UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
{ X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1999
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 0-17616
Realty Parking Properties L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-1591575
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 727-4083
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to section 12(g) of the Act:
Assignee Units of Limited Partnership Interests
(Title of class)
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
As of December 31, 1999, there were 1,909,127 Units of Assignee and Limited
Partnership Interests held by non-affiliates of the Registrant. Because there is
not an established public trading market for the Units, the aggregate market
value of the Units held by non-affiliates of the Registrant cannot be
calculated.
Documents Incorporated by Reference
The Annual Report for 1999 is incorporated by reference.
<PAGE>
REALTY PARKING PROPERTIES L.P.
<TABLE>
<CAPTION>
INDEX
Part I Page(s)
<S> <C>
Item 1. Business 3-4
Item 2. Properties 4-5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 6
Part II.
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 6
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
Item 7a. Quantitative and Qualitative Disclosures About Market Risk 8
Item 8. Financial Statements and Supplementary Data 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 9
Part III.
Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners
and Management 11
Item 13. Certain Relationships and Related Transactions 11
Part IV.
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 11-14
Signatures 15
</TABLE>
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<PAGE>
REALTY PARKING PROPERTIES L.P.
PART I
Item 1. Business
Realty Parking Properties L. P. (the "Partnership") is a Delaware
limited partnership formed on October 4, 1988. The Partnership's intent was to
acquire surface lots and parking garage buildings (the "Properties") to be held
for appreciation and used for parking operations to produce current income. The
Properties were acquired with an emphasis on surface commercial parking lots
believed to have significant future potential for eventual sale as development
sites. The Partnership acquired the Properties on an all-cash basis without debt
financing. The acquisition program is complete and only minor rehabilitation
expenditures and repairs to existing Properties are expected in the future.
The General Partner of the Partnership is Realty Parking Company, Inc., a
Maryland corporation.
A minimum of 80,000 units of assignee limited partnership interests
(the "Units") and an increased maximum of 2,400,000 Units were registered under
the Securities and Exchange Act of 1933, as amended. Throughout 1988 and 1989,
investors holding 1,909,087 Units, or $47,727,175 of gross offering proceeds,
were recognized on the books of the Partnership and the selling effort was
completed in November 1989. The offering proceeds, net of issuance-related fees,
were used to acquire the Properties and make necessary improvements on an
all-cash basis.
The Partnership has an Investment Advisory Agreement with Central
Parking System, Inc. (the "Advisor"). The Advisor identified properties for
purchase by the Partnership and leased such properties from the Partnership
following acquisition. Pursuant to the Investment Advisory Agreement, the
Advisor will earn a fee upon disposition of a property equal to 2% of the
contract price for the sale of the property, if the property is leased to the
Advisor at the time of sale. Such fee is earned for services rendered to advise
the general partner on the timing and pricing of property sales.
The Partnership initially leased its parking properties to the
Advisor for periods of 10 years, expiring between April 1999 and November 2000,
with options to extend the leases for two additional terms of five years. The
Advisor has exercised extension options for three properties held at December
31, 1999. Under the terms of the leases, the Advisor is responsible for all
operating costs, including ad valorem real estate taxes and general and garage
liability insurance coverage.
Under the terms of the leases, the Advisor is obligated to pay the
Partnership the greater of minimum rent plus reimbursement of real estate taxes
or 60% of gross parking revenues ("percentage rent"). Percentage rents earned
during 1999, 1998 and 1997 totaled $326,976, $362,260 and $167,858,
respectively. The minimum rents are 7.0% of certain acquisition costs. Parking
lot rents of $ 2,308,135 in 1999, and $2,340,413 in 1998 and 1997, represented
minimum rents under the lease agreements.
Each lease is cancelable by the Partnership upon the sale of the
property and payment to the Advisor of a "termination fee." The termination fee
generally equals 15% of the amount, if any, by which the property's sale
proceeds exceed the original acquisition cost of the property plus a 12%
compounded annual return on the original acquisition cost minus all rental
income received by the Partnership from the property, if the property is leased
to the Advisor at the time of sale.
While it is likely that most of the leases expiring in 2000 will be
renewed on terms similar to those currently in effect, at least some leases are
likely to include terms less favorable than those contained in the current
arrangements. In the fourth quarter of 1999, the Advisor gave notice that it
would not extend the leases on four properties, one of which has been placed
under a month-to-month management contract with a parking operator. Under the
terms of the management contract, the parking operator is responsible for all
operating and maintenance costs and the Partnership is responsible for the real
estate taxes. The remaining leases will expire at various dates in 2000 and
renewal negotiations with the Advisor are in process.
-3-
<PAGE>
REALTY PARKING PROPERTIES L.P.
Item 1. Business (continued)
The Partnership acquired fifteen Properties during 1989 and 1990. In
1993, the Partnership sold one Property and a small portion of another. In 1999,
an additional Property was sold. The Partnership's investment in the remaining
thirteen Properties, net of impairment losses and accumulated depreciation, was
$20,200,296 and $32,922,333 at December 31, 1999 and 1998, respectively.
The success of the Partnership will, to a large extent, depend on the
quality of management of the Partnership and the timing, terms and conditions of
any sale. Future development may be delayed or rendered legally or economically
unfeasible as a result, for example, of future building moratoriums, zoning
changes, and changes in growth and development patterns, any of which may impair
the value of the Partnership's investment in its properties.
The interim use of the Properties for parking operations to produce
current income is dependent upon the lessee's ability to pay rents under the
terms of the lease agreements. Rents may vary due to percentage rental payments
(discussed above) which are influenced by a variety of factors, including
competition, traffic levels, parking demand and the location, design and
condition of the parking lot (see Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations).
Item 2. Properties
The Partnership owns thirteen properties in total, twelve of which
are wholly owned by the Partnership. The undivided tenants-in-common ownership
of one of the properties is noted below. The properties were acquired on an
all-cash basis and, therefore, are not subject to a mortgage or other lien or
encumbrance. As of December 31, 1999, the Partnership owns the following
properties:
<TABLE>
<CAPTION>
Approximate (1) Investment (5) 1999
Location Size (Sq. Ft.) Type in Real Estate Rental Income Lease Date
<S> <C> <C> <C> <C> <C>
Birmingham, Alabama 28,000 276-car garage $ 956,798 $ 161,884 5/90-4/05
Corner of Fourth Ave.
North and 19th St.
Little Rock, Arkansas 35,000 surface lot 1,002,360 69,100 5/89-4/04
East side of Broadway
between Third and
Fourth Streets
Los Angeles, California 41,800 surface lot 3,500,000 553,432 6/90-5/00
800 Block S. Main St. (2)
Miami, Florida 90,000 surface lot 4,900,458 340,627 8/89-7/04
Block bounded by S. Miami
Ave., S.E. 2nd St.,
N.E. 1st Ave. (3)
St. Paul #1, Minnesota 55,880 surface lot 1,440,075 129,716 11/90-10/00
Bordered by 7th and 8th
Streets and N. Jackson
and Sibley Streets
St. Paul #2, Minnesota 32,930 surface lot 372,559 25,824 11/90-10/00
Located on the I94 frontage
road, north of the Science
Museum of Minnesota (4)
</TABLE>
-4-
<PAGE>
REALTY PARKING PROPERTIES L.P.
Item 2. Properties (continued)
<TABLE>
<CAPTION>
Approximate (1) Investment (5) 1999
Location Size (Sq. Ft.) Type in Real Estate Rental Income Lease Date
<S> <C> <C> <C> <C> <C>
Kansas City, Missouri 35,650 400-car garage 1,807,663 145,339 10/90-9/00
Fronting on Grand Ave.,
8th St. and Walnut St.
Reno, Nevada 30,670 surface lot 400,000 72,661 12/90-11/00
Triangle bordered by E.
First St., Lake St., and
Second St. (2)
Rochester, New York 48,970 surface lot 400,000 79,025 5/90-4/00
Pleasant St. at Andrews
and N. Clinton Streets (2)
Dayton, Ohio 40,000 surface lot 500,000 75,385 Month-to-month
Corner of Monument
and Ludlow St. (2)
Nashville, Tennessee 33,360 surface lot 1,558,046 103,945 10/90-9/00
Commerce St. and
Seventh Ave.
Houston, Texas 81,000 surface lot 1,407,423 97,867 8/90-7/00
Commerce St. at its
intersection with Austin St.
Milwaukee, Wisconsin 36,350 451-car garage 1,954,914 327,643 10/90-9/00
East side of N. 7th St.
and N. 6th St. at West
Wells St. --------------- ---------------
$20,200,296 $ 2,182,448
========= =========
</TABLE>
(1) Investment in real estate is recorded net of impairment losses totaling
$6,460,303 and accumulated depreciation totaling $1,032,377 (see Note 4. "Gain
(Loss) on Properties" in Item 8. Financial Statements, herein).
(2) Impairment losses recorded in 1999.
(3)The Partnership owns a three-quarter undivided interest in this property
with the remaining 25% owned by the Advisor.
(4) Property sold in February 2000.
(5) 1999 rental income does not include rental income from the property
sold during 1999.
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal proceedings.
-5-
<PAGE>
REALTY PARKING PROPERTIES L.P.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the security holders for a vote during
the last quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
An established public trading market for the Units does not exist and the
Partnership does not anticipate that a public market will develop. Transfer of
Units by an investor and purchase of Units by the Partnership may be
accommodated under certain terms and conditions.
The Partnership Agreement imposes certain limitations on the transfer of
Units and may restrict, delay or prohibit a transfer primarily if:
o the transfer of Units would cause a technical termination of the
Partnership within meaning of Section 708(b)(1)(A) of the Internal
Revenue Code;
o such a transfer would be a violation of any federal or state
securities laws that may cause the Partnership to be classified other
than as a partnership for federal income tax purposes; and,
o such transfers would cause the Partnership to be treated as a
"publicly traded partnership" under Sections 7704 and 469(k) of the
Internal Revenue Code.
As of December 31, 1999, there were 3,010 holders of assignee and limited
partnership interests of the registrant, owning an aggregate of 1,909,127 units.
The Partnership made four quarterly cash distributions in 1999, 1998 and
1997 totaling $2,473,212 each year. These distributions were derived from funds
provided by operations and a return of capital of $124,170 in 1997.
Item 6. Selected Financial Data
Revenues and net earnings information furnished below is for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
Revenues
<S> <C> <C> <C> <C> <C>
Parking lot rental $2,635,111 $2,702,673 $2,508,271 $2,399,810 $2,376,440
Interest income 64,155 47,354 53,389 66,240 86,000
Loss on properties (4,158,255) - - - -
Net earnings (loss) (1,752,340) 2,436,246 2,251,096 2,169,490 2,193,290
Net earnings (loss) per Unit (.97) 1.25 1.16 1.11 1.13
Total assets 30,267,124 34,354,969 34,399,045 34,658,079 34,958,378
Partners' capital 29,784,986 34,010,538 34,047,504 34,269,620 34,573,342
Cash distributions
paid per Unit:
Operations 1.27 1.27 1.21 1.20 1.18
Return of capital - - .06 .07 .09
</TABLE>
The above selected financial data should be read in conjunction with the
financial statements and accompanying notes incorporated by reference in this
report.
-6-
<PAGE>
REALTY PARKING PROPERTIES L.P.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Partnership was fully invested in parking properties as it entered
1999 and currently has no plans to use working capital to perform major repairs
or improvements to any of its properties.
At December 31, 1999, the Partnership had a working capital position that
included cash and cash equivalents of $9,803,643, accounts receivable (net of
real estate taxes payable) of $29,685 and accounts payable of $248,638. Cash and
cash equivalents increased $9,013,767 during 1999. This substantial increase is
due to the sale of the Denver property in December. Net of the Denver sale
proceeds totaling $8,439,930, cash and cash equivalents increased $573,837 in
1999. It is anticipated that remaining cash and cash equivalents will be
sufficient to satisfy the Partnership's liquidity requirements.
The Partnership made quarterly cash distributions totaling $2,473,212 in
1999, 1998 and 1997. These distributions were derived from funds provided by
operations and a return of capital of $124,170 in 1997.
On December 9, 1999, the Partnership sold its 75% interest in the Denver
facility for $8,625,000 to the Advisor, which owned 25% of the property and
exercised its Right of First Refusal. The sale represented a substantial profit
above the Partnership's acquisition costs of $6,151,322. Net sale proceeds
totaling $8,439,930, or $4.42 per unit, were distributed to investors on January
18, 2000. In accordance with the Partnership Agreement, 100% of the net sale
proceeds were distributed to assignee and limited partners.
On February 15, 2000, the Partnership made a cash distribution of
$618,303, of which 98% was allocated to assignee and limited partners. The
distribution was comprised of funds provided by operations through December 31,
1999.
Results of Operations
Parking lot rental income includes base rents and percentage rents earned
pursuant to the lease agreements in effect during the year. The Partnership
typically leases its facilities to the Advisor under terms that include a
minimum rent calculated as a percentage of certain acquisition costs. In
addition, the lessee is obligated to pay percentage rent, calculated as a
percentage of gross parking revenues.
Rental income for 1999, 1998 and 1997 totaled $2,635,111, $2,702,673 and
$2,508,271, respectively. The decline in rental income during 1999 was the
result of the lower base and percentage rent earned, primarily due to the sale
of the Denver facility. During 1999, the Denver, Birmingham, Milwaukee and St.
Paul-Jackson facilities generated $326,976 in percentage rents, a 10% decline
from 1998, due primarily to lower gross parking revenues earned at both the
Denver and St. Paul- Jackson facilities. The Partnership earned percentage rents
from six properties in 1998, totaling $362,260 (Birmingham, Denver, Kansas City,
Milwaukee, St. Paul-Jackson and St. Paul-Tank). During 1997, the Partnership
earned percentage rents from three properties, totaling $167,858 (Birmingham,
Milwaukee and Kansas City).
Expenses in 1999, net of depreciation, totaled $169,499, reflecting a
decrease of $19,534 from 1998. This decrease was primarily the result of
consulting services rendered in 1998 that were not repeated in 1999. Expenses in
1998, net of depreciation, totaled $189,033, reflecting an increase of $3,217
over 1997 primarily due to consulting services rendered at various facilities.
In the fourth quarter of 1999, the Partnership's Advisor gave notice that
it would not renew four leases that expire at various dates in 2000, including:
Dayton, Rochester, Los Angeles and Reno. As a result, the Partnership made an
evaluation as to the recoverability of the carrying amounts of the properties
from future cash flows expected to result from the use and eventual disposition
of the properties over their expected holding periods. Based upon this
evaluation, the Partnership determined that the carrying amounts of those
properties are not recoverable, and they were adjusted to their estimated fair
values at December 31, 1999, resulting in an impairment loss totaling
$6,460,303.
-7-
<PAGE>
REALTY PARKING PROPERTIES L.P.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Results of Operations (continued)
On December 9, 1999, the Partnership sold its 75% interest in the Denver,
Colorado property for $8,625,000. The Partnership's investment in the property
was $6,137,882, net of accumulated depreciation of $13,440. The capital gain
from the sale totaled $2,302,048, net of expenses of $185,070.
Outlook
The Partnership entered its tenth year in 1999 and leases expired at the
following facilities: Little Rock, Miami, Denver and Dayton. The leases on the
remaining properties will expire in 2000. To date, the Advisor has exercised
lease extensions under the same terms as those currently in existence for the
Little Rock, Miami and Birmingham properties. The Advisor notified the
Partnership that it would not extend the leases on the Dayton, Rochester, Los
Angeles and Reno facilities. Management is currently reviewing several strategic
alternatives for these facilities. Management has signed a management agreement
with a national parking operator to operate the Dayton facility for a fee. Under
this arrangement, the annual return generated by the Dayton facility will
decline by an estimated $50,000 from the return generated under the previous
lease arrangement with the Advisor. The leases on the Rochester, Los Angeles and
Reno facilities will expire in 2000. Management is currently analyzing various
operating alternatives for these facilities. It is likely that these facilities
will be operated under terms similar to those associated with the Dayton
property. The future annual rental revenue received by the Partnership from
these three properties is estimated to decrease by approximately $435,000 in the
first year following expiration of the leases. While it is expected that the
Dayton, Rochester, Los Angeles and Reno facilities will be operated in the
future on terms less favorable than those lease arrangements currently in
effect, it is not expected that the operations will negatively impact the
Partnership's operating liquidity needs. The Partnership may, however, need to
adjust its distribution rate to investors in the future to reflect the actual
terms of the lease renewals.
In January 2000, the prospective buyer of the Milwaukee facility notified
the Partnership that it would not purchase the facility because of certain
structural deficiencies. The deficiencies have impacted parking revenues and
will continue to do so until repairs are made to the facility. In 2000, reduced
parking operations will likely reduce or eliminate the $161,073 in percentage
rents that the facility generated in 1999. Management is currently in
discussions with the Advisor regarding the required repairs. The total cost of
the repairs is unknown at this time; however, Management is confident that the
Advisor, or other third parties, are legally responsible for the repairs.
On February 10, 2000, the Partnership sold its St. Paul-Tank facility for
$1,335,586 to the St. Paul Public Housing Authority, which will construct its
new headquarters on the land. The sale represented a substantial profit above
the Partnership's acquisition costs of $373,747. Net sale proceeds totaling
$1,141,688, or $.60 per unit, were distributed to investors on March 22, 2000.
In accordance with the Partnership Agreement, 100% of the net sale proceeds were
distributed to assignee and limited partners.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
None.
-8-
<PAGE>
REALTY PARKING PROPERTIES L.P.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements:
Page(s)
Herein Annual Report
Independent Auditors' Report 12 4
Balance Sheets 5
Statements of Operations 6
Statements of Partners' Capital 7
Statements of Cash Flows 8
Notes to Financial Statements 9-15
Financial Statement Schedule
Schedule III - Real Estate and
Accumulated Depreciation 13-14
All other schedules are omitted because they are not applicable, not
required, or because the required information is included in the financial
statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
-9-
<PAGE>
REALTY PARKING PROPERTIES L.P.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Partnership is Realty Parking Company, Inc. The
Partnership's principal executive office is located at 225 East Redwood Street,
Baltimore, Maryland 21202, telephone (410) 727-4083. The General Partner had
primary responsibility for the selection and negotiation of terms concerning the
acquisition of the properties' sites, selecting a manager for the interim
investments, and the structure of the offering and the Partnership. The General
Partner is responsible for overseeing the performance of those who contract with
the Partnership, as well as making decisions with respect to the financing, sale
and liquidation of the Partnership's assets. It also provides all reports to,
and communications with, investors and others, all distributions and allocations
to investors, the administration of the Partnership's business and all filings
with the Securities and Exchange Commission and other federal or state
regulatory authorities. The Partnership Agreement provides for the removal of
the General Partner and the election of successor or additional general partner
by investors holding a majority in interest of the Units.
The directors and principal officers of the General Partner are as
follows:
John M. Prugh, age 51, has been a Director and President of the General
Partner since 1988, and of Alex. Brown Realty, Inc. and Armata Financial Corp.
since 1984. Mr. Prugh graduated from Gettysburg College in 1970, and was
designated a Certified Property Manager by the Institute of Real Estate
Management in 1979. He has worked in property management for H. G. Smithy Co.,
in Washington, D.C., and Dreyfus Bros., Inc. in Bethesda, Maryland. Since 1977,
Mr. Prugh has been involved in managing, administering, developing and selling
real estate investment projects sponsored by Alex. Brown Realty, Inc. and its
subsidiaries.
Peter E. Bancroft, age 47, has been a Director and Vice President of the
General Partner since 1988 and a Senior Vice President of Alex. Brown Realty,
Inc. and Armata Financial Corp. since 1983. Mr. Bancroft graduated from Amherst
College in 1974, attended the University of Edinburgh, and received a J.D.
degree from the University of Virginia School of Law in 1979. Prior to joining
Alex. Brown Realty, Inc. in 1983, Mr. Bancroft held legal positions with
Venable, Baetjer and Howard and T. Rowe Price Associates, Inc.
Terry F. Hall, age 53, has been the Secretary of the General Partner and a
Vice President and Secretary of, and Legal Counsel for, Alex. Brown Realty, Inc.
since 1989. Mr. Hall graduated from the University of Nebraska-Lincoln in 1968,
and received a J.D. degree from the University of Pennsylvania Law School in
1973. Prior to joining Alex. Brown Realty, Inc. in 1986, Mr. Hall was a Partner
at the law firm of Venable, Baetjer and Howard from 1981 to 1986 and an
associate at the same firm from 1973 to 1981.
Timothy M. Gisriel, age 43, has been the Treasurer of the General Partner
and of Alex. Brown Realty, Inc. and Armata Financial Corp. since 1990. He was
the Controller of Alex. Brown Realty, Inc. and Armata Financial Corp. from 1984
through 1989. Mr. Gisriel graduated from Loyola College in 1978 and received his
Masters of Business Administration degree from the Robert G. Merrick School of
Business, University of Baltimore, in 1993. Prior to joining Alex. Brown Realty,
Inc. in 1984, Mr. Gisriel was an audit supervisor in the Baltimore office of
Coopers & Lybrand. He is a Maryland Certified Public Accountant.
There is no family relationship among the officers and directors of the
General Partner.
-10-
<PAGE>
REALTY PARKING PROPERTIES L.P.
Item 11. Executive Compensation
The officers and directors of the General Partner received no compensation
from the Partnership.
The General Partner is entitled to receive a share of cash distributions
and a share of profits and losses as described in the Agreement of Limited
Partnership (see Note 8. "Partners' Capital" in Item 8. Financial Statements,
herein).
For a discussion of compensation and fees to which the General Partner is
entitled, see Item 13, Certain Relationships and Related Transactions, herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person is known to the Partnership to own beneficially more than 5% of
the outstanding assignee units of limited partnership interest of the
Partnership.
The Assignor Limited Partner, Parking Properties Holding Co., Inc., an
affiliate of the General Partner, holds 40 Units representing a beneficial
interest in limited partnership interests in the Partnership. The Units held by
the Assignor Limited Partner have all rights attributable to such Units under
the Limited Partnership Agreement except that these Units of assignee limited
partnership interests are nonvoting.
The General Partner has a 2% interest in the Partnership as the General
Partner, but holds no Units.
For the three years ending December 31, 1999, the Advisor held 43,011
assignee limited partnership interests (an approximate 2% investment in the
Partnership).
There are no arrangements known to the Partnership, the operation of which
may, at a subsequent date, result in a change of control of the registrant.
Item 13. Certain Relationships and Related Transactions
The General Partner and its affiliates have and are permitted to engage in
transactions with the Partnership. For a summarization of fees paid during 1999,
1998 and 1997, and to be paid to the General Partner and its affiliates at
December 31, 1999, see Note 6, "Related Party Transactions," in Item 8,
Financial Statements, herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements: See Index to Financial Statements in
Item 8 on page 9, herein.
2. Financial Statement Schedule: See Index to Financial Statements
and Financial Statement Schedule in Item 8 on page 9.
3. Exhibits:
(3, 4) Limited Partnership Agreement on pages 1 through 38 of
Exhibit A to the Partnership's Registration Statement on
Form S-11 (File No. 33-24961) incorporated herein by
reference.
(13) Annual Report for 1999
(b) Reports on Form 8-K:
Form 8-K dated December 9, 1999 described the Partnership's sale of a
413-car parking garage, located on a 100,600 square-foot parcel of
land in Denver Colorado.
-11-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Realty Parking Properties L.P.:
Under date of January 21, 2000, we reported on the balance sheets of Realty
Parking Properties L.P. as of December 31, 1999 and 1998, and the related
statements of operations, partners' capital and cash flows for each of the years
in the three-year period ended December 31, 1999 as contained in the 1999 Annual
Report. These financial statements and our report thereon are incorporated by
reference in the Annual Report on Form 10-K for 1999. In connection with our
audits of the aforementioned financial statements, we also audited the related
financial statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG LLP
Baltimore, Maryland
January 21, 2000
-12-
<PAGE>
REALTY PARKING PROPERTIES L.P.
SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
page 1 of 2
<TABLE>
<CAPTION>
COLUMN A COLUMN C COLUMN D COLUMN E
COST CAPITALIZED GROSS AMOUNT
SUBSEQUENT AT WHICH CARRIED
INITIAL COST TO THE TO ACQUISITION AT CLOSE OF PERIOD
PARTNERSHIP LAND BUILDING LAND & BUILDING &
DESCRIPTION LAND BUILDING IMPROVEMENTS IMPROVEMENTS IMPROVEMENTS IMPROVEMENTS TOTAL
LITTLE ROCK, ARKANSAS
approximately 35,000 square-foot
<S> <C> <C> <C> <C> <C>
surface parking lot $1,001,806 554 1,002,360 0 1,002,360
MIAMI, FLORIDA
approximately 90,000 square-foot
surface parking lot 4,897,744 2,714 4,900,458 0 4,900,458
DAYTON, OHIO
approximately 40,000 square-foot
surface parking lot 492,800 15,658 508,458 0 508,458
BIRMINGHAM, ALABAMA
276-car garage on appoximately
28,000 square-foot lot 307,221 672,075 570 209,737 307,791 881,812 1,189,603
ROCHESTER, NEW YORK
approximately 48,970 square-foot
surface parking lot 399,372 628 400,000 0 400,000
LOS ANGELES, CALIFORNIA
approximately 41,800 square-foot
surface parking lot 3,450,267 79,973 3,530,240 0 3,530,240
HOUSTON, TEXAS
approximately 81,000 square-foot
surface parking lot 1,406,643 780 1,407,423 0 1,407,423
NASHVILLE, TENNESSEE
approximately 33,360 square-foot
surface parking lot 1,557,184 862 1,558,046 0 1,558,046
KANSAS CITY, MISSOURI
400-car garage on approximately
35,650 square-foot lot 1,150,000 625,447 35,639 274,294 1,185,639 899,741 2,085,380
MILWAUKEE, WISCONSIN
451-car garage on approximately
36,350 square-foot lot 737,585 929,946 1,329 734,278 738,914 1,664,224 2,403,138
ST. PAUL #1, MINNESOTA
approximately 55,880 square-foot
surface parking lot 1,417,583 45,591 1,463,174 0 1,463,174
ST. PAUL #2, MINNESOTA
approximately 32,930 square-foot
surface parking lot 371,391 2,357 373,748 0 373,748
RENO, NEVADA
approximately 30,670 square-foot
surface parking lot 391,294 19,351 410,645 0 410,645
$17,580,890 2,227,468 206,006 1,218,309 17,786,896 3,445,777 21,232,673
</TABLE>
13
<PAGE>
REALTY PARKING PROPERTIES L.P.
SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
page 2 of 2
<TABLE>
<CAPTION>
COLUMN A COLUMN F COLUMN H COLUMN I
LIFE ON
WHICH
ACCUMULATED DEPRECIATION
DEPRECIATION DATE IN LATEST I/S
DESCRIPTION ("A/D") ACQUIRED IS COMPUTED
LITTLE ROCK, ARKANSAS
approximately 35,000 square-foot
<S> <C>
surface parking lot N/A 1989 N/A
MIAMI, FLORIDA
approximately 90,000 square-foot
surface parking lot N/A 1989 N/A
DAYTON, OHIO
approximately 40,000 square-foot
surface parking lot 8,458 1989 SEE NOTE 5
BIRMINGHAM, ALABAMA
276-car garage on appoximately
28,000 square-foot lot 232,805 1990 SEE NOTE 5
ROCHESTER, NEW YORK
approximately 48,970 square-foot
surface parking lot N/A 1990 N/A
LOS ANGELES, CALIFORNIA
approximately 41,800 square-foot
surface parking lot 30,240 1990 SEE NOTE 5
HOUSTON, TEXAS
approximately 81,000 square-foot
surface parking lot N/A 1990 N/A
NASHVILLE, TENNESSEE
approximately 33,360 square-foot
surface parking lot N/A 1990 N/A
KANSAS CITY, MISSOURI
400-car garage on approximately
35,650 square-foot lot 277,717 1990 SEE NOTE 5
MILWAUKEE, WISCONSIN
451-car garage on approximately
36,350 square-foot lot 448,223 1990 SEE NOTE 5
ST. PAUL #1, MINNESOTA
approximately 55,880 square-foot
surface parking lot 23,099 1990 SEE NOTE 5
ST. PAUL #2, MINNESOTA
approximately 32,930 square-foot
surface parking lot 1,189 1990 SEE NOTE 5
RENO, NEVADA
approximately 30,670 square-foot
surface parking lot 10,646 1990 SEE NOTE 5
1,032,377
(1) 1999 1998 1997
REAL ESTATE A/D REAL ESTATE A/D REAL ESTATE A/D
BALANCE AT BEGINNING OF PERIOD $33,844,298 921,965 33,844,298 797,217 33,844,298 672,469
ADDITIONS - 123,852 - 124,748 - 124,748
REAL ESTATE SOLD (6,151,322) (13,440) - - - -
IMPAIRMENT LOSSES (6,460,303) - - - - -
BALANCE AT CLOSE OF PERIOD $21,232,673 1,032,377 33,844,298 921,965 33,844,298 797,217
(2) AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $27,692,976 AT DECEMBER 31, 1999
(3) SEE NOTES 3 AND 4 OF THE NOTES TO FINANCIAL STATEMENTS FOR INFORMATION REGARDING THE PARTNERSHIP'S
INVESTMENT IN REAL ESTATE AND THE IMPAIRMENT LOSSES RECORDED IN 1999. IMPAIRMENT LOSSES HAVE BEEN
APPLIED TO REDUCE THE INITIAL COST OF LAND, WHERE APPLICABLE.
(4) THERE ARE NO ENCUMBRANCES ON THE REAL ESTATE SET FORTH ABOVE.
(5) LAND IMPROVEMENTS ARE DEPRECIATED OVER 15 YEARS STRAIGHT LINE
BUILDING AND IMPROVEMENTS IN SERVICE PRIOR TO JANUARY 1, 1994 ARE
DEPRECIATED OVER 31.5 YEARS STRAIGHT LINE BUILDING AND IMPROVEMENTS IN
SERVICE AFTER JANUARY 1, 1994 ARE DEPRECIATED OVER 39 YEARS STRAIGHT LINE
</TABLE>
14
<PAGE>
REALTY PARKING PROPERTIES L.P.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
REALTY PARKING PROPERTIES L. P.
DATE: 3/29/00 BY: /s/ John M. Prugh
John M. Prugh
President and Director
Realty Parking Company, Inc.
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following in the capacities and on the dates
indicated.
DATE: 3/29/00 BY: /s/ John M. Prugh
John M. Prugh
President and Director
Realty Parking Company, Inc.
General Partner
DATE: 3/29/00 BY: /s/ Peter E. Bancroft
Peter E. Bancroft
Vice President and Director
Realty Parking Company, Inc.
General Partner
DATE: 3/29/00 BY: /s/ Terry F. Hall
Terry F. Hall
Secretary
Realty Parking Company, Inc.
General Partner
DATE: 3/29/00 BY: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Realty Parking Company, Inc.
General Partner
-15-
REALTY PARKING PROPERTIES L.P.
1999 ANNUAL REPORT
April 10, 2000
Dear Investor:
OPERATIONS
Operating highlights during 1999 for Realty Parking Properties L.P.
(the Partnership) featured the sale of the Partnership's Denver property, the
negotiations that led to the sale of the St. Paul-Tank property on February 10,
2000, and the receipt of percentage rents in excess of base lease entitlements
from one-third of the Partnership properties.
The Denver property was sold for $8,625,000 on December 9, 1999 to
Central Parking System, which owned a 25% interest in the property and exercised
its Right of First Refusal to acquire the Partnership's interest. The sale
represented a substantial profit above the Partnership's acquisition costs of
$6,151,322. Net sale proceeds totaling $8,439,930, or $4.42 per unit, were
distributed to investors on January 18, 2000.
On February 10, 2000, the Partnership sold its St. Paul-Tank property
for $1,335,586 to the St. Paul Public Housing Authority, who will construct its
new headquarters on the land. The sale represented a return of more than 3.5
times the Partnership's acquisition costs of $373,747. Net sale proceeds
totaling $1,141,688, or $.60 per unit, were distributed to investors on March
22, 2000.
During 1999, four of the Partnership's twelve properties earned
percentage rents in excess of their base lease entitlements. The Birmingham,
Milwaukee, Denver and St. Paul-Jackson facilities earned a total of $326,976 in
percentage rents, 10% less than earned during 1998. The decline is attributable
to lower percentage rents at the Denver, St. Paul-Jackson and Kansas City
properties.
Due primarily to the sale of the Denver property, the Partnership's
1999 parking lot rental income of $2,635,111 was 2% lower than received during
1998. Operating expenses (net of depreciation) during 1999, however, were 10%
less than incurred during 1998. The decrease is primarily the result of lower
professional and consulting fees.
1
<PAGE>
REALTY PARKING PROPERTIES L.P.
CASH DISTRIBUTIONS
On February 15, 2000, the Partnership made a cash distribution of
$618,303, of which 98% was allocated to assignee and limited partners. The
distribution was comprised of funds provided by operations through December 31,
1999. Each investor received his or her share of this distribution in the amount
of $.317 per unit, which represents a 6.5% annualized return on an investor's
remaining adjusted capital balance.
Total distributions (including sales proceeds) allocated to investors
during the first quarter of 2000, therefore, totaled $5.337 per unit.
OUTLOOK
As the Partnership entered its tenth year during 1999, property leases
began to expire, including those on the Little Rock, Miami, Denver and Dayton
properties. The leases on the remaining properties will expire in 2000. To date,
Central Parking System, the Partnership's Advisor, has exercised lease
extensions under the same terms as those currently in existence for the Little
Rock, Miami and Birmingham properties.
As mentioned in previous reports, for some time we have not expected
the Advisor to renew leases on certain of the properties, and the Advisor has
now notified the Partnership that this will be the case in Dayton, Rochester,
Los Angeles and Reno. The Advisor's position with respect to these properties
indicates that the Advisor has been unable to operate satisfactorily profitable
parking facilities at these locations, net of its lease obligations to the
Partnership. Additionally this indicates that the value of the properties, based
on their potential as parking facilities, has declined. In accordance with
Generally Accepted Accounting Principles (GAAP), therefore, the Partnership has
determined to reduce the carrying amounts of these assets on its books, and has
accordingly recorded a loss on properties (net of the Denver property gain) for
the year ending December 31, 1999 of $4,158,255.
Management is currently reviewing strategic operating and disposition
alternatives for the Rochester, Los Angeles and Reno facilities. In Dayton the
Partnership has recently entered into a management agreement with a national
parking operator. Under this arrangement, the annual return generated by the
Dayton property could be expected to decline by approximately $50,000 from the
return that had been produced by the expired lease. When the leases on the
Rochester, Los Angeles and Reno properties expire, it is likely that management
agreements will be negotiated with operators for these locations. Assuming terms
similar to the Dayton agreement, the Partnership can expect that its parking lot
rental income from these properties and distributable cash flow to investors
will decline in the future. The Partnership, however, expects to maintain a
distribution rate to investors during 2000 of 6.5% of an investor's adjusted
capital balance.
2
<PAGE>
REALTY PARKING PROPERTIES L.P.
OUTLOOK (continued)
The Partnership's efforts to sell the Milwaukee garage have been
delayed due to the discovery of certain structural deficiencies, which could
also impact parking revenues during 2000. The Milwaukee lease obligates the
Advisor for the repairs to the garage, and after all decisions regarding the
repairs are implemented, we will reevaluate the potential of selling the
property.
SUMMARY
The past year witnessed positive results for the Partnership from the
sale of the Denver property and results during 2000 will be positively
influenced by the St. Paul-Tank sale. The expiration during 1999 and 2000 of the
Partnership's initial leases, however, creates uncertainty regarding the returns
the Partnership can expect from its Dayton, Rochester, Los Angeles and Reno
properties. The Partnership's recognition of a decline in the carrying value of
these assets was required by GAAP, which further prohibits the recognition by
the Partnership of increases in the carrying value of assets that have
appreciated over time. The carrying value of the assets on the books of the
Partnership, therefore, should not be confused by investors with the fair market
value of the portfolio of properties owned by the Partnership. Additionally, the
impairment of book values does not have a direct impact on cash flow in the
short-term, and the Partnership plans to maintain its 6.5% distribution rate to
investors throughout calendar year 2000.
The Partnership noted much more interest in its properties from
potential purchasers during 1999 than had been experienced in the past. We
expect this interest level to continue during 2000 and will continue to actively
pursue sales of the remaining properties in the portfolio when doing so serves
the best interests of investors.
REALTY PARKING COMPANY, INC.
General Partner
/s/ John M. Prugh
John M. Prugh
President
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Realty Parking Properties L.P.:
We have audited the accompanying balance sheets of Realty Parking
Properties L.P. (the "Partnership") as of December 31, 1999 and 1998 and
the related statements of operations, partners' capital and cash flows for
each of the years in the three-year period ended December 31, 1999. 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.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Realty Parking
Properties L.P. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Baltimore, Maryland
January 21, 2000, except as to Note 10,
which is as of March 22, 2000
4
<PAGE>
REALTY PARKING PROPERTIES L.P.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1999 1998
---------------- -----------------
Assets
<S> <C> <C>
Investment in real estate (Notes 3 and 4) $ 20,200,296 $ 32,922,333
Cash and cash equivalents 9,803,643 789,876
Accounts receivable (Note 6) 263,185 642,760
---------------- -----------------
$ 30,267,124 $ 34,354,969
================ =================
Liabilities and Partners' Capital
Accounts payable and accrued
expenses $ 32,777 $ 31,241
Due to affiliates (Note 6) 215,861 32,690
Real estate taxes payable (Note 6) 233,500 280,500
---------------- -----------------
482,138 344,431
---------------- -----------------
Partners' Capital (Notes 7 and 8)
General Partner - (55,969)
Assignee and Limited Partnership
Interests - $25 stated value per
unit, 1,909,127 units outstanding 29,784,886 34,066,407
Subordinated Limited Partner 100 100
---------------- -----------------
29,784,986 34,010,538
---------------- -----------------
$ 30,267,124 $ 34,354,969
================ =================
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
REALTY PARKING PROPERTIES L.P.
Statements of Operations
For the years ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------
Revenues
<S> <C> <C> <C>
Parking lot rental (Note 5) $ 2,635,111 $ 2,702,673 $ 2,508,271
Interest income 64,155 47,354 53,389
--------------- --------------- --------------
2,699,266 2,750,027 2,561,660
--------------- --------------- --------------
Expenses
Administrative, including amounts to
related party (Note 6) 106,094 106,108 128,162
Professional fees 23,712 39,144 18,080
Management fees to related party (Note 6) 39,693 43,781 39,574
Depreciation 123,852 124,748 124,748
--------------- --------------- --------------
293,351 313,781 310,564
--------------- --------------- --------------
Earnings from operations 2,405,915 2,436,246 2,251,096
Loss on properties, net (Note 4) (4,158,255) - -
--------------- --------------- --------------
Net earnings (loss) $ (1,752,340) $ 2,436,246 $ 2,251,096
=============== =============== ==============
Net earnings (loss) per unit of assignee and
limited partnership interests-basic (Note 8) $ (0.97) $ 1.25 $ 1.16
=============== =============== ==============
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
REALTY PARKING PROPERTIES L.P.
Statements of Partners' Capital
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Assignee
and Limited Subordinated
Partnership Limited General
Interests Partner Partner Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 34,320,308 $ 100 $ (50,788) $ 34,269,620
Net earnings 2,206,074 - 45,022 2,251,096
Distributions to partners (2,423,748) - (49,464) (2,473,212)
------------------ -------------------- ------------- -----------------
Balance at December 31, 1997 34,102,634 100 (55,230) 34,047,504
Net earnings 2,387,521 - 48,725 2,436,246
Distributions to partners (2,423,748) - (49,464) (2,473,212)
------------------ -------------------- ------------- -----------------
Balance at December 31, 1998 34,066,407 100 (55,969) 34,010,538
Net earnings (loss) (1,857,773) - 105,433 (1,752,340)
Distributions to partners (2,423,748) - (49,464) (2,473,212)
------------------ -------------------- ------------- -----------------
Balance at December 31, 1999 $ 29,784,886 $ 100 $ - $ 29,784,986
================== ==================== ============= =================
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
REALTY PARKING PROPERTIES L.P.
Statements of Cash Flows
For the years ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------
Cash flows from operating activities
<S> <C> <C> <C>
Net earnings (loss) $ (1,752,340) $ 2,436,246 $ 2,251,096
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities
Loss on properties 4,158,255 - -
Depreciation 123,852 124,748 124,748
Changes in assets and liabilities
(Increase) decrease in accounts receivable
and real estate taxes payable, net 332,575 (362,260) 36,270
Increase (decrease) in accounts payable
and accrued expenses 1,536 4,988 (5,216)
Increase (decrease) in due to affiliates 183,171 1,692 (10,404)
--------------- --------------- ---------------
Net cash provided by operating activities 3,047,049 2,205,414 2,396,494
--------------- --------------- ---------------
Cash flows from investing activities -
proceeds from sale of property, net 8,439,930 - -
--------------- --------------- ---------------
Cash flows from financing activities -
distributions to partners (2,473,212) (2,473,212) (2,473,212)
--------------- --------------- ---------------
Net increase (decrease) in cash and cash equivalents 9,013,767 (267,798) (76,718)
Cash and cash equivalents
Beginning of year 789,876 1,057,674 1,134,392
--------------- --------------- ---------------
End of year $ 9,803,643 $ 789,876 $ 1,057,674
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
REALTY PARKING PROPERTIES L.P.
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(1) Organization
Realty Parking Properties L.P. (the "Partnership") is a Delaware limited
partnership formed on October 4, 1988 to acquire surface lots and parking
garage buildings to be held for appreciation and used for parking
operations to produce current income. The general partner is Realty
Parking Company, Inc. and the subordinated limited partner is Realty
Associates Limited Partnership, an affiliate of the general partner. The
Partnership shall continue until December 31, 2038, unless the
Partnership is dissolved prior to that date, in accordance with the
provisions of the Partnership Agreement.
The Partnership owns thirteen properties in total, twelve of which are
wholly owned by the Partnership. The undivided tenants-in-common
ownership of one of the properties is noted below. The properties were
acquired on an all-cash basis and, therefore, are not subject to a
mortgage or other lien or encumbrance. As of December 31, 1999, the
Partnership owned the following properties:
<TABLE>
<CAPTION>
Approximate
Location Size (Sq. Ft.) Type
<S> <C> <C>
Birmingham, Alabama 28,000 276-car garage
Little Rock, Arkansas 35,000 surface lot
Los Angeles, California 41,800 surface lot
Miami, Florida 90,000 surface lot
St. Paul -Jackson, Minnesota 55,880 surface lot
St. Paul -Tank, Minnesota 32,930 surface lot
Kansas City, Missouri 35,650 400-car garage
Reno, Nevada 30,670 surface lot
Rochester, New York 48,970 surface lot
Dayton, Ohio 40,000 surface lot
Nashville, Tennessee 33,360 surface lot
Houston, Texas 81,000 surface lot
Milwaukee, Wisconsin 36,350 451-car garage
</TABLE>
The Partnership owns a 75% undivided interest in the Miami, Florida
property with the remaining 25% owned by Central Parking System (the
"Advisor").
The Partnership has an Investment Advisory Agreement with the Advisor.
The Advisor purchased 43,011 assignee limited partnership interests, net
of selling commissions, representing its maximum allowable purchase of
$1,000,000.
9
<PAGE>
REALTY PARKING PROPERTIES L.P.
Notes to Financial Statements (continued)
(2) Summary of Significant Accounting Policies
The accompanying financial statements have been prepared on the accrual
basis of accounting. The Partnership reports its operating results for
income tax purposes on the accrual basis. No provision for income tax is
made because any liability for income taxes is that of the individual
partners and not that of the Partnership.
The Partnership has joint interest and control with the Advisor in a
property which is accounted for using the proportionate share method. The
financial statements include the Partnership's proportionate share of the
property's historical cost, revenues and expenses.
Lease revenues are recorded as earned under the terms of lease
agreements.
Costs associated with the marketing of assignee limited partnership
interests to the public were offset against the related partners'
capital.
The Partnership considers all short-term investments with maturities of
three months or less at dates of purchase as cash equivalents. Cash and
cash equivalents consist entirely of cash and money market accounts and
are stated at cost, which approximates market value at December 31, 1999
and 1998.
Investment in real estate is stated at cost, net of accumulated
depreciation, reduced for impairment losses where appropriate, and
includes all related acquisition costs of the properties. Depreciation of
the parking garage buildings is computed using the straight-line method
over 31.5 years for property placed in service prior to January 1, 1994
and 39 years for property placed in service after January 1, 1994. Land
improvements are depreciated using the straight-line method over 15
years.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the Partnership records impairment losses on
long-lived assets used in operations when events and circumstances
indicate that the individual assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are
less than the carrying amounts of the assets. Assets considered to be
impaired are written down to estimated fair value.
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets, liabilities, revenues
and expenses to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ
from those estimates.
10
<PAGE>
REALTY PARKING PROPERTIES L.P.
Notes to Financial Statements (continued)
(2) Summary of Significant Accounting Policies (continued)
The fair values of all financial instruments approximate their recorded
values at December 31, 1999 and 1998.
(3) Investment in Real Estate
Investment in real estate is summarized as follows at December 31:
<TABLE>
<CAPTION>
1999 1998
----------------- ----------------
<S> <C> <C>
Land $ 17,596,092 $ 30,207,717
Buildings 3,445,777 3,445,777
Land improvements 190,804 190,804
----------------- ----------------
21,232,673 33,844,298
Accumulated depreciation (1,032,377) (921,965)
----------------- ----------------
$ 20,200,296 $ 32,922,333
================= ================
</TABLE>
(4) Gain (Loss) on Properties
The gain (loss) on properties for 1999 consists of the following:
Gain on sale of operating property $ 2,302,048
Impairment loss (6,460,303)
----------------
$ (4,158,255)
================
On December 9, 1999, the Partnership sold its 75% interest in the Denver,
Colorado property for $8,625,000. The Partnership's investment in the
property was $6,137,882, net of accumulated depreciation of $13,440. The
capital gain from the sale totaled $2,302,048, net of expenses of
$185,070.
In the fourth quarter of 1999, the Partnership's Advisor gave notice that
it would not renew four leases that would expire at various dates in
2000. As a result, the Partnership made an evaluation as to the
recoverability of the carrying amounts of the related properties from
future cash flows expected to result from the use and eventual
disposition of the properties over their expected holding periods. Based
upon this evaluation, the Partnership determined that the carrying
amounts of those properties are not recoverable, and they were adjusted
to their estimated fair values at December 31, 1999.
11
<PAGE>
REALTY PARKING PROPERTIES L.P.
Notes to Financial Statements (continued)
(5) Leases
The Partnership initially leased its parking properties to the Advisor
for periods of 10 years, expiring between April 1999 and November 2000,
with options to extend the leases for two additional terms of five years.
The Advisor has exercised extension options for three properties held at
December 31, 1999. Under the terms of the leases, the Advisor is
responsible for all operating costs, including ad valorem real estate
taxes and general and garage liability insurance coverage.
Under the terms of the leases, the Advisor is obligated to pay the
Partnership the greater of minimum rent plus reimbursement of real estate
taxes or 60% of gross parking revenues ("percentage rent"). Percentage
rents earned during 1999, 1998 and 1997 totaled $326,976, $362,260 and
$167,858, respectively. The minimum rents are 7.0% of certain acquisition
costs. Parking lot rents of $2,308,135 in 1999 and $2,340,413 in 1998 and
1997, represented minimum rents under the lease agreements.
Each lease is cancelable by the Partnership upon the sale of the property
and payment to the Advisor of a "termination fee," if the property is
leased to the Advisor at the time of sale. The termination fee generally
equals 15% of the amount, if any, by which the property's sale proceeds
exceed the original acquisition cost of the property plus a 12%
compounded annual return on the original acquisition cost minus all
rental income received by the Partnership from the property.
The Advisor gave notice that it would not extend the leases on four
properties, one of which has been placed under a month-to-month
management contract with a parking operator. Under the terms of the
management contract, the parking operator is responsible for all
operating and maintenance costs and the Partnership is responsible for
the real estate taxes. The remaining leases will expire at various dates
in 2000 and renewal negotiations with the Advisor are in process.
The minimum rents to be received in accordance with the terms of the
leases in effect at December 31, 1999 are summarized as follows:
2000 $ 1,270,250
2001 492,963
2002 492,963
2003 492,963
2004-2005 332,713
-------------
Total $ 3,081,852
=============
12
<PAGE>
REALTY PARKING PROPERTIES L.P.
Notes to Financial Statements (continued)
(6) Related Party Transactions
Pursuant to an Investment Advisory Agreement, the Advisor will earn a fee
upon disposition of a property equal to 2% of the contract price for the
sale of the property, if the property is leased to the Advisor at the
time of sale. Such fee is earned for services rendered to advise the
general partner on the timing and pricing of property sales. In 1999, the
Advisor earned an advisory fee of $172,500 from the sale of the Denver,
Colorado property.
The general partner earned property management fees of $39,693, $43,781
and $39,574 (1% of the gross revenues of the properties and other sources
of income) and was reimbursed $98,007, $98,890 and $116,049 for certain
costs incurred relating to administrative services for the Partnership in
1999, 1998 and 1997, respectively.
Under the terms of the lease agreements with the Advisor, real estate
taxes paid by the Partnership will be reimbursed and are not reflected in
the statements of operations. The Partnership recorded $233,500 and
$280,500 of real estate taxes in both accounts receivable and real estate
taxes payable at December 31, 1999 and 1998, respectively.
(7) Earnings for Federal Income Tax Purposes
In 1999, the Partnership's income for income tax purposes differs from
the loss for financial reporting purposes as a result of an impairment
loss recorded for financial reporting purposes. Impairment losses are not
deductible for income tax purposes.
In 1998 and 1997, there was no difference between the Partnership's net
earnings for income tax purposes and the net earnings for financial
reporting purposes.
(8) Partners' Capital
The Partnership Agreement provides, among other provisions, for the
following:
(a) The Partnership consists of the general partner, the assignee and
limited partners and subordinated limited partner.
(b) Distributions to the partners relating to operations of the
properties are based on net cash flow, as defined in the Partnership
Agreement. Assignee and limited partners receive 98% of net cash flow
and the general partner receives 2%. Net earnings per Unit of
assignee and limited partnership interests, as disclosed in the
statements of operations, are based upon 1,909,127 Units.
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REALTY PARKING PROPERTIES L.P.
Notes to Financial Statements (continued)
(8) Partners' Capital (continued)
(c) Net proceeds of sale or financing of the properties will be
distributed as follows:
- To assignee and limited partners until each such partner has
recovered its original capital contribution in full and received
a cumulative, noncompounded annual return of 12% of its adjusted
capital balance to the extent that such return has not been
provided from prior distributions of net cash flow.
- To the general partner until the general partner has received an
amount equal to the sum of its original capital contribution and
a deferred net cash flow amount. The deferred net cash flow
amount is the cumulative excess of the amounts of net cash flow
that the general partner would have received if net cash flow
from operations had been distributed 95% to the assignee and
limited partners and 5% to the general partner over the amounts
of net cash flow actually received by the general partner.
- Any remainder will be distributed 90% to the assignee and
limited partners, 1% to the general partner and 9% to the
subordinated limited partner.
(d) Net earnings from operations and gains on sales of properties are
allocated consistent with the above distribution provisions, except
that gains on sales are allocable first to any partner with a
negative capital account balance. Losses on sales of properties are
allocated in accordance with the partners' respective partnership
interests.
(e)The assignee limited partners may elect to become substitute limited
partners, as defined in the Partnership Agreement. Assignee limited
partners who elect to become substitute limited partners will
receive one limited partnership interest for each assignee limited
partnership interest they convert and will not be able to
re-exchange their limited partnership interests for assignee limited
partnership interests.
(f) Restrictions exist regarding transferability or disposition of
partnership interests.
(9) Distributions to Investors
Distributions of cash flow to investors totaled $2,473,212 during 1999,
1998 and 1997, of which 98% was allocated to assignee and limited
partners. These distributions were derived from funds provided by
operations and a return of capital of $124,170 in 1997.
14
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REALTY PARKING PROPERTIES L.P.
Notes to Financial Statements (continued)
(10) Subsequent Events
Sale
On February 10, 2000, the Partnership sold its St. Paul-Tank, Minnesota
property for $1,335,586. The Partnership's investment in the property was
$372,558, net of accumulated depreciation of $1,189. The capital gain
from the sale totaled $769,130, net of expenses of $193,898.
Distributions
On January 18, 2000, the Partnership made a distribution of the Denver,
Colorado sale proceeds totaling $8,439,930, of which 100% was allocated
to assignee and limited partners. Assignee and limited partners received
a distribution of $4.42 per original $25 Unit.
On February 15, 2000, the Partnership made a cash distribution totaling
$618,303 of which 98% was allocated to assignee and limited partners.
This distribution was derived from funds provided by operating activities
during 1999. Assignee and limited partners received a cash distribution
of $.317 per original $25 Unit.
On March 22, 2000, the Partnership made a distribution of the St.
Paul-Tank, Minnesota sale proceeds totaling $1,141,688, of which 100% was
allocated to assignee and limited partners. Assignee and limited partners
received a distribution of $0.60 per original $25 Unit.
15
<PAGE>
REALTY PARKING PROPERTIES L.P.
Partnership Information
Directors and Executive Officers
Realty Parking Company, Inc.
General Partner:
John M. Prugh
President and Director
Peter E. Bancroft
Vice President and Director
Terry F. Hall
Vice President and Secretary
Timothy M. Gisriel
Treasurer
Form 10-K
A copy of the Partnership's Annual Report on Form 10-K for 1999 as filed with
the Securities and Exchange Commission is available to partners without charge
on request by writing to:
Investor Relations
Realty Parking Properties L.P.
225 East Redwood Street
Baltimore, Maryland 21202
Auditors
KPMG LLP
111 South Calvert Street
Baltimore, Maryland 21202
Legal Counsel
Piper Marbury Rudnick & Wolfe LLP
6225 Smith Avenue
Baltimore, Maryland 21209
Further Information
Please submit changes in name, address, investment representative and
distribution instructions to Investor Relations at the above address.
For further information or questions regarding your investment, please call
Jennifer Zepp, Investment Coordinator, at 410-547-3033.
EXHIBIT A
LIMITED PARTNERSHIP AGREEMENT
REALTY PARKING PROPERTIES L.P.
TABLE OF CONTENTS
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Page
<S> <C>
Preliminary Statement .......................................................................................... A-3
Article I - Defined Terms .................................................................................... A-3
Article II - Name; Purpose; Term and Certificate ................................................... A-9
Section 2.1 Name; Formation .............................................................................. A-9
Section 2.2 Place of Registered Office .................................................................. A-9
Section 2.3 Purpose .......................................................................................... A-9
Section 2.4 Term .............................................................................................. A-9
Section 2.5 Recording of Certificate ..................................................................... A-9
Article III - Partners; Capital .............................................................................. A-10
Section 3.1 General Partners; Assignor Limited Partner; Subordinated
Limited Partners ........................................................................................... A-10
Section 3.2 Investors ........................................................................................ A-10
Section 3.3 Partnership Capital .......................................................................... A-10
Section 3.4 Liability of Partners and Investors ..................................................... A-11
Article IV - Allocations, Distributions and Applicable Rules ................................... A-12
Section 4.1 Allocation of Profit or Loss from a Sale ............................................. A-12
Section 4.2 Distribution of Net Proceeds of Sale or Financing ............................... A-12
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and
Loss from Operations .................................................................................... A-13
Section 4.4 Liquidation or Dissolution ............................................................... A-13
Section 4.5 General and Special Rules ............................................................... A- 14
Article V - Rights, Powers and Duties of Partners ................................................. A-16
Section 5.1 Management and Control of the Partnership; Tax Matters Partner ............. A-16
Section 5.2 Authority of General Partners .......................................................... A-16
Section 5.3 Authority of Investors ..................................................................... A-19
Section 5.4 Restrictions on Authority ................................................................. A-19
Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership ............. A-21
Section 5.6 Duties and Obligations of the General Partner ................................... A-22
Section 5.7 Compensation of General Partner ..................................................... A-23
Section 5.8 Other Businesses of Partner .............................................................. A-23
Section 5.9 Liability of General Partner and Affiliates to Limited Partner or Investors . ..... A-23
Section 5.10 Indemnification ............................................................................. A-23
Article VI - Transferability of a General Partner's Interest ..................................... A-24
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner;
Transfer of Interests ...................................................................................... A-24
Section 6.2 Election and Admission of Successor or Additional General Partners ....... A-24
Section 6.3 Events of Withdrawal of a General Partner ........................................ A-24
Section 6.4 Liability of a Withdrawn General Partner .......................................... A-25
Section 6.5 Valuation of Partnership Interest of General Partner ........................... A-25
Article VII - Assignment of Assignee Units to Investors; Transferability of Limited
Partner Interests and Units ..............................................................................A-26
Section 7.1 Assignments of the Assignee Units to Investors .................................. A-26
Section 7.2 Transferability of Units .................................................................... A-27
Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an Investor or a
Limited Partner ........................................................................................... A-28
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Section 7.4 Effective Date ............................................................................ A-28
Section 7.5 Substitute Limited Partners .......................................................... A-28
Section 7.6 Retirement or Withdrawal of a Limited Partner ............................. A-28
Article VIII - Dissolution, Liquidation and Termination of the Fund ................... A-29
Section 8.1 Events Causing Dissolution ......................................................... A-29
Section 8.2 Liquidation ................................................................................ A-29
Section 8.3 Capital Contribution Upon Dissolution ......................................... A-30
Article IX - Certain Payments to the General Partners and Affiliates ................... A-30
Section 9.1 Reimbursement of Certain Costs and Expenses of the General Partner and
Its Affiliates ............................................................................................ A-30
Section 9.2 Fees and Other Payments ............................................................ A-31
Article X - Books and Records; Bank Accounts; Reports ................................... A-31
Section 10.1 Books and Records .................................................................... A-31
Section 10.2 Bank Accounts ......................................................................... A-32
Section 10.3 Reports .................................................................................... A-32
Section 10.4 Federal Tax Elections ................................................................ A-33
Article XI - Meetings of Investors ................................................................... A-34
Section 11.1 Calling Meetings ......................................................................... A-34
Section 11.2 Notice; Procedure ..................................................................... A-34
Section 11.3 Right to Vote ........................................................................... A-34
Section 11.4 Proxies; Rules .......................................................................... A-34
Article XII - General Provisions ..................................................................... A-35
Section 12.1 Appointment of General Partner as Attorney-in-Fact ......................... A-35
Section 12.2 Waiver of Partition ................................................................... A-35
Section 12.3 Notification .............................................................................. A-35
Section 12.4 Word Meanings ........................................................................ A-35
Section 12.5 Binding Provisions ................................................................... A-35
Section 12.6 Applicable Law ........................................................................ A-35
Section 12.7 Counterparts ............................................................................ A-35
Section 12.8 Separability of Provisions .......................................................... A-36
Section 12.9 Paragraph Titles ........................................................................ A-36
Section 12.10 Entire Agreement ...................................................................... A-36
Section 12.11 Amendments .......................................................................... A-36
Signatures ..................................................................................................... A-37
Schedule A .................................................................................................... A-38
</TABLE>
<PAGE>
REALTY PARKING PROPERTIES L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of October 4,1988, is by
and among Realty Parking Company, Inc., a Maryland corporation, as the General
Partner, Parking Properties Holding Co., Inc., a Maryland corporation, as the
Assignor Limited Partner, and Realty Associates 1988 Limited Partnership, a
Maryland limited partnership, as the Subordinated Limited Partner.
Preliminary Statement
The General Partner, the Subordinated Limited Partner and the Assignor
Limited Partner desire to form Realty Parking Properties L.P. (the
"Partnership"), pursuant to the Delaware Revised Uniform Limited Partnership
Act, for the purpose of acquiring parking lot properties located in the United
States.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise expressly requires, have the meanings specified in this Article I.
"Accountants" means such firm of independent certified public accountants
as shall be engaged from time to time by the General Partner on behalf of the
Partnership.
"Acquisition Expenses" means expenses, including, but not limited to, legal
fees and expenses, travel and communications expenses, costs of appraisals,
non-refundable option payments on property not acquired, accounting fees and
expenses, title insurance, and miscellaneous expenses related to selection and
acquisition of Properties, whether or not acquired.
"Acquisition Fees" means the total of all fees and commissions paid by any
party on behalf of the Partnership in connection with the selection, purchase or
development of, or investment in, any Property by the Partnership, including,
without limitation, the Property Acquisition Fee payable to the General Partner,
any real estate commission, selection fee, non-recurring management fee,
development fee, or any fee of a similar nature, however designated.
"Act"means the Delaware Revised Uniform Limited Partnership Act (6 DEL.C.
ss.17-101 et. seq.) as amended or modified from time to time.
"Additional General Partner" means any Person who is admitted as an
Additional General Partner of the Partnership, under the provisions of Article
VI, after the date of this Agreement.
"Adjusted Capital Balance" of a Partner or an Investor means the Capital
Contribution of the Partner or the Assignor Limited Partner made on behalf of an
Investor, less any Net Proceeds of Sale or Financing actually distributed to the
Partner or Investor (other than that portion, if any, which is payment of an
unpaid Preferred Return), as provided in Article IV herein, at the time of
reference thereto.
"Affiliate" means (i) any Person directly or indirectly controlling,
controlled by or under common control with another Person, (ii) any Person
owning or controlling 10% or more of the outstanding voting securities of such
other Person, (iii) any officer, director or partner of such Person, and (iv) if
such other Person is an officer, director or partner, any company for which such
Person acts in any such capacity.
"Agreement" means this Agreement of Limited Partnership as originally
executed and as amended from time to time, as the context requires. Words such
as "herein", "hereinafter, " "hereof," "hereto," "hereby" and "hereunder," when
used with reference to this Agreement, refer to this Agreement as a whole unless
the context otherwise requires.
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"Assigned Limited Partnership Interest" means a Partnership Interest which
is credited to the Assignor Limited Partner on the books and records of the
Partnership in respect of a purchase of one Unit by an Investor. Each Assigned
Limited Partnership Interest represents a contribution to the capital of the
Partnership equal to $25, regardless of any reduction in Selling Commissions.
"Assignee Units" means the ownership interests of an Investor in the
Partnership at any particular time, including the right of such Investor to any
and all benefits to which an Investor may be entitled as provided in this
Agreement. The ownership interests of the Investors in the Partnership are
sometimes referred to herein as "Units".
"Assignor Limited Partner" means Parking Properties Holding Co., Inc. which
will (i) own any Assigned Limited Partnership Interests issued pursuant to
Sections 3.2 and 7.1 hereof, and (ii) transfer and assign to those Persons who
acquire Units all of its rights and interest in Assigned Limited Partnership
Interests in accordance with Sections 3.2 and 7.1 hereof.
"Capital Account" means (i) the separate account maintained and adjusted on
the books and records of the Partnership for each Partner and (ii) the separate
subaccount of the Capital Account of the Assignor Limited Partner maintained and
adjusted for each Investor. Each Partner's and Inves- tor's Capital Account is
credited with his Capital Contributions and his distributive share of Profit (or
item thereof). Each Partner's or Investor's Capital Account is debited with the
cash and the fair market value of any property distributed to him (net of
liabilities assumed by such Partner or Investor and liabilities to which such
distributed property is subject), and his distributive share of Loss (and
deduction (or item thereof)). Each Partner's and Investor's Capital Account
shall also be adjusted pursuant to Section 4.5 hereof and as required by the
Income Tax Regulations promulgated under Section 704 of the Code. Any questions
concerning a Partner's or Investor's Capital Account shall be resolved by the
General Partner in its reasonably exercised discretion, applying principles
consistent with this Agreement and the regulations promulgated under Section 704
of the Code in order to assure that all allocations herein will have substantial
economic effect or will otherwise be respected for income tax purposes. For
purposes of this Agreement, a Partner or Investor who has more than one
Partnership Interest or Unit, as the case may be, shall have a single Capital
Account that reflects all of his Partnership Interests and Units, regardless of
the class of Interests owned (e.g., general or limited) and regardless of the
time or manner in which the Partnership Interests and Units were acquired.
"Capital Contribution" means the total amount of cash and the fair market
value of any other assets contributed to the Partnership by a Partner (net of
liabilities assumed by the Partnership and liabilities to which any such
contributed assets are subject) and, with respect to an Investor, the Capital
Contribution of the Assignor Limited Partner made on behalf of such Investor
(without regard to any reduction of Selling Commissions). Any reference in this
Agreement to the Capital Contribution of a then-Partner or Investor shall
include a Capital Contribution previously made by any prior Partner or Investor
with respect to the Interest or Unit of such then-Partner or then- Investor,
except to the extent that all or a portion of the Interest or Unit of any prior
Partner or Investor shall have been terminated and the portion so terminated not
transferred to a successor Partner or Investor.
"Certificate" means the Certificate of Limited Partnership establishing the
Partnership, as filed with the office of the Secretary of State of the State of
Delaware on or about the date of this Agreement, as it may be amended from time
to time in accordance with the terms of this Agreement and the Act.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision of succeeding law).
"Controlling Person"of the General Partner or Affiliate thereof means any
person who (a) performs functions for the General Partner or Affiliate similar
to those of (i) a Chairman or member of the Board of Directors, (ii) executive
management, such as a President, or a Vice-President, Secretary or Treasurer, or
(iii) senior management; or (b) holds a 5% or more equity interest in the
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General Partner or Affiliate, or has the power to direct or cause the direction
of the General Partner, or Affiliate, whether through the ownership of voting
securities, by contract or otherwise.
"Deferred Net Cash Flow Amount" means the cumulative excess of the amounts
of Net Cash Flow that the General Partner would have received if Net Cash Flow
had been distributed 95% to the Investors and 5% to the General Partner over the
amounts of Net Cash Flow actually received by the General Partner pursuant to
Section 4.3A hereof.
"Due Diligence Expense Reimbursement Fee" means the fee equal to 2% of the
Gross Proceeds of the Offering allowed to the Selling Agent, which may be
re-allowed to Soliciting Dealers, for advisory services, due diligence
activities and the reimbursement of expenses.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, estate, business trust, cooperative, association or other
legal form of organization.
"Escrow Agent" means Mercantile-Safe Deposit & Trust Company, or such other
escrow agent chosen by the General Partner to hold funds from Persons who have
subscribed to become Investors pending the assignment of Assignee Units to them.
"Financing" means all indebtedness encumbering the Properties or incurred
by the Partnership, the principal amount of which is scheduled to be paid over a
period of not less than 48 months, and not more than 50% of the principal amount
of which is scheduled to be paid during the first 24 months.
"Front-End Fees" means fees and expenses paid by any Person for any
services rendered during the organization or acquisition phase of the
Partnership, including the Offering and Organizational Expense Fee, the Due
Diligence Expense Reimbursement Fee, the Selling Commissions, the Acquisition
Expenses, the Acquisition Fees and any other similar fees.
"General Partner" means Realty Parking Company, Inc. and any other Person
designated as a General Partner in the Schedule and any Person who becomes a
Successor or Additional General Partner as provided herein, in each such
Person's capacity as a General Partner of the Partnership. "Gross Proceeds of
the Offering" means the aggregate of the proceeds from the sale of Units in the
Offering, which amount is equal to the total of all Capital Contributions of the
Investors.
"Increased Maximum Offering Amount" means the total amount of $60,000,000
in Gross Proceeds of the Offering.
"Interest" or "Partnership Interest" means the entire ownership interest
(which may be segmented into and/or expressed as a percentage of various rights
and/or liabilities) of a Partner in the Partnership at any particular time,
including the right of such Partner to any and all benefits to which a Partner
may be entitled as provided in the Agreement and in the Act, together with the
obligations of such Partner to comply with all the terms and provisions of this
Agreement and of the Act.
"Interim Investments" means the short-term investments made with the Net
Proceeds of the Offering until such Net Proceeds of the Offering are disbursed
for acquisition of Properties.
"Investor" means (i) any Person who holds an Assignee Unit and is reflected
as an Investor on the books and records of the Partnership, and (ii) any
Investor who has been admitted to the Partnership as a Substitute Limited
Partner pursuant to Section 7.5 hereof.
"Investment in Properties" means the amount of Capital Contributions
actually paid or allocated to the purchase and development of the Properties
(including the purchase of properties, working capital reserves allocable
thereto (except that working capital reserves in excess of 5% shall not be
included), and other cash payments such as interest and taxes but excluding
Front-End Fees).
"Investment Advisory Agreement" means the agreement referred to in the
Prospectus by and between the Partnership and Allright Auto Parks, Inc.
A-5
<PAGE>
"Leases" means those certain agreements to be entered into by the
Partnership and the Parking Lot Operator pursuant to which the Parking Lot
Operator shall lease, operate or manage each of the Properties.
"Limited Partner" means any Person who is designated as a Limited Partner
on the books and records of the Partnership at the time of reference thereto, in
each such Person's capacity as a Limited Partner of the Partnership.
"Limited Partnership Interest" means the ownership interest of the Assignor
Limited Partner and all other Limited Partners in the Partnership.
"Limited Partnership Interest Percentage" in respect of any Investor means
the percentage obtained by converting to a percentage the fraction having the
number of Assignee Units owned by such Investor as its numerator and having the
number of Assignee Units owned by all Investors at the time of reference thereto
as its denominator.
"Majority Vote of the Investors" shall mean the affirmative vote of
Investors owning more than 50% of the outstanding Units or the consent of
Investors owning more than 50% of the outstanding Units, as the case may be.
"Maximum Offering Amount" means the total amount of $25,000,000 in Gross
Proceeds of the Offering.
"Minimum Gain" means with respect to each non-recourse liability of the
Partnership and subject to certain adjustments pursuant to Income Tax Reg.
ss.1.704-1 (b)(4)(iv)(c), the amount of gain (of whatever character), if any,
that would be realized by the Partnership, if the Partnership disposed of (in a
taxable transaction) any of the assets subject to such liability in full
satisfaction of the liability. For this purpose, only the portion of the assets'
adjusted basis allocated to non-recourse liabilities of the Partnership shall be
taken into account.
"Minimum Offering Amount" means the amount of $2,000,000 in Gross Proceeds
of the Offering.
"Net Cash Flow" means, with respect to any fiscal period, the excess, if
any, of (i) all cash funds derived from the operations of the Partnership during
such period, including the yield from the Interim Investments and excess cash
reserves deemed distributable by the General Partner pursuant to Section 3.3E
hereof, over (ii) all cash disbursed in the operations of the Partnership during
such period, including cash used to pay, or establish reasonable reserves for,
operating expenses, fees, commissions, debt service and loan repayments,
improvements, repairs, replacements, contingencies and anticipated obligations,
except to the extent any such payment is made out of reserves set aside for such
purpose. Net Cash Flow shall not include amounts distributed or to be
distributed under Section 4.2 hereof.
"Net Proceeds from a Financing" means the gross proceeds to the Partnership
of any Financing, less any amounts deemed necessary by the General Partner to be
allocated to the establishment of reserves, the payment of any debts and
liabilities of the Partnership to creditors, and the payment of any reasonable
expenses or costs associated with the Financing, including but not limited to,
fees, points, or commissions paid to any unaffiliated Persons.
"Net Proceeds from a Sale" means the gross proceeds to the Partnership of
any Sale, less any amounts deemed necessary by the General Partner to be
allocated to the establishment of reserves, the payment of any debts and
liabilities of the Partnership to creditors, and the payment of any reasonable
expenses or costs associated with the Sale, including but not limited to, fees
or real estate brokerage commissions paid to any unaffiliated Persons and,
subject to Sections 5.2.A(viii) and 9.2.A(vi), fees or real estate brokerage
commissions paid to the General Partner or Affiliates.
"Net Proceeds of the Offering" means the Gross Proceeds of the Offering
less the Selling Commissions, the Due Diligence Expense Reimbursement Fee, and
the Offering and Organizational Expense Fee.
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"Net Proceeds from a Sale or Financing" means the Net Proceeds from a Sale
or Net Proceeds from a Financing, as the case may be.
"Notification" means a writing, containing the information required by this
Agreement to be communicated to any Person, sent or delivered to such Person in
accordance with the provisions of Section 12.3 of this Agreement.
"Offering"means the offering and sale of Units for a minimum of $2,000,000
and a maximum of $60,000,000, as more fully described in the Prospectus.
"Offering and Organizational Expense Fee" means the non-accountable fee
paid to the General Partner equal to 4.5% of the Gross Proceeds of the Offering,
payable at such times as the Investors are recognized as such on the books of
the Partnership, for services rendered and costs incurred in connection with the
organization of the Partnership and the offering of Units.
"Parking Lot Operator" means (i) Allright Auto Parks, Inc. or an Affiliate,
or (ii) such other person selected by the Partnership to operate the Properties.
"Partner" means any General Partner or Limited Partner. "Partnership" means the
limited partnership formed in accordance with this Agreement by the parties
hereto, as said limited partnership may from time to time be constituted.
"Partnership Property" means all or any portion of the assets owned or to
be owned by the Partnership, including the Properties and all incidental
personal property.
"Person" means any individual or Entity. "Preferred Return" means the
cumulative, non-compounded annual return equal to 12% of the Adjusted Capital
Balance of each Investor commencing on the earlier of (i) the final closing for
the sale of Units or (ii) December 31, 1988, less any Net Cash Flow distributed
to each Investor pursuant to Section 4.3 and any Net Proceeds from a Sale or
Financing distributed to each Investor in respect of the Preferred Return
pursuant to Section 4.2A(i).
"Profit" or "Loss" means, for each fiscal year or other period, an amount
equal to the Partner- ship's taxable income or loss for such year or period,
with the following adjustments: (i) any income of the Partnership that is exempt
from federal income tax shall be added to such taxable income or loss; (ii) any
expenditures of the Partnership described in Section 705(a)(2)(B) of the Code,
or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Income
Tax Reg. ss.1.704-1(b)(2)(iv)(i), shall be subtracted from such taxable income
or loss; and (iii) Pursuant to Income Tax Reg. ss.1.704- l(b)(iv)(g)(3), an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period for federal
income tax purposes shall be taken into account, except that if the fair market
value on the date that the asset is contributed to the Partnership (or if the
basis of such asset for book purposes is adjusted under the Income Tax
Regulations, such adjusted book basis) differs from its adjusted basis for
federal income tax purposes at the beginning of such year or other period, the
depreciation, amortization and other cost recovery deductions taken into account
shall be equal to an amount which bears the same ratio to such beginning fair
market value (or adjusted book basis) as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis. Except as otherwise provided herein,
each item of income, gain, loss, deduction, preference or recapture entering
into the computation of Profit or Loss hereunder shall be allocated to each
Partner in the same proportion as Profit and Loss are allocated.
"Profit or Loss from Operations" means Profit or Loss of the Partnership
from any source other than a Sale.
"Properties" means the parking lot properties acquired by the Partnership,
including, without limitation, surface commercial parking lots, parking garages,
suburban parking properties, parking properties requiring the prior demolition
of obsolete structures, or offsite airport parking lots.
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"Property Acquisition Fee" means the fee paid to the General Partner or its
Affiliates for identifying, evaluating and selecting the Properties, as
described in the Prospectus.
"Prospectus" means the Partnership's Prospectus contained in the
Registration Statement filed on Form S-11 with the Securities and Exchange
Commission for the registration of the Units under the Securities Act of 1933,
in the final form in which it is filed with the Securities and Exchange
Commission and as thereafter supplemented pursuant to Rule 424 under the
Securities Act of 1933. Any reference herein to "date of the Prospectus" shall
be deemed to refer to the date of the Prospectus in the form filed pursuant to
Rule 424(b) of the Securities Act of 1933.
"Sale" means any transaction entered into by the Partnership resulting in
the receipt of cash or other consideration (other than the receipt of Capital
Contributions) not in the ordinary course of its business, including, without
limitation, sales or exchanges or other dispositions of Properties and real or
personal property of the Partnership, condemnations, recoveries of damage awards
and insurance proceeds (other than business or rental interruption insurance
proceeds), but excepting any Financing.
"Schedule" means Schedule A annexed hereto as amended from time to time and
as so amended at the time of reference thereto.
"Selling Agent" means Alex. Brown Realty Securities, Inc., an Affiliate of
the General Partner, which will offer the Units on a best efforts basis pursuant
to the Selling Agent Agreement.
"Selling Agent Agreement" means that certain agreement to be entered into
by the Partnership, Alex. Brown Realty Securities. Inc., and the General
Partner, pursuant to which Alex. Brown Realty Securities, Inc. will offer and
sell the Units on a best efforts basis. "Selling Commissions" means the maximum
total (or any portion thereof) of 7% of the Gross Proceeds of the Offering paid
to the Selling Agent or Soliciting Dealers for their efforts in offering the
Units. The 7% maximum Selling Commissions will be reduced for volume purchases
and purchases by certain Affiliates as specified in the Prospectus.
"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership or who will manage or participate
in the management of the Partnership, and any Affiliate of such Person, but does
not include (a) any Person whose only relationship with the Partnership or the
General Partner is that of an independent property manager if such person's only
compensation from the Partnership is in the form of fees for the performance of
property management services, or (b) wholly-independent third parties such as
attorneys, accountants and broker-dealers whose only compensation from the
Partnership is for professional services rendered in connection with the
Offering or the operations of the Partnership.
"Subordinated Limited Partner" means Realty Associates 1988 Limited
Partnership and such other Persons who are designated as Subordinated Limited
Partners on the books and records of the Partnership.
"Substitute Limited Partner" means any Investor who has elected to convert
from an Investor to a Limited Partner pursuant to Section 7.5 of this Agreement.
"Successor General Partner" means any Person who is admitted as a Successor
General Partner to the Partnership under the provisions of Article VI after the
date of this Agreement.
"Tax Matters Partner" means the General Partner designated in Section 5.1C
as the tax matters partner, as defined in Section 6231(a)(7) of the Code.
"Termination Date of the Offering" means the date upon which the Offering
will terminate, which, if not sooner terminated by the General Partner, will be
one (1) year from the date of the Prospectus.
"Unit" means (i) an Assignee Unit representing the assignment by the
Assignor Limited Partner of one Assigned Limited Partnership Interest, and (ii)
the Partnership Interest attributable to one Unit of any Investor who has become
a Substitute Limited Partner pursuant to Section 7.5 hereof.
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"U.S. Person" means a Person who is (i) an individual who is either a
United States citizen or a resident of the United States for federal income tax
purposes, (ii) a corporation, partnership, or other legal entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) a corporation that is not created or organized in or under the
laws of the United States or any political subdivision thereof but which has
made an election under Section 897(i) of the Code to be treated as a domestic
corporation for certain purposes of federal income taxation, or (iv) an estate
or trust whose income from sources without the United States is includable in
its gross income for federal income tax purposes regardless of its connection
with a trade or business carried on in the United States.
"Working Capital Reserves" means, initially, the portion of the Net
Proceeds of the Offering set aside as working capital reserves pursuant to
Section 3.3E, as increased or decreased from time to time at the discretion of
the General Partner.
ARTICLE II
NAME; PURPOSE; TERM AND CERTIFICATE
Section 2.1 Name; Formation
The Partners hereby form the limited partnership to be known as "Realty
Parking Properties L.P.," and such name shall be used at all times in connection
with the Partnership's business and affairs; provided, however, that the
Partnership may use trade names in its business operations. The Partnership
shall be governed by the Act.
Section 2.2 Place of Registered Office
The address of the registered office in the State of Delaware of the
Partnership is Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801; the name of the registered agent for service of process on the
Partnership in the State of Delaware at that address is The Corporation Trust
Company. The Partnership's principal place of business is 225 East Redwood
Street, 4th Floor, Baltimore, Maryland 21202 or such other place(s) as the
General Partner may hereafter determine. Notification of any change in the
location of the principal office shall be given to the Partners and Investors on
or before the date of any such change.
Section 2.3 Purpose
The purpose of the Partnership is to acquire, own, develop, maintain,
finance, encumber, operate as a business, lease, sell, dispose of and otherwise
deal with the Properties, and to do all things necessary, convenient or
incidental to the achievement of the foregoing.
Section 2.4 Term
The Partnership shall continue until December 31, 2038, unless the
Partnership is sooner dissolved in accordance with the provisions of this
Agreement.
Section 2.5 Recording of Certificate
The General Partner shall take all necessary action to maintain the
Partnership in good standing as a limited partnership under the Act, including,
without limitation, the filing of the Certificate and such amendments and
further certificates as may be necessary under the Act and necessary to qualify
the Partnership to do business in such states as the Partnership owns property.
The General Partner shall not be required to send a copy of the Partnership's
filed Certificate to each Partner and Investor.
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ARTICLE III
PARTNERS; CAPITAL
Section 3.1 General Partner; Assignor Limited Partner; Subordinated Limited
Partner
The name, address and Capital Contribution of the General Partner, the
Assignor Limited Partner and the Subordinated Limited Partner are set forth on
the Schedule. Upon the dissolution and termination of the Partnership (i) the
General Partner, on or before the later of the last day of the fiscal year in
which the dissolution of the Partnership occurs or ninety (90) days after the
date of dissolution of the Partnership, shall make a Capital Contribution to the
Partnership in an amount equal to the lesser of (A) the deficit balance, if any,
in its Capital Account or (B) the excess of 2.02% of the Capital Contributions
of the Investors and Limited Partners (excluding capital contributions of the
Assignor Limited Partner on behalf of Investors) over the Capital Contributions
previously contributed by the General Partner, and (ii) the Subordinated Limited
Partner, on or before the later of the last day of the fiscal year in which the
dissolution of the Partnership occurs or ninety (90) days after the date of
dissolution of the Partnership, shall make a Capital Contribution to the
Partnership in an amount equal to the lesser of (x) the deficit balance in its
Capital Account or (y) the amount which it agrees to contribute to the capital
of the Partnership pursuant to an amendment hereto.
Section 3.2 Investors
A. The General Partner is authorized to accept orders for Units pursuant to
the Offering. All orders for Units shall be held in trust and deposited in an
escrow account with the Escrow Agent. Orders for Units shall be accepted or
rejected by the General Partner within thirty (30) days after their receipt by
the Escrow Agent.
B. Upon the receipt by the Escrow Agent of orders for an amount equal to
the Minimum Offering Amount, the Escrow Agent shall release the funds in the
escrow account to the Assignor Limited Partner which shall immediately transmit
such funds to the Partnership. Subsequent orders for Units that are accepted by
the General Partner shall be released from the escrow account and transmitted to
the Partnership or returned to subscribers in accordance with the Prospectus.
Upon release of an Investor's funds from the escrow account to the Partnership,
an Assigned Limited Partnership Interest shall be credited to the Assignor
Limited Partner on the books and records of the Partnership in respect of such
Unit and the Assignor Limited Partner shall assign all of its rights with
respect to such Assigned Limited Partnership Interest to the Investor to the
extent permitted by, and in accordance with, the Agreement and applicable law.
The Assignor Limited Partner hereby agrees to exercise any and all rights with
respect to such Assigned Limited Partnership Interest as directed by the
Investor.
C. Any interest earned on moneys paid by Investors during the period such
moneys are held in escrow by the Escrow Agent shall be paid to the Partnership
following the release of orders and shall be distributed in accordance with
Section 4.5A hereof. Persons whose orders for Units are rejected by the General
Partner shall be returned their moneys (and interest earned thereon) within ten
(10) days after such rejection.
D. No order for Units sold as part of the Offering shall be accepted after
the Termination Date of the Offering. If the General Partner does not accept
orders totalling an amount equal to the Minimum Offering Amount on or before the
Termination Date of the Offering, the Escrow Agent shall promptly return all
moneys deposited by subscribers together with any interest earned on such
moneys.
E. For purposes of this Agreement, an Investor who acquires Units in the
Offering shall be recognized as an Investor with respect to such Units on the
date that such Investor's funds are released from the escrow account to the
Partnership.
Section 3.3 Partnership Capital
A. Each Partner's and Investor's Capital Contribution shall be paid in cash
on or prior to the date of such Partner's admission to the Partnership or the
date of the recognition of the Investor on the books and records of the
Partnership.
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B. Except to the extent of any interest income earned on an Investor's
Capital Contribution while it is held in escrow, and later distributed to such
Investor pursuant to Section 4.5A, no Partner or Investor shall be paid interest
on any Capital Contribution.
C. Except as otherwise provided in this Agreement, no Partner or Investor
shall have the right to withdraw, or receive any return of, his Capital
Contribution prior to December 31, 2038.
D. Under circumstances requiring a return of any Capital Contribution, no
Partner shall have the right to demand or receive property other than cash.
E. The Partnership shall initially set aside Working Capital Reserves for
contingencies related to ownership of the Properties in an amount equal to at
least 3% of the Gross Proceeds of the Offering. If in any fiscal quarter, the
General Partner determines that the Working Capital Reserves of the Partnership
are in excess of the amount deemed sufficient in connection with the ownership
of the Properties and that such Working Capital Reserves may be reduced, the
amount of such reduction may be distributed to the Partners and Investors as a
portion of the Partnership's Net Cash Flow. Upon the Sale or disposition of a
Property, any Working Capital Reserves maintained for such Property may be
distributed, in the General Partner's discretion, to Partners and Investors or
applied as Working Capital Reserves for other Properties.
Section 3.4 Liability of Partners and Investors
A. Except as provided in Section 17-607 of the Act, or in Section 3.1 with
respect to the Subordinated Limited Partner, the Limited Partners and Investors
shall be liable only to pay their Capital Contributions and no Limited Partner
or Investor will be personally liable for the debts, liabilities, contracts, or
other obligations of the Partnership.
B. Except as set forth in 3.4A, no Limited Partner or Investor shall be
required to lend any funds to the Partnership or, after his Capital Contribution
has been fully paid, to make any further capital contribution to the
Partnership, nor shall any Limited Partner or Investor be liable for or have any
obligation to restore any negative balance in his Capital Account.
C. Subject to the provisions of Sections 3.1 and 5.9 of this Agreement, the
General Partner shall not have any personal liability for the repayment of the
Capital Contribution or the Preferred Return of any Limited Partner or Investor
or be required to repay to the Partnership all or any portion of any negative
balance of the Capital Accounts of the Limited Partners or the Investors.
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ARTICLE IV
ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES
Section 4.1 Allocation of Profit or Loss from a Sale
A. Profit from any Sale (and Profit from any deemed Sale pursuant to
Section 4.5) shall be allocated in the following order of priority:
(i) First, if one or more Investors or Partner has a negative balance in
his Capital Account, to such Partners and Investors, in proportion to their
negative Capital Accounts, until all such Capital Accounts have zero balances.
(ii) Second, to each of the Investors until the Capital Account of each
Investor is equal to the sum of his Adjusted Capital Balance plus his unpaid
Preferred Return, if any.
(iii) Third, to the General Partner until the Capital Account of the
General Partner is equal to the sum of its Adjusted Capital Balance and the
Deferred Net Cash Flow Amount.
(iv) Fourth, to the Subordinated Limited Partner, an amount of Profit equal
to the amount of Net Proceeds from such Sale to which the Subordinated Limited
Partner is entitled to receive pursuant to Section 4.2A (iii) or would have been
entitled to receive if the Sale Proceeds were distributed pursuant to Section
4.2A rather than Section 4.2B.
(v) Fifth, any remaining Profit shall be allocated 98% to the Investors and
2% to the General Partner.
B. Loss from any Sale (and Loss from any deemed Sale pursuant to Section
4.5) shall be allocated 98% to the Investors and 2% to the General Partner.
C. All Profit or Loss allocated pursuant to Section 4.1 hereof with respect
to any Unit which is transferred during a taxable year of the Partnership shall
be allocated to the Persons recognized (in accordance with Section 7.4 hereof)
as Investors as of the first business day of the month that includes the date on
which the Sale occurs; provided, however, that all such Profit or Loss which is
attributable to an installment or other deferred Sale shall be allocated to the
Persons recognized (in accordance with Section 7.4 hereof) as Investors as of
the first business day of the month that includes the date on which the deferred
Net Proceeds from such Sale are received by the Partnership, and the allocable
cash basis items with respect thereto shall be allocated as required under
Section 706(d) of the Code and the Income Tax Regulations thereunder.
Section 4.2 Distribution of Net Proceeds of Sale or Financing
A. Upon a Financing and upon a Sale that does not constitute a Sale of all
or substantially all of the Properties, Net Proceeds from the Financing or Sale
shall be distributed, credited and applied in the following order of priority:
(i) First, to the Investors until each Investor has received an amount
equal to his unpaid Preferred Return, if any, and then his Adjusted Capital
Balance.
(ii) Second, to the General Partner, an amount equal to the sum of its
Adjusted Capital Balance and the deferred Net Cash Flow Amount.
(iii) Third, except as provided in Section 4.2D below, any remaining Net
Proceeds of Sale or Financing shall be distributed 90% to the Investors, 9% to
Realty Associates 1988 Limited Partnership, and 1% to the General Partner.
B. Upon the Sale of all or substantially all of the Properties, Net
Proceeds from the Sale shall be allocated to the Partners and Investors, in
proportion to their positive Capital Accounts, after the allocation of Profit
and Loss pursuant to Sections 4.1A and 4.1B, until all such Capital Accounts
have been reduced to zero.
C. All Net Proceeds of Sale or Financing distributable with respect to any
Unit which is transferred during a taxable year of the Partnership shall be
distributed to the Persons recognized (in
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accordance with Section 7.4 hereof) as Investors as of the first business
day of the month that includes the date on which the Sale or Financing occurs;
provided, however, that all Net Proceeds from a Sale received by the Partnership
as a result of an installment or other deferred Sale shall be distributed to the
Persons recognized (in accordance with Section 7.4 hereof) as Investors as of
the first business day of the month that includes the date on which the deferred
Net Proceeds from a Sale are received by the Partnership.
D. Notwithstanding any other provision of this Article IV, the Subordinated
Limited Partner shall not be entitled to receive any Net Proceeds from a Sale
except (i) to the extent that it has been or will be allocated Profit from such
Sale in an amount equal to the Net Proceeds from such Sale which will be
allocated to it pursuant to Section 4.1A, and (ii) if the amount of Net Proceeds
from such Sale which it would be otherwise entitled to receive exceeds the
amount of Profit from such Sale to be allocated to it pursuant to Section 4.1A,
then, in addition to the amount to which the Subordinated Limited Partner is
entitled to receive under subparagraph (i), an amount equal to the excess of the
amount that the Subordinated Limited Partner has agreed to contribute pursuant
to Section 3.1 over the amount of Profit from such Sale which is allocated to it
(reduced by prior distributions pursuant to this subparagraph (ii)).
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss
from Operations
A. Net Cash Flow shall be distributed 98% to the Investors and 2% to the
General Partner. The General Partner will endeavor to distribute Net Cash Flow
on a quarterly basis, within approximately sixty (60) days after the close of
each calendar quarter.
B. Profit and Loss from Operations for each fiscal year shall be allocated
98% to the Investors and 2% to the General Partner.
C. For each fiscal year, all Profit and Loss allocated pursuant to Section
4.3B to the Investors shall be allocated among the Persons that are recognized
as Investors during such year by determining the Profit and Loss attributable to
each month during such year and by allocating the amount of such Profit and Loss
among Persons who are recognized as Investors on the books of the Partnership on
the first business day of such month. The Profit or Loss attributable to each
month of the fiscal year shall be determined by dividing the Profit or Loss for
such year by the number of days in such year, and then multiplying such per diem
amount by the number of days in each month.
D. All Net Cash Flow distributable to the Investors attributable to each
month of a fiscal quarter, if any, pursuant to Section 4.3A, shall be
distributed among the Persons recognized as Investors on the books of the
Partnership on the first business day of such month during the fiscal quarter.
The Net Cash Flow attributable to each month of the fiscal quarter shall be
determined by dividing the amount of Net Cash Flow for such quarter by the
number of days in the quarter, and then multiplying such per diem amount by the
number of days in each month.
E. Notwithstanding Sections 4.3C and 4.3D, the Partnership shall adopt the
"interim closing of the books" method of allocating Profit and Loss, in
accordance with a "semi-monthly convention," among persons who become Investors
pursuant to a closing of the sale of the Units on or before the Termination
Date. Accordingly, if there is more than one closing of the sale of the Units,
Investors who are recognized on the books of the Partnership (i) prior to the
sixteenth day of a calendar month, shall be treated as an Investor on the books
of the Partnership on the first business day of the month of recognition, and
(ii) on or after the sixteenth day of a calendar month shall be treated as an
Investor on the books of the Partnership on the sixteenth day of the month of
recognition.
Section 4.4 Liquidation or Dissolution
A. If the Partnership is liquidated or dissolved, the net proceeds from
such liquidation, as provided in Article VIII, shall be distributed first to
creditors, including Partners who are creditors, to the extent otherwise
permitted by law (whether by payment or by establishment of reserves), other
than liabilities for distributions to Partners and Investors, and any remaining
net proceeds shall be
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distributed in proportion to the Capital Accounts of the Partners and
Investors, determined after the allocations in Sections 4.1A and 4.1B.
B. All distributions under this Section 4.4 shall be made by the end of the
taxable year of liquidation of the Partnership or, within ninety (90) days of
the date of liquidation, whichever is later.
Section 4.5 General and Special Rules
A. Except as otherwise provided herein, the timing and amount of all
distributions shall be determined by the General Partner. Notwithstanding any
other provision of this Agreement, the General Partner shall have authority to
make the following distributions to certain of the Investors: First, if the
Partnership has realized a savings on Selling Commissions payable by the
Partnership with respect to the purchase of Units (as more fully set forth in
the Prospectus), the General Partner shall make a distribution to such Investor
equal to the amount of such savings realized by the Partnership. Second, if any
interest is earned on an Investor's Capital Contribution while it is held in
escrow pending recognition as an Investor under Article VII, such interest shall
be paid by the Partnership to such Investor and Profit attributable to such
interest shall be allocated in the same manner.
B. Subject to all of the special rules of this Section 4.5, if any property
or assets of the Partnership are distributed to the Partners in kind, such
property or assets first shall be valued on the basis of the fair market value
thereof to determine the Profit or Loss that would have resulted if such
property or assets had been sold, and then such Profit or Loss shall be
allocated as provided in Section 4.1A and Section 4.1B, and shall be properly
credited or charged to the Capital Accounts in accordance with Income Tax Reg.
ss.1.704-1(b)(2)(iv)(e) or any successor provision thereto. Any Partner entitled
to any interest in such property or assets shall receive such interest as a
tenant-in-common with all other Partners so entitled. The fair market value of
such property or assets shall be determined by an independent appraiser who
shall be selected by the General Partner. This Section 4.5B governs income tax
consequences only and shall not be read or construed as authorizing the
distribution in kind of property or assets of the Partnership.
C. Notwithstanding Sections 4.1 and 4.3 hereof, if an allocation of Loss
(or item thereof) to an Investor or Partner, other than the General Partner,
would cause or increase a deficit balance in his or its Capital Account in
excess of his proportionate share of Minimum Gain (such excess being referred to
hereafter as the "Excess Deficit Balance"), plus, in the case of the
Subordinated Limited Partner, any amount which it agrees to contribute to the
capital of the Partnership pursuant to Section 3.1, then the allocation shall
not be made to such Investor or Partner. Instead, such Loss (or item thereof)
shall be allocated first to the Partners and Investors having positive Capital
Accounts, in proportion to such positive Capital Accounts, until all such
positive Capital Accounts have been reduced to zero, and any additional Loss (or
item thereof) shall be allocated to the General Partner. For purposes of making
the determination set forth above, each Investor's and each Partner's Capital
Account balance shall be reduced by reasonably expected allocations or
adjustments of loss (or item thereof) including Loss from a Sale under Income
Tax Regulation ss.ss.1.704-1(b)(2)(ii)(d)(4) and (5), and by reasonably expected
distributions to the extent not offset by reasonably expected Capital Account
increases ("Account Reduction Items"). For purposes of calculating reasonably
expected Capital Account increases, the value of the Partnership's assets shall
be presumed to be equal to their adjusted basis for federal income tax purposes.
D. Notwithstanding Sections 4.1 and 4.3 hereof, in accordance with Income
Tax Regulation ss.ss.1.704-1(b)(2)(ii)(d) and 1.704-1(b)(4)(iv)(e), (i) if, in
any fiscal year of the Partnership, an Account Reduction Item unexpectedly
causes or increases an Investor's or Partner's Excess Deficit Balance, or (ii)
if there is a net decrease in Minimum Gain during a taxable year, then all
Investors or Partners with an Excess Deficit Balance at the end of such year
shall be specially allocated Profit and, to the extent necessary, gross income
(as defined in Section 61 of the Code) to the extent of such Excess Deficit
Balances, in proportion to the Excess Deficit Balance of each Investor or
Partner. Any remaining Profit or Loss, after adjustment has been made for
allocation of income or gain pursuant to this Section 4.5D, shall be allocated
in accordance with Sections 4.1 and 4.3 hereof. The General Partner shall be
authorized to interpret and apply this Section 4.5D so as to satisfy the
requirements
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of Income Tax Regulation ss.ss.1.704-1(b)(2)(11)(d)and 1.704-1(b)(4)(iv)(e)
and any successor provisions.
E. Any special allocations of Profit, Loss or gross income under Section
4.5D shall be taken into account in computing subsequent allocations of Profit
or Loss, so that to the extent possible, the aggregate amounts of Profit or Loss
allocated to each Partner or Investor will be equal to the aggregate amounts
that would have been allocated to them in the absence of the unexpected Account
Reduction Items.
F. In the event that any Investor fails to furnish to the General Partner
evidence, in form and substance satisfactory to the General Partner,
establishing that the General Partner has no obligation under Section 1445 of
the Code with respect to such Investor to withhold and pay over an amount to the
Internal Revenue Service, the General Partner may, in its sole discretion,
withhold with respect to such Investor the amount it would be required to
withhold pursuant to Section 1445 of the Code if such Investor were not a U.S.
Person, and any amount so withheld shall be treated as a distribution under
Sections 4.2 or 4.3 of this Agreement, as the case may be, and shall reduce the
amount otherwise distributable to such Investor thereunder. Alternatively, the
General Partner may at its option loan the Investor an amount equal to the tax
to be withheld (at an interest rate equal to the Escrow Agent's announced "prime
rate" plus two percentage points), such loan to be repaid by retaining such
Investor's distributions. In addition, the General Partner is authorized to
withhold from any distribution made to an Investor the amount of tax paid or to
be paid by the Partnership under Section 1446 of the Code with respect to such
Investor.
G. Notwithstanding anything to the contrary that may be expressed or
implied in this Agreement, if at any time the allocation provisions of this
Article IV do not result in the allocation to the General Partner of at least 1%
of the Profit or Loss being allocated, the General Partner shall be allocated 1%
thereof.
H. It is the intent of the General Partner that each Investor's and
Partner's distributive share of Profit and Loss shall be determined and
allocated in accordance with this Article IV to the fullest extent permitted by
Sections 704(b) and 706 of the Code. Therefore, if the Partnership is advised by
the Accountants or the Partnership's legal counsel, that the allocations
provided in Article IV of this Agreement are unlikely to be respected for
federal income tax purposes, the General Partner has been granted the power in
Section 12.1l.B hereof to amend the allocation provisions of this Agreement, on
advice of the Accountants or the Partnership's legal counsel, to the minimum
extent necessary to conform to Sections 704(b) and 706 of the Code the plan of
allocations and distributions of Profit and Loss, Net Cash Flow and Net Proceeds
of Sale or Financing provided in this Agreement.
I. Notwithstanding any other provision of this Agreement, the General
Partner may, after giving ninety (90) days' prior Notification to the Investors,
(i) adopt any other method for determining, in the event of transfers of Units,
the Investors entitled to distributions of Net Cash Flow or Net Proceeds from a
Sale or Financing that the General Partner, subject to the review and approval
of the Accountants, determines is reasonable, and (ii) allocate Profit or Loss
among the Investors during the taxable year in any other manner that the General
Partner, determines satisfies the requirements of Section 706 of the Code, but
only to the extent such allocation of Profit and Loss incorporates the minimum
changes required to comply with such section and is supported by an opinion of
counsel to the Partnership.
J. Allocations and distributions to Investors as a class shall be made to
each Investor entitled to such allocation or distribution based upon the ratio
of the number of Units owned by each such Investor to the number of Units owned
by all Investors entitled to such allocation or distribution.
K. In accordance with Section 704(c) of the Code and the Income Tax
Regulations thereunder, income, gain, loss, and deduction (including
depreciation) with respect to any property contributed to the capital of the
Partnership shall be allocated among the Investors and Partners so as to take
account of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its fair market value on the
date of contribution. In the event the value at
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which Partnership assets are carried on its balance sheet maintained under
the terms of this Agreement are adjusted pursuant to Income Tax Reg.
ss.1.704-1(b)(2)(iv)(f), subsequent allocations of income, gain, loss and
deduction with respect to such assets shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and the
value carried on such balance sheet in the same manner as under Section 704(c)
of the Code and the Income Tax Regulations thereunder. Any elections or other
decisions relating to such allocations shall be made by the General Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into account in
computing, any Investor's or Partner's Capital Account or share of Profit, Loss,
Net Cash Flow, Net Proceeds from a Sale, Net Proceeds from a Financing, or other
distributions pursuant to any provision of this Agreement.
ARTICLE V
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER
Section 5.1 Management and Control of the Partnership; Tax Matters Partner
A. Subject to the Majority Vote of the Investors when required by this
Agreement, the General Partner shall have the exclusive right to manage and
control the business of the Partnership.
B. No Limited Partner or Investor (except one who may also be a General
Partner, and then only in his capacity as General Partner) shall have the right
to participate in the control of the business of the Partnership, or have any
authority or right to act for or bind the Partnership.
C. The General Partner is hereby designated to serve as the Partnership's
Tax Matters Partner and shall have all of the powers and responsibilities of
such position as provided in Sections 6221 et seq. of the Code. All third party
costs and expenses incurred by the General Partner in performing its duties as
Tax Matters Partner shall be borne by the Partnership, as shall all expenses
incurred by the Partnership and/or the Tax Matters Partner in connection with
any tax audit or tax-related administrative or judicial proceeding. Each Partner
and Investor shall be responsible for all costs incurred by such Partner or
Investor with respect to any tax audit or tax related administrative or judicial
proceeding in connection with such Partner's or Investor's tax returns and all
costs incurred by any such Partner or Investor who participates in any tax audit
or tax-related administrative or judicial proceeding of or against the
Partnership or any Partner. Each Partner and Investor hereby (i) expressly
authorizes the Tax Matters Partner to enter into any settlement with the
Internal Revenue Service with respect to any tax matter, tax item, tax issue,
tax audit, or judicial proceeding, which settlement shall be binding on all
Partners and Investors; (ii) waives the right to participate in any
administrative or judicial proceeding in which the tax treatment of any
Partnership item is to be determined; and (iii) agrees to execute such consents,
waivers or other documents as the Tax Matters Partner may determine are
necessary to accomplish the provisions of this Section 5.1C. The Tax Matters
Partner shall have no liability to any Partner or Investor or the Partnership,
and shall be indemnified by the Partnership to the full extent provided by law,
for any act or omission performed or omitted by it within the scope of the
authority conferred on it by this Agreement, except for acts of negligence or
for damages arising from any misrepresentation or breach of any other agreement
with the Partnership. The liability and indemnification of the Tax Matters
Partner shall be determined in the same manner as is provided in Sections 5.9
and 5.10 hereof.
Section 5.2 Authority of General Partner
A. Except to the extent otherwise provided herein, including, without
limitation, Sections 5.3A, 5.4 and 5.5, the General Partner for, and in the name
of, and on behalf of, the Partnership is hereby authorized:
(i) to enter into any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to the
accomplishment of the purposes of the Partnership, so long as said activities
and contracts may be lawfully carried on or performed by a limited partnership
under applicable laws and regulations;
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(ii) to engage Persons, including the Sponsors as provided in Article IX,
to provide services or goods to the Partnership, upon such terms as the General
Partner deems fair and reasonable and in the best interest of the Partnership,
provided, however, that, as to services or goods provided by a Sponsor (except
for those services specifically authorized under the NASAA Guidelines to be
performed by a Sponsor), (a) the compensation for such services or goods must be
the lesser of the cost of such services or goods to the Sponsor or ninety
percent (90%) of the competitive price that would be charged by non-affiliated
persons or entities rendering similar types and quality of services in the same
or comparable geographic locations; (b) the compensation and other terms of such
contracts shall be fully disclosed to the Investors in the reports of the
Partnership; (c) the Sponsor must have been previously engaged in the business
of providing such services or goods, independent of the Partnership and as an
ongoing business; (d) all such transactions shall be embodied in a written
contract that describes the services or goods to be provided and the
compensation to be paid, which contract may only be modified by the Majority
Vote of the Investors, and ,which contract shall permit termination without
penalty on sixty (60) days notice; and (e) except for those services to be
provided under agreements referred to in this Agreement or the Prospectus, any
services provided by a Sponsor will be provided only under extraordinary
circumstances where services are not available elsewhere;
(iii) to acquire by lease or purchase, improve, develop, own, construct,
finance, maintain, mortgage, lease or exchange incident to a tax-free swap any
real estate and any personal property necessary, convenient or incidental to the
accomplishment of the purposes of the Partnership, including without limitation,
any Property;
(iv) to grant options with respect to, sell, convey, or assign any Property
or any other real estate or personal property necessary, convenient or
incidental to the accomplishment of the purposes of the Partnership;
(v) to execute any and all agreements, contracts, documents, certifications
and instruments necessary or convenient in connection with the acquisition,
development, construction, management, maintenance and operation of any
Property, including without limitation, the Investment Advisory Agreement and
the Leases;
(vi) to borrow money and issue evidences of indebtedness in furtherance of
any or all of the purposes of the Partnership, and to secure the same by deed of
trust, mortgage, security interest, pledge or other lien or encumbrance on any
Property or any other assets of the Partnership and to borrow money on the
general credit of the Partnership for use in the business of the Partnership and
to take any action and enter into any agreement necessary or advisable in
connection with such borrowing;
(vii) to repay in whole or in part, negotiate, refinance, recast, increase,
renew, modify or extend any secured, or other indebtedness affecting any
Partnership Property and in connection therewith to execute any extensions,
renewals or modifications of any evidences of indebtedness secured by deeds of
trust, mortgages, security interests, pledges or other encumbrances covering any
Partnership Property or assets, provided, however, that it is the Partnership's
objective to acquire the Properties on an all-cash basis and the General Partner
does not anticipate that it will be necessary to borrow money to acquire the
Properties or to maintain the Partnership's investment in the Properties;
(viii) to engage a real estate agent (including a Sponsor) to sell any
Partnership Property or assets or portions thereof upon such terms and
conditions as are deemed fair and reasonable by the General Partner and to be in
the best interest of the Partnership, and to pay reasonable compensation for
such services; provided, however, that any real estate commission paid shall not
exceed the lesser of the competitive real estate commission for like properties
located in the same geographic area or six percent (6%) of the contract price
for the Sale of any Partnership Property or assets, and, in addition, if a
Sponsor provides substantial services in such regard, to pay the Sponsor up to
one-half of such real estate commission, provided, however, that the payment of
such real estate commission to the Sponsor shall be subordinated to the payment
to
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Investors of their Adjusted Capital Balance plus the unpaid portion, if any, of
their Preferred Return;
(ix) to recognize transferees of Units as Investors and to admit substitute
Limited Partners in accordance with the terms described in the Prospectus and
Article VII of this Agreement;
(x) to invest Working Capital Reserves and, pending the investment of the
Partnership's assets in the Properties, to invest the Partnership's assets
(excluding Working Capital Reserves), in interest-bearing accounts and
short-term investments, including obligations of federal, state and local
governments and their agencies, regulated investment companies, commercial paper
and certificates of deposit of federally-insured commercial banks, savings banks
or savings and loan associations; provided, however, that such investments are
short-term, highly-liquid and provide appropriate safety of principal;
(xi) to purchase and cancel or otherwise retire or dispose of the
Partnership Interests or Units of any Partner or Investor according to the
provisions of this Agreement;
(xii) to execute and deliver all documents necessary or appropriate (a) for
the sale of Units, including the Prospectus and filings under the Securities Act
of 1933 and any other federal and state laws relating to the sale of securities
and (b) to file state and local tax returns at the Partnership level on behalf
of the Investors and Partners;
(xiii) to require Investors to become Limited Partners (in which case the
General Partner shall have the power to amend this Agreement without the
Majority Vote of the Investors) and to take such other action with respect to
the manner in which Units are being or may be transferred or traded as may be
necessary or appropriate to preserve the tax status of the Partnership as a
partnership for federal income tax purposes and the tax treatment of the
Investors as Partners (but such action shall be taken only to the minimum extent
required by an opinion of Counsel and only with the Majority Vote of Investors
if the changes would adversely affect the Investors);
(xiv) to take such steps (including amendment of this Agreement) as the
General Partner determines are advisable or necessary and will not result in any
material adverse effect on the economic position of a majority in interest of
the Investors with respect to the Partnership in order to preserve the tax
status of the Partnership as a partnership for federal income tax purposes and
the tax treatment of the Investors as Partners, including, without limitation,
removing the Units from public trading markets and imposing restrictions on
transfers of Units or Interests (provided such restrictions on transfers do not
cause the Partnership's assets to be deemed "plan assets" within the meaning of
ERISA) (but such action shall be taken only to the minimum extent required by an
opinion of Counsel and only with the Majority Vote of Investors if the changes
would adversely affect the Investors);
(xv) to establish and maintain the Working Capital Reserves described in
Section 3.3E; (xvi) to pay or reimburse any reasonable out-of-pocket expenses
incurred by any Affiliate of the General Partner in connection with any report
pursuant to Section 10.3, provided that no fee shall be paid to any Affiliate in
connection with any such report;
(xvii) upon the Majority Vote of the Investors to the matters set forth in
Sections 5.4A(xv), 5.4A(xvi) or 5.4A(xvii), to take any actions which they deem
appropriate to the extent authorized by the Investors to facilitate the purposes
described in such sections, including, without limitation, amendments to this
Agreement to change the dates upon which transfers of Units will be recognized,
and the General Partner shall give prior written notice to the Investors of any
such amendment; and
(xviii) to take such steps as the General Partner determines are advisable
or necessary and will not result in any material adverse effect on the economic
position of a majority in interest of the Investors with respect to the
Partnership to restructure the Partnership and its activities to obtain a
prohibited transaction exemption from the Department of Labor or to comply with
any exemption in final plan asset regulations adopted by the Department of
Labor, including, but not limited to, establishing a fixed percentage of Units
permitted to be held by qualified plans or
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other tax-exempt investors or discontinuing sales to such entities after a
given date, in the event that either the assets of the Partnership constitute
"plan assets" for purposes of ERISA or the transactions contemplated hereunder
constitute prohibited transactions under ERISA or the Code. B. Any person
dealing with the Partnership or the General Partner may rely upon a certificate
signed by the General Partner, as to:
(i) the identity of any General Partner or any Limited Partner;
(ii) the existence or non-existence of any fact or facts that constitute
conditions precedent to acts by the General Partner or in any other manner are
germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any instrument
or document of the Partnership; or
(iv) any act or failure to act by the Partnership or as to any other matter
whatsoever involving the Partnership or any Partner.
Section 5.3 Authority of Investors
A. By the Majority Vote of the Investors, the Investors, without the
consent of the General Partner, may:
(i) amend this Agreement; provided that such amendment (a) shall not in any
manner allow the Investors to take part in the control of the Partnership's
business in a manner which would subject them to liability as general partners
under the Act or any other applicable law, and (b) shall not, without the
consent of the General Partner affected, alter the rights, powers, or duties of
the General Partner or its interest in Profit and Loss, Net Cash Flow, Net
Proceeds of Sale or Financing, or alter any of the provisions of Section 8.2
hereof;
(ii) dissolve or terminate the Partnership prior to the expiration of its
term; (iii) remove the General Partner and, pursuant to Section 6.2, elect a new
General Partner, or
(iv) approve or disapprove of the Sale of all or substantially all of the
Partnership Property.
B. Any action taken pursuant to Section 5.3A hereof shall be void ab
initio, if prior to or within fifteen (15) days after such vote either (i) the
Partnership shall have received an opinion of counsel, which counsel is approved
by the Majority Vote of the Investors, that such action may not be effected
without subjecting the Investors to liability as general partners under the Act
or under the laws of such other jurisdiction in which the Partnership owns
properties or is doing business, or (ii) a court of competent jurisdiction shall
have entered a final judgment to the foregoing effect. For purposes of this
paragraph, counsel will be deemed approved by the Majority Vote of the Investors
if proposed by the General Partner and affirmatively approved in writing within
forty-five (45) days; provided, that if the holders of 10% or more of the
outstanding Units proposed counsel for this purpose, such proposed counsel, and
not counsel proposed by the General Partner shall be submitted for such approval
by the Investors. The existence of such an opinion of counsel or court judgment
with respect to a particular contemplated Partnership action shall not affect
the rights of the Investors to vote on other future actions or the existence of
such rights. If the opinion of counsel or court judgment referred to above has
not been obtained the vote shall proceed as scheduled and it shall not be
delayed or postponed for any reason except as otherwise permitted by the Act.
Section 5.4 Restrictions on Authority
A. The General Partner and its Affiliates shall have no authority to
perform any act in violation of any applicable laws or regulations thereunder,
nor shall the General Partner as such have any authority:
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(i) to purchase or acquire property other than as described in the
Prospectus or to invest more than 25% of the Gross Proceeds of the Offering in
unimproved, non-income producing property;
(ii) except as permitted in this Agreement, to do any act required to be
approved by the Investors under the Act;
(iii) to reinvest any Net Cash Flow or Net Proceeds of Sale or Financing,
except in short-term securities pursuant to Section 10.2B;
(iv) except with respect to the Interim Investments, to invest in or
underwrite securities of any type or kind for any purpose, or make investments
other than in the Properties and the operations related and incidental thereto;
(v) to do any act in contravention of this Agreement;
(vi) to do any act that would make it impossible to carry on the ordinary
business of the Partnership;
(vii) to confess a judgment against the Partnership;
(viii) to offer Interests or Units in exchange for property;
(ix) to possess any property, or assign the Partnership's rights in same,
for other than the exclusive use of the Partnership;
(x) to operate in such a manner as to be classified as an "investment
company" under the meaning of the Investment Company Act of 1940;
(xi) to purchase or lease any property from or sell or lease property to
the General Partner, its Affiliates or any program or partnership in which the
General Partner or its Affiliates have any interest (provided however that the
General Partner or an Affiliate may temporarily hold title to a Property to
facilitate an acquisition by the Partnership so long as no profit is received by
the General Partner or Affiliate);
(xii) to admit a Person as a General Partner, except as provided in this
Agreement;
(xiii) to admit a Person as an Investor or Limited Partner, except as
provided in this Agreement;
(xiv) to create or suffer to exist a total indebtedness incurred by the
Partnership in excess of 60% of the fair market value of all of the assets of
the Partnership, as determined, by an independent appraisal; provided, however,
that the General Partner shall have the authority to incur indebtedness with
respect to any single Property up to but not in excess of 75% of the then fair
market value of such Property, as determined by an independent appraiser;
provided, further, that the foregoing term "indebtedness" shall include the
principal of any loan together with any interest that may be deferred pursuant
to the terms of the loan agreement which exceeds 5% per annum of the principal
balance of such indebtedness excluding contingent participations in income or
appreciation in the value of the property);
(xv) without the Majority Vote of the Investors, to cause or facilitate the
merger or consolidation of the Partnership with other partnerships, including,
but not limited to, mergers or consolidations in which the Investors receive in
exchange for their Units interests in the surviving entity, with the objective
of listing the interests of the surviving entity on a national or regional
securities exchange or NASDAQ;
(xvi) subject to Section 7.2.A, without the Majority Vote of the Investors,
to list the Units on a securities exchange or enable the Units to be traded in
the over-the-counter market, or otherwise facilitate the establishment of a
market for the trading of Units, or (except as set forth in Section 5.2A(xiv))
to withdraw the Units from such listing; or
(xvii) without the Majority Vote of the Investors, to restructure the
Partnership as a real estate investment trust ("REIT") for federal income tax
purposes; or
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(xviii) to obtain mortgage financing which is not fully amortized over not
more than 30 years or which requires balloon payments due sooner than seven
years from the date the Partnership acquires the Property securing such
financing; provided, however, that the foregoing do not apply to financing
representing 25% or less of the purchase price of the Properties acquired or to
interim financing. B. The General Partner shall not take any action which, for
federal tax purposes, shall cause the Partnership to terminate or to be treated
as an association taxable as a corporation.
Section 5.5 Authority of Partners and Affiliated Persons to Deal with
Partnership
A. The General Partner may, for, in the name of, and on behalf of, the
Partnership, acquire property from, borrow money from, enter into agreements,
contracts or the like (in addition to those set forth herein) with, or reimburse
for reasonable out-of-pocket expenses incurred in connection with the
preparation of reports by, any Sponsor in an independent capacity, as
distinguished from such capacity (if any) as a Sponsor, as if such Sponsor were
an independent contractor; provided, however, that any such agreement shall be
subject to the conditions set forth in Section 5.2A(ii) herein.
B. Neither the General Partner nor any Affiliate thereof shall have the
authority: (i) to cause the Partnership to invest in any program, partnership or
other venture;
(ii) to receive any compensation, fee or expense not otherwise permitted to
be paid to it under the terms of this Agreement or the Prospectus;
(iii) to cause the Partnership to acquire a Property without first having
obtained an appraisal with respect to the value of the Property, rendered by a
competent, independent appraiser, in which the appraised value equals or exceeds
the purchase price to be paid by the Partnership;
(iv) to commingle the Partnership's funds with those of any other Person,
or to invest any of the Net Proceeds of the Offering in junior mortgages, junior
deeds of trust or other similar obligations, except that funds of the
Partnership may be temporarily retained by agents of the Partnership pursuant to
contracts for the rendering of services to the Partnership by such agents or
held in accounts established and maintained for the purpose of making the
Interim Investments and/or computerized disbursements;
(v) to cause the Partnership to lend money or other assets to the General
Partner or any Affiliate thereof,
(vi) to grant to the General Partner or any Affiliate thereof an exclusive
listing for the Sale of any assets of the Partnership;
(vii) to receive any rebate or give-up, or to participate in any reciprocal
business arrangement with the General Partner or an Affiliate thereof,
(viii) to cause the Partnership to acquire a Property that is under
construction without completion bonds, fixed price guarantees or other
satisfactory arrangements;
(ix) to cause the Partnership to pay directly or indirectly, a commission
or fee (except as provided under Section 5.2.A.(viii)) to a Sponsor in
connection with the reinvestment or distribution of the proceeds of the resale,
exchange or refinancing of the Properties; or
(x) to cause the Partnership to engage a Sponsor to construct or develop
the Properties or render any services in connection with the construction or
development of the Properties.
C. If a loan is made to the Partnership by the General Partner, the General
Partner may not receive interest or similar charges or fees in excess of the
amount which would be charged by unrelated lending institutions on comparable
loans for the same purpose, in the same locality of the property if the loan is
made in connection with a particular property. No prepayment charge or penalty
shall be required by the General Partner on a loan to the Partnership secured by
either a first or a junior or all-inclusive trust deed, mortgage or encumbrance
on the property, except to the extent
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that such prepayment charge or penalty is attributable to the underlying
encumbrance. Notwithstanding the foregoing, the General Partner shall not
provide Financing to the Partnership.
Section 5.6 Duties and Obligations of the General Partner
A. The General Partner shall take all action that may be necessary or
appropriate (i) for the continuation of the Partnership's existence as a limited
partnership under the Act (and under the laws of each other jurisdiction in
which such existence is necessary to protect the limited liability of the
Investors and the Limited Partners or to enable the Partnership to conduct the
business in which it is engaged), and (ii) for the acquisition, maintenance,
preservation and operation of the Properties in accordance with the Prospectus,
the provisions of this Agreement and applicable laws and regulations. The
General Partner shall devote to the Partnership such time as may be necessary
for the proper performance of its duties hereunder, but neither the General
Partner nor any of its Affiliates shall be expected to devote its full time to
the performance of such duties. The General Partner or its Affiliates may act as
general or managing partners for other partnerships engaged in businesses
similar to that conducted by the Partnership. Nothing herein shall limit the
General Partner or its Affiliates from engaging in any such business activities,
or any other activities which may be competitive with the Partnership.
B. The General Partner shall at all times conduct its affairs, the affairs
of all its Affiliates and the affairs of the Partnership in such a manner that
no Limited Partner or Investor (except a Limited Partner or Investor who is also
a General Partner) will have any personal liability for Partnership debts except
as otherwise set forth herein and in the Prospectus.
C. The General Partner shall prepare or cause to be prepared, and shall
file, on or before the due date (or any extension thereof), any federal, state
or local tax returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the Partnership
to the extent same are not payable by any other party.
D. The General Partner shall obtain and keep in force, or cause to be
obtained and kept in force during the term hereof, fire and extended coverage,
workmen's compensation, and public liability insurance in favor of the
Partnership with such insurers and in such amounts as the General Partner deems
advisable, but in amounts not less (and with deductible amounts not greater)
than those customarily maintained with respect to parking lots or garages
comparable to the Properties.
E. The General Partner shall be under a fiduciary duty to conduct the
affairs of the Partnership in the best interests of the Partnership, including
the safekeeping and use of all Partnership funds and assets, whether or not in
the General Partner's possession or control, and the use thereof for the benefit
of the Partnership. The General Partner shall not enter into any contract or
agreement relieving it of its common law fiduciary duty. The General Partner
shall at all times act in good faith and exercise due diligence in all
activities relating to the conduct of the business of the Partnership. The
General Partner shall treat the Investors as a group and shall not favor the
interests of any particular Investor.
F. The General Partner shall cause the Partnership to commit a percentage
of the Gross Proceeds of the Offering to Investment in Properties which is equal
to the greater of. (i) 80% of the Gross Proceeds of the Offering reduced
by.1625% for each 1% of financing of the Partnership; or (ii) 67% of the Gross
Proceeds of the Offering. The proceeds of the Offering will be invested in
Properties within two years of the date of the Prospectus.
I. Except for payment of the Selling Commissions and the re-allowance of
the Due Diligence Expense Reimbursement Fee, the General Partner shall not
directly or indirectly pay or award any commission or other compensation to any
Person engaged by a potential Investor for investment advice as an inducement to
such advisor to advise the purchase of Units.
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Section 5.7 Compensation of General Partner
Except as expressly provided in Articles IV and IX herein, the General
Partner shall receive no fees, salaries, profits, distributions, reimbursement
or other compensation for serving as General Partner.
Section 5.8 Other Businesses of Partners
Neither the Partnership nor any Partner or Investor shall have any rights
or obligations, by virtue of this Agreement, in or to any independent ventures
of any nature or description, or the income or profits derived therefrom, in
which a Partner or Investor may engage, including, without limitation, the
ownership, operation, management, syndication and development of other real
estate projects.
Section 5.9 Liability of General Partner and Affiliates to Limited Partners
or Investors
The General Partner and its Affiliates performing certain services on
behalf of the Partnership shall not be liable, responsible, or accountable, in
liabilities, damages or otherwise, to any Investor, Limited Partner or the
Partnership for any loss, judgment, liability, expense or amount paid in
settlement of any claims sustained which arise out of any act or omission
performed or omitted by them within the scope of the authority conferred on them
by this Agreement, provided that the General Partner determines, in good faith,
that such act or omission was in the best interests of the Partnership, except
for acts of negligence or misconduct or for damages arising from any
misrepresentation or breach of an agreement with the Partnership. The
Partnership shall not incur the cost of that portion of any liability insurance
which insures the General Partner or its Affiliates performing certain services
on behalf of the Partnership against any liability as to which the General
Partner or its Affiliate may not be indemnified under Section 5.10 herein. In
the event the General Partner is held liable to Investors and the General
Partner's assets are insufficient to satisfy such liability, the Subordinated
Limited Partner agrees to permit Investors to recover from it to the extent of
the Subordinated Limited Partner's interest in the Partnership.
Section 5.10 Indemnification
A. The General Partner and its Affiliates performing certain services on
behalf of the Partnership shall be indemnified to the full extent provided by
law for any loss, judgment, liability, expense or amount paid in settlement of
any claims sustained by them which arise out of any act or omission performed or
omitted by any or all of them within the scope of the authority conferred on
them by this Agreement, if the General Partner determines, in good faith, that
such act or omission was in the best interests of the Partnership and that such
act or omission did not constitute negligence or misconduct or breach of any
other agreement with the Partnership, provided that any indemnity under this
Section shall be provided out of and to the extent of Partnership assets only,
and no Investor or Limited Partner shall have any personal liability on account
thereof.
B. Notwithstanding Section 5.10A, the General Partner and its Affiliates
performing certain services on behalf of the Partnership and any Person acting
as a Broker-Dealer shall not be indemnified by the Partnership for any
liability, loss or damage incurred by any or all of them in connection with (i)
any claim or settlement arising under federal or state securities laws unless
(a) there has been a successful adjudication on the merits of each count
involving such securities laws violations as to the particular indemnities and
the court approves indemnification of the litigation costs, (b) such claims have
been dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular indemnities and the court approves indemnification of the
litigation costs, or(c) a court of competent jurisdiction approves a settlement
of the claims and finds that indemnification of the settlement and related costs
should be made, after being advised as to the current position of the Securities
and Exchange Commission, the Massachusetts Securities Division, the California
Commissioner of Corporations, the Pennsylvania Securities Commission, the
Tennessee Securities Commission, the Missouri Securities Division (and such
other state securities administrators as shall be required by such court),
regarding indemnification for violations of securities law; or (ii) any
liability imposed by law, including liability for negligence or misconduct.
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ARTICLE VI
TRANSFERABILITY OF THE GENERAL PARTNER'S INTEREST
Section 6.1 Removal, Voluntary Retirement or Withdrawal of the General
Partner; Transfer of Interests
A. The General Partner may be removed in the manner specified in Section
5.3A herein.
B. The General Partner may not voluntarily withdraw or retire from its
position as a General Partner of the Partnership unless another General Partner
(including any Additional or Successor General Partner admitted pursuant to
Section 6.2) remains, and unless (i) counsel for the Partnership is of the
opinion that such voluntary retirement or withdrawal from the Partnership will
not cause the Partnership: (a) to be dissolved under the Act; (b) to be
classified other than as a partnership for federal income tax purposes; or (c)
to terminate for federal income tax purposes; and (ii) the approval of the
remaining General Partners, if any, and the Majority Vote of the Investors to
such voluntary retirement or withdrawal is obtained.
C. If the General Partner voluntarily retires or withdraws from the
Partnership in violation of this Section 6.1, it shall be and remain liable to
the Partnership and the Partners for damages resulting from the General
Partner's breach of this Agreement, and, without limitation of remedies, the
Partnership may offset such damages against the amounts otherwise distributable
to the General Partner.
D. The General Partner shall not have the right to sell, exchange, or
otherwise dispose of all or any portion of its Interest unless the proposed
assignee or transferee of all or a portion of the Interest of the General
Partner is admitted as a Successor or Additional General Partner to the
Partnership pursuant to the provisions of Section 6.2 prior to any such sale,
exchange or other disposition.
E. The voluntary retirement or withdrawal of the General Partner shall
become effective only upon (i) receipt by the Partnership of the opinions of
counsel referred to in Section 6.1(B)(i); (ii) receipt by the Partnership of the
approval and consent referred to in Section 6.1B(ii); and (iii) the amendment of
the Partnership's Certificate to reflect such withdrawal or retirement and its
filing for recordation.
Section 6.2 Election and Admission of Successor or Additional General
Partners A. The General Partner may at any time designate additional persons to
be Successor or Addi- tional General Partners, provided that the conditions of
Section 6.2B are satisfied. B. Except as otherwise expressly provided herein, no
Person shall be admitted as a Successor or Additional General Partner unless (i)
counsel for the Partnership is of the opinion that the admission of such
Successor or Additional General Partner will not cause the Partnership to be
classified other than as a partnership for federal income tax purposes or cause
the Partnership to terminate for federal income tax purposes; (ii) the consent
of the then remaining General Partners, if any, is obtained; and (iii) the
Majority Vote of the Investors to such admission has been obtained.
C. The admission of such Successor or Additional General Partner shall
become effective upon (i) receipt by the Partnership of the opinion referred to
in Section 6.2B(i); (ii) receipt by the Partnership of the consents referred to
in Section 6.2B(ii) and (iii), if applicable; and (iii) the amendment of the
Certificate to reflect the admission of the Successor or Additional General
Partner and its filing for recordation.
Section 6.3 Events of Withdrawal of a General Partner
A. In addition to a voluntary withdrawal of the General Partner pursuant to
Section 6.lE, the General Partner shall be deemed to withdraw (i) if the General
Partner assigns all of its Interest in the Partnership, (ii) if the General
Partner is removed pursuant to Section 5.3A; and (iii) the filing of a
certificate of dissolution, or its equivalent, for the General Partner or the
revocation of its charter. To the maximum extent permitted by the Act, no other
act or event shall be deemed an event of withdrawal of the General Partner or
serve to convert a General Partner to a Limited Partner.
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B. In the event of the withdrawal of the General Partner and if a Successor
or Additional General Partner has been admitted to the Partnership in accordance
with Section 6.2, the remaining General Partner or General Partners, including
such Successor or Additional General Partner may elect to continue the
Partnership, and if such election is made, shall promptly give Notification of
such event and shall make and file such amendments to the Certificate as are
required by the Act to reflect the fact that the withdrawn General Partner has
ceased to be a General Partner of the Partnership.
C. In the event of the withdrawal of the General Partner and no Successor
or Additional General Partner has been admitted to the Partnership, or such
Successor or Additional General Partner does not elect to continue the
Partnership, the withdrawn General Partner, or its successors, representatives,
heirs or assigns shall promptly give Notification of such withdrawal to all
remaining Partners and Investors. In such event, the Partnership shall be
dissolved unless, within ninety (90) days after the withdrawal of the General
Partner, the Investors, by the Majority Vote of the Investors (or such higher
percentage vote as may be required by the Act), agree in writing to continue the
business of the Partnership and to the appointment, effective as of the date of
withdrawal of the sole General Partner, of one or more Additional General
Partners. If the Investors elect to reconstitute the Partnership and agree to
admit an Additional General Partner, the relationship of the Investors and of
substitute General Partner in the Partnership shall be governed by this
Agreement.
Section 6.4 Liability of a Withdrawn General Partner
A. Any General Partner who withdraws from the Partnership shall be, and
remain, liable for all obligations and liabilities incurred by it as General
Partner prior to the time such withdrawal becomes effective. In addition, a
General Partner who voluntarily withdraws in violation of this Agreement shall
be subject to the liability described in Section 6.1C.
B. Upon the withdrawal of a General Partner, such General Partner shall
immediately cease to be a General Partner, and, unless a Successor General
Partner has acquired the Interest of the withdrawing General Partner pursuant to
Section 6.5, the withdrawn General Partner's Interest shall be converted to a
limited partner Interest of a new class. Such conversion shall not affect any
rights or liabilities of the withdrawn General Partner, except that such General
Partner shall no longer participate in the management of the Partnership. For
purposes of this Section 6.4.B and Section 6.5, the Interest of the withdrawing
General Partner shall include the interest in the Partnership as a Subordinated
Limited Partner (if any) owned by an Affiliate of such withdrawing General
Partner.
C. The personal representatives, heirs, successors or assigns of any
General Partner who withdraws from the Partnership shall be, and remain, liable
for all obligations and liabilities incurred by the General Partner prior to, or
in connection with, its withdrawal.
Section 6.5 Valuation of Partnership Interest of General Partner
Upon the voluntary or involuntary withdrawal of a General Partner, the
Partnership or a Successor General Partner may purchase the Partnership Interest
of the withdrawn General Partner at any time subsequent to withdrawal. The price
of the withdrawn General Partner's Interest shall be determined by two (2)
independent appraisers, one selected by the withdrawn General Partner and one
selected by the remaining General Partner, or if none is remaining, by the
Investors. If the two appraisers are unable to agree on the value of the General
Partner's Interest, they shall jointly appoint a third independent appraiser
whose determination shall be final and binding. The Partnership shall then pay
the withdrawn General Partner the price of its Interest as a General Partner as
so determined. The expense of the appraisals shall be borne equally by the
terminated General Partner and the Partnership. If the withdrawal is
involuntary, payment shall be made by delivery of a promissory note bearing
interest payable semiannually at a floating rate of interest equal to the lowest
rate permitted under the Code to avoid the imputation of interest income to the
withdrawn General Partner, payable in five equal annual installments, the first
installment to be paid as soon as practicable after the appraisal, and
prepayable at any time. If the withdrawal is voluntary, payment shall be made by
delivery of a promissory note bearing no interest, with principal payable only
from distributions which the withdrawn General Partner would have received under
this Agreement had the
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General Partner not withdrawn. Immediately upon receiving the note, the
withdrawn General Partner shall cease to be a Partner of the Partnership for all
purposes, except that the withdrawn General Partner shall continue to be subject
to Section 6.4 hereunder. All amounts received pursuant to this Section 6.5
shall constitute complete and full discharge for all amounts owing to the
withdrawn General Partner on account of its Interest in the Partnership. Any
disputes regarding valuation or payment pursuant to this Section which are not
resolved in a binding manner by the provisions of this Section shall be resolved
by arbitration in accordance with the then current rules of the American
Arbitration Association. The expense of arbitration shall be borne equally by
the terminated General Partner and the Partnership.
ARTICLE VII
ASSIGNMENT OF ASSIGNEE UNITS TO INVESTORS;
TRANSFERABILITY OF LIMITED PARTNER INTERESTS AND UNITS
Section 7.1 Assignment of the Assignee Units to Investors
A. Pursuant to Sections 3.2 and 7.lC hereof, the Assignor Limited Partner
shall assign to each Investor Assignee Units equal to the number of Units
purchased by each Investor in the Offering.
B. Except as provided in Section 7.1.A above, the Assignor Limited Partner
may not transfer a Limited Partnership Interest without the prior written
consent of the General Partner. The Assignor Limited Partner shall have no right
to vote or consent with respect to Units owned by the Assignor Limited Partner
for its own account and such Units shall not be considered outstanding Units for
purposes of determining whether the Majority Vote of the Investors or the
Consent of the Investors has occurred. The Assignor Limited Partner, by the
execution of this Agreement, acknowledges and agrees that the Assignor Limited
Partner's management will have fiduciary responsibility for the safekeeping and
use of all funds and assets of the Investors, whether or not in the Assignor
Limited Partner's management's possession or control, and that the management of
the Assignor Limited Partner will not employ, or permit another to employ such
funds or assets in any manner except for the exclusive benefit of the Investor.
The Assignor Limited Partner agrees not to contract away the fiduciary duty owed
to the Investors by the Assignor Limited Partner's management under the common
law of agency.
C. Except as set forth in Section 7.1G, the Assignor Limited Partner, by
the execution of this Agreement, irrevocably transfers and assigns to the
Investors all of the Assignor Limited Partner's rights and interest in and to
the Assigned Limited Partnership Interests, as of the time that payment for such
Assigned Limited Partnership Interests is received by the Partnership and such
Assigned Limited Partnership Interests are credited to the Assignor Limited
Partner on the books and records of the Partnership. The rights and interest so
transferred and assigned shall include, without limitation, the following:
(i) all rights to receive distributions of uninvested Capital Contributions
pursuant to Sec- tions 3.2 and 3.3;
(ii) all rights to receive cash distributions pursuant to ArticleIV;
(iii) all rights in respect to allocations of Profit and Loss pursuant to
Article IV;
(iv) all other rights in respect of determinations of allocations and
distributions pursuant to Article IV,
(v) all rights to consent to the admission of Successor or Additional
General Partners pursuant to Sections 6.1 and 6.2;
(vi) all rights to receive any proceeds of liquidation of the Partnership
pursuant to Section 8.2;
(vii) all rights to inspect books and records and to receive reports
pursuant to Article X;
(viii)all voting rights, rights to attend or call meetings and other such
rights; and
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(ix) all rights which the Limited Partners have, or may have in the future,
under the Act.
D. The General Partner, by the execution of this Agreement, irrevocably
consents to and acknowledges that (i) the foregoing transfer and assignment
pursuant to Section 7.1 by the Assignor Limited Partner to the Investors of the
Assignor Limited Partner's rights and interest in the Assigned Limited
Partnership Interests is effective, and (ii) the Investors are intended to be
and shall be third party beneficiaries of all rights and privileges of the
Assignor Limited Partner in respect of the Assigned Limited Partnership
Interests. The General Partner covenants and agrees that, in accordance with the
foregoing transfer and assignment, all the Assignor Limited Partner's rights and
privileges in respect of Assigned Limited Partnership Interests may be exercised
by the Investors including, without limitation, those cited in Section 7.1.
E. In accordance with the transfer and assignment described in Section 7.1,
Investors shall have the same rights that the Limited Partners have under this
Agreement and under the Act.
F. Notwithstanding the assignment of the Assigned Limited Partnership
Interests referred to in this Section 7.1, the Assignor Limited Partner shall
retain legal title to and be and remain a Limited Partner of the Partnership.
Section 7.2 Transferability of Units
A. Units are generally transferable, provided, however, that a transfer of
Units shall be prohibited if one of the following restrictions applies:
(i) No sale or exchange of any Units shall be made if the Units sought to
be sold or exchanged, when added to the total of all other Units sold or
exchanged within a period of twelve (12) consecutive months prior thereto,
would, in the opinion of counsel for the Partnership, result in the Partnership
being considered to have terminated within the meaning of Section 708(b)(1)(A)
of the Code. The General Partner shall give Notification to all Investors in the
event that sales or exchanges should be suspended for this reason. All deferred
sales or exchanges shall be made (in chronological order to the extent
practicable) as of the first day of the fiscal year beginning after the end of
any such 12-month period, subject to the provisions of this Article VII.
(ii) No transfer or assignment of any Unit shall be made if a counsel for
the Partnership is of the opinion that the particular transfer or assignment
would be in violation of any federal or state securities laws (including any
investment suitability standards) applicable to the Partnership or would cause
the Partnership to be classified other than as a partnership for federal income
tax purposes.
(iii) No transfer or assignment of any Unit shall be made if in the opinion
of Counsel to the Partnership such transfer would cause the Partnership to be
treated as a "publicly traded partnership" under Sections 7704 and 469(k) of the
Code. Each Investor agrees not to transfer, and agrees that the Partnership
shall not recognize for any purpose any transfer on or through a listing on a
securities exchange, over-the-counter market or secondary market or any transfer
to or from a dealer in securities or partnership interests or other market
maker, or any transfer arranged thrugh or facilitated by means of an interdealer
quotation system, information system or other facility that may create the
equivalent of a secondary market in partnership interests, unless counsel to the
Partnership is of the opinion that such transfers will not result in the
partnership becoming taxable as a corporation or a publicly traded partnership.
(iv) No transfer or assignment of Units shall be made after which any
transferor or transferee would hold (a) a number of Units not evenly divisible
by four, or (b) less than 200 Units, except for Individual Retirement Accounts,
or (c) less than 80 Units in the case of Individual Retirement Accounts,
provided, however, that any such transferor or transferee may hold zero Units.
(v) No transfer or assignment of any Unit shall be made if it would result
in the assets of the Partnership being treated as "plan assets" or the
transactions contemplated hereunder to be prohibited transactions under ERISA or
the Code.
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(vi) No transfer or assignment of a Unit shall be made to a foreign person
under the Code or a minor or incompetent (unless such transfer or assignment
shall be made to a legal guardian on such person's behalf).
B. In order to record a trade on its books and records, the Partnership may
require such evidence of transfer or assignment and authority of the transferor
or assignor (including signature guarantees), evidence of the transferee's
suitability under state securities laws, and the written acceptance and adoption
by the transferee of the provisions of this Agreement, as the General Partner
may determine. The General Partner may charge a transfer fee sufficient to cover
an reasonable expenses connected with such transfer (with no profit to any party
in the transaction).
C. In no event shall an Investor be permitted to transfer a fraction of a
Unit.
Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an
Investor or a Limited Partner
Upon the death of an Investor or a Limited Partner, his executor,
administrator, or trustee, or, if he is adjudicated incompetent or insane, his
committee, guardian, or conservator, or, if he becomes bankrupt, the trustee or
receiver of his estate, shall have all the rights of an Investor or a Limited
Partner for the purpose of settling or managing his estate and shall have
whatever power the deceased or incompetent Investor or Limited Partner possessed
to assign all or any part of his Units or Interest. The death, dissolution,
adjudication of incompetence, or bankruptcy of an Investor or a Limited Partner
shall not dissolve the Partnership.
Section 7.4 Effective Date
The Partnership shall recognize the transferee of Units as an Investor on
the Partnership's books and records on the first business day of the next
calendar month after the month in which the Partnership receives all necessary
documentation and consents required to effect the transfer of Units.
Section 7.5 Substitute Limited Partners
Any Investor may elect to become a Substitute Limited Partner upon (i)
signing a counterpart of this Agreement and any other instrument or instruments
deemed necessary by the General Partner, including a Power of Attorney in favor
of the General Partner as described in Section 12.1.A hereof, and (ii) paying a
fee equal to the actual costs and expenses incurred by the General Partner for
legal and administrative costs and recording fees. Investors who elect to become
Substitute Limited Partners will receive one Limited Partnership Interest for
each Unit they convert and will not be able to re-exchange their Limited
Partnership Interests for Units. The Capital Account of the former Investor
attributable to transferred Units shall be credited to the Capital Account of
the Substitute Limited Partner. The Partnership's Certificate will be amended no
less often than quarterly, if required by applicable law, to reflect the
substitution of Limited Partners.
Section 7.6 Retirement or Withdrawal of an Investor
A. No Investor shall have the right to voluntarily retire or withdraw from
the Partnership unless the General Partner shall have consented to such
voluntary retirement or withdrawal by an Investor. Upon the retirement or
withdrawal of an Investor: (i) the Interest of such retiring or withdrawing
Investor shall thereafter belong to the Partnership; (ii) such retiring or
withdrawing Investor shall not be entitled to receive distributions with respect
to any periods after the time of such retirement of withdrawal; and (iii) such
retiring or withdrawing Investor shall not be entitled to receive any amount for
the fair value of his Units as of the date of his retirement or withdrawal,
other than as agreed to by the General Partner and the withdrawing Investor. The
General Partner shall not consent to the voluntary retirement or withdrawal of
an Investor if the General Partner receives an opinion of counsel to the
Partnership that such retirement or withdrawal would cause the Partnership to be
classified other than as a partnership for federal income tax purposes, or cause
the Partnership to terminate for federal income tax purposes.
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B. At any time after the Termination Date of the Offering, the Partnership
may, in its sole discretion, in response to the request of an Investor,
repurchase any or all of the Units of such Investor upon mutually agreeable
terms, provided that such repurchase does not materially impair the capital or
operation of the Partnership. The determination to repurchase Units will be made
in the sole discretion of the General Partner. The determination of the value of
the repurchased Units will be based upon, among other factors, the current fair
market value of the Properties and the assets of the Partnership, less all
Partnership debts and obligations. The Partnership will not repurchase Units
prior to the Termination Date of the Offering and is not obligated to repurchase
Units at any time. Units acquired by the General Partner and its Affiliates or
by the Assignor Limited Partner will not be eligible for repurchase by the
Partnership. Units purchased by the Partnership during any month shall be deemed
cancelled effective as of the first day of the month following the effective
date of such purchase.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE FUND
Section 8.1 Events Causing Dissolution
A. The Partnership shall dissolve and its affairs shall be wound up upon
the first to occur of the following events:
(i) the expiration of its term;
(ii) the withdrawal of the General Partner, unless the Partnership is
continued pursuant to Sections 6.3B or 6.3C;
(iii) the Sale of all of the Properties (excepting (a) a disposition
thereof which, in the opinion of counsel to the Partnership, qualifies, in whole
or in part, under Section 1031 or Section 1033 of the Code or (b) a Sale in
which the purchase price is paid in one or more installments, in which case the
Partnership shall dissolve upon receipt of the final payment thereunder);
(iv) the election by the General Partner, with the Majority Vote of the
Investors, to dissolve the Partnership;
(v) by the Majority Vote of the Investors pursuant to Section 5.3A to
dissolve the Partner- ship; or
(vi) the happening of any other event causing the dissolution of the
Partnership under applicable law.
B. Dissolution of the Partnership shall be effective on the day on which
the event occurs giving rise to the dissolution. A certificate of cancellation
shall be filed under the Act upon the dissolution and the commencement of
winding up of the Partnership; provided, however, that the Partnership shall not
terminate until the assets of the Partnership has been distributed as provided
in Section 8.2. Notwithstanding the dissolution of the Partnership, prior to the
termination of the Partnership, the business of the Partnership and the affairs
of the Partners, as such, shall continue to be governed by this Agreement.
Section 8.2 Liquidation
A. As soon as practical after the dissolution of the Partnership, the
General Partner, or if there is no General Partner, any Limited Partner or the
liquidating trustee under the Act, as the case may be, shall give Notification
to all the Limited Partner and Investors of such fact and shall prepare a plan
as to whether and in what manner the assets of the Partnership shall be
liquidated. By the Majority Vote of the Investors, the assets of the
Partnership, subject to its liabilities (and the establishment of reserves, if
necessary, for such liabilities), may be transferred to a successor Entity, upon
such terms and conditions as are then agreed upon.
B. Unless the Investors agree to transfer the assets of the Partnership,
subject to its liabilities, to a successor Entity pursuant to Section 8.2A, upon
dissolution of the Partnership, the General Partner,
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any Limited Partner or the liquidating trustee under the Act, as the case may
be, shall liquidate the assets of the Partnership, and apply and distribute the
proceeds thereof in accordance with Section 4.4.
C. Notwithstanding the provisions of Section 8.2B, in the event the General
Partner or any liquidating agent under the Act, as the case may be, shall
determine that an immediate sale of all or a portion of the assets of the
Partnership would cause undue loss to the Partners and Investors, the General
Partner or liquidating agent under the Act, as the case may be, in order to
avoid such loss, may, after having given Notification to all the Investors and
Limited Partners, either defer liquidation of, and withhold from distribution
for a reasonable time, any assets of the Partnership, or distribute the assets
in kind to a liquidating trust to be held for the benefit of the Investors and
Partners.
Section 8.3 Capital Contribution Upon Dissolution
Subject to the provisions of Section 5.9 of this Agreement, each Investor
and Partner shall look solely to the assets of the Partnership for all
distributions with respect to the Partnership and his Capital Contribution and
shall have no recourse (upon dissolution or otherwise) against any Partner or
Investor; provided, however, that upon the dissolution and termination of the
Partnership, the General Partner will make the Capital Contributions referred to
in Section 3.1. All amounts so contributed by the General Partner shall be
distributed first to the Partnership's creditors entitled thereto, and the
balance to the Investors and Partners in proportion to the positive balances in
their Capital Accounts at the time of dissolution and termination of the
Partnership.
ARTICLE IX
CERTAIN PAYMENTS TO THE GENERAL PARTNER AND AFFILIATES
Section 9.1 Reimbursement of Certain Costs and Expenses of the General
Partner and its Affiliates
A. Subject to the provisions of Article V hereof, the Partnership shall be
permitted to reimburse the General Partner for the actual cost to the General
Partner or any of its Affiliates of the Partner- ship's operating expenses. In
determining the actual cost to the General Partner or an Affiliate of the
General Partner of goods and materials and administrative services, actual cost
means the actual cost to the General Partner or an Affiliate of the General
Partner of goods and materials used for or by the Partnership and obtained from
entities not affiliated with the General Partner, and actual cost of
administrative services means the pro rata cost of personnel as if such persons
were employees of the Partnership. The cost for administrative services to be
reimbursed to the General Partner or an Affiliate shall be at the lower of the
General Partner's or Affiliate's actual cost or ninety percent (90%) of the
amount the Partnership would be required to pay to independent parties for
comparable administrative services in the same geographic location. The General
Partner shall use its best efforts to cause all of the Partnership's expenses to
be billed directly to and paid by the Partnership to the extent practicable.
B. Subject to the foregoing, the Partnership shall pay all expenses (which
expenses shall be billed directly to the Partnership) of the Partnership which
may include but are not limited to: (a) an costs of personnel (excluding rent or
depreciation, utilities, capital equipment, and other administrative items)
employed full- or part-time by the Partnership and involved in the business of
the Partnership and allocated pro rata to their administrative services
performed on behalf of the Partnership, including Persons who may also be
officers or employees of the General Partner or its Affiliates (other than
Controlling Persons); (b) all costs of borrowed money, taxes and assessments on
Properties and other taxes applicable to the Partnership; (c) legal, audit,
accounting, brokerage and other fees; (d) printing, engraving and other expenses
and taxes incurred in connection with the issuance, distribution, transfer,
registration and recording of documents evidencing ownership of an Interest or
Unit or in connection with the business of the Partnership; (e) fees and
expenses paid to independent contractors, mortgage bankers, brokers and
servicers, leasing agents, consultants, on-site property managers and other
property management personnel (other than Controlling Persons and other officers
of the General Partner or its Affiliates), real estate brokers, insurance
brokers and other
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agents; (f) expenses in connection with the disposition, replacement,
alteration, repair, remodeling, refurbishment, leasing, refinancing and
operating of the Properties (including the costs and expenses of foreclosures,
insurance premiums, real estate brokerage and leasing commissions and of
maintenance of such Properties); (g) expenses of organizing, revising, amending,
converting, modifying or terminating the Partnership; and (h) the cost of
preparation and dissemination of the informational material and documentation
relating to potential sale, or other disposition of Properties or in connection
with any meetings or votes if the Investors.
C. Notwithstanding any other provision of this Agreement, no reimbursement
shall be permitted for services for which the General Partner is entitled to
compensation by way of a separate fee.
Section 9.2 Fees and Other Payments
A. The Partnership shall cause the following payments and fees to be paid
to the General Partner and its Affiliates:
(i) to the Selling Agent, the Selling Commissions and the Due Diligence
Expense Reimburse- ment Fee.
(ii) to the General Partner or its Affiliates, the Offering and
Organizational Expense Fee.
(iii) to the General Partner or its Affiliates, the Acquisition Expenses
previously paid by the General Partner or its Affiliates. (iv) to the General
Partner or its Affiliates, the Property Acquisition Fee.
(v) to the General Partner, an annual property management fee equal to 1%
of the gross revenues of the Properties.
(vi) to the General Partner, real estate brokerage commissions, payable
upon the Sale of any Property, provided that the General Partner actually
renders real estate brokerage services in connection with such Sale. Any
commissions paid to the General Partner will be limited to one-half of the
competitive real estate commission for like properties located in the same
geographic area not to exceed 1% of the contract price for the Sale of the
Property, and will be subordinated to the payment to Investors of their Adjusted
Capital Balance plus the unpaid portion, if any, of their Preferred Return. B.
The total of the fees owed to the General Partner and its Affiliates and
described in. (i), (ii), (iii) and (iv) above shall in no event exceed 16.5% of
the Gross Proceeds of the Offering.
ARTICLE X
BOOKS AND RECORDS; BANK ACCOUNTS; REPORTS
Section 10.1 Books and Records
A. The books and records of the Partnership shall be maintained by the
General Partner at the Partnership's principal place of business. In all cases,
said books and records shall be available for examination and copying by any
Limited Partner, Investor or his duly authorized representatives, for any
purpose related to the Limited Partner's or Investor's interest as a Limited
Partner or Investor, at the expense of such Limited Partner or Investor, at any
and all reasonable times. The Partnership shall keep at its principal place of
business, without limitation, the following records: true and full information
regarding the status of the business and financial condition of the Partnership;
promptly after becoming available, a copy of the Partnership's federal, state
and local income tax returns for each year; a current list of the names and last
known business, residence or mailing addresses of and the numbers of Units held
by each Partner and Investor; a copy of this Agreement and the Certificate and
all amendments thereto; and other information regarding the affairs of the
Partnership as is just and reasonable. The current list of the names and last
known business, residence or mailing addresses of each Partner and Investor
shall be mailed to any Investor upon payment of a reasonable charge for copy
work.
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B. The Partnership shall keep its books and records in accordance with the
accounting methods determined by the General Partner. The Partnership's taxable
year shall be a calendar year.
Section 10.2 Bank Accounts
A. The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership, whether or not
in their immediate possession or control. The General Partner shall not employ,
or permit any other Person to employ, such funds in any manner except for the
benefit of the Partnership.
B. The bank accounts of the Partnership shall be maintained in such banking
institutions as the General Partner shall determine, and withdrawals shall be
made only in the regular course of Partnership business on the signature of the
General Partner or such other signature or signatures as the General Partner may
determine. All deposits and other funds may be deposited in interest bearing or
non-interest bearing accounts guaranteed by federal authorities, invested in
short-term United States Government or municipal obligations, or deposited with
a banking institution selected by the General Partner.
Section 10.3 Reports
A. No later than seventy-five (75) days after the end of each calendar
year, the General Partner will furnish each Person who was an Investor or
Limited Partner at any time during the fiscal year with all tax information
relating to the Partnership's performance for the preceding calendar year that
is required to be set forth in the Investor's and Limited Partner's federal and
state income tax return.
B. Within sixty (60) days after the end of each of the first three fiscal
quarters of each fiscal year of the Partnership, the General Partner will
furnish to each Person who was an Investor or Limited Partner at any time during
the fiscal quarter then ended, a report setting forth information with respect
to the progress of the Partnership's business, which report shall include: (i)
an unaudited balance sheet of the Partnership; (ii) an unaudited statement of
income for the quarter; (iii) an unaudited cash flow statement for the quarter;
(iv) an unaudited statement setting forth the services rendered to, and fees
received from, the Partnership by any Sponsor; and (v) other pertinent
information concerning the Partnership and its activities during the quarter.
The various reports required pursuant to this Section 10.3.B may be sent earlier
than or separately from any of the other reports required pursuant to this
Section 10.3.B, and the information required to be contained in any of the
reports required pursuant to this Section 10.3.B may be contained in more than
one report.
C. Within one hundred twenty (120) days after the end of each fiscal year,
the General Partner shall furnish an annual report to each Person who was a
Limited Partner or an Investor as of the last business day of the fiscal year
then ended. Such annual report will include:
(i) a balance sheet as of the end of the Partnership's fiscal year,
statements of income, Partners' equity and cash flow, which shall be prepared in
accordance with generally accepted accounting principles and accompanied by (a)
an auditor's report containing an opinion of an independent certified public
accountant and (b) a reconciliation to information furnished to Investors for
income tax purposes;
(ii) the breakdown of any Partnership costs reimbursed to a Sponsor and a
statement setting forth in detail the services rendered to, and fees received
from, the Partnership by any Sponsor as verified by a review of the time records
of, and the specific nature of the work performed by, individual employees, the
cost of whose services were reimbursed (and within the scope of the
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annual audit by the Accountants shall be the obligation to verify the
allocations of the costs reimbursed to the General Partner or Affiliate
thereof);
(iii) a cash flow statement; and
(iv) a report of the activities of the Partnership during the fiscal year.
The annual report shall also set forth distributions to the Investors for the
period covered thereby and shall separately identify distributions from (a) Net
Cash Flow during the period, (b) Net Cash Flow during a prior period which had
been held as reserves, (c) Net Proceeds of Sale or Financing, and (d) Working
Capital Reserves.
D. Within forty-five (45) days after the end of each fiscal quarter in
which a Sale or Financing occurs, the General Partner shall send to each Person
who was an Investor as of the close of business on the first business day of the
month that includes the date of occurrence of the Sale or Financing, a report as
to the nature of the Sale or Financing and as to the Profit or Loss arising from
the Sale or Financing.
E. The General Partner shall prepare and timely file with appropriate
federal and state regulatory authorities all reports required to be filed with
such entities under then-applicable laws, rules and regulations. Such reports
shall be prepared on the accounting or reporting basis required by such
regulatory authorities. Upon request, copies of such reports will be furnished
to any Investor or Limited Partner for any purpose reasonably related to the
Investor's or Limited Partner's interest as an Investor or a Limited Partner. In
the event that any regulatory authority promulgates rules or amendments thereto
that would permit a reduction in any of the reporting requirements to which the
Partnership is subject under this Agreement at the time of the execution hereof,
the Partnership may cease to prepare and file any such reports in accordance
with such rules or amendments.
F. The General Partner shall maintain, (I) for a period of at least six (6)
years, a record of the information obtained to indicate that an Investor has met
the suitability standards set forth in the Prospectus; and (ii) for a period of
at least five (5) years, records of the appraisals made of the Properties, which
appraisal records shall be available for inspection and copying by any Investor
or Limited Partner for any purpose reasonably related to the Investor's or
Limited Partner's interest as an Investor or a Limited Partner.
Section 10.4 Federal Tax Elections
The Partnership, in the sole discretion of the General Partner, may make
elections for federal tax purposes as follows:
(i) In case of a transfer of a Unit, the Partnership, in the sole
discretion of the General Partner, may timely elect pursuant to Section 754 of
the Code (or corresponding provisions of future law) and pursuant to similar
provisions of applicable state or local income tax laws, to adjust the basis of
the assets of the Partnership.
(ii) The General Partner may elect accelerated depreciation methods under
the Code, or may elect straight-line depreciation over a period as long as forty
(40) years if, in its sole discretion, the determination of the percentage of
tax-exempt Investors becomes too cumbersome.
(iii) All other elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partner in such manner
as will, in its sole opinion, be most advantageous to a Majority of the
Investors. The Partnership shall, to the extent permitted by applicable law and
regulations, elect to treat as an expense for federal income tax purposes all
amounts incurred by it for real estate taxes, interest and other charges which
may, in accordance with applicable law and regulations, be considered as
expenses.
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ARTICLE XI
MEETINGS OF INVESTORS
Section 11.1 Calling Meetings
Meetings of the Investors for any purpose may be called by the General
Partner and shall be called by the General Partner upon receipt of a request in
writing signed by Investors having in the aggregate more than 10% of the
outstanding Units. Upon receipt of a written request stating the purpose(s) of
the meeting, the General Partner shall provide all Investors within 10 days
after receipt of such request with notice as described in Section 11.2. The
meeting shall be held at a time and place convenient to the Investors.
Section 11.2 Notice, Procedure
If a meeting is called at the request of the Investors, the General Partner
shall provide all Investors with notice of such meeting given either personally
or by certified mail, which notice shall state the purpose thereof, such meeting
to be held on a date not less than fifteen (15) nor more than sixty (60) days
after the receipt by the General Partner of the request for the meeting. Notice
of any other meeting shall be given either personally or by certified mail, not
less than fifteen (15) days nor more than sixty (60) days before the date of the
meeting, to each Investor at his record mailing address. The notice shall be in
writing, and shall state the place, date, hour, and purpose of the meeting, and
shall indicate that it is being issued at or by the direction of the Partners or
Investors calling the meeting. If a meeting is adjourned to another time or
place, and if any announcement of the adjournment of time or place is made at
the meeting, it shall not be necessary to give notice of the adjourned meeting.
The presence in person or by proxy of the holders of more than 50% of the
outstanding Units shall constitute a quorum at all meetings of the Investors;
provided, however, that if there is no quorum present, holders of a majority in
interest of the Investors present or represented may adjourn the meeting from
time to time without further notice until a quorum is obtained. No notice of the
time, place or purpose of any meeting of Investors need be given to any Investor
who attends in person or is present by proxy (except when an Investor attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened), or to any Investor entitled to notice who, in a writing
executed and filed with the records of the meeting, either before or after the
time of the meeting, waives the notice requirement.
Section 11.3 Right to Vote
For the purpose of determining the Investors entitled to vote at any
meeting of the Partnership, the General Partner or the Investors requesting the
meeting may fix a date, in advance, as the record date for the determination of
Investors entitled to vote. This date shall be not more than fifty (50) days nor
less than ten (10) days before any meeting.
Section 11.4 Proxies; Rules
Each Investor may authorize any person or persons to act for him by proxy
in all matters in which an Investor is entitled to participate, whether by
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Investor or his attorney-in-fact. No proxy shall be
valid after the expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be recoverable at the pleasure of the
Investor executing it. At each meeting of Investors, the General Partner shall
appoint officers and adopt rules as they deem appropriate for the conduct of the
meeting.
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<PAGE>
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Appointment of General Partner as Attorney-in-Fact
A. Each Limited Partner and Investor hereunder hereby irrevocably appoints
and empowers the General Partner his attorney-in-fact to consent to or ratify
any act listed in Subsections 5.4A(i) through (xviii) and Section 6.3C of this
Agreement after the Majority Vote of the Investors thereto has been obtained,
and to execute, acknowledge, swear to and deliver all agreements and instruments
and file all documents requisite to carrying out the intentions and purposes
contemplated in this Agreement, including, without limitation, the execution and
delivery of this Agreement and all amendments hereto, the filing of all business
certificates and necessary certificates of limited partnership and amendments
thereto from time to time in accordance with all applicable laws and any
certificates of cancellation.
B. The appointment by all Limited Partners and Investors of the General
Partner as attorney-in-fact shall be deemed to be a power coupled with an
interest, shall not be affected by the subsequent disability or incapacity of
the principal and shall survive the assignment by any Limited Partners or
Investors of the whole or any part of his Interests or Units in the Partnership.
C. The power of attorney granted by this Section 12.1 shall be governed by
the laws of the State of Delaware.
Section 12.2 Waiver of Partition
Each Partner and Investor, on behalf of himself, his successors,
representatives, heirs and assigns hereby waives any right of partition or any
right to take any other action which otherwise might be available to him for the
purpose of severing his relationship with the Partnership or his interest in the
assets held by the Partnership from the interest of the other Partners or
Investors.
Section 12.3 Notification
Any Notification, in order to be effective, shall be sent by registered or
certified mail, postage prepaid, if to a Partner or Investor, to the address of
the Partner or Investor set forth in the books and records of the Partnership,
and if to the Partnership, to the principal place of business of the Partnership
set forth in Section 2.2 (unless Notification of a change of the principal
office is given), the date of registry thereof or the date of the certification
thereof being deemed the date of receipt of Notification; provided, however,
that any written communication sent to a Partner or Investor or to the
Partnership and actually received by such Person shall constitute Notification
for all purposes of this Agreement.
Section 12.4 Word Meanings
In this Agreement, the singular shall include the plural and the masculine
gender shall include the feminine and neuter and vice versa, unless the context
otherwise requires.
Section 12.5 Binding Provisions
The covenants and agreements contained herein shall be binding upon, and
inure to the benefit of, the heirs, personal representatives, successors and
assigns of the respective parties hereto.
Section 12.6 Applicable Law
This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware, without regard to principles of conflict of laws.
Section 12.7 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together
A-35
<PAGE>
constitute one and the same instrument. This Agreement shall become binding
upon the date hereof. Each Additional or Successor General Partner shall become
a signatory hereof by signing such number of counterparts of this Agreement and
such other instrument or instruments, and in such manner as the General Partner
shall determine, and by so signing, shall be deemed to have adopted and to have
agreed to be bound by all the provisions of this Agreement.
Section 12.8 Separability of Provisions
Each provision of this Agreement shall be considered separable, and if for
any reason any provision or provisions hereof are determined to be invalid or
contrary to any existing or future law, such invalidly shall not impair the
operation of or affect those portions of this Agreement which are valid.
Section 12.9 Paragraph Titles
Paragraph titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.
Section 12.10 Entire Agreement
This Agreement and the exhibits and documents referred to herein constitute
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof, and supersede all prior and contemporaneous
agreements and understanding, inducements or conditions, express or implied,
oral or written, except as herein contained. This Agreement may not be modified
or amended other than by an agreement in writing.
Section 12.11 Amendments
A. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partner with the
Majority Vote of the Investors; provided, however, that without the consent of
the Partners or Investors to be adversely affected by the amendment, except as
provided in Section 12.11B, this Agreement may not be amended so as to (i)
convert an Investor's interest into a General Partner's interest; (ii) modify
the limited liability of an Investor; (iii) alter the interest of a Partner or
Investor in Net Cash Flow, Profit or Loss, or Net Proceeds of Sale or Financing;
(iv) increase the amount of the Capital Contributions required to be paid by the
Investors; or (v) extend the Termination Date.
B. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partner, without
the consent of any of the Investors, (i) to add to the duties or obligations of
the General Partner or surrender any right or power granted to the General
Partner herein, for the benefit of the Investors; (ii) to cure any ambiguity, to
correct or supplement any provision herein which may be inconsistent with any
other provision herein, or to make any other provisions with respect to matters
or questions arising under this Agreement which will not be inconsistent with
the provisions of this Agreement; (iii) to delete or add any provision of this
Agreement required to be deleted or added by the Staff of the Securities and
Exchange Commission or other federal agency or by a state securities
commissioner or similar official and deemed by the commission, agency,
commissioner, or official to be for the benefit or protection of the Investors;
(iv) to take any actions necessary to cause the assets of the Partnership to
come within the exclusion from the definition of "plan assets" contained in
Section 2550.40lb-1 of Title 29 of the Code of Federal Regulations; and (v) to
give effect to any action permitted pursuant to Section 5.2; provided, however,
that no amendment shall be adopted pursuant to this Section 12.2.B unless its
adoption (1) is not adverse to the interests of the Investors; (2) is consistent
with Section 5.2; (3) does not affect the distribution of Net Cash Flow or Net
Proceeds of Sale or Financing or the allocation of Profit or Loss among the
Investors as a class and the General Partner, except as provided below; and (4)
does not affect the limited liability of the Investors or the status of the
Partnership as a partnership for federal income tax purposes. In addition to the
amendments otherwise authorized herein, amendments may be made to this Agreement
to amend provisions of Article IV of this Agreement relating to the allocations
of Profit or Loss and to distributions of Net Cash Flow or Net Proceeds of Sale
or
A-36
<PAGE>
Financing among the Partners and Investors if the Partnership is advised at
any time by the Partner- ship's Accountants and counsel that the allocations
provided in Article IV of this Agreement are unlikely to be respected for
federal income tax purposes. The General Partner is empowered to amend the
distribution and allocation provisions of Article IV pursuant to Section 12.11B
to the minimum extent necessary in accordance with the advice of the
Partnership's Accountants and counsel to effect the plan of distribution of Net
Cash Flow and Net Proceeds of Sale or Financing, and, consistent therewith, the
allocations of Profit and Loss provided in this Agreement. New allocations made
by the General Partner in reliance upon the advice of the Partnership's
Accountants and counsel shall be deemed to be made pursuant to the fiduciary
obligation of the General Partner to the Partnership and the Investors. This
Section 12.11 shall be subject to the provisions of Section 5.9 of this
Agreement.
C. If this Agreement is amended as a result of adding or substituting a
Limited Partner or increasing the investment of a Limited Partner, the amendment
shall be signed by the General Partner and by the Person to be substituted or
added, or the Limited Partner increasing his investment in the Partnership, and,
if a Limited Partner is to be substituted, by the assigning Limited Partner. If
this Agreement is amended to reflect the designation of an Additional General
Partner, the amendment shall be signed by the other General Partner or General
Partners and by the Additional General Partner. If this Agreement is amended to
reflect the withdrawal of a General Partner when the business of the Partnership
is being continued, the amendment shall be signed by the withdrawing General
Partner and by the remaining or successor General Partner or General Partners.
D. In making any amendments, there shall be prepared and filed for
recordation by the General Partner all documents and certificates required to be
prepared and filed under the Act and under the laws of the other jurisdictions
under the laws of which the Partnership is then formed or qualified.
IN WITNESS WHEREOF, parties hereto have executed this Agreement as of the
date first above written.
GENERALPARTNER
ATTEST: REALTY PARKING COMPANY, INC.
By: (SEAL)
Name: Name:
Title: Title:
SUBORDINATED LIMITED PARTNER
WITNESS: REALTY ASSOCIATES 1988 LIMITED
PARTNERSHIP
By: RESIDUAL INVESTMENT ASSOCIATES,
A MARYLAND LIMITED
PARTNERSHIP, General Partner
By: A.B. RESIDUAL, INC., General Partner
By: (SEAL)
Name:
Title:
ASSIGNOR LIMITED PARTNER
ATTEST: PARKING PROPERTIES HOLDING CO., INC.
By:
Name: Name:
Title: Title:
A-37
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