<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-10093
</TABLE>
RAMCO-GERSHENSON PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 13-6908486
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
27600 NORTHWESTERN HIGHWAY, SUITE 200, 48034
SOUTHFIELD, MICHIGAN (Zip code)
(Address of principal executive offices)
</TABLE>
248-350-9900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
Number of common shares of beneficial interest ($.01 par value) of the
Registrant outstanding as of June 30, 1999: 7,217,993
- --------------------------------------------------------------------------------
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets -- June 30, 1999 (unaudited) and
December 31, 1998......................................... 3
Consolidated Statements of Income (unaudited) -- Three
Months and Six Months Ended June 30, 1999 and 1998........ 4
Consolidated Statement of Shareholders' Equity
(unaudited) -- Six Months Ended June 30, 1999............. 5
Consolidated Statements of Cash Flows (unaudited) -- Six
Months Ended June 30, 1999 and 1998....................... 6
Notes to Consolidated Financial Statements (unaudited)...... 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
PART II. OTHER INFORMATION
ITEM 3. Submission of Matters to a Vote of Security Holders......... 17
ITEM 4. Exhibits and Reports on Form 8-K............................ 17
SIGNATURES........................................................... 18
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investment in real estate -- net (Note 2)................... $528,242 $509,844
Cash and cash equivalents................................... 3,049 4,550
Accounts receivable -- net.................................. 10,738 9,864
Equity investments in and advances to unconsolidated
entities.................................................. 5,769 5,896
Other assets -- net (Note 3)................................ 15,412 14,250
-------- --------
Total Assets........................................... $563,210 $544,404
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages and notes payable (Note 4)........................ $350,150 $328,248
Distributions payable....................................... 5,121 5,244
Accounts payable and accrued expenses....................... 14,945 15,235
-------- --------
Total Liabilities...................................... 370,216 348,727
Minority Interest........................................... 48,271 48,535
Commitments and Contingencies (Note 6)...................... -- --
SHAREHOLDERS' EQUITY
Preferred Shares, par value $.01, 10,000 shares authorized;
1,400 Series A convertible shares issued and outstanding,
liquidation value of $35,000.............................. 33,829 33,829
Common Shares of Beneficial Interest, par value $.01, 30,000
shares authorized; 7,218 issued and outstanding........... 72 72
Additional paid-in capital.................................. 151,973 151,973
Cumulative distributions in excess of net income............ (41,151) (38,732)
-------- --------
Total Shareholders' Equity............................. 144,723 147,142
-------- --------
Total Liabilities and Shareholders' Equity........ $563,210 $544,404
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Minimum rents....................................... $14,909 $13,146 $30,023 $26,441
Percentage rents.................................... 534 354 1,159 752
Recoveries from tenants............................. 5,121 4,620 10,929 9,263
Interest and other income........................... 191 141 422 249
------- ------- ------- -------
Total Revenues................................... 20,760 18,261 42,533 36,705
------- ------- ------- -------
EXPENSES
Real estate taxes................................... 2,008 1,700 3,986 3,447
Recoverable operating expenses...................... 3,305 3,001 7,195 5,967
Depreciation and amortization....................... 3,361 2,940 6,652 5,867
Other operating..................................... 105 179 551 415
General and administrative.......................... 1,916 1,312 3,510 2,949
Interest expense.................................... 6,428 6,195 12,939 12,244
------- ------- ------- -------
Total Expenses................................... 17,123 15,327 34,833 30,898
------- ------- ------- -------
Operating income...................................... 3,637 2,934 7,700 5,807
Loss from unconsolidated entities..................... 82 84 150 163
------- ------- ------- -------
Income before minority interest....................... 3,555 2,850 7,550 5,644
Minority interest..................................... 1,030 771 2,216 1,562
------- ------- ------- -------
Net income............................................ 2,525 2,079 5,334 4,082
Preferred dividends................................... (849) (283) (1,689) (563)
------- ------- ------- -------
Net income available to common shareholders........... $ 1,676 $ 1,796 $ 3,645 $ 3,519
======= ======= ======= =======
Basic earnings per share.............................. $0.23 $0.25 $0.50 $0.49
======= ======= ======= =======
Diluted earnings per share............................ $0.23 $0.25 $0.50 $0.49
======= ======= ======= =======
Weighted average shares outstanding:
Basic............................................... 7,218 7,123 7,218 7,123
======= ======= ======= =======
Diluted............................................. 7,219 7,172 7,218 7,171
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
4
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RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON ADDITIONAL CUMULATIVE TOTAL
PREFERRED STOCK PAID-IN EARNINGS/ SHAREHOLDERS'
STOCK PAR VALUE CAPITAL DISTRIBUTION EQUITY
--------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999................. $33,829 $72 $151,973 $(38,732) $147,142
Cash distributions declared.............. (6,064) (6,064)
Preferred Shares dividends declared...... (1,689) (1,689)
Net income............................... 5,334 5,334
------- --- -------- -------- --------
BALANCE, JUNE 30, 1999................... $33,829 $72 $151,973 $(41,151) $144,723
======= === ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................ $ 5,334 $ 4,082
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization.......................... 6,652 5,876
Amortization of deferred financing costs............... 469 528
Loss from unconsolidated entities...................... 150 163
Minority interest...................................... 2,216 1,562
Changes in assets and liabilities that provided (used)
cash:
Accounts receivable.................................. (874) (1,185)
Other assets......................................... (1,716) (2,694)
Accounts payable and accrued expenses................ (290) (269)
-------- --------
Cash Flows Provided by Operating Activities................. 11,941 8,063
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES
Real estate acquired...................................... (24,481) (12,176)
Advances (to) from unconsolidated entities................ (23) 227
-------- --------
Cash Flows Used in Investing Activities..................... (24,504) (11,949)
-------- --------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Cash distributions to shareholders........................ (6,064) (6,546)
Cash distributions to operating partnership unit
holders................................................ (2,603) (2,158)
Cash dividends paid on Preferred Shares................... (1,689) --
Repayment of Credit Facility.............................. (4,000) (3,000)
Principal repayments on mortgages payable................. (1,505) (3,279)
Adjustment of net proceeds from Preferred Shares.......... -- (330)
Payment of deferred financing costs....................... (484) (154)
Borrowings on Credit Facility............................. 10,000 19,100
Borrowings on Construction Loans.......................... 17,407 --
Net advances from related entities........................ -- 21
Refund of deferred financing costs........................ -- 250
Net proceeds from exercise of stock options............... -- 5
-------- --------
Cash Flows Provided by Financing Activities................. 11,062 3,909
-------- --------
Net (Decrease) Increase in Cash and Cash Equivalents........ (1,501) 23
Cash and Cash Equivalents, Beginning of Period.............. 4,550 5,033
-------- --------
Cash and Cash Equivalents, End of Period.................... $ 3,049 $ 5,056
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period............... $ 12,860 $ 11,628
======== ========
</TABLE>
See notes to consolidated financial statements.
6
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RAMCO-GERSHENSON PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The accompanying interim financial statements and
related notes of the Company are unaudited; however, they have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting, the instructions to Form 10-Q and the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared under
generally accepted accounting principles have been condensed or omitted pursuant
to such rules. The unaudited interim financial statements should be read in
conjunction with the audited financial statements and related notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
statements for the interim periods have been made. The results for interim
periods are not necessarily indicative of the results for a full year.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. Management has not yet evaluated the effects of
this change on its financial position or results of operations. The Company will
adopt SFAS No. 133 as required for its first quarterly filing of fiscal year
2001.
2. REAL ESTATE
Investment in real estate consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Land........................................................ $ 82,781 $ 64,433
Buildings and Improvements.................................. 471,790 464,216
Construction-in-progress.................................... 5,890 7,331
-------- --------
560,461 535,980
Less: accumulated depreciation.............................. (32,219) (26,136)
-------- --------
Investment in real estate -- net............................ $528,242 $509,844
======== ========
</TABLE>
3. OTHER ASSETS
Other assets are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Leasing costs and other..................................... $ 8,089 $ 6,893
Prepaid expenses and other.................................. 3,504 3,426
Deferred financing costs.................................... 3,543 3,059
Proposed development and acquisition costs.................. 4,353 3,911
------- -------
19,489 17,289
Less: accumulated amortization.............................. (4,077) (3,039)
------- -------
Other assets -- net......................................... $15,412 $14,250
======= =======
</TABLE>
7
<PAGE> 8
4. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Fixed rate mortgages with interest rates ranging from 6.83%
to 8.50% due at various dates through 2008................ $170,866 $172,371
Floating rate mortgages at 75% of the rate of long-term
Capital A rated utility bonds, due January 1, 2010, plus
supplemental interest to equal LIBOR plus 200 basis
points. The effective rate at June 30, 1999 was 6.59% and
at December 31, 1998 was 7.49%............................ 7,000 7,000
Construction loan financing, with an interest rate at LIBOR
plus 250 basis points due December 2002. The effective
rate at June 30, 1999, was 7.02% Maximum borrowings of
$18,500................................................... 15,801 --
Construction loan financing, with an interest rate at LIBOR
plus 185 basis points due June 2002. The effective rate at
June 30, 1999, was 7.01% and at December 31, 1998 was
7.10%. Maximum borrowings of $14,000...................... 7,495 5,889
Unsecured term loan, due October 1, 2000. The effective rate
at June 30, 1999 was 8.88% and at December 31, 1998 was
9.06%..................................................... 45,000 45,000
Credit Facility, due October 2000, maximum available
borrowings of $110,000. The effective rate at June 30,
1999 was 7.37%, and at December 31, 1998 was 7.35%........ 103,988 97,988
-------- --------
$350,150 $328,248
======== ========
</TABLE>
The mortgage notes and construction loans are secured by mortgages on
properties that have an approximate net book value of $325,942 as of June 30,
1999. The Credit Facility is secured by mortgages on various properties that
have an approximate net book value of $179,772 as of June 30, 1999.
At June 30, 1999, outstanding letters of credit issued under the Credit
Facility, not reflected in the accompanying consolidated balance sheet, total
approximately $335.
The following table presents scheduled principal payments on mortgages and
notes payable as of June 30, 1999:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1999 (July 1 -- December 31)................................ $ 1,607
2000........................................................ 157,486
2001........................................................ 4,128
2002........................................................ 25,693
2003........................................................ 3,653
Thereafter.................................................. 157,583
--------
Total.................................................. $350,150
========
</TABLE>
5. LEASES
The Company is engaged in the operation of shopping center and retail
properties and leases space to tenants and certain anchors pursuant to lease
agreements. The lease agreements provide for initial terms ranging from 3 to 30
years and, in some cases, for annual rentals which are subject to upward
adjustment based on operating expense levels and sales volume.
8
<PAGE> 9
Approximate future minimum rentals under noncancelable operating leases in
effect at June 30, 1999, assuming no new or renegotiated leases nor option
extensions on lease agreements, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1999 (July 1 -- December 31)................................ $ 28,832
2000........................................................ 54,076
2001........................................................ 48,692
2002........................................................ 43,752
2003........................................................ 38,556
Thereafter.................................................. 263,230
--------
Total.................................................. $477,138
========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Substantially all of the properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the Company's financial position or results of operations.
Management is unaware of any instances in which it would incur significant
environmental costs if any or all properties were sold, disposed of or
abandoned.
During the third quarter of 1994, the Company held more than 25% of the
value of its gross assets in overnight Treasury Bill reverse repurchase
transactions which the United States Internal Revenue Service (the "IRS") may
view as non-qualifying assets for the purposes of satisfying an asset
qualification test applicable to REIT's, based on a Revenue Ruling published in
1977 (the "Asset Issue"). The Company requested that the IRS enter into a
closing agreement which would state that the Asset Issue would not impact the
Company's status as a REIT. The IRS deferred any action relating to the Asset
Issue pending the further examination of the Company's 1991-1995 tax returns
(the "Tax Audit"). Based on developments in the law, which occurred since 1977,
the Company's Tax Counsel, Battle Fowler LLP, rendered an opinion that the
Company's investment in Treasury Bill repurchase obligations would not adversely
affect its REIT status. However, such opinion is not binding upon the IRS.
In connection with the spin-off of Atlantic, Atlantic assumed all liability
arising out of the Tax Audit and the Asset Issue, including liabilities for
interest and penalties and attorney fees relating thereto. In connection with
the assumption of such potential liabilities, Atlantic and the Company entered
into a tax agreement which provides that the Company (under the direction of its
Continuing Trustees), and not Atlantic, would control, conduct and effect the
settlement of any tax claims against the Company relating to the Tax Audit and
the Asset Issue. Accordingly, Atlantic will not have any control as to the
timing of the resolution or disposition of any such claims. The Company and
Atlantic also received an opinion from Special Tax Counsel, Wolf, Block, Schorr
and Solis-Cohen LLP, that, to the extent there is a deficiency in the Company's
taxable income arising out of the IRS examination and provided the Company
timely makes a deficiency dividend (i.e., declares and pays a distribution which
is permitted to relate back to the year for which each deficiency was determined
to satisfy the requirement that the REIT distribute 95 percent of its taxable
income), the classification of the Company as a REIT for the taxable years under
examination would not be affected. Under the tax agreement referred to above,
Atlantic agreed to reimburse the Company for the amount of any deficiency
dividend so made. If notwithstanding the above-described opinions of legal
counsel, the IRS successfully challenged the status of the Company as a REIT,
its status could be adversely affected. If the Company lost its status as a
REIT, the Company believes that it would be able to re-elect REIT status for the
taxable year beginning January 1, 1999.
The IRS agent conducting the examination has issued his examination report
with respect to the tax issues raised in the Tax Audit, including the Asset
Issue (collectively, the "Tax Issues"). The report sets forth a number of
positions which the examining agent has taken with respect to the Company's
taxes for the years that are subject to the Tax Audit, which the Company
believes are not consistent with applicable law and
9
<PAGE> 10
regulations of the IRS. Based upon the report, the Company could be liable for
up to $41.2 million in combined taxes, penalties and interest through August 15,
1999. The proposed adjustments to taxable income could require the Company to
pay a deficiency dividend to its current shareholders resulting in combined
taxes, penalties, interest and deficiency dividend of approximately $42.5
million as of August 15, 1999.
As noted above, pursuant to a Tax Agreement between Atlantic and the
Company, Atlantic assumed all liability arising out of the Tax Audit and Tax
Issues, including the payment of the deficiency dividend. Based upon the amount
of Atlantic's net assets, as disclosed in its most recent quarterly report on
Form 10-Q for the period ended March 31, 1999, the Company does not believe that
the ultimate resolution of the Tax Issues will have a material adverse effect on
the financial position, results of operations or cash flows of the Company. The
issuance of the revenue agent's report constitutes only the first step in the
IRS administrative process for determining whether there is any deficiency in
the Company's tax liability for the years at issue and any adverse determination
by the examining agent is subject to administrative appeal within the IRS and,
thereafter, to judicial review. As noted above, the agent's report sets forth a
number of positions, which the Company and its legal counsel believe are not
consistent with applicable law and regulations of the IRS. Accordingly, the
Company intends to file an administrative appeal challenging the findings
contained in the IRS agent's examination report.
During July 1997 Montgomery Ward ("Wards") a tenant at three of the
Company's properties, (Tel-Twelve Mall, Clinton Valley Mall and Shoppes of
Lakeland), filed for protection under Chapter 11 of the Bankruptcy Code. In
October 1997, Wards issued a list of anticipated store closings which included
the store at the Company's Clinton Valley Mall. This location consists of a
101,200 square foot department store and a 7,480 square foot TBA store (Tires,
Batteries and Automotive). The Company was notified in March 1998 that Wards
rejected the lease. On an annual basis, Wards paid approximately $1,000 in base
rent and operating and real estate tax expense reimbursements for the Clinton
Valley Mall. The Company leased 30,900 square feet of the former department
store and rental income commenced during the first quarter of 1999. The Company
is pursuing replacement tenants for the balance of the space.
In February 1999, Crowley, Milner and Company (Crowley's), a tenant at the
Company's Tel-Twelve Mall, filed for protection under Chapter 11 of the
Bankruptcy Code. For 1998, Crowley's paid approximately $396 in base rent and
operating and real estate tax expense reimbursement.
On March 27, 1999, Service Merchandise Company, Inc. ("Service
Merchandise"), a tenant at three of the Company's properties (Shoppes of
Lakeland, West Oaks I and Roseville Plaza), filed for protection under Chapter
11 of the Bankruptcy Code. For 1998, Service Merchandise paid approximately
$1,188 in base rent and operating and real estate tax expense reimbursements.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Dollars in Thousands, except per Share and per
Unit amounts)
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the Consolidated
Financial Statements of the Company, including the respective notes thereto
which are included in this Form 10-Q.
CAPITAL RESOURCES AND LIQUIDITY
The Company generated $11,941 in cash flows from operating activities for
the six months ended June 30, 1999 and used $24,504 to fund investing
activities, principally the development of two shopping centers and to improve
its properties. During the six months ended June 30, 1999, financing activities
provided $17,407 from borrowings on two construction loans; $6,000 from
borrowings on the Credit Facility, net of repayments of $4,000; used $1,505 to
pay mortgage obligations and $10,356 for cash distributions to shareholders,
holders of operating partnership units and dividends paid to preferred
shareholders.
The Company's mortgage and notes payable amounted to $350,150 at June 30,
1999, with a weighted average interest rate of 7.70%. The debt consists of nine
loans secured by various properties, plus two
10
<PAGE> 11
construction loans, one unsecured term loan and the Credit Facility, as defined
below. Eight of the mortgage loans amounting to $170,866 have maturities ranging
from 2000 to 2008, monthly payments which include regularly scheduled
amortization, and have fixed interest rates ranging between 6.83% to 8.50%. One
of the mortgage loans, evidenced by tax free bonds, amounting to $7,000 secured
by Oakbrook Square Shopping Center is non-amortizing, matures in 2010, and
carries a floating interest rate equal to 75% of the new issue long term Capital
A rated utility bonds, plus interest to the lender sufficient to cause the
lender's overall yield on its investment in the bonds to be equal to 200 basis
points over their applicable LIBOR rate (6.59% at June 30, 1999).
The Company has a $18.5 million construction loan to finance the
development of an 88 acre parcel of land located in Auburn Hills, Michigan. The
loan carries an interest rate of 250 basis points over LIBOR, an effective
interest rate of 7.01% at June 30, 1999 and matures December 2000. At the
Company's option, the loan can be converted to a 2-year term loan. Approximately
$15.8 million has been borrowed as of June 30, 1999.
The Company has a $14 million construction loan to finance the White Lake
MarketPlace shopping center development. The loan carries an interest rate of
185 basis points over LIBOR, an effective rate of 7.01% at June 30, 1999, and
matures June 2000. At the Company's option, the loan can then be converted to a
2-year term loan. Approximately $7.5 million has been borrowed at June 30, 1999.
The Company has an unsecured term loan amounting to $45,000, maturing
October 2000. This term loan bears interest between 250 and 275 basis points
over LIBOR, depending on certain debt ratios (8.88% at June 30, 1999).
The Company currently has a $110,000 Credit Facility, of which $103,988 was
outstanding as of June 30, 1999. This credit facility bears interest between
137.5 and 162.5 basis points over LIBOR depending on certain debt ratios
(effective interest rate of 7.37% at June 30, 1999) and matures October 2000.
The credit facility is secured by mortgages on various properties and contains
financial covenants relating to liabilities-to-assets ratio, minimum operating
coverage ratios and a minimum equity value. As of June 30, 1999, the Company was
in compliance with the covenant terms.
At June 30, 1999, outstanding letters of credit issued under the Credit
Facility amounted to $335.
The Company used proceeds from the borrowings under the Credit Facility and
the construction loans to finance the development of the two above-mentioned
properties and to pay for other capital expenditures.
In 1998, the Company executed an interest rate swap agreement to limit the
Company's exposure to increases in interest rates on its floating rate debt. The
notional amount of the agreement was $75,000. Based on rates currently in effect
under the Company's Credit Facility, the agreement provides for a fixed rate of
7.425% through October 2000. The Company is exposed to credit loss in the event
of non-performance by the other parties to the interest rate swap agreement,
however; the Company does not anticipate non-performance by the counter parties.
After taking into account the impact of converting the variable rate debt
into fixed rate debt by use of the rate protection agreement, the Company's
variable rate debt accounted for $104,285 of outstanding debt with a weighted
average interest rate of 7.85%. Variable rate debt accounted for approximately
29.8% of the Company's total debt and 19.0% of its total capitalization. The
Company has an interest rate protection agreement in place relative to $75,000
of floating rate debt as discussed above.
Based on the debt and the market value of equity, the Company's debt to
total market capitalization (debt plus market value equity) ratio was 63.9% at
June 30, 1999
The two properties in which Ramco-Gershenson Properties, L.P. (the
"Operating Partnership"), owns an interest and are accounted for on the equity
method of accounting are subject to non-recourse mortgage indebtedness. At June
30, 1999, the pro rata share of non-recourse mortgage debt on the unconsolidated
properties (accounted for on the equity method) was $6,154 with a weighted
average interest rate of 9.14%.
11
<PAGE> 12
The Company's current capital structure includes property specific
mortgages, two construction loans, the unsecured term loan, the Credit Facility,
Series A Preferred Shares, Common Shares and a minority interest in the
Operating Partnership. Currently, the minority interest in the Operating
Partnership represents the 29.0% ownership in the Operating Partnership which,
may under certain conditions, be exchanged for approximately 2.9 million Common
Shares.
As of June 30, 1999, Operating Partnership Units ("OP Units"), issued are
exchangeable for Common Shares of the Company on a one-for-one basis. The
Company, as sole general partner of the Operating Partnership, has the option to
exchange OP Units for cash based on the current trading price of the Company's
Common Shares. Assuming the exchange of all limited partnership interests in the
Operating Partnership, there would be outstanding approximately 10.2 million
Common Shares with a market value of approximately $165,270 at June 30, 1999
(based on the closing price of $16.25 per share on June 30, 1999).
The principal uses of the Company's liquidity and capital resources are for
development, including expansion and renovation programs, acquisitions and debt
repayment. To maintain its qualification as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code"), the Company is
required to distribute to its shareholders at least 95% of its "Real Estate
Investment Trust Taxable Income" as defined in the Code.
The Company anticipates that the combination of the availability under the
Credit Facility, potential new borrowings relative to the acquired properties
and development properties, construction loans, the sale of existing properties,
joint ventures, and potential future offering of securities under a shelf
registration statement will provide adequate liquidity for the foreseeable
future to fund future developments, expansions, repositionings, acquisitions and
to continue its currently planned capital programs and to make distributions to
its shareholders in accordance with the Code's requirements applicable to
REIT's. Although the Company believes that the combination of factors discussed
above will provide sufficient liquidity, no such assurance can be given.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 TO SIX MONTHS ENDED JULY 30, 1998
Total revenues for the six months ended June 30, 1999 increased by 15.9%,
or $5,828, to $42,533 as compared to $36,705 for the six months ended June 30,
1998. Minimum rents increased 13.5%, or $3,582 to $30,023 for the six months
ended June 30, 1999 as compared to $26,441 for the same period in 1998. The
acquisition of Southbay Fashion Center, Conyers Crossing, Aquia Towne Center and
Rivertowne Square during 1998 contributed $2,317 to the increase in minimum
rents for the six months ended June 30, 1999.
Recoveries from tenants increased $1,666, or 18.0% to $10,929 for the six
months ended June 30, 1999 as compared to $9,263 for the six months ended June
30, 1998. The increase is attributable to increases in recoverable operating
expenses in 1999 and higher occupancy rates for the Core Portfolio (shopping
center properties owned as of January 1, 1998); 93.7% occupancy rate at June 30,
1999 compared to 91.9% at June 30, 1998. The recovery ratio for the six months
ended June 30, 1999 decreased to 97.7% from 98.4% for the same period in 1998.
The decrease in the ratio is attributable to lower recovery ratios at the 1998
acquisitions properties when compared to the Core Portfolio. If the four
acquisition properties were excluded from the calculation, the recovery ratio
would have been approximately 99% for the six months ended June 30, 1999. As
leases expire at the four properties acquired during 1998, new lease agreements
should be negotiated at rates similar to the Company's normal recovery ratio of
approximately 100%.
For the six months ended June 30, 1999, percentage rents increased $407, of
which $145 was due to the four acquisitions made in 1998. Interest and other
income increased from $249 for the six months ended June 30, 1998 to $422. The
material components of this increase were attributable to higher temporary
tenant rentals and additional interest income for the six months ended June 30,
1999.
Total expenses for the six months ended June 30, 1999 increased by 12.7%,
or $3,935, to $34,833 as compared to $30,898 for the six months ended June 30,
1998. The increase was due to a $1,767 increase in total recoverable expenses,
including real estate taxes and recoverable operating expenses, a $776 increase
in
12
<PAGE> 13
depreciation and amortization, a $136 increase in other operating expenses, a
$561 increase in general and administrative expenses, and a $695 increase in
interest expense.
Total recoverable expenses, including real estate taxes and recoverable
operating expenses, increased by 18.18%, or $1,767, to $11,181 as compared to
$9,414 for the six months ended June 30, 1998. The increase in recoverable
expenses is primary attributable to the four acquisitions made during 1998 and
the opening of Home Depot at White Lake Marketplace development during the first
quarter of 1999.
Depreciation and amortization expense increased $776, or 13.2%, to $6,652
as compared to $5,876 for the six months ended June 30, 1998. The increase is
the result of acquisitions and renovations made during 1998. Other operating
expenses increased from $415 for the six months ended June 30, 1998 to $551 for
the six months ended June 30, 1999. The increase is primarily due to $92 of
additional bad debt expense for the six months ended June 30, 1999 when compared
to 1998.
Interest expense increased $695, from $12,244 to $12,939 for the six months
ended June 30, 1999. The 5.7% increase is the result of additional interest
expense on a mortgage loan assumed in connection with the acquisition of Aqua
Towne Center in September 1998 and increased borrowings on the Credit Facility
and construction loans.
The minority interest of $2,216 for the six months ended June 30, 1999
represents a 29.0% share of income before minority interest of the operating
partnership compared to a 28.0% share of income before minority interest, or
$1,562 for the six months ended June 30, 1998.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1999 TO THREE MONTHS ENDED JUNE 30,
1998
Total revenues increased $2,499, or 13.7%, from $18,261 for the three
months ended June 30, 1998 to $20,760 for the three months ended June 30, 1999.
The increase was a result of a $1,763 increase in minimum rents, a $501 increase
in recoveries from tenants, $180 increase in percentage rents and an increase of
$50 in interest and other income.
Minimum rents for the three months ended June 30, 1999 increased $1,763, or
13.4% to $14,909 from $13,146 for the three months ended June 30, 1998. The four
properties acquired during 1998 and the opening of an anchor store at White Lake
MarketPlace development during the first quarter of 1999 accounted for $1,433,
or 81.3% of this increase. Recoveries from tenants increased 10.8%, or $501, to
$5,121 from $4,620 for the three months ended June 30, 1998. The impact of the
1998 acquisitions amounted to $208, or 41.5% of this increase.
The recovery ratio for the three months ended June 30, 1999 decreased to
96.4% as compared to 98.3% for the comparable quarter ended June 30, 1998. The
decrease in the ratio is attributable to lower recovery ratios at the 1998
acquisitions properties as compared to the Core Portfolio. As leases turnover at
these four properties, the recovery ratios should increase to a level comparable
to the Company's normal ratio.
Percentage rents increased 50.8%, or $180, to $534 for the three months
ended June 30, 1999 as compared to $354 for the three months ended June 30,
1998. The increase in percentage rents is attributable to $102 related to the
1998 acquisitions included in the three months ended June 30, 1999 and the
result of strong retail sales.
Total expenses for the three months ended June 30, 1999 increased by
$1,796, or 11.7%, to $17,123 as compared to $15,327 for the three months ended
June 30, 1998. The increase was due to a $612 increase in total recoverable
expenses, including real estate taxes and recoverable operating expenses, a $421
increase in depreciation and amortization, an increase of $604 in general and
administrative expenses, a decrease of $74 in other operating expenses and an
increase of $233 in interest expense.
Total recoverable expenses, including real estate taxes and recoverable
operating expenses, increased by 13.0%, or $612, to $5,313 as compared to $4,701
for the three months ended June 30, 1998. Depreciation and amortization
increased by 14.3%, or $421, to $3,361 as compared to $2,940 for the three
months ended June 30, 1998, and general and administrative expenses increased
$604, or 46.0% to $1,916 as compared to $1,312 for the three months ended June
30, 1998. The increase in recoverable expenses of $612 and
13
<PAGE> 14
depreciation and amortization of $421 are primarily due to the 1998 acquisitions
and the opening of Home Depot at the White Lake MarketPlace development during
the first quarter of 1999.
Other operating expenses decreased $74, or 41.3%, to $105 for the three
months ended June 30, 1999 as compared to $179 for the three months ended June
30, 1998. The decrease is the primarily the result of a decrease in bad debt
expense for the three months ended June 30, 1999 when compared to the same
quarter ended June 30, 1998.
Interest expense increased $233, from $6,195 to $6,428 for the three months
ended June 30, 1999. The 3.8% increase is the result of additional interest
expense on a mortgage loan assumed in connection with the acquisition of Aqua
Townie Center in September 1998 and increased borrowings on the Credit Facility
and construction loans.
The minority interest of $1,030 for the three months ended June 30, 1999
represents a 29.0% share of income before minority interest of the operating
partnership compared to a 28.0% share of income before minority interest, or
$771 for the three months ended June 30, 1998.
GENERAL AND ADMINISTRATIVE
Following is a breakdown of the general and administrative expenses shown
in the financial statements:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Management fees............................................. $ 353 $ 320 $ 770 $ 648
Leasing and development fees................................ 127 77 237 142
Other revenues.............................................. 175 183 424 345
Leasing/Development cost reimbursements..................... 469 510 1,195 1,004
------ ------ ------ ------
Total revenues......................................... 1,124 1,090 2,626 2,139
------ ------ ------ ------
Employee expenses........................................... 1,365 1,119 2,918 2,474
Office and other expenses................................... 571 479 880 797
Depreciation and amortization............................... 106 65 159 128
------ ------ ------ ------
Total expenses......................................... 2,042 1,663 3,957 3,399
------ ------ ------ ------
Operating partnership cost reimbursement expenses........... 918 573 1,331 1,260
------ ------ ------ ------
Operating partnership administrative expenses............... 716 620 1,507 1,273
------ ------ ------ ------
Shopping center level general and administrative expenses... 282 119 672 416
------ ------ ------ ------
Total general and administrative expenses......... $1,916 $1,312 $3,510 $2,949
====== ====== ====== ======
</TABLE>
The increase in general and administrative expenses, when compared to the
six months ended June 30, 1998 is primarily due to corporate general salary
increases and an increase in headcount when compared to the six months ended
June 30, 1998.
FUNDS FROM OPERATIONS
Management generally considers funds from operations ("FFO") to be one
measure of financial performance of an equity REIT. It has been presented to
assist investors in analyzing the performance of the Company and to provide a
relevant basis for comparison to other REITs.
The Company has adopted the most recent National Association of Real Estate
Investment Trusts ("NAREIT") definition of FFO, which was effective on January
1, 1996. Under the NAREIT definition, FFO represents income (loss) before
minority interest (computed in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructuring and sales of
property, plus real estate
14
<PAGE> 15
related depreciation and amortization (excluding amortization of financing
costs), and after adjustments for unconsolidated partnerships and joint
ventures.
Therefore, FFO does not represent cash generated from operating activities
in accordance with generally accepted accounting principles and should not be
considered an alternative to net income as an indication of the Company's
performance or to cash flows from operating activities as a measure of liquidity
or of the ability to pay distributions. Furthermore, while net income and cash
generated from operating, investing and financing activities determined in
accordance with generally accepted accounting principles consider capital
expenditures which have been and will be incurred in the future, the calculation
of FFO does not.
The following table illustrates the calculation of FFO for the three months
and six months ended June 30, 1999, and 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income.............................................. $ 2,525 $ 2,079 $ 5,334 $ 4,082
Add: Depreciation and amortization.................... 3,356 2,947 6,654 5,890
Add: Minority interest in partnership................. 1,030 771 2,216 1,562
------- ------- ------- -------
Funds from operations -- diluted........................ 6,911 5,797 14,204 11,534
Less: Preferred share dividends....................... 849 283 1,689 563
------- ------- ------- -------
Funds from operations -- basic.......................... $ 6,062 $ 5,514 $12,515 $10,971
======= ======= ======= =======
Weighted average equivalent shares outstanding(1)
Basic................................................. 10,170 9,891 10,170 9,891
======= ======= ======= =======
Diluted............................................... 12,171 10,607 12,171 10,606
======= ======= ======= =======
Supplemental disclosure:
Straight-line rental income........................... $ 458 $ 330 $ 1,115 $ 751
======= ======= ======= =======
Amortization of management contracts and covenants not
to compete......................................... $ 124 $ 124 $ 248 $ 248
======= ======= ======= =======
</TABLE>
- -------------------------
(1) For basic FFO, represents the weighted average total shares outstanding,
assuming the redemption of all Operating Partnership Units for Common
Shares. For diluted FFO, represents the weighted average total shares
outstanding, assuming the redemption of all Operating Partnership Units for
Common Shares, the Series A Preferred Shares converted to Common Shares, and
the common shares issuable under the treasury stock method upon exercise of
stock options.
CAPITAL EXPENDITURES
During the six months ended June 30, 1999, the Company spent approximately
$20,784 on revenue generating capital expenditures including tenant allowances,
leasing commissions paid to third-party brokers, legal costs relative to lease
documents, capitalized leasing, land acquisition costs and construction costs.
These types of costs generate a return through rents from tenants over the term
of their leases. Revenue enhancing capital expenditures, including expansions,
renovations or repositionings, were approximately $3,205. Revenue neutral
capital expenditures, such as roof and parking lot repairs, which are
anticipated to be recovered from tenants, amounted to approximately $1,318.
YEAR 2000
The Company recognizes that Year 2000 issues may have an impact on its
business, operations and financial condition. The Company has completed an
assessment of its Year 2000 readiness with respect to all of its information
technology ("IT") systems and is currently addressing the reliability and
condition of its non-IT systems. These assessments will continue to be updated
as additional information becomes available and as new concerns are identified.
15
<PAGE> 16
The Company's IT systems generally consist of file servers, operating
systems, application programs and workstations that utilize purchased and
customized software. The Company continues to evaluate the Year 2000 compliance
status of each vendor and tenant and believes that its existing systems or
planned upgrades during 1999 will be Year 2000 compliant. Implementation and
upgrades of non-Year 2000 compliant systems are not expected to result in
significant additional cost to the Company.
The Company's non-IT systems which may be subject to Year 2000 issues are
facility related and encompass areas such as HVAC systems, elevators, security,
lighting, telecommunications, electrical, plumbing, fire and sprinkler controls.
The Company is currently addressing the potential impact of Year 2000 issues in
these areas and has not identified any instances where Year 2000 issues will
require material costs to repair or replace any of these systems.
The significant risks to the Company, in the event that Year 2000 issues
are not identified and corrected, are that the Company could experience delays
or errors in processing financial and operational information. Non-IT system
problems could result in forced closure of certain facilities, which could limit
the efficient operation of the Company's properties.
Contingency plans will be developed if it appears the Company or its key
suppliers and tenants will not be Year 2000 compliant, and if such noncompliance
is expected to have a significant adverse effect on the Company's financial
position or results of operations.
INFLATION
Substantially all of the leases at the Company's properties provide for
tenants to pay their pro rata share of operating expenses, including common area
maintenance and real estate taxes, thereby reducing the Company's exposure to
increases in operating expenses resulting from inflation. Many of the tenants'
leases contain provisions designed to lessen the impact of inflation. Such
provisions include the ability to receive percentage rentals based on a tenant's
gross sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. In
addition, many of the leases are for terms of less than ten years, which may
enable the Operating Partnership to replace existing leases with new leases at a
higher base and/or percentage rentals if rents of the existing leases are below
the then existing market rate.
FORWARD LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements with respect to the
operation of certain of the Company's properties. Management of the Company
believes the expectations reflected in the forward-looking statements made in
this document are based on reasonable assumptions. Certain factors could occur
that might cause actual results to vary. These include general economic
conditions, the strength of key industries in the cities in which the Company's
properties are located, the performance of the Company's tenants at the
Company's properties and elsewhere, and other factors discussed in this report
and the Company's reports filed with the Securities and Exchange Commission.
16
<PAGE> 17
PART II -- OTHER INFORMATION
ITEM 3 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual Meeting of Shareholders of the Company was held on June 9, 1999.
At the Annual Meeting, Selwyn Isakow, Arthur H. Goldberg and Mark K. Rosenfeld
were re-elected as trustees of the Company to serve until the 2002 Annual
Meeting of Shareholders or until their successors are elected and qualified. The
following votes were cast for or were withheld from voting with respect to the
election of each of the following persons:
<TABLE>
<CAPTION>
VOTES AUTHORITY
NAME FOR WITHHELD
---- ----- ---------
<S> <C> <C>
Selwyn Isakow........................................... 7,108,386 412,224
Arthur H. Goldberg...................................... 7,107,575 413,035
Mark K. Rosenfeld....................................... 7,108,236 412,374
</TABLE>
There were no broker non-votes or abstentions in connection with the
election of the trustees at the Annual Meeting.
The following votes were cast for, against or withheld regarding the
ratification to increase the number of shares available under the trust's 1996
Share Option Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
4,469,758 804,808 64,878
</TABLE>
ITEM 4 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index immediately preceding the exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ending June 30,
1999.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
RAMCO-GERSHENSON PROPERTIES TRUST
<TABLE>
<S> <C>
Date: August 11, 1999 By: /s/ Dennis E. Gershenson
----------------------------------------------------
Dennis E. Gershenson
President and Trustee
(Chief Executive Officer)
Date: August 11, 1999 By: /s/ Richard J. Smith
----------------------------------------------------
Richard J. Smith
Chief Financial Officer
(Principal Accounting Officer)
</TABLE>
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.48 Loan Agreement dated June 1, 1999 between RAMCO-GERSHONSON
PROPERTIES, L.P. and BANK ONE.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.48
LOAN AGREEMENT
THIS AGREEMENT is made this 1st day of June, 1999, between
RAMCO-GERSHENSON PROPERTIES, L.P., a Delaware limited partnership, whose address
is 27600 Northwestern Highway, Suite 200, Southfield, Michigan 48034
("Borrower"), and BANK ONE, MICHIGAN, a Michigan banking corporation, whose
address is 611 Woodward Avenue, Mail Suite MI1-8029, Detroit, Michigan 48226
("Lender").
Following is a recital of the facts underlying this Agreement:
The purpose of this facility is to provide partial construction
financing for a shopping center development on certain real estate located in
Oakland County, Michigan ("Site") which Site is described in Exhibit A attached
and is sometimes called "Premises" or "Project."
Borrower has applied to Lender for a loan for the purpose of providing
funds for the acquisition and construction described above. Lender desires to
make the loan to Borrower, and Borrower desires to borrow the money from Lender,
upon the terms and conditions set forth in this Agreement.
In consideration of the covenants and agreements of the parties,
Borrower and Lender agree:
DEFINITIONS 1. As used in this
Agreement, the
following terms shall
have the following
meanings:
1.1 "Appraisal" shall mean an Appraisal of the Project prepared by
an appraiser approved by Lender in form and substance
acceptable to Lender.
1.2 "Appraised Value" shall mean the value of the Project as
determined by Lender, in its discretion, based upon the
Appraisal.
1.3 "Assignment of Leases" shall mean the Assignment of Leases
executed by Borrower and delivered to Lender on even date, as
it may be amended, restated or replaced from time to time.
1.4 "Base LIBOR Rate" shall mean, with respect to a LIBOR
Borrowing for a LIBOR Interest Period, the rate at which
deposits in U.S. Dollars are offered to Lender by first-class
banks in the London interbank market at approximately 11:00
a.m. (London time) two (2) Business Days prior to the first
day of such LIBOR Interest Period, with a maturity
approximately equal to such LIBOR Interest Period and in an
amount approximately equal to the amount of such LIBOR
Borrowing.
1.5 Each "Basis Point" shall mean one one-hundredth of one
(1/100%) percent per annum.
1.6 "Borrowing" or "Loan Advance" shall mean an advance of all or
any portion of the Loan.
1.7 "Borrowing and Rate Selection Notice" shall mean a written,
telex or telephonic notice by Borrower to Lender specifying:
(1) that Borrower wishes to make a Borrowing;
(2) the amount thereof and the rate option or options
applicable to the whole or designated portions;
(3) the Effective Date of the selection of the Rate; and
(4) the Interest Period applicable to each Borrowing.
<PAGE> 2
1.8 "Business Day" shall mean with respect to borrowing, payment
or rate selection of LIBOR Borrowings, a day on which banks,
generally, are open for business in Detroit and on which
dealings in U.S. Dollars are carried on in the London
interbank market.
1.9 "Completion Date" shall mean the Maturity Date of the
Construction Note.
1.10 "Construction Loan" shall mean the loan evidenced by the
Construction Note.
1.11 "Construction Note" shall mean the Construction Note in the
original principal amount of Eighteen Million Five Hundred
Thousand ($18,500,000.00) Dollars, executed by Borrower and
delivered to Lender on even date, as it may be amended,
restated or replaced from time to time.
1.12 "Conversion Date" shall mean the earlier of (i) the date of
the final advance, or (ii) the Maturity Date of the
Construction Note.
1.13 "Cost Budget" shall mean a budget attached as Exhibit B, which
Borrower certifies as true and correct for the development and
construction costs for the Project.
1.14 "Debt Service Coverage Ratio" shall mean Net Operating Income
divided by principal and interest debt service.
1.15 "Effective Date" shall mean any future Business Day designated
by Borrower in a Borrowing and Rate Selection Notice or in a
Prepayment Notice as the date such borrowing and rate
selection or such prepayment shall become effective.
1.16 "Effective Rate" shall mean the Prime Rate.
1.17 "Fixed Rate" shall mean a fixed rate of interest negotiated by
the parties for the Term Note.
1.18 "Guarantor" shall mean Ramco-Gershenson Properties Trust.
1.19 "Guaranty" shall mean the Guaranty executed by Guarantor and
delivered to Lender on even date, as it may be amended,
restated or replaced from time-to-time.
1.20 "Improvements" shall mean the Site development and the
construction of the shopping center and related amenities and
improvements in accordance with the Plans and Specifications.
1.21 "Interest Period" shall mean a LIBOR Interest Period.
1.22 "LIBOR Borrowing" shall mean that portion of any Borrowing at
the time a LIBOR Rate is applicable, under Section 2.5.
1.23 "LIBOR Interest Period" shall mean, with respect to a LIBOR
Borrowing, a period of thirty (30), sixty (60), ninety (90),
or one-hundred eighty (180) days, to the extent LIBOR
Borrowings of such or similar periods are available,
commencing on a Business Day and selected by Borrower in its
Borrowing and Rate Selection Notice. If any LIBOR Interest
Period would otherwise end on a day which is not a Business
Day, such LIBOR Interest Period shall end on the next
succeeding Business Day.
1.24 "LIBOR Rate" shall mean, with respect to a LIBOR Borrowing and
a LIBOR Interest Period, the sum of:
(1) the quotient of:
(a) the Base LIBOR Rate applicable to that LIBOR
Interest Period, divided by
<PAGE> 3
(b) one (1) minus the Reserve Requirement (expressed
as a decimal) applicable to that LIBOR Interest
Period; plus
(2) Two hundred fifty (250) Basis Points per annum. When the
budget becomes In Balance, this shall reduce to two
hundred (200) Basis Points per annum. For purposes of
this provision and Section 8.10, "In Balance" means that
Borrower shall have contributed thirty (30%) percent of
the total project costs as equity. The total project
costs as now set forth on the Cost Budget is Twenty-Six
Thousand Eight Hundred Ninety-Three Thousand Eight
Hundred Sixty-Seven ($26,893,867.00) Dollars.
The LIBOR Rate shall be rounded, if necessary, to the next
higher one one-hundredth of one (1/100%) percent.
1.25 "Loan" shall mean the facility provided for under this Loan
Agreement and evidenced by the Note (the Construction Loan and
Term Loan).
1.26 "Loan Amount" shall mean Eighteen Million Five Hundred
Thousand ($18,500,000.00) Dollars.
1.27 "Loan Documents" shall mean this Loan Agreement, the
Construction Note, the Term Note, the Mortgage, the Assignment
of Leases, the Security Agreement, and all accompanying
financing statements, and the Guaranty, as these documents may
be amended, restated or replaced from time to time, together
with each and every other document now or hereafter
evidencing, securing or executed in conjunction with the Loan.
1.28 "Maturity Date" shall mean eighteen (18) months from the date
of this Agreement for the Construction Note, and if the
Construction Note is converted to a Term Note in accordance
with this Agreement, the Maturity Date for the Term Note shall
mean twenty-four (24) months from the Conversion Date.
1.29 "Minimum Notice Period" shall mean receipt of notice no later
than:
(1) 11:00 a.m. (Detroit time) on the Effective Date of a
Prime Rate Borrowing or a rate selection relating
thereto; and
(2) 11:00 a.m. (Detroit time) four (4) Business Days before
the Effective Date of a LIBOR Rate Borrowing and the rate
selection relating thereto.
1.30 "Mortgage" shall mean the Mortgage executed by Borrower and
delivered to Lender on even date, as it may be amended,
restated or replaced from time to time.
1.31 "Net Operating Income" shall mean gross receipts and all other
income, less Operating Expenses.
1.32 "Note" shall mean the Construction Note and/or the Term Note,
as the context requires.
1.33 "Operating Expenses" shall mean expenditures of all kinds made
with respect to operation of the Premises in the normal course
of business, including but not limited to, expenditures for
taxes, insurance, repairs, replacements, maintenance,
management fees, advertising expenses, salaries and wages, and
utility payments and amounts equal to Seven ($0.07) Cents per
square foot for capital reserves, but expressly exclusive of
(i) any debt service on the Loan, (ii) depreciation,
amortization and other non-cash expenditures, and (iii)
capital expenditures.
1.34 "Phase I Environmental Report" shall mean a Phase I
Environmental Site Assessment Report, in form and substance
satisfactory to Lender.
1.35 "Plans and Specifications" shall mean the plans and
specifications pertaining to the construction of the
Improvements identified on Exhibit C, as they may be amended
in accordance with the terms of this Loan Agreement.
<PAGE> 4
1.36 "Premises" shall mean the Site.
1.37 "Prepayment Notice" shall mean a written, telex or telephonic
notice by Borrower to Lender in accordance with Section 2.9,
specifying the amount of principal to be prepaid and the
Effective Date of such prepayment.
1.38 "Prime Rate" shall mean a rate of interest per annum equal to
the prime rate of interest as publicly announced by Lender
from time to time, adjusting and changing when and as the
prime rate changes, which rate may not be the lowest rate
charged by Lender.
1.39 "Prime Rate Borrowing" shall mean that portion of the Loan
outstanding at any time that the Effective Rate is applicable.
1.40 "Project" shall mean the Site and all Improvements constructed
or to be constructed thereon.
1.41 "Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System from time to time in
effect and shall include any successor or other regulation or
official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal
Reserve System.
1.42 "Reserve Requirement" shall mean, with respect to a LIBOR
Interest Period, the daily average during such LIBOR Interest
Period of the aggregate reserve requirement (including all
basic, supplemental, marginal and other reserves and taking
into account any transitional adjustments or other scheduled
changes in reserve requirements during such LIBOR Interest
Period) which may be imposed on Lender under Regulation D in
respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which consist of or include
deposits by reference to which the interest rate on LIBOR
loans is determined or any category of extensions of credit or
other assets which consists of or includes loans by any
non-United States office of Lender to United States
residents).
1.43 "Security Agreement" shall mean the Security Agreement
executed by Borrower and delivered to Lender on even date, as
it may be amended, restated or replaced from time to time.
1.44 "Site" shall mean the real property upon which the
Improvements shall be constructed, as more particularly
described in Exhibit A.
1.45 "Survey" shall mean an ALTA/ACSM mortgage survey otherwise
conforming to requirements set forth in Section 4.2(2)(l).
1.46 "Term Loan" shall mean the loan evidenced by the Term Note.
1.47 "Term Note" shall mean the promissory note to be executed by
Borrower and delivered to Lender in the form attached as
Exhibit D-1 or D-2 if the requirements for conversion under
Section 13 of this Agreement have been satisfied.
<PAGE> 5
COMMITMENT TO LEND,
BORROWINGS AND
CONDITIONS OF LENDING 2.
2.1 Agreement to Lend. Lender agrees, subject to the terms and
conditions set forth in this Agreement, to advance to Borrower, from time to
time, from and after the effective date of this Agreement, sums not to exceed,
in the aggregate at any one time outstanding, the Loan Amount. The sums shall be
repaid, together with interest and certain costs and charges which may be
incurred by Lender, all as set forth in the Note.
2.2 The Note and Other Loan Documents. All Borrowings under this
Agreement shall be evidenced by, secured, and repaid pursuant to the Note and by
the other Loan Documents, which shall be executed and delivered by Borrower
simultaneously upon the execution of this Agreement (except the Term Note which
shall be executed and delivered under the terms of this Loan Agreement).
2.3 Limitation on Borrowings. Anything herein to the contrary
notwithstanding, Loan Advances shall be limited to the amounts as Borrower is
eligible to receive under and upon compliance with, the conditions of Section 4.
2.4 Rate. The outstanding principal balance due under the Construction
Note shall bear interest at the Effective Rate, unless the LIBOR Rate is
selected by Borrower as provided in Section 2.5. The outstanding principal
balance due under the Term Note shall bear interest at the Prime Rate unless a
Fixed Rate or the LIBOR Rate is selected by Borrower.
2.5 Selection of LIBOR Rate. Subject to the terms and conditions of
this Agreement, with respect to the Construction Note, Borrower may elect once
per month, which shall be at the time when the monthly advance is made if an
advance is made during such month, to have interest accrue and be payable at the
LIBOR Rate and for a LIBOR Interest Period selected by Borrower as provided in
this Agreement for any new Borrowing or any Borrowing made upon expiration of
the Interest Period by giving Lender a Borrowing and Rate Selection Notice of
not less than the applicable Minimum Notice Period. Borrower may request Lender
to provide a LIBOR Rate quote, but the quotation shall only remain available for
a period of thirty (30) minutes. The unpaid principal amount of each LIBOR
Borrowing shall bear interest from and including the first day of the applicable
Interest Period, but not including, the last day of such Interest Period at the
rate of interest applicable to the Borrowing. During the Interest Period, the
rate of interest applicable to the Borrowing shall not be changed. If, at the
end of an Interest Period for an outstanding LIBOR Borrowing, Borrower fails to
extend the option by giving a new Borrowing and Rate Selection Notice as to the
Borrowing, then the Borrowing shall bear interest at the Effective Rate on and
after the last day of the Interest Period until paid or until the Effective Date
of a new LIBOR Rate which is selected by Borrower in accordance with this
section. This provision shall also apply to the Term Note except LIBOR
Borrowings must apply to the entire outstanding principal balance.
2.6 Limitation on Selection of LIBOR Rate. Borrower shall not have the
right to make a LIBOR Rate election of any Interest Period extending beyond the
Maturity Date of the Construction Note or the Term Note, as the case may be. In
addition, Borrower shall not have the right to make a LIBOR Rate election for
LIBOR Borrowings in any amount less than Five Hundred Thousand ($500,000.00)
Dollars for the Construction Note and the full principal balance for the Term
Note.
2.7 Interest Basis and Payment Dates. Interest on the outstanding
principal balance of the Loan shall be calculated on the basis of the actual
number of days elapsed over a three hundred sixty (360) day year. The interest
rate payable on Prime Rate Borrowings shall change when and as the Prime Rate
changes. Interest accrued on all Prime Rate Borrowings, Fixed Rate Borrowings
and LIBOR Borrowings shall be payable monthly on the first day of each calendar
month beginning on the first day of the first month following the date of the
first disbursement under the Construction Note. Interest shall be payable for
the day on which a Borrowing is made, but not for the day of any payment on the
amount paid.
2.8 Method of Payment. All principal payments and any interest paid on
the Maturity Date (defined in the Note) shall be made in immediately available
funds to Lender at the place specified by Lender by 12:00 noon (Detroit time) on
the date when due, and all interim interest payments due under the Note and fees
due may be paid by Borrower's check or draft.
<PAGE> 6
2.9 Prepayment. Borrower may, from time to time and without penalty,
pay all, or any part of the principal, of the Prime Rate Borrowings at any time
outstanding before maturity by paying, in addition to the principal amount of
the payment, all interest accrued on the amount of such prepayment to the date
thereof. Fixed Rate Borrowings may be prepaid in accordance with Section 13 of
this Loan Agreement. LIBOR Borrowings may not be prepaid before the last day of
the applicable Interest Period unless:
(1) the Borrowings are subject to either Sections 2.10 or 2.11; and
(2) all sums described in Sections 2.10 and 2.11 are paid by Borrower
to Lender.
2.10 Failure to Pay or Borrow on Certain Dates. If (i) any payment of a
LIBOR Borrowing occurs on a date which is not the last day of an applicable
Interest Period, or (ii) a LIBOR Borrowing is not made on the date specified in
a Borrowing and Rate Selection Notice for any reason other than default by
Lender, Borrower will indemnify Lender for any loss, costs or penalties
reasonably incurred by it resulting therefrom, including, without limitation,
any prepayment costs or penalties or loss in liquidating or employing deposits
acquired or required to fund or maintain the LIBOR Borrowing.
2.11 Yield Protection. If either:
(1) there is any change (including, but not limited to, any change by
way of imposition of increased Reserve Requirement) of or in the
official interpretation of any existing or future law, rule,
regulation or directive, whether or not having the force of law;
or
(2) the compliance by Lender with any guidelines or requests from any
central bank or other governmental authority, whether or not
having the force of law, shall in the reasonable judgment of
Lender's counsel result in any increase in the cost to Lender of
making, funding or maintaining Eurodollar Advances (LIBOR
Borrowings),
then, within fifteen (15) days of demand by Lender, Borrower shall pay as
additional interest the increased costs or the amount of reduction in the amount
received by Lender which Lender reasonably determines is attributable to making,
funding and maintaining the LIBOR Borrowings, or if such increased costs would
cause the Loan to violate Michigan's criminal usury laws, Lender may, at its
option, without complying with Article 24 of the Mortgage, waive the portion of
the costs which would be violative of the criminal usury law or immediately
terminate Borrower's right to elect LIBOR Rate Borrowings.
2.12 Certificates; Survival of Indemnity. A certificate of Lender as to
the amount of payment or additional interest due under Sections 2.10 and 2.11
shall be rebuttably presumed to be correct in the absence of manifest error, and
Borrower shall pay Lender during the pendency of any dispute all amounts
specified in such certificate. Lender will, on request, provide evidence
supporting the certificate. Determination of amounts payable under Sections 2.10
and 2.11 in connection with a LIBOR Borrowing shall be calculated as though
Lender funded the LIBOR Borrowing through the purchase of a deposit of the type,
maturity and amount corresponding to the deposit used as a reference in
determining the amount payable which is applicable to the Borrowing. Unless
otherwise provided in this Agreement, the amount specified in the certificate
shall be payable five (5) Business Days after Lender's mailing of the
certificate by certified mail. The obligations under Sections 2.10 and 2.11
shall survive payment of the Loan and termination of this Agreement.
2.13 Availability of Interest Rate. If and as long as Lender, in its
sole discretion, determines, and notifies Borrower, that:
(1) Lender is unable to obtain deposits in U.S. dollars in the London
interbank market; or
(2) maintenance of Eurodollar advances (LIBOR Borrowings) would
violate any applicable law, rule, regulation or directive, whether
or not having the force of law;
then Lender may suspend the availability of the LIBOR Rate and LIBOR Borrowings
with respect to all Borrowings and require all outstanding Borrowings under a
LIBOR Rate to be converted to Prime Rate Borrowings.
<PAGE> 7
2.14 Telephonic Notices. Lender is authorized to extend Borrowings and
effect rate selection choices based on telephonic Borrowing and Rate Selection
Notices made by any person Lender, in good faith, believes to be an authorized
agent acting on behalf of Borrower. Borrower agrees to confirm to Lender
promptly any telephonic Borrowing and Rate Selection Notice in writing signed by
an authorized agent. If the written confirmation differs in any material respect
from the action taken by Lender, the records of Lender shall govern, absent
manifest error.
2.15 Conditions of Lending. Lender shall not be obligated to lend or
make any Loan Advances at any time unless:
(1) all of the conditions for receipt of Loan Advances set forth in
Section 4 have been fulfilled; and
(2) no uncured default under any of the Loan Documents then exists,
and no event which might become a default after the lapse of time
or the giving of notice, or both, has occurred and is continuing
or shall exist upon the disbursement of such advance, provided
that Lender shall not unreasonably exercise its right to refuse to
make advances because of conditions which have not yet ripened
into defaults.
2.16 Designation of Agent. Borrower designates Dennis Gershenson as its
agent for purposes of delivery of all notices required or permitted to be given
pursuant to this Agreement and for purposes of execution and/or certification,
on behalf of Borrower, of all documents required to be executed and/or certified
on behalf of Borrower in conjunction with all requests for advances under this
Agreement, and any such notice delivered by or document executed and/or
certified by the said agent shall be fully binding upon Borrower.
CONSTRUCTION, COSTS
AND FEES 3.
3.1 Construction. Borrower shall, at its expense, construct or cause
to be constructed upon the Site the Improvements described in Exhibit A attached
hereto. Said Improvements shall be completed prior to the Completion Date, in a
workmanlike manner and in substantial compliance with the Plans and
Specifications, heretofore submitted to and approved by Lender, and in
accordance with all building, safety, zoning, environmental and other
requirements of any state, municipal or other governmental authority. Borrower
shall diligently and continuously carry out or cause to be carried out the
construction of the Improvements so as to insure the completion thereof by the
Completion Date.
With respect to the Project and this Loan Agreement, Lender hereby
approves as:
A. General Contractor: Clark Construction Company
3225 West Saint Joseph Street
Post Office Box 40087
Lansing, MI 48901
B. Project Architect:
-------------------------------
-------------------------------
-------------------------------
C. Site Engineer: Giffels-Webster Engineers, Inc.
407 East Fort Street, Suite 600
Detroit, Michigan 48226-2940
3.2 Plans and Specifications. All requests for changes in the Plans
and Specifications must be in writing signed and approved by the General
Contractor, Borrower, Permanent Lender, if any, tenants whose approval is
required, if any, Lender and such other parties as Lender may require. Lender's
approval may be subject to such terms and conditions as Lender may prescribe.
Copies of all bulletins, addenda, change orders and modifications to the Plans
and Specifications shall be promptly delivered to Lender.
Lender shall at all times have the right to require strict compliance
with the original Plans and Specifications, but Borrower may effect changes in
the Plans from time to time, without first obtaining Lender's approval, provided
such
<PAGE> 8
changes do not impair the structural integrity, design concept or architectural
appearance of the Improvements, no default in any other obligation to any other
party or authority results therefrom and the aggregate of all such changes does
not result in a net construction cost increase or decrease of more than two
(2.0%) percent of the construction contract.
All materials, fixtures, equipment or articles used in the construction
or equipping of Improvements shall comply with the Plans and Specifications, and
said Improvements shall not be constructed in violation of any restrictive
covenants, laws, statutes, ordinances or other governmental rules or
regulations.
3.3 Construction Costs and Fees. Borrower represents that the total
construction costs, together with Related Costs (as hereinafter defined), shall
not exceed Twenty-Six Million Eight Hundred Ninety-Three Thousand Eight Hundred
Sixty-Seven ($26,893,867.00) Dollars, as more particularly set forth in the Cost
Budget. Borrower acknowledges and agrees that the Loan Amount does not
constitute adequate funds to complete construction of the Improvements. Borrower
further acknowledges and agrees that Lender shall not be obligated to fund any
amounts in excess of the Loan Amount. Before the first request for a Loan
Advance, Borrower shall furnish sworn statements, waivers of lien and other
assurances of payment as Lender may require and acceptable to the title company
insuring the Loan, evidencing payment of all costs heretofore paid including the
Borrower's equity described on Exhibit B.
Related Costs of the Project shall include:
(1) premiums for title, casualty and other insurance required by
Lender;
(2) the cost of recording and filing Loan Documents and any tax
levied upon such filing;
(3) real estate taxes and other assessments which Borrower is
obligated to pay;
(4) fees and disbursements of Lender's counsel and architect, if
any; and
(5) interest and other costs and charges payable by Borrower to
Lender or the mortgagee under the permanent loan commitment, as
they become due and payable.
Lender may advance to or on behalf of Borrower amounts payable as
Related Costs to the extent costs have accrued. Borrower shall deliver to Lender
acceptable receipts showing payment of these items.
3.4. Commitment Fee and Expenses. Borrower shall pay to Lender an
initial commitment fee of one (1.0%) percent of the Loan Amount, which fee is
deemed earned and nonrefundable. This commitment fee shall be paid
simultaneously with the execution of this Agreement.
In addition, Borrower shall promptly pay all of Lender's out-of-pocket
costs incurred related to the Loan, including, without limitation, reasonable
attorneys' fees, costs of title insurance, surveys and environmental reports,
recording costs, outside architectural/engineering inspection fees, and such
other work provided for in the Loan Documents, upon presentation of an invoice
therefor.
3.5 Conversion Fee. In the event the Loan is converted to a Term Loan
in accordance with Paragraph 13, Borrower shall pay to Lender as a condition of
the conversion a conversion fee of one-quarter (0.25%) percent of the original
principal amount of the Term Note.
ADVANCES 4. Lender shall, subject
to the terms and
conditions of this
Loan Agreement, make
advances to the
Borrower to
defray actual costs of construction of the Improvements incurred up to the Loan
Amount, subject to the following:
4.1 Requests for Loan Advances shall be made on forms provided by or
acceptable to Lender, and all requests shall be approved by parties as Lender
requires. The requests shall indicate the amount of the Loan Advance and the
date on which the Loan Advance is desired, which shall be not less than ten (10)
days after the date on which the request
<PAGE> 9
is received by Lender. Advances shall be limited to one (1) in any calendar
month. Additional Loan Advances may be made available at the sole discretion of
Lender.
4.2. Lender shall not be obligated to make the first Loan Advance
unless the following have been satisfied:
(1) All representations and warranties made in this Loan
Agreement shall be true and correct on and as of the date
of the Loan Advance with the same effect as if made on
that date;
(2) Lender shall have received:
(a) executed copies of all Loan Documents and any
other documents required by Lender;
(b) an estimated cost breakdown of all direct and
indirect costs of the Project;
(c) appraisals of the Project as required by Lender
in form and substance satisfactory to Lender;
(d) Plans and Specifications, and all bulletins,
addenda, change orders and modifications to the date of
the request for the Loan Advance, acceptable to Lender,
and approved in writing by Borrower, the Architect, the
General Contractor, Permanent Lender and tenants whose
approval is required, if any;
(e) an undertaking by the General Contractor and
Architect to continue performance on Lender's behalf
without additional cost in the event of Borrower's
default;
(f) evidence of compliance with all building, safety,
zoning, environmental and other requirements of any state,
municipal or other governmental authority affecting the
construction and use of the Project;
(g) all required permits, licenses, approvals and
authorizations then procurable which are required for the
construction and use of the Project;
(h) original paid insurance policies as required
hereunder and by the Mortgage;
(i) a request for advance as specified in Section
4.2(l);
(j) Borrower shall, in Lender's opinion, have fully
complied with all of the provisions of the Construction
Lien Act, being Michigan Public Act 497 of 1980, as
amended, and shall prior to the commencement of any actual
physical improvements (as defined in said Act) on the
Site, have recorded a Notice of Commencement (as defined
therein) and delivered a copy to Lender;
(k) sworn statements, schedule of costs by work trade
category, waivers of lien, copies of all writings received
or transmitted by the "Designee" identified in the Notice
of Commencement during the period ending with the date of
the request for Loan Advance, affidavits and certificate
of the Architect and of Borrower, and acceptable
assurances of payment of the General Contractor, all
subcontractors and materialmen, which shall cover all
work, labor and materials, including equipment and
fixtures of all kinds, done, performed or furnished for
the Project to the date of the request. The Architect's
certificate shall be certified to both Lender and Borrower
and certify:
(1) that each request for payment is correct and
that to the best of its knowledge all work
pursuant to the contract to the date thereof has
been done in substantial compliance with the
Plans and Specifications;
<PAGE> 10
(2) that to the date thereof, there has been no
material deviation from the contract amount or
time of completion of the work, except as
authorized by contract modifications approved by
Lender; and
(3) the total construction cost, the cost to
complete the Improvements, and that after giving
effect to all amounts previously certified for
payment, plus the amount then requested, the
remaining uncertified and undisbursed funds will
be sufficient to meet all known costs to complete
the work covered by the contract;
(l) a current engineering survey, certified by a
registered land surveyor or engineer to Lender and the
mortgage title insurer, showing the location of all
Improvements made to the Site, the location of all
easements and public utilities (identified by liber and
page of recording), all means of ingress and egress, all
set-back lines, any encroachments either upon the real
estate of others or by others upon the Site, indicating
the location and availability of satisfactory utility
services and storm drain and sewer facilities, and
disclosing no other matter objectionable to Lender, and
bearing the following certification:
"We certify to Bank One, Michigan and Lawyers Title
Insurance Company, we have surveyed the property described
herein (the "Property") for the purpose of a mortgage loan
to be received by Ramco-Gershenson Properties L.P., a
Michigan limited partnership, from Bank One, Michigan, and
further certify that (i) there are located thereon
buildings, improvements and parking areas, as shown, (ii)
said buildings, improvements and parking areas are within
the boundaries of the Property and do not encroach on any
adjoining property, nor do the buildings, improvements or
parking areas on any adjoining property encroach upon the
Property, (iii) all easements, rights-of-way and building
lines affecting the Property are noted and located hereon
by dimension and liber and page of recording, (iv) all
means of ingress and egress to the Property are shown and,
if by virtue of an easement, the liber and page of
recording thereof is shown, (v) there is no moving or
standing water on the Property, except as shown, and (vi)
the Property (is) (is not) located within a Special Flood
Hazard Area as identified by the Federal Insurance
Administration, Department of Housing and Urban
Development.
We further certify that this map or plat and the survey on
which it is based were made in accordance with "Minimum
Standard Detail Requirements for ALTA/ACSM Land Title
Surveys" currently established and adopted by ALTA and
ACSM in 1997; and meets the accuracy requirements of a
Class A survey as registered therein.";
(m) copies of soil tests, indicating that the
sub-soil and geological conditions of the land are normal
and suitable for the Project without incurring any premium
costs with respect thereto;
(n) a paid policy of mortgage title insurance,
without exceptions, issued by a company and in form
satisfactory to Lender, in the full amount of the Loan,
insuring that Lender is a first mortgagee of the Premises,
and that title to the Premises is in Borrower, free and
clear of all other liens, claims, charges and
encumbrances, except such as are indicated in the Schedule
of Encumbrances attached to the Mortgage or approved by
Lender hereafter. At the time of each Loan Advance, Lender
shall be furnished with an appropriate endorsement of
coverage with respect to each Loan Advance then being
made, indicating that since the last advance, there has
been no change in the state of title and no survey
exceptions not approved by Lender, increasing the coverage
under the policy by an amount equal to the advance then
being made, and insuring that the full amount of all
disbursements up to and including such increase
constitutes a valid lien prior to any liens or other
matters of record and any unrecorded mechanics' liens
arising from nonpayment of bills covering improvements set
forth in the work progress and inspection reports and
sworn statements submitted in connection with such
disbursements;
(o) a written opinion of counsel for Borrower and
Guarantor, in form and substance satisfactory to Lender,
setting forth that:
<PAGE> 11
(1) Borrower is a duly organized and existing
Delaware limited partnership with a current and
valid Certificate of Limited Partnership and a
Certificate of Fact, each certified by the
Secretary of State, Division of Corporations and
the Borrower and Guarantor are authorized to do
business in Michigan. Guarantor is a duly formed
Maryland Corporation (Real Estate Investment
Trust).
(2) the due authorization of the Loan by
appropriate partnership action and due
authorization of the Guaranty by appropriate
corporate action;
(3) the execution of the Loan Documents is not in
contravention of the Limited Partnership
Agreement or of any undertaking, contract or
restriction known to such counsel to which
Borrower is a party or subject and the execution
of the Guaranty is not in contravention of the
bylaws or of Declaration of Trust or any
undertaking, contract or restriction known to
such counsel to which Borrower or Guarantor is a
party or subject;
(4) counsel has no knowledge of any proceeding,
whether legal or equitable, pending or threatened
against Borrower, Guarantor or the Premises which
involves the validity or enforceability of the
Loan Documents or which would affect the
contemplated use of the Premises; and
(5) when executed and delivered, the Loan
Documents will be valid and legally binding upon
Borrower and Guarantor enforceable in accordance
with their respective terms, except as
enforcement thereof may be limited by any
proceedings in bankruptcy, insolvency,
reorganization, moratorium or other laws relating
to or affecting generally the enforcement of
creditors' rights and remedies;
(p) a Phase I environmental report by an
environmental engineer acceptable to Lender (including a
50-year title search), together with an Environmental
Questionnaire and an Environmental Certificate executed by
Borrower;
(q) other documents as may be reasonably required by
Lender; and
(r) each of the items described above shall be in
form and substance satisfactory to Lender.
4.3 The obligation of Lender to make any Loan Advances after the first
Loan Advance shall be subject to satisfaction of the following conditions:
(1) All conditions for the first Loan Advance set forth in
Section 4.2, except condition 4.2(2)(l);
(2) There shall be no default under any of the Loan Documents;
(3) If required by Lender, an updated engineering survey in
form and substance as required by Section 4.2(l);
(4) That the budget is In Balance as defined in Section
1.24(2).
4.4 Each Loan Advance(s) shall be subject to inspection and approval
of the portion of the Improvements which has been completed at the time of the
Loan Advance by Lender or its designee.
4.5 Lender shall not be required to make any Loan Advance if:
(1) there is any materially adverse change in the projected
income and expenses of the Premises or any lessee under a lease to
be assigned as security or Borrower does not satisfy the financial
covenants set forth in the Second Amended and Restated Revolving
Credit Agreement dated as of October 30, 1997 between Borrower and
Bank Boston, N.A., and others, as it may be amended, restated or
replaced from time to time;
<PAGE> 12
(2) there shall have occurred any of the events described in
Sections 14.5 or 14.6 for which Lender has the right to terminate
this Loan Agreement;
(3) either the Borrower, or any tenant under any lease to be
assigned as security, or any Guarantor of the Loan or any such
lease shall be the subject of any bankruptcy, reorganization or
insolvency proceeding;
(4) there shall have occurred and be continuing any default by
Borrower under the Loan Documents; or
(5) there shall be a default in any other loan by Lender to
Borrower or any Guarantor of the Loan.
4.6 At no time shall the total amount of Loan Advances, together with
the cost to complete the Improvements in accordance with the Plans and
Specifications, Loan Documents and leases, if any, exceed the Loan Amount. As
construction progresses, Lender will hold back from each advance ten (10%)
percent (the hold back shall be reduced to five (5%) percent once fifty (50%)
percent of the Improvements have been completed) of all amounts advanced to
cover the cost of labor and materials furnished to the Project, which hold-backs
shall be distributed upon completion of the Improvements in accordance with the
Plans and Specifications, Loan Documents and leases, if any, and upon
satisfaction of all of the conditions for the final Loan Advance hereinafter set
forth.
4.7 Lender may establish reserves from the undisbursed portion of the
Loan in sums sufficient, in its opinion, to pay or satisfy any requirements of
the permanent loan commitment or any lien or claim prior or prejudicial to the
lien of Lender, and all funds so reserved shall be deemed loan proceeds
disbursed under this Loan Agreement whether or not segregated and whether or not
at interest. If at any time, in the reasonable judgment of Lender, the then
undisbursed portion of the Loan shall be insufficient to defray the remaining
cost of completion of the Improvements, then, Lender may in its sole discretion
cease making Loan Advances until the Loan is brought in balance and Borrower
shall go out-of-pocket to pay all costs of the Project until the Loan is brought
in balance.
4.8 Lender's obligation to make the final Loan Advance shall be
subject to satisfaction of the following:
(1) Borrower shall have furnished all of the certificates and
documents required hereunder; provided, that the certified
engineering survey required shall be a final, as-built survey and
shall include the location of all parking areas, if any, with any
dimensions and striping indicated and photographs of the Premises
from at least three (3) different views.
(2) Delivery to Lender of evidence satisfactory to it of
issuance of all certificates, permits, licenses and other
approvals required by any governmental or public authority or
rating bureau of all work requiring inspection and authorizing the
use and occupancy of the Premises.
(3) The requirements of Section 4.5.
(4) Receipt of Subordination, Non-Disturbance and Attornment
Agreements and Tenant Estoppels from tenants where required by
leases with such tenants or if requested by Lender.
(5) Certification by the Architect and General Contractor, if
any, and by Borrower of final completion of the Improvements in
accordance with the Plans and Specifications, and final inspection
and approval of the construction by Lender or its designee.
(6) All other documents, as may be reasonably required by
Lender.
(7) Each of the items described above shall be in form and
substance satisfactory to Lender.
Anything herein to the contrary notwithstanding, Lender's obligation to
make the final Loan Advance shall terminate on the Maturity Date of the Note,
without in any way affecting the obligations of Borrower hereunder.
<PAGE> 13
INSURANCE 5. During the
construction of the
Improvements and for
as long as any part of
the Loan advanced to
or on behalf of
Borrower
remains unpaid, Borrower shall maintain a policy or policies of insurance
against fire (with extended coverage, malicious mischief and vandalism
endorsements and covering all property covered by the lien of the Mortgage or
any other instrument securing the Loan), builder's risk, public liability,
workers' compensation, Federal Flood Insurance and other insurance as Lender
may, from time to time, require (including but not limited to rental
interruption insurance for a term of at least 12 months upon issuance of a
temporary certificate of occupancy), containing where applicable a standard loss
payable clause, without contribution, in favor of Lender. All policies shall be
with companies and in form, amount and substance satisfactory to Lender, and
shall be noncancellable, except upon thirty (30) days' written notice to Lender.
APPLICATION
OF ADVANCES 6. Borrower shall apply each
Loan Advance against amounts
due and payable for
construction of the
Improvements or
obligations in connection therewith, and shall set aside the remainder, if any,
to apply against all amounts as shall become due and payable therefor. Nothing
contained in the Loan Documents shall impose upon Lender any obligation to see
to the proper application of Loan Advances by Borrower or any other party. In
the event of Borrower's default, Lender may, in making Loan Advances, pay any
portion of the Loan Advance directly to the General Contractor or any
subcontractor or supplier of materials, fixtures, equipment or labor for the
Premises.
REPRESENTATIONS
AND WARRANTIES 7. Borrower and Guarantor
(where applicable)
represent and warrant
that:
7.1 Borrower has good and marketable fee simple title to the Premises
free from all liens and encumbrances, except as provided in the Mortgage.
7.2. Borrower has fully performed all covenants and obligations to be
performed by Borrower under all leases assigned as security for the repayment of
the Loan.
7.3 The financial statements heretofore delivered to Lender are true
and correct in all material respects and have been prepared in conformity with
generally accepted accounting principles. No materially adverse change has
occurred since the date of each financial statement.
7.4 There are no suits or proceedings pending or, to the knowledge of
Borrower, threatened against or affecting Borrower, the Premises or the
Guarantor, if any, or involving the validity or enforceability of the Loan
Documents or involving any risk of a judgment or liability which, if satisfied,
would have a materially adverse effect on the financial condition, business or
properties of Borrower, or the priority of the lien of the Mortgage.
7.5 The execution and delivery of this Loan Agreement and the other
Loan Documents, and the consummation of the transactions contemplated do not
conflict with or result in the breach of any valid regulation, order, writ,
injunction, judgment or decree of any court or governmental or municipal
instrumentality or in breach of or default under any agreement or other
instrument to which the Borrower or Guarantor is a party or by which it is
bound.
7.6 Borrower has delivered to Lender accurate and complete copies of
the Plans and Specifications and all other contract documents requested,
including all modifications thereof.
7.7 The Premises have adequate rights of access to public ways, soil
conditions are appropriate for the construction of the Project, and water,
sanitary sewer and storm drain facilities and all public utilities necessary or
convenient to the full use and enjoyment of the completed Project are available
to the Site and, if not now installed, will be promptly constructed and
installed to service the Project.
7.8 Borrower has obtained all required permits, licenses, approvals
and authorizations, including those
<PAGE> 14
required by the Federal Environmental Protection Agency and any state or local
authority charged with the enforcement of regulations of such agency, and fully
complied with all building, safety, zoning, environmental and other requirements
of any state, municipal or other governmental authority pertaining to the
construction of the Improvements capable of being complied with at the date
hereof, and will obtain all such permits, licenses, approvals and authorizations
and will comply with all such building, safety, zoning and other requirements
hereafter.
7.9 The Project will be constructed in strict accordance with all
applicable building, safety, zoning and other requirements of all state,
municipal or other governmental or regulatory authorities and rating or
inspection offices having jurisdiction, and will be constructed entirely on the
Site and will not unlawfully encroach on any easement, right-of-way or land of
others or violate any set-back lines or applicable use or other restrictions or
regulations.
7.10 There is no default on the part of the Borrower under any of the
Loan Documents.
COVENANTS OF
BORROWER 8. Borrower and Guarantor
(where applicable)
covenant with Lender
as follows:
8.1 To permit Lender or its designee access to the Project and to make
available for audit and inspection, at any reasonable time by the Lender or its
duly authorized agents, all property, equipment, books, contracts, records and
other papers relating to the Project. To keep the books and accounts of all
operations relating to the Project in accordance with generally accepted
accounting procedures.
8.2 To promptly respond to any inquiry from Lender for information
with respect to the Project, which information may be verified by Lender at
Borrower's expense; provided, however, that Lender shall at all times be
entitled to rely upon any statements or representations made by Borrower or its
agents, and Borrower shall hold Lender harmless from and indemnify it against
all loss, cost (including reasonable attorney's fees) and damage suffered
through any action taken or forbearance granted by Lender in reliance on these
statements or representations, excluding, however, any loss, cost or damage
resulting from Lender's willful misconduct or negligence.
8.3 To cause the construction of the Project to be prosecuted with
diligence and continuity and to complete the same in accordance with the Plans
and Specifications, leases, if any, and the Loan Documents before the Completion
Date.
8.4 To pay, when due, all costs, fees and expenses, required to
satisfy the conditions of the Loan Documents, and the consummation of the
transactions contemplated thereby.
8.5 Borrower shall not, without the prior written approval of Lender:
(1) Convey, transfer, sell, lease or encumber any of the mortgaged
property, or modify any existing or future lease affecting the
Premises (other than the leases to Dayton Hudson Corporation and
Meijer, Inc.);
(2) Assign, transfer, dispose of or encumber any personal property
or equipment covered by the Loan Documents, except in the ordinary
course of its business and as permitted by any of said Loan
Documents;
(3) Convey, assign or transfer any beneficial interest in the
properties described in the Mortgage or any right to manage or
receive any of the rents, contract payments, income and profits
thereof;
(4) Remodel, add to, reconstruct, improve or demolish any part of
the properties described in the Mortgage, except as required to do
so by the provisions of this Loan Agreement;
(5) Permit the use of the Project for any purpose except the use
which was originally intended, nor suffer any occupancy of the
Project prior to completion thereof, excepting only in connection
with the construction thereof;
(6) Guarantee the indebtedness of any other party except affiliate
parties;
<PAGE> 15
(7) Purchase or acquire any materials, fixtures or equipment for
the Project upon leases, conditional sale or other type of title
retention of security agreement.
8.6 To comply with all terms and conditions of the permanent loan
commitment, if any, so that Borrower will
qualify for the financing provided for therein (which financing Borrower will
accept), and to transmit to Lender, immediately upon receipt thereof, any
communication pertaining to the permanent loan commitment or the Project.
8.7 Upon demand of Lender, to correct any structural defect or
unauthorized departure from the Plans and Specifications not approved by Lender.
8.8 The Borrower will take all actions reasonably necessary to assure
that Year 2000 Issues will not have a material adverse effect on the business
operations or financial condition of the Borrower. "Year 2000 Issues" means
anticipated costs, problems and uncertainties associated with the inability of
certain computer applications to effectively handle data including dates on and
after January 1, 2000, as such inability affects the business, operations, and
financial condition of the Borrower and of the Borrower's material customers,
suppliers and vendors. Upon Banks' request, Borrower will provide Banks with a
description of its plan to address Year 2000 Issues, including updates and
progress reports. Borrower will advise Banks of any reasonably anticipated
material adverse effect on the business operations or financial condition of the
Borrower as a result of Year 2000 Issues.
8.9 From and after one year from conversion to a Term Loan under
Section 13, it will maintain a debt service coverage ratio of not less than 1:25
to 1. This covenant shall be serviced quarterly based on a trailing twelve (12)
month period.
8.10 From and after six (6) months from the date of this Agreement,
Borrower shall bring the budget In Balance.
EVENTS
OF DEFAULT 9. The following shall
constitute Events of
Default:
9.1 If Borrower is in default under any of the Loan Documents;
9.2 If at any time any representation or warranty contained herein or
in any certificate or document delivered to the Lender is false or incorrect;
9.3 If the Project, in the exclusive judgment of Lender, is not or
cannot be completed on or before the Completion Date;
9.4 If construction of the Improvements is not carried on with
reasonable dispatch, except for delays and events entirely beyond the control of
Borrower, such as strikes, acts of God or inability to obtain materials;
9.5 If a lien for the performance of work or the supply of materials
be perfected against the Premises and remains unsatisfied or unbonded at the
time of any request for advance or for a period of thirty (30) days after the
date of filing thereof;
9.6 Any assignment by Borrower of this Loan Agreement or any advance
hereunder without Lender's prior written consent;
9.7 The filing of formal charges under any federal, state or local
statute, law or ordinance for which forfeiture of any property mortgaged or
pledged to Lender or in which Lender is granted a security interest pursuant to
any documents required to be executed by Borrower under this Agreement is a
potential penalty; or
9.8 If Lender, or its employees, agents or designees, shall be denied
any information relating to the Premises or access thereto for information
purposes.
<PAGE> 16
REMEDIES
UPON DEFAULT 10. In addition to all other remedies
available under the Loan Documents,
the following remedies shall be
available upon
default by Borrower:
10.1 Lender may, as an alternative to other methods of summary
execution, but without waiving such other methods, and particularly its rights
and remedies as mortgagee, enter into possession of the Premises and perform any
and all work and labor necessary to complete said Project substantially
according to said Plans and Specifications and/or take all appropriate steps to
secure and protect the Project. All sums expended by Lender for such purpose
shall be deemed to have been paid to Borrower and secured by the Mortgage. In
the event of any default, Borrower hereby constitutes and appoints Lender its
true and lawful attorney-in-fact with full power of substitution in the
premises, to complete the Project in the name of Borrower, and hereby empowers
Lender as its attorney-in-fact as follows: (a) to use any funds of Borrower,
including any balance which may be held in escrow and any funds which may remain
unadvanced under the Mortgage or hereunder, for the purpose of completing the
Project in the manner called for by the Plans and Specifications; (b) to make
such additions, changes and corrections in the Plans and Specifications which
may be necessary or desirable to complete the Project in the manner contemplated
by the permanent loan commitment or otherwise to Lender's satisfaction; (c) to
employ such contractors, subcontractors, agents, architects and inspectors as
shall be required for said purposes; (d) to execute all applications and
certificates in the name of Borrower which may be required by any contract
documents relating to the Project; and (e) to do any and every act which
Borrower could be required by Lender to do in its own behalf. In the event of
entry by Lender for the purposes aforesaid, Lender shall be paid as compensation
for such efforts and in addition to all other sums payable to it, a sum equal to
ten (10%) percent of all costs incurred for such purposes and of all costs
directly related thereto. This power of attorney shall be deemed a power coupled
with an interest and cannot be revoked by Borrower. Lender, as attorney-in-fact,
shall also have power to prosecute and defend all actions or proceedings in
connection with the construction and/or security of the Project or in any other
respect relating to the Premises and to take such action and require such
performance as it deems necessary under accepted bonds, guaranties or other
assurances of completion. Borrower hereby assigns and transfers to Lender all
sums unadvanced under said Mortgage or hereunder and all sums held in escrow,
conditioned upon the use of said sums in the completion of the Improvements and
payment of all costs directly related to such completion and/or security
thereof, such assignment to become effective only in case of Borrower's default,
but upon such default being called, without further notice to or demand made
upon Borrower. In the event of such default and entry by Lender, all materials
purchased by Borrower for use in construction shall be and become forthwith the
property of Lender and shall be deemed to have been delivered to Lender
accordingly, and, upon demand, Borrower shall deliver to Lender bills of sale as
further evidence thereof.
10.2 Lender may avail itself of any and all remedies available to it at
law or in equity or hereunder, and all such remedies shall be cumulative and
none shall be deemed exclusive of any other. Further, and not in limitation of
the foregoing, Lender may terminate this Loan Agreement and demand full payment
of Borrower's indebtedness to it, may enter upon the Premises and complete the
Project as hereinabove provided, and may utilize any remedy available to it
under the terms and provisions of the Loan Documents. In addition, Borrower
will, at the request of Lender, assign, transfer and set over to Lender by
appropriate instrument, in writing, all of Borrower's right, title and interest
in and to any construction contract, bonds or other contracts relating to the
construction and operation of the Project. Borrower does hereby constitute
Lender its attorney-in-fact, with full power of substitution, to act in
Borrower's name to execute assignments and contracts and to realize upon any of
Borrower's right, title and interest therein and to negotiate, receive and
receipt for all goods, funds or credits which may be owing Borrower, and to such
end to initiate legal action and prosecute or compromise all claims relating
thereto.
CAPITAL
ADEQUACY PROTECTION 11. If Lender shall have determined that
(i) the adoption of, or compliance
with, the risk based capital
guidelines adopted by
the Board of Governors of the Federal Reserve System, 12 CFR Part 208, Appendix
A, or the Federal Deposit Insurance Corporation, 12 CFR Part 325, Appendix A,
and amendments thereto, or (ii) the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender (or any branch or lending office
thereof) with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on Lender's
capital as a consequence of its obligations under this Agreement and the
<PAGE> 17
Note to a level below that which Lender could have achieved but for such
adoption, change or compliance (taking into consideration Lender's policies with
respect to capital adequacy) by an amount deemed by Lender to be material, then,
from time to time within fifteen (15) days after demand by Lender, Borrower
shall pay to Lender such additional amount or amounts as will compensate Lender
for such reduction.
Lender will promptly notify Borrower of any event of which it has
knowledge, occurring after such date, which will entitle Lender to compensation
pursuant to this Section 11 pertaining to capital adequacy requirements and will
designate a different branch or lending office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of Lender, be otherwise disadvantageous to Lender. A certificate of
Lender claiming such compensation and setting forth the additional amount or
amounts to be paid to it in respect hereof shall be conclusive in the absence of
manifest error. In determining such amount, Lender may use any reasonable
averaging and attribution methods.
APPLICATION OF
RENTS AND RECEIPTS 12. After completion of the Project, or
of any phase, unit or portion
thereof, all rents, revenues or
receipts received by
Borrower from the operation in excess of normal operating expenses shall be used
by Borrower exclusively for payment of (i) construction costs and Related Costs
of the Project, or (ii) interest or principal due on the Note, as specified by
Lender.
CONVERSION TO
TERM LOAN 13. Besides any other conditions or
requirements the Borrower must meet
under the terms of this Agreement or
the other Loan
Documents to convert the Construction Loan to the Term Loan, Lender's obligation
to convert the Construction Loan to the Term Loan shall be further subject to
the Borrower's compliance with and fulfillment of the following
conditions/requirements on or before the Conversion Date, each in form,
substance and amount (if applicable) satisfactory to Lender:
(A) There is no default under any of the Loan Documents, and a
default would not occur with the passage of time or giving of
notice or both;
(B) The Borrower shall have paid all fees, expenses and costs
associated with the conversion;
(C) The Borrower shall have caused the title insurance company
insuring the Mortgage to issue a "date down" or other
appropriate endorsement(s) to its title policy for the
Mortgage (1) changing the "Date of Policy" in the title policy
to the Conversion Date, (2) indicating that since the last
advance under the Construction Loan, there has been no change
in the state of title of the Site and no survey exceptions not
previously approved by the Bank and (3) insuring that, as of
the Conversion Date, the full amount of the Term Loan
constitutes a valid lien on the Site that is prior to any
liens or other matters of record and any unrecorded
construction liens arising from nonpayment of bills covering
improvements described in the work progress and inspection
reports and sworn statements submitted as part of advances
made under Construction Loan:
(D) The Borrower shall have caused the title insurance company
insuring the Mortgage to have (1) changed the ALTA Form 3.0
zoning endorsement to an ALTA Form 3.1 zoning endorsement that
covers the completed Improvements and (2) issued/brought
current such other endorsements (including, without
limitation, the ALTA 9 endorsement) to the title policy as the
Bank may require; and
(E) The Borrower shall have executed and delivered the Term Note
in the form attached as Exhibit D-1 or D-2 to Lender, together
with all other documents required under this Agreement and the
other Loan Documents; and
(F) At least one (1) day before the conversion, Borrower shall
notify Lender in writing of its election of a LIBOR Rate, the
Effective Rate, or a Fixed Rate. If Borrower wishes to elect a
LIBOR Rate, it shall comply with the requirements set forth in
this Loan Agreement. If Borrower does not elect a rate of
interest, the Effective Rate will apply.
If Borrower elects a floating rate of interest, the Term Note may be
prepaid in whole or in part, at any time without penalty as to any floating rate
borrowings. If Borrower elects a Fixed Rate of interest, prepayment shall be
subject to a prepayment premium equal to the Current Value of: (a) the interest
that would have accrued on the amount prepaid at
<PAGE> 18
the Fixed Rate, minus (b) the interest rate that could accrue on the amount
prepaid at the Treasury Rate. In both cases, interest will be calculated from
the prepayment to the maturity dates of the installments being paid. Such
maturity dates shall be determined by applying the prepayment to the scheduled
installments of principal in their inverse order of maturity. "Treasury Rate"
shall mean the yield, as of the date of prepayment, on United States Treasury
bills, notes or bonds, selected by the Lender in its discretion, having
maturities comparable to the scheduled maturities of the installments being
prepaid. "Current Value" means the net present value of the dollar amount of the
interest to be earned, discounted at the Treasury Rate. In no event shall the
prepayment premium be less than zero. As to LIBOR Borrowings, prepayment shall
be subject to Section 2.
Borrower shall provide one (1) day notice of its intent to prepay the
Term Note which notice shall be irrevocable. If the balance of the Loan is
accelerated, the resulting balance due shall be considered a prepayment due and
payable as of the date of acceleration.
Borrower agrees that the prepayment premium is a reasonable estimate of
loss and not a penalty. The prepayment premium is payable as liquidated damages
for the loss of bargain, and its payments shall not in any way reduce,
affect or impair any other obligation of the Borrower under the Loan.
MISCELLANEOUS 14.
14.1 No waiver at any time of the provisions or conditions of this Loan
Agreement or of any other Loan Documents shall be construed as a waiver of any
of the other provisions or conditions thereof, nor shall a waiver of any such
provision or condition be construed as a right to subsequent waiver of the same
provision or condition.
14.2 No provision of this Agreement shall be amended, waived or
modified, except by an instrument in writing signed by the parties.
14.3 Unenforceability for any reason of any provision of this Loan
Agreement shall not limit or impair the operation or validity of any other
provisions of this Loan Agreement or any other of the Loan Documents.
14.4 If, in the opinion of Lender, its position under the Loan
Documents may be prejudiced or impaired by failure or unreasonable delay on the
part of Borrower in the performance of its obligations hereunder, including the
payment of any prior charge upon the Premises or any other charge payable by
Borrower whether or not related to the Project, then and in any such events,
Lender may pay or otherwise satisfy the obligations of Borrower with respect
thereto, and any such payments or costs of such satisfaction, including a
reasonable attorney's fee, may be charged to the proceeds of the Loan as any
other advance hereunder and deemed made pursuant to this Loan Agreement and not
in modification thereof.
14.5 In the event of any loss or damage to the Project by fire or other
casualty, and the same is not repaired or replaced, or such repairs commenced or
arrangements therefor made and reasonable progress toward the completion thereof
made, within sixty (60) days from date of such fire or casualty in accordance
with Article 4 of the Mortgage, Lender may, at its election, terminate this Loan
Agreement without affecting the validity of the Note or the security for the
principal advances already made and interest thereon, and demand full payment of
the entire indebtedness owing hereunder and under the Loan Documents. If this
Loan Agreement is not terminated, as provided above, when the Project shall have
been repaired to the same state of completion as was when the loss or damage was
suffered, both parties shall then carry out the terms of this Loan Agreement as
if no such loss or damage had occurred.
14.6 In the event that by or pursuant to proper authority there is
taken or condemned the entire Premises, or such part thereof as in the opinion
of Lender would result in limitation or impairment of Borrower's ability or
capacity to satisfy all of its obligations now or at any time relating to the
Premises, or if any such taking or condemnation results in the cancellation,
termination or amendment of the permanent loan commitment or any lease or other
agreement for occupancy of the Premises or any part thereof, which is
unsatisfactory to Lender, Lender may terminate this Loan Agreement without
affecting the validity of the Note or the security for the principal advances
already made and interest thereon and demand full payment of the entire
indebtedness owing hereunder and under the Loan Documents; provided, however,
Borrower shall have thirty (30) days within which to seek other financing
arrangements satisfactory to Borrower and Lender.
14.7 Borrower acknowledges that the right to trial by jury is a
constitutional one, but that it may be waived.
<PAGE> 19
Borrower, after consulting counsel of its choice (or having had the opportunity
to consult with counsel), knowingly, voluntarily and without coercion, waives
all rights to a trial by jury of all disputes between Borrower and Lender.
14.8 This Agreement is cross-defaulted with all other Loan Documents.
Any default under any instrument or agreement delivered to evidence or secure
the indebtedness secured by the Note, or executed in conjunction therewith,
including, this Loan Agreement, shall be deemed an act of default by the
Mortgagor under any other instrument or agreement delivered to evidence or
secure the indebtedness evidenced by the Note.
14.9 This Agreement is entered into by and between, and for the benefit
of, Borrower and Lender only. No other party (including, but not limited to, the
General Contractor, Architect, subcontractors, laborers and materialmen) shall
have the right to rely upon or derive any benefits from this Agreement, nor
shall such party be deemed to be a third party beneficiary of this Agreement.
14.10 Lender shall release portions of the Property from the lien of
the Mortgage in accordance with the release provision of the Mortgage.
14.11 Any notice, demand, request or other instrument which may be or
is required to be given under this Loan Agreement shall be given to the parties
at their respective addresses first above written by U.S. Certified Mail, Return
Receipt Requested.
14.12 Time is of the essence for all purposes of this Agreement.
14.13 This Loan is made and accepted in the State of Michigan and this
Loan Agreement and all of the Loan
Documents shall be construed in accordance with the laws of the State of
Michigan.
The parties have executed this Loan Agreement as of the day and year
first above written.
Signed:
RAMCO-GERSHENSON PROPERTIES, L.P., a Delaware
limited partnership
By: Ramco-Gershenson Properties Trust, a Maryland
real estate investment trust
Its: General Partner
By: /s/ DENNIS GERSHENSON
Dennis Gershenson
Its: President
"Borrower"
BANK ONE, MICHIGAN, a Michigan banking corporation
By: /s/ STEVEN J. MAHR
Steven J. Mahr
Its: First Vice President
"Lender"
INSTRUMENT DRAFTED BY:
Elaine Fieldman, Atty.
BARRIS, SOTT, DENN & DRIKER, P.L.L.C.
211 West Fort Street, Suite 1500
Detroit, Michigan 48226-3281
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, STATEMENT OF INCOME, STATEMENTS OF SHAREHOLDERS
EQUITY, STATEMENT OF CASH FLOWS, AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,049
<SECURITIES> 0
<RECEIVABLES> 10,738
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 560,461
<DEPRECIATION> 32,219
<TOTAL-ASSETS> 563,210
<CURRENT-LIABILITIES> 20,066
<BONDS> 350,150
33,829
0
<COMMON> 72
<OTHER-SE> 110,822
<TOTAL-LIABILITY-AND-EQUITY> 563,210
<SALES> 0
<TOTAL-REVENUES> 42,533
<CGS> 0
<TOTAL-COSTS> 11,181
<OTHER-EXPENSES> 10,713
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,939
<INCOME-PRETAX> 7,700
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,334
<EPS-BASIC> .50
<EPS-DILUTED> .50
</TABLE>
