II
Quincy, MA 02169
ATTN: Charles M. Moran, Jr.
Owner: The Cosmopolitan at Mears Park, LLC
Batterymarch Park II
Quincy, MA 02169
ATTN: Terrence P. Sullivan
Such notice or other communication may be mailed by
United States registered or certified mail, return
receipt requested, postage prepaid, and may be
deposited in a United States Post Office or a
depository for the receipt of mail regularly
maintained by the post office. Such notices,
demands, consents, and reports may also be delivered
by hand or by any other receipted method or means
permitted by law. For purposes of this Agreement,
notices shall be deemed to have been "given" or
"delivered" upon personal delivery thereof forty-
eight (48) hours after having been deposited in the
United States mails as provided herein.
Section 28 - AGREEMENT BINDING UPON SUCCESSORS AND
ASSIGNS
This Agreement shall be binding the parties hereto
and their respective personal representatives,
heirs, administrators, executors, successors and
assigns.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have affixed
or caused to be affixed their respective signatures this
_________ day of _______________ 1996.
Witnesses: The Cosmopolitan at Mears Park, LLC
a Delaware Limited Liability Company
__________________________
By:
_______________________________
Terrence P.Sullivan, Manager
Agent:
Firm: Claremont Management Corporation
__________________________
By:
_______________________________
Charles M. Moran, Jr., President
FIRST AMENDMENT TO LOAN DOCUMENTS
This FIRST AMENDMENT TO LOAN DOCUMENTS (this
"Agreement") is made as of June 1, 1995, by and between
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP, a
limited partnership organized under the laws of
Delaware ("Borrower"), and CAPITAL CONSULTANTS, INC.,
an Oregon corporation, as agent for certain participant
lenders ("Lender").
RECITALS
A. Reference is made to that certain Promissory
Note executed by Borrower in favor of Lender dated
December 29, 1989, in the original principal amount of
Four Hundred Thousand and 00/100 Dollars ($400,000.00)
(the "Note").
B. The Note is secured by that certain Deed of
Trust and Security Agreement given by Joseph W. Angel
II and Lynne I. Angel ("Angel") for the benefit of
Lender dated December 29, 1989, and recorded in Book
2264, Page 2663, of the Records of Multnomah County,
Oregon (the "Angel Deed of Trust"), and covering
certain real and personal property as more specifically
set forth in the Loan Documents. Terms with initial
capitals used in this Agreement, unless otherwise
defined, shall have the meanings given them in the
Note.
C. Borrower has requested that the interest rate
of the Note be decreased and that the Maturity Date of
the Note be automatically extended for one (1) year,
with the option to extend the Maturity Date for five
(5) additional successive periods of one (1) year each.
Borrower and Lender have been negotiating the terms of
the amendment to the Loan Documents since December 29,
1994, the original Maturity Date. Lender is willing to
decrease the interest rate of the Note, to extend the
term of the Note and to amend the Loan Documents,
provided that such amendment is made pursuant to the
terms and subject to the conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises
and of the mutual covenants set forth herein, the
parties agree:
1. Borrower's Representations and Warranties.
Borrower represents, warrants and covenants to and for
the benefit of Lender as follows:
1.1 Truth of Certain Facts. Each of the
facts stated in paragraphs A and B of the Recitals to
this Agreement is true, correct, and complete in all
material respects.
1.2 Representations in Loan Agreement. Each
of the representations and warranties made by Borrower
in the Note or Deed of Trust, or in any other
certificate, instrument, or document submitted by
Borrower to Lender to evidence amendment of the Loan
Documents as contemplated by this Agreement, is true
and accurate in all material respects as of the date
made, and any fact or circumstance occurring since the
date made that render the same untrue or inaccurate is
disclosed in Schedule 1.2 to this Agreement.
1.3 Debt Absolute. The outstanding
principal balance under the Note as of the date of this
Agreement is Four Hundred Thousand and 00/100 Dollars
($400,000.00). There are no existing claims or
defenses, personal or otherwise, or rights of set-off
whatsoever with respect to the Note or any of the
obligations evidenced thereby.
1.4 Loan Documents. Each of the Loan
Documents is in full force and effect and unmodified,
and no defenses exist to the enforcement of any such
document against Borrower in accordance with its terms.
1.5 No Defaults. To the best of Borrower's
knowledge, no event has occurred and no condition
exists that would constitute an Event of Default under
the Note, or any other Loan Document, either with or
without notice, the lapse of time, or both.
2. Amendment to Note. The Note is hereby amended
as follows:
2.1 Interest Rate. Commencing on the
date hereof, the outstanding principal balance under
the Note from time to time shall accrue interest at the
rate of thirteen and eleven one hundredths percent
(13.11%) per annum, which rate shall be adjusted in
connection with any prepayment made under the Note, and
any prepayment in full of the Angel Note described
below, in accordance with the following formula:
IR = (.114 X (OB + AB)) - (AIR X AB)
OB
Where, giving effect to such prepayment:
IR means the new interest rate (per annum) applicable under
this Note effective the day following such prepayment;
OB means the outstanding principal
balance of the Note;
AB means the outstanding principal
balance of that certain Promissory Note dated
December 29, 1989, given by Angel to
Lender in the original principal amount
of $360,000.00 (the "Angel Note");
and
AIR means the interest rate (per annum)
applicable under the Angel Note.
2.2 Maturity Date. The Maturity Date of the
Note is hereby extended to December 29, 1995, which
date may, at Borrower's election, be further extended
for up to five (5) successive periods of one (1) year
each (to December 29 in each of 1996, 1997, 1998, 1999,
and 2000) provided that: (a) on and as of December 29
beyond which the maturity date is to be extended (the
"Extension Date") there exists no Event of Default and
no fact or circumstance that, with notice, the passage
of time, or both, would constitute an Event of Default,
and (b) on or before the Extension Date Borrower has
paid Lender an extension fee equal to one-half of one
percent (.5%) of the outstanding principal balance of
the Note on and as of such Extension Date.
3. Amendment to Angel Deed of Trust and Security
Agreement. Contemporaneously with the execution of
this Agreement, (a) Angel shall execute and record in
the real property records of Multnomah County, Oregon,
an amendment of the Angel Deed of Trust and Security
Agreement, in form and substance acceptable to Lender,
and (b) Borrower shall cause to be delivered to Lender
a modification endorsement to the title insurance
policy issued to Lender in connection with the Angel
Deed of Trust (the "Policy"), insuring that the Angel
Deed of Trust is and remains a lien against the
Property, subject only to the exceptions contained in
the Policy.
4. Ratification. Except to the extent expressly
amended hereby, the Note and other Loan Documents is
each ratified and confirmed in all respects.
5. Governing Law. This Agreement and the
obligations of the parties hereunder shall be
interpreted, construed, and enforced in accordance with
the laws of the state of Oregon.
6. Entire Agreement. This Agreement contains
the entire agreement of the parties relative to the
amendment of the Loan Agreement, Note and other Loan
Documents and supersedes any prior or contemporaneous
negotiations or writings.
7. Binding Agreement. This Agreement shall
enure to the benefit of and be binding upon the parties
and their respective heirs, personal representatives,
successors, and assigns.
IN WITNESS WHEREOF, this Agreement has been
executed and delivered as of the day and year first
above written.
PORTLAND LOFTS ASSOCIATES CAPITAL CONSULTANTS,
LIMITED PARTNERSHIP INC.,
an Oregon corporation, as agent for certain participant
lenders
BY: EAST BANK ANGEL JOINT
VENTURE, its General Partner
By:
_____________________
By: _____________________
Title:
___________________
Joseph W. Angel, Partner
"Lender"
"Borrower"
Schedule 1.2 to First Amendment to Loan Documents
between
Portland Lofts Associates Limited Partnership
("Borrower"), and
Capital Consultants, Inc. ("Lender")
1. East Bank Development, Inc. no longer has any
interest in East Bank Angel Joint Venture, as
evidenced by the Memorandum of Complete Dilution
between Joseph W. Angel, II and East Bank
Development, Inc. (reference date March 31, 1992),
a copy of which was previously delivered to
Lender's counsel by Borrower's counsel.
2. In addition to the exceptions set forth in Exhibit
A to the Angel Deed of Trust, title to the
property described in the Angel Deed of Trust is
encumbered by the additional encumbrances shown in
the modification endorsement delivered to Lender
in accordance with Section 3(b) of the First
Amendment.
3. Pursuant to a Stipulated Decree and Judgment of
Dissolution of Marriage executed by Joseph Angel
and Lynne Angel on May 18, 1995, Lynne Angel's
interest in the property secured by the Angel Deed
of Trust (the "Office Building") is to be
transferred to Joseph Angel, effective as of March
1, 1995. The transfer of Lynne Angel's interest
in the Office Building to Joseph Angel has not yet
occurred, but documents accomplishing the transfer
are expected to be recorded by June 15, 1995.
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
OF FORECLOSED PROPERTY
FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
UNAUDITED
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
OF FORECLOSED PROPERTY
FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
UNAUDITED
CONTENTS
Page
Financial Statements:
Balance Sheets F-26
Statements of Operations F-27
Statements of Partners' Equity (Deficiency) F-28
Statements of Cash Flows F-29
Notes to Financial Statements F-30
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
OF FORECLOSED PROPERTY
DECEMBER 31, 1995 AND 1994
UNAUDITED
ASSETS
1995 1994
Investment in real estate:
Land $ - $ 6,473,807
Buildings and improvements - 16,276,114
Tenant improvements - 3,850,203
Furniture and fixtures - 1,308
- 26,601,432
Less accumulated depreciation - 3,978,688
- 22,622,744
Cash - 165,979
Escrow deposits - 385,655
Prepaid expenses and other assets 900 106,156
Due from affiliates 311,829 303,891
Rents receivable - 659,365
Deferred costs, net of accumulated
amortization ($694,562, 1994) - 682,614
$ 312,729 $24,926,404
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
Liabilities not subject to compromise:
Accounts payable and accrued expenses $ 94,025 $ 34,849
Other liabilities 30,715 -
Loans from partners 556,146 -
680,886 34,849
Liabilities subject to compromise: - 24,192,073
Commitments
Total liabilities 680,886 24,226,922
Partners' equity (deficiency) (368,157) 699,482
$ 312,729 $24,926,404
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS OF FORECLOSED PROPERTY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
UNAUDITED
1995 1994 1993
Revenues:
Rental income $ 1,339,270 $ 2,496,489 $ 2,146,331
Other income 42,327 32,167 6,379
Total revenues 1,381,597 2,528,656 2,152,710
Expenses:
Depreciation and
amortization 668,154 1,139,369 1,102,270
Management fees 15,504 148,712 152,258
Bad debt expense - 25,071 32,276
Professional fees 90,837 39,019 8,882
Real estate taxes 185,673 273,145 251,067
Utilities 89,738 150,939 149,408
Repairs and maintenance 130,401 191,510 157,602
Insurance 34,454 82,480 62,014
Salaries and wages 42,546 69,652 60,630
Other 6,177 42,981 32,118
Total expenses 1,263,484 2,162,878 2,008,525
Income from operations 118,113 365,778 144,185
Interest expense 43,505 1,453,707 1,547,485
Income (loss) before loss
on transfer of property 74,608 (1,087,929) (1,403,300)
Loss on transfer of
property 1,142,247 - -
Net loss $(1,067,639) $(1,087,929)$ (1,403,300)
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
OF FORECLOSED PROPERTY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
UNAUDITED
Limited
HPP 1989 Developer Partner Total
Balance
December 31, 1992 $3,417,696 $(152,235) $(3,210) $ 3,262,251
Net loss
(Unaudited) (1,333,135) (68,762) (1,403) (1,403,300)
Balance
December 31, 1993
(Unaudited) 2,084,561 (220,997) (4,613) 1,858,951
Distributions (71,540) - - (71,540)
Net loss
(Unaudited) (1,033,533) (53,308) (1,088 ) (1,087,929)
Balance
December 31, 1994
(Unaudited) 979,488 (274,305) (5,701) 699,482
Net loss
(Unaudited) (1,014,257) (52,314) (1,068) (1,067,639)
Balance
December 31, 1995
(Unaudited) $ (34,769) $(326,619) $(6,769) $(368,157)
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
OF FORECLOSED PROPERTY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
UNAUDITED
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,067,639) $ (1,087,929)$(1,403,300)
Adjustments to reconcile net income
(loss) to net cash
provided by (used in)
operating activities:
Non-cash items:
Deprec and amort 668,154 1,139,369 1,102,270
Interest on loans
from partners 43,505 36,222 31,385
Loss on dispos of prop 1,142,247 - -
Dec (inc) in esc dep (46,377) (18,054) 5
Decrease (increase)
in rents receivable, net 18,809 (244,847) (26,841)
Decrease (increase)
in prepaid expenses 93,966 11,810 (30,999)
Increase in deferred
costs, net (27,271) (5,256) (83,205)
Increase (decrease)
in accrued interest (739,000) 781,097 618,482
Increase (decrease)
in accounts payable
and accrued expenses (89,486) 70,078 (54,874)
Decrease in other liab (39,699) (130,937) (50,226)
Net cash provided by (used in)
operating activities (42,791) 551,553 102,697
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (90,250) (51,730) (371,554)
Decrease (increase)
in note receivable - 10,000 (10,000)
Distribution - (71,540) -
Payment of settlement expenses (25,000) - -
Increase in due from affiliates (7,938) (180,901) (34,842)
Net cash used
in investing activities (123,188) (294,171) (416,396)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on construction
loans payable - 36,891 481,253
Repayment of construction
loan payable - (148,500) (198,000)
Net cash provided by (used in)
financing activities - (111,609) 283,253
NET INCREASE (DECREASE) IN CASH (165,979) 145,773 (30,446)
CASH, BEGINNING OF YEAR 165,979 20,206 50,652
CASH, END OF YEAR $ - $ 165,979 $20,206
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ - $ 672,610 $ 897,618
NON-CASH FINANCING ACTIVITY:
Interest on loans from partners $ 43,505 $ 36,222 $ 31,385
JENKINS COURT ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OF FORECLOSED PROPERTY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
UNAUDITED
1. Partnership Organization:
Jenkins Court Associates Limited Partnership (the Partnership), a
Delaware limited partnership, was formed on December 20, 1988 to
acquire, construct, rehabilitate, own and operate a 144,000 net
rentable square foot five-story building and 30,000 net rentable
square feet of new retail space, including storage areas and
parking facilities (herein known as the Project), located at Old
York Road and Rydal Road, Jenkintown Borough, Pennsylvania.
The general partners of the Partnership are Jenkins Court
Investors Limited Partnership (Developer), a Delaware limited
partnership whose sole general partner is Court Investors
Corporation, and Historic Preservation Properties 1989 Limited
Partnership (HPP 1989), a Delaware limited partnership whose sole
general partner is Boston Historic Partners Limited Partnership.
The limited partner is Miles S. Katzen, who is also a limited
partner of the Developer. The rehabilitation of the building was
substantially complete as of December 31, 1989.
2. Summary of Significant Accounting Policies:
Basis of accounting:
The Partnership's financial statements are prepared on the accrual
basis of accounting in accordance with generally accepted
accounting principles.
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.
2. Summary of Significant Accounting Policies (continued):
Depreciation:
The Partnership's real estate was held for lease and stated at
cost. Depreciation was computed on a straight-line basis over 40
years for buildings and improvements and over seven years for
personal property. Tenant improvements were depreciated on a
straight-line basis over the terms of the related leases,
generally five to ten years.
Capitalization of project costs:
The Partnership capitalized all project costs incurred during
construction including interest, real estate taxes, insurance and
other indirect project costs.
Deferred costs:
Direct costs attributable to obtaining financing were capitalized
and amortized on a straight-line basis over the term of the
related debt. Direct costs related to the restructuring of the
construction loan in 1992 have been capitalized and were amortized
on a straight line basis over a twelve month period (see Note 3).
Organization costs have been capitalized and were amortized on a
straight-line basis over a 60-month period. Leasing commissions
have been capitalized and were amortized on a straight-line basis
over the terms of the related leases, generally five to ten years.
Revenue recognition:
Rental income was recorded by recognizing the aggregate minimum
rentals to be received over the term of each lease in equal
monthly installments over the related lease terms. Rental income
recorded prior to actual cash collections under the terms of the
leases was recorded as rents receivable (approximately $358,000 at
December 31, 1994). Revenue from rent escalations was recorded
when billed.
2. Summary of Significant Accounting Policies (continued):
Income taxes:
No provision (benefit) has been made for income taxes, since the
income or loss of the Partnership is to be included in the tax
returns of the individual partners.
3. Construction Loans Payable:
On July 2, the Partnership and the lender of the Partnership's
construction loan entered into the Second and Restated Settlement
Agreement (the Amended Agreement). In summary, under the Amended
Agreement, the lender forgave $4,033,426 of accrued interest, late
fees and extension fees, divided the construction loan into two
promissory notes (Promissory Note A and Promissory Note B) and
required the Partnership to establish escrow accounts for debt
service shortfall and real estate taxes and contractual lease
buyout obligations to former landlords of existing tenants.
Promissory Note A originally consisted of $12,200,000 of principal
outstanding under the original loan plus up to $1,478,171 which
may have been advanced by FNB to the Partnership for new tenant
improvements as required. As of December 31, 1994, $676,269 was
advanced for such tenant improvements. Monthly payments
of principal and interest were based upon a 25 year amortization
period and the Partnership repaid $148,500 and $198,000 to FNB in
1994 and 1992, respectively. The note bore interest at 7.25% for
the first year, and was to bear interest at FNB's cost of funds
rate, as defined, plus 2% for each extension period, if
applicable.
As explained in detail later in this footnote, the interest rate
for Promissory Note A was amended in June 1993. Interest expense
in 1994 and 1993 for Promissory Note A equaled $694,227 and
$791,884, respectively. As of December 31, 1994, accrued interest
on Promissory Note A equaled $160,825.
3. Construction Loans Payable (continued):
Promissory Note B originally consisted of the remaining $9,260,092
of outstanding principal due under the original construction loan.
Monthly payments were calculated based on Net Operating Income, as
defined in the Second Amended Agreement, reduced by debt service
payments made pursuant to Promissory Note A, replenishments to the
Reserve Account and payments to the Tax and Buyout Account. This
note provided for an interest rate of 7.75% for the first year,
and 8.75% and 9.75% for the second and third years, if applicable.
Any shortfall between all interest and other debt service payments
due for any month and the actual monthly payment received by FNB
were accrued and added to the outstanding principal balance of
Promissory Note B. Interest expense for Promissory Note B in 1994
and 1993 totaled $723,257 and $724,216, respectively. As of
December 31, 1994, accrued interest on Promissory Note B totaled
$1,608,670.
On June 15, 1993, the lender extended the maturity date of
Promissory Notes A and B until June 15, 1994 under the following
conditions. The deposit of $250,000 into the restricted payment
account was deferred until maturity and would have been due and
payable at that time. The interest rate of the outstanding
balance of Promissory Note A was adjusted to 5.5%. The interest
rate of any additional borrowings for Promissory Note A was
adjusted to 1.5% above the lender's commercial lending rate.
The lender retained the option to rescind the entire Amended
Agreement if Jenkins Court commenced or participated as an adverse
party in any suit or proceeding against the lender relating to the
original loan or the Agreement. If such rescission took effect,
all amounts previously forgiven and all amounts due would have
been payable upon the lender's demand. In addition, subject to
the provisions of the Amended Agreement, the lender reserved any
and all rights and remedies which it may have had against any
party pursuant to the original loan documents.
At any time after a Future Default Event or Maturity Date (both
terms defined in the Amended Agreement), whichever first occurred,
3. Construction Loans Payable (continued):
the lender may have requested that Jenkins Court deed the property
to the lender in lieu of foreclosure.
The terms of the note not only secured the building, land and all
improvements, but also granted a security interest and rights to
all leases and rents upon an event of default under the notes.
The notes were guaranteed by the local general partner and limited
partner.
Management was negotiating with the lender to further extend the
notes. On September 30, 1994, the lender sold the notes to a real
estate investment entity (the mortgage holder). Jenkins Court
began negotiations with the mortgage holder to extend or
restructure the notes. On November 23, 1994, the mortgage holder
presented a notice of default and demanded full payment of the
notes and related accrued interest. On November 23, 1994, Jenkins
Court filed petitions for bankruptcy protection under Chapter 11
of the federal bankruptcy laws. Under Chapter 11, certain claims
against Jenkins Court in existence prior to the filing of
petitions for relief under federal bankruptcy laws were stayed
while the Partnership continued business operations as Debtor-in-
Possession.
Due to the limited net operating income of the property, no
interest expense was recorded by the Partnership on Promissory Notes A
and B while the partnership was in banckruptcy protection.
Remaining cash after the payment of operating expenses was paid to the
holder as a reduction of previously accrued interest.
The acceptance of a plan of reorganization through the bankruptcy
proceedings was highly unlikely and Jenkins Court had maximized
the vesting of its remaining tax credits for 1995 on June 30,
1995.
As discussed further in Note 6, on August 31, 1995, Jenkins Court
and the mortgage holder entered into a settlement agreement to
resolve the bankruptcy litigation. As part of the settlement
agreement, Jenkins Court transferred the deed and title to the
property to the mortgage holder in lieu of foreclosure
proceedings. The mortgage holder agreed to release Jenkins Court
and its
3. Contstruction Loans Payable (continued):
guarantors for the entire indebtedness and Jenkins Court received
$25,000 to pay certain professional fees incurred during the
bankruptcy proceedings.
Although Jenkins Court no longer owns its investment property and
will no longer have property operations, the Jenkins Court
partnership will remain in existence until the resolution of
certain partnership assets and liabilities.
4. Partners' Equity (Deficiency):
Profits, losses and tax credits from operations during the first
five years following the completion of the rehabilitation of the
Property are to be allocated as follows:
HPP 1989 95.0%
Developer 4.9
Limited partner .1
100.0%
Thereafter, cash flow from operations, as defined in the Amended
and Restated Agreement of Limited Partnership (Partnership
Agreement), shall be distributed to the partners as follows:
YFirst, 100% to
the payment of accrued interest on any outstanding default
loans and then to the unpaid principal on same.
YSecond, 100%
to HPP 1989 until HPP 1989 has received cash flow
distributions for that year equal to an 8% noncumulative,
noncompounded return on its invested capital in that year.
4. Partners' Equity (Deficiency) (Continued):
YThird, 100% to
the Developer until the Developer Mall Amount, as defined, has
been reduced to zero and then, according to the cash flow
percentages defined in the agreement, until HPP 1989 has
received distributions of cash flow in that year equal to an
8% noncumulative, noncompounded return on its invested capital
and the Developer has received distributions equal to an 8%
noncumulative, noncompounded return on its invested capital.
YThe remaining
balance, if any, shall be distributed as follows:
HPP 1989 60.0%
Developer 39.9
Limited partner .1
100.0%
Under the terms of the Partnership Agreement, at any time after
January 5, 1994, HPP 1989 had the right to cause the Partnership
to sell all or part of the property to a third party without the
consent of the Developer provided that HPP 1989 first offered to
sell the property to the Developer.
5. Related Party Transactions and Commitments:
The Partnership entered into a Property Management and Leasing
Agreement with the Developer which was to expire on January 1,
1995. The Developer was to perform the duties involved with the
day-to-day management of the Project for a fixed annual fee of
$25,000 and a fee equal to 6% of gross receipts as defined in the
agreement. Additionally, the Developer earned leasing commissions
equal to 5% of gross rental receipts as defined in the agreement
for the first five years and 2.5% of gross rental receipts for the
balance of the term, less any amounts paid to third parties.
Commissions earned on extensions, expansions and renewals were one-
half of the above rates.
5. Related Party Transactions and Commitments (continued):
On October 1, 1994, the Partnership terminated the Property
Management and Leasing Agreement with the Developer and entered
into a property and partnership management agreement with the
Developer, HPP 1989, and an independent third party property
manager. This agreement co
nsisted of the independent third party property managerperforming
the property management function for a fee of 2% of gross
receipts, the developer performing a co-asset management function
for a fee of 2% of gross receipts, and HPP 1989 performing a co-
asset management and partnership accounting function for a fee of
2% of gross receipts. The Developer retained the leasing
responsibility and fee arrangement under the initial Property
Management and Leasing Agreement.
Total fees and commissions earned by the developer under these
agreements equaled $131,004 and $152,258 in 1994 and 1993,
respectively. In 1995 and 1994, the third party property manager
earned management fees of $22,364 and $10,848, respectively. No
amounts were paid to HPP 1989 in 1995 and 1994 under the above
agreements.
If at any time through June 30, 1992, the costs and expenses of
operating the Project exceeded revenues and capital contributions,
the Developer was obligated to fund the amount of such operating
deficits up to $1,000,000. In 1991, the Developer funded
$162,598. Operating deficit loans bear interest at 1% above the
base rate (10% at December 31, 1995), as defined in the
Partnership Agreement, and will be repaid in accordance with the
terms of the Partnership Agreement. The Developer alleges that it
has satisfied the remainder of its operating deficit obligation in
full by pledging collateral. However, HPP 1989 does not agree
with the position of the Developer. Interest earned on operating
deficit loans totaled $16,158, $13,289 and $11,796 for 1995, 1994
and 1993, respectively. As of December 31, 1995 and 1994, accrued
interest on Developer operating deficit loans totaled $52,625 and
$36,467, respectively.
During 1991, HPP 1989 loaned $250,000 to the Partnership as a
default loan (Default Loan), as defined in the Partnership Agreement.
This Default Loan bears interest at 2% above the base rate (11.0% at
December 31, 1995) and is secured by the Developer's
5. Related Party Transactions and Commitments (Continued):
interest in an unrelated limited partnership. Interest earned on
the Default Loan totaled $27,347, $22,933 and $20,003 in 1995,
1994 and 1993, respectively. As of December 31, 1995 and 1994,
accrued interest on the Default Loan equaled $90,923 and $63,576,
respectively. The Default Loan may be repaid in accordance with
the terms of the Partnership Agreement.
As of December 31, 1995 and 1994, advances made by the Partnership
to the Developer and its affiliates totaled $311,829 and $303,891,
respectively. These advances are unsecured and are non-interest
bearing.
6. Petition for Relief Under Chapter 11 and Transfer of the Property:
As discussed in Note 3, in 1992 the Partnership restructured its
construction loans extending the maturity dates to June 15, 1993
and realizing a significant gain on forgiveness of debt. In 1993,
the Partnership was able to further extend the maturity dates to
June 15, 1994. On September 30, 1994, Notes A and B were sold to
a new real estate investment entity (mortgage holder) and on
November 23, 1994 the mortgage holder presented a notice of
default and demanded full payment of all outstanding principal and
interest. Also on November 23, 1994, Jenkins Court Associates
Limited Partnership filed a petition for relief under Chapter 11
of the federal bankruptcy laws in the United States Bankruptcy
Court for the jurisdiction of Eastern District of Pennsylvania.
Under Chapter 11, certain claims against the Partnership in
existence prior to the filing of a petition for relief under the
federal bankruptcy laws are stayed while the Partnership continues
business operations as Debtor-in-possession. These liabilities
are reflected in the balance sheet as of December 31,
1994 as
"liabilities subject to compromise".
The Partnership received approval from the Bankruptcy Court to pay
or otherwise honor certain of its pre-petition obligations
including employee wages.
6. Petition for Relief Under Chapter 11 and Transfer of the Property
(continued):
Liabilities subject to compromise as of December 31, 1994,
consisted of:
Construction loans payable
Segment A $ 12,430,769
Segment B 9,260,092
Accrued interest 1,769,495
Accounts payable and accrued expenses 148,662
Other liabilities 70,414
Loans from partners 512,641
$ 24,192,073
On August 31, 1995, Jenkins Court entered into a settlement
agreement with the mortgage holder to resolve the bankruptcy
litigation. Jenkins Court transferred the property to the mortgage
holder in lieu of foreclosure proceeding. The mortgage holder agreed
to release Jenkins Court and its guarantors for the entire
indebtedness and Jenkins Court received $25,000 to pay certain
professional fees incurred during the bankruptcy proceedings. With
the transfer of the deed and title to the mortgage holder in August
1995, all liabilities associated with the building were satisfied and
the case was dismissed from Federal Bankruptcy Court. The transaction
resulted in a loss on transfer of property of $1,142,247 to the
Partnership and recapture of Rehabilitation Tax Credits of $46,790 to
the partners of Jenkins Court.
Although Jenkins Court no longer owns its investment property an
dwill no longer have property operations, the Jenkins Court
partnership will remain in existence until the resolution of certain
partnership assets and liabilities. These liabilities include
approximately $94,000 of trade payables, as well as a $250,000 default
loan and accrued interest thereon which had been provided by HPP 1989
and secured by the developer's interest in an unaffiliated limited
partnership.
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
CONTENTS
Page
Financial Statements:
Balance Sheets F-43
Statements of Operations F-44
Statements of Partners' Equity F-45
Statements of Cash Flows F-46
Notes to Financial Statements F-47
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated
Depreciation F-56
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(UNAUDITED)
ASSETS
1995 1994
Real estate, at cost
Land $ 899,526 899,526
Buildings and improvements 10,762,100 10,702,100
11,661,626 11,601,626
Less accumulated depreciation 1,608,170 1,315,808
10,053,456 10,285,818
Cash 22,816 10,628
Tenant improvement escrow - 60,265
Rents and other receivables 11,732 15,368
Deferred financing fees (1995, $6,543;
1994, $2,479) net of amortization 1,127 2,029
Other assets 8,065 24,153
$10,097,196 $10,398,261
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage note payable $ 6,547,037 $ 6,621,940
Notes payable 973,772 977,285
Accounts payable and accrued liabilities 57,685 39,219
Interest payable 56,116 56,014
Payable to:
Construction contractor 1,105 1,105
Related party 2,267 2,267
Tenant security deposits 9,125 8,925
Total liabilities 7,647,107 7,706,755
Partners' equity 2,450,089 2,691,506
$10,097,196 $10,398,261
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
1995 1994 1993
Revenues:
Rental income $ 1,072,709 $1,003,123 $ 905,571
Interest and other income 42,548 56,760 72,477
Total revenues 1,115,257 1,059,883 978,048
Expenses:
Depreciation and amortization 298,914 297,337 299,753
Administrative and operating 254,627 202,356 182,924
Marketing 17,823 22,980 16,070
Utilities 47,694 48,871 44,943
Taxes and insurance 61,978 130,758 44,322
Total expenses 681,036 702,302 588,012
Income from operations 434,221 357,581 390,036
Interest expense 675,638 562,058 460,849
Net loss before
extraordinary item (241,417) (204,477) (70,813)
Extraordinary item - Gain on
settlement of liability - 57,130 -
Net loss $ (241,417) $ (147,347) $ (70,813)
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
Historic
Preservation East Bank
Properties Angel Total
1989 Limited Joint Partners'
Partnership Venture Equity
Balance, December 31, 1992
(Unaudited) $1,873,441 $1,036,225 $2,909,666
Net loss (Unaudited) (70,105) (708) (70,813)
Balance, December 31, 1993
(Unaudited) 1,803,336 1,035,517 2,838,853
Net loss (Unaudited) (145,874) (1,473) (147,347)
Balance, December 31, 1994
(Unaudited) 1,657,462 1,034,044 2,691,506
Net loss (Unaudited) (239,003) (2,414) (241,417)
Balance, December 31, 1995
(Unaudited) $1,418,459 $1,031,630 $2,450,089
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED)
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(241,417) $(147,347) $(70,813)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 298,914 297,337 299,753
Decrease (Increase) in tenant
improvement escrow 60,265 (60,265) -
Gain on settlement of liability - (57,130) -
Decrease (Increase) in rents
and other receivables 3,636 6,255 5,993
Dec (Inc) in other assets 21,600 (14,409) 637
(Decrease) Increase in accounts
payable and accrued liabil 18,466 (1,685) (79,050)
Increase (Decrease) in interest
payable 102 15,160 (4,738)
(Decrease) Increase in tenant
deposits 200 (1,291) (2,345)
Net cash provided by
operating activities 161,766 36,625 149,437
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of tenant improv (60,000) (3,500) (34,207)
Payment of deferred fees (11,162) - -
Net cash used in investing act (71,162) (3,500) (34,207)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage, notes payable
and construction loan (78,416) (73,719) (65,789)
Net cash used in financing act (78,416) (73,719) (65,789)
NET INCREASE (DECREASE) IN CASH 12,188 (40,594) 49,441
CASH, BEGINNING OF YEAR 10,628 51,222 1,781
CASH, END OF YEAR $22,816 $10,628 $51,222
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $675,536 $546,898 $465,587
Non-Cash financing activity:
In February 1994, Portland Lofts settled $72,130 of outstanding
trade payables; $15,000 was converted to a note payable and $57,130
was forgiven and recognized as a gain in 1994. See Note 2.
1. Summary of Partnership Organization, Operations and Significant
Accounting Policies:
Organization:
Portland Lofts Associates Limited Partnership (the Partnership), a
Delaware limited partnership, was formed on August 8, 1989 to
acquire, rehabilitate and operate three buildings and the related
land (the Property) containing 107 residential units and 23,470
net rentable square feet of commercial space, located at 555
Northwest Park Avenue in Portland, Oregon.
The general partners of the Partnership are East Bank Angel Joint
Venture (EBAJV), an Oregon general partnership (also known as the
"developer"), and Historic Preservation Properties 1989 Limited
Partnership (HPP'89), a Delaware limited partnership, whose sole
general partner is Boston Historic Partners Limited Partnership.
EBAJV, whose venturers are Pacific Star, Inc. and Joseph Angel
(Angel), is also the only limited partner (see Note 4).
Operations and ability to continue in business:
The Partnership has experienced difficulty in obtaining extensions
from lenders and working out certain debt obligations.
As described in Note 2, the $550,000 unsecured note had an
extended maturity date of March 1, 1992. It is the Partnership's
position that the maturity date of the unsecured note had been
effectively further extended to correspond with the maturity date
of the mortgage note. However, the current holder of the
unsecured note and mortgage note (the current holder) claimed that
the unsecured note had matured and was in technical default.
Also, the current holder claimed that the default for non-payment
of the unsecured note constituted a default on the mortgage note
(the balance of which was $6,547,037 as of December 31, 1995)
which is secured by the Property. On October 7, 1994, the current
holder demanded full payment of the unsecured note. On November
11, 1994, the current holder filed judicial foreclosure
proceedings against the Partnership for non-payment of the
unsecured note.
Portland Lofts successfully contested through the Circuit Court of
Oregon, Multnomah County, the current holder's right to foreclose
on the property. Portland Lofts' position was that the default
claimed on the unsecured note does not constitute a default on the
mortgage note. On August 25, 1995, the court issued a summary
judgment in favor of Portland Lofts and affirmed that the current
holder cannot foreclose on the property due to the default claimed
on the unsecured note.
1. Summary of Partnership Organization, Operations and Significant
Accounting Policies (continued):
However, the current holder continues to pursue the payment of the
$550,000 unsecured note through litigation. While this case is
still in the discovery phase, debt service payments on the
unsecured note have been paid by Portland Lofts and accepted by
the current holder. The current holder maintains that acceptance
of debt service payments does not constitute a waiver of any
rights under the note. Portland Lofts is continuing to negotiate
with the current holder to resolve this dispute out of court
through a global settlement of the mortgage and other debt. The
result of such negotiations or a court decision cannot be
determined at this time.
The Partnership has operated on a break even basis since 1993 and
has not accumulated any reserves at the property level.
The conditions described in the preceding paragraphs continue to
raise substantial doubt about the Partnership's ability to
continue as a going concern. The Partnership's ability to
continue as a going concern depends on its ability to (1) obtain a
formal extension of the $550,000 note, (2) negotiate a global
settlement of the mortgage and other debt, (3) generate sufficient
cash flow to fund debt service and operations, and (4) obtain
additional cash contributions from EBAJV to fund certain principal
payments if and when necessary. The Partnership's financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Basis of accounting:
The Partnership's financial statements are prepared on the accrual
basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
1. Summary of Partnership Organization, Operations and Significant
Accounting Policies (continued):
Buildings and improvements:
The Partnership's real estate is held for lease and stated at
cost. Depreciation is computed on a straight-line basis over 40
years for buildings and improvements, and over 7 years for
personal property.
Leasing costs:
Costs to lease residential units are generally expensed; however,
leasing costs associated with commercial space are capitalized as
other assets and amortized on a straight-line basis over the
related lease terms. Leasing costs capitalized in 1995 and 1994
totaled $8,000 and $3,719. Amortization in 1995, 1994 and 1993
totaled $2,488, $6,574 and $5,538, respectively.
Organization costs:
Organization costs were amortized on a straight-line basis over a
60-month period. Amortization in 1993 was $1,072.
Deferred financing fees:
Direct costs attributable to obtaining financing are capitalized
and amortized on a straight-line basis over the terms of the
related debt. Amortization of financing costs in 1995, 1994 and
1993 totaled $4,064, $901 and $16,934, respectively.
Revenue recognition:
Rental revenue from commercial leases is recorded by recognizing
the aggregate minimum rentals to be received over the terms of
each lease in equal monthly installments over the related lease
terms. Rental income recorded prior to actual cash collections
under the terms of the leases is reflected as rents receivable
($8,825 and $14,759 as of December 31, 1995 and 1994,
respectively). Rental revenue under residential leases is
recorded when due.
Income taxes:
No provision (benefit) has been made for income taxes, since the
income or loss of the Partnership will be included in the tax
returns of the respective partners.
2. Mortgage and Notes Payable:
The Partnership refinanced its $6,800,000 construction loan to a
permanent mortgage on March 31, 1992. The mortgage note matures
on April 1, 1997. Principal and interest payments, which
commenced May 1, 1992 are based upon an amortization period of 30
years. A balloon payment of all unpaid principal and accrued
interest is due on April 1, 1997. The interest rate is variable
based on the LIBOR rate plus 2.5% (8.36% at December 31, 1995).
The interest rate is adjusted every 30 days. As of December 31,
1995, the mortgage note is guaranteed by Joseph Angel.
Aggregate annual maturities under the mortgage note payable,
assuming an 8.36% interest rate, are as follows:
December 31,
1996 82,456
1997 6,464,581
$ 6,547,037
The mortgage note is collateralized by the Property, all existing
and future rents, profits, income, condemnation awards, insurance
proceeds and all proceeds of the foregoing arising out of or in
connection with the Property, as well as all existing and future
equipment, machinery, furniture and fixtures used in connection
with the Property. Interest incurred during 1995, 1994 and 1993
totaled $565,934, $459,647 and $365,674, respectively. As of
December 31, 1995 and 1994, accrued interest totaled $47,128 and
$46,848, respectively.
Effective December 29, 1989, the Partnership assumed an unsecured
note dated November 3, 1989 from EBAJV in the amount of $800,000
of which a balance of $550,000 is outstanding at December 31,
1995. The consent of HPP'89 was required for the Partnership to
assume the note. As a condition to granting this consent, HPP'89
required EBAJV to enter into an agreement whereby EBAJV would make
a capital contribution in the amount of the outstanding principal
plus accrued interest if the Partnership does not have the funds
to repay the note when due. The capital contribution shall be
concurrently applied by the Partnership to repay the note in full.
If EBAJV is required to make a capital contribution, the Amended
and Restated Agreement of Limited Partnership (Partnership
Agreement) shall be amended to reflect EBAJV's additional
contribution. This note was payable to Bank of America and was
used for the rehabilitation costs of the Property.
2. Mortgage and Notes Payable (continued):
The note had an extended maturity date of March 1, 1992. It is
the Partnership's position that the maturity date of the unsecured
note had been effectively further extended to correspond with the
maturity date of the mortgage note. The unsecured note is
guaranteed by Angel. Interest is payable monthly at an annual
rate of 1.00% over the Prime Rate (9.75% at December 31, 1995).
The Partnership has continued to pay interest expense on the
unsecured note. Interest incurred on the note during 1995, 1994
and 1993 totaled $54,847, $45,421, and $39,175, respectively. As
of December 31, 1995 and 1994, accrued interest totaled $4,618 and
$4,499, respectively.
As part of the agreement extending the maturity date of the
$550,000 unsecured note to March 1, 1992, Angel and HPP'89 were
required to fund a Cash Collateral Account, as defined in the
agreement.
In July 1993, the mortgage note and a $550,000 unsecured note were
purchased by a real estate investment entity (the current holder
of the mortgage and unsecured notes). The current holder claims
that the unsecured note matured on March 1, 1992, and is in
technical default. It is Portland Lofts' position that the
maturity date of the unsecured note had been effectively extended
to correspond to the maturity date of the mortgage note. Also,
the current holder claims that a default for non-payment of the
unsecured note constitutes a default of the mortgage note.
On October 7, 1994, the current holder demanded full payment of
the unsecured note by November 10, 1994. The guarantors of the
note maintained that they were unable to make full payment on the
note. On November 11, 1994, the current holder filed judicial
foreclosure proceedings against the Partnership for non-payment of
the unsecured note. Portland Lofts successfully contested through
the court the right of the current holder to foreclose on the
property. Portland Lofts' position was that the default claimed
on the unsecured note does not constitute a default on the
mortgage note. On August 25, 1995, the court issued a summary
judgment in favor of Portland Lofts.
However, the current holder continues to pursue the payment of the
$550,000 unsecured note through litigation. While this case is
still in discovery phase, debt service payments on the unsecured
note have been paid by Portland Lofts and accepted by the current
holder. The current holder maintains that acceptance of debt
service payments does not constitute a waiver of its rights under
the note. Portland Lofts continues to negotiate with the current
holder to resolve the dispute out of court. The result of such
2. Mortgage and Notes Payable (continued):
negotiations or a court decision cannot be determined at this
time.
On December 29, 1989, the Partnership entered into a promissory
note with Capital Consultants, Inc. totaling $400,000 which was
used to pay certain construction related expenses not otherwise
chargeable to the construction loan. Interest at the original
rate of 14.00% was payable in monthly installments of $4,667. The
note is secured by a Deed of Trust and Security Agreement given by
Angel and Lynn Angel. The note is guaranteed by Angel. The note
was extended until January 4, 1994 in consideration for a $16,000
extension fee paid by the Partnership in January 1993. In early
1994, this note was extended until February 28, 1994. On June 30,
1995, Portland Lofts further extended the note payable until
December 31, 1995, with the option to further extend for five
additional successive one year periods. Fees totaling $3,162 to
extend the note were paid in 1995. Under the new terms, the
interest rate was decreased to 13.11%, with monthly interest only
installments payable of $4,370. Interest expense for the note in
1995, 1994 and 1993 totaled $53,923, $56,000 and $56,000,
respectively. Accrued interest totaled $4,370 and $4,667 as of
December 31, 1995 and 1994, respectively.
The Portland Development Commission (PDC) loaned $15,000 to the
Partnership on March 2, 1992. The note is non-interest bearing
and is due and payable upon any sale or transfer of the property
securing the note in the amount of the original loan balance less
1/84th of the original loan balance for each month after
completion of renovations in which the Partnership remains owner
of the property. If the Partnership remains owner of the property
for seven full years from the date of completion of renovations,
then the note shall be deemed paid in full.
In February 1994, the Partnership settled a $72,130 outstanding
liability which had been included as part of accounts payable. As
part of the settlement agreement, $15,000 of the obligation was
converted to a note payable amortizing over four years at a 9.0%
interest rate, and the remaining $57,130 of the obligation was
forgiven and recognized as a gain in 1994. Monthly principal and
interest payments of $350 are due on this note. Interest expense
on this note in 1995 and 1994 totaled $934 and $990, respectively.
As of December 31, 1995 and 1994, the balance of this note totaled
$8,772 and $12,285, respectively.
3. Partners' Equity:
Profits, losses and tax credits from operations during the first
five years following completion of the rehabilitation of the
Property are to be distributed as follows:
HPP'89 99.0%
EBAJV .9
Limited partner .1
100.0%
Thereafter, profits, losses and tax credits shall be distributed
in accordance with the above formula except that if cash flows are
distributed to the partners in accordance with (b) and (c) below,
then profits, losses and tax credits shall be distributed in
accordance with such formula.
Cash flows from operations shall be distributed to the partners,
as defined in the Partnership Agreement, as follows:
a. 100 percent to the payment of accrued interest on, and
then the unpaid principal balance of, any outstanding loans
made to the Partnership by HPP'89.
b. Thereafter, 100 percent to HPP'89 until HPP'89 has re
ceived distributions of cash flow in such year in an amount
equal to an 8 percent cumulative, noncompounded return on its
weighted average HPP'89 invested capital for such year.
c. The remaining balance, if any, is to be distributed as
follows:
Prior to
call/put date Thereafter
HPP'89 50.0% 75.0%
EBAJV 49.9 24.9
Limited partner .1 .1
100.0% 100.0%
3. Partners' Equity (continued):
The Partnership Agreement allows certain call options and put
rights to the partners under terms as defined in the agreement,
including:
(a)During the first six months following the fifth calendar
year after rehabilitation of the Property has been completed,
the developer has the option (the call option) to acquire
HPP'89's interest in the Partnership for the greater of, (1)
the excess of $5,750,000 over the total amount distributed to
HPP'89 under the terms of the Partnership Agreement or (2) the
amount which would be distributed to HPP'89 upon a
hypothetical sale of the Property for the appraised value.
(b)After the call option expires, HPP'89 has a put right to
require the developer to purchase HPP'89's interest in the
Partnership for the amount indicated in 3(a). The developer,
provided it has met certain conditions defined in the
agreement, shall have the right to locate a third party to
purchase HPP's interest on behalf of the developer at the
terms noted in 3(a) and defined in the agreement.
Cash from the sale or refinancing of the Property shall be
distributed to repay any outstanding loans and related interest
and then to the partners, as defined in the Partnership Agreement.
4. Related parties:
EBAJV provided design services totaling $200,000, of which the
Partnership paid $197,733. The remaining $2,267 remains payable
as of December 31, 1995. Developer and design fees were
capitalized as a cost of the Property.
5. Minimum Future Rentals under Operating Leases:
The Partnership rents space to residential tenants mainly under
one year operating leases and to commercial tenants under
operating leases of varying terms expiring through 1999. As of
December 31, 1995, the Partnership had entered into eighteen
commercial leases covering approximately 96% of the building's net
rentable commercial space.
Certain commercial leases provide for reimbursement of real estate
taxes and certain operating expenses. The approximate minimum
future rentals to be received under the commercial leases for each of
the next five years are as follows:
Ending, December 31
1996 $ 178,674
1997 128,701
1998 89,768
1999 81,600
2000 61,640
The above amounts do not include additional rentals that will
become due as a result of escalation provisions in the commercial
leases.
6. Fair Value of Financial Instruments
The carrying amounts of cash, escrows, rents receivable, accounts
payable and accrued liabilities, and other payables approximate
their fair values due to their short maturities. The fair value
of the Partnership's mortgage note payable and notes payable
estimated to equal the carrying amounts based on the current
maturities and interest rates that approximate market rates. The
mortgage note payable and notes payable are held for nontrading
purposes.
<TABLE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE & ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Gross Amounts
Costs Capitilized Subs at December 31,
Initial Costs To Acquisition 1995
Bldg & Bldg Date of Date Depre
Encum- Improv Improv Carrying Improv Accum Constr or Interest Life
brances Land ments ments Costs Land ments Total Deprec Rehabil Acquired (years)
Residential Building/
with Commercial Space
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portland, Oregon $ 7,750 $ 900 $ 886 $ 9,471 $ 345 $ 900 $ 10,762 $ 11,662 $ 1,608 4/15/91 8/31/89 40
Note 1: The aggregate cost of the property on a tax basis net of
the reduction due to the rehabilitation tax credit at
December 31, 1995 and 1994 is as follows:
1995 1994
$9,797 $9,737
Note 2: The changes in accumulated depreciation for the years
ended December 31, 1995 and 1994 are as follows:
1995 1994
Balance at beginning of period $1,316 $1,026
Depreciation during the year -
Buildings and improvements 292 290
Balance at end of period $1,608 $ 1,316
Note 3:The changes in total costs of land, building and improavements
for the years ended December 31, 1995 and 1994 are as follows:
1995 1994
Balance at beginnig of period $11,602 $11,598
Additions: Building and Improvements 60 4
$11,662 $11,602
</TABLE>
