SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1996
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 No. 0-18531
Development Partners III
(A Massachusetts Limited Partnership)
(Exact name of registrant as specified in its charter)
Massachusetts 04-3017036
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization)
Identification No.)
5110 Langdale Way, Colorado Springs, CO 80906
(Address of principal executive offices) (Zip Code)
(719) 527-0544
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are not actively traded on any exchange.
Documents incorporated by reference: None
The Exhibit Index is located on page ____
<PAGE>
PART I
ITEM 1. BUSINESS
This form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Development Partners III (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners III, was formed on
July 11, 1988. The General Partners are Stephen B. Boyle and GP L'Auberge
Communities, L.P., a California Limited Partnership, formerly Berry and Boyle
Management.
On January 13, 1989, the Partnership commenced an offering of $30,000,000 of
Units of Limited Partnership Interests at $500 each. The initial closing took
place on December 28, 1989, upon the filing of an amended and restated
partnership agreement (the "Partnership Agreement"), at which time investors
acquiring 3,048 Units totaling $1,524,000 were admitted to the Partnership. The
Partnership continued to admit subscribers monthly thereafter until December 27,
1991, its last closing date. The Partnership terminated the offering on January
13, 1992 having admitted 289 investors acquiring 7,401 Units totaling
$3,700,500. Of this amount $3,145,425 was available for investment, including
related fees and expenses, and working capital reserves, after deducting
organization and offering costs. To the extent such available funds have not
been expended for the purchase of properties (see Item 2 below) and related fees
and expenses, the Partnership has invested such funds in money market funds or
other highly liquid short-term investments.
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI"), a
Phoenix based residential development, construction and management firm and
developer of the property known as Casabella, which separated the interests of
EWI and the Partnership, thus affording the Partnership greater flexibility in
the operation and disposition of Casabella. In consideration of a payment by the
Partnership, Development Partners (A Massachusetts Limited Partnership) ("DPI"),
and Development Partners II (A Massachusetts Limited Partnership) ("DPII"), to
EWI totaling $109,741 ($38,345 of which was the partnership's portion) and the
delivery of certain mutual releases, EWI (i) relinquished its contract to manage
Casabella and its option to exercise its rights to first refusal with regard to
the sale of the property and (ii) assigned all of its interest in the Casabella
Joint Venture to the Partnership, DPI and DPII (while preserving the economic
interest of the venture in these Joint Ventures), which resulting in the
dissolution of the Casabella Joint Venture. EWI may share in the cash flow
distributions or proceeds for sale if certain performance levels are met.
The primary business of the Partnership is to invest in, operate, and ultimately
dispose of a 154-unit residential property known as Casabella through its joint
venture interest. The Partnership's acquisition is described below in Item 2.
Properties as well as in Note 5 of the Notes to Consolidated Financial
Statements included in this report and incorporated herein by reference thereto.
The Partnership expects to sell Casabella at some future time, taking into
consideration such factors as the price to be realized, the possible risks of
continued ownership and the anticipated advantages to be gained for the
partners. Proceeds from the sale, financing or refinancing of Casabella will not
be reinvested by the Partnership, but will be distributed to the partners, so
that the Partnership will, in effect, be self-liquidating.
The success of the Partnership will depend upon factors which are difficult to
predict and many of which are beyond the control of the Partnership. Such
factors include, among other things, general economic and real estate market
conditions, both on a national basis and in the area where the Partnership's
investment is located, competitive factors, the availability and cost of
borrowed funds, real estate tax rates, federal and state income tax laws,
operating expenses (including maintenance and insurance), energy costs,
government regulations, and potential liability under and changes in
environmental and other laws, as well as the successful management of the
property.
On-site management of Casabella, is currently provided by an affiliate of the
General Partner. The terms of such property management services between the
Partnership and the property manager are embodied in a written management
agreement. The property manager receives management fees which are competitive
with those obtainable in arm's-length negotiations with independent parties
providing comparable services in the locality in which the property is located.
Such fees will not exceed 4% of the gross revenues from the property. It is the
responsibility of the General Partners to select or approve the property manager
and to supervise its performance. The property manager is responsible for
on-site operations and maintenance, generation and collection of rental income,
and payment of operating expenses.
The difference between rental income and expenses related to operations,
including items such as local taxes and assessments, utilities, insurance
premiums, maintenance, repairs and improvements (and reserves therefor),
bookkeeping and payroll expenses, legal and accounting fees, property management
fees and other expenses incurred, will constitute the property's operating cash
flow. The Partnership's internal administrative expenses will be paid out of the
Partnership's share of such cash flow from the property and from interest income
which the Partnership earns on its short-term investments.
The Partnership's investment in real estate is also subject to certain
additional risks including, but not limited to, (i) competition from existing
and future projects held by other owners in the area of the Partnership's
property, (ii) possible reduction in rental income due to an inability to
maintain high occupancy levels, (iii) adverse changes in mortgage interest
rates, (iv) possible adverse changes in general economic conditions and adverse
local conditions, such as competitive overbuilding, or a decrease in employment
or adverse changes in real estate zoning laws, (v) the possible future adoption
of rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
The Partnership's investment is also subject to competition from similar types
of properties in the locality in which the Partnership's real property
investment is located, and the Partnership will compete with other real property
owners and developers in the rental, lease and sale of such property.
Furthermore, the General Partners of the Partnership are affiliated with other
partnerships owning similar properties in the vicinity in which the
Partnership's property is located. In addition, other limited partnerships may
be formed by affiliates of the General Partners which could compete with the
Partnership.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
ITEM 2. PROPERTIES
On September 28, 1990, the Partnership purchased an approximate 53% interest in
Casabella Associates ("Associates"), a general partnership consisting of the
Partnership and two other affiliated partnerships. Under the terms of the
purchase, the Partnership contributed $2,500,000 to Associates. Associates owns
and operates a 154-unit multifamily rental property located in Scottsdale,
Arizona, known as Casabella. The ownership was formerly structured as a Joint
Venture of which Associates owned a majority interest. With regard to the
termination of the Casabella Joint Venture see Note 5 of Notes to Consolidated
Financial Statements.
Associates has been designated as the managing joint venture partner of
Casabella and will control all decisions regarding the operation and sale of the
property. In addition to its $2,500,000 contribution to Associates, the
Partnership incurred $280,930 of acquisition expenses as of December 31, 1996.
As of February 28, 1997, the property was 99% occupied, compared to 98%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
Unit Type ............................. 1996 1995
- ---------------------------------------------- ------ ------
One bedroom two bath w/den ................... $ 820 $ 820
Two bedroom two bath ......................... 950 943
Two bedroom two bath w/den ................... 1,185 1,170
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership or the
joint venture in which it owns an interest is a party, or of which the property
is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of holders of Units as of December 31, 1996 was 317.
Distributions will be made to the Partners on a quarterly basis based upon Net
Cash from Operations, as calculated under Section 10 of the Partnership
Agreement. Total cash distributions to the Limited Partners for 1996 and 1995
were paid as follows:
Quarter Ended ........................ Payment Date Amount
- -------------------------------------- ----------------- -------
March 31, 1995 ....................... May 15, 1995 $33,305
June 30, 1995 ........................ August 15, 1995 $33,305
September 30, 1995 ................... November 15, 1995 $33,305
December 31, 1995 .................... February 15, 1996 $33,305
March 31, 1996 ....................... May 15, 1996 $33,305
June 30, 1996 ........................ August 15, 1996 $33,305
September 30, 1996 ................... November 15, 1996 $33,305
December 31, 1996 .................... February 28, 1997 $33,305
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Partnership and consolidated
subsidiaries has been derived from consolidated financial statements audited by
Coopers & Lybrand, LLP, whose reports for the periods ended December 31, 1996,
1995 and 1994 are included elsewhere in the Form 10K and should be read in
conjunction with the full consolidated financial statements of the Partnership
including the Notes thereto.
<TABLE>
Year Ended
-------------------------------------------------------------------------
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Rental income $1,361,622 $1,579,782 $1,544,449 $1,462,062 $1,370,005
Net loss ($229,558) ($27,479) ($25,059) ($52,046) ($142,453)
Net loss allocated to Partners:
Limited Partners - Per Unit
Aggregate 7,401 Units ($30.71) ($3.68) ($3.35) ($6.96) ($19.06)
General Partners ($2,296) ($275) ($251) ($520) ($1,425)
Cash distributions to Partners:
Limited Partners:
Weighted average per Unit $18.00 $19.10 $16.40 $7.00 $3.25
General Partners $11,584 $12,115 $10,554 $4,505 $2,092
Total assets $10,192,774 $10,882,925 $11,229,315 $11,632,967 $11,961,537
Long term obligations $6,885,673 $6,994,549 $7,093,963 $7,184,739 $7,267,626
</TABLE>
Long term obligations become due in 1997. The Partnership intends to refinance
this note prior to the due date, although there can be no assurance that the
Partnership will be able to do so.. See Note 6 in Notes to Consolidated
Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; Capital Resources
The Partnership admitted 289 investors who purchased a total of 7,401 Units
aggregating $3,700,500. These offering proceeds, net of organizational and
offering costs of $555,075, provided $3,145,425 of net proceeds to be used for
the purchase of income-producing residential properties, including related fees
and expenses, and working capital reserves. The Partnership expended (1)
$2,780,930 to acquire its interest in Casabella Associates and to pay
acquisition expenses, including an acquisition fee to the General Partners and
(2) $52,768 to cover costs associated with discontinued acquisitions. The
remaining net proceeds of $311,727 were used to establish working capital
reserves sufficient to meet the needs of the Partnership, including
contributions that may be required at the joint venture level, as determined by
the General Partners.
In addition to the proceeds generated from the public offering, the Partnership
has utilized external sources of financing at the joint venture level to
purchase Casabella. The Partnership Agreement limits the aggregate mortgage
indebtedness which may be incurred in connection with the acquisition of
Partnership properties to 80% of the purchase price of such properties.
The working capital reserves of the Partnership consist of cash and cash
equivalents and short-term investments. These reserves provide the Partnership
with the necessary liquidity to carry on its day-to-day operations and to make
necessary contributions to Casabella. In 1996, the aggregate net decrease in
working capital reserves was $581,967. This decrease resulted primarily from
cash provided by operations of $54,292, offset by fixed asset purchases of
$156,015, distributions to the minority partners with respect to their interest
in Associates of $220,331, distributions to partners of $133,218 and $108,873 of
principal payments on mortgage notes payable.
In 1995, the aggregate net decrease in working capital reserves was $15,179.
This decrease resulted primarily from cash provided by operations of $369,025,
offset by fixed asset purchases of $47,771, distributions to the minority
partners with respect to their interest in Associates of $86,112, distributions
to partners of $153,474 and $99,414 of principal payments on mortgage notes
payable.
The Partnership's future ability to generate cash adequate to meet its needs is
dependent primarily on the successful operations of Casabella. Such ability may
also be dependent upon the future availability of bank borrowings, and upon the
future refinancing or sale of Casabella and the collection of any mortgage
receivable which may result from such sale. These sources of liquidity will be
used by the Partnership for payment of expenses related to real estate
operations, debt service and professional and management fees and expenses. Net
Cash From Operations and Net Proceeds, if any, as defined in the Partnership
Agreement, will then be available for distribution to the Partners in accordance
with Section 10 of the Partnership Agreement. The General Partners believe that
the current working capital reserves together with projected cash flows for 1997
are adequate to meet the Partnership's operating cash needs in the coming year.
With regard to certain balloon payments on existing first mortgage debt on the
Partnership's property, the General Partners do not anticipate having sufficient
cash from operations in 1997 to retire this mortgage note payable. As these
mortgage notes payable are due in fiscal 1997, the partnership will seek to
renegotiate these mortgage notes with its existing lenders or seek new sources
of financing for these properties on a long term basis, although there can be no
assurance that the Partnership will be able to do so. The General Partners
believe that existing cash flows from the properties will be sufficient to
support a level of borrowing that is at least equal to amounts outstanding as of
December 31, 1996. If the general economic climate for real estate in these
respective locations were to deteriorate resulting in an increase in interest
rates for mortgage financing or a reduction in the availability of real estate
mortgage financing or a decline in the market values of real estate it may
affect the Partnership's ability to complete these refinancings.
<PAGE>
Results of Operations
The Partnership's operating results for the year ended December 31, 1996
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense and its share of the income (loss)
from Casabella Associates and Casabella. A summary of these operating results
appears below:
<TABLE>
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $1,362,677 $29,171 $10,822 $1,402,670
Expenses:
General and administrative 383 5,840 141,151 147,374
Operating expenses 656,435 9,443 3,000 668,878
Depreciation and amortization 266,730 - - 266,730
Interest 633,360 - - 633,360
-------------- ------------- -------------- ----------------
1,556,908 15,283 144,151 1,716,342
-------------- ------------- -------------- ----------------
Net income (loss) before minority (194,231) 13,888 (133,329) (313,672)
interest
Minority Interests' share of
net loss - 84,114 - 84,114
-------------- ------------- -------------- ----------------
Net income (loss) ($194,231) $98,002 ($133,329) ($229,558)
============== ============= ============== ================
</TABLE>
The Partnership's operating results for the year ended December 31, 1995
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense, and its share of the income
(loss) from Casabella Associates and Casabella Joint Venture. A summary of these
operating results appears below:
<TABLE>
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $1,581,184 $43,131 $17,883 $1,642,198
Expenses:
General and administrative 7,200 3,000 62,895 73,095
Operating expenses 561,516 - - 561,516
Depreciation and amortization 375,234 - - 375,234
Interest 642,857 - - 642,857
-------------- --------------- -------------- ---------------
1,586,807 3,000 62,895 1,652,702
-------------- --------------- -------------- ---------------
Net income (loss) before minority (5,623) 40,131 (45,012) (10,504)
interest
Minority Interests' share of
net income - (16,975) - (16,975)
-------------- --------------- -------------- ---------------
Net income (loss) ($5,623) $23,156 ($45,012) ($27,479)
============== =============== ============== ===============
</TABLE>
<PAGE>
The Partnership's operating results for the year ended December 31, 1994
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense and its share of the income (loss)
from Casabella Associates and Casabella Joint Venture. A summary of these
operating results appears below:
<TABLE>
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $1,545,625 $29,480 $12,207 $1,587,312
Expenses:
General and administrative 7,494 2,558 44,675 54,727
Operations 521,969 - - 521,969
Depreciation and amortization 371,172 - 2,567 373,739
Interest 651,528 - - 651,528
------------ -------------- --------------- ---------------
1,552,163 2,558 47,242 1,601,963
------------ -------------- --------------- ---------------
Net income (loss) before minority (6,538) 26,922 (35,035) (14,651)
interest
Minority Interests' share of
net income - (10,408) - (10,408)
------------ -------------- --------------- ---------------
Net income (loss) ($6,538) $16,514 ($35,035) ($25,059)
============ ============== =============== ===============
</TABLE>
Comparison of 1996 and 1995 Operating Results
In accordance with its dispositions strategy, the Partnership incurred one time
costs associated with the Evans Withycombe termination ($38,345) and the related
legal costs. (Refer to Note 5 of the Consolidated Financial Statement.) In
addition, the Partnership incurred one-time costs associated with its property
interior and exterior refurbishment program, the change in on-site management
following the Evans Withycombe termination, the outsourcing of much of the
Partnership's administration work to an administrative agent and the relocation
of the remaining administration, financial and investor services functions to a
more cost efficient location in Colorado Springs, Colorado. Consequently,
competitive pressures and disposition-related activities led to a decrease in
total revenue of $239,528 (15%), rental operating expenses (including
advertising, promotion, apartment locator and concession costs) to increase by
$107,362 or 19% over the prior year and total general and administrative
expenses of the Partnership increased $74,279 (102%) over the prior year. Fixed
asset purchases increased $156,015, consisting of such items as carpet,
appliances, equipment for fitness center facilities, and remodeling features.
However, distributions to partners remained the same as 1995.
Comparison of 1995 and 1994 Operating Results
Total revenue increased $54,886 or 3% due primarily to higher rental rates
resulting in increased rental income of $35,333. In addition, interest income
increased $19,553 or 46% in 1995, as a result of higher interest rates earned on
money market accounts and short-term investments. Rental operating expenses
increased $39,547, or 8% over the prior year due primarily to increased real
estate taxes and maintenance and advertising and promotion costs.. General and
administrative expenses increased $18,368 or 34%, due primarily to increased
salary expense allocations and legal costs and printing and mailing costs
associated with the voluntary withdrawal of a general partner of the
Partnership. Fixed asset purchases increased $38,993. Distributions to partners
increased $21,544, or 16% from 1994.
<PAGE>
Projected 1997 Operating Results
Although there can be no assurance that the Partnership will dispose of any or
all of its properties during 1997, consistent with the Partnership's disposition
strategy the Partnership will continue to seek to do so. In the event that the
Partnership were to dispose of any property during 1997, operating results of
the Partnership would vary significantly from those achieved in prior periods.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to the
individual general partners of the Partnership and directors and executive
officers of L'Auberge Communities, Inc. (formerly Berry and Boyle Inc.), the
general partner of GP L'Auberge Communities, L.P., is set forth below.
Individual General Partners
Stephen B. Boyle, age 56, is President, Executive Officer and Director of
L'Auberge Communities, Inc. and a general partner and co-founder of LP L'Auberge
Communities, a California Limited Partnership (formerly Berry and Boyle), a
limited partnership formed in 1983 to provide funds to various affiliated
general partners of real estate limited partnerships, one of which is GP
L'Auberge Communities, L.P.
In September 1995, with the consent of Limited Partners holding a majority of
the outstanding Units, as well as the consent of the mortgage lenders for the
Partnership's three properties, Richard G. Berry resigned as a general partner
of the Partnership.
GP L'Auberge Communities, L.P.
Information as to the directors and executive officers of L'Auberge Communities,
Inc., a general partner of GP L'Auberge Communities, L.P., which is a general
partner of the Partnership, and its affiliates, is set forth below. There are no
familial relationships between or among any officer and any other officer or
director.
Name Position
Stephen B. Boyle See above
Earl C. Robertson Executive Vice President and Chief Financial
Officer
Donna Popke Vice President and Secretary
Earl C. Robertson, age 48, has been a senior development officer, partner and
consultant in several prominent real estate development companies for over
twenty years, including Potomac Investment Associates, developers of planned
golf course communities nationwide. Mr. Robertson was also a key member of the
management team that developed the nationally acclaimed Inn at the Market in
Seattle. He joined L'Auberge Communities, Inc. in June 1995.
Donna Popke, age 37, joined L'Auberge Communities, Inc. in July, 1995 and holds
the title of Vice President and Secretary. Prior to joining L'Auberge
Communities, Inc., Ms. Popke was employed by Olive & Associates in the field of
public accounting for six years and later from 1989 to 1995 with David R. Sellon
& Company, a Colorado Springs land development company.
ITEM 11. EXECUTIVE COMPENSATION
None of the General Partners or any of their officers or directors received any
compensation from the Partnership. See Item 13 below with respect to a
description of certain transactions of the General Partners and their affiliates
with the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 21, 1997, no person of record owned or was known by the General
Partners to own beneficially more than 5% of the Partnership's outstanding
Units. None of the General Partners nor any of their directors and officers owns
Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1996, the Partnership paid or accrued
remuneration to the General Partners or their affiliates as set forth below. In
addition to the information provided herein, certain transactions are described
in Notes 7 and 8 in the Notes to Consolidated Financial Statements appearing in
Appendix A, which are included in this report and are incorporated herein by
reference thereto.
Net Cash From 1996 Operations to be distributed
to the General Partners $11,584
Allocation of Loss to the General Partners ($2,296)
Property management fees paid to an affiliate of
the General Partners $37,735
Reimbursements to General Partners $35,441
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1,2 See Page F-2
3 See Exhibit Index contained herein
(b) Reports on Form 8-K
The Partnership has not filed, and was not required to
file, any reports on Form 8-K during the last quarter of
1996
(c) See Exhibit Index contained herein
(d) See Page F-2.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P., A California Limited Partnership,
General Partner
By: L'Auberge Communities, Inc., its General Partner
By: ____/s/ Earl C. Robertson________________
Earl C. Robertson, Executive Vice President and
Chief Financial Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
___/s/ Stephen B. Boyle _____ Director, President and March 26, 1997
--------------------
STEPHEN B. BOYLE Principal Executive
Officer of L'Auberge
Communities, Inc.
___/s/ Earl C. Robertson _ Executive Vice President and March 26, 1997
---------------------
EARL C. ROBERTSON Principal Financial Officer of
L'Auberge Communities, Inc.
<PAGE>
F-2
F-3
APPENDIX A
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
---------
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the year ended December 31, 1996
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1996 and 1995 ............... F-4
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 ........................................ F-5
Consolidated Statements of Partners' Equity (Deficit) for the years ended
December 31, 1996, 1995 and 1994 ........................................ F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 .................................. F-7 -- F-8
Notes to Consolidated Financial Statements .................... .... F-9 -- F-14
All Schedules are omitted as they are not applicable, not required, or the
information is provided in the financial statements or the notes thereto.
<PAGE>
Report of Independent Accountants
To the Partners of
Development Partners III
(A Massachusetts Limited Partnership):
We have audited the accompanying consolidated balance sheets of
Development Partners III (A Massachusetts Limited Partnership) and subsidiaries
as of December 31, 1996 and 1995, the related consolidated statements of
operations, partners' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the General Partners of the Partnership. 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 the
General Partners of the Partnership, 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 consolidated financial position of
Development Partners III (A Massachusetts Limited Partnership) and subsidiaries
as of December 31, 1996 and 1995, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Denver, Colorado
February 28, 1997
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------
F-18
F-19
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
---------------
ASSETS
<TABLE>
1996 1995
---- ----
Property, at cost
<S> <C> <C>
Land $2,976,101 $2,976,100
Buildings and improvements 7,648,060 7,648,060
Equipment, furnishings and fixtures 995,909 839,894
--------------- ----------------
11,620,070 11,464,054
Less accumulated depreciation (1,996,504) (1,752,197)
--------------- ----------------
9,623,566 9,711,857
Cash and cash equivalents 531,778 367,213
Short-term investments 746,532
-
Real estate tax escrow 24,268 23,685
Deposits 1,950 -
Deferred expenses, net of accumulated
amortization of $100,918 and $78,492 11,212 33,638
=============== ================
Total assets $10,192,774 $10,882,925
=============== ================
LIABILITIES AND PARTNERS' EQUITY
Mortgage note payable $6,885,673 $6,994,549
Accounts payable and accrued expenses 208,425 103,070
Due to affiliates (Note 8) 3,012 5,318
Tenant security deposits 24,834 33,860
Rents received in advance 3,507 -
Minority Interest 1,252,041 1,556,486
--------------- ----------------
Total liabilities 8,377,492 8,693,283
Partners' equity 1,815,282 2,189,642
--------------- ----------------
Total liabilities and $10,192,774 $10,882,925
partners' equity
=============== ================
</TABLE>
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
1996 1995 1994
---- ---- ----
Revenue:
<S> <C> <C> <C>
Rental income $1,361,622 $1,579,782 $1,544,449
Interest Income 41,048 62,416 42,863
------------- --------------- ----------------
1,402,670 1,642,198 1,587,312
Expenses:
Operating Expenses 668,878 561,516 521,969
Interest 633,360 642,857 651,528
Depreciation and amortization 266,730 375,234 373,739
General and administrative 147,374 73,095 54,727
------------- --------------- ----------------
1,716,342 1,652,702 1,601,963
------------- --------------- ----------------
Net loss before minority interest (313,672) (10,504) (14,651)
Minority interests' equity in
subsidiary net (income) loss 84,114 (16,975) (10,408)
------------- --------------- ----------------
Net loss ($229,558) ($27,479) ($25,059)
============= =============== ================
Net loss allocated to:
General Partners ($2,296) ($275) ($251)
Per unit net loss of Investor Limited Partner interest:
7,401 Units issued ($30.71) ($3.68) ($3.35)
</TABLE>
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1993 ($10,110) $2,537,694 $2,527,584
Cash distributions (10,554) (121,376) (131,930)
Net loss (251) (24,808) (25,059)
------------- --------------- ----------------
Balance at December 31, 1994 (20,915) 2,391,510 2,370,595
Cash distributions (12,115) (141,359) (153,474)
Net loss (275) (27,204) (27,479)
------------- --------------- ----------------
Balance at December 31, 1995 (33,305) 2,222,947 2,189,642
Cash distributions (11,584) (133,218) (144,802)
Net loss (2,296) (227,262) (229,558)
------------- --------------- ----------------
Balance at December 30, 1996 ($47,185) $1,862,467 $1,815,282
============= =============== ================
</TABLE>
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Interest received $56,920 $59,849 $32,665
Cash received from rents 1,356,103 1,579,281 1,548,035
General and administrative expenses (144,439) (77,117) (42,680)
Operating expense (580,518) (549,753) (522,483)
Interest paid (633,774) (643,235) (651,873)
------------- --------------- ----------------
Net cash provided by operating 54,292 369,025 363,664
activities
Cash flows from investing activities:
Purchase of fixed assets (156,015) (47,771) (8,778)
Cash (paid for) received from short-term investments 730,660 272,724 (52,701)
------------- --------------- ----------------
Net cash provided (used) by investing 574,645 224,953 (61,479)
activities
Cash flows from financing activities:
Distributions to partners (133,218) (153,474) (131,930)
Payments on mortgage note payable (108,873) (99,414) (90,776)
Distributions paid to minority (220,331) (86,112) (173,160)
interest
Cash paid for deposits (1,950) - -
------------- --------------- ----------------
Net cash used by financing activities (464,372) (339,000) (395,866)
------------- --------------- ----------------
Net increase (decrease) in cash and cash equivalents 164,565 254,978 (93,681)
Cash and cash equivalents at beginning of 367,213 112,235 205,916
year
------------- --------------- ----------------
Cash and cash equivalents at end of $531,778 $367,213 $112,235
year
============= =============== ================
Non cash financing activities:
Accrual of distribution to $11,584
Partners
</TABLE>
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
Reconciliation of net loss to net cash provided by operating activities:
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net loss ($229,558) ($27,479) ($25,059)
Adjustments to reconcile net loss to net
cash
provided by operating activities:
Depreciation and amortization 266,730 375,234 373,739
Minority interests' equity in subsidiary income (loss) (84,114) 16,975 10,408
Change in assets and liabilities net of effects of investing and financing
activities:
Decrease (increase) in interest 15,871 (2,567) (10,198)
receivable
Decrease (increase) in real estate tax (583) 3,748 7,909
escrow
(Decrease) increase in accounts
payable and accrued expenses 93,771 10,168 (7,861)
(Decrease) increase in due to (2,306) (6,553) 11,140
affiliates
(Decrease) increase in rents received in advance 3,507 (101) 101
(Decrease) increase in tenant security deposits (9,026) (400) 3,485
------------- --------------- ----------------
Net cash provided by operating $54,292 $369,025 $363,664
activities
============= =============== ================
</TABLE>
<PAGE>
1. Organization of Partnership
Development Partners III (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners III, was formed on
July 11, 1988. GP L'Auberge Communities, L.P., a California Limited Partnership
(formerly Berry and Boyle Management) and Stephen B. Boyle are the General
Partners. In September, 1995, with the consent of Limited Partners holding a
majority of the outstanding Units, as well as the consent of the mortgage
lenders for the Partnership's three properties, Richard G. Berry resigned as a
general partner of the Partnership. Except under certain limited circumstances
upon termination of the Partnership, the General Partners are not required to
make any additional capital contributions. The General Partners or their
affiliates will receive various fees for services and reimbursement for various
organizational and selling costs incurred on behalf of the Partnership.
On January 13, 1989 the Securities and Exchange Commission declared the
Partnership's public offering (the "Prospectus") of up to 80,000 units of
Limited Partnership Interests at $500 per unit (the "Units") effective and the
marketing and sale of the Units commenced shortly thereafter. The initial
closing of the offering took place on December 28, 1989 at which time the
holders of 3,048 Units were admitted into the Partnership. The Partnership
continued to admit subscribers monthly thereafter until December 27, 1991, its
last closing date. The Partnership terminated the offering on January 13, 1992
having admitted 289 investors acquiring 7,401 Units totaling $3,700,500.
The Partnership will continue until December 31, 2018, unless earlier terminated
by the sale of all, or substantially all, of the assets of the Partnership, or
as otherwise provided in the Partnership Agreement.
2. Significant Accounting Policies
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiary Casabella Associates. All intercompany
accounts and transactions have been eliminated in consolidation. The
Partnership follows the accrual basis of accounting. Refer to Note 5
regarding the termination of the Casabella Joint Venture.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Short-term Investments
At December 31, 1995, short term investments consisted solely of
various forms of U. S. Government backed securities, with an aggregate
par value of $750,000, which matured in February 1996. As of December
31, 1996 there were no short term investments. Investments are recorded
at amortized cost, which approximates market value
D. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
E. Depreciation
Depreciation is provided for by the use of the straight-line method
over the estimated useful lives as follows:
Buildings and improvements ................. 39-40 years
Equipment, furnishings and fixtures .. ..... 5-15 years
F. Deferred Expenses
Costs of obtaining the mortgage on Casabella are being amortized over
the mortgage term using the straight-line method, which approximates
the effective interest method. Any unamortized costs remaining at the
date of refinancing are expensed in the year of refinancing.
G. Income Taxes
The Partnership is not liable for Federal or state income taxes because
Partnership income or loss is allocated to the Partners for income tax
purposes. If the Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and such an examination
results in a change in Partnership taxable income (loss), such change
will be reported to the Partners.
H. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
I. Reclassification
Certain items in the financial statements for the years ended December
31, 1995 and 1994 have been reclassified to conform to the 1996
presentation
J. Long-Lived Assets
The Partnership's long-lived assets include property and equipment. On
a quarterly basis, the Partnership evaluates the recoverability of the
rental property, using undiscounted cash flows from operations.
<PAGE>
<TABLE>
Property, at cost, consisted of the following at December 31, 1996:
Initial Cost Costs Capitalized Amount at Which Carried
to Subsequent to At Close of Period
Partnership Acquisition
------------------------------------ ----------------------------------- -------------------------------
Buildings Equipment, Buildings Equipment, Buildings Equipment,
Property and Furnishings and Furnishings and Furnishings
Description Land Improv. & Fixtures Land Improv. & Fixtures Land Improv. & Fixtures Total
- ---------------------------------------------------- --------------------------------- -----------------------------------------
Casabella a 154-unit
residential rental
complex
located in
Scottsdale,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Arizona $2,976,101 $7,639,160 $782,784 - $8,900 $213,125 $2,976,101 $7,648,060 $995,909 $11,620,070
Depreciation expense for the years ended December 31, 1996, 1995, and 1994, and accumulated
depreciation at December 31, 1996 and 1995, consisted of the following:
</TABLE>
<TABLE>
Accumulated Depreciation
Depreciation Expense December 31,
1996 1995 1994 1996 1995
<S> <C> <C> <C> <C> <C>
Buildings and improvements $190,254 $191,202 $191,202 $1,149,637 $959,383
Equipment, furnishings and fixtures $54,053 161,609 157,547 846,867 792,814
--------------------------------------------------------------
$244,307 $352,811 $348,749 $1,996,504 $1,752,197
==============================================================
</TABLE>
Casabella is encumbered by a nonrecourse mortgage note payable (see Note 6).
<PAGE>
4. Cash and cash equivalents
Cash and cash equivalents at December 31, 1996 and 1995 consisted of the
following:
1996 1995
-------- --------
Cash on hand ............................... $213,574 $ 35,935
Certificates of deposit .................... 318,204 200,000
Money market accounts ...................... -- 131,278
--------
$531,778 $367,213
======== ========
5. Joint Venture and Partnership Acquisitions
On September 28, 1990, the Partnership acquired a majority interest in Casabella
Associates, a general partnership comprised of the Partnership, Development
Partners (A Massachusetts Limited Partnership) ("DPI"), formerly Berry and Boyle
Development Partners, and Development Partners II (A Massachusetts Limited
Partnership) ("DPII"), formerly Berry and Boyle Development Partners II.
Casabella Associates was formed to acquire a majority interest in the Casabella
Joint Venture which owns Casabella, a 154-unit residential property located in
Scottsdale, Arizona. Since the Partnership owns a majority interest in Casabella
Associates, the accounts and operations of Casabella Associates (including the
accounts and operations relating to Casabella Associates' majority interest in
the Casabella Joint Venture) have been consolidated into the Partnership.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI
also the developed the property known as Casabella.
At December 31, 1996, the Partnership, DPI and DPII had contributed $2,500,000,
$400,000 and $1,800,000, respectively to Casabella Associates. Of the total
contributions, $3,845,154 was used to purchase the majority interest in the
Casabella Joint Venture referred to in the preceding paragraph and $500,000 was
used to fund an escrow account maintained by the permanent lender. In addition
to the $4,700,000 of cash contributions referred to above, the Partnership, DPI
and DPII collectively incurred $280,930 of acquisition costs which have been
recorded as additional capital contributions to Casabella Associates.
The Partnership has invested in a single property located in Scottsdale,
Arizona. The success of the Partnership will depend upon factors which are
difficult to predict including general economic and real estate market
conditions, both on a national basis and in the area where the Partnership's
investment is located.
JANUARY 1, 1996 THROUGH MAY 13, 1996:
Cash distributions and allocations of income and loss from Casabella Associates
are governed by the partnership agreement and are generally based on the ratio
of capital contributed by each of the joint venture partners.
Net cash from operations of the Casabella Joint Venture, to the extent
available, shall be distributed not less often than quarterly with respect to
each fiscal year, as follows:
(A) First, to Associates, an amount equal to a 10.6% per annum
(computed on a simple noncompounded daily basis from the date
of the closing) of their capital investment;
(B) Second, the balance 70% to Associates and 30% to the property
developer.
All losses from operation and depreciation for the Casabella Joint Venture were
allocated 99.5% to Associates and 0.5% to the property developer.
All profits from operations of the Casabella Joint Venture were allocated in
accordance with distributions of net cash from operations; provided, however,
that if any fiscal year has no distributable net cash from operations, profits
will be allocated 99.5% to Associates and 0.5% to the property developer.
In the case of certain capital transactions and distributions as defined in the
Casabella joint venture agreement, the allocation of related profits, losses and
cash distributions, if any, would be different than as described above and would
be effected by the relative balance in the individual partners' capital
accounts.
MAY 14, 1996 THROUGH DECEMBER 31, 1996:
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI")
which separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of Casabella.
The Partnership, DPI, and DPII paid $109,741 to EWI ($38,345 of which was the
partnership's portion) and delivered certain mutual releases. EWI (i)
relinquished its contract to manage Casabella and its option to exercise its
rights to first refusal with regard to the sale of the property and (ii)
assigned all of its interest in the Casabella Joint Venture to the Partnership,
DPII and DPIII (while preserving the economic interest of the venture in these
Joint Ventures), which resulted in the dissolution of the Casabella Joint
Venture. EWI may still share in the cash flow distributions or the proceeds from
sale of the properties if certain performance levels are met.
6. Mortgage Note Payable
All of the property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage note payable pertaining to Casabella in the original
principal amount of $7,320,000. Under the terms of the note, monthly principal
and interest payments of $61,887, based on a fixed interest rate of 9.125%, are
required over the term of the loan. The balance of the note will be due on July
15, 1997. As these mortgage notes payable are due in fiscal 1997, the
partnership will seek to renegotiate these mortgage notes with its existing
lenders or seek new sources of financing for these properties on a long term
basis. The General Partners believe that existing cash flows from the properties
will be sufficient to support a level of borrowing that is at least equal to
amounts outstanding as of December 31, 1996. If the general economic climate for
real estate in these respective locations were to deteriorate resulting in an
increase in interest rates for mortgage financing or a reduction in the
availability of real estate mortgage financing or a decline in the market values
of real estate it may affect the Partnership's ability to complete these
refinancings.
Accrued interest included in accrued expenses on the Balance Sheets of the
Consolidated Financial Statements at December 31, 1996 and 1995, consisted of
$26,180 and $26,594, respectively.
The principal balance of the mortgage note payable appearing on the consolidated
balance sheets approximates the fair value of such note at December 31, 1996 and
1995.
7. Partners' Equity
Under the terms of the Partnership Agreement, as amended, profits are allocated
92% to the Limited Partners and 8% to the General Partners; losses are allocated
99% to the Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 92% to the Limited Partners and 8% to the
General Partners.
In the case of certain events as defined in the Partnership Agreement, such as
the sale of an investment property or an interest in a joint venture
partnership, the allocation of the related profits, losses, and distributions,
if any, would be different than described above.
8. Related Party Transactions
Due to affiliates at December 31, 1996 and 1995 consisted of $3,012 and $5,318,
respectively, of reimbursable costs payable to L'Auberge Communities, Inc.,
formerly Berry and Boyle Inc.
In 1996, 1995 and 1994, general and administrative expenses included $35,441,
$29,304, and $22,271, respectively, of salary reimbursements paid to the General
Partners for certain administrative and accounting personnel who performed
services for the Partnership.
The officers and principal shareholders of Evans Withycombe, Inc., the developer
of Casabella, together hold a two and one half percent cumulative profit or
partnership voting interest in LP L'Auberge Communities, formerly Berry and
Boyle.
During the years ended December 31, 1996, 1995 and 1994, property management
fees of $37,735, $78,663, and $77,227, respectively, were paid to Evans
Withycombe, Inc. This represents 5% of the rental revenues. From November 16,
1996 to December 31, 1996, Residential Services-L'Auberge, an affiliate of the
General Partner, was paid 4% of the rental revenue for management fees in the
amount of $6,612.
<PAGE>
EXHIBIT INDEX
Exhibit
Number
(4)(a)(1) Amended and Restated Certificate and Agreement of Limited
Partnership (included as an exhibit to the Partnership's Form
10-K for the year ended December 31, 1989, and incorporated
herein by reference).
(4)(a)(2) Fifteenth Amendment to the Amended and Restated Certificate and
Agreement of Limited partnership dated January 13, 1991.
(4)(b) Subscription Agreement included as Exhibit B to Prospectus
contained in Amendment No. 2 to the Partnership's Registration
Statement No. 33-23240 filed and declared effective January 13,
1989, and incorporated herein by reference.
(10)(a) Agreement of Joint Venture of Casabella Associates dated September
27, 1990 (filed as Exhibit (10)(f) to the Form 10-K of Berry and
Boyle Development Partners for the year ended December 31, 1990,
and incorporated herein by reference).
(10)(b) Documents pertaining to the $7,300,000 permanent loan for
Casabella Joint Venture (filed as an exhibit to the Form 10-K of
Berry and Boyle Development Partners for the year ended December
31, 1991, and incorporated herein by reference).
(10)(c) Property Management Agreement between Casabella Associates and
L'Auberge Communities Inc. dated November 1, 1996.
(10)(d) Agreement regarding Casabella Joint Venture
(27) Financial Data Schedule
<PAGE>
PROPERTY MANAGEMENT AGREEMENT
(Casabella)
THIS AGREEMENT is made as of this 1st day of November, 1996, by and
between L'AUBERGE COMMUNITIES INC., a California corporation ("Agent"), and
CASABELLA ASSOCIATES, an Arizona joint venture partnership ("Owner"), with
reference to the following:
A. Owner owns certain real property located in Scottsdale, Arizona, as
more particularly described on Exhibit "A" attached hereto (the "Site"), upon
which 154 apartment units (the "Units") have been constructed. (The Site, Units
and all improvements relating to or connected with the Units, together with all
appurtenances, fixtures and equipment and all rights and privileges now or
hereafter contained in, belonging to or in any way pertaining or beneficial to
any of the foregoing, whether or not attached to the Site or the Units, are
sometimes hereinafter collectively referred to as the "Property.")
B. Agent possesses the organization and skills necessary to discharge
its obligations hereunder.
C. Owner desires to employ Agent, and Agent desires to be
employed by Owner, for the orderly management and operation of the Property
on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Appointment of Manager.
Owner hereby appoints Agent as Owner's exclusive
representative, manager and agent for the purposes of managing, maintaining, and
operating the Property for the account of Owner during the term of this
Agreement and upon the terms and conditions set forth below.
2. Term.
The term of this Agreement shall commence on the date first
set forth above (the "Commencement Date") and Agent's obligations ("Agent's
Management Obligations") pursuant to this Agreement shall expire in accordance
with the provisions of Paragraph 9 below.
<PAGE>
3. Agent's Duties.
a. Agent agrees to perform the following duties on behalf
of Owner:
(i) To accept and does hereby accept the management
of the Property for the period and upon the terms herein provided, and
agrees to furnish the services of its organization for the renting,
operating and managing of the Property, and to do and perform any and
all things in and about the management, maintenance and operation of
the Property customarily performed by agents of similar properties, in
a professional, reasonable, effective and efficient manner, subject
however to the provisions of Section 3(d) below;
(ii) [Intentionally deleted];
(iii) To aid, assist and cooperate in the matter
of real property taxes and insurance claim adjustments;
(iv) Subject to the provisions of Paragraph 8
below, to care for, place and supervise all insurance coverage;
(v) Subject to the provisions of Paragraph 8 below,
to render on or before the tenth (10th) day of each calendar month
during the term hereof, statements of receipts, expenses and charges
for the previous calendar month;
(vi) [Intentionally deleted];
(vii) To hire, discharge and supervise all labor and
employees ("Project Personnel") required for the operation and
maintenance of the Property (exclusive of employees retained to
undertake the activities described in Section 3(d) below), it being
agreed that all employees shall be deemed to be employees of Agent and
not of Owner, and that Agent may perform its duties through its
attorneys, agents and employees holding such licenses as may be
necessary or appropriate for the performance of such duties, but shall
not be responsible for their acts, defaults and negligence if
reasonable care has been exercised in their appointment, supervision
and retention;
(viii) To pay all expenses, including without limitation
mortgage payments, real estate and personal property taxes, insurance
premiums, licenses, fees and payroll taxes and other obligations of
Owner, incurred in connection with the Property during the term of this
Agreement, prior to their due dates;
(ix) To account for all deposits received from
tenants, and the excess of operating revenues over the sum of operating
expenses plus reserves established by Owner (or as otherwise approved
from time to time by Owner, provided that in any event such amount
shall not be less than the amount reasonably sufficient to pay all
accounts payable of the Property), to Owner; and
(x) To enter into any laundry, laundry machine and/or
vending machine leases and other personal property leases.
b. Agent shall establish operating procedures and
policies necessary to perform Agent's Management Obligations under this
Agreement.
c. Agent shall be authorized to make contracts for
electricity, gas, fuel, water, telephone, sweeping, cleaning and other similar
services or such of them as Agent, in its discretion, shall deem advisable.
d. Notwithstanding anything contained in this Section 3 or
elsewhere in this Agreement to the contrary, Agent shall not be responsible for,
nor shall Agent perform, any of the activities described in Arizona Revised
Statute ss. 32-2101.32, or any successor statute, which activities require an
Arizona real estate broker's or salesperson's license. These activities
presently include without limitation renting, offering to rent, or negotiating
the rental of real estate and collecting rents for the use of real estate. Owner
acknowledges that Agent does not have a real estate license in Arizona. Owner
and Agent further acknowledge that any natural person hired to undertake such
activities for the Property pursuant to A.R.S. ss. 32-2121.A.7 shall be employed
directly by Owner and shall be compensated directly by Owner.
4. Compensation.
During the term hereof, Owner agrees to pay to Agent on the
first day of each month a management fee (the "Property Management Fee") equal
to 4% of rents collected in the preceding month (including forfeited security
deposits and nonrefundable deposits and fees) as long as Agent's Management
Obligations have not been terminated, as compensation for Agent's management
services hereunder.
5. Operating Budget; Accounting.
a. Agent shall prepare an operating budget for the Property
for each calendar year during the term of this Agreement. Such operating budget
shall be prepared in consultation with Owner.
b. All monthly accounting functions for the Property,
including without limitation rent collection and the processing and payment of
accounts payable of the Property but excluding rent collection, shall be the
responsibility of Agent at Agent's sole cost and expense.
6. Bank Account.
Agent shall establish and maintain a separate trust account in
the name of Owner for the deposit of all monies collected from or in connection
with the operation of the Property. Agent shall have the authority to draw on
this account for any payments which Agent may make solely for the discharge of
any liabilities or obligations incurred pursuant to this Agreement, and for the
payment of the Property Management Fee, all of which payments shall be subject
to the limitations of this Agreement.
7. Records; Reports; Meetings; Remittance.
a. Agent shall maintain books of account on all receipts and
disbursements incurred in the management and operation of the Property, which
records shall, at all reasonable times, be open to inspection by Owner without
prior notice.
b. During the term of this Agreement, Agent shall
furnish to Owner, the following written reports:
(i) On a monthly basis, not later than ten (10) days
following the end of each calendar month, a detailed cash operating
report, showing all receipts and disbursements for the previous month;
and
(ii) On a monthly basis, not later than ten (10) days
following the end of each calendar month, a recapitulation of
delinquent rents and a rent roll.
c. All net cash flow from operations of the Property, after
establishment of Property operating reserves, shall be remitted to Owner by the
tenth (10th) day of the following calendar month.
8. Property Personnel; Insurance.
a. Subject to the provisions of Paragraph 3(a)(vii) above,
Agent shall hire or discharge on behalf of Owner all Property Personnel required
for the operation and maintenance of the Property exclusive of employees
retained to undertake the activities described in Section 3(d) above.
b. Owner shall maintain public liability insurance and have
Agent named as an additional insured in all such policies. The maintenance of
other insurance in connection with the Property shall be the responsibility of
Owner, but, upon the request of Owner, shall be supervised and implemented by
Agent, as hereinabove provided.
9. Termination.
Agent's Management Obligations may be terminated or modified
at any time as provided below:
a. If Owner shall sell or otherwise transfer title to
the Property (except in connection with a reorganization of Owner):
(i) Agent's Management Obligations shall
automatically terminate as of the date of closing of such sale or transfer; and
(ii) Owner shall pay to Agent any accrued but unpaid
Property Management Fees owing to Agent pursuant to this Agreement up
to the date of closing of such sale or transfer.
b. Either party shall have the right, by giving written notice
to the other party, to terminate Agent's Management Obligations without cause
effective upon thirty (30) days prior written notice and with cause effective
immediately upon delivery.
c. In the event Agent's Management Obligations are terminated
pursuant to Paragraph 9.b. above, Agent's right to receive the Property
Management Fee shall terminate as of the effective date of such termination. For
purposes hereof, "cause" shall mean, in addition to any material default or
breach by Agent under this Agreement, any act or omission which constitutes
negligence, willful malfeasance or fraud.
10. Settlement.
Upon the expiration or sooner termination of Agent's
Management Obligations, or in the event that, by mutual agreement of the
parties, on-site management of the Property is delegated to a third party:
a. Agent shall deliver and transfer to Owner or Owner's
designee all books, records, agreements, documents and instruments of whatsoever
nature pertaining to the Property maintained by Agent on behalf of Owner other
than those maintained by Agent in the course of its own day-to-day business, and
shall pay over to Owner or its designee all sums arising out of the operation of
the Property from the commencement of business operations thereat, including,
without limitation, all advance rent, security deposits, unused cleaning fees
and the like, less permitted expenses actually paid by such transferring party;
b. Owner shall pay to Agent any sums for which Agent is then
entitled to reimbursement hereunder, including those which Agent may have
theretofore advanced on behalf of Owner and for which Agent shall not have
theretofore received reimbursement.
11. Reimbursement.
Owner agrees to promptly reimburse Agent for any monies that
Agent may advance on behalf of or for the benefit of the Property or Owner if
such reimbursement may not reasonably be made from funds from the Property.
Notwithstanding the foregoing, Agent shall not be obligated to make any such
advances for the benefit of the Property or Owner.
12. Indemnity.
Owner hereby indemnifies and agrees to hold Agent harmless
from and against any and all suits, claims or costs incurred by Agent in any
actions brought by third parties in connection with the management of the
Property or this Agreement, and from any liability or injury suffered by third
parties in or on the Property, except for any such suits, claims or costs which
arise from or relate to any act or omission of Agent or its employees which
constitutes negligence, willful malfeasance or fraud, as to which Agent shall
indemnify and hold Owner harmless.
13. Notices.
All notices required to be given by either party to the other
shall be in writing and shall be deemed to have been properly given and
delivered when deposited in the United States mail, sent certified or
registered, return receipt requested, postage prepaid, or by commercial air
courier, addressed to the parties as follows:
If to Owner:
c/o L'Auberge Communities Inc.
5110 Langdale Way
Colorado Springs, Colorado 80906
Attention: Stephen B. Boyle
With a copy to:
Hughes Hubbard & Reed LLP
350 South Grand Avenue, Suite 3600
Los Angeles, California 90071-3442
Attention: George A. Furst, Esq.
If to Agent:
L'Auberge Communities Inc.
5110 Langdale Way
Colorado Springs, Colorado 80906
Attention: Stephen B. Boyle
With a copy to:
Hughes Hubbard & Reed LLP
350 South Grand Avenue, Suite 3600
Los Angeles, California 90071-3442
Attention: George A. Furst, Esq.
Such notices shall be effective upon delivery if delivered in person and either
upon actual receipt or three (3) days after mailing, whichever is earlier, if
delivered by mail.
14. Entire Agreement.
Except as otherwise specifically set forth herein, this
Agreement is the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements between the parties
with respect thereto. There have been no representations or warranties by either
party to the other except as expressly contained herein. No claim of waiver,
modification, consent or acquiescence with respect to any provision of this
Agreement shall be made against either party except on the basis of a written
instrument executed by or on behalf of such party.
15. Successors and Assigns.
This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties hereto. Agent may not
assign any of its rights, or delegate any of its duties, under this Agreement
without the prior written consent of Owner.
16. Exhibits.
All Exhibits referred to in this Agreement are expressly
incorporated herein by reference as though set forth in full.
17. Paragraph Headings.
The headings of the several paragraphs of this Agreement are
inserted solely for convenience of reference and are not a part of and are not
intended to govern, limit or aid in the construction of any term or provision
thereof.
18. Time.
Time is of the essence in the performance of this Agreement.
19. Authority.
All parties to this Agreement warrant and represent that they
have the power and authority to enter into this Agreement in the names, titles
and capacities herein stated and on behalf of any entities, persons, estates or
firms represented or purported to be represented by such persons, and shall
deliver to the other party such corporate resolutions, powers of attorney and
such other documents or instruments as shall be reasonably necessary to evidence
such authority.
<PAGE>
20. Governing Law.
This Agreement is to be governed by and construed in
accordance with the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
effective the day and year first above written.
AGENT: OWNER:
L'AUBERGE COMMUNITIES INC., CASABELLA ASSOCIATES,
a California corporation An Arizona Joint Venture Partnership
By: By: Development Partners III
Stephen B. Boyle (A Massachusetts Limited Partnership)
President
By: GP L'Auberge Communities II L.P.,
a California limited partnership,
General Partner
By: L'Auberge Communities Inc.,
General Partner
By: ___________________
Stephen B. Boyle
President
AGREEMENT
(Casabella)
This Agreement is made and entered into as of March 29, 1996, by and
among Casabella Joint Venture, an Arizona joint venture partnership (the "Joint
Venture"), Casabella Associates, an Arizona joint venture partnership (the
"L'Auberge Venturer"), EW Casabella I Limited Partnership, an Arizona limited
partnership (the "EW Venturer") and Evans Withycombe Management, Inc., an
Arizona corporation ("Manager"), with reference to the following:
A. The L'Auberge Venturer and the EW Venturer formed the Joint Venture
by entering into that certain Joint Venture Agreement of Casabella Joint Venture
dated October 1, 1990 (as amended, the "Joint Venture Agreement"). The Joint
Venture owns that certain multi-family residential project (the "Project")
located at 10101 North Arabian Trail, Scottsdale, Arizona, and commonly known as
Casabella Apartments. Each of the L'Auberge Venturer and the EW Venturer now
desires to effectuate the amicable and mutual dissolution and termination of the
Joint Venture through an assignment by the EW Venturer of all of its right,
title and interest in the Joint Venture to the L'Auberge Venturer on the terms
and conditions hereinafter set forth.
B. The Joint Venture and Manager entered into those certain Property
Management Agreements (as they may have been amended, the "Property Management
Agreement") dated December 29, 1989, and October 3, 1990, with respect to the
Project whereby the Joint Venture engaged Manager to manage the Project on the
terms and conditions more particularly set forth therein. Each of the Joint
Venture and Manager now desires to effectuate the termination of the Property
Management Agreement on the terms and conditions hereinafter set forth.
C. The Project is encumbered by a Deed of Trust and Security Agreement
dated June 25, 1993 (the "Deed of Trust"), securing certain indebtedness of the
Joint Venture in favor of The Lincoln National Life Insurance Company
("Lender"). Under the provisions of the Deed of Trust, the Joint Venture is
required to obtain Lender's consent to the termination of Manager, and the
appointment of a successor, as manager of the Project.
D. The L'Auberge Venturer has inspected the Project in order to
determine the physical, operational and financial condition thereof and
acknowledges that it has approved the result of such inspection except as
otherwise provided in Paragraph 4(b) below.
E. Concurrently herewith, various other entities affiliated with the
L'Auberge Venturer and the EW Venturer are entering into other agreements
(collectively, the "Other Agreements") pertaining to other joint ventures and
containing substantially the same provisions as this Agreement. The Other
Agreements and this Agreement are collectively referred to herein as the
"Agreements." The parties contemplate that the closings with respect to each of
the Agreements shall be conditions concurrent and shall occur simultaneously.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Termination of Property Management Agreement.
(a) At the Closing (hereinafter defined), Manager, on the one hand, and
the Joint Venture and the L'Auberge Venturer, on the other hand, shall enter
into a Termination Agreement in the form attached hereto as Exhibit A and
incorporated herein by this reference, and the Joint Venture shall pay to
Manager accrued compensation in accordance with the provisions of the
Termination Agreement.
(b) Prior to the Closing, Manager shall continue to manage the Project
in the same manner and with the same quality as the Project has been managed
prior to the execution hereof (and in any event in compliance with the terms and
conditions of the Property Management Agreement) and shall be entitled to
receive a Property Management Fee in accordance therewith.
2. Termination of Right of First Refusal.
At the Closing, the EW Venturer shall terminate its right of first
refusal with respect to the Project by executing and delivering that certain
First Amendment to Joint Venture Agreement of Casabella Joint Venture (the
"Amendment"), in the form attached hereto as Exhibit B and incorporated herein
by this reference.
3. Assignment of Joint Venture Interest; Dissolution and Termination of
Joint Venture.
(a) At the Closing, the EW Venturer shall assign all of its right,
title and interest in and to its interest in and to the Joint Venture and in, to
and under the Joint Venture Agreement to the L'Auberge Venturer by executing and
delivering that certain Assignment of Joint Venture Interest (the "Assignment")
in the form attached hereto as Exhibit C and incorporated herein by this
reference, except as provided in Paragraph 4(a) below. Following such
assignment, the EW Venturer shall have no right to participate in any manner in
the management or control of the Joint Venture or the Project and shall be
released from any liability with respect to the ownership or operation of the
Project accruing and arising from and after the Closing, notwithstanding the
provisions of Paragraph 3(b) below.
(b) Concurrently with such assignment, the L'Auberge Venturer and the
Joint Venture, on the one hand, and the EW Venturer, on the other hand, shall
execute and deliver that certain Partnership Interest Payment Agreement in the
form attached hereto as Exhibit D and incorporated herein by this reference.
(c) Immediately following such assignment, the L'Auberge Venturer shall
hold one hundred percent (100%) of the interest in the Joint Venture and shall
cause the dissolution and termination thereof by filing or recording such
documents (including without limitation a Termination of Certificate of
Fictitious Name and Notice of Dissolution of Casabella Joint Venture (the
"Termination") in the form attached hereto as Exhibit E and incorporated herein
by this reference) and/or taking such other steps as may be necessary or
appropriate in that regard.
4. Conditions to Closing.
(a)No later than the execution of this Agreement, the Joint Venture
shall solicit the consent of Lender to the transactions contemplated
hereby to the extent that such consent is required under the Deed of
Trust. The Joint Venture and the L'Auberge Venturer shall use
reasonable efforts (but shall not be required thereby to incur any
material cost or expense) to obtain such consent, to furnish Lender
with all required financial or other information requested by Lender in
connection with such consent and to obtain a written acknowledgment
from Lender that the loan with respect to which such consent is being
sought will not continue to apply against Lender's lending limit
applicable to Evans Withycombe Management, Inc., an Arizona corporation
("EWM"), or its affiliates following the assignment of the EW
Venturer's interest in the Joint Venture to the L'Auberge Venturer and
the dissolution of the Joint Venture. The Closing shall be subject to
receipt of Lender's written consent pursuant to such solicitation for
consent and the written consent of Lender and John Hancock Mutual Life
Insurance Company ("John Hancock") pursuant to all similar
solicitations being made concurrently herewith by various affiliates of
the Joint Venture under the Other Agreements. If such consents shall
not have been received by the Joint Venture on or before October 1,
1996 (the "Outside Closing Date"), this Agreement shall terminate
without liability of any party to the other hereunder on account of
such termination; provided, however, that in the event John Hancock
shall have failed or refused to give its consent to any of the other
transactions under one or more of the Other Agreements on or before the
Outside Closing Date but all other conditions to the Closing hereunder
shall have been satisfied, the transactions contemplated hereby shall
be consummated as set forth elsewhere in this Agreement.
(b) Prior to the execution hereof, the Joint Venture has commenced an
evaluation of the environmental condition of the Project. The approval by the
Joint Venture of the environmental condition of the Project as disclosed in such
evaluation shall be a condition to the Closing unless the Joint Venture waives
such condition in writing on or before March 31, 1996. Failure by the Joint
Venture to approve the evaluation or waive the condition on or before March 31,
1996, in either case in writing, shall be deemed a disapproval and shall result
in a termination of this Agreement without liability of any party to the other
hereunder on account of such termination. No partial or condition waivers or
approvals shall be made or given. In the event such condition is neither
satisfied nor waived on or before March 31,
<PAGE>
1996, the Joint Venture shall immediately notify Lender thereof and withdraw its
request for consent described in Paragraph 4(a) above.
5. Payment of Settlement Amount.
At the Closing, the Joint Venture and the L'Auberge Joint Venturer
shall pay, or cause to be paid, to the EW Venturer and to Manager an amount (the
"Settlement Amount") which shall be equal to the excess of $500,000 over the
aggregate of the Settlement Amounts payable to the EW Venturer and Manager so
denominated in the Other Agreements; provided, however, that the total amount
payable to EWM under all of the Agreements shall be $500,000. The payment of the
Settlement Amount shall be made by confirmed wired funds or cashier's check to
EWM, as collection agent for the EW Venturer and Manager. The EW Venturer and
Manager, by their execution of this Agreement, hereby appoint EWM to act as
their agent for purposes of collecting and distributing the Settlement Amount,
and EWM, by its execution of this Agreement, hereby accepts such appointment.
6. Mutual Release.
At the Closing, the Joint Venture and the L'Auberge Venturer, on the
one hand, and the EW Venturer and Manager, on the other hand, shall execute and
deliver that certain Mutual Release in the form attached hereto as Exhibit F and
incorporated herein by this reference.
7. Closing.
(a) The Closing shall take place at the offices of Ryley, Carlock &
Applewhite, at 101 North First Avenue, Suite 2700, Phoenix, Arizona 85003, on
the third (3rd) business day following the satisfaction of the conditions to the
Closing enumerated in Paragraph 4 above (or waiver of the condition in Paragraph
4(b) above if such condition shall have been waived on or before March 31, 1996)
or on such earlier date as may be mutually agreeable to the parties hereto. If
such conditions are not satisfied or waived on or before the Outside Closing
Date, this Agreement and all obligations of the parties hereto shall
automatically terminate and be of no further force and effect.
(b) At the Closing, the parties shall cause the following to occur:
(i) The Joint Venture, the L'Auberge Joint Venturer and
Manager shall each execute and deliver the Termination Agreement.
(ii) The L'Auberge Venturer and the EW Venturer shall each
execute and deliver the Amendment.
(iii) The EW Venture and the L'Auberge Venturer shall each
execute and deliver the Assignment.
(iv) The L'Auberge Venturer shall execute and deliver the
Termination for recordation.
(v) The EW Venturer and the L'Auberge Venturer shall each
execute and deliver the Partnership Interest Payment Agreement.
(vi) The Joint Venture and the L'Auberge Venturer shall
deliver or cause to be delivered the Settlement Amount to EWM for the
benefit of the EW Venturer and Manager.
(vii) The Joint Venture, the L'Auberge Venturer, the EW
Venturer and Manager shall each execute and deliver the Mutual Release.
8. Representations and Warranties.
(a) The L'Auberge Venturer, for itself and the Joint Venture,
represents and warrants to the EW Venturer as follows:
(i) Each of the recitals set forth above is true and correct.
(ii) The L'Auberge Venturer is the Managing Venturer of the
Joint Venture and has not assigned, transferred, encumbered or
hypothecated all or any portion of its interest in the Joint Venture.
(iii) The Joint Venture and the L'Auberge Venturer each has the
legal power and authority, by and through those persons executing this
Agreement, to enter into this Agreement and to consummate the
transactions contemplated hereby, subject to the receipt of the consent
of Lender as provided in Paragraph 4 above.
(iv) Each of the Agreements contemplated hereby will when
executed be a valid and binding obligation of the Joint Venture and the
L'Auberge Venturer and will be enforceable in accordance with its
terms, subject to and limited by the effect of applicable bankruptcy,
insolvency, fraudulent transfer or conveyance, reorganization,
receivership, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights of creditors generally.
(v) No consent of any person related to or affiliated with
the L'Auberge Venturer which is not party to this Agreement, no consent
of any governmental authority and no additional consent other than
those which have already been or prior to the Closing will be obtained
is required to be obtained in connection with or resulting from the
execution, delivery or performance of this Agreement or the agreements
contemplated hereby by the L'Auberge Venturer.
(vi) The L'Auberge Venturer has not filed nor had filed
against it a petition in bankruptcy, made an assignment for the benefit
of creditors or had a receiver appointed to take custody of all or
substantially all of its assets.
(b) The EW Venturer and Manager each represent and warrant to the
Joint Venture and the L'Auberge Venturer as follows:
(i) Each of the recitals set forth above is true and correct.
(ii) The EW Venturer has not assigned, transferred,
encumbered or hypothecated all or any portion of its
interest in the Joint Venture.
(iii) Manager and the L'Auberge Venturer each has the legal
power and authority, by and through those persons executing this
Agreement, to enter into this Agreement and to consummate the
transactions contemplated hereby, subject to the receipt of the consent
of Lender as provided in Paragraph 4 above.
(iv) Each of the Agreements contemplated hereby will when
executed be a valid and binding obligation of Manager and the EW
Venturer and will be enforceable in accordance with its terms, subject
to and limited by the effect of applicable bankruptcy, insolvency,
fraudulent transfer or conveyance, reorganization, receivership,
moratorium or other similar laws now or hereafter in effect relating to
or affecting the rights of creditors generally.
(v) No consent of any person related to or affiliated with
the EW Venturer or Manager which is not party to this Agreement, no
consent of any governmental authority and no additional consent other
than those which have already been or prior to the Closing will be
obtained is required to be obtained in connection with or resulting
from the execution, delivery or performance of this Agreement or the
agreements contemplated hereby by the EW Venturer or Manager.
(vi) The EW Venturer has not filed nor had filed against it a
petition in bankruptcy, made an assignment for the benefit of creditors
or had a receiver appointed to take custody of all or substantially all
of its assets.
(vii) Neither the EW Venturer nor Manager has any actual
knowledge of any fact, condition or circumstance related to the
physical, environmental, operational and/or financial condition of the
Project that has not been disclosed in previous physical,
environmental, operational and/or financial reports prepared for or on
behalf of, and delivered to, the Joint Venture. Notwithstanding the
foregoing sentence, the representations and warranties of Manager and
the EW Venturer contained in this subparagraph (vii) shall not be
deemed to modify the provisions of the Property Management Agreement
between Manager and the Joint Venture or modify the provisions of any
development agreement, development obligations agreement or
construction agreement relating to the Project between the EW Venturer,
on the one hand, and the Joint Venture or the L'Auberge Joint Venturer,
on the other hand, including any express or implied warranties or
statutes of limitation relating thereto.
(c) The representations and warranties set forth herein have been made
as of the date hereof and shall be deemed to have been made as of the Closing
and shall survive the Closing.
9. General Provisions.
(a) Severability. The provisions of this Agreement shall be deemed
severable. If any provision hereof shall be found invalid, illegal, void or
unenforceable, in whole or in part, the remaining provisions or portions thereof
shall remain in full force and effect to the maximum extent permitted by
applicable law. To the maximum extent permitted by applicable law, each party
hereby waives any provision of law which renders any provision of this Agreement
invalid, illegal, void or unenforceable.
(b) Governing Law. This Agreement and all relations of the parties in
connection herewith shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to the conflict of laws or
choice of law rules or laws of such jurisdiction.
(c) Attorneys' Fees and Costs. In the event any party fails to perform
any of its obligations under this Agreement or in the event a dispute arises
concerning the meaning or interpretation of any provision of this Agreement, the
defaulting party or the party not prevailing in such dispute, as the case may
be, shall pay any and all costs and expenses incurred by the other party in
enforcing or establishing its rights hereunder, including, without limitation,
court costs and reasonable attorneys' fees. The prevailing party shall include,
without limitation, (i) a party who dismisses an action in exchange for sums
allegedly due, (ii) the party who received performance from the other party
where such performance is substantially equivalent to the relief sought in an
action, or (iii) the party determined to be the prevailing party by a court of
law, and the "party not prevailing" shall be the other party.
(d) Successors and Assigns. This Agreement set forth herein shall
be binding upon, and inure to the benefit of, any successors
and assigns of the parties.
(e) Entire Agreement; Modification. This Agreement set forth herein,
together with the schedules and exhibits attached hereto, shall constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior negotiations and agreements with respect to the
subject matter hereof. This Agreement may be modified only by an instrument in
writing duly executed by the party sought to be bound by such modification.
(f) Waivers. No breach of any covenant, condition, agreement, warranty
or representation made in this Agreement shall be deemed waived unless expressly
waived in writing by the party who might assert such breach. Any such waiver may
be made in advance or after the right waived has arisen or the breach or default
waived has occurred. Any such waiver may be conditional. No such waiver shall be
deemed to be a waiver of any other matter, whenever occurring and whether
identical, similar or dissimilar to the matter waived.
(g) Notices. All notices required or permitted by this Agreement shall
be in writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by regular certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 9(g). The address of the L'Auberge Venturer and the Joint
<PAGE>
Venture for notice purposes shall be as follows:
Mr. Stephen B. Boyle
Canyon View Apartments
6655 Canyon Crest Drive
Tucson, Arizona 85750
Attention: Rental Office
Facsimile No.: (520) 577-6703
With a copy to:
Hughes Hubbard & Reed
350 South Grand Avenue, Suite 3600
Los Angeles, California 90071-3442
Attention: George A. Furst, Esq.
Facsimile No.: (213) 613-2950
The address for the EW Venturer and Manager for notice purposes is as follows:
Evans Withycombe Management, Inc.
6991 East Camelback Road, Suite 200A
Scottsdale, Arizona 85251
Attention: Stephen Evans
Facsimile No.: (602) 423-8843
With a copy to:
Ryley, Carlock & Applewhite
101 First Avenue, Suite 2600
Phoenix, Arizona 85003-1973
Attention: Lynn T. Ziolko, Esq.
Facsimile No.: (602) 257-9582
Either party may by written notice to the other specify a different address for
notice purposes. A copy of all notices required or permitted to be given to
either party hereunder shall be concurrently transmitted to such party or
parties at such addresses as either party may from time to time hereafter
designate by written notice to the other.
Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by U.S. Postal Service Express Mail or overnight courier that guarantees next
day delivery shall be deemed given twenty-four (24) hours after delivery of the
same to the United States Postal Service or courier. If any notice is
transmitted by facsimile transmission or similar means, the same shall be deemed
served or delivered upon telephone confirmation of receipt of the transmission
thereof, provided that a copy is also delivered by delivery or mail. If any
notice is received on a Saturday, Sunday or legal holiday, it shall be deemed
received on the next business day.
(h) Further Agreements and Assurances. Each party agrees promptly to
execute and deliver such other documents and to do such other acts as may be
requested by any other party and are in the reasonable judgment of the
requesting party necessary or appropriate to effectuate the purposes of this
Agreement.
(i) Headings; Gender; Number. The headings of the sections and
subsections herein are inserted for convenience of reference only and are not
intended to be a part of, or to affect the meaning or interpretation of, this
Agreement. As used herein and as the context requires, a reference to the male,
female or neutral gender includes a reference to each other gender, and a
reference to the singular or plural number includes a reference to the other
number.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed to constitute an original.
(k) Default; Specific Performance. In the event that a party shall
default in the performance of any of its obligations or agreements hereunder,
the other party shall be entitled to specific performance of such obligations
and agreements by the defaulting party, in addition to any and all other
equitable and legal rights and remedies which such non-defaulting party may
have.
(l) No Admission. The parties hereto have entered into this Agreement
and entered into the negotiations that led to this Agreement, solely for the
purpose of compromising and settling various matters in dispute among the
parties. This Agreement, and the settlement negotiations that led to this
Agreement, however, shall not constitute an admission of any liability or
responsibility by any party as to any matter relating to the Joint Venture or
the Project.
(m) Nondisclosure of Terms. Each of the parties hereto hereby agrees
not to disclose the terms of this Agreement or the transactions contemplated
hereby to any person or entity (other than its respective partners, affiliates,
underwriters, agents, advisors, officers or employees who need to know such
information for the purpose of entering into and performing the obligations
under this Agreement or any other person or entity to whom such disclosure is
required by law), except (i) with the prior written consent of each of the other
parties hereto, (ii) in connection with any required financial accounting or
other required reporting or legal proceedings brought by any of the parties
hereto or their respective affiliates to enforce this Agreement or (iii) in
compliance with applicable legal requirements.
(n) Simultaneous Closing. Notwithstanding anything contained in
this Agreement or any of the Other Agreements to the contrary, the Closing shall
not occur unless there occurs the simultaneous closing of the transactions
described in the Other Agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CASABELLA JOINT VENTURE,
an Arizona joint venture partnership
By: Casabella Associates,
Managing Venturer
By: Development Partners III
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
General Partner
By: L'Auberge Communities Inc.,
General Partner
By: ____________________
Stephen B. Boyle
President
CASABELLA ASSOCIATES,
an Arizona joint venture partnership
By: Development Partners III
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
General Partner
By: L'Auberge Communities Inc.,
General Partner
By: ____________________
Stephen B. Boyle
President
[signatures continued.]
<PAGE>
EW CASABELLA I LIMITED PARTNERSHIP,
an Arizona limited partnership
By: EWI Management, Inc.,
an Arizona corporation,
its general partner
By: ________________________
Name: __________________
Title:__________________
EVANS WITHYCOMBE MANAGEMENT, INC., an Arizona corporation formerly known as
Evans Withycombe, Inc.
By: ____________________________
Name: ______________________
Title:______________________
The undersigned accepts its appointment as collection agent pursuant to
Paragraph 5 above:
EVANS WITHYCOMBE MANAGEMENT, INC.,
an Arizona corporation
By:
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 531,778
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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0
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