<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 $250
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For the fiscal year ended DECEMBER 31, 1995
----------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
-----------------
For the transition period from to
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Commission file number 33-25729
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IDS/SHURGARD INCOME GROWTH PARTNERS L.P. II
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(Exact name of registrant as specified in its charter)
WASHINGTON 91-1436174
- ----------------------- ---------------------------------
(State of organization) (IRS Employer Identification No.)
1201 Third Avenue, Suite 2200, Seattle, Washington 98101
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 624-8100
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
[ X ]
DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report to Security Holders for the fiscal year ended
December 31, 1995 are incorporated by reference into Part II and III of this
Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
IDS/Shurgard Income Growth Partners L.P. II (the Partnership) was
organized under the laws of the State of Washington on November 15, 1988. The
General Partner is Shurgard Associates L.P. II. The Partnership will
terminate December 31, 2030, unless terminated at an earlier date.
The business of the Partnership is to acquire, develop and operate
storage centers. The Partnership has completed the acquisition and
development phase of the business; currently its focus being on the operation
of the storage centers. The principal investment objectives of the
Partnership are to provide the Limited Partners with regular quarterly cash
distributions which, for Taxable Limited Partners, are expected to be
partially tax-sheltered; to obtain long-term appreciation in the value of its
properties; and to preserve and protect the Limited Partners' capital. The
Partnership began operations during 1989, at which time it obtained
approximately $10.3 million in short-term financing for the purchase of two
existing storage facilities. The offering was completed in April 1990 with
total proceeds raised through the sale of limited partnership interests of
approximately $28.8 million. This enabled the Partnership to retire the
short-term loans and purchase an additional five existing storage centers and
one partially completed center. During 1992, the Partnership borrowed
approximately $1.8 million under a seven year note with a commercial bank to
pay off its $1.24 million line of credit, upon the completion of a storage
center. Additionally during 1993, the Partnership drew $1.25 million on a
line of credit to fund an expansion at an existing storage center. For more
information regarding the properties owned by the Partnership at December 31,
1995, see Item 2 below.
On March 24, 1995, Shurgard Incorporated was merged (the Merger) into
Shurgard Storage Centers, Inc. (SSCI). As a result of the Merger, SSCI
assumed all of Shurgard Incorporated's rights and obligations under the
Management Services Agreement and will manage the Partnership's properties on
the terms set forth in the Management Services Agreement.
SELF SERVICE STORAGE
Self service storage centers provide a low-cost alternative to
warehousing and other forms of storage. Storage customers vary from
individuals and professionals to small and large businesses. These customers
rent an enclosed space or "unit" to store various items, including household
goods, recreation vehicles, inventory and business records. Individual units
are secured by the customer's own lock and key and the property's security is
maintained through a computerized access system. Storage space is rented on a
month-to-month basis and the typical rental period for storage tenants is
less than two years. This short rental period makes it necessary for
management to continually re-lease available space in order to maximize
property revenues. The primary technique for renting available space is
through advertisements placed in local Yellow Pages and through signage at
the property site. In addition, the Partnership may utilize various
promotional programs to stimulate rental activities at a particular facility
or within specific market areas.
The Partnership's storage centers are designed to offer high-quality
storage space for personal and business use at a competitive price. Rental
rates reflect the comparative quality of the center (security, accessibility
and appearance), as well as the superior service provided by on-site
managers. Because storage leases are short term, any adjustments in rental
rates
<PAGE>
due to inflation or other market factors can become effective promptly based
on the manager's analysis of demand and availability at the particular store.
While rental income from leased space constitutes the primary source of
revenue from the properties, additional revenue is generated from incidental
services and products available at the storage centers. Management believes
that providing such ancillary services will become increasingly important as
competition forces operators to seek to differentiate their product. The
Partnership currently receives additional revenue from storage supplies sales
as well as truck rental operations.
PROPERTY MANAGEMENT
The Partnership entered into a Management Services Agreement with
Shurgard Incorporated which was assumed by SSCI in the Merger, whereby SSCI
manages the Partnership's properties for a monthly fee of 6% of the gross
revenues from operations of storage centers, plus $75 per month per facility
for rendering advertising services. Since SSCI manages the centers, all
on-site managers and associate managers are employees of SSCI. As of
February 6, 1996, there were 13 such employees on-site at the Partnership's
storage centers.
Under the Management Services Agreement, SSCI has granted the
Partnership the non-exclusive right to use the name, trademark and service
mark "Shurgard" in connection with the rental and operation of its
properties. The Management Services Agreement can be terminated without cause
by the Partnership with sixty days written notice. However, if the agreement
is so terminated, all rights to use the "Shurgard" name, trademark and
service mark are also terminated and any signs bearing the name "Shurgard"
are to be removed at the Partnership's expense. If the agreement is
terminated by SSCI for reasons other than the Partnership's breach thereof,
or SSCI is terminated for cause, the Partnership will maintain the right to
use the "Shurgard" name, trademark, service mark and related items until the
properties are sold or otherwise disposed of. However, such rights may not be
passed on to any subsequent purchaser of a property.
COMPETITION
Management considers occupancy levels in the 90% range to be "full", and
as such they believe significant future occupancy gains will be difficult to
obtain. Management anticipates that future increases in revenues from storage
centers currently owned by the Partnership to continue to be primarily the
result of rental rate increases, as they have been in the last two years. To
the extent that the existing properties continue to operate profitably, this
will likely stimulate further development and result in greater competition
between the newly developed and existing properties. The Partnership seeks to
maximize revenues by adjusting rents to match demand more flexibly. Store
managers evaluate their store's rental rates, based on unit demand, unit
availability and competitors' rental rates. The Partnership trains its store
managers in revenue optimization and empowers them to adjust marginal rental
rates based on their "on the ground" analysis of demand and availability at
their particular store. In addition, the use of month-to-month leases,
combined with customer turnover, allows rents to be quickly adjusted to match
current demand in a flexible manner.
Entry into the self storage business through acquisition of existing
facilities is relatively easy for persons or institutions with the required
initial capital. Development of new self storage facilities is more
difficult, however, due to zoning, environmental and other regulatory
requirements. Management has seen recent increases in storage development,
but anticipates that this development will not begin to effect industry
occupancies until late 1996 or 1997. The Partnership competes with, among
others, national and regional storage
<PAGE>
operators and developers. Performance at any one location is generally most
influenced by competition within a five mile radius. The primary factors upon
which competition will be based are location, rental rates, suitability of
the property's design to prospective tenants' needs and the manner in which
the property is operated and marketed. The Partnership has established itself
within its markets as a quality operator, emphasizing customer service and
security.
Competition may be accentuated by any increase in availability of funds
for investment in real estate. Rising interest rates tend to decrease the
availability of funds and therefore can have a positive impact on
competition. The extent to which the Partnership is affected by competition
will depend in significant part on general market conditions.
DISPOSITION OF ASSETS
As originally stated, the Partnership plans to dispose of its interest
in its properties seven to nine years after acquisition or completion of the
properties' development, i.e., between 1996 and 2000. However, as originally
indicated, the actual time of the sale depends on a variety of factors not
capable of prediction, including future property values, availability of
credit worthy purchasers, existing financing opportunities, operating results
and the Partnership's assessment of the respective merits of the continued
operation or disposition of the properties.
The Partnership is currently conducting discussions with an affiliated
party regarding the possible acquisition of an interest in, or a merger with,
the Partnership. Whether and when the Partnership will reach agreement
regarding this potential acquisition will depend on a number of factors. There
can be no assurance that any agreement will be reached, or if reached, that the
transactions contemplated thereby will be consummated.
ITEM 2. PROPERTIES.
The following table lists each of the Partnership's storage centers at
December 31, 1995, the property location, the respective rentable space, the
acquisition or completion date, and the square foot occupancy at December 31,
1993, 1994 and 1995.
<TABLE>
<CAPTION>
Rentable Acquisition/ Occupancy at Dec. 31,
Property Location Square Completion ---------------------
Footage Date 1993 1994 1995
----------------- -------- ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shurgard of Orange Los Angeles, CA 90,200 2/89 91 92 86
Shurgard of Sterling Heights Detroit, MI 104,650 12/88 95 88 80
Shurgard of Newport News North Newport News, VA 59,000 8/89 * * *
Shurgard of Chesapeake Virginia Beach, VA 31,900 8/89 * * *
Shurgard of Leesburg Washington, D.C. 27,510 8/89 * * *
Shurgard of T.C. Jester Houston, TX 64,012 4/90 92 92 87
Shurgard of Bellefield Bellevue, WA 64,774 2/90 92 93 93
Shurgard of Kennydale Bellevue, WA 58,450 5/91 91 91 87
</TABLE>
* These properties are individually less than 10% of historical cost of
storage centers for the Partnership. The average occupancy of these
projects was 88%, 87% and 88% for the years 1993, 1994 and 1995,
respectively.
Shurgard of Kennydale was purchased from an affiliated partnership after
approval by a majority vote of limited partners. The Houston, Texas center
was purchased from Shurgard Incorporated (now SSCI) at its net cost. The
remaining six centers were purchased from unaffiliated sellers.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) Market information.
There is no established public market for the Partnership's units of
limited partnership interest.
Transfers of limited partner interests are restricted in certain
circumstances. Transfers which would result in the termination of the
Partnership under Section 708 of the Internal Revenue Code, transfers
of fractional units, and transfers which result in a limited partner
owning less than the minimum number of units are restricted. There is
a fee charged for transfers.
(b) Holders.
As of February 6, 1996, there was one general partner and
approximately 4,200 limited partners in the Partnership.
(c) Distributions.
During the fiscal years ended December 31, 1994 and 1995, the
Partnership distributed $15.78 and $16.25 respectively, per $250 unit
of limited partnership interest. In February 1996, the Partnership
distributed $4.06 per $250 unit of limited partnership interest. As of
December 31, 1995, total distributions of $11,005,727 are greater than
total earnings on a basis consistent with generally accepted
accounting principles by $3,653,372. Therefore, the partners' original
investment has been reduced by that amount for financial reporting
purposes.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this item is incorporated by reference of the
Annual Report to Security Holders for the fiscal year ended December 31, 1995, a
copy of which is filed as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS.
The information called for by this item is incorporated by reference of the
Annual Report to Security Holders for the fiscal year ended December 31, 1995, a
copy of which is filed as Exhibit 13.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by this item is incorporated by reference of the
Annual Report to Security Holders for the fiscal year ended December 31, 1995, a
copy of which is filed as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership's General Partner is Shurgard Associates L.P. II, a
Washington limited partnership. Shurgard Associates L.P. II is managed by the
directors and executive officers of Shurgard General Partner, Inc., the
corporate General Partner, and by the Individual General Partners. SSCI and IDS
Partnership Services Corporation (IPSC), a Minnesota corporation, are limited
partners of Shurgard Associates L.P. II, and as such, do not control the day-to-
day affairs of the General Partner or, through the General Partner, the
Partnership. Management of the operations of Partnership projects is performed
by SSCI pursuant to the Management Services Agreement.
The directors of Shurgard General Partner, Inc. have been elected to serve
until their successors are duly elected and qualified. As the sole shareholder
of Shurgard General Partner, Inc., Charles K. Barbo is in a position to control
the election of directors.
The directors and officers of Shurgard General Partner, Inc., are required
to devote only so much of their time to the Partnership's affairs as is
necessary or required for the effective conduct and operation of the
Partnership's business. The Individual General Partners devote their individual
time to the Partnership to the extent they deem advisable in view of the
participation of SSCI in Partnership affairs and such other factors as they
consider relevant.
The Individual General Partners of Shurgard Associates L.P. II and the
executive officers, directors and certain key personnel of Shurgard General
Partner, Inc., and SSCI are as follows:
<TABLE>
<CAPTION>
Name Age Company Office and Date of Election
- ------------------ --- ------------------------------ ------------------------------------------
<S> <C> <C> <C>
Charles K. Barbo 54 Shurgard Associates L.P. II Individual General Partner (1987-present)
SSCI President, Chief Executive Officer, and
Chairman of the Board (March 1995-present)
Shurgard General Partner, Inc. President (1992-present),
Chairman of the Board (1983-present)
Arthur W. Buerk 60 Shurgard Associates L.P. II Individual General Partner (1987-present)
Shurgard General Partner, Inc. Director (1979-February 1996)
Donald B. Daniels 57 Shurgard General Partner, Inc. Vice President (1983-present),
Director (1979-present)
Kristin H. Stred 37 SSCI Senior Vice President, Secretary and General
Counsel (1994-present)
Shurgard General Partner, Inc. Secretary (1992-present)
Harrell L. Beck 39 SSCI Director, Senior Vice President, Chief Financial
Officer and Treasurer (1994-present)
Shurgard General Partner, Inc. Treasurer (1992-present)
Michael Rowe 39 SSCI Executive Vice President (1994-present)
Shurgard General Partner, Inc Vice President (1992-present)
Mark Hall 38 Shurgard General Partner, Inc Vice President (February 1996)
</TABLE>
<PAGE>
CHARLES K. BARBO has been involved as a principal in the real estate
investment industry since 1969. Mr. Barbo is one of the co-founders of
Shurgard Incorporated, which was organized in 1972 to provide property
management services for self service storage centers and other real estate
and commercial ventures. Mr. Barbo was also a co-founder of Shurgard General
Partner, Inc. Upon Mr. Buerk's resignation on January 1, 1992, Mr. Barbo
assumed the responsibilities of President of Shurgard Incorporated until
March 24, 1995 and Shurgard General Partner, Inc. Mr. Barbo is also a general
partner in a number of other public real estate partnerships. On March 24,
1995, Shurgard Incoporated merged into SSCI and Mr. Barbo was named the
Chairman of the Board, President and Chief Executive Officer of SSCI.
ARTHUR W. BUERK joined Shurgard Incorporated in 1977. During the ensuing
years, Mr. Buerk shared with Messrs. Barbo and Daniels (see below) the various
executive management functions within Shurgard Incorporated. Mr. Buerk served as
President of Shurgard Incorporated from 1979 to 1991 and Shurgard General
Partner, Inc. from 1983 to 1991. Effective January 1, 1992, Mr. Buerk resigned
as President of both Shurgard Incorporated and Shurgard General Partner, Inc. to
pursue other areas of interest. He served as a director of Shurgard General
Partner Inc. until February, 1996 and a director of Shurgard Incorporated until
March 24, 1995. Mr Buerk remains a general partner of Shurgard Associates L.P.
II and is also a general partner in a number of other public real estate
partnerships.
DONALD B. DANIELS has been involved in the real estate investment industry
since 1971 and in the self service storage industry since 1974. Mr. Daniels is
one of the co-founders of Shurgard Incorporated. He is a director of Shurgard
General Partner, Inc. and was a director of Shurgard Incorporated until March
24,1995. Mr. Daniels is also a general partner in a number of other real estate
partnerships.
KRISTIN H. STRED joined Shurgard Incorporated in 1992. She served as
General Counsel and Secretary of Shurgard Incorporated until March 24, 1995 and
currently serves as Secretary of Shurgard General Partner, Inc. Ms. Stred served
as a corporate attorney in the broadcasting and aerospace industries from 1987
to 1992. On March 24, 1995, Ms. Stred was named Senior Vice President of SSCI.
She also serves as Secretary and general counsel of SSCI.
HARRELL BECK joined Shurgard Incorporated in April 1986 as the Eastern
Regional Operations Manager and, in 1990, he became the Chief Financial Officer.
Mr. Beck served as Treasurer of Shurgard Incorporated from 1992 until March 24,
1995. He currently serves as Director, Treasurer and CFO of SSCI as well as
Treasurer of Shurgard General Partner, Inc. On March 24, 1995, Mr. Beck was
named Senior Vice President of SSCI.
MICHAEL ROWE came to Shurgard Incorporated as Controller in 1982. In 1983,
he became a Vice President and, in 1987, was named Director of Operations of
Shurgard Incorporated. Mr. Rowe served as Treasurer of Shurgard Incorporated
from 1983 to 1992 and Executive Vice President from 1993 until March 24, 1995.
Mr. Rowe currently serves as Executive Vice President of SSCI and Vice President
of Shurgard General Partner, Inc.
MARK HALL joined Shurgard Incorporated in 1985 as Corporate Controller.
In 1987 he became the South Western Regional Operations Manager. Prior to
joining Shurgard Incorporated, Mr. Hall worked for Touch Ross & Co. where he
was employed for approximately four years, during which time he provided
services primarily to clients in the real estate and service industries. He
has a Bachelor of Arts degree in Business Administration from the
<PAGE>
University of Washington. Mr. Hall currently serves as Vice President of Real
Estate Services for SSCI and Vice President of Shurgard General Partner, Inc.
Pursuant to Articles 16 and 17 of the Agreement of Limited Partnership, a
copy of which is filed as an exhibit to the Partnership's Registration
Statement, each of the general partners continues to serve until (i) death,
insanity, insolvency, bankruptcy or dissolution, (ii) withdrawal with the
consent of the other general partners (if any) and a majority vote of the
limited partners, or (iii) removal by a majority vote of the limited partners.
ITEM 11. EXECUTIVE COMPENSATION.
<TABLE>
<CAPTION>
Number of Capacities
Persons in in which Cash
Group Served Compensation
---------- ---------- ------------
<S> <C> <C>
1 General Partner 98,400*
</TABLE>
*The General Partner has a 5% interest in cash distributions made by the
Partnership, which is disproportionate to its share of the capital of the
Partnership, which is .0035%. This amount represents the portion of cash
distributions made to the General Partner during the fiscal year ended
December 31, 1995, which is in excess of what a proportionate share of
distributions would have been.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a) Security ownership of certain beneficial owners as of February 6,
1996: None owning more than 5% of the Partnership's voting
securities.
(b) Security ownership of management as of February 6, 1996:
Management's security ownership in Shurgard Associates L.P. II as
of February 6, 1996 was as follows:
Title of Name of Percent
Class Beneficial Owner of Class
--------- -------------------------------------- --------
General Shurgard General Partner, Inc.(1),(2) .2%
Partners' Charles K. Barbo(2) 9.9%
Interest Arthur W. Buerk(2) 9.9%
Shurgard Incorporated(3),(4) 40.0%
IDS Partnership Services Corporation(3) 40.0%
------
100.0%
------
------
(1) Charles K. Barbo owns 100% of the stock of Shurgard
General Partner, Inc.
(2) Owner is a General Partner of Shurgard
Associates L.P. II.
(3) Owner is a Limited Partner of Shurgard
Associates L.P. II.
(4) On March 24, 1995, these interests were transferred
from Shurgard Incorporated to SSCI as a result of the
Merger. Although SSCI acquired through the Merger
Shurgard Incorporated's interest in the General
Partner, substantially all of the appreciation in the
value of that interest during the next five years will
inure to the benefit of the former shareholders of
Shurgard Incorporated in the form of additional shares
of SSCI. As a consequence, most of the future benefits
to be derived from the interest in the General Partner
(except current operating cash flow and appreciation
after five years), if any, will
<PAGE>
be received by the shareholders of Shurgard
Incorporated (including members of management of SSCI)
and not by SSCI or its shareholders.
(c) Changes in control: On March 24, 1995, Shurgard Incorporated was
acquired by SSCI. As a result of the Merger, SSCI will perform
all the duties previously performed by Shurgard Incorporated,
including supervision of the operation of the Partnership
projects. For the directors, executive officers, key personnel of
SSCI and a description of the circumstances under which the
General Partner may be removed, see Item 10 of this form 10-K.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Partnership agreement provides a fee payable to SSCI for property
management services equal to 6% of gross revenues from self service storage
operations for day-to-day professional property management services. The monthly
fee for management services will be reduced to 3% if leasing services are
performed by a party other than SSCI. Payments to SSCI for such management
totaled $258,253 for the year ended December 31, 1995.
Note C of the Annual Report to Security Holders for the year ended
December 31, 1995, a copy of which is included as Exhibit 13, is incorporated by
reference. In addition, Shurgard Incorporated will receive fees from the
Partnership as specified in the Agreement of Limited Partnership, reference to
which is made as Exhibit 3(a), and in the Management Services Agreement,
reference to which is made as Exhibit 10(a), both of which documents are
incorporated by reference. SSCI will succeed Shurgard Incorporated with respect
to these agreements. On March 24, 1995 as a result of the merger of Shurgard
Incorporated with SSCI, the shareholders of Shurgard Incorporated received
shares of SSCI. The following persons owned approximately the designated
percentages of SSCI's outstanding common stock.
<TABLE>
<CAPTION>
Ownership
of
Person Relationship to Partnership SSCI (1)
------ --------------------------- ---------
<S> <C> <C>
Charles K. Barbo Individual General Partner
of Shurgard Associates L.P.
President and Chairman of the Board of
Shurgard General Partner, Inc. 3.1%
Arthur W. Buerk Individual General Partner of
Shurgard Associates L.P. 2.2%
Donald B. Daniels Director and Vice President of
Shurgard General Partner, Inc. *
</TABLE>
As shareholders of SSCI these individuals may benefit indirectly from the
transactions disclosed in this item.
(1) As a result of the Merger, Shurgard Incorporated shareholders were
entitled to receive additional SSCI shares based on (i) the extent to
which, during the five years following the closing of the Merger, SSCI
realized value as a result of certain transactions relating to, among
others, SSCI's interest in the General Partner and (ii) the value, at the
end of five years or in the event of a change of control, of any remaining
interests in the General Partner as determined by independent appraisal.
The ownership percentages in SSCI above do not reflect theses additional
shares.
* Mr. Daniels owns less than 1% of SSCI.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND
REPORTS ON FORM 8-K.
(a) 1. Financial statements:
The following financial statements of IDS/Shurgard Income Growth
Partners L.P. II are incorporated by reference in Part II and are
filed as Exhibit 13:
Balance sheets - December 31, 1995 and 1994
Statements of earnings - Three years ended December 31, 1995
Statements of partners' equity (deficit) - Three years ended
December 31, 1995
Statements of cash flows - Three years ended December 31, 1995
Notes to financial statements - Three years ended December 31, 1995
Independent auditors' report
2. All schedules are omitted because either they are not applicable or
the required information is shown in the financial statements or
notes thereto.
3. Exhibits:
All exhibits to this report are listed in the Exhibit Index.
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 28, 1996 IDS/SHURGARD INCOME GROWTH PARTNERS L.P. II
By: Shurgard Associates L.P. II, General Partner
By: Shurgard General Partner, Inc. General Partner
By: HARRELL BECK
---------------------------------
Harrell Beck, Treasurer
By: CHARLES K. BARBO
--------------------------------------
Charles K. Barbo, General Partner
By: ARTHUR W. BUERK
--------------------------------------
Arthur W. Buerk, General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
CHARLES K. BARBO President, Chairman of the Board and March 28, 1996
------------------ Director of Shurgard General Partner, Inc.
Charles K. Barbo (principal executive officer)
ARTHUR W. BUERK General Partner March 28, 1996
------------------
Arthur W. Buerk
HARRELL BECK Treasurer of Shurgard General Partner, Inc. March 28, 1996
------------------ (principal financial officer and principal
Harrell Beck accounting officer)
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
3. Articles of incorporation and by-laws: Filed as Exhibit 3 to Form S-11 for
(a) Agreement of Limited Partnership Registration No. 33-25729
4. Instruments defining the rights of security See Exhibit 3(a), above
holders, including indentures
10. (a) Management Services Agreement Filed as Exhibit 10(a) to Form S-11 for
Registration No. 33-25729
(b) Note by IDS/Shurgard Income Growth
Partners L.P. II in favor of Seattle-First
National Bank dated June 24, 1992
(c) Note and Deed of Trust Modification
Agreement between IDS/Shurgard Income Growth
Partners L.P. II and Seattle-First National
Bank dated November 19, 1992
(d) Deed of Trust, Security Agreement and
Fixture Filing with Assignment of Leases and
Rents between IDS/Shurgard Income Growth
Partners L.P. II and Seattle-First National
Bank dated June 24, 1992
(e) Letter Agreement dated November 19, 1992
between Seattle-First National Bank and IDS/
Shurgard Income Growth Partners L.P. II
(f) Amended and Restated Promissory Note by
IDS/Shurgard Income Growth Partners LP II in
favor of Seattle-First National Bank dated
January 31, 1994
13. Annual report to security holders
21. Subsidiaries of the registrant See Item 1 of this Form 10-K
27. Financial Data Schedule
</TABLE>
<PAGE>
NOTE
$1,800,000.00 June 24, 1992 Seattle, Washington
FOR VALUE RECEIVED, the undersigned jointly and severally promise to pay
to the order of SEATTLE-FIRST NATIONAL BANK, a national banking association, at
its principal office in the City of Seattle, Washington, or at such other place
or places as any holder hereof may in writing designate, the sum of ONE MILLION
EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($1,800,000.00) in lawful money of the
United States, together with interest thereon in like lawful money from the date
of disbursement until paid at the rate of eight percent (8.000%) per annum, and
after maturity, or after default, at the rate of four percent (4%) per annum
above the interest rate otherwise in effect hereunder (the "default rate"),
interest payable monthly as it accrues, both principal and interest to be
payable in monthly installments of FIFTEEN THOUSAND FIFTY-FIVE AND 92/100
DOLLARS ($15,055.92), one such payment of principal and interest to become due
on the first day of each month hereafter commencing with September 1, 1992 and
continuing until the principal and interest are fully paid except that the final
payment of principal and interest shall be due and payable August 1, 1999. Each
such installment shall be applied first to interest to the due date of such
installment, balance to principal, except that if any late charge is not paid
and/or any advance made by the holder hereof under the terms of any instrument
securing this Note is not repaid, any monies received, at the option of the
holder, may first be applied to pay such late charge and/or advances plus
interest thereon, and the balance shall be applied on account of any installment
due. Interest shall be calculated using a 30-day month and a 360-day year.
PREPAYMENT
The undersigned may not prepay a portion of the principal but may prepay
the whole outstanding principal, provided, however, that a prepayment fee is
paid as set forth below. This prepayment fee shall be payable whether such
prepayment is by voluntary prepayment, operation of law, acceleration or
otherwise.
The amount of the prepayment fee depends on the following:
1) The amount by which interest rates have changed between the time
the interest rate was fixed and the time the loan is prepaid. Certain U.S.
Treasury rates are used as a benchmark to measure changes in interest rate
levels.
<PAGE>
a) A "reference rate" equal to the average interest rate
yield at the time the rate is fixed for U.S. Government Securities having
maturities equivalent to the fixed rate period will be assigned to this loan at
the time the rate is fixed. This rate represents interest rate levels at the
time the rate is fixed.
b) An "applicable rate," determined as described below,
represents interest rate levels at the time of prepayment.
2) The amount of principal prepaid.
3) A prepayment fee factor (see "prepayment fee factor schedule"
below). The factor is used to approximate the economic loss to the holder of
this Note resulting from a one dollar prepayment if rates were to drop by one
percent from the time the rate was fixed.
CALCULATION OF PREPAYMENT FEE
If the reference rate is lower than or equal to the applicable rate,
there is no prepayment fee.
If the applicable rate is lower than the reference rate, the prepayment
fee shall be equal to the difference between the reference rate and the
applicable rate (as a decimal), multiplied by the appropriate factor from the
prepayment fee factor schedule, multiplied by the principal amount of this loan
which is prepaid.
EXAMPLE:
An amortizing loan (with balloon) with remaining principal of $850,000 is
fully prepaid with 24 months remaining in the fixed rate period. A reference
rate of 10% was assigned to the loan when the rate was fixed. The applicable
rate (as determined by current 24 month U.S. Treasury rates) is 8.5%. Rates are
therefore judged to have dropped by 1.5% since the rate was fixed, and a
prepayment fee applies. A prepayment fee factor of 1.7 is determined from the
tables below, and the prepayment fee is computed as follows:
Prepayment Fee = (.10 - .085) x (1.7) x ($850,000) = $21,675
APPLICABLE RATES
The applicable rate is equal to the average interest rate yield at the
time of prepayment for U.S. Government Securities having maturities equivalent
to the remaining fixed rate period.
-2-
<PAGE>
The applicable rate shall be determined from the Federal Reserve
Statistical Release (Publication H.15 (519)) in the "This Week" (most recent
week) column under the heading:
U.S. Government Securities-Treasury Constant Maturities (if the
remaining fixed rate period is one year or more);
OR
U.S. Government Securities Treasury Bills-Secondary Market (if
the remaining fixed rate period is less than one year);
Interpolated to the nearest month.
Rates listed in the Federal Reserve Statistical Release for maturities of
less than one year are on a discount rate basis, and these rates shall be
converted to a coupon equivalent basis, based upon a 365-day year. The
Statistical Release published on Monday shall be used for calculation of
prepayment fees payable on the following Tuesday through the following Monday,
with appropriate adjustment if the day of publication changes.
PREPAYMENT FEE FACTOR SCHEDULES
TABLE I. AMORTIZlNG LOANS WITHOUT BALLOON
<TABLE>
<CAPTION>
Months Remaining in the Fixed Rate Period (1)
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Factors 0 12 24 36 48 60 84 120 240 360
--------------------------------------------------------------
0 .7 1.2 1.8 2.3 2.8 3.8 5.0 7.5 8.5
</TABLE>
TABLE II. AMORTIZlNG LOANS WITH BALLOON
<TABLE>
<CAPTION>
Months Remaining in the Fixed Rate Period (1)
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Factors 0 12 24 36 48 60 84 120 240 360
--------------------------------------------------------------
0 .9 1.7 2.4 3.1 3.7 4.7 5.9 7.9 8.6
</TABLE>
(1) If the remaining fixed rate period is between any two time
periods in the above schedules, interpolate between the corresponding factors to
the closest month.
The holder of this Note is not required to actually reinvest the prepaid
principal in any U.S. Government Treasury obligations as a condition to
receiving a prepayment fee as calculated above. Maker agrees that this
prepayment fee is the bargained-for consideration to the holder for permitting
prepayment and the above is not a liquidated damages provision. This prepayment
fee provision is to be interpreted in a
-3-
<PAGE>
manner that would make it enforceable to the fullest extent permitted by law,
with any portion of the fee that is unenforceable being stricken or otherwise
changed to cause the fee, as revised, to be enforced.
If any payment is not received by the holder on or before fifteen (15)
days after its due date, the holder, at its option, may assess a late charge
equal to four percent (4%) of each dollar not timely paid. If the payment is
not made on or before the fifteenth day of the first month following the month
in which it is due, an additional 4% will be charged. An additional 4% will be
charged for each successive month the payment remains fifteen (15) days past
due. This late charge shall apply individually to all payments past due and
there will be no daily pro rata adjustment. Such late charge shall be due and
payable on demand, and the holder, at its option, may (a) refuse any late
payment or any subsequent payment unless accompanied by such late charge, (b)
add such late charge to the principal balance of this Note, (c) pay any late
charge with advances from the loan proceeds or (d) treat the failure to pay such
late charge as demanded as a default hereunder. If such late charge is added to
the principal balance of this Note, it shall bear interest at the default rate.
In the event the undersigned does not pay interest when due, the holder,
at its option, in addition to charging interest at the default rate, may a)
charge interest on said interest at the same rate as on principal; b) add said
interest to the principal balance where it will become a part thereof, and bear
interest at the same rate as the principal; or c) pay said interest with
advances of the loan proceeds which advances shall likewise bear interest at the
same rate as the principal.
If default be made in compliance with the provisions of any instrument
securing this Note or in the payment of any installment when due under this
Note, then, or at any time thereafter, at the option of the legal holder of this
Note, the whole of the principal sum then remaining unpaid, together with all
interest accrued thereon, shall become immediately due and payable without
notice, and any lien given to secure its payment may be foreclosed. Such
acceleration of the debt shall be deemed to be a prepayment, and the undersigned
shall also pay to the holder, in addition to such amounts, an amount equal to
the prepayment fee which would otherwise have been payable as hereinbefore
provided had the undersigned exercised the privilege to prepay this Note in
full. Failure of the holder to exercise this acceleration option, or any other
right the holder may, in such event, be entitled to, shall not constitute a
waiver of the right to exercise such option or any other right in the event of
any subsequent default. If this Note is placed in the hands of an attorney for
collection or is collected through any court of competent jurisdiction
(including the Bankruptcy Court) or through other legal proceedings, the
undersigned promise(s) to pay the reasonable attorney's fees of holder,
including allocated costs of in-house counsel, and
-4-
<PAGE>
all other costs, and expenses, incurred by the holder in connection with such
collection, whether or not suit is commenced and whether incurred at trial or
any appeal therefrom, and any costs, expenses or losses related to the fixed
rate.
The undersigned and all endorsers and all persons liable or to become
liable on this Note, waive demand, protest and notice of demand, and protest and
nonpayment, and consent to any and all renewals and extensions in the time of
payment hereof and further agree that at any time the terms of payment hereof
may be modified or security released by agreement between the holder hereof and
any owner of the premises affected by the instrument securing this Note without
affecting the liability of any party to this Note or of any person liable or to
become liable with respect to any indebtedness evidenced hereby.
In any action or proceeding to recover any sum herein provided for, no
defense of adequacy of security or that resort must first be had to security or
to any other person shall be asserted. All of the covenants, provisions and
conditions herein contained are made on behalf of, and shall apply to and bind
the respective heirs, devisees, personal representatives, successors and assigns
of the parties hereto, jointly and severally. Each and every party signing or
endorsing this Note binds himself as principal and not as surety.
The obligation evidenced by this Note is exclusively for commercial or
business purposes.
The undersigned consents to the nonexclusive personal jurisdiction and
venue of the courts of the state where the real property is located and the
federal courts located therein in any action relating to or arising out of the
enforcement or interpretation of this Note. The undersigned further agrees not
to assert in any such action that the proceeding has been brought in an
inconvenient forum.
This Note is executed to evidence an actual loan in the face amount
hereof and repayment is secured by a Deed of Trust or Mortgage, in favor of the
holder hereof affecting real property in King County, Washington and will be
governed by the laws of the state of Washington affecting real property in King
County, Washington.
At the time this loan is closed, the undersigned agrees that the interest
rate, the reference rate and the amount of the monthly payment will be inserted
above by the holder of this Note.
/X/ If this box is checked, the holder is authorized to deduct the payment(s)
on this Note and any other sums secured by the Deed of Trust securing
this Note on
-5-
<PAGE>
the fifth day of each month from Seafirst Deposit Account No. 53075297 or
such other Seafirst Deposit Account as may be authorized in the future.
/X/ If this box is checked, the holder is authorized to deposit the
advance(s) on this loan, subject to the terms of the loan documents, to
Seafirst Deposit Account No. 53075297.
IDS/SHURGARD INCOME GROWTH PARTNERS L.P.
II, a Washington limited partnership
By: Shurgard Associates L.P. II, a
Washington limited partnership,
general partner
By: Shurgard General Partner, Inc., a
Washington corporation, general
partner
By: Harrell Beck
----------------------------
Its: Treasurer
By:
----------------------------
Its:
----------------------------
By Charles K. Barbo
----------------------------
Charles K. Barbo, general
partner
By Arthur W. Buerk
----------------------------
Arthur W. Buerk, general
partner
-6-
<PAGE>
Return after Recording to: SFNB Loan No. 179226-6
SEAFIRST/CREG
P.O. Box 3688
Seattle, WA 98124-3686
ATTN: Diane Espey
NOTE AND DEED OF TRUST MODIFICATION AGREEMENT
THIS AGREEMENT made and entered into by and between IDS/SHURGARD INCOME
GROWTH PARTNERS L.P. II, a Washington limited partnership (hereinafter referred
to as "Grantor") and SEATTLE-FIRST NATIONAL BANK, a national banking association
(hereinafter referred to as "Beneficiary"):
WITNESSETH:
WHEREAS, Grantor heretofore executed and delivered a certain Deed of Trust
between Grantor, DWTR & J Corp., as Trustee, and Beneficiary, dated June 24,
1992 (hereinafter referred to as "said Deed of Trust"), which Deed of Trust was
recorded on the 4th day of September, 1992 as Instrument No. 9209041656, records
of King County, Washington, said Deed of Trust being made to secure one Note
dated June 24, 1992 executed by Grantor (hereinafter referred to as "said
Note"), for the aggregate principal sum of ONE MILLION EIGHT HUNDRED THOUSAND
AND NO/100 DOLLARS ($1,800,000.00) with interest and also such further sums as
may be advanced or loaned by Beneficiary to Grantor. As used herein, the
"Property" refers to all of the property which is affected by said Deed of
Trust.
AND WHEREAS, Grantor represents that 1) it is now the sole owner of the
Property; 2) that the portion of the Property which is personal property is free
and clear of any security agreements, reservations of title and conditional
sales contracts; 3) that there is no financing statement affecting any such
personal property on file in any public office other than financing statements
in favor of Beneficiary; and 4) that the lien of the Deed of Trust shall
continue to have the same priority upon the Property. Beneficiary represents
that it is the legal owner and holder of said indebtedness and the Note and Deed
of Trust evidencing and securing the same, and said parties mutually agree to
modify the said Note and Deed of Trust as hereinafter provided;
NOW, THEREFORE, in consideration of the premises, the promises and
agreements between the said parties hereinafter contained, and the mutual
benefits accruing to the undersigned parties, the parties hereto for themselves
and their respective successors and assigns do hereby agree as follows:
<PAGE>
1. That said Note is hereby amended to add the following:
Interest Rate Adjustments.
The interest rate will be adjusted on September 8, 1997 in accordance with
the provisions set forth below.
Interest on the whole principal shall be fixed on the date set forth above
and on those dates which will be the day after the then expiration day of the
prior fixed rate period until maturity, upon written notice to the holder
hereof, provided, however, that the length of time period for which the rate may
be fixed is subject to the availability to the holder hereof of matchfunding
opportunities for an equivalent time period and, that such time period shall be
for either 6-months, 1-year, 3-years, 5-years or 7-years, at Maker's option,
except that no fixed rate period may extend beyond the maturity date of this
Note.
Said fixed interest rate shall be Seattle-First National Bank's reserve-
adjusted "Fixed Rate Index" for the period for which the rate is being fixed and
the remainder of the original 20-year amortization schedule, rounded upward to
the next highest one-eighth of one percent (0.125%), plus two and one-half
percent (2.5%) per annum. The Fixed Rate Index will be adjusted at the holder's
option to reflect the holder's cost of statutory reserves, deposit insurance,
regulatory capital, taxes and assessments, if any, as set forth below. Said
Fixed Rate Index will be that quoted on the day the rate is fixed, which will be
the day after the expiration of the prior fixed rate period. If such day is not
a business day, then the Fixed Rate Index for the last prior business day will
be used. The funds will be fixed at the fixed rate corresponding to the time
period chosen by maker so long as Maker's written notice is received by the
holder at least two business days prior to the end of the then current fixed
rate period. If such notice is not received by holder, holder will fix the rate
for 6-month periods upon expiration of the then current fixed rate period based
on the 6-month Fixed Rate Index plus 2.50% per annum.
The amount of adjustment for reserves, deposit insurance, regulatory
capital, taxes and assessments may change on any Interest Change Date depending
on such charges being assessed against holder at that time. Such charges may
change due to various factors, including but not limited to, changes in the
requirements for reserves and capital adequacy promulgated by the Federal
Reserve System of the United States and/or other state and federal regulatory
agencies, statutory changes affecting holder, and/or imposition of taxes, FDIC
fees and/or assessments. Each determination of an adjustment amount shall be
made by the holder in its sole and absolute discretion and shall be conclusive
and binding upon maker and shall be determined without benefit
-2-
<PAGE>
of or credit for prorations, exceptions or offsets that may be available to the
holder from time to time.
The monthly payment will be recalculated at the beginning of each fixed
rate period at the fixed rate using an amortization term that will amortize the
loan over the remainder of the original 20-year amortization schedule. The
holder will mail or deliver to the undersigned a notice of any changes in the
monthly payment before the effective date of any change.
2. That, except insofar as herein expressly changed, all terms, covenants
and provisions of said Note and Deed of Trust and the obligation evidenced and
secured thereby shall remain in full force and effect and are hereby expressly
ratified and confirmed by the parties hereto. This Agreement, together with all
other loan documents, supersede all oral negotiations and prior and other
writings with respect to their subject matter and are intended by the parties as
the complete and exclusive statement of the terms agreed to by the parties. If
there is any conflict between the terms, conditions and provisions of this
Agreement and those of any other agreement or instrument, including any of the
other loan documents, the terms, conditions and provisions of this Agreement
shall prevail.
SIGNED, SEALED AND DELIVERED this 19th day of November, 1992.
BENEFICIARY:
SEATTLE-FIRST NATIONAL BANK, a
national banking association
By KIRSTEN M. TOLLEFSON
-------------------------------------
Title: Assistant Vice President
-3-
<PAGE>
GRANTOR:
IDS/SHURGARD INCOME GROWTH PARTNERS
LP. II, a Washington limited partnership
By:Shurgard Associates LP. II,
a Washington limited partnership,
general partner
By:Shurgard General Partner, Inc., a
Washington corporation, general
partner
By Harrell Beck
-------------------------------------
Its Treasurer
By Charles K. Barbo
-------------------------------------
Charles K. Barbo, general partner
By Arthur W. Buerk
-------------------------------------
Arthur W. Buerk, general partner
-4-
<PAGE>
GUARANTOR(S)
The following Guarantors hereby acknowledge and agree with above described
amendment to the Loan's terms and conditions, and further ratify and confirm
their Guaranty dated June 23, 1992.
SHURGARD GENERAL PARTNER, INC.,
a Washington corporation
By:Harrell Beck
------------------------------------
Its Treasurer
By:
------------------------------------
Its:
------------------------------------
Charles K. Barbo
- ---------------------------------------
CHARLES K. BARBO
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 15 day of December, 1992, before me personally appeared Harrell
Beck, to me known (or proven on the basis of satisfactory evidence) to be the
Treasurer of SHURGARD GENERAL PARTNER, INC., a Washington corporation, the
corporation that executed the within and foregoing instrument, and acknowledged
said instrument to be the free and voluntary act and deed of said corporation,
for the uses and purposes therein mentioned, and on oath stated that he was
authorized to execute said instrument and on oath further stated that said
corporation is the general partner of SHURGARD ASSOCIATES L.P. II, a Washington
limited partnership, and that said corporation was authorized to execute the
said instrument on behalf of said partnership and that said instrument was the
free and voluntary act and deed of said partnership for the uses and purposes
therein mentioned, and further stated that said limited partnership is the
general partner of IDS/SHURGARD INCOME GROWTH PARTNERS L.P. II, a Washington
limited partnership, and that SHURGARD ASSOCIATES L.P. II was authorized to
execute the said instrument on behalf of said partnership, and that said
instrument was the free and voluntary act and deed of said partnership for the
uses and purposes therein mentioned.
-5-
<PAGE>
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day and
year first above written.
Barbara J. Everett
----------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at North Bend.
My appointment expires 3-23-94.
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 15 day of December, 1992, before me personally appeared CHARLES K.
BARBO, to me known (or proven on the basis of satisfactory evidence) to be the
general partner of SHURGARD ASSOCIATES, L.P. II, a Washington limited
partnership, and that they were authorized to execute the said instrument on
behalf of said partnership and that said instrument was the free and voluntary
act and deed of said partnership for the uses and purposes therein mentioned,
and further stated that said limited partnership is the general partner of
IDS/SHURGARD INCOME GROWTH PARTNERS L.P. II, a Washington limited partnership,
and that SHURGARD ASSOCIATES L.P. II was authorized to execute the said
instrument on behalf of said partnership, and that said instrument was the free
and voluntary act and deed of said partnership for the uses and purposes therein
mentioned.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day
and year first above written.
Barbara J. Everett
----------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at North Bend. My
appointment expires 3/23/94.
-6-
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 15 day of December, 1992, before me personally appeared ARTHUR W.
BUERK, to me known (or proven on the basis of satisfactory evidence) to be
general partner of SHURGARD ASSOCIATES, L.P. II, a Washington limited
partnership, and that they were authorized to execute the said instrument on
behalf of said partnership and that said instrument was the free and voluntary
act and deed of said partnership for the uses and purposes therein mentioned,
and further stated that said limited partnership is the general partner of
IDS/SHURGARD INCOME GROWTH PARTNERS L.P. II, a Washington limited partnership,
and SHURGARD ASSOCIATES L.P. II was authorized to execute the said instrument on
behalf of said partnership, and that said instrument was the free and voluntary
act and deed of said partnership for the uses and purposes therein mentioned.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day
and year first above written.
Janet L. Hesness
----------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at North Bend. My
appointment expires 3-23-94.
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 15 day of December , 1992, before me, personally appeared
Charles K. Barbo and Harrell Beck to me known (or proven on the basis of
satisfactory evidence) to be the President and Treasurer respectively of
SHURGARD GENERAL PARTNER, INC., a Washington corporation, the corporation that
executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that they were authorized to
execute said instrument and that the seal affixed, if any, is the corporate seal
of said corporation.
-7-
<PAGE>
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day
and year first above written.
Barbara J. Everett
----------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at North Bend. My
appointment expires 3-23-94.
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day personally appeared before me CHARLES K. BARBO to me known (or
proven on the basis of satisfactory evidence) to be the individual described in
and who executed the within and foregoing instrument, and acknowledged that he
signed the same as his free and voluntary act and deed, for the uses and
purposes therein mentioned.
GIVEN UNDER my hand and official seal this 15 day of December, 1992
Janet L. Hesness
----------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle. My
appointment expires 5-4-96.
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 29th day of March, 1993, before me personally appeared Kirsten M.
Tollefson, to me known (or proven on the basis of satisfactory evidence) to be
the Assistant Vice President of SEATTLE-FIRST NATIONAL BANK, a national banking
association, the corporation that executed the within and foregoing instrument,
and acknowledged said instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes therein mentioned, and on oath state
that she was authorized to execute said instrument and that the seal affixed, if
any, is the corporate seal of said corporation.
-8-
<PAGE>
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day and
year first above written.
Diane F. Espey
----------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Renton. My
appointment expires 11-3-95.
-9-
<PAGE>
DEED OF TRUST, SECURITY AGREEMENT
AND FIXTURE FILING WITH ASSIGNMENT
OF LEASES AND RENTS
Loan No.: 179226-2
Title Co. & No.: Chicago Title
No. 240058-6
AFTER RECORDING RETURN TO:
SEATTLE-FIRST NATIONAL BANK
P.O. BOX 3686 (CSC-15)
SEATTLE, WA 98124-3686
Attention: Diane Espey
CREG Loan Admin.
THIS DEED OF TRUST is made this 24th day of June, 1992 between IDS/SHURGARD
INCOME GROWTH PARTNERS L.P. II, a Washington limited partnership, as Grantor,
whose address is 1201 Third Avenue, Suite 2200, Seattle, Washington 98101;
DWTR & J Corp. as Trustee, whose address is 2600 Century Square, 1501 Fourth
Avenue, Seattle, Washington 98101-1688; and SEATTLE-FIRST NATIONAL BANK, a
national banking association, as Beneficiary, whose address is 701 Fifth Avenue,
Seattle, Washington 98104.
1. GRANTING CLAUSE
Grantor irrevocably grants, bargains, sells and conveys to Trustee in
trust, with power of sale, all Grantor's estate, right, title, interest, claim
and demand, now owned or hereafter acquired, in and to the following:
(a) The property in King County, Washington, described in
Schedule "A" attached hereto and incorporated herein by this reference (the
"Property" which term shall include all or any part of the Property, any
improvements thereon and all of the property described in this Section 1).
(b) All land lying in streets and roads adjoining the Property,
and all access rights and easements pertaining to the Property.
(c) All the lands, tenements, privileges, reversions,
remainders, irrigation and water rights and stock, oil and gas rights,
royalties, minerals and mineral rights, all development rights and credits, air
rights, hereditaments and appurtenances belonging or in any way pertaining to
the Property.
(d) All buildings, structures, improvements, fixtures, equipment
and machinery and property now or hereafter attached to or used in connection
with the use, occupancy or operation of the Property including, but not limited
to, heating and incinerating apparatus and equipment, boilers, engines, motors,
generating equipment, telephone and other communication systems, piping and
plumbing fixtures, ranges, cooking apparatus and mechanical kitchen equipment,
refrigerators, cooling, ventilating, sprinkling and vacuum cleaning systems,
fire extinguishing apparatus, gas and electric fixtures, irrigation equipment,
carpeting, underpadding, elevators, escalators, partitions, mantles, built-in
mirrors, window shades, blinds, screens, storm sash, awnings, furnishings of
public spaces, halls and lobbies, and shrubbery and plants.
<PAGE>
All property mentioned in this subsection (d) shall be deemed part of the realty
and not severable wholly or in part without material injury to the Property.
(e) All rents, issues and profits of the Property, all existing
and future leases of the Property (including extensions, renewals and
subleases), all agreements for use and occupancy of the Property (all such
leases and agreements whether written or oral, are hereafter referred to as the
"Leases"), and all guaranties of lessees' performance under the Leases, together
with the immediate and continuing right to collect and receive all of the rents,
income, receipts, revenues, issues, profits and other income of any nature now
or hereafter due (including any income of any nature coming due during any
redemption period) under the Leases or from or arising out of the Property
including minimum rents, additional rents, percentage rents, parking or common
area maintenance contributions, tax and insurance contributions, deficiency
rents, liquidated damages following default in any Lease, all proceeds payable
under any policy of insurance covering loss of rents resulting from
untenantability caused by destruction or damage to the Property, all proceeds
payable as a result of exercise of an option to purchase the Property, all
proceeds derived from the termination or rejection of any Lease in a bankruptcy
or other insolvency proceeding, all security deposits or other deposits for the
performance of any lessee's obligations under the Leases, and all proceeds from
any rights and claims of any kind which Grantor may have against any lessee
under the Leases, and all proceeds from any rights and claims of any kind which
Grantor may have against any lessee under the Leases or any occupants of the
Property (all of the above are hereafter collectively referred to as the
"Rents"). This subsection (e) is subject to the right, power and authority
given to the Beneficiary in the Loan Documents (as defined herein) to collect
and apply the Rents.
(f) All of Grantor's rights to further encumber said Property
for debt and all Grantor's rights to enter into any lease agreement which would
create a tenancy that is or may become subordinate in any respect to any
mortgage or deed of trust other than this Deed of Trust.
The Property is not used principally or primarily for agricultural or farming
purposes.
2. COLLATERAL
The following described estate, property and rights of Grantor are also
included as security for the performance of each covenant and agreement of
Grantor contained herein and the payment of all sums of money secured hereby:
(a) All furniture, furnishings, appliances, machinery, vehicles,
equipment and all other property of any kind now or hereafter located on the
Property, used or intended to be used on the Property wherever actually located,
or purchased with the proceeds of the Note (as defined herein), and all rights
of Grantor as lessee of any property described in this Section 2 and
Subsection 1(d) above.
(b) All compensation, awards, damages, rights of action and
proceeds (including insurance proceeds and any interest on any of the foregoing)
arising out of or relating to a taking or damaging of the Property by reason of
any public or private improvement, condemnation proceeding (including change of
grade), fire, earthquake or other casualty, injury or decrease in the value of
the Property.
(c) All returned premiums or other payments on any insurance
policies pertaining to the Property and any refunds or rebates of taxes or
assessments on the Property.
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(d) All rights to the payment of money, accounts receivable,
deferred payments, refunds, cost savings, payments and deposits, whether now or
later to be received from third parties (including all utility deposits),
architectural and engineering plans, specifications and drawings, contract
rights, governmental permits and licenses, and agreements and purchase orders
which pertain to or are incidental to the design or construction of any
improvements on the Property, Grantor's rights under any payment, performance,
or other bond in connection with construction of improvements on the Property,
and all construction materials, supplies, and equipment delivered to the
Property or intended to be used in connection with the construction of
improvements on the Property wherever actually located.
(e) All contracts and agreements pertaining to or affecting the
Property including, but not limited to, management, operating and franchise
agreements, licenses, trade names and trademarks.
(f) All of Grantor's interest in and to the loan account, the
loan funds, whether disbursed or not, and Grantor's own funds now or later to be
held on deposit as equity funds or for payment of bills relating to the
Property.
(g) All commitments or agreements, now or hereafter in
existence, which will provide Grantor with proceeds to satisfy the Secured
Obligations and the right to receive the proceeds due under such commitments or
agreements including refundable deposits and fees.
(h) All books and records pertaining to any and all of the
property described above, including computer-readable memory and any computer
hardware or software necessary to access and process such memory.
(i) All additions, accessions, replacements, substitutions,
proceeds and products of the property described in this Section 2 and of any of
the Property which is personal property.
The Property and all of the property and rights described in Section 1 and
2 are referred to herein collectively as the "Collateral."
3. SECURITY AGREEMENT
To the extent that any of the Collateral may be determined to be personal
property, Grantor as debtor hereby grants Beneficiary as secured party a
security interest in all such personal property to secure payment and
performance of the Secured Obligations (defined below). This Deed of Trust
constitutes a security agreement, a financing statement and fixture filing
pursuant to the Uniform Commercial Code with respect to any and all property now
or hereafter described in any Uniform Commercial Code Financing Statement naming
Grantor as Debtor and Beneficiary as Secured Party affecting or related to the
use and enjoyment of the Property. The remedies for any violation of the
covenants, terms and conditions of the agreements herein contained shall be
(i) as prescribed herein, or (ii) by general law, or (iii) as to such part of
the security which is also reflected in any such Financing Statement by the
specific statutory consequences now or hereafter enacted and specified in the
Uniform Commercial Code, all at Beneficiary's sole election. Grantor and
Beneficiary agree that the filing of such a Financing Statement in the records
normally having to do with personal property shall never be construed as in
anywise derogating from or impairing this declaration and hereby stated
intention of the parties hereto, that everything used in connection with the
production of income from the property that is the subject of this Deed of Trust
and/or adapted for use therein and/or which is described or reflected in this
Deed of Trust is, and at all times and for all purposes and in all proceedings
both legal or equitable shall be, regarded as part of the real estate
irrespective of whether (i) any such item is physically attached to the
improvements, (ii) serial numbers are used for the better
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identification of certain equipment items capable of being thus identified in
any list filed with the Beneficiary, or (iii) any such item is referred to or
reflected in any such Financing Statement so filed at any time.
4. FINANCING STATEMENT
This Deed of Trust shall also serve as a financing statement filed for
record in the real estate records as a fixture filing pursuant to the Uniform
Commercial Code. This Deed of Trust may be given to secure an obligation
incurred for the construction of an improvement on the Property, including the
acquisition of the Property, or to secure an obligation incurred to refinance an
obligation incurred for the construction of an improvement on the Property,
including the acquisition of the Property.
5. OBLIGATIONS SECURED
THIS DEED OF TRUST IS FOR THE PURPOSE OF SECURING the following ("Secured
Obligations"):
(a) Payment of the sum of ONE MILLION EIGHT HUNDRED THOUSAND AND
NO/100 DOLLARS ($1,800,000.00) with interest thereon according to the terms of a
promissory note of even date herewith, payable to Beneficiary or order and made
by Grantor (the "Note," which term shall include all notes or other instruments
evidencing the indebtedness secured by this Deed of Trust including all
renewals, amendments, modifications or extensions thereof and substitutions
therefor). THE NOTE MAY CONTAIN PROVISIONS ALLOWING FOR CHANGES IN THE INTEREST
RATE.
(b) Payment of any further sums advanced or loaned by
Beneficiary to Grantor, or any of its successors or assigns, if (1) the Note or
other document evidencing the future advance or loan specifically states that it
is secured by this Deed of Trust or (2) the advance, including costs and
expenses incurred by Beneficiary, is made pursuant to this Deed of Trust or any
other documents executed by Grantor evidencing, securing, or relating to the
Note and/or the Collateral, whether executed prior to, contemporaneously with,
or subsequent to this Deed of Trust (this Deed of Trust, the Note and all such
other documents, including any construction or other loan agreement, are
hereafter collectively referred to as the "Loan Documents") together with
interest thereon at the rate set forth in the Note unless otherwise specified in
the Loan Documents or agreed to in writing.
(c) Performance of each agreement, term and condition set forth
or incorporated by reference in the Loan Documents, as such may be amended,
including without limitation the loan commitment dated N/A and assignment of
leases and/or rents of even date herewith, which are incorporated herein by
reference, or contained herein.
6. PERFORMANCE OF OBLIGATIONS
Grantor shall promptly and timely pay all sums due pursuant to the Loan
Documents, strictly comply with all the terms and conditions of the Loan
Documents, and perform each Secured Obligation in accordance with its terms.
7. ASSIGNMENT OF RENTS AND LEASES
Grantor hereby absolutely and irrevocably assigns to Beneficiary all
Grantor's interest in the Rents and Leases. This assignment shall be subject to
the terms and conditions of any separate assignment of leases and/or rents,
whenever executed, in favor of Beneficiary and covering the Property. Grantor
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warrants that it has made no prior assignment of the Rents or Leases and will
make no subsequent assignment without the prior written consent of Beneficiary.
(a) Unless otherwise provided in any separate assignment of
leases and/or rents, and so long as Grantor is not in default under the Loan
Documents, Grantor may collect the Rents as they become due. Grantor shall use
the Rents to pay normal operating expenses for the Property and sums due and
payments required under the Loan Documents. No Rents shall be collected for a
period subsequent to the current one month rental period and first or last
month's rent. Grantor's right to collect the Rents shall not constitute
Beneficiary's consent to the use of cash collateral in any bankruptcy
proceeding.
(b) If Grantor is in default under the Loan Documents, without
notice to Grantor, Beneficiary or its agents, or a court appointed receiver, may
collect the Rents. In doing so, Beneficiary may (a) evict lessees for
nonpayment of rent, (b) terminate in any lawful manner any tenancy or occupancy,
(c) lease the Property in the name of the then owner of such terms as it may
deem best and (d) institute proceedings against any lessee for past due rent.
The Rents received shall be applied to payment of the costs and expenses of
collecting the Rents, including a reasonable fee to Beneficiary, a receiver or
an agent, operating expenses for the Property and any sums due or payments
required under the Loan Documents, in such order as Beneficiary may determine.
Any excess shall be paid to Grantor, however, Beneficiary may withhold from any
excess a reasonable amount to pay sums anticipated to become due which exceed
the anticipated future Rents. Beneficiary's failure to collect or discontinuing
collection at any time shall not in any manner affect the subsequent enforcement
by Beneficiary of its rights to collect the Rents. The collection of the Rents
shall not cure or waive any default under the Loan Documents. Any Rents paid to
Beneficiary or a receiver shall be credited against the amount due from the
lessee under the Lease. In the event any lessee under the Lease becomes the
subject of any proceeding under the Bankruptcy Code or any other federal, state
or local statute which provides for the possible termination or rejection of the
Leases assigned hereby, Grantor covenants and agrees that in the event any of
the Leases are so rejected, no damages settlement shall be made without the
prior written consent of Beneficiary; any check in payment of damages for
rejection or termination of any such Lease will be made payable to both the
Grantor and Beneficiary; and Grantor hereby assigns any such payment to
Beneficiary and further covenants and agrees that upon request of Beneficiary,
it will duly endorse to the order of Beneficiary any such check, the proceeds of
which will be applied to any portion of the indebtedness secured hereunder in
such manner as Beneficiary may elect.
(c) Regardless of whether or not Beneficiary, in person or by
agent, takes actual possession of the Property or any part thereof, Beneficiary
is not and shall not be deemed to be:
(1) "a mortgagee in possession" for any purpose; or
(2) responsible for performing any of the obligations
of the lessor under any lease; or
(3) responsible for any waste committed by lessees or
any other parties, any dangerous or defective condition of the Property, or any
negligence in the management, upkeep, repair or control of the Property; or
(4) liable in any manner for the Property or the use,
occupancy, enjoyment or operation of all or any part of it.
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In exercising its rights under this section Beneficiary shall be liable
only for the proper application of and accounting for the Rents collected by
Beneficiary or its agents.
8. LEASES
Grantor shall fully comply with all of the terms, conditions and provisions
of the Leases so that the same shall not become in default and do all that is
needful to preserve all said Leases in force. With respect to any Lease of the
whole or any part of the Property involving an initial term of three years or
more, Grantor shall not, without the prior written consent of Beneficiary,
(a) permit assignment or subletting of all or part of the lessee's rights under
the Lease unless the right to assign or sublet is expressly reserved by the
lessee under the Lease, (b) modify or amend the Lease for a lesser rental or
term, or (c) accept surrender of the Lease or terminate the Lease except in
accordance with the terms of the Lease providing for termination in the event of
a default. Any proceeds or damages resulting from a lessee's default under any
such Lease, at Beneficiary's option, shall be paid to Beneficiary and applied
against sums owed under the Loan Documents even though such sum may not be due
and payable. Except for real estate taxes and assessments, Grantor shall not
permit any lien to be created against the Property which may be or may become
prior to any Lease. If the Property is partially condemned or suffers a
casualty, Grantor shall promptly repair and restore the Property in order to
comply with the Leases.
9. WARRANTY OF TITLE
Grantor warrants that it has good and marketable title to an indefeasible
fee simply estate in the Property, unless Grantor's present interest in the
Property is described in Schedule A as a leasehold interest, in which case
Grantor warrants that it lawfully possesses and holds a valid leasehold interest
in the Property as stated in Schedule A, and good marketable title to the
personal property Collateral, subject to no liens, encumbrances, easements,
assessments, security interests, claims or defects of any kind prior or
subordinate to the lien of this Deed of Trust, except those listed in
Beneficiary's title insurance policy or approved by Beneficiary in writing (the
"Exceptions") and real estate taxes for the current year. Grantor warrants that
the Exceptions and the real estate taxes are not delinquent or in default, and
that Grantor has the right to convey the Property to Trustee for the benefit of
Beneficiary, and the right to grant a security interest in the personal property
Collateral. Grantor will warrant and defend title to the Collateral and will
defend the validity and priority of the lien of this Deed of Trust and the
security interest granted herein against any claims or demands.
10. PROHIBITED LIENS
(a) Grantor shall not permit any governmental or statutory liens
(including tax, mechanic's or materialmen's liens) to be filed against the
Property except for real estate taxes and assessments not yet due and liens
permitted by the Loan Documents or approved by Beneficiary in writing.
(b) Grantor will have the right to contest in good faith by an
appropriate legal or administrative proceeding the validity of any prohibited
lien, encumbrance or charge so long as (i) no default exists under the Loan
Documents, (ii) Grantor first deposits with Beneficiary a bond or other security
satisfactory to Beneficiary in the amount reasonably required by Beneficiary,
but not more than one and one-half (1-1/2) (i.e., 150%) of the amount of the
claim; (iii) Grantor immediately commences its contest of such lien, encumbrance
or charge, applies to court for a show cause as provided for in
RCW 60.04.221(8), and continuously pursues the contest in good faith and with
due diligence; (iv) foreclosure of the lien, encumbrance or charge is stayed;
and (v) Grantor pays any judgment rendered for the lien claimant or other third
party within ten (10) days after the entry of the judgment. If the
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contested item is a mechanic's or materialmen's lien, Grantor will furnish
Beneficiary with an endorsement to its title insurance policy which insures the
priority of this Deed of Trust over the lien being contested. Grantor will
discharge or elect to contest and post an appropriate bond or other security
within twenty (20) days of written demand by Beneficiary.
11. PAYMENT OF TAXES AND OTHER ENCUMBRANCES
Grantor shall pay the real estate taxes and any assessments or ground rents
at least 7 days prior to delinquency unless otherwise provided for in the
reserve account described in paragraph 23 below. All other encumbrances,
charges and liens affecting the Property, including mortgages and deeds of
trust, whether prior to or subordinate to the lien of this Deed of Trust, shall
be paid when due and shall not be in default. On request Grantor shall furnish
evidence of payment of these items.
12. MAINTENANCE--NO WASTE
Grantor shall protect and preserve the Collateral and maintain it in good
condition and repair. Grantor shall do all acts and take all precautions which,
from the character and use of the Collateral, are reasonable, proper or
necessary to so maintain, protect and preserve the Collateral. Grantor shall
not commit or permit any waste of the Collateral.
13. ALTERATIONS, REMOVAL AND DEMOLITION
Grantor shall not structurally alter, remove or demolish any building or
improvement on the Property without Beneficiary's prior written consent.
Grantor shall not remove any fixture or other item of property which is part of
the Collateral without Beneficiary's prior written consent unless the fixture or
item of property is replaced by an article of equal suitability owned by Grantor
free and clear of any lien or security interest.
14. COMPLETION, REPAIR AND RESTORATION
Grantor shall promptly complete or repair and restore in good workmanlike manner
any building or improvement on the Property which may be constructed or damaged
or destroyed and shall pay all costs incurred therefor. Prior to commencement
of any construction Grantor shall submit the plans and specifications for
Beneficiary's approval and furnish evidence of sufficient funds to complete the
work.
15. COMPLIANCE WITH LAWS
Grantor shall comply with all laws, ordinances, regulations, covenants,
conditions, and restrictions affecting the Property and shall not commit or
permit any act upon or concerning the Property in violation of any such laws,
ordinances, regulations, covenants, conditions, and restrictions.
16. IMPAIRMENT OF COLLATERAL
Grantor shall not, without Beneficiary's prior written consent, change the
general nature of the occupancy of the Property, initiate, acquire or permit any
change in any public or private restrictions (including without limitation a
zoning reclassification) limiting the uses which may be made of the Property, or
take or permit any action which would impair the Collateral or Beneficiary's
lien or security interest in the Collateral.
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17. INSPECTION OF PROPERTY
Beneficiary and/or its representative may inspect the Property at
reasonable times after reasonable notice.
18. GRANTOR'S DEFENSE OF COLLATERAL
Grantor shall appear in and defend any action or proceeding which may
affect the Collateral or the rights or powers of Beneficiary or Trustee.
19. BENEFICIARY'S RIGHT TO PROTECT COLLATERAL
Beneficiary may commence, appear in, and defend any action or proceeding
which may affect the Collateral or the rights or powers of Beneficiary or
Trustee. Beneficiary may pay, purchase, contest or compromise any encumbrance,
charge or lien not listed as an Exception which in its judgment appears to be
prior or superior to the lien of this Deed of Trust. If Grantor fails to make
any payment or do any act required under the Loan Documents, Beneficiary,
without any obligation to do so and without releasing Grantor from any
obligations under the Loan Documents, may make the payment or cause the act to
be performed in such manner and to such extent as Beneficiary may deem necessary
to protect the Collateral. Beneficiary is authorized to enter upon the Property
for such purposes. In exercising any of these powers Beneficiary may incur such
expenses, in its absolute discretion, it deems necessary.
20. HAZARDOUS SUBSTANCES
(a) Grantor represents and warrants to Beneficiary that to the
best of Grantor's knowledge after due and diligent inquiry, no hazardous or
toxic waste or substances are being stored on the Property or any adjacent
property nor have any such waste or substances been stored or used in, on,
under, over or about the Property or any adjacent property prior to or during
Grantor's ownership, possession or control of the Property. Grantor agrees to
provide written notice to Beneficiary immediately upon Grantor becoming aware
that the Property or any adjacent property is being or has been contaminated
with hazardous or toxic waste or substances. Grantor will not cause nor permit
any activities on the Property which directly or indirectly could result in the
Property or any other property becoming contaminated with hazardous or toxic
waste or substances. For purposes of this Deed of Trust, the term "hazardous or
ftoxic waste or substances" means any substance or material defined or
designated as hazardous or toxic wastes, hazardous or toxic material, a
hazardous, toxic or radioactive substance or other similar term by any
applicable federal, state or local statute, regulation or ordinance now or
hereafter in effect.
(b) Grantor shall promptly comply, at Grantor's expense, with
all statutes, regulations and ordinances which apply to Grantor or the Property,
and with all orders, decrees or judgments of governmental authorities or courts
having jurisdiction which Grantor is bound by, relating to the use, collection
storage, treatment, control, removal or cleanup of hazardous or toxic substances
in, on, under, over or about the Property or in, on, under, over or about any
adjacent property that becomes contaminated with hazardous or toxic substances
as a result of construction, operations or other activities on, or the
contamination of, the Property. Beneficiary may, but is not obligated to, enter
upon the Property to inspect it for compliance and to take such actions and
incur such costs and expenses to effect such compliance as it deems advisable to
protect its interest as Beneficiary; and whether or not Grantor has actual
knowledge of the existence of hazardous or toxic substances in, on, under, over
or about the Property or any adjacent property as of the date hereof, Grantor
shall reimburse Beneficiary on demand for the full amount of all costs and
expenses incurred by Beneficiary prior to Beneficiary acquiring title to the
Property through
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foreclosure or deed in lieu of foreclosure, in connection with such compliance
activities. This Deed of Trust does not secure any separate indemnity regarding
hazardous substances not included in this Deed of Trust which may be executed by
Grantor.
(c) Grantor's obligations under this Hazardous Substances
provision are unconditional and shall not be limited by any non-recourse or
other limitations of liability provided for in any Loan Documents.
21. INSURANCE
(a) Grantor shall maintain insurance on the Property with
premiums prepaid providing replacement cost coverage and insuring against loss
by fire and such other risks covered by extended coverage insurance, flood, and
such other perils and risks, including earthquake, loss of rents and business
interruption as may be required by Beneficiary. Grantor shall also maintain
comprehensive general public liability insurance. All insurance shall be with
companies satisfactory to Beneficiary and in such amounts as required by
Beneficiary with lender's loss payable clauses in favor of and in form
satisfactory to Beneficiary. At least 30 days prior to the expiration of the
term of any insurance policy, Grantor shall furnish Beneficiary with written
evidence of renewal or issuance of a satisfactory replacement policy. If
requested Grantor shall deliver copies of all policies to Beneficiary. If
Grantor fails to maintain such insurance satisfactory to Beneficiary,
Beneficiary may make the payment on behalf of Grantor and any sums expended
shall be added to principal and bear interest at the rate of four percent
(4.000%) per annum above the rate provided in the Note. Each policy of
insurance shall provide Beneficiary with no less than forty-five (45) days prior
written notice of any cancellation, expiration, non-renewal or modification.
(b) In the event of foreclosure of this Deed of Trust all
interest of Grantor in any insurance policies pertaining to the Collateral and
in any claims against the policies and in any proceeds due under the policies
shall pass to Beneficiary.
(c) If under the terms of any Lease the lessee is required to
maintain insurance of the type required by the Loan Documents and if the
insurance is maintained for the benefit of both the lessor and Beneficiary,
Beneficiary will accept such policies provided all of the requirements of
Beneficiary and the Loan Documents are met. In the event the lessee fails to
maintain such insurance, Grantor shall promptly obtain such policies as are
required by the Loan Documents.
22. DAMAGES AND CONDEMNATION AND INSURANCE PROCEEDS
(a) Grantor hereby absolutely and irrevocably assigns to
Beneficiary, and authorizes the payor to pay to Beneficiary, the following
claims, causes of action, awards, payments and rights to payment:
(i) all awards of damages and all other compensation payable
directly or indirectly because of a condemnation, proposed
condemnation or taking for public or private use which
affects all or part of the Property or any interest in it;
and
(ii) all other awards, claims and causes of action, arising out
of any warranty affecting all or any part of the Property,
or for damage or injury to or decrease in value of all or
part of the Property or any interest in it; and
(iii) all proceeds of any insurance policies payable because of
loss sustained to all or part of the Property; and
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(iv) all interest which may accrue on any of the foregoing.
(b) Grantor shall immediately notify Beneficiary in writing if:
(i) any damage occurs or any injury or loss is sustained in the
amount of $25,000 or more to all or part of the Property, or
any action or proceeding relating to any such damage, injury
or loss is commenced; or
(ii) any offer is made, or any action or proceeding is commenced,
which relates to any actual or proposed condemnation or
taking of all or part of the Property.
If Beneficiary chooses to do so, it may in its own name appear in or
prosecute any action or proceeding to enforce any cause of action based on
warranty, or for damage, injury or loss to all or part of the Property, and it
may make any compromise or settlement of the action or proceeding. Beneficiary,
if it so chooses, may participate in any action or proceeding relating to
condemnation or taking of all or part of the Property, and may join Grantor in
adjusting any loss covered by insurance.
(c) All proceeds of these assigned claims, other property and
rights which Grantor may receive or be entitled to shall be paid to Beneficiary.
In each instance, Beneficiary shall apply those proceeds first toward
reimbursement of all Beneficiary's costs and expenses of recovering the
proceeds, including attorneys' fees.
(d) If, in any instance, each and all of the following
conditions are satisfied in Beneficiary's reasonable judgment, Beneficiary shall
permit Grantor to use the balance of the proceeds ("Net Claims Proceeds") to pay
costs of repairing or reconstructing the Property in the manner described below:
(i) The plans and specifications, cost breakdown, construction
contract, construction schedule, contractor and payment and
performance bond for the work of repair or reconstruction
must all be acceptable to Beneficiary.
(ii) Beneficiary must receive evidence satisfactory to it that
after repair or reconstruction, the Property would be at
least as valuable as it was immediately before the damage or
condemnation occurred.
(iii) The Net Claims Proceeds must be sufficient in Beneficiary's
determination to pay for the total cost of repair or
reconstruction, including all associated development costs
and interest projected to be payable on the Note until the
repair or reconstruction is complete; or Grantor must
provide its own funds in an amount equal to the difference
between the Net Claims Proceeds and a reasonable estimate,
made by Grantor and found acceptable by Beneficiary, of the
total cost of repair or reconstruction.
(iv) Beneficiary must receive evidence satisfactory to it that
all leases which it may find acceptable will continue after
the repair or reconstruction is complete.
(v) Beneficiary has received evidence satisfactory to it, that
reconstruction and/or repair can be completed at least three
months prior to the date the Note secured by this Deed of
Trust is due and payable.
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(vi) No default under any of the Loan Documents shall have
occurred and be continuing.
If it finds that the conditions are met, Beneficiary shall hold the Net
Claims Proceeds and any funds which Grantor is required to provide in a non-
interest-bearing account and shall disburse them to Grantor to pay costs of
repair or reconstruction upon presentation of evidence reasonably satisfactory
to Beneficiary that repair or reconstruction has been completed satisfactorily
and lien-free. However, if Beneficiary finds that one or more of the conditions
are not satisfied, it may apply the Net Claims Proceeds to pay or prepay some or
all of the Note.
23. RESERVE ACCOUNT
(a) If Beneficiary so requires, Grantor shall pay to Beneficiary
monthly, together with and in addition to any payments of principal and/or
interest due under the Note, a sum, as estimated by the Beneficiary, equal to
the ground rents, if any, the real estate taxes and assessments next due on the
Property and the premiums next due on insurance policies required under the Loan
Documents, less all sums already paid therefor, divided by the number of months
to elapse before 2 months prior to the date when the ground rents, real estate
taxes, assessments and insurance premiums will become delinquent. The monthly
reserve account payments and any principal and/or interest payments due shall be
paid in a single payment and applied by Beneficiary in the following order;
(1) ground rents, real estate taxes, assessments and insurance premiums,
(2) expenditures made pursuant to the Loan Documents and interest thereon,
(3) interest on the Note, and (4) principal due on the Note. Grantor shall
promptly deliver to Beneficiary all bills and notices pertaining to the ground
rents, taxes, assessments and insurance premiums.
(b) The reserve account is solely for the protection of
Beneficiary. Beneficiary shall have no responsibility except to credit properly
the sums actually received by it. No interest will be paid on the funds in the
reserve account and Beneficiary shall have no obligation to deposit the funds in
an interest-bearing account. Upon assignment of this Deed of Trust by
Beneficiary, any funds in the reserve account shall be turned over to the
assignee and any responsibility of Beneficiary with respect thereto shall
terminate. Each transfer of the Property shall automatically transfer to the
grantee all rights of Grantor to any funds in the reserve account.
(c) If the total of the payments to the reserve exceeds the
amount of payments actually made by Beneficiary, plus such amounts as have been
reasonably accumulated in the reserve account toward payments to become due,
such excess may, at Beneficiary's election, be (1) credited by Beneficiary
against sums then due and payable under the Loan Documents or (2) refunded to
Grantor as its name appears on the records of Beneficiary. If, however, the
reserve account does not have sufficient funds to make the payments when they
become due, Grantor shall pay to Beneficiary the amount necessary to make up the
deficiency within 15 days after written notice to Grantor. If this Deed of
Trust is foreclosed or if Beneficiary otherwise acquires the Property, the
Beneficiary shall, at the time of commencement of the proceedings or at the time
the Property is otherwise acquired, apply the remaining funds in the reserve
account, less such sums as will become due during the pendency of the
proceedings, against the sums due under the Loan Documents and/or to make
payments required under the Loan Documents.
(d) Unless required by the terms of Beneficiary's loan
commitment or loan agreement, Grantor shall not be required to pay pursuant to
the provisions of this Deed of Trust monthly reserve account payments so long as
there has been no more than four late payments due under the Note throughout the
loan term and there is no other default under the loan and so long as Grantor
remains in ownership of said property, provided receipted bills evidencing the
payment of all taxes and/or assessments and
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insurance premiums are exhibited to Beneficiary within 60 days following the
respective due dates of such items. Upon any change in any of these conditions,
the Beneficiary may, at its option then or thereafter exercised, enforce this
Deed of Trust section according to its terms.
24. REPAYMENT OF BENEFICIARY'S EXPENDITURES
Grantor shall pay within 10 days after written notice from Beneficiary
all sums expended by Beneficiary and all costs and expenses incurred by
Beneficiary in taking any actions pursuant to the Loan Documents including
attorneys' fees, accountants' fees, appraisal and inspection fees, and the costs
for title reports. If any laws or regulations are passed subsequent to the date
of this Deed of Trust which require Beneficiary to incur out-of-pocket expenses
in order to maintain, modify, extend or foreclose this Deed of Trust, revise the
terms of the loan secured hereby or consent to an Accelerating Transfer (as
defined herein), Grantor shall reimburse Beneficiary for such expenses within 10
days after written notice from Beneficiary. Expenditures by Beneficiary shall
bear interest from the date of such advance or expenditure at the rate of four
percent (4.000%) per annum above the interest rate then in effect under the Note
but not less than twelve percent (12.000%) per annum until paid, shall
constitute advances made under this Deed of Trust and shall be secured by and
have the same priority as the lien of this Deed of Trust. If Grantor fails to
pay any such expenditures, costs and expenses and interest thereon, Beneficiary
may, at its option, without foreclosing the lien of this Deed of trust, commence
an independent action against Grantor for the recovery of the expenditures
and/or advance any undisbursed loan proceeds to pay the expenditures.
25. ADDITIONAL SECURITY DOCUMENTS
Grantor shall within 15 days after request by Beneficiary execute and
deliver any financing statement, renewal, affidavit, certificate, continuation
statement, or other document Beneficiary may request in order to perfect,
preserve, continue, extend, or maintain security interests or liens previously
granted and the priority of the security interests or liens. Grantor shall pay
all costs and expenses incurred by Beneficiary in connection with the
preparation, execution, recording, filing, and refilling of any such document.
26. ACCELERATING TRANSFER
"Accelerating Transfer" means any sale, contract to sell, conveyance,
encumbrance, transfer of full possessory rights, or other transfer of all or any
material part of the Property or any interest in it, whether voluntary,
involuntary, by operation of law or otherwise and whether or not for record or
for consideration. If Grantor is a corporation, "Accelerating Transfer" also
means any transfer or transfers of shares possessing, in the aggregate, more
than fifty percent (50%) of the voting power. If Grantor is a partnership,
"Accelerating Transfer" also means withdrawal or removal of any general partner,
dissolution of the partnership under Washington law, or any transfer, or any
transfers of, in the aggregate, more than fifty percent (50%) of the partnership
interest. If Grantor is the majority owner of a business, either through
ownership of shares of a corporation or interest in a partnership or otherwise,
which occupies 75% or more of the improvements on the Property, "Accelerating
Transfer" also means any sale, contract to sell, or other transfer of the
business or substantial assets of the business, other than in the ordinary
course, or the failure of the business to continue to occupy the Property.
Grantor acknowledges that Beneficiary is taking actions in reliance on
the expertise, skill, experience and reliability of Grantor, thus the
obligations secured hereby include material elements similar in nature to a
personal service contract or ownership interest. In consideration of
Beneficiary's reliance, Grantor agrees that Grantor shall not make any
Accelerating Transfer unless the transfer is preceded by
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<PAGE>
Beneficiary's express written consent to the particular transaction and
transferee. Beneficiary may withhold such consent in its sole discretion. If
Beneficiary consents, it may charge the Grantor a fee as consideration for such
consent and Grantor shall pay Beneficiary's actual costs incurred in making its
decision to consent, including but not limited to the cost of credit reports, an
appraisal of the Property, an environmental assessment and documentation. If
any Accelerating Transfer occurs without Beneficiary's prior written consent,
Beneficiary in its sole discretion may declare all sums secured by this Deed of
Trust to be immediately due and payable, and Beneficiary may invoke any rights
and remedies provided herein. This provision shall apply to each and every
Accelerating Transfer regardless of whether or not Beneficiary has consented or
waived its rights, whether by action or nonaction, in connection with any
previous Accelerating Transfer(s).
If the preceding paragraphs of this section or any part thereof relevant
to a particular Accelerating Transfer are unenforceable according to the law in
effect at the time of the Accelerating Transfer, then Grantor shall reimburse
Beneficiary for its actual costs incurred in processing the Accelerating
Transfer on its records, including but not limited to the cost of modifications
of Loan Documents, an appraisal, and obtaining relevant credit and financial
information.
27. RELEASE OF PARTIES OR COLLATERAL
Without affecting the obligations of any party under the Loan Documents
and without affecting the lien on this Deed of Trust and Beneficiary's security
interest in the Collateral, Beneficiary and/or Trustee may, without notice (a)
release all or any Grantor and/or any other party now or hereafter liable for
any of the Secured Obligations (including guarantors), (b) release all or any
part of the Collateral, (c) subordinate the lien of this Deed of Trust or
Beneficiary's security interest in the Collateral, (d) take and/or release any
other security for or guarantees of the Secured Obligations, (e) grant an
extension of time for performance of the Secured Obligations, (f) modify, waive,
forbear, delay or fail to enforce any of the Secured Obligations, (g) sell or
otherwise realize on any other security or guaranty prior to, contemporaneously
with or subsequent to a sale of all or any part of the Collateral, (h) make
advances pursuant to the Loan Documents including advances in excess of the Note
amount, (i)consent to the making of any map or plat of the Property, and (j)
join in the grant of any easement on the Property. Any subordinate lienholder
shall be subject to all such releases, extensions or modifications without
notice to or consent from the subordinate lienholder. Grantor shall pay any
Trustee's, attorneys', title insurance, recording, inspection or other fees or
expenses incurred in connection with release of Collateral, the making of a map,
plat or the grant of an easement.
28. DEFAULT--REMEDIES
Grantor's failure to comply with any term or condition of the Loan
Documents, including without limitation, this Deed of Trust and payments due on
the Note, shall constitute a default. The Note contains a late charge
provisions and Grantor agrees to pay such late charge if any payment or portion
thereof is not paid according to the terms of the Note. In the event of a
default Beneficiary may declare all amounts owed under the Loan Documents
immediately due and payable after applicable notice as set forth herein and/or
exercise its rights and remedies under the Loan Documents and applicable law
including foreclosure of this Deed of Trust judicially or non-judicially by the
Trustee pursuant to the power of sale. Beneficiary's exercise of any of its
rights and remedies shall not constitute a waiver or cure of a default.
Beneficiary's failure to enforce any default shall not constitute a waiver of
the default or any subsequent default. In the event of foreclosure, the cost of
the title premium for the trustee sale guarantee (or equivalent policy) shall be
paid for by Grantor. In the event the Loan Documents are referred to an
attorney for enforcement or preservation of Beneficiary's rights or remedies,
whether or not suit is filed or any proceedings are
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<PAGE>
commenced, Grantor shall pay all Beneficiary's costs and expenses including
Trustee's and attorneys' fees (including attorneys' fees for any appeal,
bankruptcy proceeding or any other proceeding), accountant's fees, appraisal and
inspection fees and cost of a title report.
29. NOTICE AND OPPORTUNITY TO CURE
Notwithstanding any other provision of this Deed of Trust, Beneficiary
shall not accelerate the maturity of one or more of the Secured Obligations
because of a monetary default by Grantor unless Grantor fails to cure the
default within 10 days of the date on which Beneficiary mails or delivers
written notice of such default to Grantor. Notwithstanding any other provision
of this Deed of Trust, Beneficiary shall not accelerate the maturity of one or
more of the Secured Obligations because of a nonmonetary default by Grantor
unless Grantor fails to cure the default within 30 days of the date on which
Beneficiary mails or delivers written notice of such default to Grantor. The
thirty (30) day period to cure a nonmonetary default shall be extended up to
ninety (90) days so long as Grantor has commenced action to cure and, in
Beneficiary's opinion, is proceeding to cure the default with due diligence.
Beneficiary's agreement not to accelerate the maturity of the Secured
Obligations as set forth in this section shall not be construed to obligate
Beneficiary to forebear in any other manner and Beneficiary may pursue any other
rights or remedies which Beneficiary may have because of Grantor's default. A
monetary default is defined as a failure to perform any obligation to pay money
which arises under the Loan Documents. A nonmonetary default is defined as a
failure to perform any obligation under the Loan Documents other than one to pay
money.
30. CUMULATIVE REMEDIES
To the extent allowed by law, all Beneficiary's and Trustee's rights and
remedies specified in the Loan Documents are cumulative, not mutually exclusive
and not in substitution for any rights or remedies available in law or equity.
In order to obtain performance of Grantor's obligations under the Loan
Documents, without waiving its rights in the Collateral, Beneficiary may proceed
against Grantor or may proceed against any other security or guaranty for the
Secured Obligations, in such order and manner as Beneficiary may elect. The
commencement of proceedings to enforce a particular remedy shall not preclude
the discontinuance of the proceedings and the commencement of proceedings to
enforce a different remedy.
31. ENTRY
Beneficiary, in person, by agent or by court appointed receiver, may
enter, take possession of, manage and operate all or any part of the Property,
and may also do any and all other things in connection with those actions that
Beneficiary may in its sole discretion consider necessary and appropriate to
protect the security of this Deed of Trust. Such other things may include:
taking and possessing all of Grantor's or the then owner's books and records;
entering into, enforcing, modifying, or canceling Leases on such terms and
conditions as Beneficiary may consider proper; obtaining and evicting tenants;
fixing or modifying Rents; collecting and receiving any payment of money owing
to Grantor; completing any unfinished construction; and/or contracting for and
making repairs and alterations. Grantor hereby irrevocably constitutes and
appoints Beneficiary as its attorney-in-fact to perform such acts and execute
such documents as Beneficiary in its sole discretion may consider to be
appropriate in connection with taking these measures.
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32. APPOINTMENT OF RECEIVER
In the event of a default, Grantor consents to and Beneficiary shall be
entitled, without notice, without bond, and without regard to the adequacy of
the Collateral, to the appointment of a receiver for the Collateral. The
receiver shall have, in addition to all the rights and powers customarily given
to and exercised by a receiver, all the rights and powers granted to Beneficiary
by the Loan Documents. The receiver shall be entitled to receive a reasonable
fee for management of the Property. If Grantor is an occupant of the Property,
Beneficiary has the right to require Grantor to pay rent at fair market rates
and the right to remove Grantor from Property if Grantor fails to pay rent.
33. SALE OF PROPERTY AFTER DEFAULT
The Collateral may be sold separately or as a whole, at the option of
Beneficiary following a default. In the event of a Trustee's sale of all the
Collateral, Beneficiary hereby assigns its security interest in the personal
property Collateral to the Trustee. Beneficiary may also realize on the
personal property Collateral in accordance with the remedies available under the
Uniform Commercial Code or at law. In the event of a Trustee's sale, Grantor,
and the holder of any subordinate liens or security interest with actual or
constructive notice hereof, waive any equitable, statutory or other right they
may have to require marshaling of assets in connection with the exercises of any
of the remedies permitted by applicable law or provided herein, or to direct the
order in which any of the Collateral will be sold in the event of any sale under
this Deed of Trust or foreclosure in the inverse order of alienation.
34. FORECLOSURE OF LESSEE'S RIGHTS--SUBORDINATION
Beneficiary shall have the right, at its option, to foreclose this Deed
of Trust subject to the rights of any lessees of the Property. Beneficiary's
failure to foreclose against any lessee shall not be asserted as a claim against
Beneficiary or as a defense against any claim by Beneficiary in any action or
proceeding. Beneficiary at any time may subordinate this Deed of Trust to any
or all of the Leases except that Beneficiary shall retain its priority claim to
any condemnation or insurance proceeds.
35. REPAIRS DURING REDEMPTION
In the event of a judicial foreclosure the purchaser during any
redemption period may make such repairs and alterations to the Property as may
be reasonably necessary for the proper operation, care, preservation, protection
and insuring of the Property. Any sums so paid, together with interest from the
date of the expenditure at the rate provided in the judgment, shall be added to
the amount required to be paid for redemption of the Property.
36. RECONVEYANCE AFTER PAYMENT
Upon written request of Beneficiary stating that all obligations secured
by this Deed of Trust have been paid, Trustee shall reconvey, without warranty,
the Property then subject to the lien of this Deed of Trust. The recitals in
any reconveyance of any matters of fact shall be conclusive proof of the
truthfulness thereof. The grantee in the reconveyance may be described as "the
person or persons legally entitled thereto." Grantor shall pay any costs,
Trustee's fees and recording fees incurred in so reconveying the Property.
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<PAGE>
37. NONWAIVER OF TERMS AND CONDITIONS
Time is of the essence with respect to performance of the obligations
due under the Loan Documents. Beneficiary's failure to require prompt
enforcement of any required obligation shall not constitute a waiver of the
obligation due or any subsequent required performance of the obligation. No
term or condition of the Loan Documents may be waived, modified or amended
except by a written agreement signed by Grantor and Beneficiary. Any waiver of
any term or condition of the Loan Documents shall apply only to the time and
occasion specified in the waiver and shall not constitute a waiver of the term
or condition at any subsequent time or occasion.
38. WAIVERS BY GRANTOR
Without affecting any of Grantor's obligations under the Loan Documents,
Grantor waives the following:
(a) Any right to require Beneficiary to proceed against any
specific party liable for sums due under the Loan Documents or to proceed
against or exhaust any specific security for sums due under the Loan Documents.
(b) Diligence, demand for performance, notice of
nonperformance, presentment, protest and notice of dishonor and notice of new or
additional indebtedness of any Grantor or any other party liable for sums due
under the Loan Documents to Beneficiary.
(c) Any defense arising out of Beneficiary entering into
additional financing or other arrangements with any Grantor or any party liable
for sums due under the Loan Documents not relating to the Property and any
action taken by Beneficiary in connection with any such financing or other
arrangements or any pending financing or other arrangements not related to the
Property.
(d) Any defense arising out of the absence, impairment, or
loss of any or all rights of recourse, reimbursement, contribution or
subrogation or any other rights or remedies of Beneficiary against any Grantor
or any other party liable for sums due under the Loan Documents or any
Collateral.
(e) Any obligation of Beneficiary to see to the proper use
and application of any proceeds advanced pursuant to the Loan Documents.
39. RIGHT OF SUBROGATION
Beneficiary is subrogated to the rights, whether legal or equitable, of
all beneficiaries, mortgagees, lienholders and owners directly or indirectly
paid off or satisfied in whole or in part by any proceeds advanced by
Beneficiary under the Loan Documents, regardless of whether these parties
assigned or released of record their rights or liens upon payment.
40. JOINT AND SEVERAL LIABILITY
If there is more than one Grantor of this Deed of Trust, their
obligations shall be joint and several.
41. STATEMENT OF AMOUNT OWING
Grantor upon request by Beneficiary will furnish a written statement
duly acknowledged of the amount due under the Loan Documents and whether any
offsets or defenses exist against the amount due.
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<PAGE>
42. OPERATING AND FINANCIAL STATEMENTS
Grantor shall deliver to Beneficiary within 90 days following the end of
each of Grantor's fiscal years, at Grantor's expense, Grantor's financial
statement certified by Grantor to be true and correct and Grantor's most
recently filed federal tax return, financial statements of all guarantors of the
Secured Obligations certified by each guarantor respectively, and certified
operating statements in form satisfactory to Beneficiary covering the Property,
including tenant lists and current rent schedules. Beneficiary or its
authorized representative shall have access to the books and records of the
Grantor and obtain such statements at Grantor's expense if Grantor fails to
provide them as herein set forth, or at any time at Beneficiary's option if
Grantor is in default. Beneficiary shall have the option, within 60 days
following receipt of the financial and operating statements from Grantor, to
order a confirmatory examination of Grantor's books and records pertaining to
the Property. Said examination shall be at Beneficiary's expense unless, in
Beneficiary's reasonable opinion, Grantor's statements are found to contain
significant discrepancies, in which case the confirmatory audit will be at
Grantor's expense. In default thereof Beneficiary shall, in addition to all
other remedies, have the option of accelerating the maturity of the Secured
Obligations.
43. APPRAISALS
In the event of a default Beneficiary may obtain a current appraisal of
the Property which is to be paid for by Grantor. Appraisals may be commissioned
by Beneficiary when required by laws and regulations which govern Beneficiary's
lending practices. The cost of all such appraisals will be borne by Grantor.
44. MAXIMUM INTEREST RATE
If any payment of interest, fees and/or charges under the Loan Documents
shall exceed the maximum amounts permitted by any applicable law of the State of
Washington, then the payment made or to be made shall be reduced so that in no
event shall any obligor pay or Beneficiary receive an amount in excess of the
maximum amount permitted by any applicable law. If Beneficiary receives an
excess amount, it shall be treated as a prepayment of principal or shall be
returned to the payor, at Beneficiary's option.
45. EVASION OF PREPAYMENT FEE
If Grantor is in default, whether Beneficiary has accelerated the
maturity of the indebtedness or not, any tender of payment sufficient to satisfy
all sums due under the Loan Documents made at any time prior to foreclosure sale
shall constitute an evasion of the prepayment terms of the Note, if any, and
shall be deemed a voluntary prepayment. Any such payment, to the extent
permitted by law, shall include the additional payment required under the
prepayment fee provision in the Note, if any, or if at that time prepayment is
not permitted, then such payment, to the extent permitted by law, will include
an additional payment of 5% of the then principal balance.
46. PAYMENT OF NEW TAXES
If any federal, state or local law is passed subsequent to the date of
this Deed of Trust which requires Beneficiary to pay any tax because of this
Deed of Trust or the sums due under the Loan Documents (excluding income taxes),
then Grantor shall pay to Beneficiary on demand any such taxes if it is lawful
for Grantor to pay them, or, in the alternative Grantor may repay all sums due
under the Loan
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<PAGE>
Documents plus any prepayment fee within 30 days of such demand. If it is not
lawful for Grantor to pay such taxes, then at its option Beneficiary may declare
under the Loan Documents.
47. INSOLVENCY PROCEEDINGS
Grantor or any party liable on the Secured Obligations (including
guarantors) shall not make any assignment for the benefit of creditors and shall
not permit the institution of any proceedings under any federal or state
statutes pertaining to bankruptcy, insolvency, arrangement, dissolution,
liquidation or receivership whether or not an order for relief is entered.
48. SUBSTITUTION OF TRUSTEE
Beneficiary may at any time discharge the Trustee and appoint a
successor Trustee who shall have all of the powers of the original Trustee.
49. IN-HOUSE COUNSEL FEES
Whenever Grantor is obligated to pay or reimburse Beneficiary or Trustee
for any attorneys' fees, those fees shall include the allocated costs for
services of in-house counsel.
50. NOTICES
Any notice given by Grantor, Trustee or Beneficiary shall be in writing
and shall be effective (1) on personal delivery to the party receiving the
notice or (2) on the third day after deposit in the United States mail, postage
prepaid with return receipt requested, addressed to the party at the address set
forth above, or with respect to the Grantor, to the address at which Beneficiary
customarily or last communicated with Grantor.
51. TIME
Time is of the essence in connection with all obligations of Grantor
herein.
52. SUCCESSORS AND ASSIGNS
This Deed of Trust applies to, inures to the benefit of, and binds all
parties hereto and their successors and assigns. The terms "Grantor," "Trustee"
and "Beneficiary" include their successors and assigns.
53. CONTROLLING DOCUMENT
In the event of a conflict or inconsistency between the terms and
conditions of this Deed of Trust and the terms and conditions of any other of
the Loan Documents (except for any separate assignment of rents and/or leases
and any loan agreement which shall prevail over this Deed of Trust), the terms
and conditions of this Deed of Trust shall prevail.
54. INVALIDITY OF TERMS AND CONDITIONS
If any term or condition of this Deed of Trust is found to be invalid,
the invalidity shall not affect any other term or condition of the Deed of Trust
and the Deed of Trust shall be construed as if not containing the invalid term
or condition.
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<PAGE>
55. LEGISLATION AFFECTING BENEFICIARY'S RIGHTS
If enactment or expiration of applicable laws has the effect of
rendering any provision of the Note or this Deed of Trust unenforceable
according to its terms, Beneficiary, at its option, may require immediate
payment in full of all sums secured by this Deed of Trust and may invoke any
remedies permitted herein.
56. RULES OF CONSTRUCTION
This Deed of Trust shall be construed so that, whenever applicable, the
use of the singular shall include the plural, the use of the plural shall
include the singular, and the use of any gender shall be applicable to all
genders and shall include corporations, partnerships and limited partnerships.
57. JOINT AND SEVERAL LIABILITY
If there is more than one Grantor, their obligations hereunder are joint
and several.
58. SECTION HEADINGS
The headings to the various sections have been inserted for convenience
of reference only and shall not be used to construe this Deed of Trust.
59. APPLICABLE LAW
The Loan Documents shall be governed by and construed in accordance with
the laws of the State of Washington.
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<PAGE>
The undersigned Grantor requests that a copy of any notices, including
but not limited to any Notice of Sale, be mailed to him at the address herein
before set forth.
GRANTOR
IDS/SHURGARD INCOME GROWTH PARTNERS L.P. II,
a Washington limited partnership
By: Shurgard Associates L.P. II,
a Washington limited partnership,
general partner
By: Shurgard General Partner, Inc.,
a Washington corporation,
general partner
By: Harrell Beck
--------------------------
Its Treasurer
By:
--------------------------
Its
----------------------
By: Charles K. Barbo
---------------------------------
Charles K. Barbo, general partner
By: Arthur W. Buerk
---------------------------------
Arthur W. Buerk, general partner
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<PAGE>
STATE OF WASHINGTON )
)Sections
COUNTY OF KING )
On this 2nd day of July, 1992, before me personally appeared Harrell
Beck and ________________________, to me known (or proven on the basis of
satisfactory evidence) to be the treasurer and _________________, respectively,
of SHURGARD GENERAL PARTNER, INC., the corporation that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that they were authorized to execute said
instrument and on oath further stated that said corporation is the general
partner of SHURGARD ASSOCIATES L.P. II, a Washington limited partnership, and
that said corporation was authorized to execute the said instrument on behalf of
said partnership and that said instrument was the free and voluntary act and
deed of said partnership for the uses and purposes therein mentioned, and
further stated that said limited partnership is the general partner of
IDS/SHURGARD INCOME GROWTH PARTNERS L.P. II, a Washington limited partnership,
and that SHURGARD ASSOCIATES L.P. II was authorized to execute the said
instrument on behalf of said partnership, and that said instrument was the free
and voluntary act and deed of said partnership for the uses and purposes therein
mentioned.
In witness whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
------------------------------------------
Notary Public in and for the State of
Washington, residing at Seattle.
My appointment expires August 1, 1993.
STATE OF WASHINGTON)
)Sections
COUNTY OF KING )
On this 2nd day of July, 1992, before me personally appeared CHARLES K.
BARBO, to me known (or proven on the basis of satisfactory evidence) to be the
general partner of SHURGARD ASSOCIATES L.P. II, a Washington limited
partnership, the partnership that executed the within and foregoing instrument,
and acknowledged that he signed the same as his free and voluntary act and deed
of said partnership, for the uses and purposes therein mentioned, and on oath
stated that he was authorized to execute said instrument, and further stated
that said limited partnership is the general partner of IDS/SHURGARD INCOME
GROWTH PARTNERS L.P. II, a Washington limited partnership, and that SHURGARD
ASSOCIATES L.P. II was authorized to execute the said instrument on behalf of
said partnership, and that said instrument was the free and voluntary act and
deed of said partnership for the uses and purposes therein mentioned.
In witness whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
------------------------------------------
Notary Public in and for the State of
Washington, residing at Seattle.
My appointment expires August 1, 1993.
<PAGE>
STATE OF WASHINGTON )
)Sections
COUNTY OF KING )
On this 2nd day of July, 1992, before me personally appeared ARTHUR W.
BUERK, to me known (or proven on the basis of satisfactory evidence) to be the
general partner of SHURGARD ASSOCIATES L.P. II, a Washington limited
partnership, the partnership that executed the within and foregoing instrument,
and acknowledged that he signed the same as his free and voluntary act and deed
of said partnership, for the uses and purposes therein mentioned, and on oath
stated that he was authorized to execute said instrument, and further stated
that said limited partnership is the general partner of IDS/SHURGARD INCOME
GROWTH PARTNERS L.P. II, a Washington limited partnership, and that SHURGARD
ASSOCIATES L.P. II was authorized to execute the said instrument on behalf of
said partnership, and that said instrument was the free and voluntary act and
deed of said partnership for the uses and purposes therein mentioned.
In witness whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
------------------------------------------
Notary Public in and for the State of
Washington, residing at Seattle.
My appointment expires August 1, 1993.
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<PAGE>
November 19, 1992
IDS/Shurgard Income Growth Partners L.P. II
1201 Third Avenue, Suite 2200
Seattle, WA 98101
RE: 1755 NE 48TH ST., RENTON, WA
S-FNB LOAN NO. 179226-6
Dear Mr. Kimball:
We are pleased to advise you that the terms of the loan have been amended
to allow for an option to re-fix the interest rate on the loan for periods of
six months, 1 year, 3 years, 5 years or 7 years based Lender's Fixed Rate Index,
plus 2.50% per annum, subject to the following:
1. Our receipt of fully executed Note and Deed of Trust Modification
Agreement.
The undersigned, in consideration of said modification of the loan,
represents and warrants to Seattle-First National Bank its successors and
assigns in respect to the above-captioned loan, the following matters:
(a) As of December 1, 1992, the principal balance of the loan is
$1,796,944.08 plus accrued interest from November 1, 1992.
(b) As of the date of this letter, all disbursements made by Seattle-
First National Bank are approved and/or hereby ratified and confirmed by the
undersigned.
(c) As of the date of this letter, the undersigned does not have and
does not know of any disputes with or claims against Seattle-First National
Bank, or any breach or violation by Seattle-First National Bank of the terms and
conditions of the above-captioned loan, including but not necessarily limited
to, breach or violation of the terms and conditions of the Note, Deed of Trust
or Loan Agreement.
(d) There are no other loans, loan commitments and/or alleged loan
commitments, verbal or written, made or claimed to have been made by Seattle-
First National Bank to the undersigned and/or co-signed or guaranteed by the
undersigned, in regard to the above-captioned project.
The undersigned agrees to and does hereby indemnify and hold Seattle-First
National Bank harmless from any and all loss, costs, charges, or expenses,
including reasonable attorney fees, which have been or may be asserted against
or incurred by Seattle-First National Bank as a result of or by reason of or in
connection with the matters hereby represented and warranted to Seattle-First
National Bank by the undersigned. This indemnification is binding on the
undersigned, its successors and assigns.
Please acknowledge your approval and acceptance of the above conditions by
signing and returning to Diane Epsey the duplicate copy of this letter together
with the fully-executed Modification Agreement within
<PAGE>
IDS/Shurgard Income Growth Partner L.P. II
November 19, 1992
Page 2
10 days of the date hereof. If we have not received the above items within 10
days, this letter shall be null and void and Seafirst shall have no obligations
hereunder.
Sincerely,
Assistant Vice President
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
FROM ENFORCING PAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
RCW 19.36.
Above terms read and approved this 15th day of December, 1992.
IDS/SHURGARD INCOME GROWTH PARTNERS LP. II,
a Washington limited partnership
By: Shurgard Associates L.P. II,
a Washington limited partnership,
general partner
By: Shurgard General Partner, Inc.,
a Washington corporation,
general partner
By: Harrell Beck
Its: Treasurer
By: /s/CHARLES K. BARBO
-----------------------------------
Charles K. Barbo, general partner
By: /s/ARTHUR W. BUERK
-----------------------------------
Arthur W. Buerk, general partner
<PAGE>
AMENDED AND RESTATED
PROMISSORY NOTE
$1,250,000.00 January 31, 1994 Seattle, Washington
FOR VALUE RECEIVED, the undersigned jointly and severally promise to pay to
the order of SEATTLE-FIRST NATIONAL BANK, a national banking association, at its
principal office in the City of Seattle, Washington or at such other place or
places as any holder hereof may in writing designate, the sum of One Million Two
Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) in lawful money of the
United States, together with interest thereon in like lawful money from the date
of disbursement until paid at the rate of seven and one-eighth percent (7.125%)
per annum, and after maturity, or after default, at the rate of four percent
(4%) per annum above the interest rate otherwise in effect hereunder, interest
payable monthly as it accrues, both principal and interest to be payable in
monthly installments of Nine Thousand Seven Hundred Eighty-Five And 25/100
Dollars ($9,785.25) one such payment of principal and interest to become due on
the first day of each month hereafter commencing with March 1, 1994, and
continuing until the principal and interest are fully paid except that the final
payment of principal and interest shall be due and payable March 1, 2001. Each
such installment shall be applied first to interest to the due date of such
installment, balance to principal, except that if any late charge is not paid
and/or any advance made by the holder hereof under the terms of any instrument
securing this Note is not repaid, any monies received, at the option of the
holder, may first be applied to pay such late charge and/or advances plus
interest thereon, and the balance shall be applied on account of any installment
due. Interest shall be calculated using a 30-day month and a 360-day year.
The undersigned may elect a variable interest rate or a fixed interest rate
at closing of the loan. SECTIONS 1-4 shall apply (1) unless a fixed interest
rate is elected by the undersigned either at closing or pursuant to SECTION 5
herein and (2) until interest commences to accrue at the fixed rate. Thereafter,
SECTIONS 1-4 herein shall be void and of no further effect.
1. INTEREST
(a) CHANGES IN INTEREST OWED; INTEREST CHANGE DATE. The interest rate
will change five (5) months after the first payment date and every sixth month
thereafter ("Interest Change Date").
<PAGE>
(b) INDEX; CURRENT INDEX. Changes in the interest rate will be based
on changes in the 180-day LIBOR as defined in PARAGRAPH 4 below ("Index"). If
the Index is no longer available, the holder will choose a new index based upon
comparable information and give the undersigned notice of this choice. The most
recently available Index figure 15 Business Days (defined below) before each
Interest Change Date is the "Current Index."
(c) CALCULATION OF INTEREST RATE. Before each Interest Change Date, the
holder will calculate the interest rate by adding Two and 75/100 percent (2.75%)
to the Current Index, rounded to the next highest one-eighth of one percent
(0.125%), which will be the new interest rate until the next Interest Change
Date.
2. PAYMENTS
The holder will change the monthly payment after each Interest Change Date
(every six months) to an amount sufficient to repay the unpaid principal balance
in full at the then current interest rate in substantially equal payments over
the balance of the original twenty-year amortization schedule. Until the payment
is again changed, the undersigned shall pay the new monthly payment each month
beginning on the first monthly payment due date after the Interest Change Date.
3. NOTICE OF CHANGES
The holder will mail or deliver to the undersigned a notice of any changes
in the monthly payment before the first payment due date after the Interest
Change Date.
4. LIBOR
(a) The "Index" is the London Interbank Offer rate ("LlBOR"),
adjusted at the holder's option for statutory reserves, deposit insurance,
regulatory capital, taxes and assessments, if any. It is the average of the
rates of interest, on a per annum basis, at which deposits in United States
dollars having a term of 180 days are offered by major banks in immediately
available funds to prime banks in the London Interbank market at 11:00 A.M.
(London time) on the day which is fifteen (15) Business Days prior to the
applicable Interest Change Date. This rate is reported on Telerate, a national
and international medium which provides interest rate quotations daily, as
quoted by the British Bankers Association as Interest Settlement Rates on page
3750 (or such other page as may replace it). Such interest rate quotation, as
provided by Telerate, shall be deemed conclusive and final with respect to LIBOR
determinations for so long as Telerate continues to make such interest rate
reports. If Telerate or the British Bankers Association report is no longer
available for 180-day maturities, a comparable publication or report containing
such information
-2-
<PAGE>
will be used. If there is no such publication or comparable publication
containing such information, 180-day LIBOR shall be the average rate (rounded if
necessary to the nearest one-thousandth of a percent) at which dollar deposits
having a maturity of 180 days are offered by at least two major banks in an
interbank market where Eurodollars are being traded, to prime banks in
immediately available funds on the LIBOR determination date described above or
as soon thereafter as such offer quotes can be obtained.
(b) "Business Day" shall mean a day on which commercial banks are
generally open for business in Seattle, Washington and London, England.
(c) The amount of adjustment for reserves, deposit insurance,
regulatory capital, taxes and assessments may change on any Interest Change Date
depending on such charges being assessed against holder at that time. Such
charges may change due to various factors, including but not limited to changes
in the requirements for reserves and capital adequacy promulgated by the Federal
Reserve System of the United States and/or other state and federal regulatory
agencies, statutory changes affecting holder and/or imposition of taxes, FDIC
fees and/or assessments. Each determination of an adjustment amount shall be
made by the holder in its sole and absolute discretion and shall be conclusive
and binding upon maker and shall be determined without benefit of or credit for
prorations, exceptions or offsets that may be available to the holder from time
to time.
5. INTEREST RATE CONVERSION OPTION
If the undersigned is in compliance with all terms and conditions of the
loan documents executed in connection with this Note, interest on the whole
principal may, at the undersigned's option, upon 24 hours notice to the holder
hereof, be converted from the adjustable rate basis as provided above to a fixed
rate in accordance with the following provisions, PROVIDED, HOWEVER, that the
undersigned's option to fix the rate is subject to the availability to the
holder hereof of matchfunding opportunities for an equivalent time period. This
option to fix the rate of interest under this Note may be elected at any one or
more times during the term of this loan provided that any fixed rate period must
either (a) extend to the maturity date of this Note, or (b) be for a period of
one (1) year or any integer multiple thereof and PROVIDED FURTHER, that no fixed
rate period may extend beyond the maturity date of this Note.
Said fixed interest rate shall be Seattle-First National Bank's
reserve-adjusted "Fixed Rate Index" as quoted by Seattle-First National Bank on
the date the funds are converted for the period for which the rate is being
fixed and the remainder of the original amortization schedule, rounded upward to
the next highest one-eighth of one percent (0.125%) plus Two and 75/100 percent
(2.75%) per annum. The Fixed Rate
-3-
<PAGE>
Index will be adjusted at the holder's option to reflect the holder's cost of
statutory reserves, deposit insurance, regulatory capital, taxes and
assessments, if any, as set forth in PARAGRAPH 4(C) herein.
The funds will be converted to the fixed rate on the date the holder
receives the undersigned's written notice exercising the fixed rate option,
PROVIDED that the notice is received before 12 noon Seattle time and that the
fee in connection therewith has been received by holder.
Should the undersigned elect to fix the interest rate, the monthly payment
will be recalculated at the beginning of the fixed rate period using the fixed
rate and an amortization term that will amortize the loan over the remainder of
the original amortization schedule. Upon expiration of any fixed rate period,
the interest rate will automatically revert to the adjustable rate set forth
above for the remainder of the term unless the undersigned elects in writing to
repeat the process and reset the fixed rate in accordance with the above.
6. PREPAYMENT
Prior to the undersigned's exercise of the fixed interest rate conversion
option under PARAGRAPH 5 above, the undersigned may prepay principal, in whole
or in part, without prepayment fee, at any time. Any partial prepayments shall
not reduce nor postpone regular monthly installment payments.
In the event the interest rate on the loan is converted to a fixed rate,
the undersigned may not prepay a portion of the principal but may prepay the
whole outstanding principal, PROVIDED, HOWEVER, that a prepayment fee is paid as
set forth below. This prepayment fee shall be payable whether such prepayment is
by voluntary prepayment, operation of law, acceleration or otherwise.
(a) PREPAYMENT FEES
The amount of the prepayment fee depends on the following:
(1) The amount by which interest reference rates as defined
below have changed between the time the loan is prepaid and the time the loan
was converted to a fixed rate.
(2) The amount of principal prepaid.
(3) A prepayment fee factor (see "Prepayment Fee Factor
Schedule" below).
-4-
<PAGE>
(b) DEFINITION OF REFERENCE RATE
The "Reference Rate" used to represent interest rate levels shall be the
bond equivalent yield of the average U.S. Treasury rate having maturities
equivalent to the remaining period to maturity of this loan rounded upward to
the nearest month. The "Initial Reference Rate" shall be the Reference Rate
assigned to the loan by the holder at the time the loan was converted to a fixed
rate. The "Final Reference Rate" shall be the Reference Rate at the time of
prepayment.
The Reference Rate shall be interpolated from the Federal Reserve
Statistical Release (Publication H.15) as displayed on Page 119 of the Dow Jones
Telerate Service (or such other page or service as may replace that page or
service for the purpose of displaying rates comparable to said U.S. Treasury
rates) on the day the loan was converted to a fixed rate (Initial Reference
Rate) or the day of prepayment (Final Reference Rate).
(c) CALCULATION OF PREPAYMENT FEE
(1) If the Initial Reference Rate is less than or equal to
the Final Reference Rate, there is no prepayment fee.
(2) If the Initial Reference Rate is greater than the Final
Reference Rate, the prepayment fee shall be equal to the difference between the
Initial and Final Reference Rates (expressed as a decimal), multiplied by the
appropriate factor from the Prepayment Fee Factor Schedule, multiplied by the
principal amount of this loan being prepaid.
EXAMPLE OF PREPAYMENT FEE CALCULATION:
An amortizing loan with remaining principal of $250,000.00 is fully prepaid
with 24 months remaining until maturity. An Initial Reference Rate of 9.000% was
assigned to the loan at the time the loan was converted to a fixed rate. The
Final Reference Rate (as determined by current 24 month U.S. Treasury rate on
Page 119 of Telerate) is 7.500%. Rates therefore have dropped 1.500% since the
loan was converted to a fixed rate and a prepayment fee applies. A prepayment
fee factor of 1.3 is determined from Table 1 below, and the prepayment fee is
computed as follows:
Prepayment Fee = (0.09 - 0.075) x (1.3) x ($250,000.00) =
$4,875.00
(d) PREPAYMENT FEE FACTOR SCHEDULE
TABLE 1 - FULLY AMORTIZING LOANS
-5-
<PAGE>
Months Remaining to Maturity(*)
0 3 6 9 12 24 36 48 60 84 120 240 360
- ---------------------------------------------------------------
0 .21 .36 .52 .67 1.3 1.9 2.5 3.1 4.8 5.9 10.3 13.1
TABLE 2 - PARTIALLY AMORTIZING (BALLOON) LOANS
Months Remaining to Maturity(*)
0 3 6 9 12 24 36 48 60 84 120 240 360
- ---------------------------------------------------------------
0 .26 .49 .71 .94 1.8 2.7 3.4 4.2 5.6 7.4 11.6 14.0
(*) If the remaining fixed rate period is between any two time periods shown in
the above schedules, interpolate between the corresponding factors to the
closest month.
The holder of this Note is not required to actually reinvest the prepaid
principal in any U.S. Government Treasury Obligations, or otherwise prove its
actual loss, as a condition to receiving a prepayment fee as calculated above.
Maker agrees that this prepayment fee is the bargained-for consideration to the
holder for permitting prepayment and the above is not a liquidated damages
provision. This prepayment fee provision is to be interpreted in a manner that
would make it enforceable to the fullest extent permitted by law, with any
portion of the fee that is unenforceable being stricken or otherwise changed to
cause the fee, as revised, to be enforced.
7. LATE CHARGE
If any payment is not received by the holder on or before fifteen (15) days
after it is due, the holder, at its option, may assess a late charge equal to
four percent (4%) of each dollar not timely paid. If the payment is not made on
or before the fifteenth (15th) day of the first month following the month in
which it is due, an additional four percent (4%) will be charged. An additional
four percent (4%) will be charged for each successive month the payment remains
fifteen (15) days past due. This late charge shall apply individually to all
payments past due and there will be no daily PRO RATA adjustment. Such late
charge shall be due and payable on demand, and the holder, at its option, may
(a) refuse any late payment or any subsequent payment unless accompanied by such
late charge, (b) add such late charge to the principal balance of this Note, (c)
pay any late charge with advances from the loan proceeds, or (d) treat the
failure to pay such late charge as demanded as a default hereunder. If such late
charge is added to the principal balance of this Note, it shall bear interest at
the default rate.
-6-
<PAGE>
8. DEFAULT
Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment when due.
(b) Borrower breaks any promise Borrower has made to Lender, or
Borrower fails to perform promptly at the time and strictly in the manner
provided in this Note or any agreement related to this Note, or in any other
agreement or loan Borrower has with Lender.
(c) Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any material respect.
(d) Any partner dies or any of the partners or Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in
which lender has a lien or security interest. This includes a garnishment of any
of Borrower's accounts with Lender.
(f) Any of the events described in this Default section occurs with
respect to any guarantor of this Note.
(g) Lender in good faith deems itself insecure.
(h) The filing of a voluntary or involuntary petition in bankruptcy
by Shurgard Incorporated or the discontinuance of property management services
by Shurgard Incorporated or Shurgard Storage Centers, Inc.
(i) The breach by Borrower of any one of the following negative
financial covenants:
(1) Borrower shall not permit or allow the ratio of (x) annual
income minus the operating expenses of the Property (each calculated in
accordance with generally accepted accounting principles) ("Net Income") plus
depreciation, amortization and other noncash expenses for such period to (y)
principal and interest payments on the loan for each fiscal year to be less than
3.0:1.0.
(2) Borrower shall not permit or create any lien or encumbrance
on any of its assets other than liens or encumbrances of the type
-7-
<PAGE>
permitted under the Deed of Trust nor incur, assume, guaranty, or otherwise
become or remain directly or indirectly liable with respect to any debt of
Borrower other than debt currently due by Borrower at the time of closing of the
Loan or incurred in the ordinary course of its business.
(3) Total partnership debt repayments plus partnership
distributions shall not exceed Net Income plus depreciation and amortization for
any fiscal quarter.
(4) Borrower will not at any time permit the net worth of
Borrower to be less than the amount as of December 31, 1993, less depreciation
and amortization occurring thereafter.
(5) Borrower agrees that at all times the loan to value ratio of
the property secured by this Deed of Trust shall never exceed fifty percent
(50%) if at any time Lender determines in its reasonable discretion that the
loan to value ratio exceeds fifth percent (50%), Borrower shall immediately
pledge additional real estate collateral to Lender or prepay the loan to lower
the ratio to fifty percent (50%).
(6) Borrower shall at all times maintain a ratio of
Indebtedness, as defined in the Deed of Trust, to tangible net worth of no more
than 0.5:1.0.
9. GENERAL PROVISIONS
(a) In the event the undersigned does not pay interest when due, the
holder, at its option, may (a) charge interest on said interest at the same rate
as on principal; (b) add said interest to the principal balance where it will
become a part thereof, and bear interest at the same rate as the principal; or
(c) pay said interest with advances of the loan proceeds which advances shall
likewise bear interest at the same rate as the principal.
(b) If default be made in compliance with the provisions of any
instrument securing this Note or in the payment of any installment when due
under this Note, then, or at any time thereafter, at the option of the legal
holder of this Note, the whole of the principal sum then remaining unpaid,
together with all interest accrued thereon, shall become immediately due and
payable without notice, and any lien given to secure its payment may be
foreclosed. Such acceleration of the debt shall be deemed to be a prepayment,
and the undersigned shall also pay to the holder, in addition to such amounts,
an amount equal to the prepayment fee which would otherwise have been payable as
hereinbefore provided and the undersigned exercised the privilege to prepay this
Note in full. Failure of the holder to exercise this
-8-
<PAGE>
acceleration option, or any other right the holder may, in such event, be
entitled to, shall not constitute a waiver of the right to exercise such option
or any other right in the event of any subsequent default. If this Note is
placed in the hands of an attorney for collection or is collected through any
court of competent jurisdiction (including the Bankruptcy Court) or through
other legal proceedings, the undersigned promise to pay the reasonable
attorneys' fees of holder including allocated costs of in-house counsel, and all
other costs and expenses incurred by holder in connection with such collection,
whether or not suit is commenced and whether incurred at trial or any appeal
therefrom, and any costs, expenses or losses related to the fixed rate.
(c) The undersigned and all endorsers and all persons liable or to
become liable on this Note waive demand, protest and notice of demand, protest
and nonpayment and consent to any and all renewals and extensions in the time of
payment hereof and further agree that at any time the terms of payment hereof
may be modified or security released by agreement between the holder hereof and
any owner of the premises affected by the instrument securing this Note without
affecting the liability of any party to this Note or of any person liable or to
become liable with respect to any indebtedness evidenced hereby.
(d) In any action or proceeding to recover any sum herein provided
for, no defense of adequacy of security or that resort must first be had to
security or to any other person shall be asserted. All of the covenants,
provisions and conditions herein contained are made on behalf of, and shall
apply to and bind the respective heirs, devisees, personal representatives,
successors and assigns of the parties hereto, jointly and severally. Each and
every party signing or endorsing this Note binds himself as principal and not as
surety.
(e) The obligation evidenced by this Note is exclusively for
commercial or business purposes.
(f) The undersigned consents to the nonexclusive personal
jurisdiction of the courts of the state where the real property is located and
the federal courts located therein in any action relating to or arising out of
the enforcement or interpretation of this Note. The undersigned further agrees
not to assert in any such action that the proceeding has been brought in an
inconvenient forum.
(g) At the time this loan is closed, the undersigned agrees that the
interest rate and the amount of the monthly payment will be inserted above by
the holder of this Note.
[ ] If this box is checked, the holder is authorized to deduct
the payment(s) on this Note and any other sums secured by the Deed of Trust
securing
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<PAGE>
this Note on the fifth day of each month from Seafirst Deposit Account No.
________________ or such other Seafirst Deposit Account as may be authorized in
the future.
[ ] If this box is checked, the holder is authorized to deposit
the advance(s) on this loan, subject to the terms of the loan documents, to
Seafirst Deposit Account No. ________________.
10. CONDITIONS
This AMENDED AND RESTATED NOTE (the "Note") amends and restates that
certain promissory note in the maximum principal amount of $1,250,000.00 dated
as of October 1, 1993, executed by Borrower in favor of Lender, as amended by
that certain Loan Modification Agreement dated as of November 24, 1993, by and
between Lender and Borrower. This Note shall become effective on the date that
all of the following conditions precedent shall have been satisfied by Borrower
or waived in writing by Lender (the "Effective Date"):
(a) Borrower shall have paid to Lender a Commitment Fee of $12,500.00
and shall have reimbursed Lender for all expenses incurred in connection with
the negotiation and drafting of this Note including but not limited to legal
fees, appraisal fees, title insurance premiums and recording fees.
(b) Borrower shall have executed and delivered to Lender (1) this
Note, (2) an Amendment to Deed of Trust in the form of Exhibit A to this Note,
(3) partnership resolutions in form and substance satisfactory to Lender
authorizing Borrower to enter into and perform under this Note, (4) a
Certificate and Indemnity Agreement Regarding Compliance with Building Laws, (5)
a Certificate and Indemnity Agreement Regarding Hazardous Substances, (6) a UCC-
1 Financing Statement, and (7) a letter in form and substance satisfactory to
Lender regarding compliance with Americans With Disabilities Act.
(c) Lender shall have received endorsements (or irrevocable
commitments to issue endorsements) in form and substance satisfactory to Lender
from Chicago Title Insurance Company to that certain title insurance policy (the
"Policy") dated as of October 12, 1993 (Policy No. 654692-4) (i) insuring that
nothing contained herein or in the Amendment to Deed of Trust impairs the lien
or priority of the Deed of Trust, and (ii) insuring that Special Exception
Number 9 and Special Exception Number 11 have been deleted from the Policy.
(d) Lender shall have received evidence satisfactory to Lender that
all insurance required by the Deed of Trust is in effect.
-10-
<PAGE>
11. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants as follows:
(a) The making and performance of this Note is within the Borrower's
partnership powers, has been duly authorized by all necessary partnership
action, has received all necessary governmental approvals, and does not
contravene any law or any contractual restriction binding on the Borrower or its
partners.
(b) This Note constitutes the valid and binding obligation of the
Borrower enforceable in accordance with its terms.
(c) Each of the representations and warranties contained in this Note
or any related document is true and correct in each case as if made on and as of
the Effective Date of this Note, and Borrower expressly agrees that it shall be
an additional event constituting an Event of Default under the Deed of Trust if
any representation or warranty made hereunder shall prove to have been incorrect
in any material respect when made.
(d) No Event of Default and no event which, with the giving of notice
or the lapse of time or both would constitute an Event of Default, shall have
occurred and be continuing or will have occurred as a result of the execution of
this Note.
12. SECURITY
This Note is secured by that certain Deed of Trust dated October 1, 1993,
executed by Borrower in favor of RAINIER CREDIT COMPANY for the benefit of
Lender, recorded under Recording No. 93-0689321, in the real property records of
Orange County, State of California, on October 12, 1993.
13. CONCERNING ORAL AGREEMENTS
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
14. NO FURTHER AMENDMENT
Except as expressly modified hereby, the Note and all other documents executed
in connection therewith shall remain unmodified and in full force and effect and
the parties hereby ratify their respective obligations thereunder.
-11-
<PAGE>
Executed as of the date first above written.
BORROWER: IDS/SHURGARD INCOME GROWTH
PARTNERS L.P. II,
a Washington limited partnership
By: SHURGARD ASSOCIATES LP II, a Washington limited
partnership, its sole general partner
By: CHARLES K. BARBO
-------------------------------------------
Charles K. Barbo
Its general partner
By: ARTHUR W. BUERK
-------------------------------------------
Arthur W. Buerk
Its general partner
By: SHURGARD GENERAL PARTNER,
INC., a Washington corporation, its
general partner
By CHARLES K. BARBO
-------------------------------------------
Charles K. Barbo
Its Chairman
-12-
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS
REVENUE: The Partnership's rental revenue rose $271,000 and $420,000 in
1995 and 1994, respectively. These increases resulted primarily from the rise
in the average rental rate per square foot from $7.78 in 1993 to $8.08 in 1994
to $8.59 in 1995 as well as storage center expansions. Additionally, earnings
increased $120,000 in 1995 and $246,000 in 1994. The average occupancy for all
of the Partnership's storage centers was 87%, 90%, and 91% at December 31, 1995,
1994 and 1993, respectively. Although the average occupancy for the Partnership
decreased three percentage points during 1995, total revenues increased as a
result of the Partnership seeking to maximize revenue by adjusting rents to
match demand. Store managers evaluate their store's rental rates, based on unit
demand, unit availability and competitors' rental rates. The Partnership trains
its store managers in revenue optimization and empowers them to adjust marginal
rental rates based on their "on the ground" analysis of demand and availability
at their particular store. In addition, the use of month-to-month leases,
combined with customer turnover, allows rents to be quickly adjusted to match
current demand in a flexible manner.
EXPENSES: Operating expenses increased $68,000 in 1995 after an $89,000
increase in 1994. Operating expenses for 1995 rose primarily due to 1)
increased hours worked by store managers, 2) higher postage and supply costs, 3)
increased payout of tenant claims and foreclosure expenses and 4) the increase
in utility expense at the Chesapeake storage center due to the new expansion.
Increases in 1994 were primarily attributable to repair and maintenance costs
for the air conditioning unit at T.C. Jester and higher salary cost throughout
the Partnership's storage centers.
Real estate expense has decreased each year from 1993 to 1995. The slight
decrease in 1995 was due to a tax refund received in 1995 as a result of the
successful real estate tax appeal of the Sterling Heights storage center's 1994
assessed value. The decrease in real estate taxes in 1994 was accredited to
winning an appeal for Kennydale's 1993 and 1994 assessed value. The refund due
for 1993 taxes was offset against the taxes due in 1994. The Partnership does
not expect to be able to continue to decrease real estate taxes in the future.
Additionally, interest expense rose $16,000 and $72,000 in 1995 and 1994,
respectively. The increase in 1995 was due to additional borrowings on the
Partnership's line of credit to fund the Chesapeake expansion as well as the
slight rise in interest rates from 8.125% at December 31, 1994 to 8.5% at
December 31, 1995 on the commercial bank note totaling $1,200,000. The increase
in 1994 was due to the Partnership borrowing on their line of credit to finance
the expansion of Newport News North which was subsequently refinanced.
Administrative expenses rose $29,000 in 1995 after a slight increase in
1994. The 1995 increase is primarily due to the increase in printing costs for
the Partnership's quarterly and annual reports.
LIQUIDITY AND CAPITAL RESOURCES
CASH FROM OPERATIONS: Cash from operations increased by $460,800 from 1993
to 1994 and $289,500 from 1994 to 1995, reflecting the increase in earnings.
These fluctuations reflect changes in earnings adjusted by the timing of certain
expense payments and payments due to affiliates. Management believes that cash
balances and cash flow from operations will be adequate to support the future
operating needs of the Partnership.
INVESTING ACTIVITIES: During 1994 and 1995 the Partnership invested
approximately $1,200,000 to expand the Chesapeake storage center. This project
entailed the construction of two, one-story buildings adding approximately
26,000 square feet of storage space, as well as the addition of 2,400 square
feet of RV
<PAGE>
parking. The new expansion opened the beginning of April 1995 and is currently
76% occupied. The expenditures during 1994 and 1995 were primarily funded from
operating cash flow and cash reserves; the remaining costs were funded from the
line of credit. The expansion of the Partnership's existing facilities provide
an opportunity to increase revenue without a significant increase in operating
costs. In 1993 the Partnership completed the expansion at Newport News North at
a cost of $763,000. This expansion added 26,000 square feet to the existing
33,000 square feet of storage. The additional space includes both climate
controlled and non-climate controlled units.
Additionally, investments in the remaining storage centers have been
$69,000, $51,000, and $47,000 in 1995, 1994, and 1993, respectively. In 1995,
investments included pavement work at the Sterling Heights and Bellefield
storage centers as well as security upgrades at the Orange storage center. The
majority of improvement in 1994 were security upgrades at the Orange and
Sterling Heights storage centers. During 1993 improvements included new
pavement at the Bellefield and Sterling Heights storage centers as well as new
doors installed at the Orange storage center. Planned improvements for 1996
total approximately $91,000 and are expected to be funded from operations of the
Partnership.
FINANCING ACTIVITIES: On May 1, 1995, the Partnership obtained an $850,000
non-revolving line of credit with interest rate of prime plus one half percent,
maturing May 1, 1997. During 1995, the Partnership drew $470,000 on the line of
credit in order to fund the Chesapeake expansion. The Partnership intends to
pay off or refinance this line of credit from operating cash flow over the next
two years. Additionally, in 1994, the Partnership converted its $1,250,000 line
of credit into a seven year note which will mature in March of 2001.
DISTRIBUTIONS TO PARTNERS: Annualized distribution rates were 6.5%, 6.31%
and 6.25% for 1995, 1994 and 1993, respectively. Distributions are expected to
continue on a quarterly basis and will reflect the Partnership's future
operating results and cash position.
POTENTIAL TRANSACTION: The Partnership is currently conducting
discussions with an affiliated party regarding the possible acquisition of an
interest in, or a merger with, the Partnership. Whether and when the
Partnership will reach agreement regarding this potential acquisition will
depend on a number of factors. There can be no assurance that any agreement
will be reached, or if reached, that the transactions contemplated thereby
will be consummated.
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
At or For Year Ended December 31,
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Rental Revenue $ 4,308,603 $ 4,037,720 $ 3,617,849 $ 3,239,555 $ 2,277,377
- ------------------------------------------------------------------------------------------------------
Interest Income $11,044 $19,765 $3,549 $7,191 $ 104,082
- ------------------------------------------------------------------------------------------------------
Earnings $ 1,460,799 $ 1,340,145 $ 1,094,475 $ 967,598 $ 1,133,764
- ------------------------------------------------------------------------------------------------------
Earnings per Unit of
Limited
- ------------------------------------------------------------------------------------------------------
Partnership Interest $ 12.06 $ 11.06 $ 9.03 $ 7.99 $ 9.36
- ------------------------------------------------------------------------------------------------------
Distributions to
- ------------------------------------------------------------------------------------------------------
Limited Partners $ 1,870,536 $ 1,816,578 $ 1,798,591 $ 1,798,591 $ 1,798,591
- ------------------------------------------------------------------------------------------------------
Distributions per Unit of
- ------------------------------------------------------------------------------------------------------
Limited Partnership
- ------------------------------------------------------------------------------------------------------
Interest $16.25 $15.78 $15.62 $15.62 $15.62
- ------------------------------------------------------------------------------------------------------
Total Assets $25,685,359 $25,866,021 $26,321,921 $26,123,867 $26,371,546
- ------------------------------------------------------------------------------------------------------
Total Debt $ 3,337,661 $ 2,938,331 $ 3,005,313 $ 1,793,868 $ 1,240,000
- ------------------------------------------------------------------------------------------------------
Partners' Equity $21,958,768 $22,466,953 $23,038,996 $23,837,776 $24,763,433
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets:
- -------------------------------------------------------------------------------
Cash and cash equivalents $ 455,167 $ 384,867
- -------------------------------------------------------------------------------
Storage centers, net 24,965,503 25,126,512
- -------------------------------------------------------------------------------
Other assets 155,712 174,768
- -------------------------------------------------------------------------------
Amortizable assets, less accumulated
- -------------------------------------------------------------------------------
amortization of $350,718 and $279,821 108,977 179,874
- -------------------------------------------------------------------------------
Total Assets $25,685,359 $25,866,021
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Liabilities and partners' equity (deficit):
- -------------------------------------------------------------------------------
Liabilities:
- -------------------------------------------------------------------------------
Accounts payable and other accrued expenses $ 256,049 $ 169,033
- -------------------------------------------------------------------------------
Construction payable 173,572
- -------------------------------------------------------------------------------
Unearned rent and tenant deposits 132,881 118,132
- -------------------------------------------------------------------------------
Line of credit 470,000
- -------------------------------------------------------------------------------
Notes payable 2,867,661 2,938,331
- -------------------------------------------------------------------------------
Total Liabilities 3,726,591 3,399,068
- -------------------------------------------------------------------------------
Partners' equity (deficit):
- -------------------------------------------------------------------------------
Limited partners 22,140,440 22,623,217
- -------------------------------------------------------------------------------
General partner (181,672) (156,264)
- -------------------------------------------------------------------------------
Total Partners' Equity 21,958,768 22,466,953
- -------------------------------------------------------------------------------
Total Liabilities and Partners'
Equity $25,685,359 $25,866,021
- -------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
- ---------------------------------------------------------------------------------------------------------------
Rental $4,308,603 $4,037,720 $3,617,849
- ---------------------------------------------------------------------------------------------------------------
Interest income 11,044 19,765 3,549
- ---------------------------------------------------------------------------------------------------------------
Total Revenue 4,319,647 4,057,485 3,621,398
- ---------------------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------------------
Operating 943,532 875,926 786,459
- ---------------------------------------------------------------------------------------------------------------
Property management fees 258,253 242,259 217,121
- ---------------------------------------------------------------------------------------------------------------
Depreciation 848,364 832,554 814,883
- ---------------------------------------------------------------------------------------------------------------
Real estate taxes 324,450 327,337 337,741
- ---------------------------------------------------------------------------------------------------------------
Interest 254,026 237,962 166,036
- ---------------------------------------------------------------------------------------------------------------
Amortization 70,897 70,835 78,580
- ---------------------------------------------------------------------------------------------------------------
Administrative 159,326 130,467 126,103
- ---------------------------------------------------------------------------------------------------------------
Total Expenses 2,858,848 2,717,340 2,526,923
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
EARNINGS $1,460,799 $1,340,145 $1,094,475
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST $ 12.06 $ 11.06 $ 9.03
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS PER UNIT OF LIMITED PARTNERSHIP INTEREST $ 16.25 $ 15.78 $ 15.62
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Limited Partners General Partner Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1993 $23,925,497 $ (87,721) $23,837,776
- ---------------------------------------------------------------------------------------------------------------
Distributions (1,798,591) (94,664) (1,893,255)
- ---------------------------------------------------------------------------------------------------------------
Earnings 1,039,751 54,724 1,094,475
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 23,166,657 (127,661) 23,038,996
- ---------------------------------------------------------------------------------------------------------------
Distributions (1,816,578) (95,610) (1,912,188)
- ---------------------------------------------------------------------------------------------------------------
Earnings 1,273,138 67,007 1,340,145
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 22,623,217 (156,264) 22,466,953
- ---------------------------------------------------------------------------------------------------------------
Distributions (1,870,536) (98,448) (1,968,984)
- ---------------------------------------------------------------------------------------------------------------
Earnings 1,387,759 73,040 1,460,799
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $22,140,440 $(181,672) $21,958,768
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
- ---------------------------------------------------------------------------------------------------------------------
Earnings $ 1,460,799 $ 1,340,145 $ 1,094,475
- ---------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile earnings
- ---------------------------------------------------------------------------------------------------------------------
to net cash provided by operating activities:
- ---------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 919,261 903,389 893,463
- ---------------------------------------------------------------------------------------------------------------------
Changes in operating accounts:
- ---------------------------------------------------------------------------------------------------------------------
Other assets 19,056 (41,692) (22,696)
- ---------------------------------------------------------------------------------------------------------------------
Accounts payable and other accrued expenses 87,016 (1,861) (212,815)
- ---------------------------------------------------------------------------------------------------------------------
Unearned rent and tenant deposits 14,749 11,414 (1,796)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,500,881 2,211,395 1,750,631
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
- ---------------------------------------------------------------------------------------------------------------------
Construction of and improvements to storage centers (860,927) (430,410) (809,619)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
- ---------------------------------------------------------------------------------------------------------------------
Proceeds from (payments on) line of credit 470,000 (1,250,000) 1,250,000
- ---------------------------------------------------------------------------------------------------------------------
Payment of loan costs (38,021) (2,671)
- ---------------------------------------------------------------------------------------------------------------------
Payments on notes payable (70,670) (66,982) (38,555)
- ---------------------------------------------------------------------------------------------------------------------
Proceeds from notes payable 1,250,000
- ---------------------------------------------------------------------------------------------------------------------
Distributions to partners (1,968,984) (1,912,188) (1,893,255)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (1,569,654) (2,017,191) (684,481)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
- ---------------------------------------------------------------------------------------------------------------------
cash equivalents 70,300 (236,206) 256,531
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents
- ---------------------------------------------------------------------------------------------------------------------
at beginning of year 384,867 621,073 364,542
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 455,167 $ 384,867 $ 621,073
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- ---------------------------------------------------------------------------------------------------------------------
Cash paid during year for interest $ 254,026 $ 237,962 $ 166,036
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
- ---------------------------------------------------------------------------------------------------------------------
Liabilities incurred in connection with
- ---------------------------------------------------------------------------------------------------------------------
the improvement and construction
- ---------------------------------------------------------------------------------------------------------------------
of storage centers $ -- $ 173,572 $ --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL: IDS/Shurgard Income Growth Partners L.P. II (the Partnership) was
organized under the laws of the State of Washington on November 15, 1988, to
serve as a vehicle for investments in and ownership of , a professionally
managed, real estate portfolio consisting of self storage properties
which provide month-to-month leases for business and personal use. The
Partnership will terminate December 31, 2030, unless terminated at an earlier
date. The general partner is Shurgard Associates L.P. II, a Washington limited
partnership.
As of December 31, 1995, there were approximately 4,200 limited partners in
the Partnership. There were 115,100 units of limited partnership interest
outstanding at a contribution of $250 per unit.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenue and expenses during the
reporting period. Actual results can differ from those estimates.
CASH EQUIVALENTS: Cash equivalents consist of money market instruments
with original maturities of 90 days or less.
STORAGE CENTERS: Storage centers, including land, buildings and equipment,
are recorded at cost. Depreciation on buildings and equipment is recorded on a
straight-line basis over their estimated useful lives which range from three to
thirty years.
AMORTIZABLE ASSETS: Amortizable assets, consisting of loan costs and non-
compete covenants, are amortized over their expected useful lives of three to
eight years.
RENTAL REVENUE: Rental revenue is recognized as earned under accrual
accounting principles.
TAXES ON INCOME: The financial statements do not reflect a provision for
Federal income taxes because such taxes are the responsibility of the individual
partners.
LITIGATION: The Partnership has a policy of accruing for probable
losses, which if any, could be material to the future financial position or
results of operations. As of December 31, 1995 there are currently no known
probable losses, therefore, no such accruals have been made.
EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST: Earnings per unit of
limited partnership interest is based on earnings allocated to the limited
partners divided by the number of limited partnership units outstanding during
the year (115,110 units for each of the three years ended December 31, 1995).
DISTRIBUTIONS PER UNIT OF LIMITED PARTNERSHIP INTEREST: Distributions per
unit of limited partnership interest is based on the total amount distributed to
limited partners divided by the number of limited partnership units outstanding
during the year (115,110 units for each of the three years ended December 31,
1995).
VALUATION OF LONG LIVED ASSETS: The Partnership, using its best estimates
based on reasonable and supportable assumptions and projections, reviews storage
centers and other assets for impairment whenever events or changes in
circumstances have indicated that the carrying amounts of its assets might not
be recoverable. Impaired assets are reported at the lower of cost or fair
value. At December 31, 1995, no assets had been written down.
<PAGE>
NOTE B - STORAGE CENTERS
Storage centers consist of the following :
<TABLE>
<CAPTION>
December 31,
1995 1994
----------------------------------------------------------------
<S> <C> <C>
Land $ 6,014,514 $ 5,848,181
----------------------------------------------------------------
Buildings 22,762,245 22,381,990
----------------------------------------------------------------
Equipment 872,980 732,213
----------------------------------------------------------------
29,649,739 28,962,384
----------------------------------------------------------------
Less accumulated depreciation (4,684,236) (3,835,872)
----------------------------------------------------------------
$24,965,503 $25,126,512
----------------------------------------------------------------
</TABLE>
Construction in progress was $625,437 in 1994 and is included in
Buildings.
NOTE C - TRANSACTIONS WITH AFFILIATES
In connection with the management of both the storage centers and the
Partnership, the Partnership has paid or accrued management expenses,
reimbursements, and a monthly property management fee equal to 6% of the
properties gross revenue to Shurgard Storage Centers, Inc., an affiliate of
the general partner. On March 24, 1995 the Management Company of Shurgard
Incorporated merged with Shurgard Storage Centers, Inc. Prior to the merger
date such fees were paid to the Management Company of Shurgard Incorporated.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C>
Partnership management expenses
----------------------------------------------------------------
and reimbursement at cost $ 54,700 $ 64,800 $ 83,700
----------------------------------------------------------------
Property management fees 258,253 242,259 217,121
----------------------------------------------------------------
</TABLE>
NOTE D - NOTE PAYABLE
<TABLE>
<CAPTION>
December 31,
1995 1994
----------------------------------------------------------------
<S> <C> <C>
Note payable to a commercial
----------------------------------------------------------------
bank. Secured by real estate
----------------------------------------------------------------
and payable in monthly
----------------------------------------------------------------
installments of $15,056,
----------------------------------------------------------------
including principal and
----------------------------------------------------------------
interest at 8%, due October
----------------------------------------------------------------
1999. The note reprices in
----------------------------------------------------------------
September 1997 and can be
----------------------------------------------------------------
fixed for various periods at
----------------------------------------------------------------
the Partnership's option. $1,668,337 $1,713,603
----------------------------------------------------------------
Note payable to a commercial
----------------------------------------------------------------
bank. Secured by real estate
----------------------------------------------------------------
and payable in monthly
----------------------------------------------------------------
installments of $10,837,
----------------------------------------------------------------
including principal and interest
----------------------------------------------------------------
at 8.25%, due March 2001. The
----------------------------------------------------------------
note reprices in September 1996
----------------------------------------------------------------
and can be fixed for various
----------------------------------------------------------------
periods at the Partnership's
----------------------------------------------------------------
option. 1,199,324 1,224,728
----------------------------------------------------------------
$2,867,661 $2,938,331
----------------------------------------------------------------
</TABLE>
<PAGE>
Based on the borrowing rates currently available to the Partnership
for bank loans with similar terms and average maturities, the fair value of the
fixed rate long-term debt which matures October, 1999 is estimated to be
$1,765,000. The note maturing March 2001 reprices to market every six months,
accordingly, the recorded value approximates fair value.
The approximate maturities of principal on these notes payable over the
next five years are as follows:
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------------------------
1996 $ 78,207
----------------------------------------------------------------
1997 84,856
----------------------------------------------------------------
1998 92,071
----------------------------------------------------------------
1999 99,899
----------------------------------------------------------------
2000 108,395
----------------------------------------------------------------
thereafter 2,404,233
----------------------------------------------------------------
$2,867,661
----------------------------------------------------------------
</TABLE>
On May 1, 1995 the Partnership obtained an $850,000 non-revolving line of
credit with interest rate of prime plus one half percent (9% at December 31,
1995), maturing May 1, 1997. During the year, the Partnership drew $470,000 on
the line of credit in order to fund the Chesapeake expansion.
NOTE E - LEASE
The Partnership leases retail space at the Kennydale storage center to a
single tenant under a noncancellable operating lease which expires October 31,
2003. The lease is renewable at current market rates at that time. Future
minimum lease receipts are as follows:
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------------------------
1996 $ 131,818
----------------------------------------------------------------
1997 136,948
----------------------------------------------------------------
1998 137,938
----------------------------------------------------------------
1999 126,084
----------------------------------------------------------------
2000 126,084
----------------------------------------------------------------
2001 to 2003 378,252
----------------------------------------------------------------
$1,037,124
----------------------------------------------------------------
</TABLE>
Independent Auditors' Report
General Partners and Limited Partners
IDS/Shurgard Income Growth Partners L.P. II
Seattle, Washington
We have audited the accompanying balance sheets of IDS/Shurgard Income
Growth Partners L.P. II as of December 31, 1995 and 1994, and the related
statements of earnings, partners' equity (deficit), and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Partnership as of December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Seattle, Washington
March 1, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 455,167
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29,649,739
<DEPRECIATION> 4,684,236
<TOTAL-ASSETS> 25,685,359
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21,958,768
<TOTAL-LIABILITY-AND-EQUITY> 25,685,359
<SALES> 0
<TOTAL-REVENUES> 4,319,647
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,604,822
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254,026
<INCOME-PRETAX> 1,460,799
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,460,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,460,799
<EPS-PRIMARY> 12.06
<EPS-DILUTED> 12.06
</TABLE>
