UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED DECEMBER 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______ to _______ .
Commission File Number: 33-24129
Historic Preservation Properties 1989 Limited Partnership
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(Exact name of registrant as specified in its charter)
Delaware 04-3021042
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45 Broad Street, Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 338-6900
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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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Yes |X| No |_|.
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 |_|.
Voting stock held by non-affiliates of the registrant. Not applicable.
<PAGE>
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.
K-2
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
1998 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- 7 8
Item 3 Legal Proceedings K- 7 8
Item 4 Submission of Matters to a
Vote of Unit Holders K- 7 8
PART II
Item 5 Market for the Registrant's
Units and Related Unit
Holder Matters K- 8 9
Item 6 Selected Financial Data K- 9 10
Item 7 Management's Discussion and
Analysis of Financial
Condition and Results of
Operations K-10 11
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-17 18
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-20 21
SIGNATURES K-21 22
SUPPLEMENTAL INFORMATION K-22 23
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-half percent limited partnership interest which is owned by Sullivan).
The Partnership does not have any employees.
On October 1, 1995, HPP'89 engaged Claremont Management Corporation (CMC), a
Massachusetts Corporation previously unaffiliated and a related party as of
March 15, 1996 through ownership by a member The Cosmopolitan at Mears Park 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.
Commencing July 1, 1996, the annual fee for such services was reduced to
$67,200. The contract with CMC, which originally expired on June 30, 1997, was
renewed until June 30, 1998. On July 1, 1998, HPP'89 engaged Gunn Financial,
Inc. (GFI), an unaffiliated Massachusetts Corporation, to provide asset
management, accounting and investor services for an annual fee of $63,000 and
reimbursement of all operating expenses of providing such services. The
agreement expires on the earlier of June 30, 2006 or the liquidation of the
Partnership, as defined. The Partnership's only business is investing in real
properties for which the cost of rehabilitating such properties qualifies 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.
The Partnership originally invested an aggregate of $11,158,064 in three limited
partnerships (collectively, the "Investee Partnerships") through the acquisition
of general partnership interests in the Investee Partnerships, each of which
owned or acquired real properties, the rehabilitation of which qualified for
Rehabilitation Tax Credits. The Partnership also originally invested $5,000,000
in a real property that the Partnership purchased directly. As of December 31,
1998, 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.
As discussed below, in March 1996, the Partnership contributed its interest in
the property it owned directly to an Investee Limited Liability Company, of
which the Partnership maintained an interest.
The Investee Partnerships and the Investee Limited Liability Company are herein
collectively referred to as "the Investee Entities". Each of the Investee
Entities' agreements is different, but in general, provides for a sharing of
management duties and decisions among HPP'89 and the respective local general
partners or other managing members and certain priorities to HPP'89 with respect
to return on and return of invested capital. Significant Investee Entity
decisions require the approval of both HPP'89 and the local general partners or
other managing members. In addition, each Investee Entity has entered into
various agreements with its local general partners or an other member, or their
affiliates, to provide development, management and other services, for which the
local general partners, other member, or their affiliates, are paid fees by the
respective Investee Entity. All the Investee Entities are subject to first
mortgage loans (except for Jenkins Court Associates Limited Partnership, as
discussed below). 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 Entities of the HPP'89 are 402 Julia Street Associates Limited
Partnership, Jenkins Court Associates Limited Partnership, The Cosmopolitan at
Mears Park Limited Liability Company and Portland Lofts Associates Limited
Partnership.
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.
HPP'89 originally contributed $775,000 to the capital of 402 Julia and owns a
general partnership interest therein. HPP'89's original investment in 402 Julia
represented approximately 4% of the aggregate amount which HPP'89 has
contributed to the capital of its three Investee Entities acquired in 1989 and
to purchase its direct interest in the Cosmopolitan Building.
On September 16, 1993, the Partnership sold one-third of its general partnership
interest in 402 Julia to the developer general partner. The Partnership's
percentage interest in 402 Julia was thereby reduced from 98% to 65%.
Rehabilitation Tax Credits generated by 402 Julia and previously allocated
to HPP'89 Limited Partners totaled $248,796 since inception. As of March
31, 1995, 100% of these credits were fully vested.
Jenkins Court Associates Limited Partnership (Jenkins Court) is a Delaware
limited partnership which was 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 the date of Jenkins Court's Chapter 11
filing (see below) to the capital of Jenkins Court and had a general partnership
interest therein. HPP'89's investment in Jenkins Court represented approximately
36% of the aggregate amount which HPP'89 originally contributed to the capital
of its three Investee Entities acquired during 1989 and to purchase its direct
interest in the Cosmopolitan Building.
Jenkins Court filed for protection under Chapter 11 federal bankruptcy laws on
November 23, 1994. On August 31, 1995, after maximum vesting of the remaining
Rehabilitation Tax Credits had been achieved for 1995 and considering the
unlikelihood of a successful plan of reorganization, Jenkins Court negotiated
with the mortgage holder to transfer the deed and title of the property to the
mortgage holder in lieu of foreclosure. 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, of which $44,007 was allocated to the
Limited Partners of HPP'89. Tax credits allocated to the Limited Partners of
HPP'89 totaling $2,758,113 were vested on or before June 15, 1995. Therefore,
98.5% of the Limited Partners' tax credits were vested prior to the loss of the
property.
On December 18, 1989, HPP'89 acquired the Cosmopolitan Building (The
Cosmopolitan) containing 255 residential units and approximately 2,200 square
feet of commercial space. The building was renovated, and certain renovation
costs qualified for Rehabilitation Tax Credits. HPP'89's investment in The
Cosmopolitan represented approximately 39% of the aggregate amount which HPP'89
originally contributed to the capital of its three Investee Entities acquired in
1989 and to purchase its direct interest in The Cosmopolitan.
Rehabilitation Tax Credits generated by the purchase of the Cosmopolitan
Building and previously allocated to HPP'89's limited partners totaled
$4,307,491 since inception. As of December 31, 1994, 100% of these tax credits
were fully vested.
In March 1996, the Partnership contributed The Cosmopolitan and certain other
assets and liabilities to The Cosmopolitan at Mears Park, LLC (TCAMP), a
Delaware limited liability company, for a 50% ownership interest in TCAMP.
Concurrently, a party related to CMC contributed $650,000 in cash to TCAMP for a
50% ownership interest in TCAMP. Simultaneously, TCAMP issued a mortgage note,
the proceeds of which, along with the $650,000 cash contribution, were used to
settle in full the Partnership's mortgage note related to The Cosmopolitan.
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 89 residential units
including 29,250 square feet of ground floor space useable as either commercial
space or as home/studio space for artists, located at 555 Northwest Park Avenue
in Portland, Oregon.
HPP'89 contributed $3,820,000 through December 31, 1998 to the capital of
Portland Lofts and owns a general partnership interest therein. HPP'89's
investment in Portland Lofts represents approximately 21% of the aggregate
amount which HPP'89 originally contributed to the capital of its three Investee
Entities acquired in 1989 and to purchase its direct interest in the
Cosmopolitan Building.
Rehabilitation Tax Credits generated by Portland Lofts and allocated to
HPP'89's Limited Partners totaled $1,775,571 since inception. As of April
1, 1996, 100% of these tax credits were fully vested.
The Investee Entities are, and will continue to be, subject to competition from
existing and future projects in their respective geographic 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 geographic 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 effect on the business of
the Partnership.
Item 2. Properties
See Item 1 above.
Item 3. Legal Proceedings
The Partnership and its Investee Entities are not party to, to the best
knowledge of the General Partner, 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.
<PAGE>
PART II
Item 5. Market for Registrant's Units and Related Unit Holder Matters.
(a) There is no established public market for the Units and no such market is
expected to develop. Trading in the Units is limited and sporadic and
occurs solely through private transactions.
(b) As of March 15, 1999, there were 2,520 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, 1998, 1997 and
1996, no distributions of Cash Flow or Sale or Refinancing Proceeds were paid or
accrued to the Limited Partners.
<PAGE>
Item 6. Selected Financial Data.
Periods
Ended December 31,
1998 1997 1996 1995 1994
--------- -------- --------- ---------- ---------
(Unaudited)(Unaudited) (Unaudited)
Revenue $ 6,667 $ 8,912 $552,395 $ 2,164,691 $ 2,188,421
Net Income (Loss) $60,571 $(96,522) $473,848 $(1,928,010) $(1,391,927)
Net Income (Loss)per
weighted average Unit
outstanding:
Loss before
extraordinary gain $ 2.26 $ (3.59) $(324.25)$ (71.79) $ (51.83)
Extraordinary gain - $ - $ 341.89 $ - $ -
Net Income (Loss) $ 2.26 $ (3.59) $ 17.64 $ (71.79) $ (51.83)
Total Assets as of
December 31, $849,087 $783,736 $892,540 $17,160,719 $19,092,470
Long Term Debt,
excluding discount
as of December 31, $ 0 $ 0 $ 0 $17,579,606 $18,496,144
Cash Distributions per
weighted average Unit
Outstanding $ 0 $ 0 $ 0 $ 0 $ 0
Rehabilitation Tax
Credit per Unit $ 0 $ 0 $ 0 $ 0 $ 0
See Item 7 for a discussion of the factors that may materially affect the
foregoing information in future years.
<PAGE>
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. The Partnership
originally invested an aggregate of $11,158,064 in three Investee Partnerships
which owned or acquired real properties, the rehabilitation of which qualified
for Rehabilitation Tax Credits. The Partnership also originally invested
$5,000,000 in The Cosmopolitan, real property that the Partnership had 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.
Such amounts originally 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.
The Cosmopolitan is a 255 unit residential property with traditional, annual
operating leases to individuals that expire within one year of signing. This 255
unit building operates in a very competitive lowertown St. Paul market.
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 received approximately $286,000 from the escrow account which
was used to fund and reserve for the general and administrative expenses of the
Partnership, and obtained 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. Effective March 15, 1996, HPP'89
contributed The Cosmopolitan, and certain other assets and liabilities, to TCAMP
(a Limited Liability Company) for a 50% ownership interest. Concurrently,
another member contributed $650,000 cash to TCAMP for a 50% ownership interest.
Simultaneously, TCAMP issued a mortgage note in the amount of $7,000,000 the
proceeds of which along with the $650,000 contributed cash, were used to settle
in full HPP'89's mortgage note payable related to the Cosmopolitan Building.
TCAMP's mortgage bears interest at 9.14%; amortizes over a 25 year schedule and
requires monthly payments of principal, interest, real estate tax and
replacement reserve deposits totaling $94,550; the mortgage matures in March
2003, at which time all unpaid principal and accrued interest is due. After
March 14, 1996, HPP'89 no longer had any operations directly related to real
estate activity or generated cash from rental activity of The Cosmopolitan. As
of March 15, 1996, the Partnership accounts for its investment in TCAMP under
the equity method of accounting.
Jenkins Court filed for protection under Chapter 11 Federal Bankruptcy laws on
November 23, 1994. On August 31, 1995, after maximum vesting of the remaining
Rehabilitation Tax Credits had been achieved for 1995, and considering the
unliklihood of a successful plan of reorganization, Jenkins Court negotiated
with the mortgage holder to transfer the deed and the title of the property to
the mortgage holder, in lieu of foreclosure.
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 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. As a result of the Chapter 11 proceedings, The
Partnership is not expected to be liable as a general partner of Jenkins Court
for any remaining obligations of Jenkins Court.
Due to the foreclosure proceeding related to Jenkins Court, HPP'89 no longer has
an investment in the property. As of December 31, 1995, the investment in
Jenkins Court and its corresponding reserve, both totaling $5,471,055, were
eliminated from the balance sheet.
In May 1996, Portland Lofts reached a settlement agreement with the holder of
its mortgage note and an unsecured note. According to the Settlement Agreement,
Portland Lofts was allowed until, July 31, 1996, to pay $5,400,000 to the holder
in full satisfaction of both the mortgage note and an unsecured note.
On June 20, 1996, Portland Lofts issued a promissory mortgage note in the amount
of $5,625,000 and a promissory note to a general partner in the amount of
$340,000 to provide sufficient funds to pay in full the $5,400,000 settlement
amount with the holder in full satisfaction of both the mortgage note, the
unsecured note payable and all related closing costs. The transaction resulted
in an extraordinary gain on extinguishment of debt of $1,656,579. The current
mortgage note on the property: bears interest at 9.0%; amortizes over a 25-year
schedule; requires monthly payments of principal and interest of $47,205; and
matures on July 1, 2006, at which time all unpaid principal and interest is due.
402 Julia is a mix-use property with 24 residential units and 3,500 square feet
of commercial space. 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 required an initial payment of $100,000, which was
received in September 1993, and requires annual payments of $3,500 through 2016
and a final payment of $4,500 in 2017. On July 17, 1998, 402 Julia refinanced
its mortgage debt by issuing a promissory note to a new lender in the amount of
$1,100,000 bearing interest at 6.69%, amortizing over 30 years and maturing in
August 2008, at which time all unpaid interest and principal is due. The
mortgage note requires monthly payments of principal and interest and escrow
deposits (real estate tax and insurance) in the aggregate amount of $7,091 and
$1,312, respectively.
The short-term liquidity of the Investee Entities, with the exception of Jenkins
Court, depends on their ability to generate sufficient rental income to fund
operating expenses and debt service requirements. TCAMP, Portland Lofts and 402
Julia have stabilized operations and, after considering the effects of TCAMP's,
Portland Lofts' and 402 Julia's recent respective refinancings, are expected to
generate cash flow. For the year ended December 31, 1998, the Partnership
received distributions from Portland Lofts and TCAMP totaling $156,000 and
$75,000, respectively. For the year ended December 31, 1997, the Partnership
received distributions from Portland Lofts of $156,000 and for the year ended
December 31, 1996, the Partnership received distributions from Portland Lofts
and TCAMP totaling $26,000 and $98,200, respectively.
As of December 31, 1998 and 1997, the Partnership had $170,981 and $175,288 of
total cash. HPP'89's cash is used primarily to fund general and administrative
expenses of managing the public fund. The Partnership's only source of short
term liquidity is from distributions received from Investee Entities and the
proceeds from the previous sale of a partial interest in 402 Julia. The
Partnership expects to fund its expenses with cash flow distributions from
Portland Lofts and TCAMP.
Distributions from TCAMP to the Partnership and the other member of TCAMP are
subject to the order of distributions as specified in the operating agreement of
TCAMP. Until the other member's original $650,000 capital contribution has been
reduced to zero, to the extent that the Partnership accumulates from whatever
sources operating reserve amounts greater than $140,000 at the end of any fiscal
year, the Partnership is required to contribute such excess within thirty days
of the end of such fiscal year to TCAMP as additional capital contributions to
be distributed by TCAMP to its other member as a return of its original capital
contribution.
As of December 31, 1997, the outstanding balance of TCAMP's other member's
unreturned original $650,000 capital contribution was $223,773. On February 27,
1998, the Partnership contributed to TCAMP $35,288, representing operating
reserves in excess of $140,000 at December 31, 1997. The funds were then
distributed from TCAMP to its other member as a return of its original capital
contribution. On May 18, 1998, TCAMP's other member's original $650,000 capital
contribution was reduced to zero, thereby eliminating any future requirements
for the Partnership to make additional capital contributions to TCAMP.
In late 1998, a dispute developed between HPP'89 and the other member regarding
distributions from TCAMP. The dispute could result in a significant delay and/or
reduction of anticipated distributions by TCAMP to HPP'89, which, in turn, could
have a detrimental effect on HPP'89's short term liquidity. HPP'89 intends to
pursue all of its rights to distributions under the TCAMP Operating Agreement.
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. As a result of the contribution of The Cosmopolitan to
TCAMP for a 50% ownership interest in TCAMP, subsequent to March 14, 1996 HPP'89
no longer had operations directly related to real estate activity. As of the
date of contribution, the Partnership accounts for its investment in TCAMP under
the equity method of accounting.
Due to the foreclosure proceeding related to Jenkins Court, HPP'89 no longer has
an investment in the property. As of December 31, 1995, the investment in
Jenkins Court and its corresponding reserve, both totaling $5,471,055, were
eliminated from the balance sheet.
The Partnership accounts for its investments in its three remaining investee
entities 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 Entity is recorded as
income (loss) with a corresponding increase (decrease) to the investment
account. The allocable portion of losses of an Investee Entity are not recorded
after the respective investment account is reduced to zero. The allocable
portion of earnings of an Investee Entity are not recorded until all previously
unrecorded losses are absorbed. The Partnership's allocable share of operating
income and/or losses in investee entities range from 50% to 99%.
Distributions received are recorded as reductions to the investment account.
Distributions received from an Investee Entity whose respective investment
account has been reduced to zero are recorded as income.
As of December 31, 1998, 402 Julia leased 100% of its residential units and
commercial space. 402 Julia has benefited from a relatively strong New Orleans
market and continues to record stable operations in recent years. The average
occupancy has decreased slightly compared to prior years due to the increased
availability of low mortgage rates in the single family home market. 402 Julia
rents units to residential tenants, half of which are under short-term operating
leases with the remaining rented under month-to-month arrangements. For the year
ended December 31, 1998, 402 Julia recorded a net loss of approximately $26,500
which included depreciation and amortization of approximately $56,000.
At December 31, 1998, Portland Lofts had leased approximately 88% of its
residential apartment units and 95% of the commercial space for a combined
occupancy of 90%. Portland Lofts rents space to residential tenants principally
under month-to-month arrangements and to commercial tenants under operating
leases of varying terms expiring through 2004. As of December 31, 1998, the
Partnership had entered into seventeen commercial leases. The Partnership's
largest commercial tenant occupancies 23% of the commercial space at December
31, 1998, representing only 5.8% of the total square feet of the property. For
the year ended December 31, 1998, Portland Lofts recorded net income of
approximately $4,500 of which included depreciation and amortization of
approximately $286,000.
TCAMP operates in the competitive lowertown district of St. Paul. Despite the
availability of low mortgage rates in the single family house market, the
building has increased rental rates with the market and maintained occupancy
above 95% for several years.
TCAMP has achieved stable occupancy and had an economic occupancy of 97% for the
year ended December 31, 1998. TCAMP recorded net income of approximately
$268,000, which included depreciation and amortization expense of approximately
$271,000, for the year ended December 31, 1998. In 1990, the Partnership had
fully reserved against its investment in Portland Lofts, due to the substantial
doubt it would continue as a going concern. Accordingly, since the Portland
Lofts investment was fully reserved for, the Partnership had cumulative
unrecorded losses of $1,325,926 associated with the investment as of December
31, 1995. Principally as a result of an extraordinary gain on extinguishment of
debt, Portland Lofts generated net income of $1,547,514 in 1996, of which HPP'89
has been allocated $1,532,039. This allocated net income allowed HPP'89 to
recover all of its cumulative unrecorded losses from Portland Lofts. HPP'89's
net income in equity recognized in 1996, after recovery of all cumulative
unrecorded losses, from the Portland Lofts Investment, totaled $206,113. As of
December 31, 1996, the net balance of HPP'89's investment in Portland Lofts
totaled approximately $180,100.
For the year ended December 31, 1997, Portland Lofts allocated a net loss of
$173,710 and paid cash distributions of $156,000 to HPP'89. During 1997,
HPP'89's investment in Portland Lofts was reduced to zero due to allocation of
losses and distributions received. Accordingly, HPP'89 has cumulative unrecorded
losses at December 31, 1997 totaling $95,391 and recorded distributions received
of $54,203 as equity income of Investee Entities. Although HPP'89's investment
in Portland Lofts has been reduced to zero, Portland Lofts has stabilized
operations and will continue to provide distributions to HPP'89.
For the year ended December 31, 1998, the Partnership was allocated net income
of $4,404 from the Portland Lofts investment, reducing the unrecorded losses to
$90,987 at December 31, 1998. For the year ended December 31, 1998, the
Partnership received distributions of $156,000 from Portland Lofts which are
recorded as equity income of Investee Entities.
The Partnership recorded net income, under generally accepted accounting
principles, of $60,571 for the year ended December 31, 1998, compared to a net
loss of $96,522 for the year ended December 31, 1997. This increase is primarily
due to the increase in equity in income of investee entities of $210,651, offset
by an increase in operating administrative expenses of $51,313. The increase in
the Partnership's share of equity in income from investee entities is mainly due
to the activity from Portland Lofts and an increase in TCAMP's allocated net
income, offset by an increase in 402 Julia's allocated net loss. As mentioned
above, the Partnership's net investment balance in Portland Lofts had been
reduced to zero in the third quarter of 1997, as a result of allocated net
losses and distributions received. Therefore, for the year ended December 31,
1997, the Partnership had recorded a net loss from Portland Lofts of $78,314
offset by distributions of $54,206 received in excess of the net investment
balance compared to distributions of $156,000 recorded as equity income of
investee entities for the year ended December 31, 1998 from Portland Lofts. The
increase in TCAMP's allocated net income of $35,630 for 1998 compared to 1997,
is primarily due to increased revenue due to higher rental rates and furniture
rental, offset by a slight increase in operating expenses. The increase in 402
Julia's net loss of $6,749 for 1998 compared to 1997, is primarily attributed to
the amortization of the deferred loan commitment fee related to 402 Julia's
original mortgage which was refinanced in July of 1998. The increase in
operating and administrative expense for 1998 compared to 1997 is due to an
increased overhead requirement of the Partnership.
The Partnership recorded a net loss, under generally accepted accounting
principles, of $96,522 for the year ended December 31, 1997, compared to net
income of $473,848 for the year ended December 31, 1996. This $570,370 decrease
is primarily attributable to transactions relating to the contribution in 1996
of The Cosmopolitan to TCAMP and a decrease in HPP'89's share of equity in
income of investee entities. The contribution of The Cosmopolitan to TCAMP in
1996 resulted in a provision for impairment of real estate of $8,437,963, the
difference between the carrying value and the fair market value of the property
at transfer, and an extraordinary gain on extinguishment of debt of $9,182,017,
the amount outstanding under the mortgage payable and the amount accepted by the
lender from TCAMP in full settlement. The decrease in HPP'89's share of equity
in income of investee entities is primarily due to the allocated net income from
Portland Lofts in 1996. Portland Lofts' net income for the year ended December
31, 1996 was primarily attributable to the extraordinary gain on extinguishment
of debt, the difference between the amount outstanding under the mortgage
payable and previous agreed settlement amount with the holder of the mortgage
and the unsecured note.
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, principally investments in Investee
Entities, are highly leveraged in view of the fact that each Investee property
is subject to a long-term first mortgage loan. Operating expenses and rental
revenue of each Investee 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 and its Investees 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 and Investee
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.
Year 2000 Issues
The Partnership and its Investee Entities have analyzed the effect of the Year
2000 on their respective financial and computer systems and have incorporated
and/or expect to have incorporated the necessary modifications to avert any
negative consequences. The Partnership does not anticipate Year 2000 issues to
have any material effect on its operations or the operations of the Investee
Entities, or incur substantial costs to address Year 2000 issues.
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.
None.
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 52
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, 52, 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, approximately 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 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.
There were no expense reimbursements paid to or accrued, for the years ended
December 31, 1998, 1997 and 1996.
For the years ended December 31, 1998, 1997 and 1996 the Partnership allocated
to the General Partner unaudited taxable income (losses) of $872, $(120,227) and
$(104,578), respectively. See Note 4 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 15, 1999. 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 15, 1999. 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 4 of Notes to Financial Statements for information about transactions
between the Partnership and the General Partner and its affiliates.
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 1998.
<PAGE>
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 15, 1999 By: /s/Terrence P. Sullivan
Terrence P. Sullivan,
President
and
Date: March 15, 1999 By: /s/Terrence P. Sullivan
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
/s/Terrence P. Sullivan Partnership and President, Principal
Terrence P. Sullivan Executive Officer and Director of
Portfolio Advisory Services, Inc.,
Date: March 15, 1999 General Partner of Boston Historic
Partners Limited Partnership.
Principal Financial and Principal
Accounting Officer of Portfolio
/s/Terrence P. Sullivan Advisory Services, Inc., General
Terrence P. Sullivan Partner of Boston Historic Partners
Limited Partnership
Date: March 15, 1999
<PAGE>
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.
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
<PAGE>
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).
<PAGE>
Index to Exhibits
(Continued)
Exhibit No. Title of Documents
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, and Transfer Deed, 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, (filed as Exhibit
10(v) to the Partnership's Form 10-K as of December
31, 1995 and incorporated herein by this reference).
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, (filed as Exhibit 10(w) to the
Partnership's Form 10-K as of December 31, 1995 and
incorporated herein by this reference).
10(x) Property Management Agreement, dated November 1, 1995,
by and between Historic Preservation Properties 1989
L.P. and Claremont Management Corporation, (filed as
Exhibit 10(x) to the Partnership's Form 10-K as of
December 31, 1995 and incorporated herein by this
reference).
10 (y) First Amendment to Loan Documents, dated June 1,
1995, by and between Portland Lofts Associates
Limited Partnership and Capital Consultants, Inc.,
(filed as Exhibit 10(y) to the Partnership's Form
10-K as of December 31, 1995 and incorporated herein
by this reference).
10 (z) Documents relating to the organization and
management of The Cosmopolitan at Mears Park, LLC.
1996 (filed as Exhibit 10(z) to the Partnership's
Form 10-K as of December 31, 1996 and incorporated
herein by this reference).
I. Operating Agreement of the Cosmopolitan at Mears
Park, LLC, dated March 15, 1996 (filed as Exhibit
10(z) to the Partnership's Form 10-K as of
December 31, 1996 and incorporated herein by this
reference).
II. Management Agreement between The Cosmopolitan at
Mears Park, LLC and Claremont Management
Corporation, dated March 20, 1996 (filed as
Exhibit 10 (z) to the Partnership's Form 10-K as
of December 31, 1996 and incorporated herein by
this reference).
10 (aa) Documents relating to the refinancing of The
Cosmopolitan at Mears Park, LLC Mortgage Debt.
(filed as Exhibit 10 (aa) to the Partnership's Form
10-K as of December 31, 1996 and incorporated herein
by this reference).
I. Promissory Note between the Cosmopolitan at Mears
Park, LLC and Heller Financial, Inc., dated March
20, 1996 (filed as Exhibit 10 (aa) to the
Partnership's Form 10-K as of December 31, 1996
and incorporated herein by this reference).
II. Mortgage, Assignment of Rents and Security
Agreement between the Cosmopolitan at Mears Park,
LLC and Heller Financial, Inc., dated March 20,
1996 (filed as Exhibit 10 (aa) to the
Partnership's Form 10-K as of December 31, 1996
and incorporated herein by this reference).
III. Letter Agreement between Patrick Carney and
Heller Financial regarding Personal Liability for
carve-outs to non-recourse language dated March
20, 1996 (filed as Exhibit 10 (aa) to the
Partnership's Form 10-K as of December 31, 1996
and incorporated herein by this reference).
10 (bb) Settlement Agreement of the Amended Construction
Loan to Portland Lofts Associates, L.P., (Amended
Construction Loan Agreement filed as Exhibit No.
10(m) to the Partnership's Form 10-K as of December
31, 1992) (filed as Exhibit 10 (bb) to the
Partnership's Form 10-K as of December 31, 1996 and
incorporated herein by this reference).
10 (cc) Documents relating to the refinancing of the
Portland Lofts Associates, L.P. Mortgage Debt, (all
dated as of June 20, 1996).
I. Promissory Note between Portland Lofts
Associates, L.P. and Bank of America Oregon
(filed as Exhibit 10 Form 10-K as of December 31,
1996 and incorporated herein by this reference).
II. The Standing Loan Agreement between Portland
Lofts Associates, L.P. and Bank of America Oregon
(filed as Exhibit 10 (cc) to the Partnership's
Form 10-K as of December 31, 1996 and
incorporated herein by this reference).
III. The Deed of Trust, with Assignment of Rents,
Security Agreement and Fixture Filing between
Portland Lofts Associates, L.P. and Bank of
America Oregon (filed as Exhibit 10 (cc) to the
Partnership's Form 10-K as of December 31, 1996
and incorporated herein by this reference).
IV. The Payment Guaranty between Joseph W. Angel, II
and Bank of America Oregon (filed as Exhibit 10
(cc) to the Partnership's Form 10-K as of
December 31, 1996 and incorporated herein by this
reference).
V. The Payment Guaranty between Lynne I. Angel and
Bank of America Oregon (filed as Exhibit 10 (cc)
to the Partnership's Form 10-K as of December 31,
1996 and incorporated herein by this reference).
10 (dd) Promissory Note between Portland Loft Associates,
L.P. and Joseph Angel and Lynne Angel, dated
December 18, 1996 (filed as Exhibit 10 (dd) to the
Partnership's Form 10-K as of December 31, 1996 and
incorporated herein by this reference).
10 (ee) Forbearance Agreement between Historic Preservation
Properties 1989, L.P. and East Bank Angel Joint
Venture, dated July 1, 1997 (filed as Exhibit 10(ee)
to the Partnership's Form 10-K as of December 31,
1997 and incorporated herein by this reference).
10 (ff) Asset Management agreement between Historic
Preservation Properties 1989, L.P. and Gunn
Financial Incorporated, dated July 1, 1998.
10 (gg) Documents relating to the refinancing of 402
Julia Street Associates, L.P.'s Mortgage Debt, dated
July 9, 1998.
I. Multifamily Note between 402 Julia Street
Associates, L.P.'s and Investment Property
Mortgage, L.L.C.
II. Multifamily Mortgage, Assignment of Rents and
Security Agreement between 402 Julia Street and
Investment Property Mortgage L.L.C.
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).
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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
Independent Auditors' Report........................................F-4
Balance Sheets as of December 31, 1998 and 1997.....................F-5
Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996...................................F-6
Statements of Changes in Partners' Equity (Deficit) for the
Years Ended December 31, 1998, 1997 and 1996.......................F-7
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996...................................F-8
Notes to Financial Statements.......................................F-10
Independent Auditors' Report on Accompanying Information............F-18
Financial Statement Schedule:
Real Estate and Accumulated Depreciation Held
Directly and by Investee Entities...............................F-19
Financial Statements of The Cosmopolitan at Mears Park, LLC
(the St. Paul, Minnesota
Investee Entity)
Independent Auditors' Report........................................F-21
Balance Sheets as of December 31, 1998 and 1997.....................F-22
Statements of Operations for the Years Ended December 31, 1998
and 1997 and for the Period March 15, 1996 (Inception) through
December 31, 1996 F-23
Statements of Changes in Members' Equity (Deficit) for the Years
Ended December 31, 1998 and 1997 and the Period March 15, 1996
(Inception) through December 31, 1996 F-24
Statements of Cash Flows for the Years Ended December 31, 1998
and 1997 and for the Period March 15, 1996 (Inception) through
December 31, 1996 F-25
Notes to Financial Statements.......................................F-27
Financial Statements of Portland Lofts Associates
Limited Partnership (the Portland, Oregon
Investee Partnership)
Independent Auditors' Report........................................F-32
Balance Sheets as of December 31, 1998 and 1997.....................F-33
Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996...................................F-34
Statements of Changes in Partners' Equity for the
Years Ended December 31, 1998, 1997 and 1996.......................F-35
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996...................................F-36
Notes to Financial Statements.......................................F-38
F-2
INDEX TO FINANCIAL STATEMENTS (Continued)
Page
Financial Statements of 402 Julia Street Associates
Limited Partnership (the New Orleans, Louisiana
Investee Partnership)
Independent Auditors' Report........................................F-43
Balance Sheets as of December 31, 1998 and 1997.....................F-44
Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996...................................F-45
Statements of Changes in Partners' Equity (Deficit) for the
Years Ended December 31, 1998, 1997 and 1996.......................F-46
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996...................................F-47
Notes to Financial Statements.......................................F-48
F-3
INDEPENDENT AUDITORS' REPORT
The Partners
Historic Preservation Properties 1989 Limited Partnership
Boston, Massachusetts
We have audited the accompanying balance sheets of Historic Preservation
Properties 1989 Limited Partnership (the Partnership) as of December 31, 1998
and 1997, and the related statements of operations, partners' equity (deficit)
and cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Because we were not engaged to audit the statements of operations, changes in
partners' equity (deficit) and cash flows for the year ended December 31, 1996,
we did not extend our auditing procedures to enable us to express an opinion on
the results of operations, changes in partners' equity (deficit) and cash flows
of Historic Preservation Properties 1989 Limited Partnership for the year ended
December 31, 1996. Accordingly, we express no opinion on them.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Historic
Preservation Properties 1989 Limited Partnership as of December 31, 1998 and
1997, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 16, 1999
F-4
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
------------- --------------
INVESTMENTS IN INVESTEE ENTITIES $ 4,074,023 $ 4,000,210
Less reserve for realization of investments
in Investee Entities (3,469,267) (3,469,267)
------------- --------------
604,756 530,943
CASH EQUIVALENTS 170,981 175,288
OTHER ASSETS 73,350 77,505
------------- --------------
$ 849,087 $ 783,736
============= ==============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 38,342 $ 33,562
------------- --------------
Total liabilities 38,342 33,562
------------- --------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY
Limited Partners' Equity - Units of Investor
Limited Partnership Interest, $1,000 stated
value per Unit-Issued and outstanding 26,588
units 1,033,973 974,008
General Partner's Deficit (223,228) (223,834)
------------- --------------
Total partners' equity 810,745 750,174
------------- --------------
$ 849,087 $ 783,736
============= ==============
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
--------- --------- ---------
(Unaudited)
REVENUE:
Rental and related income $ -- $ -- $ 533,027
Interest and other income 6,667 8,912 19,368
--------- --------- -----------
6,667 8,912 552,395
--------- --------- -----------
EXPENSES:
Operating and administrative 215,621 164,308 177,397
Property operating expenses:
Other property operating -- -- 57,709
Management fees -- -- 21,940
Repairs and maintenance -- -- 52,728
Utilities -- -- 84,691
Real estate taxes -- -- 85,698
Insurance -- -- 7,295
Depreciation and amortization -- -- 124,804
--------- --------- -----------
215,621 164,308 612,262
PROVISION FOR IMPAIRMENT OF REAL
ESTATE -- -- (8,437,963)
--------- --------- -----------
LOSS FROM OPERATIONS (208,954) (155,396) (8,497,830)
INTEREST EXPENSE -- -- 508,073
EQUITY IN INCOME
OF INVESTEE ENTITIES 269,525 58,874 297,734
--------- --------- -----------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
GAIN 60,571 (96,522) (8,708,169)
EXTRAORDINARY GAIN ON
EXTINGUISHMENT OF DEBT -- -- 9,182,017
--------- --------- -----------
NET INCOME (LOSS) $ 60,571 $ (96,522) $ 473,848
========= ========= ===========
NET INCOME (LOSS) ALLOCATED
TO GENERAL PARTNER $ 606 $ (965) $ 4,738
========= ========= ===========
NET INCOME (LOSS) ALLOCATED
TO LIMITED PARTNERS $ 59,965 $ (95,557) $ 469,110
========= ========= ===========
NET INCOME (LOSS) PER UNIT OF
INVESTOR LIMITED PARTNERSHIP INTEREST,
BASED ON 26,588 UNITS
ISSUED AND OUTSTANDING:
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN $ 2.26 $ (3.59) $ (324.25)
EXTRAORDINARY GAIN - - 341.89
--------- --------- -----------
NET INCOME (LOSS) $ 2.26 $ (3.59) $ 17.64
========= ========= ===========
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
Units of
Investor Investor
Limited Limited General
Partnership Partners' Partner's
Interest Equity Deficit Total
--------- --------- ---------- ----------
BALANCE, December 31, 1995
(Unaudited) 26,588 $ 600,455 $(227,607) $ 372,848
Net Income (Unaudited) -- 469,110 4,738 473,848
------ ----------- --------- ---------
BALANCE, December 31, 1996 26,588 1,069,565 (222,869) 846,696
(Unaudited)
Net Loss -- (95,557) (965) (96,522)
------ ----------- --------- ---------
BALANCE, December 31,1997 26,588 974,008 (223,834) 750,174
Net Income -- 59,965 606 60,571
------ ----------- --------- ---------
BALANCE, December 31, 1998 26,588 $1,033,973 (223,228) 810,745
====== =========== ========= =========
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---------- ---------- ----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 60,571 $ (96,522) $ 473,848
Adjustments to reconcile net income
(loss) to
net cash provided by operating
activities:
Depreciation and amortization - - 124,804
Amortization of discount on mortgage - - 233,893
payable
Provision for impairment of real
estate at transfer of
ownership interest in real estate - - 8,437,963
to investee entity
Extraordinary gain on extinguishment - - (9,182,017)
of debt
Deferred interest expense added to
the principal of mortgage - - 78,237
payable
Equity in income in investee
entities (over) under
distributions received (38,525) 97,126 (173,534)
Decrease (increase) in other assets 4,155 23,650 (23,306)
Increase (decrease) in accounts
payable and accrued expenses 4,780 (12,282) 87,087
---------- ---------- -----------
Net cash provided by operating activities 30,981 11,972 56,975
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment - - (2,694)
Cash payment at transfer of
ownership interest in
Investment in real estate to - - (679,567)
investee entity
Contribution to investee entity (35,288) - -
---------- ---------- -----------
Cash used in investing activities (35,288) - (682,261)
---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH .
AND CASH EQUIVALENTS (4,307) 11,972 (625,286)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR 175,288 163,316 788,602
---------- ---------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR 170,981 175,288 163,316
========== ========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ - $ - $ 301,349
========== ========== ===========
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NON-CASH INVESTING ACTIVITY:
On March 15, 1996, Historic Preservation Properties 1989 Limited Partnership
contributed the following assets and liabilities to The Cosmopolitan at Mears
Park, LLC:
Land $ 1,009,000
Building and improvements 6,074,104
Furniture and equipment 200,994
Cash and cash equivalents 144,633
Cash, security deposits 94,093
Real estate tax escrow 168,416
Rent receivable 6,533
Deferred financing fees 233,397
Mortgage note payable (7,650,000)
Accounts payable and
accrued expenses (184,799)
Security deposits (96,371)
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(1) Organization and General Partner - BHP
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. 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, 1998, BHP had established three such
partnerships, including HPP'89. 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) Summary of Significant Accounting Policies
Investments in Investee Entities
HPP'89 accounts for its investments in its four investee entities
(Investee Entities) 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
Entity is recorded as income (loss) with a corresponding increase
(decrease) to the investment account. The allocable portion of losses of
an Investee Entity are not recorded after the respective investment
account is reduced to zero. The allocable portion of earnings of an
Investee Entity are not recorded until all previously unrecorded losses
are absorbed.
Distributions received are recorded as reductions to the investment
account. Distributions received from an Investee Entity whose respective
investment account has been reduced to zero are recorded as income.
Expenditures attributable to HPP'89's 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.
F-10
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(2) Summary of Significant Accounting Policies (Continued)
Investment in Real Estate and Depreciation
Investment in real estate was held for lease and stated at cost through
the date of contribution to TCAMP (see Note 3). Depreciation was computed
on a straight-line basis over 40 years for real property and over seven
years for personal property.
Cash, Cash Equivalents and Concentration of Credit Risk
HPP'89 considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. At December 31, 1998
and 1997, cash equivalents totaled $170,981 and $175,288, respectively.
At December 31, 1998 and 1997, HPP'89 had approximately $71,000 and
$77,600, respectively, of cash equivalents on deposit in a bank 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 had been
capitalized and were being amortized on a straight-line basis over the
estimated life of real property (40 years) through the date of the
contribution of real estate to TCAMP (see Note 3).
Rental Income
Until March 15, 1996, HPP'89 had a direct ownership interest in a property
located in St. Paul, Minnesota (see Note 3). Revenue under annual
operating leases from that property was recorded when due.
Income Taxes
No provision (benefit) for income taxes is reflected in the accompanying
financial statements of HPP'89. Partners of HPP'89 are required to report
on their tax returns their allocable share of income, gains, losses,
deductions and credits determined on a tax basis.
Reclassification
Certain amounts in the 1997 and 1996 statements of cash flows have been
reclassified to conform with the 1998 presentation.
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies
During 1989, HPP'89 acquired general partnership interests in three
Investee Entities, as well as a direct interest in a property located in
St. Paul, Minnesota. Each such Investee Entity placed a property in
service in December 1989 and commenced initial leasing activity.
As discussed below, in March 1996, HPP'89 contributed land, building and
improvements and furniture and equipment related to its property located
in St. Paul, Minnesota (the Cosmopolitan Building), and certain other
assets and liabilities, to a limited liability company for a 50% ownership
interest in the Investee Entity.
HPP'89's current allocable percentage of operating income and/or losses in
the Investee Entities ranges from 50% to 99%. Each of the Investee
Entities' agreements is different but, in general, provides for a sharing
of management duties and decisions among HPP'89 and the respective local
general partners or
F-11
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
other managing members, and certain priorities to HPP'89 with respect to
return on and return of invested capital. Significant Investee Entity
decisions require the approval of both HPP'89 and the local general
partners or other managing members. In addition, each Investee Entity has
entered into various agreements with its local general partners or
members, or their affiliates, to provide development, management and other
services, for which the local general partners or other members (or their
affiliates), are paid fees by the respective Investee Entity.
Following is a summary of information regarding the Investee Entities and
HPP'89's investments therein:
Jenkins Court Associates Limited Partnership (Jenkins Court) is a Delaware
limited partnership which was 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 the date of Jenkins Court's Chapter
11 filing (see below) to the capital of Jenkins Court and had a general
partnership interest therein. HPP'89's investment in Jenkins Court
represented approximately 36% of the aggregate amount which HPP'89
originally contributed to the capital of its three Investee Entities
acquired during 1989 and to purchase its direct interest in the
Cosmopolitan Building.
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, after maximum vesting of the remaining Rehabilitation Tax
Credits had been achieved for 1995 and considering the unlikelihood of a
successful plan of reorganization, Jenkins Court and the mortgage holder
entered into a settlement agreement under which Jenkins Court transferred
the deed and title of the property to the mortgage holder. The mortgage
holder released 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, of
which $44,007 was allocated to the Limited Partners of HPP'89. Tax credits
allocated to the Limited Partners of HPP'89 totaling $2,758,113 were
vested on or before June 15, 1995. Therefore, 98.4% of the Limited
Partners' tax credits were vested prior to the loss of the property.
Although Jenkins Court no longer owns investment property or has property
operations after August 31, 1995, the Jenkins Court partnership will
remain in existence until the resolution of certain partnership assets and
liabilities. Partnership assets include approximately $312,000 of
unsecured receivables from the developer and its affiliates which have
been fully reserved for at December 31, 1998 and 1997; partnership
liabilities include approximately $94,000 of trade payables which have
been fully reserved for at December 31, 1998 and 1997 since HPP'89 does
not believe such amount will be recourse to HPP'89, 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.
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, 1998, 402 Julia had leased 100% (unaudited) of
its residential units and commercial space.
HPP'89 originally contributed $775,000 to the capital of 402 Julia and
owns a general partnership interest therein. HPP'89's original investment
in 402 Julia represented approximately 4% of the aggregate amount which
HPP'89 has contributed to the capital of its three Investee Entities
acquired in 1989 and to purchase its direct interest in the Cosmopolitan
Building.
F-12
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
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 required an initial payment of $100,000,
which was received in September 1993, and requires annual payments of
$3,500 through 2016 and a final payment of $4,500 in 2017. At December 31,
1998 and 1997, the remaining uncollected payments total $67,500 and
$71,000, respectively, which are secured by the interest sold to the
developer general partner. The sale transaction did not generate any
Investment Tax Credit recapture.
Rehabilitation Tax Credits generated by 402 Julia and previously allocated
to HPP'89 Limited Partners totaled $248,796 since inception. As of March
31, 1995, 100% of these credits were fully vested.
HPP'89 recorded a net loss from the 402 Julia Investment of $17,345,
$10,596 and $3,327 for the years ended December 31, 1998, 1997, and 1996,
respectively, as well as amortization of $3,252 for each of the years
ended December 31, 1998, 1997 and 1996.
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 89
residential units and 29,250 square feet of 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, 1998,
Portland Lofts had leased approximately 88% (unaudited) of its residential
apartment units and 95% (unaudited) of the commercial space for a combined
occupancy of 90% (unaudited).
HPP'89 contributed $3,820,000 through December 31, 1998 to the capital of
Portland Lofts and owns a general partnership interest therein. HPP'89's
investment in Portland Lofts represents approximately 21% of the aggregate
amount which HPP'89 originally contributed to the capital of its three
Investee Entities acquired in 1989 and to purchase its direct interest in
the Cosmopolitan Building.
Rehabilitation Tax Credits generated by Portland Lofts and allocated to
HPP'89's Limited Partners totaled $1,775,571 since inception. As of April
1, 1996, 100% of these tax credits were fully vested.
On May 21, 1996, Portland Lofts and the holder of its mortgage note and a
$550,000 unsecured note entered into a Settlement Agreement (the
Agreement) to resolve claims concerning the mortgage note and the
unsecured note (the Notes). According to the Agreement, Portland Lofts was
allowed, until July 31, 1996, to pay $5,400,000 to the holder in full
satisfaction of the Notes.
On June 20, 1996, Portland Lofts issued a promissory mortgage note to a
bank in the amount of $5,625,000 and a promissory note to one of its
general partners in the amount of $340,000 to provide sufficient funds to
pay in full the $5,400,000 settlement amount with the holder, a separate
$400,000 note payable and all related closing costs. The transaction
resulted in an extraordinary gain on extinguishment of debt of $1,656,579.
In 1990, HPP'89 had reserved against its investment in Portland Lofts
reducing such investment to zero due to the substantial doubt that
Portland Lofts may not be able to continue as a going concern. Due to the
debt settlement and refinancing completed in June 1996, Portland Lofts is
expected to continue as a going concern. Generally, under the equity
method of accounting, an investment may not be carried below zero.
Accordingly, since the Portland Lofts Investment was fully reserved for,
HPP'89 had cumulative unrecorded losses of $1,325,926 at December 31,
1995. Principally as a result of the extraordinary gain on extinguishment
of debt, Portland Lofts generated net income of $1,547,514 during the year
ended December 31, 1996 of which HPP'89
F-13
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
has been allocated $1,532,039. Consequently, HPP'89 was able to recover
all of its cumulative unrecorded losses from Portland Lofts and recognize
income in equity from its investment in Portland Lofts of $206,113 for the
year ended December 31, 1996.
For the year ended December 31, 1997, Portland Lofts allocated a net loss
of $173,710 and paid cash distributions of $156,000 to HPP'89. As
mentioned above, generally, under the equity method of accounting, an
investment may not be carried below zero. During 1997, HPP'89's investment
in Portland Lofts was reduced to zero due to allocated losses and
distributions received. Although HPP'89's investment in Portland Lofts has
been reduced to zero, Portland Lofts is expected to continue as a going
concern and to continue to provide distributions to HPP'89. At December
31, 1997, HPP'89 has cumulative unrecorded losses totaling $95,392
relating to the Portland Lofts investment.
For the year ended December 31, 1998, HPP'89 was allocated net income of
$4,404 from Portland Lofts, thereby decreasing the cumulative unrecorded
loss relating to the Portland Lofts investment to $90,988 at December 31,
1998.
For each of the years ended December 31, 1998 and 1997, HPP'89 received
distributions of $156,000, from the Portland Lofts investment and recorded
distributions received of $156,000 and $54,206, respectively, as equity in
income of investee entities.
The Cosmopolitan at Mears Park, LLC (TCAMP) On December 18, 1989, HPP'89
acquired the Cosmopolitan Building containing 255 residential units and
approximately 2,200 square feet of commercial space. The building was
renovated, and certain renovation costs qualified for Rehabilitation Tax
Credits. HPP'89's investment in The Cosmopolitan Building represented
approximately 39% of the aggregate amount which HPP'89 originally
contributed to the capital of its three Investee Entities acquired in 1989
and to purchase its direct interest in the Cosmopolitan Building. During
the year ended December 31, 1998 the economic occupancy of TCAMP was 97%
(unaudited).
Rehabilitation Tax Credits generated by the purchase of the Cosmopolitan
Building and previously allocated to HPP'89's Limited Partners totaled
$4,307,491 since inception. As of December 31, 1994, 100% of these tax
credits were fully vested.
The mortgage HPP'89 assumed relating to its purchase of the Cosmopolitan
Building had an original maturity date of December 18, 1999. On January 5,
1995, HPP'89 consummated the Second Amendment to the Loan Agreement
(Second Amendment) with the holder and received an option to buy the
mortgage note for the fair market value of the property. In exchange,
HPP'89 agreed to reduce the maturity date of the note from December 18,
1999 to December 18, 1996.
Effective March 15, 1996, HPP'89 contributed the Cosmopolitan Building,
and certain other assets and liabilities, to TCAMP (a Limited Liability
Company) for a 50% ownership interest. Concurrently, another member
contributed $650,000 cash to TCAMP for a 50% ownership interest.
Simultaneously, TCAMP issued a mortgage note in the amount of $7,000,000,
the proceeds of which along with the $650,000 contributed cash were used
to settle in full HPP'89's mortgage note payable related to the
Cosmopolitan Building. The fair value
F-14
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
of the Cosmopolitan Building and other assets contributed by HPP'89
approximated the fair value of liabilities transferred to TCAMP by HPP'89
and the amount paid by TCAMP to settle in full HPP'89's mortgage note
payable related to the Cosmopolitan Building. This transaction resulted in
a provision for impairment of real estate of $8,437,963 to recognize a
reduction to fair value at the date of contribution to TCAMP and an
extraordinary gain on debt extinguishment of $9,182,017 to recognize the
difference between the amount outstanding under the mortgage payable and
the amount accepted by the lender from TCAMP in full settlement.
Distributions from TCAMP to HPP'89 and the other member are subject to the
order of distributions as specified in the Operating Agreement of TCAMP.
Until the other member's original $650,000 capital contribution has been
repaid in full, to the extent that the Partnership accumulates from
whatever sources operating reserve amounts greater than $140,000 at the
end of any fiscal year, the Partnership is required to contribute such
excess within thirty days of the end of such fiscal year to TCAMP as
additional capital contributions to be distributed by TCAMP to its other
member as a return of its original capital contribution.
On February 27, 1998, HPP'89 contributed to TCAMP $35,288, representing
operating reserves in excess of $140,000 at December 31, 1997. The funds
were then distributed from TCAMP to its other member as a return of its
original capital contribution. As of December 31, 1997, the outstanding
balance of the other member's unreturned original $650,000 capital
contribution was $223,773. On May 18, 1998 the other member's original
$650,000 capital contribution was reduced to zero, thereby eliminating any
future requirements for HPP'89 to make additional capital contributions to
TCAMP.
As a result of the contribution of the Cosmopolitan to TCAMP for a 50%
ownership interest in TCAMP, HPP'89 no longer has operations directly
related to real estate activity. As of March 15, 1996 (the date of
contribution), the Partnership accounts for its investment in TCAMP under
the equity method of accounting.
HPP'89 recorded net income of $134,122, $96,834 and $32,334 for the years
ended December 31, 1998 and 1997 and for the period March 15, 1996
(inception) through December 31, 1996, respectively, from the TCAMP
Investment. HPP'89 received cash distributions of $75,000 and $98,200 from
TCAMP for the year ended December 31, 1998 and for the period March 15,
1996 (inception) through December 31, 1996, respectively. Generally, under
the equity method of accounting, an investment cannot be carried below
zero. At December 31, 1996, HPP'89 reduced its investment in TCAMP to zero
and recorded distributions received of $65,866 as equity in income of
investee entities.
HPP'89's investments in the Investee Entities at December 31, 1998 and
1997 are summarized as follows:
Cumulative: 1998 1997
------------ -------------
Investments and advances
made in cash $ 4,880,288 $ 4,845,000
Evaluation and acquisition costs 835,709 835,709
Interest capitalization and
other costs 39,615 39,615
Net equity in loss of Investee
Entities (879,041) (1,151,818)
Reserves for realization of
investments (3,469,267) (3,469,267)
Amortization of certain costs (49,728) (46,476)
Distributions received from
Investee Entities (511,200) (280,200)
Sale of one third interest of
Investee Entity (241,620) (241,620)
------------- -------------
$ 604,756 $ 530,943
============ =============
The above summary of HPP'89's investments in Investee Entities does not
include its investment in Jenkins Court.
F-15
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
The equity in income of Investee Entities reflected in the accompanying
statements of operations included income of $272,777, $62,126 and $300,986
(unaudited) for the years ended December 31, 1998, 1997 and 1996,
respectively, and annual amortization of certain costs of $3,252, for the
years ended December 31, 1998, 1997 and 1996 (unaudited), respectively.
Summary combined balance sheets of the Investee Entities as of December
31, 1998 and 1997, and summary combined statements of operations for the
years ended December 31, 1998, 1997 and 1996 are as follows:
COMBINED BALANCE SHEETS
ASSETS
1998 1997
------------ ------------
Buildings and improvements, (net
of accumulated depreciation;
$3,446,938, 1998; $2,896,633,
1997) $ 15,344,965 $ 15,855,990
Land 2,041,326 2,041,326
Other assets (net of accumulated
amortization;$123,795, 1998;
$105,860, 1997) 600,899 469,949
Cash and cash equivalents 287,348 173,000
------------ ------------
Total assets $ 18,274,538 $ 18,540,265
============ ============
LIABILITIES AND PARTNERS' EQUITY
1998 1997
------------ ------------
Liabilities:
Mortgage and notes payable $ 13,339,188 $13,412,706
Other liabilities 726,135 735,828
------------ ------------
Total liabilities 14,065,323 14,148,534
------------ ------------
Partners' equity:
HPP'89 3,311,062 2,983,908
Other partners 898,153 1,407,823
------------ ------------
Total partners' equity 4,209,215 4,391,731
------------ ------------
Total liabilities
and partners' equity $ 18,274,538 $18,540,265
============ ============
Members' equity in TCAMP has been classified as partners'
equity in the combined balance sheets.
F-16
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
COMBINED STATEMENTS OF OPERATIONS
1998 1997 1996
------------ ---------- -----------
(Unaudited)
Revenue:
Rental revenue $ 3,904,024 $ 3,626,904 $ 3,006,379
Interest and other
income 56,095 76,817 70,324
------------ ---------- -----------
3,960,119 3,703,721 3,076,703
------------ ---------- -----------
Expenses:
Interest expense 1,239,999 1,269,792 1,187,076
Depreciation and
amortization 613,471 594,870 548,737
Operating expenses 1,860,506 1,837,075 1,390,379
------------ ---------- -----------
3,713,976 3,701,737 3,126,192
------------ ---------- -----------
Net income(loss)from
operations 246,143 1,984 (49,489)
Extraordinary item: gain on
settlement of debt - - 1,656,579
------------ ---------- -----------
Net income $ 246,143 $ 1,984 $ 1,607,090
============ ========== ===========
Net income allocated to
other partners $ 121,182 $(87,472) $ 1,561,047
============ ========== ===========
$ 124,961 $ 89,456 $ 46,043
============ ========== ===========
(4) Transactions With Related Parties and Commitments
On October 1, 1995, HPP'89 engaged Claremont Management Corporation (CMC),
a Massachusetts corporation previously unaffiliated and a related party as
of March 15, 1996 through ownership by a member of TCAMP, to provide asset
management, accounting and investor services. CMC provided such services
for an annual management fee of $67,200 plus reimbursement of all its
costs of providing these services. The contract with CMC expired June 30,
1998. For the period January 1, 1998 through June 30, 1998 and for the
years ended December 31, 1997 and 1996, CMC was reimbursed $50,716,
$73,850 and $61,635 (unaudited), respectively, for operating costs.
Effective July 1, 1998, HPP'89 engaged Gunn Financial, Inc. (GFI), an
unaffiliated Massachusetts corporation, to provide accounting, asset
management and investor services. GFI provides such services for an annual
management fee of $63,000 plus reimbursement of all its costs of providing
these services. The agreement expires on the earlier of June 30, 2006 or
liquidation of the Partnership, as defined. For the period July 1, 1998
through December 31, 1998, GFI was reimbursed $56,109 for operating costs.
On November 1, 1995, HPP'89 entered into a management agreement with CMC,
to manage the Cosmopolitan Building. CMC's management agreement required
the payment of management fees equal to the greater of $5,200 monthly or
4% of gross receipts as defined in the agreements. For the period January
1, 1996 through March 15, 1996, CMC was paid $21,940 (unaudited) in
property management fees. On March 15, 1996, the property management
contract between HPP'89 and CMC was terminated and TCAMP directly engaged
CMC under similar management fee terms.
(5) Fair Value of Financial Instruments
The fair values of cash equivalents and accounts payable and accrued
expenses at December 31, 1998 and 1997 approximate their carrying amounts
due to their short maturities.
F-17
Independent Auditors' Report on Accompanying Information
The Partners
Historic Preservation Properties 1989 Limited Partnership
Boston, Massachusetts
We have audited, in accordance with generally accepted auditing
standards, the financial statements as of and for the years ended
December 31, 1998 and 1997 of Historic Preservation Properties 1989
Limited Partnership (the Partnership) and have issued our report
thereon dated February 16, 1999. Our audits were made for the
purpose of forming an opinion on the 1998 and 1997 basic financial
statements taken as a whole. The supplemental schedule is the
responsibility of the Partnership's management and is presented for
the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the 1998 and 1997 basic
financial statements. The information included in this schedule
has been subjected to the auditing procedures applied in the audits
of the 1998 and 1997 basic financial statements, and in our
opinion fairly states in all material respects the financial data
required to be set forth therein in relation to the 1998 and 1997
basic financial statements as a whole.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 16, 1999
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES
DECEMBER 31, 1998
(IN THOUSANDS)
Costs Capitalized
Initial Costs Subsequent to
Acquisition
Description Building
and Ownership Encum- & Improve- Improve- Carrying
Percentage brances Land memts ment Cost
Residential
Building/Commercial
Building
402 Julia Street
Associates L.P.
New Orleans, Louisiana
65% $1,096 $ 133 $ 282 $ 1,154 $ 145
Residential
Building/Commercial
Building
Portland Lofts
Associates L.P.
Portland, Oregon
99% 5,463 900 886 9,273 610
Residential Building
The Cosmopolitan at
Mears Park, LLC
St. Paul, Minnesota
50% 6,780 1,009 6,074 368 -
-------- ------- --------- --------- --------
Total $ 13,339 $2,042 $ 7,242 $ 10,795 $ 755
========= ======= ========= ========= ========
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES
DECEMBER 31, 1998
(IN THOUSANDS)
Gross Amounts at
December 31,
1998 (Note 1)
Building
Description and &
Ownership Percentage Land Improve- Accumulated
ments Depreciation
(Note 3) Total (Note2)
Residential
Building/Commercial
Building
402 Julia Street
Associates L.P.
New Orleans, Louisiana
65% $ 133 $ 1,581 $ 1,714 $ 356
Residential
Building/Commercial
Building
Portland Lofts
Associates L.P.
Portland, Oregon
99% 900 10,769 11,669 2,447
Residential Building
The Cosmopolitan at
MearsPark, LLC
St. Paul, Minnesota
50% 1,009 6,442 7,451 644
-------- ------- --------- ---------
Total $ 2,042 $ 18,792 $ 20,834 $ 3,447
========= ========= ========== ===========
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES
DECEMBER 31, 1998
(IN THOUSANDS)
Description and Construction
or Interest Life
Ownership Percentage Rehabilitation Acquired (Years)
Residential Building/Commercial
Building
402 Julia Street Associates L.P.
New Orleans, Louisiana
65% 8/1/89 7/25/89 40
Residential Building/Commercial
Building
Portland Lofts Associates L.P.
Portland, Oregon
99% 8/31/89 8/8/89 40
Residential Building
The Cosmopolitan at Mears
Park, LLC
St. Paul, Minnesota
50% 12/18/89 3/15/96 34
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS)
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, 1998,
1997 and 1996 are as follows:
1998 1997 1996
----------- ------------- -------------
Jenkintown,
Pennsylvania $ - $ - $ -
New Orleans,
Louisiana 1,457 1,457 1,457
Portland, Oregon 4,207 4,207 9,799
St. Paul, Minnesota 16,638 16,598 21,642
----------- ------------- -------------
$ 22,302 $ 22,262 $ 32,898
========= =========== ===========
Note 2: The changes in accumulated depreciation for the years ended December 31,
1998, 1997 and 1996 are as follows:
1998 1997 1996
----------- ------------- -------------
Balance at
beginning of period $ 2,897 $ 2,351 $ 4,692
Depreciation during
the year 550 546 620
Transfer of property - - (2,961)
----------- ------------- -------------
$ 3,447 2,897 2,351
=========== ============= =============
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS)
Note 3: The changes in total costs of land, building and improvements
for the years ended December 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996
----------- ------------- -------------
Balance at
beginning of period $ 20,794 $ 20,774 $ 29,103
Additional
improvements 40 20 109
Provisions for write
down of building &
improvement
(The Cosmopolitan) - - (8,438)
---------- ----------- -----------
Balance at end of
period $ 20,834 $ 20,794 $ 20,774
=========== ============= =============
F-19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 170,981
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 849,087
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 849,087
<SALES> 0
<TOTAL-REVENUES> 6,667
<CGS> 0
<TOTAL-COSTS> 215,621
<OTHER-EXPENSES> (269,525)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,571
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,571
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.26
</TABLE>
THE COSMOPOLITAN AT MEARS PARK, LLC
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
Table of Contents
Page
Independent Auditors' Report F-21
Balance Sheets as of December 31, 1998 and 1997 F-22
Statements of Operations for the Years Ended December 31,
1998 and 1997 and for the Period March 15, 1996 (Inception)
through December 31, 1996 F-23
Statements of Changes in Members' Equity (Deficit) for the
Years Ended December 31, 1998 and 1997 and for the Period March 15,
1996 (Inception)through December 31, 1996 F-24
Statements of Cash Flows for the Years Ended December 31,
1998 and 1997 and the Period March 15, 1996 (Inception) through
December 31, 1996 F-25
Notes to Financial Statements F-27
F-20
INDEPENDENT AUDITORS' REPORT
The Members
The Cosmopolitan at Mears Park, LLC
Boston, Massachusetts
We have audited the accompanying balance sheets of The Cosmopolitan at
Mears Park, LLC (the "Company") as of December 31, 1998 and 1997, and the
related statements of operations, changes in members' equity (deficit) and cash
flows for the years ended December 31, 1998 and 1997 and for the period March
15, 1996 (inception) through December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Cosmopolitan at Mears
Park, LLC as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended and for the period March 15, 1996
(inception) through December 31, 1996 in conformity with generally accepted
accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 16, 1999
F-21
THE COSMOPOLITAN AT MEARS PARK, LLC
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
---------- ----------
Investment in real estate:
Land $1,009,000 $1,009,000
Building and improvements 6,215,517 6,194,821
Furniture and equipment 226,060 207,476
---------- ----------
7,450,577 7,411,297
Less accumulated depreciation 644,376 407,054
---------- ----------
6,806,201 7,004,243
Cash 58,439 51,763
Cash equivalent, security deposits 82,275 21,069
Real estate tax escrow 94,279 56,557
Replacement reserve 43,023 38,641
Rent receivable 1,949 1,775
Prepaid expenses 20,080 17,563
Deferred financing fees, less accumulated amortization
(1998, $91,697; 1997, $58,349) 141,700 175,048
---------- ----------
$7,247,946 $7,366,659
========== ==========
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Mortgage note payable $6,779,916 $6,868,764
Accounts payable and accrued expenses 102,821 61,499
Accrued interest 51,640 52,317
Security deposits 110,630 103,955
---------- ----------
Total liabilities 7,045,007 7,086,535
Commitments (Notes 4 and 5)
Members' equity 202,939 280,124
---------- ----------
$7,247,946 $7,366,659
========== ==========
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
1998 1997 1996
---------- ---------- ----------
Revenue:
Rental income $2,464,338 $2,302,138 $1,659,166
Interest and other income 23,559 26,254 15,637
---------- ---------- ----------
Total revenue 2,487,897 2,328,392 1,674,803
---------- ---------- ----------
Expenses:
Operating and administrative 272,679 232,858 171,672
Management fee 99,507 93,136 66,819
Repairs and maintenance 224,506 228,972 164,186
Utilities 325,242 315,586 237,425
Real estate taxes 370,602 332,496 251,926
Insurance 32,980 32,590 22,839
Depreciation and amortization 270,670 267,827 197,576
---------- ---------- ----------
Total expenses 1,596,186 1,503,465 1,112,443
---------- ---------- ----------
Income from operations 891,711 824,927 562,360
Interest expense 623,467 631,259 497,692
---------- ---------- ----------
Net income $ 268,244 $ 193,668 $ 64,668
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
Historic
Preservation
Properties
1989 Total
Lillian Limited Members'
Carney Partnership Equity
-------------- --------------- --------------
Capital contributions $ 650,000 $ - $ 650,000
Distributions (61,750) (98,200) (159,950)
Net income 32,334 32,334 64,668
-------------- --------------- --------------
Balance, December 31, 1996 620,584 (65,866) 554,718
Distributions (468,262) - (468,262)
Net income 96,834 96,834 193,668
-------------- --------------- --------------
Balance, December 31, 1997 249,156 30,968 280,124
Distribution (305,717) (75,000) (380,717)
Contribution - 35,288 35,288
Net income 134,122 134,122 268,244
-------------- --------------- --------------
Balance, December 31, 1998 $ 77,561 $ 125,378 $ 202,939
============== =============== ============
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 268,244 $ 193,668 $ 64,668
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 270,670 267,827 197,576
Decrease (increase) in rent
receivable (174) (1,077) 5,835
Increase in prepaid expenses (2,517) (2,352) (15,211)
Increase (decrease) in accounts
payable and accrued expenses 41,322 (2,548) (129,496)
Decrease (increase) in cash
equivalent, security deposits, net (54,531) 87,589 (6,981)
Increase (decrease) in accrued
interest (677) (618) 52,935
------------ ------------ ------------
Net cash provided by operating
activities 522,337 542,489 169,326
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Funds disbursed for acquisition
of real estate and property assets
and liabilities - - (650,000)
Purchase of improvements, furniture
and equipment (39,280) (16,721) (101,734)
Decrease (increase) in real estate
tax escrow and replacement reserve (42,104) 6,661 66,557
------------ ------------ ------------
Net cash used in investing
activities (81,384) (10,060) (685,177)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from member contribution 35,288 - 650,000
Principal payments on mortgage note
payable (88,848) (81,115) (50,121)
Distributions to members (380,717) (468,262) (159,950)
------------ ------------ ------------
Net cash provided by (used in)
financing activities (434,277) (549,377) 439,929
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 6,676 (16,948) (75,922)
CASH, BEGINNING 51,763 68,711 144,633
------------ ------------ ------------
CASH, END OF YEAR $ 58,439 $ 51,763 $ 68,711
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 624,144 $ 631,877 $ 444,757
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
NON-CASH INVESTING ACTIVITY:
On March 15, 1996, Historic Preservation Properties 1989 Limited Partnership
contributed the following assets and liabilities to The Cosmopolitan at Mears
Park, LLC:
Land $ 1,009,000
Building and improvements 6,074,104
Furniture and equipment 200,994
Cash and cash equivalents 144,633
Cash, security deposits 94,093
Real estate tax escrow 168,416
Rent receivable 6,533
Deferred financing fees 233,397
Mortgage note payable paid by TCAMP on behalf of HPP'89 (7,650,000)
Accounts payable and accrued expenses (184,799)
Security deposits (96,371)
Also, on March 15, 1996, The Cosmopolitan at Mears Park, LLC paid the above
noted $7,650,000 mortgage note in full with the proceeds of a $7,000,000
mortgage note issued to a lender and $650,000 of cash contributions received
from a Member.
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(1) Organization and Description of Business
The Cosmopolitan at Mears Park, LLC (TCAMP), a Limited Liability Company,
was formed on March 15, 1996, under the Delaware Limited Liability Company
Act. The purpose of TCAMP is to engage in investment in, and operation and
development of, real estate and interests therein. The members of TCAMP
are Historic Preservation Properties 1989 Limited Partnership and Lillian
Carney (the Members).
Effective March 15, 1996, Historic Preservation Properties 1989 Limited
Partnership (HPP'89) contributed land, building and improvements and
furniture and equipment (Contributed Real Estate), and certain other
assets and liabilities to TCAMP for a 50% ownership interest.
Concurrently, Lillian Carney contributed $650,000 cash to TCAMP for a 50%
ownership interest. Simultaneously, TCAMP issued a $7,000,000 mortgage
note, the proceeds of which, along with the $650,000 contributed cash,
were used to settle in full HPP'89's mortgage note payable related to the
Contributed Real Estate. The fair value of the Contributed Real Estate and
other assets contributed by HPP'89 approximated the fair value of
liabilities transferred to TCAMP by HPP'89 and the amount paid by TCAMP to
settle in full HPP'89's mortgage note payable related to the Contributed
Real Estate.
TCAMP owns a residential apartment complex containing 255 units located at
250 6th Street, St. Paul, Minnesota. During the year ended December 31,
1998, the economic occupancy of TCAMP was 97% (unaudited).
(2) Basis of Presentation and Summary of Significant Accounting Policies
Basis of accounting
TCAMP'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.
Investment in real estate and depreciation
Investment in real estate is held for lease. Contributed Real Estate was
recorded at fair value and subsequent additions are stated at cost.
Depreciation is computed on a straight-line basis over the estimated
economic lives of the assets.
Depreciation expense for the years ended December 31, 1998, 1997 and for
the period March 15, 1996 (inception) through December 31, 1996 totaled $
237,322, $234,485 and $172,569, respectively.
F-27
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(2) Basis of Presentation and Summary of Significant Accounting Policies
(Continued)
Cash, cash equivalents and concentration of credit risk
TCAMP considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Cash equivalents at
December 31, 1998 and 1997 totaled $81,990 and $21,069, respectively.
At December 31, 1998 and 1997, TCAMP had $81,990 and $20,980,
respectively, of cash and cash equivalents on deposit in banks in excess
of amounts insured by the Federal Deposit Insurance Corporation.
Deferred financing fees
Deferred financing fees have been capitalized and are being amortized on a
straight-line basis over the term of the mortgage note payable.
Amortization expense for the years ended December 31, 1998, 1997 and for
the period March 15, 1996 (inception) through December 31, 1996 totaled
$33,348, $33,342 and $25,007, respectively.
Revenue recognition
Revenue, principally under annual operating leases, is recorded when due.
In most cases, management expects that in the normal course of business,
leases will be renewed or replaced by other leases.
Income taxes
No provision (benefit) for income taxes is reflected in the accompanying
financial statements since the Members of TCAMP are required to report
their allocable share of net income (loss) on their respective income tax
returns.
(3) Mortgage Note Payable and Escrow Accounts
TCAMP's mortgage note with the lender bears interest at 9.14% per annum
and amortizes over a 25 year schedule. The mortgage note requires monthly
payments of principal and interest, real estate tax escrow deposits and
replacement reserve deposits of $59,416, $30,884 and $4,250, respectively.
The mortgage note matures in March 2003, at which time all unpaid
principal and accrued interest is due. The mortgage note is secured by
TCAMP's property, rents and assignments of leases.
At December 31, 1998, annual maturities of the mortgage note for each of
the next five years are as follows:
Year Ending December 31, Amount
1999 $ 97,321
2000 106,599
2001 116,761
2002 127,891
2003 6,331,344
F-28
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(4) Related Party Transaction and Commitment
TCAMP entered into a management agreement with Claremont Management
Corporation (CMC) to manage the property. The sole shareholder of CMC is
related to Lillian Carney. The agreement expires on June 30, 1999 and
automatically renews thereafter on an annual basis, unless terminated as
provided for in the agreement. The management agreement requires the
payment of a management fee equal to the greater of $5,200 monthly or 4%
of gross receipts, as defined in the agreement, plus the reimbursement of
all CMC's costs of providing these services. Management fees under the
management agreement totaled $99,507, $93,136 and $66,819, respectively,
for the years ended December 31, 1998, 1997 and the period March 15, 1996
(inception) through December 31, 1996. Expense reimbursements to CMC for
the years ended December 31, 1998, 1997 and the period March 15, 1996
(inception) through December 31, 1996 totaled $282,412, $264,484 and
$208,820, respectively.
During the period March 15, 1996 (inception) through December 31, 1996,
TCAMP paid $8,744 in construction management fees to First Claremont
Corporation, an affiliate of CMC.
(5) Liability of Members and Distributions of Cash
The liability of the Members for losses, debts and obligations of TCAMP is
limited to their capital contributions, except under applicable law
Members may, under certain circumstances, be liable to TCAMP to the extent
of previous distributions received by the Members in the event TCAMP does
not have sufficient assets to discharge its liabilities.
Distributions by TCAMP to the Members at the end of each fiscal year, or
at such time as determined by the Board of Managers, are as follows:
(i) First, to Lillian Carney in payment of any current or accrued
portion of the 12% preferred return on her unreturned original
capital contribution;
(ii) Second, to HPP'89, as the Preferred Return, in an amount when added
to all other cash available to HPP'89 from its operations or any
other source equals $140,000;
(iii) Third, to Lillian Carney in payment of any unpaid principal portion
of Lillian Carney's original capital contribution;
(iv) Fourth, to the payment of any principal or interest due with respect
to any loans from Members, with any such payments to be applied
first to accrued but unpaid interest and then to principal; and
(iv) Fifth, the balance, if any, to the Members in accordance with their
respective percentage interests (50% HPP'89 and 50% Lillian Carney).
To the extent that HPP'89 accumulated from whatever sources operating
reserve amounts greater than $140,000 at the end of any fiscal year,
HPP'89 was required to contribute such excess within thirty days of the
end of such fiscal year to TCAMP as additional capital contributions to be
distributed by TCAMP to Lillian Carney as a return of the outstanding
portion of her original capital contribution until her original capital
contribution was reduced to zero.
F-29
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(5) Liability of Members and Distributions of Cash (Continued)
Distributions to Lillian Carney for the years ended December 31, 1998,
1997 and for the period March 15, 1996 to December 31, 1996 include a 12%
preferred return of $6,944, $42,035 and $61,750, respectively.
Distributions to Lillian Carney for the years ended December 31, 1998 and
1997 also include a return of $223,773 and $426,227 of her original
capital contribution. On February 27, 1998, HPP'89 contributed to TCAMP an
additional $35,288 representing operating reserves in excess of $140,000
as of December 31, 1997. The funds were then distributed to Lillian Carney
by TCAMP as a return of her original capital contribution. On May 18,
1998, TCAMP had returned the total outstanding portion of Lillian Carney's
original $650,000 capital contribution. For the remainder of 1998, TCAMP
also distributed $75,000 each to HPP'89 and Lillian Carney.
(6) Fair Value of Financial Instruments
At December 31, 1998 and 1997, the carrying amounts of cash, cash
equivalent security deposits, real estate tax escrow, replacement reserve,
rent receivable, prepaid expenses, accounts payable and accrued expenses,
accrued interest and security deposits approximate their fair values due
to their short maturities. The fair value of the mortgage note payable at
December 31, 1998 and 1997 approximates its carrying amount based on
interest rates available to TCAMP for similar financing arrangements. All
financial instruments are held for non-trading purposes.
F-30
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Table of Contents
Page
Independent Auditors Report F-32
Balance Sheets as of December 31, 1998 and 1997 F-33
Statements of Operations for the Years Ended December 31,
1998, 1997 and 1996 F-34
Statements of Changes in Partners' Equity for the
Years Ended December 31, 1998, 1997 and 1996 F-35
Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996 F-36
Notes to Financial Statements F-38
F-31
INDEPENDENT AUDITOR REPORT
The Partners
Portland Lofts Associates Limited Partnership
Boston, Massachusetts
We have audited the accompanying balance sheets of Portland Lofts Associates
Limited Partnership (the Partnership) as of December 31, 1998 and 1997, and
the related statements of operations, changes in partners equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnerships management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
Because we were not engaged to audit the statements of operations, changes in
partners equity and cash flows for the year ended December 31, 1996, we did
not extend our auditing procedures to enable us to express an opinion on the
results of operations, changes in partners equity and cash flows of Portland
Lofts Associates Limited Partnership for the year ended December 31, 1996.
Accordingly, we express no opinion on them.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Portland
Lofts Associates Limited Partnership as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 16, 1999
F-32
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
------------- ------------
Investment in real estate:
Land $ 899,526 $ 899,526
Buildings and improvements 10,684,704 10,684,704
Furniture and equipment 84,051 84,051
------------- ------------
11,668,281 11,668,281
Less accumulated depreciation 2,446,972 2,173,528
------------- ------------
9,221,309 9,494,753
Cash 13,716 2,220
Rent receivable 8,663 5,006
Prepaid expenses 25,742 19,789
Replacement reserve 21,960 32,787
Deferred costs, less accumulated amortization
(1998, $30,309; 1997, $17,357) 81,583 94,535
------------- ------------
$ 9,372,973 $ 9,649,090
============= ============
LIABILITIES AND PARTNERS EQUITY
Liabilities:
Notes payable:
Mortgage $5,463,137 $5,534,391
General partner 298,152 320,221
Other - 733
Accounts payable and accrued expenses 40,399 86,931
Accrued interest 49,923 50,665
Security deposits 32,775 16,010
------------- ------------
Total liabilities 5,884,386 6,008,951
Commitments (Note 5)
Partners equity 3,488,587 3,640,139
------------- ------------
$ 9,372,973 $ 9,649,090
============= ============
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
-------------- -------------- -------------
(Unaudited)
Revenue:
Rental income $ 1,211,437 $ 1,092,135 $ 1,105,940
Interest and other income 27,038 41,061 49,453
------------ -------------- -------------
Total revenue 1,238,475 1,133,196 1,155,393
------------ -------------- -------------
Expenses:
Operating and administrative 83,510 154,526 119,295
Management fees 65,902 63,289 39,086
Repairs and maintenance 152,375 154,355 111,164
Utilities 54,242 54,917 49,901
Real estate taxes 40,186 37,888 36,702
Insurance 22,813 23,407 19,809
Depreciation and amortization 286,396 282,981 300,925
----------- ------------- ------------
Total expenses 705,424 771,363 676,882
------------ ------------- ------------
Income from operations 533,051 361,833 478,511
Interest expense 528,603 537,298 587,575
-------------- -------------- ------------
Net income (loss) before 4,448 (175,465) (109,064)
extraordinary item
Extraordinary item gain on
extinguishment of debt - - 1,656,579
-------------- -------------- ------------
Net income (loss) $ 4,448 $ (175,465) $ 1,547,515
============== ============== =============
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Historic
Preservation East Bank
Properties Angel Total
1989 Limited Joint Partners
Partnership Venture Equity
--------------- --------------- ------------
Balance, December 31, 1995
(Unaudited) 1,418,459 1,031,630 2,450,089
Distributions (26,000) - (26,000)
Net income 1,532,040 15,475 1,547,515
--------------- --------------- --------------
Balance, December 31,1996
(Unaudited) 2,924,499 1,047,105 3,971,604
Distributions (156,000) - (156,000)
Net loss (173,710) (1,755) (175,465)
--------------- --------------- --------------
Balance, December 31,1997 2,594,789 1,045,350 3,640,139
Distributions (156,000) - (156,000)
Net income 4,404 44 4,448
--------------- --------------- --------------
Balance, December 31, 1998 $ 2,443,193 $ 1,045,394 $ 3,488,587
=============== =============== ==============
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---------- ---------- ---------
Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,448 $ (175,465) $ 1,547,515
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 286,396 282,981 300,925
Extraordinary gain on
extinguishment of debt - - (1,656,579)
Decrease (increase) in rent
receivable (3,657) (2,165) 8,891
Decrease (increase) in prepaid
expenses (5,953) 4,684 (24,473)
Increase in deferred costs - (9,152) -
Increase (decrease) in accounts
payable and accrued expenses (46,532) 3,347 22,527
Increase (decrease) in accrued
interest (742) (10,067) 4,616
Increase (decrease) in security
deposits 16,765 7,605 (720)
---------- ------- -----------
Net cash provided by operating
activities 250,725 101,768 202,702
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to buildings and
improvements - - (3,655)
Purchase of tenant improvements - (3,000) -
Decrease (increase) in replacement
reserve 10,827 128,933 (161,720)
---------- ----------- -----------
Net cash provided by (used in)
investing activities 10,827 125,933 (165,375)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from refinancing - - 5,625,000
Proceeds from general partner note
payable - - 340,000
Payment on mortgage, notes payable
and construction loan - - (5,815,000)
Principal payments on mortgage and
other notes payable (94,056) (89,107) (69,778)
Payment of deferred financing fees - - (94,739)
Distributions (156,000) (156,000) (26,000)
---------- ----------- ------------
Net cash used in financing activities (250,056) (245,107) (40,517)
----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH 11,496 (17,406) (3,190)
CASH, BEGINNING OF YEAR 2,220 19,626 22,816
---------- ----------- ------------
CASH, END OF YEAR $ 13,716 $ 2,220 $ 19,626
============ ========== ============
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 529,345 $ 547,365 $582,959
============ =========== ==========
NON-CASH FINANCING ACTIVITY:
In June 1996, Portland Lofts settled $7,621,579 of mortgage and other notes
payable and paid closing costs through issuing a promissory mortgage note and
other promissory note totaling $5,965,000 and recognizing an extraordinary
gain of $1,656,579.
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. Organization and Description of Business
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 89 residential apartment units and 23,470 net
rentable square feet of commercial space, located at 555 Northwest Park
Avenue, 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 (HPP89), a Delaware limited partnership whose sole general
partner is Boston Historic Partners Limited Partnership. EBAJV, whose
venturers are Pacific Star Corporation and Joseph Angel (Angel), is also
the only limited partner (see Note 5).
At December 31, 1998 the Partnership had leased 88% (unaudited) of the
residential apartment units and 95% (unaudited) of the commercial space
for a combined occupancy of 90% (unaudited).
2. Basis of Presentation and 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.
Investment in real estate and 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
buildings and improvements, and over 5 to 7 years for personal property.
Depreciation expense for the years ended December 31, 1998, 1997 and
1996 totaled $273,444, $272,094 and $293,263 (unaudited), respectively.
Cash, cash equivalents and concentration of credit risk
The Partnership considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. The
Partnership had no cash equivalents at December 31, 1998 and
1997.
At December 31, 1998 and 1997, the Partnership had no cash on deposit in
banks in excess of amounts insured by the Federal Deposit Insurance
Corporation.
F-38
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2. Basis of Presentation and Significant Accounting Policies (Continued)
Deferred costs
Costs to lease residential apartment units are generally expensed; however,
leasing costs associated with commercial space are capitalized and
amortized on a straight-line basis over the related lease terms.
Amortization of costs associated with leasing for the years ended
December 31, 1998, 1997 and 1996 totaled $3,478, $1,413 and $1,798
(unaudited), respectively.
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 for the years ended December 31, 1998,
1997 and 1996 totaled $9,474, $9,474 and $5,864 (unaudited),
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 included in rent receivable ($4,988 and $4,000 as of December 31, 1998
and 1997, respectively). Principally all residential apartment units
are rented under month-to-month arrangements and rent is recorded when due.
Income taxes
No provision (benefit) for income taxes is reflected in the accompanying
financial statements since income or loss of the Partnership is required
to be reported in the tax returns of the respective partners.
Reclassification
Certain amounts in the 1997 and 1996 financial statements have been
reclassified to conform to the 1998 presentation.
3. Mortgage and Notes Payable
The Partnerships original mortgage note was to mature on April 1,
1997. Also, the Partnership had an unsecured note which it assumed from
EBAJV effective December 19, 1989 bearing interest at the prime rate
plus 1%. On
May 21, 1996, the Partnership and the holder of the mortgage note and
the unsecured note entered into a Settlement Agreement (Settlement
Agreement) to resolve claims concerning the debt. According to the
Settlement Agreement, the Partnership was allowed, until July 31, 1996,
to pay $5,400,000 to the new holder in full satisfaction of the mortgage
note and the unsecured note.
On June 20, 1996, the Partnership issued a promissory mortgage note to a
bank in the amount of $5,625,000 and a promissory note to Angel in the
amount of $340,000 to provide sufficient funds to pay in full the
$5,400,000 settlement amount with the holder of the mortgage note and
unsecured note, a separate $400,000 promissory note bearing interest at
13.11% and due currently, and all related closing costs. The
transaction resulted in an extraordinary gain on extinguishment of debt
of $1,656,579. The mortgage note bears interest at 9%; amortizes over a
25-year schedule; requires monthly payments of principal and interest of
$47,205; and matures on July 1, 2006, at which time all unpaid principal
and interest is due. The mortgage note is secured by the Property,
rents and assignments of leases.
The Angel Note bears interest at 11%; amortizes over a 10-year schedule;
requires monthly principal and interest payments in the amount of
$4,684; and matures January 1, 2007.
F-39
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
3. Mortgage and Notes Payable (Continued)
At December 31, 1998, aggregate annual maturities under the mortgage
note payable and note payable to general partner for each of the next
five years are as follows:
Year Ending Mortgage Note Payable to
December 31, Note Payable General Partner Total
------------------ ----------------- ---------------- ------------
1999 $ 77,938 24,622 $ 102,560
2000 85,249 27,471 112,720
2001 93,246 30,650 123,896
2002 101,994 34,197 136,191
2003 111,561 38,154 149,715
4. Partners' Equity
Profits, losses and tax credits shall be distributed to the partners, as
defined in the Partnership Agreement, as follows : 99% to HPP89, .9% to
EBAJV and .1% to EBAJV as a limited partner. However, 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
those same formulas.
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 HPP89.
b. Thereafter, 100 percent to HPP89 until HPP89 has received
distributions of cash flow in such year in an amount equal to an 8
percent cumulative, noncompounded return on its weighted average
HPP89 invested capital for such year.
c. The remaining balance, if any, prior to call/put date
(discussed below), 50% to HPP89, 49.9% to EBAJV and .1% to EBAJV
as limited partner, and after the call/put date, 75% to HPP89,
24.9% to EBAJV and .1% to EBAJV as limited partner.
The Partnership Agreement provides HPP89 with certain put rights, as
defined in the agreement, to require the Developer to purchase HPP89s
interest in the Partnership. On July 1, 1997, HP89 and the Developer
entered into an agreement under which the parties acknowledged that
HPP89s put right commenced July 1, 1997 and HPP89 agreed not to
exercise its put right until July 1, 2000 provided it receives
distributions of no less than $30,000 per quarter. Under the put right,
the Developer is required to pay HPP89 the excess of $5,750,000, plus
$25,467 for each month commencing July 1, 1997 through the month in
which the closing of the sale of HPP89s interest is consummated
pursuant to the put right, less the amount previously distributed to
HPP89. The Developer, provided it has met certain conditions defined in
the agreement, shall have the right to locate a third party to purchase
HPP89s interest on behalf of the Developer. 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.
F-40
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
5. Transactions with Related Parties and Commitments
Interest expense for the years ended December 31, 1998, 1997 and 1996
totaled $33,931, $36,241 and $18,735 (unaudited), respectively, related
to the Angel Note. At December 31, 1998 and 1997, $8,949 and $9,152 is
included in accrued interest.
In November 1996, the Partnership entered into an agreement to pay EBAJV
a monthly fee of $2,400 for partnership management services provided to
the Partnership. Partnership management fees for the years ended
December 31, 1998, 1997 and 1996 totaled $28,800 $28,800 and $4,800
(unaudited), respectively.
The Partnership has a month-to-month management agreement with an
unrelated party to manage the property for a fee equal to 3% of gross
receipts as defined in the agreement. Management fees for the years
ended December 31, 1998, 1997 and 1996 totaled $37,102, $34,489 and
$34,286 (unaudited). The unrelated party also receives leasing
commissions equal to 5% of amounts due under commercial leases.
6. Minimum Future Rentals under Operating Leases
The Partnership rents space to commercial tenants under operating leases
of varying terms expiring through 2004. Approximately 16% of all
residential apartment units are rented to tenants under short-term
operating leases and the remaining rented under month-to-month
arrangements. As of December 31, 1998, the Partnership had entered into
seventeen commercial leases covering approximately 95% (unaudited) of
the building's net rentable commercial space. The Partnershis largest
commercial tenant occupancies 23% of the commercial space at December
31, 1998, representing only 5.8% of the total square feet of the
property.
At December 31, 1998, minimum future rentals, excluding reimbursement of
real estate taxes and certain operating expenses, to be received under
noncancellable commercial leases for each of the next five years are as
follows:
Year Ending December 31,
------------------------
1999 243,169
2000 141,081
2001 89,642
2002 53,180
2003 53,180
The above amounts do not include additional rentals that will become due
as a result of escalation provisions in the commercial leases.
In most cases, management expects that in the normal course of business,
commercial leases will be renewed or replaced by other leases and
month-to-month arrangements with residential tenants will be continued
or replaced by short-term operating leases.
7. Fair Value of Financial Instruments
The carrying amounts of cash, rent receivable, prepaid expenses,
replacement reserve, accounts payable and accrued expenses, accrued
interest and security deposits at December 31, 1998 and 1997
approximate their fair values due to their short maturities. The fair
values of the Partnerships mortgage note payable and other notes
payable at December 31, 1998 and 1997 approximate their carrying
amounts based on interest rates currently available to the Partnership
for similar financing arrangements. All financial instruments are held
for non-trading purposes.
F-41
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Table of Contents
Page
Independent Auditors' Report F-43
Balance Sheets as of December 31, 1998 and 1997 F-44
Statements of Operations for the Years Ended December 31, 1998, 1997 and
1996 F-45
Statements of Changes in Partners' Equity (Deficit) for the Years
Ended December 31, 1998, 1997 and 1996 F-46
Statements of Cash Flows for the Years Ended December 31, 1998, 1997
and 1996 F-47
Notes to Financial Statements F-48
F-42
INDEPENDENT AUDITORS REPORT
The Partners
402 Julia Street Associates Limited Partnership
Boston, Massachusetts
We have audited the accompanying balance sheets of 402 Julia Street
Associates Limited Partnership (the Partnership) as of December 31, 1998 and
1997, and the related statements of operations, changes in partners equity
(deficit) and cash flows for the years then ended. These financial statements
are the responsibility of the Partnerships management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Because we were not engaged to audit the statements of operations, changes
in partners equity (deficit) and cash flows for the year ended December 31,
1996, we did not extend our auditing procedures to enable us to express an
opinion on the results of operations, changes in partners equity (deficit) and
cash flows of 402 Julia Street Associates Limited Partnership for the year ended
December 31, 1996. Accordingly, we express no opinion on them.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of 402 Julia
Street Associates Limited Partnership as of December 31, 1998 and 1997, and the
results of its operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 16, 1999
F-43
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
---------- ----------
Investment in real estate:
Land $ 132,800 $ 132,800
Building and improvements 1,581,571 1,581,571
---------- ----------
1,714,371 1,714,371
Less accumulated depreciation 355,590 316,051
---------- ----------
1,358,781 1,398,320
Cash 91,640 46,067
Cash equivalent, security deposits 19,318 19,094
Accounts receivable 1,314 1,314
Real estate tax and insurance escrow 24,119 20,944
Replacement reserve 26,039 23,700
Deferred financing fees, less accumulated
amortization (1998, $1,789; 1997 $30,154) 41,138 15,077
---------- ----------
$1,562,349 $1,524,516
========== ==========
LIABILITIES AND PARTNERS EQUITY
Liabilities:
Mortgage note payable $1,096,135 $1,009,551
Accounts payable and accrued expenses 12,325 15,325
Accrued interest 6,111 8,413
Security deposits 21,359 19,759
--------- ---------
Total liabilities 1,135,930 1,053,048
Commitments (Note 4)
Partners' equity 426,419 471,468
--------- ---------
$1,562,349 $1,524,516
========= =========
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
-------------- ------------- ------------
(Unaudited)
Revenue:
Rental income $ 228,249 $ 232,631 $241,273
Interest and other income 5,498 9,502 5,234
-------------- ------------- ---------
Total revenue 233,747 242,133 246,507
-------------- ------------- ---------
Expenses:
Operating and administrative 29,695 37,681 24,362
Management fees 23,842 23,075 22,400
Repairs and maintenance 39,366 33,249 26,830
Utilities 7,757 5,401 8,371
Real estate taxes 5,967 5,836 6,046
Insurance 9,335 7,813 11,546
Depreciation and amortization 56,405 44,062 50,236
-------------- ------------- ---------
Total expenses 172,367 157,117 149,791
-------------- ------------- ---------
Income from operations 61,380 85,016 96,716
Interest expense 87,929 101,235 101,809
-------------- ------------- ---------
Net loss $ (26,549) $ (16,219) $ (5,093)
============== ============= =========
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Historic
Preservation
Properties
1989 Limited Limited
Partnership Developers Partner Total
------------- ------------- ---------- ------------
Balance,
December 31, 1995
(Unaudited) $ 372,074 157,737 (31) $ 529,780
Distributions - (18,500) - (18,500)
Net loss (3,327) (1,766) - (5,093)
------------- ------------- ------------- ---------
Balance,
December 31, 1996 368,747 137,471 (31) 506,187
(Unaudited)
Distributions - (18,500) - (18,500)
Net loss (10,596) (5,623) - (16,219)
------------- ------------- ------------- ---------
Balance,
December 31, 1997
358,151 113,348 (31) 471,468
Distributions - (18,500) - (18,500)
Net loss (17,344) (9,205) - (26,549)
------------- ------------- ------------- ---------
Balance,
December 31, 1998 $ 340,807 $ 85,643 $ (31) $426,419
============= ============= ============= =========
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
----------- ----------- ----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (26,549) $ (16,219) $ (5,093)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 56,405 44,062 50,236
Decrease (increase)in accounts
receivable - (1,314) 377
Increase (decrease)in accounts
payable and accrued expenses (3,000) 10,700 (4,625)
Increase(decrease)in security
deposits, net 1,376 (78) 743
Decrease in accrued interest (2,302) (50) (45)
----------- ----------- ---------
Net cash provided by operating
activities 25,930 37,101 41,593
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in real estate tax
and insurance escrow and replacement
reserve (5,514) (11,457) (3,620)
----------- ----------- ---------
Cash used in investing activities (5,514) (11,457) (3,620)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from refinancing 1,100,000 - -
Payment on mortgage note payable (1,005,764) - -
Payment of deferred financing fees (42,927) - -
Principal payments on mortgage
notes payable (7,652) (6,002) (5,433)
Distributions (18,500) (18,500) (18,500)
----------- ----------- ---------
Net cash provided by (used
in)financing activities 25,157 (24,502) (23,933)
----------- ----------- ---------
NET INCREASE IN CASH 45,573 1,142 14,040
CASH, BEGINNING OF YEAR 46,067 44,925 30,885
----------- ----------- ---------
CASH, END OF YEAR $ 91,640 $ 46,067 $ 44,925
=========== =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 90,231 $ 101,285 $101,854
=========== =========== =========
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(1) Organization and Description of Business
402 Julia Street Associates Limited Partnership (the Partnership), a
Delaware limited partnership, was formed on July 25, 1989 to acquire a 19,000
square foot site and the building situated thereon in New Orleans, Louisiana,
and rehabilitate the building into 24 residential apartment units and
approximately 3,500 net rentable square feet of commercial space known as the
Loft (the Property). The Partnership is owned by Historic Preservation
Properties 1989 Limited Partnership (HPP 1989) as a general partner (65.33%), by
Henry M. Lambert and R. Carey Bond (the Developers) as a general partner
(34.66%), and by John D. Lambert III (the Limited Partner) as a limited partner
(.01%).
At December 31, 1998, the Partnership had leased 100% (unaudited) of the
residential apartment units and commercial space.
(2) Basis of Presentation and 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.
Investment in real estate and depreciation
Investment in real estate is held for lease and stated at cost.
Depreciation is provided over the estimated economic useful lives of the assets
using the straight-line method.
Depreciation expense for the years ended
December 31, 1998, 1997 and 1996 totaled $39,539, $39,539 and $45,713
(unaudited), respectively.
Cash, cash equivalents and concentration of credit risk
The Partnership considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash equivalents at
December 31, 1998 and 1997 totaled $19,318 and $19,094, respectively.
At December 31, 1998, the Partnership had $13,041 of cash and cash
equivalents on deposit in banks in excess of amounts insured by the Federal
Deposit Insurance Corporation. At December 31, 1997, the Partnership had no cash
and cash equivalents on deposit in banks in excess of amounts insured by the
Federal Deposit Insurance Corporation.
Deferred financing fees
Deferred financing fees are being amortized on a straight-line basis over
the term of the mortgage note. Amortization expense for each of the years ended
December 31, 1998, 1997, and 1996 totaled $16,866, $4,523 and $4,523
(unaudited), respectively. Amortization expense for the year ended December 31,
1998 includes $15,077 of previously deferred fees relating to the mortgage note
refinanced during July 1998 (see Note 3).
F-48
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(2) Basis of Presentation and Significant Accounting Policies (Continued)
Revenue recognition
Revenue from commercial units, principally under short-term operating
leases, is recorded when due. Approximately half of all residential apartment
units are rented under short-term operating leases and the remaining residential
apartment units and all commercial space is rented under month-to-month
arrangements. Rental revenue is recorded when due.
Income taxes
No provision (benefit) for income taxes is reflected in the accompanying
financial statements since income or loss of the Partnership is required to be
reported in the tax returns of the respective partners.
(3) Mortgage Note Payable
On July 17, 1998, 402 Julia refinanced its mortgage note payable by issuing
a promissory note to a new lender in the amount of $1,100,000, bearing interest
at 6.69%, amortizing over 30 years, and maturing in August 2008 at which time
all unpaid interest and principal is due. The mortgage note requires monthly
payments of principal and interest and real estate tax and insurance escrow
deposits in the aggregate amounts of $7,091, and $1,312, respectively. The
mortgage note also requires monthly replacement reserve deposits of $300 which
the lender has waived until the lender determines that the property is not being
maintained in accordance with, or an event of default occurs under, the
agreements related to the mortgage note payable.
At December 31, 1998, annual maturities of the mortgage note for each of
the next five years are as follows:
Year Ending December 31, Amount
1999 $ 12,145
2000 12,962
2001 13,856
2002 14,812
2003 15,834
The mortgage note is secured by the Partnership's property, rents and
assignment of leases.
(4) Transactions with Related Party and Commitments
The Partnership has a month-to-month property management and lease broker
agreement with a company owned by the Developers (the Affiliate) to manage the
Property for a fee equal to 6% of gross rental receipts and to serve as the
lease broker for a fee equal to one half of one month's rent for each lease
signed or continuation of existing rental relationship. For the years ended
December 31, 1998, 1997 and 1996, fees paid under this agreement totaled
$23,842, $23,075 and $22,400 (unaudited), respectively.
The Partnership reimbursed to the Affiliate certain payroll and related
payroll costs totaling $11,686, $11,437 and $7,657 (unaudited) for the years
ended December 31, 1998, 1997 and 1996, respectively.
F-49
(5) Leases
Real estate tax and operating expense reimbursements for the years ended
December 31, 1998, 1997 and 1996 totaled $1,401, $2,655 and $2,581 (unaudited),
respectively, and have been reported as a reduction of expenses in the
accompanying financial statements.
In most cases, management expects that in the normal course of business,
commercial leases will be renewed or replaced by other leases and month-to-month
arrangements with residential and commercial tenants will be continued or
replaced by short-term operating leases.
(6) Fair Value of Financial Instruments
The carrying amounts of cash, cash equivalent security deposits, accounts
receivable, real estate tax and insurance escrow, replacement reserve, accounts
payable and accrued expenses, accrued interest and security deposits approximate
their fair values at December 31, 1998 and 1997 due to their short maturities.
The fair value of the mortgage note payable at December 31, 1998 and 1997
approximates its carrying amount based on the interest rates currently available
to the Partnership for similar financing arrangements. All financial instruments
are held for non-trading purposes.
F-50
ASSET MANAGEMENT AGREEMENT
THIS ASSET MANAGEMENT AGREEMENT ( the "Agreement") is made and entered
into as of July 1, 1998 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 Gunn Financial
Incorporated, a Massachusetts corporation ("Gunn").
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 "HPP
Partnerships."
B. The HPP Partnerships were organized and formed to 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 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 desires to engage Gunn to manage certain
of the business affairs of the HPP Partnerships and provide the services set
forth in this Agreement on the terms and conditions hereinafter set forth.
I. Gunn 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 Gunn
Each HPP Partnership hereby engages and designates Gunn as the manager of
certain of the business affairs of the HPP Partnerships as more fully set forth
herein. Gunn hereby accepts such engagement and designation and hereby agrees to
perform its obligations under this agreement in a businesslike and professional
manner. Gunn shall at all times act only at the specific direction of BHP or BHP
II. Every act performed by Gunn or any agent or employee of Gunn 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 Gunn
2.1 Duties. It shall be the obligation of Gunn to perform the following
duties on behalf of HPP Partnerships (the "Services"):
(a) Asset Management Services. Gunn 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 specifically directed by BHP or BHP II
in writing,
a representative of Gunn will visit and meet with the independent
third party
property management company, where applicable, for 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 a Project Partnership
having
an HPP Partnership as a partner. A representative of Gunn 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. Gunn 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. Gunn 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,
Gunn 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 on a hardship exemption but they do provide
investors
with a complete unaudited Annual Report.
(c) Investor Services. Gunn will assist BHP and BHP II in the
preparation and distribution of (I) quarterly and annual reports to
the investors in
the HPP 90 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 Due Diligence officers of selling broker
dealer firms
consistent with prior levels of service.
(d) Personnel. In performing Services, Gunn 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 Gunn
and HPP.
All employees be employees of Gunn, but are subject to reimbursement
pursuant
to Section 3.2.
(e) Office Space. Gunn 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 charges as set
forth in the
operating budget.
(f) Support Staff. Gunn 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 Gunn, costs
of accounting, statistical or bookkeeping services and computing or
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 Gunn
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 Gunn will
be based in large part on information received from the HPP Partnerships. Gunn
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 nit
contain, or omit to contain, any statement of material fact known by the HPP
Partnerships to be false or misleading. Gunn 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 Gunn
that no information furnished or to be furnished by the HPP Partnerships
hereunder or in connection with the consulting services to be provided by Gunn
hereunder, contains or will contain any untrue statement of 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 Gunn 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 Gunn 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,
employees and directors of Gunn engaging in such competitive activities. Under
no circumstances will Gunn 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 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 Gunn a base monthly fee of
$1,500 per property (except as indicated on Exhibit C) 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. The Base Fee shall be in the following amounts through June 30, 1999
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, 2000:
HPP 1987 $36,000
HPP 1988 $72,000
HPP 1989 $63,000
HPP 1990 $36,000
3.2 Reimbursement. The HPP Partnerships shall pay the directly allocable
costs incurred by Gunn in providing the Services and the costs and expenses set
forth in the budget for the period July 1, 1998 through December 31, 1998
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 from January 1,
1999 through December 31, 2000. Total charges which are more than 10% in excess
of the Budget must be approved by the HPP Partnerships in advance. Payments to
Gunn 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 July 1,
1998 through December 31, 1998 fiscal year:
HPP 1987 4.80% HPP 1988 26.65% HPP 1989 24.28% HPP 1990
44.27%
These allocations will be reviewed and reset, if appropriate in the following
fiscal year. Gunn shall provide a new annual budget by November 15, 1998 for
fiscal year January 1, 1999 through December 31, 1999. Expense allocations may
change from year to year based on various factors. The budget must be approved
in advance in advance by the HPP Partnerships by December 15th of each year.
3.3 Extra Services. If requested in writing by BHP or BHP II from time to
time, in addition to the Services, Gunn shall provide extra services. Gunn 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 Gunn or any
employee of Gunn to pay any costs or expenses of any HPP Partnership if moneys
are not available for the payment of such costs or expenses from the incomes 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
nit paid when due, the accrued amount owed to Gunn shall bear interest at the
prime rate published in the Wall Street Journal until paid.
3.4 Allocation of Costs. In the event that any services are performed both
for HPP Partnership and for other entities, Gunn shall make such allocation of
the expense of such services among the HPP Partnership and such other entities
as Gunn shall determine is appropriate, any such allocation made in good faith
by Gunn shall be final and binding on the parties hereto.
Section 4.Indemnification.
4.1 Indemnification by Gunn. Gunn 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 attorneys 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 Gunn, its employees, agents or others under the direction or control of
Gunn 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 Partnerships. Gunn and the HPP Partnerships
hereby acknowledge that the acts of Gunn hereunder are solely as agent for HPP
Partnerships and Gunn 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 operations of the Properties or otherwise. Each
HPP Partnership agrees to defend and hold Gunn harmless from and indemnify Gunn
against any and all liabilities which Gunn may incur or suffer as a result of
any claim against Gunn arising out of any action taken, omitted or suffered by
it in good faith and in accordance with general or specific instructions from
the HPP Partnerships or the General Partners, except where such liabilities
result from the negligence, bad faith, fraud or willful misconduct on the part
of Gunn, its employees, agents or others under the direction or control of Gunn.
For purposes of this Section 4.2 only the term "Gunn" shall also include any
officer, director, employee or agent of Gunn in the event any such person incurs
or suffers any such liability as a result of activities on behalf of or under
the direction or control of Gunn 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 Gunn, its
directors, officers, agents or employees with respect to any matter as to which
it shall have been fully adjudicated in any action or proceeding that Gunn, 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 July 1, 1998 (the
"Commencement Date"), and shall terminate on June 30, 2006, unless previously
terminated by the parties hereto pursuant to Section 5.2.
5.2 Termination. This Agreement will expire on June 30, 2006 unless an
earlier termination date is mutually agreed upon by HPP Partnerships and Gunn.
On an individual HPP Partnership basis, this contract will naturally terminate
for a HPP Partnership on June 30th of the year following the calender year in
which the disposition of the final property in that HPP Partnership occurs.
5.3 Breach. This Agreement may be terminated by the HPP Partnerships or
Gunn upon the default by the other party of any such other party's material
obligations hereunder; provided, however, that the non-defaulting party shall
have delivered to the other party a written specifying such default in
reasonable detail and that the defaulting party shall not have cured such
default within thirty (30) days after the receipt of such notice.
5.4 Payment of Fees. Upon any termination pursuant to this Section 5, Gunn
shall have the right to receive any unpaid fees or unreimbursed expenses 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, or by courier (against confirmation of
delivery or rejection of delivery) and if given by courier, registered or
certified mail same shall be deemed to have been given and received when
personally delivered or three 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
45 Broad Street
Boston, MA 02109
Attn.: Terrence P. Sullivan
If to Gunn: Robert Gunn
Gunn Financial Incorporated
45 Broad Street
Boston, MA 02109
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 laws 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 HPP Partnerships and Gunn shall be deemed to constitute a
partnership, joint venture or any other relationship and Gunn shall at all times
be deemed an independent contractor for the purposes of this Agreement.
6.7 No Assignment. Gunn 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 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 _________________________________
Terrace 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
GUNN FINANCIAL, INCORPORATED
a Massachusetts corporation
By ____________________________________
Robert Gunn, President
<PAGE>
Exhibit A
LIST OF PROPERTIES - HPP 1987
Name of Project Partnership Name of ProjectLocation
1027 Arch Street Associates Pitcarin Building Philadelphia,
PA
Limited Partnership
432 Julia Street Associates Gallery Row New Orleans,
LA
Limited Partnership
<PAGE>
Exhibit B
LIST OF PROPERTIES - HPP 1988
Name of Project Partnership Name of ProjectLocation
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
<PAGE>
Exhibit C
LIST OF PROPERTIES - HPP 1989
Name of Project Partnership Name of ProjectLocation
Historic Preservation Properties The Cosmopolitan St. Paul, MN
1989 L. P. Building
Jenkins Court Associates Jenkins Court Jenkintown, PA
Limited Partnership (1)
Portland Loft Associates Honeyman Portland, OR
Limited Partnership Hardware Lofts
402 Julia Street Associates The Lofts New Orleans, LA
Limited Partnership
(1) 50% of standard Asset Management fee to monitor
and collect receivable
<PAGE>
Exhibit D
LIST OF PROPERTIES - HPP 1990
Name of Project Partnership Name of ProjectLocation
Henderson's Wharf Baltimore, Henderson's Wharf Baltimore, MD
L.P. (Inn/ Apartments)
Henderson's Wharf Baltimore, Henderson's Wharf Baltimore, MD
L.P. Marina
MULTIFAMILY NOTE
US $1,100,000 New Orleans, Louisiana
as of July 9, 1998
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of INVESTMENT PROPERTY MORTGAGE,
L.L.C., a Louisiana limited liability company, the principal sum of One Million
One Hundred Thousand and No/100ths Dollars (US$],] 00,000), with interest on
the unpaid principal balance at the annual rate of Six and 69/1 00ths percent
(6.69%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the
holder of tills Note, and (11) the term "Indebtedness" means the principal of,
interest on, or any other amounts due at any time under, this Note, the
Security Instrument or any other Loan Document, including prepayment premiums,
late charges, default interest, and advances to protect the security of the
Security Instrument under Section 12 of the Security Instrument. Event of
Default, Key Principal and other capitalized terms used but not defined in this
Note shall have the meanings given to such terms in the Security Instrument (as
defined in Paragraph 5).
2. Address for Payment. All payments due under tills Note shall be payable
at 300 Plaza, One Shell Square, New Orleans, Louisiana 70139, or such other
place as may be designated by written notice to Borrower from or on behalf of
Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid
as follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the
first day of tile month, interest for the period beginning oil the date of
disbursement and ending on and including tile last day of the month in which
such disbursement is made shall be payable simultaneously with the execution of
tills Note. Interest under this Note shall be computed oil the basis of a
360-day year consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in
the amount of Seven Thousand Ninety and 76/100ths Dollars (US $7,090.76), shall
be payable oil the first day of each month beginning on September 1, 1998,
until the entire unpaid principal balance evidenced by tills Note is fully
paid. Any accrued interest remaining past due for 30 days or more shall be
added to and become part of the unpaid principal balance and shall bear
interest at the rate or rates specified in this Note, and any reference below
to "accrued interest" shall refer to accrued interest which has not become part
of the unpaid principal balance. Any remaining principal and interest shall be
due and payable on August 1, 2008 or oil any earlier date oil which tile unpaid
principal balance of this Note becomes due and payable, by acceleration or
otherwise (tile "Maturity Date"). The unpaid principal balance shall continue
to bear interest after the Maturity Date at the Default Rate set forth Ili
tills Note until and including the date oil which it is paid in full.
(c) Any regularly scheduled monthly Installment of principal and Interest
that is received by Lender before tile date it is due shall be deemed to have
been received oil the due date solely for tile purpose of calculating interest
due.
<PAGE>
4. Application of Payments. If at any time Lender receives, from Borrower
or otherwise, any amount applicable to tile Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "Security Instrument"), and reference is made to the Security
Instrument for other rights of Lender concerning tile collateral for the
Indebtedness.
6. Acceleration. If all Event of Default has occurred and is
continuing, the entire unpaid
principal balance, any accrued interest, the prepayment premium payable under
Paragraph 10, if any, and all other amounts payable under tills Note and any
other Loan Document shall at once become due and payable, at tile option of
Lender, without any prior notice to Borrower. Lender may exercise this option
to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
10 days after the amount is due, Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to 5 percent of such amount.
Borrower acknowledges that its failure to make timely payments will cause
Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (tile "Loan"), and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable pursuant to tills Paragraph represents a fair and
reasonable estimate, taking into account all circumstances existing oil the
date of this Note, of the additional expenses Lender will Incur by reason of
such late payment. The late charge is payable in addition to, and not in lieu
of, any interest payable at the Default Rate pursuant to Paragraph 8.
8. Default Rate. So long as any monthly Installment or any other payment
due under this Note remains past due for 30 days or more, interest under tills
Note shall accrue oil tile unpaid principal balance from tile earlier of the
due date of the first unpaid monthly installment or other payment due, as
applicable, at a rate (the "Default Rate") equal to the lesser of 4 percentage
points above tile rate stated in the first paragraph of this Note or the
maximum interest rate which may be collected from Borrower Under applicable
law. If the unpaid principal balance and all accrued interest are not paid in
full oil the Maturity Date, the unpaid principal balance and all accrued
interest shall bear interest from the Maturity Date at the Default Rate.
Borrower also acknowledges that its failure to make timely payments will cause
Lender to incur additional expenses in servicing and processing the Loan, that,
during the time that any monthly installment or payment under tills Note is
delinquent for more than 30 days, Lender will incur additional costs and
expenses arising from its loss of the use of the money due and from the adverse
impact oil Lender's ability to meet its other obligations and to take advantage
of other investment opportunities, and that It is extremely difficult and
impractical to determine those additional costs and expenses. Borrower also
acknowledges that, during the time that any monthly installment or other
payment due under tills Note is delinquent for more than 30 days, Lender's risk
of nonpayment of this Note will be materially increased and Lender is entitled
to be compensated for such increased risk. Borrower agrees that tile increase
in the rate of interest payable under this Note to tile Default Rate
<PAGE>
represents a fair and reasonable estimate, taking into account all
circumstances existing oil the date of this Note, of the additional costs and
expenses Lender will incur by reason of the Borrower's delinquent payment and
the additional compensation Lender is entitled to receive for the increased
risks of nonpayment associated with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in tills Paragraph 9, Borrower shall have
no personal liability under this Note, the Security Instrument or any other
Loan Document for the repayment of tile Indebtedness or for the performance of
any other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation oil Borrower's liability shall not limit
or impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a
portion of the Indebtedness equal to any loss or damage suffered by Lender as a
result of (I) failure of Borrower to pay to Lender upon demand after an Event
of Default, all Rents to which Lender is entitled under Section 3(a) of tile
Security Instrument and the amount of all security deposits collected by
Borrower from tenants then in residence; (2) failure of Borrower to apply all
insurance proceeds and condemnation proceeds as required by the Security
Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the
Security Instrument relating to the delivery of books and records, statements,
schedules and reports; (4) fraud or written material misrepresentation by
Borrower, Key Principal or any officer, director, partner, member or employee
of Borrower in connection with the application for or creation of the
Indebtedness or any request for any action or consent by Lender; or (5) failure
to apply Rents, first, to tile payment of reasonable operating expenses (other
than Property management fees that are not currently payable pursuant to the
terms of all Assignment of Management Agreement or any other agreement with
Lender executed in connection with the Loan) and then to amounts ("Debt Service
Amounts") payable under this Note, the Security Instrument or any other Loan
Document (except that Borrower will not be personally liable (1) to the extent
that Borrower lacks the legal right to direct the disbursement of such sums
because of a bankruptcy, receivership or similar Judicial proceeding, or (11)
with respect to Rents that are distributed in any calendar year if Borrower has
paid all operating expenses and Debt Service Amounts for that calendar year).
(c) Borrower shall become personally liable to Lender for tile repayment
of all of tile Indebtedness upon the occurrence of any of the following Events
of Default: (1) Borrower's acquisition of any property or operation of any
business not permitted by Section 33 of the Security Instrument; or (2) a
Transfer that is all Event of Default under Section 21 of the Security
Instrument.
(d) To the extent that Borrower has personal liability under tills
Paragraph 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against tile Mortgaged
Property or any other security, or pursued any rights against any guarantor, or
pursued any other rights available to Lender under this Note, the Security
Instrument, any other Loan Document or applicable law. For purposes of tills
Paragraph 9, tile term "Mortgaged Property" shall not include any funds that
(I) have been applied by Borrower as required or permitted by the Security
Instrument prior to the occurrence of an Event of Default, or (2) Borrower was
unable to apply as required or permitted by the Security Instrument because of
a bankruptcy, receivership, or similar judicial proceeding.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any
prepayment made under this Note as provided below:
(1) Borrower may voluntarily prepay all (but not less than all) of
the unpaid principal balance of this Note oil the last Business Day of a
calendar month if Borrower has given Lender at least 30 days prior notice
of its Intention to make such prepayment. Such prepayment shall be made by
paying (A) the amount of principal being prepaid, (B) all accrued
interest, (C) all other sums due Lender at the time of such prepayment,
and (D) the prepayment premium calculated pursuant to Schedule A. For all
purposes, including the accrual of interest, any prepayment received by
Lender on any day other than the last calendar day of the month shall be
deemed to have been received on the last calendar day of such month. For
purposes of this Note, a "Business Day" means any day other than a
Saturday, Sunday or any other day oil which Lender is not open for
business.
(2) Upon Lender's exercise of any right of acceleration under this
Note, Borrower shall pay to Lender, in addition to the entire unpaid
principal balance of this Note outstanding at the time of the
acceleration, (A) all accrued interest and all other sums due Lender under
this Note and the other Loan Documents, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to
the repayment of any portion of the unpaid principal balance of this Note
prior to the Maturity Date and in the absence of acceleration shall be
deemed to be a partial prepayment by Borrower, requiring tile payment to
Lender by Borrower of a prepayment premium. Tile amount of any such
partial prepayment shall be computed so as to provide to Lender a
prepayment premium computed pursuant to Schedule A without Borrower having
to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to (A) any prepayment made no more than
90 days before the Maturity Date, or (B) any prepayment occurring as a result
of tile application of any insurance proceeds or condemnation award under the
Security Instrument.
(c) Schedule A is hereby Incorporated by reference into this Note.
(d) Any required prepayment of less than the unpaid principal balance of
this Note shall not extend or postpone the due date of any subsequent monthly
installments or change the amount of such installments, unless Lender agrees
otherwise in writing.
(e) Borrower recognizes that any prepayment of tile unpaid principal
balance of this Note, whether voluntary or Involuntary or resulting from a
default by Borrower, will result in Lender's incurring loss, including
reinvestment loss, additional expense and frustration or impairment of Lender's
ability to meet its commitments to third parties. Borrower agrees to pay to
Lender upon demand damages for the detriment caused by any prepayment, and
agrees that it is extremely difficult and impractical to ascertain the extent
of such damages. Borrower therefore acknowledges and agrees that the formula
for calculating prepayment premiums set forth on Schedule A represents a
reasonable estimate of the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions
of tills Note are a material part of the consideration for the loan evidenced
by this Note, and acknowledges that tile terms of this Note are in other
respects more favorable to Borrower as a result of the Borrower's voluntary
agreement to the prepayment premium provisions.
11. Costs and Expenses. Borrower shall pay on demand all expenses and
costs, including fees and out-of-pocket expenses of attorneys and expert
witnesses and costs of investigation, incurred by Lender as a result of any
default under this Note or in connection with efforts to collect any amount due
under this Note, or to enforce the provisions of any of the other Loan
Documents, including those incurred in post-Judgment collection efforts and in
any bankruptcy proceeding (including any action for relief from the automatic
stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or
remedy under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after tile due date of such payment, or in an amount which is less than
tile required payment, shall not be a waiver of Lender's right to require
prompt payment when due of all other payments or to exercise any right or
remedy with respect to any failure to make prompt payment. Enforcement by
Lender of any security for Borrower's obligations under this Note shall not
constitute all election by Lender of remedies so as to preclude the exercise of
any other right or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower, Key Principal, and all
endorsers and guarantors of tills Note and all other third party obligors.
14. Loan Charges. If any applicable law limiting the amount of interest or
other charges permitted to be collected from Borrower in connection with the
Loan is interpreted so that any interest or other charge provided for in any
Loan Document, whether considered separately or together with other charges
provided for in any other Loan Document, violates that law, and Borrower is
entitled to tile benefit of that law, that interest or charge is hereby reduced
to tile extent necessary to eliminate that violation. Tile amounts, if any,
previously paid to Lender in excess of tile permitted amounts shall be applied
by Lender to reduce the unpaid principal balance of this Note. For the purpose
of determining whether any applicable law limiting the amount of interest or
other charges permitted to be collected from Borrower has been violated, all
Indebtedness that constitutes interest, as well as all other charges made in
connection with tile Indebtedness that constitute interest, shall be deemed to
be allocated and spread ratably over the stated term of the Note. Unless
otherwise required by applicable law, such allocation and spreading shall be
effected in such a manner that tile rate of interest so computed is uniform
throughout the stated term of tile Note.
<PAGE>
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference In this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the
jurisdiction in which tile Land is located.
18. Captions. The captions of the paragraphs of this Note are for
convenience only and shall be disregarded in construing this Note.
19. Notices. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be
given in accordance with Section 3 1 of the Security Instrument.
20. Consent to Jurisdiction and Venue. Borrower and Key Principal each
agrees that any controversy arising under or in relation to this Note shall be
litigated exclusively in the jurisdiction in which the Land is located (the
"Property Jurisdiction"). The state and federal courts and authorities with
jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction
over all controversies which shall arise under or in relation to this Note.
Borrower and Key Principal each irrevocably consents to service, jurisdiction,
and venue of such courts for any such litigation and waives any other venue to
which it might be entitled by virtue of domicile, habitual residence or
otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER, KEY PRINCIPAL AND LENDER EACH (A)
AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF
THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER, KEY PRINCIPAL AND
BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL
BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW
OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY
EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL
COUNSEL.
ATTACHED SCHEDULES. The following Schedules are attached to
this Note:
Schedule A Prepayment Premium (required)
Schedule B Modifications to Multifamily
Note
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
BORROWER:
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP,
a Delaware limited partnership
By: HISTORIC PRESERVATION PROPERTIES 1989
LIMITED PARTNERSHIP, a Delaware limited
partnership ("HPP"), its General Partner
By: BOSTON HISTORIC PARTNERS LIMITED
PARTNERSHIP, a Massachusetts limited
partnership
("BHP"), HPP's General Partner
By: PORTFOLIO ADVIS
a Massachusetts
corporation,
BHP's General Partner
By:
Terrence P. Sullivan
President
By:
Terrence P. Sullivan,
BHP's General Partner
"NE VARIETUR "for identification with an Act of Mortgage passed this day before
me, Notary.
MA, July 1998
JOANNE M. LAURIA
Name: My commission
expires: Notary Public
My Commission Expires October
29, 2004
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE>
BORROWER:
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP,
a Delaware limited partnership
By:
Henry M. Lambert, its General
Partner
By:
R. Carey Bond, its General
Partner
Borrower's Social Security/Employer ID Number:
72-1149319
"NE VARIETUR "for
identification with an Act of
Mortgage passed this day
before me. Notary.
New Orleans, LA., July _,
1998
Name: Paul E. Ramoni, Jr., My commission
expires at my death.
Pay to the Order of FANNIE MAE Without Recourse.
INVESTMENT PROPERTY MORTGAGE, L.L.C.
a Louisiana limited
liability company
BY: STANDARD MORTGAGE CORPORATION
a Louisiana corporation
Manager
By:
F. Owen Kendrick
Vice President
"NE I/ARIETUR "for identification, with an Act of Assignment of Mor1gage passed
this day before me, Notary New Orleans, LA., July , 1998
Name: Paul E. Ramoni, Jr.
My commission expires at my
death.
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall
be computed as
follows:
(a) If the prepayment is made during the first 9Y2 years beginning on the
date of the Note
(the "Yield Maintenance Period"), the prepayment premium
shall be tile greater of-
(i) % of the unpaid principal balance of this Note; or (i i)
The product obtained by multiplying:
(A) the amount of principal being
prepaid,
by
(B) the difference obtained by subtracting from the
interest rate on
this Note the yield rate (the "Yield Rate") on the
5.625% U.S. Treasury Security due 05/2008 (the
"Specified U.S. Treasury Security"), as the Yield
Rate is reported in The Wall Street Journal on the
fifth Business Day preceding (x) the date notice of
prepayment is given to Lender where prepayment is
voluntary, or (y) the date Lender accelerates the
Loan,
by
(C) the present value factor calculated using the
following formula:
1 - (1 + r) -n
r
[r = Yield Rate
n = the number of 365-day years (or 366-day
years, if applicable), and any fraction thereof,
remaining between the Prepayment Date and the
expiration of the Yield Maintenance Period]
In the event that no Yield Rate is published for the
Specified U.S. Treasury Security, then the nearest
equivalent U.S. Treasury Security shall be selected
at Lender's discretion. If tile publication of such
Yield Rates in The Wall Street Journal is
discontinued, Lender shall determine such Yield Rates
from another source selected by Lender.
For purposes of subparagraph (ii)(C), the "Prepayment
Date" shall be (x) in the case of a voluntary
prepayment, the date on which the prepayment is made,
and (y) in any other case, the date on which Lender
accelerates the unpaid principal balance of this
Note.
(b) If the prepayment is made after the expiration of the Yield
Maintenance Period but more
than 90 days before the Maturity Date, the prepayment premium shall
be 1% of the unpaid principal balance of this Note.
INITIAL(S)
INITIAL(S)
INITIAL(S)
INITIAL(S)
MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
BE IT KNOWN, that on the dates hereinafter set forth, before each of us,
the undersigned Notaries Public, duly commissioned and qualified in and for the
Parish/County and States hereinafter set forth, and in the presence of the
undersigned competent witnesses, personally came and appeared 402 JULIA STREET
ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership, represented
herein by Historic Preservation Properties 1989 Limited Partnership, a Delaware
limited partnership, Henry M. Lambert and R. Carey Bond, its General Partners
(Taxpayer Identification No. 72-1149319) ("Borrower"), whose permanent mailing
address is c/o RC!B Developers, Inc., 333 Julia Street, New Orleans, Louisiana
70130, who by me duly sworn did declare and acknowledge that Borrower is
indebted in favor of INVESTMENT PROPERTY MORTGAGE, L.L.C., a limited liability
company organized and existing under the laws of Louisiana, and whose permanent
mailing address is 300 Plaza, One Shelf Square, New Orleans, Louisiana 70139
(Taxpayer Identification No. 72-1283369) (together with its successors and
assigns and any subsequent holders, "Lender"), under Borrower's Multifamily
Note, dated as of the date of this Instrument, in the principal amount of $
1,100,000, which Note is payable to the order of the above-named Lender, has a
stated maturity date of August 1, 2008, and, together with and as a part of the
Indebtedness, is secured by this Multifamily Mortgage, Assignment of Rents and
Security Agreement (the "Instrument").
TO SECURE TO LENDER the repayment of the Indebtedness (including the
payment of attorneys fees), and all renewals, extensions, modifications and
refinancings of the Indebtedness, and the performance of the covenants and
agreements of Borrower contained in the Loan Documents, Borrower hereby
mortgages, hypothecates and assigns to Lender the Mortgaged Property, including
the Land located in the Parish of Orleans, State of Louisiana and described in
Exhibit A attached to this Instrument. The maximum amount of the Indebtedness
outstanding at any time and from time to time that is secured by this
Instrument shall be limited to an amount equal to the original principal
balance of the Note multiplied by three, inclusive of principal, interest, late
charges, default interest, prepayment premiums, additional advances pursuant to
this Instrument, costs, expenses and attorneys' fees.
Borrower represents and warrants that Borrower is the full owner and
lawfully seized of the Mortgaged Property and has the right, power and
authority to mortgage, grant, convey and assign the Mortgaged Property, and
that the Mortgaged Property is unencumbered. Borrower covenants that Borrower
will warrant and defend generally the title to, and the ownership and
possession of, the Mortgaged Property against all claims and demands, subject
to any servitudes, easements and restrictions listed in a schedule of
exceptions to coverage in any title insurance policy issued to Lender
contemporaneously with the execution and recordation of this Instrument and
insuring Lender's interest in the Mortgaged Property.
<PAGE>
Covenants. Borrower and Lender covenant and
agree as follows:
1. DEFINITIONS. The following terms, when used in this Instrument
(including when used in the above recitals), shall have the following meanings:
(a) "Borrower" means all persons or entities identified as "Borrower" in
the first paragraph of this Instrument, together with their successors and
assigns.
(b) "Collateral Agreement" means any separate agreement between Borrower
and Lender for the purpose of establishing replacement reserves for the
Mortgaged Property, establishing a fund to assure completion of repairs or
improvements specified in that agreement, or assuring reduction of the
outstanding principal balance of the Indebtedness if the occupancy of or income
from the Mortgaged Property does not increase to a level specified in that
agreement, or any other agreement or agreements between Borrower and Lender
which provide for the establishment of any other fund, reserve or account.
(c) "Environmental Permit" means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.
(d) "Event of Default" means the occurrence of any event listed in Section
22.
(e) "Fixtures" means all property which is so attached to the Land or the
Improvements as to constitute an integral or component part, or a fixture under
applicable law, including: machinery, equipment, engines, boilers,
incinerators, installed building materials; systems and equipment for the
purpose of supplying or distributing heating, cooling, electricity, gas, water,
air, or light; antennas, cable, wiring and conduits used in connection with
radio, television, security, fire prevention, or fire detection or otherwise
used to carry electronic signals; telephone systems and equipment; elevators
and related machinery and equipment; fire detection, prevention and
extinguishing systems and apparatus; security and access control systems and
apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens,
refrigerators, dishwashers, garbage disposers, washers, dryers and other
appliances; light fixtures, awnings, storm windows and storm doors; pictures,
screens, blinds, shades, curtains and curtain rods; mirrors; cabinets,
paneling, rugs and floor and wall coverings; fences, trees and plants; swimming
pools; and exercise equipment.
(f) "Governmental Authority" means any board, commission, department or
body of any municipal, county, state or federal governmental unit, or any
subdivision of any of them, that has or acquires jurisdiction over the
Mortgaged Property or the use, operation or improvement of the Mortgaged
Property.
<PAGE>
(g) "Hazardous Materials" means petroleum and petroleum products and
compounds containing them, including gasoline, diesel fuel and oil; explosives;
flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs")
and compounds containing them; lead and lead-based paint; asbestos or
asbestos-containing materials in any form that is or could become friable;
underground or above-ground storage tanks, whether empty or containing any
substance; any substance the presence of which on the Mortgaged Property is
prohibited by any federal, state or local authority; any substance that
requires special handling; and any other material or substance now or in the
future defined as a "hazardous substance," "hazardous material," "hazardous
waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant"
within the meaning of any Hazardous Materials Law.
(h) "Hazardous Materials Laws" means all federal, state, and local laws,
ordinances and regulations and standards, rules, policies and other
governmental requirements, administrative rulings and court judgments and
decrees in effect now or in the future and including all amendments, that
relate to Hazardous: Materials and apply to Borrower or to the Mortgaged
Property. Hazardous Materials Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 260
1, et seq., the Clean Water Act, 33 U.S.C. Section 125 1, et seq., and the
Hazardous Materials Transportation Act, 49 U.S. C. Section 5 10 1, et seq., and
their state analogs.
(i) "Impositions" and "Imposition Deposits" are defined in Section 7(a).
(j) "Improvements" means the buildings, structures, improvements, and
alterations now constructed or at any time in the future constructed or placed
upon the Land, including any future replacements and additions.
(k) "Indebtedness" means the principal of, interest on, and all other
amounts due at any time under, the Note, this Instrument or any other Loan
Document, including prepayment premiums, late charges, default interest,
attorneys' fees, keeper fees, collection and foreclosure expenses, advances as
provided in Section 12 to protect the security of this Instrument, and any
other sums that Lender may advance or incur with respect to the Mortgaged
Property, or as otherwise provided in this Instrument or any other Loan
Document.
(1) [Intentionally
omitted]
(m) "Key Principal" means the natural person(s) or entity identified as
such at the foot of this Instrument, and any person or entity who becomes a Key
Principal after the date of this Instrument and is identified as such in an
amendment or supplement to this Instrument.
(n) "Land" means the immovable property described in Exhibit A. The
immovable property is located at 402 Julia Street, New Orleans, Louisiana
70130.
(o) "Leases" means all present and future leases, subleases, licenses,
concessions or grants or other possessory interests now or hereafter in force,
whether oral or written, covering or affecting the Mortgaged Property, or any
portion of the Mortgaged Property (including proprietary leases or occupancy
agreements if Borrower is a cooperative housing corporation), and all
modifications, extensions or renewals.
(p) "Lender" means the entity identified as "Lender" in the first
paragraph of this Instrument and its successors and assigns, or any subsequent
holder of the Note.
(q) "Loan Documents" means the Note, this Instrument, all guaranties, all
indemnity agreements, all Collateral Agreements, O&M Programs, and any other
documents now or in the future executed by Borrower, Key Principal, any
guarantor or any other person in connection with the loan evidenced by the
Note, as such documents may be amended from time to time.
(r) "Loan Servicer" means the entity that from time to time is designated
by Lender to collect payments and deposits and receive notices under the Note,
this Instrument and any other Loan Document, and otherwise to service the loan
evidenced by the Note for the benefit of Lender. Unless Borrower receives
notice to the contrary, the Loan Servicer is the entity identified as "Lender"
in the first paragraph of this Instrument.
(s) "Mortgaged Property" means all of Borrower's present and future right,
title and interest in and to all of the following:
(1)
the Land;
(2) the
Improvements;
(3) the
Fixtures;
(4) the
Personalty;
(5) all current and future rights, including air
rights, development rights, zoning
rights and other similar rights or interests, servitudes,
easements, tenements, rights-of-way, strips and gores of land,
streets, alleys, roads, sewer rights, waters, watercourses, and
appurtenances related to or benefitting the Land or the
Improvements, or both, and all rights-of-way, streets, alleys
and roads which may have been or may in the future be vacated;
(6) all proceeds paid or to be paid by any insurer of the Land, the
Improvements, the Fixtures, the Personalty or any other part of
the Mortgaged Property, whether or not Borrower obtained the
insurance pursuant to Lender's requirement;
(7) all awards, payments and other compensation made or
to be made by any
municipal, state or federal authority with respect to the Land,
the Improvements, the Fixtures, the Personalty or any other part
of the Mortgaged Property, including any awards or settlements
resulting from condemnation proceedings or the total or partial
taking of the Land, the Improvements, the Fixtures, the
Personalty or any other part of the Mortgaged Property under the
power of eminent domain or otherwise and including any
conveyance in lieu thereof,
(8) all contracts, options and other agreements for the
sale of the Land, the
Improvements, the Fixtures, the Personalty or any other part of
the Mortgaged Property entered into by Borrower now or in the
future, including cash or securities deposited to secure
performance by parties of their obligations;
(9) all proceeds from the conversion, voluntary or
involuntary, of any of the
above into cash or liquidated claims, and the right
to collect such proceeds;
(10) all Rents and Leases;
(11) all earnings, royalties, accounts receivable, issues and profits
from the Land, the Improvements or any other part of the
Mortgaged Property, and all undisbursed proceeds of the loan
secured by this Instrument and, if Borrower is a cooperative
housing corporation, maintenance charges or assessments payable
by shareholders or residents;
(12) all Imposition Deposits;
(13) all refunds or rebates of Impositions by any municipal, state or
federal authority or insurance company (other than refunds
applicable to periods before the real property tax year in which
this Instrument is dated);
(14) all tenant security deposits which have not been forfeited by
any tenant under any Lease; and
(15) all names under or by which any of the above Mortgaged Property
may be operated or known, and all trademarks, trade names, and
goodwill relating to any of the Mortgaged Property.
<PAGE>
(t) "Note" means the Multifamily Note described on page I of this
Instrument, including the Acknowledgment and Agreement of Key Principal to
Personal Liability for Exceptions to Non-Recourse Liability (if any), and all
schedules, riders, allonges and addenda, as such Multifamily Note may be
amended from time to time.
(u) "O&M Program" is defined in Section 18(a).
(v) "Personalty" means all furniture, furnishings, equipment, machinery,
building materials, appliances, goods, supplies, tools, books, records (whether
in written or electronic form), computer equipment (hardware and software) and
other tangible (corporeal) personal (movable) property (other than Fixtures)
which are used now or in the future in connection with the ownership,
management or operation of the Land or the Improvements or are located on the
Land or in the Improvements, and any operating agreements relating to the Land
or the Improvements, and any surveys, plans and specifications and contracts
for architectural, engineering and construction services relating to the Land
or the Improvements and all other intangible (incorporeal) property and rights
relating to the operation of, or used in connection with, the Land or the
Improvements, including all governmental permits relating to any activities on
the Land.
(w) "Property Jurisdiction" is defined in Section 30(a).
(x) "Rents" means all rents (whether from residential or non-residential
space), revenues and other income of the Land or the Improvements, including
parking fees, laundry and vending machine income and fees and charges for food,
health care and other services provided at the Mortgaged Property, whether now
due, past due, or to become due, and deposits forfeited by tenants.
(y) "Taxes" means all taxes, assessments, vault rentals and other charges,
if any, general, special or otherwise, including all assessments for schools,
public betterments and general or local improvements, which are levied,
assessed or imposed by any public authority or quasi-public authority, and
which, if not paid, will become a lien, on the Land or the Improvements.
(z) "Transfer" means (A) a sale, assignment, transfer or other disposition
(whether voluntary, involuntary or by operation of law, and whether on a bond
for deed basis or otherwise); (B) the granting, creating or attachment of a
lien, encumbrance or security interest (whether voluntary, involuntary or by
operation of law, and whether on a bond for deed basis or otherwise); (C) the
issuance or other creation of an ownership interest in a legal entity,
including a partnership interest, interest in a limited liability company or
corporate stock; (D) the withdrawal, retirement, removal or involuntary
resignation of a partner in a partnership or a member or manager in a limited
liability company; or (E) the merger, dissolution, liquidation, or
consolidation of a legal entity. "Transfer" does not include (i) a conveyance
of the Mortgaged Property at a judicial or non-judicial foreclosure sale under
this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy
estate by operation of law under the United States Bankruptcy Code. For
purposes of defining the term "Transfer," the term "partnership" shall mean a
general partnership, a limited partnership or partnership in commendam, a joint
venture and a registered limited liability partnership, and the term "partner"
shall mean a general partner, a limited partner and a joint venturer.
(aa) "Uniform Commercial Code" or "UCC" means the Uniform Commercial Code
as adopted in any state or the District of Columbia. In Louisiana, "Uniform
Commercial Code" or "UCC" shall refer to the Louisiana Commercial Laws,
Louisiana Revised Statues Title 10, Sections 1-101, et seq.
2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also a
security agreement under the Uniform Commercial Code for any of the Mortgaged
Property which, under applicable law, may be subject to a security interest
under the Uniform Commercial Code, whether acquired now or in the future, and
all products and cash and non-cash proceeds thereof (collectively, "UCC
Collateral"), and Borrower hereby grants to Lender a security interest in the
UCC Collateral. Borrower shall execute and deliver to Lender, upon Lender's
request, financing statements, continuation statements and amendments, in such
form as Lender may require to perfect or continue the perfection of this
security interest. Borrower shall pay all filing costs and all costs and
expenses of any record searches for financing statements that Lender may
require. Without the prior written consent of Lender, Borrower shall not create
or permit to exist any other lien or security interest in any of the UCC
Collateral. If an Event of Default has occurred and is continuing, Lender shall
have the remedies of a secured party under the Uniform Commercial Code, in
addition to all remedies provided by this Instrument or existing under
applicable law. In exercising any remedies, Lender may exercise its remedies
against the UCC Collateral separately or together, and in any order, without in
any way affecting the availability of Lender's other remedies. This Instrument
constitutes a financing statement with respect to any part of the Mortgaged
Property which is or may become a Fixture.
3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.
(a) As part of the consideration for the Indebtedness, Borrower absolutely
and unconditionally assigns and transfers to Lender all Rents. It is the
intention of Borrower to establish a present, absolute and irrevocable transfer
and assignment to Lender of all Rents and to authorize and empower Lender to
collect and receive all Rents without the necessity of further action on the
part of Borrower. Promptly upon request by Lender, Borrower agrees to execute
and deliver such further assignments as Lender may from time to time require.
Borrower and Lender intend this assignment of Rents to be immediately effective
and to constitute an absolute present assignment and not an assignment for
additional security only. For purposes of giving effect to this absolute
assignment of Rents, and for no other purpose, Rents shall not be deemed to be
a part of the "Mortgaged Property," as that term is defined in Section I(s).
However, if this present, absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the Property Jurisdiction, then the
Rents shall be included as a part of the Mortgaged Property and it is the
intention of the Borrower that in this circumstance this Instrument create and
perfect a security interest on Rents in favor of Lender, which security
interest shall be effective as of the date of this Instrument.
(b) After the occurrence of an Event of Default, Borrower
authorizes Lender to collect, sue for and compromise
Rents and directs each tenant of the Mortgaged Property
to pay all Rents to, or as directed by, Lender. However,
until the occurrence of an Event of Default, Lender
hereby grants to Borrower a revocable license to collect
and receive all Rents, to hold all Rents in trust for the
benefit of Lender and to apply all Rents to pay the
installments of interest and principal then due and
payable under the Note and the other amounts then due and
payable under the other Loan Documents, including
Imposition Deposits, and to pay the current costs and
expenses of managing, operating and maintaining the
Mortgaged Property, including utilities, Taxes and
insurance premiums (to the extent not included in
Imposition Deposits), tenant improvements and other
capital expenditures. So long as no Event of Default has
occurred and is continuing, the Rents remaining after
application pursuant to the preceding sentence may be
retained by Borrower free and clear of, and released
from, Lender's rights with respect to Rents under this
Instrument.
From and after the occurrence of an Event of Default, and without the necessity
of Lender entering upon and taking and maintaining control of the Mortgaged
Property directly, or by a receiver, Borrower's license to collect Rents shall
automatically terminate and Lender shall without notice be entitled to all
Rents as they become due and payable, including Rents then due and unpaid.
Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.
At any time on or after the date of Lender's demand for Rents, Lender may give,
and Borrower hereby irrevocably authorizes Lender to give, notice to all
tenants of the Mortgaged Property instructing them to pay all Rents to Lender,
no tenant shall be obligated to inquire further as to the occurrence or
continuance of an Event of Default, and no tenant shall be obligated to pay to
Borrower any amounts which are actually paid to Lender in response to such a
notice. Any such notice by Lender shall be delivered to each tenant personally,
by mail or by delivering such demand to each rental unit. Borrower shall not
interfere with and shall cooperate with Lender's collection of such Rents.
(c) Borrower represents and warrants to Lender that Borrower has not
executed any prior assignment of Rents (other than an assignment of Rents
securing indebtedness that will be paid off and discharged with the proceeds of
the loan evidenced by the Note), that Borrower has not performed, and Borrower
covenants and agrees that it will not perform, any acts and has not executed,
and shall not execute, any instrument which would prevent Lender from
exercising its rights under this Section 3, and that at the time of execution
of this Instrument there has been no anticipation or prepayment of any Rents
for more than two months prior to the due dates of such Rents. Borrower shall
not collect or accept payment of any Rents more than two months prior to the
due dates of such Rents.
(d) If an Event of Default has occurred and is continuing, Lender may,
regardless of the adequacy of Lender's security or the solvency of Borrower and
even in the absence of waste, enter upon and take and maintain full control of
the Mortgaged Property in order to perform all acts that Lender in its
discretion determines to be necessary or desirable for the operation and
maintenance of the Mortgaged Property, including the execution, cancellation or
modification of Leases, the collection of all Rents, the making of repairs to
the Mortgaged Property and the execution or termination of contracts providing
for the management, operation or maintenance of the Mortgaged Property, for the
purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Instrument, or for
such other purposes as Lender in its discretion may deem necessary or
desirable. Alternatively, if an Event of Default has occurred and is
continuing, regardless of the adequacy of Lender's security, without regard to
Borrower's solvency and without the necessity of giving prior notice (oral or
written) to Borrower, Lender may apply to any court having jurisdiction for the
appointment of a receiver for the Mortgaged Property to take any or all of the
actions set forth in the preceding sentence. If Lender elects to seek the
appointment of a receiver for the Mortgaged Property at any time after an Event
of Default has occurred and is continuing, Borrower, by its execution of this
Instrument, expressly consents to the appointment of such receiver, including
the appointment of a receiver ex parte if permitted by applicable law. Lender
or the receiver, as the case may be, shall be entitled to receive a reasonable
fee for managing the Mortgaged Property. Immediately upon appointment of a
receiver or immediately upon the Lender's entering upon and taking possession
and control of the Mortgaged Property, Borrower shall surrender possession of
the Mortgaged Property to Lender or the receiver, as the case may be, and shall
deliver to Lender or the receiver, as the case may be, all documents, records
(including records on electronic or magnetic media), accounts, surveys, plans,
and specifications relating to the Mortgaged Property and all security deposits
and prepaid Rents. In the event Lender takes possession and control of the
Mortgaged Property, Lender may exclude Borrower and its representatives from
the Mortgaged Property. Borrower acknowledges and agrees that the exercise by
Lender of any of the rights conferred under this Section 3 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and
Improvements.
(e) If Lender enters the Mortgaged Property, Lender shall be liable to
account only to Borrower and only for those Rents actually received. Lender
shall not be liable to Borrower, anyone claiming under or through Borrower or
anyone having an interest in the Mortgaged Property, by reason of any act or
omission of Lender under this Section 3, and Borrower hereby releases and
discharges Lender from any such liability to the fullest extent permitted by
law.
(f) If the Rents are not sufficient to meet the costs of taking control of
and managing the Mortgaged Property and collecting the Rents, any funds
expended by Lender for such purposes shall become an additional part of the
Indebtedness as provided in Section 12.
(g) Any entering upon and taking of control of the Mortgaged Property by
Lender or the receiver, as the case may be, and any application of Rents as
provided in this Instrument shall not cure or waive any Event of Default or
invalidate any other right or remedy of Lender under applicable law or provided
for in this Instrument.
4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.
(a) As part of the consideration for the Indebtedness, Borrower absolutely
and unconditionally assigns and transfers to Lender all of Borrower's right,
title and interest in, to and under the Leases, including Borrower's right,
power and authority to modify the terms of any such Lease, or extend or
terminate any such Lease. It is the intention of Borrower to establish a
present, absolute and irrevocable transfer and assignment to Lender of all of
Borrower's right, title and interest in, to and under the Leases. Borrower and
Lender intend this assignment of the Leases to be immediately effective and to
constitute an absolute present assignment and not an assignment for additional
security only. For purposes of giving effect to this absolute assignment of the
Leases, and for no other purpose, the Leases shall not be deemed to be a part
of the "Mortgaged Property," as that term is defined in Section I (s). However,
if this present, absolute and unconditional assignment of the Leases is not
enforceable by its terms under the laws of the Property Jurisdiction, then the
Leases shall be included as a part of the Mortgaged Property and it is the
intention of the Borrower that in this circumstance this Instrument create and
perfect a security interest on the Leases in favor of Lender, which security
interest shall be effective as of the date of this Instrument.
(b) Until Lender gives notice to Borrower of Lender's exercise of its
rights under this Section 4, Borrower shall have all rights, power and
authority granted to Borrower under any Lease (except as otherwise limited by
this Section or any other provision of this Instrument), including the right,
power and authority to modify the terms of any Lease or extend or terminate any
Lease. Upon the occurrence of an Event of Default, the permission given to
Borrower pursuant to the preceding sentence to exercise all rights, power and
authority under Leases shall automatically terminate. Borrower shall comply
with and observe Borrower's obligations under all Leases, including Borrower's
obligations pertaining to the maintenance and disposition of tenant security
deposits.
(c) Borrower acknowledges and agrees that the exercise by Lender, either
directly or by a receiver, of any of the rights conferred under this Section 4
shall not be construed to make Lender a mortgagee-in-possession of the
Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and the Improvements. The acceptance by Lender of the
assignment of the Leases pursuant to Section 4(a) shall not at any time or in
any event obligate Lender to take any action under this Instrument or to expend
any money or to incur any expenses. Lender shall not be liable in any way for
any injury or damage to person or property sustained by any person or persons,
firm or corporation in or about the Mortgaged Property. Prior to Lender's
actual entry into and taking possession of the Mortgaged Property, Lender shall
not (i) be obligated to perform any of the terms, covenants and conditions
contained in any Lease (or otherwise have any obligation with respect to any
Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible for
the operation, control, care, management or repair of the Mortgaged Property or
any portion of the Mortgaged Property. The execution of this Instrument by
Borrower shall constitute conclusive evidence that all responsibility for the
operation, control, care, management and repair of the Mortgaged Property is
and shall be that of Borrower, prior to such actual entry and taking of
possession.
(d) Upon delivery of notice by Lender to Borrower of Lender's exercise of
Lender's rights under this Section 4 at any time after the occurrence of an
Event of Default, and without the necessity of Lender entering upon and taking
and maintaining control of the Mortgaged Property directly, by a receiver, or
by any other manner or proceeding permitted by the laws of the Property
Jurisdiction, Lender immediately shall have all rights, powers and authority
granted to Borrower under any Lease, including the right, power and authority
to modify the terms of any such Lease, or extend or terminate any such Lease.
(e) Borrower shall, promptly upon Lender's request, deliver to Lender an
executed copy of each residential Lease then in effect. All Leases for
residential dwelling units shall be on forms approved by Lender, shall be for
initial terms of at least six months and not more than two years, and shall not
include options to purchase. If customary in the applicable market, residential
Leases with terms of less than six months may be permitted with Lender's prior
written consent.
(f) Borrower shall not lease any portion of the Mortgaged Property for
non-residential use except with the prior written consent of Lender and
Lender's prior written approval of the Lease agreement. Borrower shall not
modify the terms of, or extend or terminate, any Lease for nonresidential use
(including any Lease in existence on the date of this Instrument) without the
prior written consent of Lender. Borrower shall, without request by Lender,
deliver an executed copy of each non-residential Lease to Lender promptly after
such Lease is signed. All non-residential Leases, including renewals or
extensions of existing Leases, shall specifically provide that (1) such Leases
are subordinate to the lien of this Instrument (unless waived in writing by
Lender); (2) the tenant shall attorn to Lender and any purchaser at a
foreclosure sale, such attornment to be self-executing and effective upon
acquisition of title to the Mortgaged Property by any purchaser at a
foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute
such further evidences of attornment as Lender or any purchaser at a
foreclosure sale may from time to time request; (4) the Lease shall not be
terminated by foreclosure or any other transfer of the Mortgaged Property; (5)
after a foreclosure sale of the Mortgaged Property, Lender or any other
purchaser at such foreclosure sale may, at Lender's or such purchaser's option,
accept or terminate such Lease; and (6) the tenant shall, upon receipt after
the occurrence of an Event of Default of a written request from Lender, pay all
Rents payable under the Lease to Lender.
(g) Borrower shall not receive or accept Rent under any Lease (whether
residential or non-residential) for more than two months in advance.
5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT
PREMIUM. Borrower shall pay the Indebtedness when due in accordance with the
terms of the Note and the other Loan Documents and shall perform, observe and
comply with all other provisions of the Note and the other Loan Documents.
Borrower shall pay a prepayment premium in connection with certain prepayments
of the Indebtedness, including a payment made after Lender's exercise of any
right of acceleration of the Indebtedness, as provided in the Note.
6. EXCULPATION. Borrower's personal liability for payment of the
Indebtedness and for performance of the other obligations to be performed by it
under this Instrument is limited in the manner, and to the extent, provided in
the Note.
7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.
(a) Borrower shall deposit with Lender on the day monthly installments of
principal or interest, or both, are due under the Note (or on another day
designated in writing by Lender), until the Indebtedness is paid in full, an
additional amount sufficient to accumulate with Lender the entire sum required
to pay, when due (1) any water and sewer charges which, if not paid, may result
in a lien on all or any part of the Mortgaged Property, (2) the premiums for
fire and other hazard insurance, rent loss insurance and such other insurance
as Lender may require under Section 19, (3) Taxes, and (4) amounts for other
charges and expenses which Lender at any time reasonably deems necessary to
protect the Mortgaged Property, to prevent the imposition of liens on the
Mortgaged Property, or otherwise to protect Lender's interests, all as
reasonably estimated from time to time by Lender. The amounts deposited under
the preceding sentence are collectively referred to in this Instrument as the
"Imposition Deposits". The obligations of Borrower for which the Imposition
Deposits are required are collectively referred to in this Instrument as
"Impositions". The amount of the Imposition Deposits shall be sufficient to
enable Lender to pay each Imposition before the last date upon which such
payment may be made without any penalty or interest charge being added. Lender
shall maintain records indicating how much of the monthly Imposition Deposits
and how much of the aggregate Imposition Deposits held by Lender are held for
the purpose of paying Taxes, insurance premiums and each other obligation of
Borrower for which Imposition Deposits are required. Any waiver by Lender of
the requirement that Borrower remit Imposition Deposits to Lender may be
revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.
(b) Imposition Deposits shall be held in an institution (which may be
Lender, if Lender is such an institution) whose deposits or accounts are
insured or guaranteed by a federal agency. Lender shall not be obligated to
open additional accounts or deposit Imposition Deposits in additional
institutions when the amount of the Imposition Deposits exceeds the maximum
amount of the federal deposit insurance or guaranty. Lender shall apply the
Imposition Deposits to pay Impositions so long as no Event of Default has
occurred and is continuing. Unless applicable law requires, Lender shall not be
required to pay Borrower any interest, earnings or profits on the Imposition
Deposits. Borrower hereby pledges and grants to Lender a security interest in
the Imposition Deposits as additional security for all of Borrower's
obligations under this Instrument and the other Loan Documents. Any amounts
deposited with Lender under this Section 7 shall not be trust funds, nor shall
they operate to reduce the Indebtedness, unless applied by Lender for that
purpose under Section 7(e).
(c) If Lender receives a bill or invoice for an Imposition, Lender shall
pay the Imposition from the Imposition Deposits held by Lender. Lender shall
have no obligation to pay any Imposition to the extent it exceeds Imposition
Deposits then held by Lender. Lender may pay an Imposition according to any
bill, statement or estimate from the appropriate public office or insurance
company without inquiring into the accuracy of the bill, statement or estimate
or into the validity of the Imposition.
(d) If at any time the amount of the Imposition Deposits held by Lender
for payment of a specific Imposition exceeds the amount reasonably deemed
necessary by Lender, the excess shall be credited against future installments
of Imposition Deposits. If at any time the amount of the Imposition Deposits
held by Lender for payment of a specific Imposition is less than the amount
reasonably estimated by Lender to be necessary, Borrower shall pay to Lender
the amount of the deficiency within 15 days after notice from Lender.
(e) If an Event of Default has occurred and is continuing, Lender may
apply any Imposition Deposits, in any amounts and in any order as Lender
determines, in Lender's discretion, to pay any Impositions or as a credit
against the Indebtedness. Upon payment in full of the Indebtedness, Lender
shall refund to Borrower any Imposition Deposits held by Lender.
8. COLLATERAL AGREEMENTS. Borrower shall deposit with Lender such amounts
as may be required by any Collateral Agreement and shall perform all other
obligations of Borrower under each Collateral Agreement.
9. APPLICATION OF PAYMENTS. If at any time Lender receives, from Borrower
or otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, then Lender may apply that payment to
amounts then due and payable in any manner and in any order determined by
Lender, in Lender's discretion. Neither Lender's acceptance of an amount which
is less than all amounts then due and payable nor Lender's application of such
payment in the manner authorized shall constitute or be deemed to constitute
either a waiver of the unpaid amounts or an accord and satisfaction.
Notwithstanding the application of any such amount to the Indebtedness',
Borrower's obligations under this Instrument and the Note shall remain
unchanged.
10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws, ordinances,
regulations and requirements of any Governmental Authority and all recorded
lawful covenants and agreements relating to or affecting the Mortgaged
Property, including all laws, ordinances, regulations, requirements and
covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, zoning and land use, and Leases. Borrower
also shall comply with all applicable laws that pertain to the maintenance and
disposition of tenant security deposits. Borrower shall at all times maintain
records sufficient to demonstrate compliance with the provisions of this
Section 10. Borrower shall take appropriate measures to prevent, and shall not
engage in or knowingly permit, any illegal activities at the Mortgaged Property
that could endanger tenants or visitors, result in damage to the Mortgaged
Property, result in forfeiture of the Mortgaged Property, or otherwise
materially impair the lien created by this Instrument or Lender's interest in
the Mortgaged Property. Borrower represents and warrants to Lender that no
portion of the Mortgaged Property has been or will be purchased with the
proceeds of any illegal activity.
11. USE OF PROPERTY. Unless required by applicable law, Borrower shall
not (a) except for any change in use approved by Lender, allow changes in the
use for which all or any part of the Mortgaged Property is being used at the
time this Instrument was executed, (b) convert any individual dwelling units
or common areas to commercial use, (c) initiate or acquiesce in a change in
the zoning classification of the Mortgaged Property, or (d) establish any
condominium or cooperative regime with respect to the Mortgaged Property.
12. PROTECTION OF LENDER'S SECURITY.
(a) If Borrower fails to perform any of its obligations under this
Instrument or any other Loan Document, or if any action or proceeding is
commenced which purports to affect the Mortgaged Property, Lender's security
or Lenders rights under this Instrument, including eminent domain, insolvency,
code enforcement, civil or criminal forfeiture, enforcement of Hazardous
Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender at Lender's option may make such
appearances, disburse such sums and take such actions as Lender reasonably
deems necessary to perform such obligations of Borrower and to protect
Lender's interest, including (1) payment of fees and out-of-pocket expenses of
attorneys, accountants, inspectors and consultants, (2) entry upon the
Mortgaged Property to make repairs or secure the Mortgaged Property, (3)
procurement of the insurance required by Section 19, and (4) payment of
amounts which Borrower has failed to pay under Sections 15 and 17.
(b) Any amounts disbursed by Lender under this Section 12, or under any
other provision of this Instrument that treats such disbursement as being made
under this Section 12, shall be added to, and become part of, the principal
component of the Indebtedness, shall be immediately due and payable and shall
bear interest from the date of disbursement until paid at the "Default Rate",
as defined in the Note.
(c) Nothing in this Section 12 shall require Lender to incur any expense
or take any
action.
13. INSPECTION. Lender, its agents, representatives, and designees may
make or cause to be made entries upon and inspections of the Mortgaged
Property (including environmental inspections and tests) during normal
business hours, or at any other reasonable time.
14. BOOKS AND RECORDS; FINANCIAL REPORTING.
(a) Borrower shall keep and maintain at all times at the Mortgaged
Property or the management agent's offices, and upon Lender's request shall
make available at the Mortgaged Property, complete and accurate books of
account and records (including copies of supporting bills and invoices)
adequate to reflect correctly the operation of the Mortgaged Property, and
copies of all written contracts, Leases, and other instruments which affect the
Mortgaged Property. The books, records, contracts, Leases and other instruments
shall be subject to examination and inspection at any reasonable time by
Lender.
(b) Borrower shall furnish to Lender all of the following:
(1) within 120 days after the end of each fiscal year of Borrower, a
statement of
income and expenses for Borrower's operation of the Mortgaged
Property for that fiscal year, a statement of changes in
financial position of Borrower relating to the Mortgaged
Property for that fiscal year and, when requested by Lender, a
balance sheet showing all assets and liabilities of Borrower
relating to the Mortgaged Property as of the end of that fiscal
year;
(2) within 120 days after the end of each fiscal year
of Borrower, and at any
other time upon Lender's request, a rent schedule for the
Mortgaged Property showing the name of each tenant, and for
each tenant, the space occupied, the lease expiration date, the
rent payable for the current month, the date through which rent
has been paid, and any related information requested by Lender;
(3) within 120 days after the end of each fiscal year
of Borrower, and at any
other time upon Lender's request, an accounting of all security
deposits held pursuant to all Leases, including the name of the
institution (if any) and the names and identification numbers
of the accounts (if any) in which such security deposits are
held and the name of the person to contact at such financial
institution, along with any authority or release necessary for
Lender to access information regarding such accounts;
(4) within 120 days after the end of each fiscal year
of Borrower, and at any
other time upon Lender's request, a statement that identifies
all owners of any interest in Borrower and the interest held by
each, if Borrower is a corporation, all officers and directors
of Borrower, and if Borrower is a limited liability company,
all managers who are not members;
(5) upon Lender's request, a monthly property
management report for the
Mortgaged Property, showing the number of inquiries made and
rental applications received from tenants or prospective
tenants and deposits received from tenants and any other
information requested by Lender;
(6) upon Lender's request, a balance sheet, a statement
of income and expenses
for Borrower and a statement of changes in
financial position of Borrower
for Borrower's most recent fiscal year; and
(7) if required by Lender, a statement of income and
expense for the Mortgaged
Property for the prior month or quarter.
(c) Each of the statements, schedules and reports required by Section
14(b) shall be certified to be complete and accurate by an individual having
authority to bind Borrower, and shall be in such form and contain such detail
as Lender may reasonably require. Lender also may require that any statements,
schedules or reports be audited at Borrower's expense by independent certified
public accountants acceptable to Lender.
(d) If Borrower fails to provide in a timely manner the statements,
schedules and reports required by Section 14(b), Lender shall have the right to
have Borrower's books and records audited, at Borrower's expense, by
independent certified public accountants selected by Lender in order to obtain
such statements, schedules and reports, and all related costs and expenses of
Lender shall become immediately due and payable and shall become an additional
part of the Indebtedness as provided in Section 12.
(e) If an Event of Default has occurred and is continuing, Borrower shall
deliver to Lender upon written demand all books and records relating to the
Mortgaged Property or its operation.
(f) Borrower authorizes Lender to obtain a credit report on Borrower at
any time.
(g) If an Event of Default has occurred and Lender has not previously
required Borrower to furnish a quarterly statement of income and expense for
the Mortgaged Property, Lender may require Borrower to furnish such a statement
within 45 days after the end of each fiscal quarter of Borrower following such
Event of Default.
15. TAXES; OPERATING EXPENSES.
(a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower
shall pay, or cause to be paid, all Taxes when due and before the addition of
any interest, fine, penalty or cost for nonpayment.
(b) Subject to the provisions of Section 15(c), Borrower shall pay the
expenses of operating, managing, maintaining and repairing the Mortgaged
Property (including insurance premiums, utilities, repairs and replacements)
before the last date upon which each such payment may be made without any
penalty or interest charge being added.
(c) As long as no Event of Default exists and Borrower has timely
delivered to Lender any bills or premium notices that it has received, Borrower
shall not be obligated to pay Taxes, insurance premiums or any other individual
Imposition to the extent that sufficient Imposition Deposits are held by Lender
for the purpose of paying that specific Imposition. If an Event of Default
exists, Lender may exercise any rights Lender may have with respect to
Imposition Deposits without regard to whether Impositions are then due and
payable. Lender shall have no liability to Borrower for failing to pay any
Impositions to the extent that any Event of Default has occurred and is
continuing, insufficient Imposition Deposits are held by Lender at the time an
Imposition becomes due and payable or Borrower has failed to provide Lender
with bills and premium notices as provided above.
(d) Borrower, at its own expense, may contest by appropriate legal
proceedings, conducted diligently and in good faith, the amount or validity of
any Imposition other than insurance premiums, if (1) Borrower notifies Lender
of the commencement or expected commencement of such proceedings, (2) the
Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower
deposits with Lender reserves sufficient to pay the contested Imposition, if
requested by Lender, and (4) Borrower furnishes whatever additional security is
required in the proceedings or is reasonably requested by Lender, which may
include the delivery to Lender of the reserves established by Borrower to pay
the contested Imposition.
(e) Borrower shall promptly deliver to Lender a copy of all notices of,
and invoices for, Impositions, and if Borrower pays any Imposition directly,
Borrower shall promptly furnish to Lender receipts evidencing such payments.
16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the extent
provided in Section 21, the grant, creation or existence of any mortgage, deed
of trust, deed to secure debt, security interest or other lien, privilege or
encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this
Instrument) or on certain ownership interests in Borrower, whether voluntary,
involuntary or by operation of law, and whether or not such Lien has priority
over the lien of this Instrument, is a "Transfer" which constitutes an Event of
Default.
17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.
(a) Borrower (1) shall not commit waste or pen-nit impairment or
deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged
Property, (3) shall restore or repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its
original condition, or such other condition as Lender may approve writing,
whether or not insurance proceeds or condemnation awards are available to cover
any costs of such restoration or repair, (4) shall keep the Mortgaged Property
in good repair, including the replacement of Personalty and Fixtures with items
of equal or better function and quality, (5) shall provide for professional
management of the Mortgaged Property by a residential rental property manager
satisfactory to Lender under a contract approved by Lender in writing, and (6)
shall give notice to Lender of and, unless otherwise directed in writing by
Lender, shall appear in and defend any action or proceeding purporting to
affect the Mortgaged Property, Lender's security or Lender's rights under this
Instrument. Borrower shall not (and shall not permit any tenant or other person
to) remove, demolish or alter the Mortgaged Property or any part of the
Mortgaged Property except in connection with the replacement of tangible
Personalty.
(b) If, in connection with the making of the loan evidenced by the Note or
at any later date, Lender waives in writing the requirement of Section 17(a)(5)
above that Borrower enter into a written contract for management of the
Mortgaged Property and if, after the date of this Instrument, Borrower intends
to change the management of the Mortgaged Property, Lender shall have the right
to approve such new property manager and the written contract of the management
of the Mortgaged Property and require that Borrower and such new property
manager enter into an Assignment of Management Agreement on a form approved by
Lender. If required by Lender (whether before or after an Event of Default),
Borrower will cause any Affiliate of Borrower to whom fees are payable for the
management of the Mortgaged Property to enter into an agreement with Lender, in
a form approved by Lender, providing for subordination of those fees and such
other provisions as Lender may require. "Affiliate of Borrower" means any
corporation, partnership, joint venture, limited liability company, limited
liability partnership, trust or individual controlled by, under common control
with, or which controls Borrower (the term "control" for these purposes shall
mean the ability, whether by the ownership of shares or other equity interests,
by contract or otherwise, to elect a majority of the directors of a
corporation, to make management decisions on behalf of, or independently to
select the managing partner of, a partnership, or otherwise to have the power
independently to remove and then select a ma ority of those j individuals
exercising managerial authority over an entity, and control shall be
conclusively presumed in the case of the ownership of 50% or more of the equity
interests).
<PAGE>
18. ENVIRONMENTAL HAZARDS.
(a) Except for matters covered by a written program of operations and
maintenance approved in writing by Lender (an "O&M Program") or matters
described in Section I 8(b), Borrower shall not cause or permit any of the
following:
(1) the presence, use, generation, release, treatment,
processing, storage
(including storage in above ground and underground storage
tanks), handling, or disposal of any Hazardous Materials on or
under the Mortgaged Property or any other property of Borrower
that is adjacent to the Mortgaged Property;
(2) the transportation of any Hazardous Materials to,
from, or across the
Mortgaged
Property;
(3) any occurrence or condition on the Mortgaged
Property or any other
property of Borrower that is adjacent to the Mortgaged
Property, which occurrence or condition is or may be in
violation of Haza dous Materials Laws; or
(4) any violation of or noncompliance with the terms of
any Environmental
Permit with respect to the Mortgaged Property or any property
of Borrower that is adjacent to the Mortgaged Property.
The matters described in clauses (1) through (4) above are referred to
collectively in this Section 18 as "Prohibited Activities or Conditions".
(b) Prohibited Activities and Conditions shall not include the safe and
lawful use and storage of quantities of (1) pre-packaged supplies, cleaning
materials and petroleum products customarily used in the operation and
maintenance of comparable multifamily properties, (2) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for
consumer use and used by tenants and occupants of residential dwelling units in
the Mortgaged Property; and (3) petroleum products used in the operation and
maintenance of motor vehicles from time to time located on the Mortgaged
Property's parking areas, so long as all of the foregoing are used, stored,
handled, transported and disposed of in compliance with Hazardous Materials
Laws.
(c) Borrower shall take all commercially reasonable actions (including the
inclusion of appropriate provisions in any Leases executed after the date of
this Instrument) to prevent its employees, agents, and contractors, and all
tenants and other occupants from causing or permitting any Prohibited
Activities or Conditions. Borrower shall not lease or allow the sublease or use
of all or any portion of the Mortgaged Property to any tenant or subtenant for
nonresidential use by any user that, in the ordinary course of its business,
would cause or pen-nit any Prohibited Activity or Condition.
(d) If an O&M Program has been established with respect to Hazardous
Materials, Borrower shall comply in a timely manner with, and cause all
employees, agents, and contractors of Borrower and any other persons present on
the Mortgaged Property to comply with the O&M Program. All costs of performance
of Borrower's obligations under any O&M Program shall be paid by Borrower, and
Lender's out-of-pocket costs incur-red in connection with the monitoring and
review of the O&M Program and Borrower's performance shall be paid by Borrower
upon demand by Lender. Any such out-of-pocket costs of Lender which Borrower
fails to pay promptly shall become an additional part of the Indebtedness as
provided in Section 12.
(e) Borrower represents and warrants to Lender that, except as previously
disclosed by Borrower to Lender in writing:
(1) Borrower has not at any time engaged in, caused or
permitted any Prohibited
Activities or
Conditions;
(2) to the best of Borrower's knowledge after
reasonable and diligent inquiry, no
Prohibited Activities or Conditions
exist or have existed;
(3) except to the extent previously disclosed by
Borrower to Lender in writing,
the Mortgaged Property does not now contain any underground
storage tanks, and, to the best of Borrower's knowledge after
reasonable and diligent inquiry, the Mortgaged Property has not
contained any underground storage tanks in the past. If there
is an underground storage tank located on the Property which
has been previously disclosed by Borrower to Lender in writing,
that tank complies with all requirements of Hazardous Materials
Laws;
(4) Borrower has complied with all Hazardous Materials
Laws, including all
requirements for notification regarding releases of Hazardous
Materials. Without limiting the generality of the foregoing,
Borrower has obtained all Environmental Pen-nits required for
the operation of the Mortgaged Property in accordance with
Hazardous Materials Laws now in effect and all such
Environmental Permits are in full force and effect;
(5) no event has occurred with respect to the Mortgaged
Property that
constitutes, or with the passing of time or the
giving of notice would
constitute, noncompliance with the terms of any
Environmental Permit;
(6) there are no actions, suits, claims or proceedings
pending or, to the best of
Borrower's knowledge after reasonable and diligent inquiry,
threatened that involve the Mortgaged Property and allege,
arise out of, or relate to any Prohibited Activity or
Condition; and
(7) Borrower has not received any complaint, order,
notice of violation or other
communication from any Governmental Authority with regard to
air emissions, water discharges, noise emissions or Hazardous
Materials, or any other environmental, health or safety matters
affecting the Mortgaged Property or any other property of
Borrower that is adjacent to the Mortgaged Property.
The representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the terin of the loan evidenced by the Note, until the Indebtedness
has been paid in full.
(f) Borrower shall promptly notify Lender in writing upon the occurrence
of any of the following events:
(1) Borrower's discovery of any Prohibited Activity or Condition;
(2) Borrower's receipt of or knowledge of any complaint, order,
notice of
violation or other communication from any Governmental
Authority or other person with regard to present or future
alleged Prohibited Activities or Conditions or any other
environmental, health or safety matters affecting the Mortgaged
Property or any other property of Borrower that is adjacent to
the Mortgaged Property; and
(3) any representation or warranty in this Section 18 becomes untrue
after the date of this Agreement.
Any such notice given by Borrower shall not relieve Borrower of, or result in a
waiver of, any obligation under this Instrument, the Note, or any other Loan
Document.
(g) Borrower shall pay promptly the costs of any environmental
inspections, tests or audits ("Environmental Inspections") required by Lender
in connection with any foreclosure or deed in lieu of foreclosure, or as a
condition of Lender's consent to any Transfer under Section 2 1, or required by
Lender following a reasonable determination by Lender that Prohibited
Activities or Conditions may exist. Any such costs incurred by Lender
(including the fees and out-of-pocket costs of attorneys and technical
consultants whether incurred in connection with any judicial or administrative
process or otherwise) which Borrower fails to pay promptly shall become an
additional part of the Indebtedness as provided in Section 12. The results of
all Environmental Inspections made by Lender shall at all times remain the
property of Lender and Lender shall have no obligation to disclose or otherwise
make available to Borrower or any other party such results or any other
information obtained by Lender in connection with its Environmental
Inspections. Lender hereby reserves the right, and Borrower hereby expressly
authorizes Lender, to make available to any party, including any prospective
bidder at a foreclosure sale of the Mortgaged Property, the results of any
Environmental Inspections made by Lender with respect to the Mortgaged
Property. Borrower consents to Lender notifying any party (either as part of a
notice of sale or otherwise) of the results of any of Lender's Environmental
Inspections. Borrower acknowledges that Lender cannot control or otherwise
assure the truthfulness or accuracy of the results of any of its Environmental
Inspections and that the release of such results to prospective bidders at a
foreclosure sale of the Mortgaged Property may have a material and adverse
effect upon the amount which a party may bid at such sale. Borrower agrees that
Lender shall have no liability whatsoever as a result of delivering the results
of any of its Environmental Inspections to any third party, and Borrower hereby
releases and forever discharges Lender from any and all claims, damages, or
causes of action, arising out of, connected with or incidental to the results
of, the delivery of any of Lender's Environmental Inspections.
(h) If any investigation, site monitoring, containment, clean-up,
restoration or other remedial work ("Remedial Work") is necessary to comply
with any Hazardous Materials Law or order of any Governmental Authority that
has or acquires jurisdiction over the Mortgaged Property or the use, operation
or improvement of the Mortgaged Property under any Hazardous Materials Law,
Borrower shall, by the earlier of (1) the applicable deadline required by
Hazardous Materials Law or (2) 30 days after notice from Lender demanding such
action, begin performing the Remedial Work, and thereafter diligently prosecute
it to completion, and shall in any event complete the work by the time required
by applicable Hazardous Materials Law. If Borrower fails to begin on a timely
basis or diligently prosecute any required Remedial Work, Lender may, at its
option, cause the Remedial Work to be completed, in which case Borrower shall
reimburse Lender on demand for the cost of doing so. Any reimbursement due from
Borrower to Lender shall become part of the Indebtedness as provided in Section
12.
(i) Borrower shall cooperate with any inquiry by any Governmental
Authority and shall comply with any governmental or judicial order which arises
from any alleged Prohibited Activity or Condition.
(j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii)
any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior
Loan Servicer, (v) the officers, directors, shareholders, partners, employees
and trustees of any of the foregoing, and (vi) the heirs, legal
representatives, successors and assigns of each of the foregoing (collectively,
the "Indemnitees") from and against all proceedings, claims, damages, penalties
and costs (whether initiated or sought by Governmental Authorities or private
parties), including fees and out-of-pocket expenses of attorneys and expert
witnesses, investigatory fees, and remediation costs, whether incurred in
connection with any judicial or administrative process or otherwise, arising
directly or indirectly from any of the following:
(1) any breach of any representation or warranty of
Borrower in this Section 18;
(2) any failure by Borrower to perform any of its
obligations under this
Section
18;
(3) the existence or alleged existence of any
Prohibited Activity or Condition;
(4) the presence or alleged presence of Hazardous
Materials on or under the
Mortgaged Property or any property of Borrower that
is adjacent to the
Mortgaged Property; and
(5) the actual or alleged violation of any Hazardous Materials Law.
(k) Counsel selected by Borrower to defend Indemnitees shall be subject to
the approval of those Indemnitees. However, any Indemnitee may elect to defend
any claim or legal or administrative proceeding at the Borrower's expense.
(1) Borrower shall not, without the prior written consent of those
Indemnitees who are named as parties to a claim or legal or administrative
proceeding (a "Claim"), settle or compromise the Claim if the settlement (1)
results in the entry of any judgment that does not include as an unconditional
term the delivery by the claimant or plaintiff to Lender of a written release
of those Indemnitees, satisfactory in form and substance to Lender; or (2) may
materially and adversely affect Lender, as deten-nined by Lender in its
discretion.
(m) Lender agrees that the indemnity under this Section 18 shall be
limited to the assets of Borrower and Lender shall not seek to recover any
deficiency from any natural persons who are general partners of Borrower.
(n) Borrower shall, at its own cost and expense, do all of the following:
(1) pay or satisfy any judgment or decree that may be
entered against any
Indemnitee or Indemnitees in any legal or administrative
proceeding incident to any matters against which Indemnitees
are entitled to be indemnified under this Section 18;
(2) reimburse Indemnitees for any expenses paid or
incurred in connection with
any matters against which Indemnitees are entitled
to be indemnified under
this Section 18; and
<PAGE>
(3) reimburse Indemnitees for any and all expenses,
including fees and out-of-
pocket expenses of attorneys and expert witnesses, paid or
incurred in connection with the enforcement by Indemnitees of
their rights under this Section 18, or in monitoring and
participating in any legal or administrative proceeding.
(o) In any circumstances in which the indemnity under this Section 18
applies, Lender may employ its own legal counsel and consultants to prosecute,
defend or negotiate any claim or legal or administrative proceeding and Lender,
with the prior written consent of Borrower (which shall not be unreasonably
withheld, delayed or conditioned), may settle or compromise any action or legal
or administrative proceeding, Borrower shall reimburse Lender upon demand for
all costs and expenses incurred by Lender, including all costs of settlements
entered into in good faith, and the fees and out-of-pocket expenses of such
attorneys and consultants,
(p) The provisions of this Section 18 shall be in addition to any and all
other obligations and liabilities that Borrower may have under applicable law
or under other Loan Documents, and each Indemnitee shall be entitled to
indemnification under this Section 18 without regard to whether Lender or that
Indemnitee has exercised any rights against the Mortgaged Property or any other
security, pursued any rights against any guarantor, or pursued any other rights
available under the Loan Documents or applicable law. If Borrower consists of
more than one person or entity, the obligation of those persons or entities to
indemnify the Indemnitees under this Section 18 shall be solidary. The
obligation of Borrower to indemnify the Indemnitees under this Section 18 shall
survive any repayment or discharge of the Indebtedness, any foreclosure
proceeding, any foreclosure sale, any delivery of any deed in lieu of
foreclosure, and any release of record of the lien of this Instrument.
19. PROPERTY AND LIABILITY INSURANCE.
(a) Borrower shall keep the Improvements insured at all times against such
hazards as Lender may from time to time require, which insurance shall include
but not be limited to coverage against loss by fire and allied perils, general
boiler and machinery coverage, and business income coverage. Lender's insurance
requirements may change from time to time throughout the term of the
Indebtedness. If Lender so requires, such insurance shall also include sinkhole
insurance, mine subsidence insurance, earthquake insurance, and, if the
Mortgaged Property does not conform to applicable zoning or land use laws,
building ordinance or law coverage. If any of the Improvements is located in an
area identified by the Federal Emergency Management Agency (or any successor to
that agency) as an area having special flood hazards, and if flood insurance is
available in that area, Borrower shall insure such Improvements against loss by
flood.
(b) All premiums on insurance policies required under Section 19(a)
shall be paid in the manner provided in Section 7,
unless Lender has designated in writing another method
of payment. All such policies shall also be in a form
approved by Lender. All policies of property damage
insurance shall include a non-contributing,
non-reporting mortgage clause in favor of, and in a form
approved by, Lender. Lender shall have the right to hold
the original policies or duplicate original policies of
all insurance required by Section 19(a). Borrower shall
promptly deliver to Lender a copy of all renewal and
other notices received by Borrower with respect to the
policies and all receipts for paid premiums. At least 30
days prior to the expiration date of a policy, Borrower
shall deliver to Lender the original (or a duplicate
original) of a renewal policy in form satisfactory to
Lender.
(c) Borrower shall maintain at all times commercial general liability
insurance, workers' compensation insurance and such other liability, errors and
omissions and fidelity insurance coverages as Lender may from time to time
require.
(d) All insurance policies and renewals of insurance policies required by
this Section 19 shall be in such amounts and for such periods as Lender may
from time to time require, and shall be issued by insurance companies
satisfactory to Lender.
(e) Borrower shall comply with all insurance requirements and shall not
permit any condition to exist on the Mortgaged Property that would invalidate
any part of any insurance coverage that this Instrument requires Borrower to
maintain.
(f) In the event of loss, Borrower shall give immediate written notice to
the insurance carrier and to Lender. Borrower hereby authorizes and appoints
Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and
compromise any claims under policies of property damage insurance, to appear in
and prosecute any action arising from such property damage insurance policies,
to collect and receive the proceeds of property damage insurance, and to deduct
from such proceeds Lender's expenses incurred in the collection of such
proceeds. This power of attorney is coupled with an interest and therefore is
irrevocable. However, nothing contained in this Section 19 shall require Lender
to incur any expense or take any action. Lender may, at Lender's option, (1)
hold the balance of such proceeds to be used to reimburse Borrower for the cost
of restoring and repairing the Mortgaged Property to the equivalent of its
original condition or to a condition approved by Lender (the "Restoration"), or
(2) apply the balance of such proceeds to the payment of the Indebtedness,
whether or not then due. To the extent Lender determines to apply insurance
proceeds to Restoration, Lender shall do so in accordance with Lender's
then-current policies relating to the restoration of casualty damage on similar
multifamily properties.
(g) Lender shall not exercise its option to apply insurance proceeds to
the payment of the Indebtedness if all of the following conditions are met: (1)
no Event of Default (or any event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default) has occurred
and is continuing; (2) Lender determines, in its discretion, that there will be
sufficient funds to complete the Restoration; (3) Lender determines, in its
discretion, that the rental income from the Mortgaged Property after completion
of the Restoration will be sufficient to meet all operating costs and other
expenses, Imposition Deposits, deposits to reserves and loan repayment
obligations relating to the Mortgaged Property; (4) Lender determines, in its
discretion, that the Restoration will be completed before the earlier of (A)
one year before the maturity date of the Note or (B) one year after the date of
the loss or casualty; and (5) upon Lender's request, Borrower provides Lender
evidence of the availability during and after the Restoration of the insurance
required to be maintained by Borrower pursuant to this Section 19.
(h) If the Mortgaged Property is sold at a foreclosure sale or Lender
acquires title to the Mortgaged Property, Lender shall automatically succeed to
all rights of Borrower in and to any insurance policies and unearned insurance
premiums and in and to the proceeds resulting from any damage to the Mortgaged
Property prior to such sale or acquisition.
20. CONDEMNATION.
(a) Borrower shall promptly notify Lender of any action or proceeding
relating to any condemnation or other taking, or conveyance in lieu thereof, of
all or any part of the Mortgaged Property, whether direct or indirect (a
"Condemnation"). Borrower shall appear in and prosecute or defend any action or
proceeding relating to any Condemnation unless otherwise directed by Lender in
writing. Borrower authorizes and appoints Lender as attorney-in-fact for
Borrower to commence, appear in and prosecute, in Lender's or Borrower's name,
any action or proceeding relating to any Condemnation and to settle or
compromise any claim in connection with any Condemnation. This power of
attorney is coupled with an interest and therefore is irrevocable. However,
nothing contained in this Section 20 shall require Lender to incur any expense
or take any action. Borrower hereby transfers and assigns to Lender all right,
title and interest of Borrower in and to any award or payment with respect to
(i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any
damage to the Mortgaged Property caused by governmental action that does not
result in a Condemnation.
(b) Lender may apply such awards or proceeds, after the deduction of
Lender's expenses incurred in the collection of such amounts, at Lender's
option, to the restoration or repair of the Mortgaged Property or to the
payment of the Indebtedness, with the balance, if any, to Borrower. Unless
Lender otherwise agrees in writing, any application of any awards or proceeds
to the Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 of this Instrument or any
Collateral Agreement, or change the amount of such installments. Borrower
agrees to execute such further evidence of assignment of any awards or proceeds
as Lender may require.
21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
(a) The occurrence of any of the following events shall constitute an
Event of Default under this Instrument:
(1) a Transfer of all or any part of the Mortgaged
Property or any interest in the
Mortgaged
Property;
(2) a Transfer of a Controlling
Interest in Borrower;
(3) a Transfer of a Controlling Interest in any entity
which owns, directly or
indirectly through one or more intermediate
entities, a Controlling Interest in
Borrower;
(4) a Transfer of all or any part of Key Principal's
ownership interests (other
than limited partnership interests) in Borrower, or in any
other entity which owns, directly or indirectly through one or
more intermediate entities, an ownership interest in Borrower;
(5) if Key Principal is an entity (A) a Transfer of a
Controlling Interest in Key
Principal, or (B) a Transfer of a Controlling Interest in any
entity which owns, directly or indirectly through one or more
inten-nediate entities, a Controlling Interest in Key
Principal;
(6) if Borrower or Key Principal is a trust, the
termination or revocation of such
trust;
and
(7) a conversion of Borrower from one type of legal entity into
another type of
legal entity, whether or not
there is a Transfer.
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default in order to exercise any of its
remedies with respect to an Event of Default under this Section 2 1.
(b) The occurrence of any of the following events shall not constitute an
Event of Default under this Instrument, notwithstanding any provision of
Section 2 1 (a) to the contrary:
(1) a Transfer to which Lender
has consented;
(2) a Transfer that occurs by devise, descent, or by
operation of law upon the
death of a natural
person;
(3) the grant of a leasehold interest in an individual
dwelling unit for a ten-n of
two years or less not containing an
option to purchase;
(4) a Transfer of obsolete or worn out Personalty or
Fixtures that are
contemporaneously replaced by items of equal or
better function and quality,
which are free of liens, encumbrances and security interests
other than those created by the Loan Documents or consented to
by Lender;
(5) the grant of an easement, if before the grant
Lender determines that the
easement will not materially affect the operation or value of
the Mortgaged Property or Lender's interest in the Mortgaged
Property, and Borrower pays to Lender, upon demand, all costs
and expenses incurred by Lender in connection with reviewing
Borrower's request; and
(6) the creation of a tax lien or a mechanic's,
materialman's or judgment lien
against the Mortgaged Property which is bonded off, released of
record or otherwise remedied to Lender's satisfaction within 30
days of the date of creation.
(c) Lender shall consent, without any adjustment to the rate at which the
Indebtedness secured by this Instrument bears interest or to any other economic
terms of the Indebtedness, to a Transfer that would otherwise violate this
Section 21 if, prior to the Transfer, Borrower has satisfied each of the
following requirements:
(1) the submission to Lender of all information
required by Lender to make the
determination required by this
Section 21 (c);
(2) the absence of any Event
of Default;
(3) the transferee meets all of the eligibility,
credit, management and other
standards (including any standards with respect to previous
relationships between Lender and the transferee and the
organization of the transferee) customarily applied by Lender at
the time of the proposed Transfer to the approval of borrowers
in connection with the origination or purchase of similar
mortgages, deeds of trust or deeds to secure debt on multifamily
properties;
(4) the Mortgaged Property, at the time of the proposed
Transfer, meets all
standards as to its physical condition that are customarily
applied by Lender at the time of the proposed Transfer to the
approval of properties in connection with the origination or
purchase of similar mortgages on multifamily properties;
(5) in the case of a Transfer of all or any part of the
Mortgaged Property, or
direct or indirect ownership interests in Borrower or Key
Principal (if any entity), if transferor or any other person
has obligations under any Loan Document, the execution by the
transferee or one or more individuals or entities acceptable to
Lender of an assumption agreement (including, if applicable, an
Acknowledgment and Agreement of Key Principal to Personal
Liability for Exceptions to Non-Recourse Li , ability) that is
acceptable to Lender and that, among other things, requires the
transferee to perform all obligations of transferor or such
person set forth in such Loan Document, and may require that
the transferee comply with any provisions of this Instrument or
any other Loan Document which previously may have been waived
by Lender;
(6) if a guaranty has been executed and delivered in
connection with the Note,
this Instrument or any of the other Loan Documents, the
Borrower causes one or more individuals or entities acceptable
to Lender to execute and deliver to Lender a guaranty in a form
acceptable to Lender; and
(7) Lender's receipt of all of
the following:
(A) a non-refundable review fee in the amount of
$3,000 and a transfer
fee equal to I percent of the outstanding
Indebtedness immediately prior to the Transfer.
(B) In addition, Borrower shall be required to reimburse Lender
for all of
Lender's out-of-pocket costs (including
reasonable attorneys' fees)
incurred in reviewing the Transfer request, to
the extent such
expenses exceed $3,000.
(d) For purposes of this Section, the following terins shall have the
meanings set forth
below:
(1) "Initial Owners" means, with respect to Borrower or any other
entity, the persons or entities who on the date of the Note own in
the aggregate 100% of the ownership interests in Borrower or that
entity;
(2) A Transfer of a "Controlling Interest" shall mean,
with respect to any
entity, the
following:
(i) if such entity is a general partnership or a joint venture,
a Transfer of any general partnership interest or joint
venture interest which would cause the Initial Owners to
own less than 51% of all general partnership or joint
venture interests in such entity;
(ii) if such entity is a limited partnership, a
Transfer of any general
partnership interest;
(iii)if such entity is a limited liability company or a limited
liability partnership, a Transfer of any membership or
other ownership interest which would cause the Initial
Owners to own less than 5 1 % of all membership or other
ownership interests in such entity;
(iv) if such entity is a corporation (other than a
Publicly-Held Corporation) with only one class of voting
stock, a Transfer of any voting stock which would cause
the Initial Owners to own less than 5 1 % of voting stock
in such corporation;
(v) if such entity is a corporation (other than a
Publicly-Held
Corporation) with more than one class of voting stock, a
Transfer of any voting stock which would cause the Initial
Owners to own less than a sufficient number of shares of
voting stock having the power to elect a majority of
directors of such corporation; and
(vi) if such entity is a trust, the removal,
appointment or substitution of a
trustee of such trust other than (A) in the case of a land
trust, or (B) if the trustee of such trust after such
removal, appointment or substitution is a trustee
identified in the trust agreement approved by Lender.
(3) "Publicly-Held Corporation" shall mean a
corporation the outstanding
voting stock of which is registered under Section 12(b) or
12(g) of the Securities and Exchange Act of 1934, as amended.
22. EVENTS OF DEFAULT. The occurrence of any one or more of
the following shall constitute an Event of Default under this
Instrument:
(a) any failure by Borrower to pay or deposit when due any amount required
by the Note, this Instrument or any other Loan Document-,
(b) any failure by Borrower to maintain the insurance coverage required by
Section 19;
(c) any failure by Borrower to comply with the provisions of Section 33;
(d) fraud or material misrepresentation or material omission by Borrower,
or any of its officers, directors, trustees, general partners or managers, Key
Principal or any guarantor in connection with (A) the application for or
creation of the Indebtedness, (B) any financial statement, rent roll, or other
report or information provided to Lender during the term of the Indebtedness,
or (C) any request for Lender's consent to any proposed action, including a
request for disbursement of funds under any Collateral Agreement;
(e) any Event of Default under Section 2 1;
(f) the commencement of a forfeiture action or proceeding, whether civil
or criminal, which, in Lender's reasonable judgment, could result in a
forfeiture of the Mortgaged Property or otherwise materially impair the lien
created by this Instrument or Lender's interest in the Mortgaged Property;
(g) any failure by Borrower to perform any of its obligations under this
Instrument (other than those specified in Sections 22(a) through (f)), as and
when required, which continues for a period of 30 days after notice of such
failure by Lender to Borrower, but no such notice or grace period shall apply
in the case of any such failure which could, in Lender's judgment, absent
immediate exercise by Lender of a right or remedy under this Instrument, result
in harm to Lender, impairment of the Note or this Instrument or any other
security given under any other Loan Document;
(h) any failure by Borrower to perform any of its obligations as and when
required under any Loan Document other than this Instrument which continues
beyond the applicable cure period, if any, specified in that Loan Document; and
(i) any exercise by the holder of any other debt instrument secured by a
mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a
right to declare all amounts due under that debt instrument immediately due and
payable.
23. REMEDIES CUMULATIVE. Each right and remedy provided in this Instrument
is distinct from all other rights or remedies under this Instrument or any
other Loan Document or afforded by applicable law, and each shall be cumulative
and may be exercised concurrently, independently, or successively, in any
order.
24. FORBEARANCE.
(a) Lender may (but shall not be obligated to) agree with Borrower, from
time to time, and without giving notice to, or obtaining the consent of, or
having any effect upon the obligations of, any guarantor or other third party
obligor, to take any of the following actions: extend the time for payment of
all or any part of the Indebtedness; reduce the payments due under this
Instrument, the Note, or any other Loan Document; release anyone liable for the
payment of any amounts under this Instrument, the Note, or any other Loan
Document; accept a renewal of the Note; modify the tern-is and time of payment
of the Indebtedness; join in any extension or subordination agreement; release
any Mortgaged Property; take or release other or additional security; modify
the rate of interest or period of amortization of the Note or change the amount
of the monthly installments payable under the Note; and otherwise modify this
Instrument, the Note, or any other Loan Document.
(b) Any forbearance by Lender in exercising any right or remedy under the
Note, this Instrument, or any other Loan Document or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of any other
right or remedy. The acceptance by Lender of payment of all or any part of the
Indebtedness after the due date of such payment, or in an amount which is less
than the required payment, shall not be a waiver of Lender's right to require
prompt payment when due of all other payments on account of the Indebtedness or
to exercise any remedies for any failure to make prompt payment. Enforcement by
Lender of any security for the Indebtedness shall not constitute an election by
Lender of remedies so as to preclude the exercise of any other right available
to Lender. Lender's receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.
25. LOAN CHARGES. If any applicable law limiting the amount of interest or
other charges permitted to be collected from Borrower is interpreted so that
any charge provided for in any Loan Document, whether considered separately or
together with other charges levied in connection with any other Loan Document,
violates that law, and Borrower is entitled to the benefit of that law, that
charge is hereby reduced to the extent necessary to eliminate that violation.
The amounts, if any, previously paid to Lender in excess of the permitted
amounts shall be applied by Lender to reduce the principal of the Indebtedness.
For the purpose of determining whether any applicable law limiting the amount
of interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness which constitutes interest, as well as all other
charges levied in connection with the Indebtedness which constitute interest,
shall be deemed to be allocated and spread over the stated tern-i of the Note.
Unless otherwise required by applicable law, such allocation and spreading
shall be effected in such a manner that the rate of interest so computed is
uniform throughout the stated term of the Note.
26. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to
assert any statute of limitations as a bar to the enforcement of the lien of
this Instrument or to any action brought to enforce any Loan Document.
27. WAIVER OF MARSHALLING. Notwithstanding the existence of any other
security interests in the Mortgaged Property held by Lender or by any other
party, Lender shall have the right to determine the order in which any or all
of the Mortgaged Property shall be subjected to the remedies provided in this
Instrument, the Note, any other Loan Document or applicable law. Lender shall
have the right to determine the order in which any or all portions of the
Indebtedness are satisfied from the proceeds realized upon the exercise of such
remedies. Borrower and any party who now or in the future acquires a security
interest in the Mortgaged Property and who has actual or constructive notice of
this Instrument waives any and all right to require the marshalling of assets
or to require that any of the Mortgaged Property be sold in the inverse order
of alienation or that any of the Mortgaged Property be sold in parcels or as an
entirety in connection with the exercise of any of the remedies permitted by
applicable law or provided in this Instrument.
28. FURTHER ASSURANCES. Borrower shall execute, acknowledge, and deliver,
at its sole cost and expense, all further acts, deeds, conveyances,
assignments, estoppel certificates, financing statements, transfers and
assurances as Lender may require from time to time in order to better assure,
grant, and convey to Lender the rights intended to be granted, now or in the
future, to Lender under this Instrument and the Loan Documents.
29. ESTOPPEL CERTIFICATE. Within 10 days after a request from Lender,
Borrower shall deliver to Lender a written statement, signed and acknowledged
by Borrower, certifying to Lender or any person designated by Lender, as of the
date of such statement, (i) that the Loan Documents are unmodified and in full
force and effect (or, if there have been modifications, that the Loan Documents
are in full force and effect as modified and setting forth such modifications);
(ii) the unpaid principal balance of the Note; (iii) the date to which interest
under the Note has been paid; (iv) that Borrower is not in default in paying
the Indebtedness or in performing or observing any of the covenants or
agreements contained in this Instrument or any of the other Loan Documents (or,
if the Borrower is in default, describing such default in reasonable detail);
(v) whether or not there are then existing any setoffs or defenses known to
Borrower against the enforcement of any right or remedy of Lender under the
Loan Documents; and (vi) any additional facts requested by Lender.
30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
(a) This Instrument, and any Loan Document which does not itself expressly
identify the law that is to apply to it, shall be governed by the laws of the
jurisdiction in which the Land is located (the "Property Jurisdiction").
(b) Borrower agrees that any controversy arising under or in relation to
the Note, this
Instrument, or any other Loan Document shall be litigated
exclusively in the Property Jurisdiction.
The state and federal courts and authorities with I I I
1 jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to the Note, any security for the
Indebtedness, or any other Loan Document. Borrower irrevocably consents to
service, Jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
31. NOTICE.
(a) All notices, demands and other communications ("notice") under or
concerning this Instrument shall be in writing. Each notice shall be addressed
to the intended recipient at its address set forth in this Instrument, and
shall be deemed given on the earliest to occur of (1) the date when the notice
is received by the addressee; (2) the first Business Day after the notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges for next Business Day delivery; or (3) the third Business
Day after the notice is deposited in the United States mail with postage
prepaid, certified mail, return receipt requested. As used in this Section 3 1,
the term "Business Day" means any day other than a Saturday, a Sunday or any
other day on which Lender is not open for business.
(b) Any party to this Instrument may change the address to which notices
intended for it are to be directed by means of notice given to the other party
in accordance with this Section 3 1. Each party agrees that it will not refuse
or reject delivery of any notice given in accordance with this Section 3 1,
that it will acknowledge, in writing, the receipt of any notice upon request by
the other party and that any notice rejected or refused by it shall be deemed
for purposes of this Section 31 to have been received by the rejecting party on
the date so refused or rejected, as conclusively established by the records of
the U.S. Postal Service or the courier service.
(c) Any notice under the Note and any other Loan Document which does not
specify how notices are to be given shall be given in accordance with this
Section 3 1.
32. SALE OF NOTE; CHANGE IN SERVICER. The Note or a partial interest in
the Note (together with this Instrument and the other Loan Documents) may be
sold one or more times without prior notice to Borrower. A sale may result in a
change of the Loan Servicer. There also may be one or more changes of the Loan
Servicer unrelated to a sale of the Note. If there is a change of the Loan
Servicer, Borrower will be given notice of the change.
33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in full,
Borrower (a) shall not acquire any real or personal property other than the
Mortgaged Property and personal property related to the operation and
maintenance of the Mortgaged Property; (b) shall not operate any business other
than the management and operation of the Mortgaged Property; and (c) shall not
maintain its assets in a way difficult to segregate and identify.
34. SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and the
rights granted by this Instrument shall inure to, the respective successors and
assigns of Lender and Borrower. However, a Transfer not permitted by Section 21
shall be an Event of Default.
35. JOINT AND SEVERAL LIABILITY. If more than one person or entity signs
this Instrument as Borrower, the obligations of such persons and entities shall
be solidary.
36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.
(a) The relationship between Lender and Borrower shall be solely that of
creditor and debtor, respectively, and nothing contained in this Instrument
shall create any other relationship between Lender and Borrower.
<PAGE>
(b) No creditor of any party to this Instrument and no other person shall
be a third party beneficiary of this Instrument or any other Loan Document.
Without limiting the generality of the preceding sentence, (1) any arrangement
(a "Servicing Arrangement") between. the Lender and any Loan Servicer for loss
sharing or interim advancement of funds shall constitute a contractual
obligation of such Loan Servicer that is independent of the obligation of
Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third
party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan
Servicer under any Servicing Arrangement will reduce the amount of the
Indebtedness.
37. SEVERABILITY; AMENDMENTS. The invalidity or unenforceability of any
provision of this Instrument shall not affect the validity or enforceability of
any other provision, and all other provisions shall remain in full force and
effect. This Instrument contains the entire agreement among the parties as to
the rights granted and the obligations assumed in this Instrument. This
Instrument may not be amended or modified except by a writing signed by the
party against whom enforcement is sought.
38. CONSTRUCTION. The captions and headings of the sections of this
Instrument are for convenience only and shall be disregarded in construing this
Instrument. Any reference in this Instrument to an "Exhibit" or a "Section"
shall, unless otherwise explicitly provided, be construed as referring,
respectively, to an Exhibit attached to this Instrument or to a Section of this
Instrument. All Exhibits attached to or referred to in this Instrument are
incorporated by reference into this Instrument. Any reference in this
Instrument to a statute or regulation shall be construed as referring to that
statute or regulation as amended from time to time. Use of the singular in this
Agreement includes the plural and use of the plural includes the singular. As
used in this Instrument, the term "including" means "including, but not limited
to."
39. LOAN SERVICING. All actions regarding the servicing of the loan
evidenced by the Note, including the collection of payments, the giving and
receipt of notice, inspections of the Property, inspections of books and
records, and the granting of consents and approvals, may be taken by the Loan
Servicer unless Borrower receives notice to the contrary. If Borrower receives
conflicting notices regarding the identity of the Loan Servicer or any other
subject, any such notice from Lender shall govern.
40. DISCLOSURE OF INFORMATION. Lender may furnish information regarding
Borrower or the Mortgaged Property to third parties with an existing or
prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including trustees, master
servicers, special servicers, rating agencies, and organizations maintaining
databases on the underwriting and performance of multifamily mortgage loans.
Borrower irrevocably waives any and all rights it may have under applicable law
to prohibit such disclosure, including any right of privacy.
41. NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the
application for the loan submitted to Lender (the "Loan Application") and in
all financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application are complete and accurate in
all material respects. There has been no material adverse change in any fact or
circumstance that would make any such information incomplete or inaccurate.
42. SUBROGATION. If, and to the extent that, the proceeds of the loan
evidenced by the Note are used to pay, satisfy or discharge any obligation of
Borrower for the payment of money that is secured by a pre-existing mortgage,
deed of trust or other lien encumbering the Mortgaged Property (a "Prior
Lien"), such loan proceeds shall be deemed to have been advanced by Lender at
Borrower's request, and Lender shall automatically, and without further action
on its part, be subrogated to the rights, including lien priority, of the owner
or holder of the obligation secured by the Prior Lien, whether or not the Prior
Lien is released.
43. ACCELERATION; FORECLOSURE; CONFESSION OF JUDGMENT. At any time during
the existence of an Event of Default, Lender, at Lender's option, may
accelerate the maturity of and declare the Indebtedness to be immediately due
and payable, and may cause the Mortgaged Property and UCC Collateral to be
immediately seized and sold, in whole, in part, or separately, whether in term
of court or in vacation, under ordinary or executory process, in accordance
with applicable Louisiana law, to the highest bidder for cash, with or without
appraisement, and without the necessity of making additional demand upon or
notifying Borrower or placing Borrower in default, all of which are expressly
waived. For purposes of foreclosure under the Louisiana executory process
procedures, Borrower confesses judgment and acknowledges to be indebted to and
in favor of Lender up to the full amount of the Indebtedness, including
principal, interest, prepayment premiums, late charges, default interest,
costs, expenses, collection attorneys' fees, and any additional sums that
Lender may advance as provided under this Instrument. To the extent permitted
under applicable Louisiana law, Borrower additionally waives: (a) the benefit
of appraisal as provided in Articles 2332, 2336, 2723 and 2724 of the Louisiana
Code of Civil Procedure, and all other laws with regard to appraisal upon
judicial sale; (b) the demand and three (3) days' delay as provided under
Articles 2639 and 2721 of the Louisiana Code of Civil Procedure; (c) the notice
of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of
Civil Procedure; (d) the three (3) days' delay provided under Articles 2331 and
2722 of the Louisiana Code of Civil Procedure; and (e) all other benefits
provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil
Procedure and all other articles not specifically mentioned above. Borrower
agrees that Lender shall have all of the additional enforcement rights and
remedies of a secured party under the Louisiana Commercial Laws (Louisiana
Revised Statutes, Title 10) and under the Uniform Commercial Code of any
applicable state with respect to the UCC Collateral wherever located. Borrower
further agrees that any declarations of fact made under an authentic act before
a Notary Public in the presence of two witnesses, by a person declaring such
facts to lie within his or her knowledge, shall constitute authentic evidence
for purposes of executory process and also for purposes of Louisiana Revised
Statutes, Title 9, Sections 3509.1 and 3504(b)(6), and Title 10, Section 9-508.
44. RELEASE. Upon payment of the Indebtedness in full, Borrower may
request Lender in writing to provide Borrower with the Note marked "Canceled,"
or alternatively, at Lender's option, with a certificate sufficient to permit
Borrower to cancel this Instrument from the public records, Borrower agrees
that Lender may delay providing the foregoing to Borrower for up to 30 days
following receipt of Borrower's written request. If Borrower requests Lender to
perform the necessary services to cancel this Instrument from the public
records, Borrower agrees to pay Lender's reasonable costs incurred in
connection with such cancellation.
45. WAIVER OF HOMESTEAD. Borrower and Borrower's spouse, if any, waive all
homestead and other exemptions from seizure with respect to the Mortgaged
Property and the UCC Collateral.
46. VENDOR'S LIEN MORTGAGE. If Lender is a savings and loan
association, the
Note and the other amounts secured by this Instrument shall be secured by a
vendor's lien and privilege on and against the Mortgaged Property pursuant to
the provisions of Louisiana Revised
Statutes, Title 6, Section 833.
47. ATTORNEYS' FEES. Whenever referred to in this Instrument, other than
in Section 43, "attorneys' fees" shall mean a fee of $ 10,000-00.
48. MORTGAGE AND CONVEYANCE CERTIFICATES. The production of Mortgage and
conveyance certificates is waived by Lender and Borrower, who release me,
Notary, from all liability for nonproduction.
49. LATE CHARGE. Borrower shall pay to Lender a late charge of S% of any
monthly installment of principal and interest as provided in the Note not
received by Lender within 10 days after that installment is due.
50. KEEPER OF MORTGAGED PROPERTY. Pursuant to the provisions of Louisiana
Revised Statutes, Title 9, Section 5136, Borrower and Lender covenant and agree
that Lender shall have the right to designate a keeper of the Mortgaged
Property at the time any seizure of the Mortgaged Property is effected and that
Lender may designate itself or its employees, agents or independent contractors
as such keeper. Borrower agrees that the reasonable fees of such a keeper shall
be treated as a disbursement made under Section 12 and shall be secured by this
Instrument. At no time has or will Borrower occupy the Mortgaged Property, or
any portion of the Mortgaged Property, as its home.
51. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) COVENANTS AND
ACRE ES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF
THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER
THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN
THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH
PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBITS. The following Exhibits are
attached to this Instrument:
X Exhibit A Description of the Land (required).
Exhibit B Modifications to
Instrument
IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or
has caused this Instrument to be signed and delivered by its duly authorized
representatives.
STATE OF
MASSACHUSETTS
COUNTY OF
Suffolk
THUS DONE and signed in the County of Suffolk,State of Massachusetts, in
the presence of the undersigned competent witnesses, who have hereunto signed
their names together with said appearer and me, Notary, on the 6th day of July,
1998.
BORROWER:
402 JULIA STREET ASSOCIATES LIMITED
PARTNERSHIP,
a Delaware limited partnership
By: HISTORIC PRESERVATION PROPERTIES 1989
LIMITED
PARTNERSHIP, a Delaware limited
partnership ("HPP"),
its General Partner
By: BOSTON HISTORIC PARTNERS LIMITED
PARTNERSHIP,
a Massachusetts limited partnership
("BHP"),
HPP's General Partner
Witness/Attest: By: PORTFOLIO ADVISORY
SERVICES, INC.
a Massachusetts
corporation,
BHP's General Partner
Name:
By:
Terrence P. Sullivan,
Name: President
By:
Terrence P. Sullivan,
BHP's General Partner
Notary Public JOANNE M.
LAURIA
Notary Public
My Commission
Expires October
29,200-1
[SIGNATURES CONTINUED ON FOLLOWING
PAGE]
<PAGE>
STATE OF
LOUISIANA
PARISH OF
ORLEANS
THUS DONE and signed in the Parish of Orleans, State of Louisiana, in the
presence of the undersigned competent witnesses, who have hereunto signed their
names together with said appearer and me, Notary, on the day of July, 1998.
BORROWER:
402 JULIA STREET ASSOCIATES LIMITED
PARTNERSHIP,
a Delaware limited partnership
By:
Henry M. Lambert, its
General Partner
Name:
Name:
By:
R. Carey Bond, its
General Partner
Borrower's Employer ID
Number: 72-1149319
Notary
Public
<PAGE>
KEY PRINCIPAL
Name: Henry M. Lambert
Address: 225 Girod Street
New Orleans,
Louisiana 70130
Key
Principal
Name: R. Carey Bond
Address: 225 Girod Street
New Orleans,
Louisiana 70130
EXHIBIT A
Tract I
THAT CERTAIN PIECE OR PORTION OF GROUND, together with all the buildings and
improvements thereon and all of the rights, ways, privileges, servitudes,
advantages and appurtenances thereunto belonging or in anywise appertaining,
situated in the State of Louisiana, Parish of Orleans, in the FIRST DISTRICT of
the City of New Orleans, in SQUARE NO. 123, bounded by Tchoupitoulas Street,
Julia Street, Constance Street (side) (late Foucher) and St. Joseph Street
(side). Said portion of ground is designated as LOTS NOS. 23, 24, 25 and a
small undesignated triangle adjoining Lot No. 25 on the Constance Street side,
which said lots adjoin each other and measures as follows, to-wit:
Commencing at the intersection of Julia and Tchoupitoulas Streets, which point
is the POINT OF BEGINNING, measure North 78 degrees 49 minutes West a distance
of 87.3.0 feet to a point; thence measure South I I degrees I I minutes West a
distance of 62. 10. 0 feet to a point; thence measure South 78 degrees 49
minutes East a distance of 99.8.0 feet to a point; thence measure due North a
distance of 64.0.5 feet to the POINT OF BEGINNING.
LOTS NOS. 23 and 24 adjoin each other on the Tchoupitoulas Street
side, said Lot No. 24 forming the corner of Tchoupitoulas Street
and Julia Street. Lot No. 24 adjoins Lot 25 on the Julia Street
side, which said lots front on Julia Street. Lot No. 25 adjoins
the small undesignated triangle portion of ground on the Constance
Street side and said lots 23 and 25 adjoin each other on the St.
Joseph Street side.
The improvements thereon bear the No. 402 Julia Street.
Tract II
Those predial servitudes of light, view and passage as established by the owner
of Lot 3, Square 123, First District of the City of New Orleans, in favor of
the immovable property described as Tract I as set forth and described in an
Agreement to Abandon Common Wall by and between ' ) 3 0 Julia Street Associates
Limited Partnership [owner of the servient estate] and 402 Julia Street Limited
Partnership [owner of the dominant estate] passed before Paul E. Ramoni, Jr.,
Notary Public on the I " day of August, 1989, registered in C.O.B. 832, folio
11 - 16, of the conveyance records of the Parish of Orleans, State of Louisiana
on August 1, 1989, under N.A. 4811011.
