<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15d
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER: 001-13915
------------------------
UNITED INVESTORS REALTY TRUST
(Exact Name of Registrant as Specified in Its Declaration of Trust)
TEXAS 76-0265701
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
5847 SAN FELIPE, SUITE 850, 77057
HOUSTON, TEXAS (zip code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (713) 781-2860
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ----------------------------------- -----------------------------------------
<S> <C>
Common Shares of Beneficial NASDAQ Stock Market
Interest, no par value Pacific Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
------------------------
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 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]
The aggregate market value of the common shares of beneficial interest held
by non-affiliates was approximately $51,550,000 based upon the closing price on
the NASDAQ Stock Market for such shares of $6.00 on March 15, 2000.
As of March 15, 2000, the number of common shares of beneficial interest
outstanding was 9,043,892.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
UNITED INVESTORS REALTY TRUST
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>
ITEM NO. PAGE NO.
- --------- --------
<C> <C>
PART I
1. Business 1
2. Properties 8
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
PART II
5. Market for Registrant's Common Equity and Related
Shareholder Matters 10
6. Selected Financial Data 11
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
7A. Quantitative and Qualitative Disclosure
about Market Risk 15
8. Financial Statements and Supplementary Data 15
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 16
PART III
10. Directors and Executive Officers of the Company 16
11. Executive Compensation 16
12. Security Ownership of Certain Beneficial Owners
and Management 16
13. Certain Relationships and Related Transactions 16
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 16
SIGNATURES 20
</TABLE>
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this report on Form 10-K incorporates by reference information
from the Registrant's definitive proxy statement relating to the Registrant's
2000 annual meeting to be filed with the Securities and Exchange Commission
within 120 days of the close of the Registrant's fiscal year.
FORWARD LOOKING STATEMENTS
The information contained and incorporated by reference in this Form 10-K
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1993, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "1934 Act"). A number of
factors could cause results to differ materially from those anticipated by such
forward-looking statements. These factors include, but are not limited to, the
competitive environment in the retail industry in general and in the Company's
specific market areas, changes in prevailing interest rates and the availability
of financing, inflation, economic conditions in general and in the Company's
specific market areas, labor disturbances, demands placed on management by the
recent substantial increase in number of properties owned by the Company,
changes in the Company's acquisition plans, the timing of and anticipated
proceeds from the sale of assets, and certain other factors described under
"Business" in Item 1 below. In addition, such forward-looking statements are
necessarily dependent upon assumptions, estimates and data that may be incorrect
or imprecise. Accordingly, any forward-looking statements included or
incorporated by reference in this Form 10-K do not purport to be predictions of
future events or circumstances and may not be realized. Forward-looking
statements can be identified by, among other things, the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should," "seeks,"
"pro forma," or "anticipates," or the negatives thereof, or other variations
thereon or comparable terminology, or by discussions of strategies or
intentions.
PART I
ITEM 1. BUSINESS
UIRT is a real estate investment trust formed under the Texas REIT Act. We
elected to be taxed as a REIT under the Internal Revenue Code for our taxable
year ended December 31, 1989 and for each subsequent taxable year. Our principal
executive offices are located at 5847 San Felipe, Suite 850, Houston, Texas
77057, and our telephone number is (713) 781-2860, our fax number is (713)
781-3846, and our internet address is www.UIRT.com.
We acquire, develop, and operate neighborhood and community shopping
centers in the "Sunbelt" region of the United States. As of December 31, 1999,
we owned controlling interests in 28 shopping centers and a 50% non-controlling
interest in a limited partnership that owns one project under development. The
28 operating shopping centers comprised approximately 3,100,000 square feet of
gross leaseable area ("GLA"), of which approximately 700,000 square feet was
owned by grocery store operators and other third parties.
Of our 28 properties, 23 are 100% owned directly or indirectly. Two of the
properties are owned through limited partnerships in which we hold at least 96%
of the partnership interests. Three of the properties are owned pursuant to
capital lease arrangements that have transferred to us virtually all risks and
rewards of ownership. As noted, we also own a 50% non-controlling interest in a
limited partnership that owns one property under development at December 31,
1999.
Of the 28 neighborhood and community shopping centers owned as of December
31, 1999, 19 are located in Texas (including eight in the Houston area and six
in the Dallas/Ft. Worth area), four are located in Florida, three are located in
Arizona, and two are located in Tennessee. The properties are located in areas
we believe provide busy working families with the opportunity to do most of
their shopping between work and home. The properties range in size from
approximately 16,000 square feet to approximately 316,000 square feet, and are
anchored primarily by national and regional supermarkets, drug stores and
retailers that offer everyday necessities to their neighborhood communities.
Approximately 95% (based on GLA) of the existing leases at the properties are
triple net. The tenants under such leases are required to pay base rent and
their respective shares of the common area maintenance charges, real estate
taxes and insurance costs incurred annually at their respective properties.
UIRT is managed for a fee by the Investment Manager, FCA Corp. Robert W.
Scharar, Chairman of the Board, President, and Chief Executive Officer of UIRT,
is the principal shareholder of the Investment Manager's parent corporation. The
Investment Manager originally sponsored the organization of UIRT in 1989 as a
benefit to a number of financial planning clients who desired to include real
estate properties in their investment portfolios. In return for the fee paid by
UIRT, the Investment Manager currently provides certain administrative,
accounting, financial, and operating personnel to UIRT. In addition, UIRT also
reimburses the Investment Manager for the costs of other personnel, essentially
involved in property operations, and their related occupancy costs. The
Investment Manager has dedicated to the administration of UIRT, on a priority
basis, the services of Randall D. Keith, R. Steven Hamner, and Joseph W. Karp
who serve as our Vice President-Chief Operating Officer, Vice President-Chief
Financial Officer and Vice President-Asset Management and Leasing, respectively.
1
<PAGE>
BUSINESS STRATEGIES
UIRT operated from 1989 until 1998 as a private REIT. On March 13, 1998, we
completed an initial public offering of 7,600,000 common shares of beneficial
interest. In April 1998, we issued another 1,000,000 common shares of beneficial
interest pursuant to the exercise of the underwriters' overallotment options.
Prior to the IPO, we had outstanding approximately 915,000 shares.
In 1998 and 1999, our primary growth strategy was the acquisition of
operating shopping centers. We used proceeds from the IPO and our revolving line
of credit and assumed existing mortgage loans in order to make these
acquisitions. As discussed below, however, we believe current market and
economic conditions require us to modify this strategy.
Our common shares, and the common shares of most equity REITs, have
recently traded at prices that we believe reflect a high return expectation by
shareholders. In addition, interest rates on mortgage loans have increased
significantly during the last 12 months. Accordingly, we believe that cash flows
from properties with characteristics we desire may not provide an adequate
return on invested capital, and therefore, we do not plan to make substantial
property acquisitions while such conditions exist.
Our primary strategies for the foreseeable future are (1) increase the
overall portfolio occupancy from its current 89% to approximately 95%, which we
believe current market conditions warrant, (2) develop, on a highly selective
basis, new properties that we anticipate will provide higher than normal
returns, (3) invest new capital in certain of our existing centers in order to
take advantage of redevelopment opportunities that we believe may also provide
higher than normal returns, (4) capital repositioning through selective sales of
properties that may no longer meet our investment criteria, and maximizing our
financing alternatives. Following is a brief summary of each of these
strategies.
Leasing Strategy
We believe in an aggressive leasing and property management strategy
conducted by professionals with extensive experience, knowledge of local markets
and an established track record with national, regional and local retailers. Our
leasing and property management activities are conducted by our managers and
representatives as well as by local leasing and property managers, all of whom
are supervised by our officers. We believe that the expertise and relationships
developed by these professional leasing and management teams enhance our ability
to retain existing tenants as well as attract national and regional retailers to
our properties.
Our overall property management and leasing strategy is designed to permit
us to realize opportunities for increased rental revenue and cash flow growth.
Each property has a specific management and leasing program which takes into
account the location, community needs, tenant mix and other factors affecting
such property.
During 1999, three of our larger tenants defaulted on their lease
obligations and vacated an aggregate of approximately 100,000 square feet of
GLA. Another major tenant vacated its 28,000 square foot space upon the
expiration of its lease term in January 2000. None of these spaces have been
released, and accordingly, our occupancy level is approximately 89%, or 5% lower
than occupancy at the beginning of 1999. We anticipate leasing some or all of
this space during 2000, which if we are successful, we expect will significantly
increase our revenue and net income.
Development Strategy
We also intend to develop a limited number of new properties. We believe
that development properties, if well-located and appropriately pre-leased, can
provide better than average returns. Because the risk inherent in such
development is also potentially greater than in acquisition of mature
properties, we intend to limit our exposure to such development activities, at
any one time, to approximately 20% of our GLA.
When we identify a development opportunity, we generally enter into an
arrangement with a local developer whereby we are not compelled to take title to
or fund the acquisition of the property unless certain conditions are met. Such
conditions generally include: binding leases with anchor tenants must be
executed; the land entitlement process must be substantially complete; land
acquisition and development costs must be identified; and financing sources and
costs must be circumscribed.
2
<PAGE>
In November 1999, a wholly owned subsidiary of UIRT and an affiliate of the
Stuart S. Golding Co. formed a partnership to develop a new shopping center in
the Tampa, Florida area. We own a 50% interest (through our wholly owned
subsidiary) in the partnership. The shopping center will be anchored by a 48,000
square foot Kash N Karry grocery store, and is expected to be completed during
the fourth quarter of 2000.
During 1998, we entered into three development projects:
- We agreed to purchase two neighborhood shopping centers under
development in Houston from a local developer. Both centers are
anchored by Albertson's, which owns its own space within the centers.
The remaining space was substantially leased to tenants acceptable to
us prior to our acquisition of the property. We acquired one of these
centers in January 1999 and the other in August 1999.
- In Tampa, Florida, the Stuart S. Golding Co. developed a shopping
center for us that is anchored by a Kash N Karry grocery store (whose
lease is guaranteed by its parent company, Food Lion, Inc.). This
property was completed in June 1999 and is currently 100% leased.
Redevelopment Strategy
Redevelopment activities have been an integral part of our business
strategy and will continue to be an important component of our strategy in the
future. Redevelopment activities generally involve physically upgrading an
existing retail facility in order to meet and, in some instances, help set
current industry standards as well as to accommodate the expansion of existing
tenants and/or the placement of additional tenants.
During 1999, we started the redevelopment of McMinn Plaza in Athens,
Tennessee. Although this negatively impacts net income and cash flow from
operations during the development period, we believe it will enhance our longer
term prospects. The project includes the construction of a new 60,000 square
foot building that we have leased to a regional grocery company for an initial
term of 20 years. We expect to complete this project during the fourth quarter
of 2000. We are considering the possibility of additional redevelopment
projects. Whether we undertake these projects will depend on the availability
and cost of necessary capital, the complexity of the project, and our assessment
of the potential returns.
Capital Repositioning Strategy
Some of our properties may not offer the opportunities we are presently
seeking, and yet remain attractive to investors with different investment
criteria. If we are able to negotiate appropriate sales prices we may sell
certain properties. Depending upon conditions existing after any such sales, we
may use sales proceeds to reduce our debt, repurchase shares pursuant to our
previously announced share repurchase program, and invest in new and existing
properties as discussed above.
At December 31, 1999, we had identified five properties that may no longer
have the investment characteristics currently attractive to us. In 1999, these
properties accounted for approximately $4,100,000 in revenue and had a carrying
value of approximately $25,000,000 at December 31, 1999.
FINANCING STRATEGIES
Successful implementation of our strategies will require significant new
capital. Releasing vacant space typically requires high expenditures for
build-out allowances, leasing commissions, and other tenant inducements.
Development and redevelopment projects are substantially more costly than
releasing and require correspondingly greater capital. In addition, we presently
intend to continue making quarterly distributions of $0.215 per common share.
Accordingly, we must raise new equity capital, increase our debt levels, and/or
sell properties in order to supply our capital needs.
We intend to finance our acquisitions, redevelopments and developments and
make our quarterly distributions to shareholders with what we consider to be the
most appropriate sources of capital, which may include cash flows from
operations, the issuance of equity securities (including preferred shares,
rights, or warrants), the issuance of downREIT units and interests in privately
financed joint ventures, bank and other institutional borrowings (secured and
unsecured), the issuance of debt securities and proceeds from the sale of
properties. As previously described, recent market conditions have resulted
generally in a high cost of public equity capital, and we do not presently have
plans to issue new public equity capital.
We use two types of debt financing, long-term fixed rate mortgages and a
secured revolving line of credit with a variable interest rate (see Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations). At December 31, 1999, we had several unencumbered properties we
could use to secure additional mortgage loans and over $8 million available
under the credit line. However, current covenants in our revolving credit
agreement may preclude us from utilizing all of our borrowing capacity.
3
<PAGE>
One of the credit agreement covenants limits total company debt to not more
than 50% of a formula-based calculation of total asset value. As of December 31,
1999, our total debt represented approximately 55% of such value. We have begun
discussions with our lender concerning the modification of the loan terms to
increase this limit to 60% and cure the default. We may add one or more
unencumbered proerties to our lender's pool of collateral properties to
facilitate the modification. In the event the lender is unwilling to modify the
agreement, the lender could accelerate the debt, which is scheduled to mature in
August 2001.
The lender has indicated the willingness to modify the covenant and
accordingly, management believes the Company will be able to successfully modify
the credit agreement. In the event the Company is unsuccessful, management
believes the credit agreement can be refinanced with other lenders, although at
higher interest rates.
EMPLOYEES
At December 31, 1999, we had no employees. The Investment Manager had
approximately 16 employees who were utilized on an essentially full time basis
for UIRT business.
RISK FACTORS
An investment in the Company involves various investment risks. Prospective
investors should carefully consider the following factors together with the
information provided elsewhere in this Annual Report in evaluating an investment
in the Company.
High Distribution Payout Ratio
Since the IPO, our annual distribution per common share has been $0.86.
This distribution amount represents approximately 94% of our Funds Available for
Distribution in 1999. Funds Available for Distribution ("FAD") is FFO reduced by
capital expenditures required to maintain the properties (roof and parking lot
repairs and replacements, equipment replacements, major maintenance, etc.) and
leasing costs (broker commissions, tenant improvement costs, and other
inducements), along with certain other adjustments.
We believe that FAD per share in 2000 may be less than $0.86 per share.
Accordingly, in order to continue making annual distributions at a level of
$0.86 per share, we will be required to access funds through borrowing, issuance
of equity instruments or the sale of assets. Should we be unable to access such
funds, we may be unable to maintain our recent distribution level. Any such
failure to make expected distributions could result in a decrease in the market
price of our common shares.
Conflicts of Interest
The fee of the Investment Manager is based on a percentage of Funds From
Operations before deducting interest payments on outstanding indebtedness and
the fee payable to the Investment Manager, and is not dependent upon the
profitability of our Properties. Determination of the fee was not the result of
an arm's-length negotiation.
Limited Geographic Diversification of the Portfolio
Our properties are located in four states, Texas (56%), Florida (26%),
Arizona (14%) and Tennessee (4%) (based on percentage of GLA), all of which are
in the Sunbelt region. The concentration of the portfolio in the Sunbelt region
creates the risk that, should this region experience an economic downturn, our
operations may be adversely affected.
Limitations on Acquisition and Change in Control
Our Amended and Restated Declaration of Trust (the "Charter") and Amended
and Restated Bylaws (the "Bylaws") contain a number of provisions, and the Board
of Trust Managers has taken certain actions, that could impede a change of
control. The Charter authorizes the Board of Trust Managers to create new
classes and series of shares. The issuance of securities by the Board of Trust
Managers pursuant to this Charter provision could have the effect of delaying or
preventing a change of control, even if a change of control were in the interest
of some, or a majority of, shareholders.
4
<PAGE>
Ownership Limit; Anti-Takeover Effect
In order to maintain our qualification as a REIT, not more than 50% in
value of our outstanding shares may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities). To
ensure that we will not fail to qualify as a REIT under this test, our Charter
provides that no holder of capital shares, other than any person approved by the
Trust Managers, may directly or indirectly own more than 9.8% of the lesser of
the number or value of the outstanding capital shares. There can be no assurance
that there will not be five or fewer individuals who will own more than 50% in
value of the shares thereby causing us to fail to qualify as a REIT. The
ownership limits may discourage a change of control and may also (1) deter
tender offers for common shares, which offers may be attractive to the
shareholders or (2) limit the opportunity for shareholders to receive a premium
for their common shares that might otherwise exist if an investor attempted to
assemble a block of common shares in excess of 9.8% in number or value of the
outstanding capital shares or otherwise to effect a change of control.
Changes in Investment and Financing Policies Without Shareholder Approval
Our investment and financing policies, and our policies with respect to
certain other activities, including growth, debt capitalization, distributions,
REIT status and investment and operating policies are determined by the Board of
Trust Managers. These policies may be amended or revised from time to time at
the discretion of the Board of Trust Managers without a vote of the
shareholders.
At December 31, 1999, our debt was approximately 55% of a formula-based
calculation of asset value. Although the use of leverage may increase our rate
of return on investments and allow us to make more investments than we otherwise
could, the use of leverage also presents an additional element of risk in the
event that the cash flow from lease payments on our properties is insufficient
to meet debt obligations, we are unable to meet mortgage payments, the property
could be lost through foreclosure with a consequent loss of income and asset
value of the Company. Currently, 23 of our properties are mortgaged to secure
the repayment of indebtedness.
No Limitation in Organizational Documents on the Incurrence of Debt
Our organizational documents contain no limitation on the amount of
indebtedness which we may incur. If our debt to capitalization ratio is
increased we would become more highly leveraged, resulting in an increase in
debt service that could adversely affect our operating cash flow and our ability
to make expected distributions to shareholders and could result in an increased
risk of default on our obligations.
Failure to Continue to Qualify as a REIT Would Reduce Shareholder Returns
We must continue to meet a number of highly technical and complex
requirements to maintain our status as a REIT under the Code. Failure to
continue to qualify as a REIT would result in the taxation at corporate rates
and loss of pass-through tax treatment which would have a significant adverse
effect on the return to shareholders. Failure to qualify as a REIT under the
Code during a taxable year would generally render us ineligible to elect REIT
status again until the fifth subsequent taxable year. We will not be required to
make distributions to shareholders in the event that we fail to qualify as a
REIT under the Code and there can be no assurance that we will continue to make
distributions in such event. Transfers of the Common Shares are subject to
certain restrictions to protect our REIT status under the Code. In addition, we
may be subject to state or local taxes. No assurance can be given that
legislation, new regulations, administrative interpretations or court decisions
will not change the tax laws with respect to qualification as a REIT, the
federal income tax consequences of such qualification or the application of
state or local taxes.
Risks Associated with Development and Construction
We intend to selectively develop and construct neighborhood and community
shopping centers on a limited basis (up to approximately 20% of GLA) with
experienced joint venture partners. Risks associated with development and
construction activities may include abandonment of development opportunities;
goals of the joint venture partner may not be compatible with our goals;
construction costs of a property exceeding original estimates, possibly making
the property uneconomical; occupancy rates and rents at a newly renovated or
completed property may not be sufficient to make the property profitable;
financing may not be available on favorable terms for development of a property;
permanent financing may not be available on favorable terms to replace a
short-term construction loan; and construction and lease-up may not be completed
on schedule, resulting in increased debt service expense and construction costs.
In addition, new development activities, regardless of whether they are
ultimately successful, typically require a substantial portion of management's
time and attention. The inability to obtain, or delays in obtaining, all
necessary zoning, land-use, building, occupancy and other required governmental
permits and authorizations could result in the inability to develop a property
or a delay in completion of the project. Any delay in completion would delay
cash flow from such project needed to service debt, if any, on such project.
5
<PAGE>
REAL ESTATE INVESTMENT RISKS
Economic Performance and Value of Properties Dependent on Many Factors
Real property investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend on the amount of
income generated and expenses incurred. If our properties do not generate income
sufficient to meet operating expenses, including debt service, our income and
ability to make distributions to our shareholders will decrease.
The income from and market value of a leased property may be decreased by
such factors as changes in the general economic climate, local conditions such
as an oversupply of space or a reduction in demand for real estate in the area,
the attractiveness of the properties to tenants and competition from other
available space. Real estate values and income are also affected by such factors
as government regulations and changes in real estate, zoning or tax laws,
interest rate levels, the availability of financing and potential liability
under environmental and other laws.
Adverse economic conditions could decrease the ability of a tenant to make
its lease payments, resulting in a reduction in our cash flow and a decrease in
the value of the property leased to such tenant in the event the lease is
terminated and we are unable to lease the property to another tenant on similar
or better terms, or at all. In addition, we may experience delays in enforcing
our rights as lessor and may incur substantial costs in protecting our
investment. We not only could lose the cash flow from such defaulting tenant,
but in order to prevent a foreclosure, also might divert cash flow generated by
other properties to meet mortgage payments, if any, and pay other expenses
associated with owning the property with respect to which the default occurred.
Illiquidity of Real Estate Investments
Equity real estate investments are relatively illiquid and, therefore, tend
to limit our ability to make changes in our portfolio in response to changes in
economic or other conditions. In addition, mortgage payments and, to the extent
a property is not subject to triple net leases, certain significant expenditures
such as real estate taxes and maintenance costs generally are not reduced when
circumstances cause a reduction in income from the investment, and should such
events occur, our income and Funds Available for Distribution would decrease.
Changes in Laws
Costs resulting from changes in real estate taxes generally may be passed
through to tenants and, to such extent, will not affect our results of
operations. Increases in income, service or transfer taxes, however, generally
are not passed through to tenants under the leases and may decrease our
operating cash flow and our ability to make distributions to shareholders.
Similarly, changes in laws increasing the potential liability for environmental
conditions existing on properties or increasing the restrictions on discharges
or other conditions may result in significant unanticipated expenditures, which
would decrease our operating cash flow and its distributions to shareholders.
Competition
All of our properties are located in areas which have shopping centers and
other retail facilities. Generally, there are other community shopping centers
within close proximity. The amount of rentable retail space in an area could
have a material adverse effect on the amount of rent we charge and on our
ability to rent vacant space and/or renew leases. There are numerous commercial
developers, real estate companies, REITs and major retailers that compete with
us in seeking properties for acquisition and tenants for properties, many of
which may have greater financial and other resources than the Company and may
have substantially more operating experience than us. There are numerous
shopping facilities that compete with our properties in attracting retailers to
lease space. In addition, retailers at our properties face increasing
competition from internet retailing, outlet malls, discount shopping clubs,
catalog companies, direct mail, and telemarketing. This competition may affect
the amount of percentage rent retailers pay to us and their desire to renew
their leases at our properties.
Increase In Market Interest Rate May Cause a Common Share Price Decrease
One of the factors that may influence the price of our shares in public
markets is the annual distribution rate on the common shares. Thus, an increase
in market interest rates may lead purchasers of common shares to demand a higher
annual distribution rate, which could adversely affect the market price of the
common shares. In addition, an increase in the market rate of interest may
increase interest expenses under our variable rate indebtedness.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, an
owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. Such laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The costs
6
<PAGE>
of any required remediation or removal of such substances may be substantial and
the owner's liability therefore as to any property is sometimes not limited
under such laws, ordinances and regulations and could exceed the value of the
property. The presence of such substances, or the failure to properly remediate
such substances, may adversely affect the owner's ability to sell the property
or to borrow using real estate as collateral. We are not aware of any
environmental liability that we believe would have a material adverse effect on
our business, assets or results of operations, taken as a whole, after
consideration of pollution liability insurance policies that we maintain.
We believe that we are in compliance in all material respects with all
federal, state and local ordinances and regulations regarding hazardous or toxic
substances, and neither we nor the Investment Manager has been notified by any
governmental authority of any material noncompliance, liability or other claim
in connection with any of our respective present or former properties.
Uninsured Loss and Condemnation
We carry comprehensive liability, fire, flood, extended coverage and rental
loss insurance with respect to our properties with policy specifications and
insured limits customarily carried for similar properties. There are, however,
certain types of losses (such as from wars or earthquakes) which may be either
uninsurable or not economically insurable. Should an uninsured loss occur, we
could lose both our invested capital in and anticipated profits from the
property, and we would continue to be obligated to repay any mortgage
indebtedness on the property, other than non-recourse mortgage indebtedness. As
of December 31, 1999, such non-recourse mortgage indebtedness represented 100%
of our total mortgage indebtedness.
Tenant leases may permit the tenant to terminate its lease in the event of
a substantial casualty or a taking by eminent domain of a substantial portion of
a property. Should any such event occur, we generally will be compensated by
insurance proceeds or a condemnation award. There can be no assurance, however,
that insurance proceeds, if available, or a condemnation award, if given, will
equal the value of such property or our investment in such property.
7
<PAGE>
ITEM 2. PROPERTIES
The following table and notes describe the Company's properties and rental
information for leases in effect as of December 31, 1999:
<TABLE>
<CAPTION>
GROSS LEASABLE AREA
-------------------
YEAR SQUARE FEET SQUARE FEET ANNUALIZED
TEXAS DEVELOPED/ OWNED BY OWNED BY PERCENT ANNUALIZED BASE RENT MAJOR TENANT(S)
SHOPPING CENTERS RENOVATED UIRT ANCHORS LEASED BASE RENT PER SQ. FT. (LEASE EXPIRATION)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Albertson's Bissonnet 1999 15,542 63,000 100% $223,665 $14.39 Albertson's
Houston, TX Supermarkets (1)
Arlington Shopping Center 1982/1991 65,091 58,000 87% $571,480 $10.12 Kroger (1)
Arlington, TX
Autobahn Shopping Center 1984 28,878 0 75% $263,214 $12.20 Blockbuster Video
San Antonio, TX (2005)
Bandera Festival Shopping 1989 189,438 0 79% $1,250,631 $ 8.38 K-Mart (2013)
Center Eckerd Drugs(2)(2008)
San Antonio, TX
Benchmark Crossing 1986/1990 58,384 0 100% $672,271 $11.52 Jack-In-The-Box (2006)
Shopping Center 1994 Burger King (2010)
Houston, TX IHOP (2013)
Bally's (2006)
Centennial Shopping Center 1970/1984 80,492 0 57% $436,508 $ 9.52
Austin, TX
Colony Plaza Shopping 1997 26,513 53,000 95% $444,313 $17.55 Albertson's Supermarkets
Center (1)
Sugar Land, TX
El Campo Shopping Center 1985 83,330 0 90% $335,100 $ 4.46 David's Supermarket
El Campo, TX (2002)
Garland Shopping Center 1984 33,366 0 64% $240,935 $11.29 Blockbuster Video(2003)
Garland, TX
Hedwig Shopping Centers 1974/1987/ 69,554 155,650 100% $883,387 $12.70 Target (1)
Houston, TX 1989 Marshall's (1)
Ross Dress for Less (2010)
Wherehouse Music (2000)
Highland Square Shopping 1998 64,171 0 90% $849,042 $14.73 Radio Shack (2002)
Center
Sugar Land, TX
Hurst Shopping Center 1982/1993 47,517 0 93% $424,235 $ 9.56 Southwestern Bell Mobile
Hurst, TX (2002)
Market at First Colony 1988/1991/ 100,261 62,000 97% $1,388,143 $14.30 Kroger (1)
Houston, TX 1994/1999 TJ Maxx (2002)
Eckerd (2014)
Mason Park Centre 1985 160,047 58,800 94% $1,680,720 $11.20 Kroger (1)
Houston, TX Palais Royal (2006)
PetCo (2005)
Walgreen's (2)(2015)
Plano Shopping Center 1985 81,590 62,000 100% $987,981 $12.11 Albertson's
Plano, TX Supermarkets (1)
Hollywood Video (2007)
Richardson Shopping Center 1984 54,872 62,000 83% $515,515 $11.34 Albertson's
Richardson, TX Supermarkets (1)
Blockbuster Video (2009)
Rosemeade Park Shopping 1986 49,554 58,900 51% $311,446 $12.21 Kroger (1)
Center Blockbuster Video (2003)
Carrollton, TX
8
<PAGE>
Spring Shadows Shopping Center 1999 36,611 63,000 88% $519,728 $16.24 Albertson's
Houston, TX Supermarkets (1)
Hollywood Video (2013)
University Park Shopping 1973/1991 91,654 0 100% $749,770 $8.18 Albertson's
Center Supermarkets
College Station, TX (2023)
---------- ---------- ----- ----------- -------
Total/Weighted Average 1,336,865 696,350 87% $12,748,084 $10.88
</TABLE>
<TABLE>
<CAPTION>
GROSS LEASABLE AREA
-------------------
ANNUALIZED
YEAR SQUARE FEET STRAIGHT-LINE
FLORIDA DEVELOPED/ OWNED SQ. OWNED BY PERCENT ANNUALIZED BASE RENT MAJOR TENANT(S)
SHOPPING CENTERS RENOVATED FT. ANCHORS LEASED BASE RENT PER SQ. FT. (LEASE EXPIRATION)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lake St. Charles 1999 57,015 0 100% $509,241 $8.93 Kash N Karry (2019)
Tampa, FL
Skipper Palms 1984 86,503 0 95% $665,359 $8.12 Winn Dixie (2016)
Tampa, FL
Town 'N Country Shopping 1970/1986 158,104 0 100% $764,782 $4.84 Auto Zone (2002)
Center TJ Maxx (2005)
Tampa, FL Blockbuster Video (2002)
University Mall Shopping 1973/1984 315,596 0 80% $1,283,244 $5.01 Upton's (2002)
Center Office Max (2004)
Pembroke Pines, FL Ross Stores (2001)
--------- ------ ------ ---------- ----- Sports Authority (2012)
Total/Weighted Average 617,218 0 89% $3,222,626 $5.76
TENNESSEE
SHOPPING CENTERS
- ----------------------------------
McMinn Plaza Shopping 1982 47,200 0 100% $247,804 $5.25 Ingles (3)
Center
Athens, TN
Twin Lakes Shopping Center 1986 51,656 0 100% $373,500 $7.23 Food City (2007)
Lenoir City, TN
------ ---- ----- -------- -----
Total/Weighted Average 98,856 0 100% $621,304 $6.28
ARIZONA
SHOPPING CENTERS
- ----------------------------------
Big Curve Shopping Center 1969/1983/ 126,402 100,010 95% $1,083,425 $8.99 Albertson's
Yuma, AZ 1990/1996 Supermarkets (1)
Michael's (1)
Walgreen's (2004)
Millers Outpost (2004)
Park Northern Shopping 1982 126,852 0 92% $725,192 $6.24 Safeway (2003)
Center
Phoenix, AZ
Southwest Walgreen's 1975 83,698 0 93% $513,051 $6.60 Southwest
Shopping Center Supermarket(2000)
Phoenix, AZ Walgreens (2000)
------- ------- ----- ---------- -----
Total/Weighted Average 336,952 100,010 93% $2,321,668 $7.36
------- ------- ----- ---------- -----
Grand Total/Weighted Average 2,389,891 796,360 89% $18,913,682 $8.87
</TABLE>
(1) The space is owned by the tenant.
(2) Tenant has vacated premises but continues to pay rent under the terms of the
lease.
(3) Tenant has executed a new lease with a 20-year initial term for 60,000
square feet; UIRT is presently constructing the 60,000 square foot building.
Tenant expects to occupy the new building during the fourth quarter of 2000.
9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
UIRT is a party to legal proceedings that arise in the normal course of
business, which matters are generally covered by insurance. The resolution of
these matters cannot be predicted with certainty. However, in the opinion of
management, based upon currently available information, liability under such
proceedings, either individually or in the aggregate, will not have a materially
adverse affect on our consolidated financial statements taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the last quarter
of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common shares began trading on the NASDAQ Stock Market and on the
Pacific Exchange on March 13, 1998, under the symbols "UIRT" and "UIR,"
respectively. On March 15, 2000, we had approximately 350 shareholders of record
and approximately 4,500 beneficial owners. The following table sets forth for
the periods indicated the high and low bid prices as reported by NASDAQ and the
distributions declared by us during 1999.
<TABLE>
<CAPTION> DISTRIBUTIONS
HIGH LOW DECLARED
1999 -------- ------ ----------
<S> <C> <C> <C>
First Quarter .................................$ 7.81 $ 6.75 $ 0.215
Second Quarter ................................$ 8.88 $ 6.69 $ 0.215
Third Quarter ..... ...........................$ 8.25 $ 6.56 $ 0.215
Fourth Quarter ................................$ 7.38 $ 6.00 $ 0.215
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
<C> DECLARED
1998 ------ ----- -------------
<S> <C> <C> <C>
First Quarter (from March 13, 1998)........... $10.00 $9.50 $0.000
Second Quarter................................ $10.25 $9.00 $0.215
Third Quarter................................. $ 9.56 $6.88 $0.215
Fourth Quarter................................ $ 8.00 $6.56 $0.215
</TABLE>
Distributions
The fourth quarter 1998 and 1999 distribution amounts to $0.86 per share on
an annualized basis. Distributions paid in 1999, totaling $0.86 per share, were
comprised of ordinary taxable income of $0.70 (82%) and return of capital of
$0.16 (18%). Distributions paid in 1998, totaling $0.43 per share, were
comprised of ordinary taxable income of $0.19 (44%) and return of capital of
$0.24 (56%). All distributions will be made by UIRT at the discretion of the
Board of Trust Managers and will depend upon our earnings, our financial
condition and such other factors as the Board of Trust Managers deems relevant.
In order to maintain our qualification as a REIT under the Internal Revenue
Code, we are required to make distributions to shareholders in an amount equal
to at least 95%(90% beginning in 2001) of our "real estate investment trust
taxable income," as defined in Section 857 of the Internal Revenue Code.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, on a historical basis, Selected Financial
Data for UIRT. This information should be read in conjunction with the
consolidated financial statements of UIRT, including the related notes thereto,
and Management's Discussion and Analysis of Financial Condition and Results of
Operations. The historical Selected Financial Data for UIRT has been derived
from the audited financial statements.
<TABLE>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- -----------
<C> <C> <C> <C> <C>
<S>
FINANCIAL INFORMATION:
Revenues:
Rental revenues.............. $25,647,442 $ 17,323,768 $ 6,148,575 $ 4,966,673(1) $ 5,238,466
Interest and other income.... 348,113 426,402 27,278 67,409 44,224
------------ ----------- ----------- ----------- -----------
Total revenue............ 25,995,555 17,750,170 6,175,853 5,034,082 5,282,690
============ =========== =========== =========== ===========
Income (loss) before gain on sale
of investment real estate,
extraordinary item, minority
interest and redeemable preferred
share distribution requirements $5,422,836 $ 2,303,710 $ (634,189) $ 299,269 $ 254,580
=========== =========== =========== =========== ===========
Net income (loss) available for
common shareholders............ $5,240,382 $ 1,924,397 $ (771,716) $ 151,032 $ 192,704
=========== =========== =========== =========== ===========
Net income (loss) per share...... $ 0.56 $ 0.25 $ (0.85) $ 0.17 $ 0.21
=========== =========== =========== =========== ===========
Weighted average common shares... 9,433,883 7,702,709 912,493 909,405 909,397
=========== =========== =========== =========== ===========
Cash distributions declared per
common share................... $ 0.86 $ 0.645 --(2) --(2) --(2)
=========== =========== =========== =========== ===========
BALANCE SHEET INFORMATION:
Investment real estate,
gross........................ $177,302,953 $160,329,516 $39,734,731 $39,327,929 $34,166,161
Total assets................... 174,965,762 164,624,109 39,286,969 37,201,773 32,461,433
Long-term obligations.......... 89,723,960 73,883,884 28,363,899 26,542,992 22,484,845
Total liabilities.............. 97,557,366 80,929,506 29,793,132 27,406,859 23,407,145
Minority interest.............. 2,745,791 2,825,284 1,571,018 1,584,673 699,984
Preferred shares............... -- -- 1,068,226 1,068,226 1,068,226
Net equity..................... 74,662,605 80,869,319 6,854,593 7,142,015 7,286,078
OTHER DATA:
Cash flows from:
Operating activities........... 10,021,861 6,209,892 1,688,057 1,062,002 958,510
Investing activities........... (15,703,803) (58,150,977) (2,711,802) (1,319,213) (269,479)
Financing activities........... 2,003,638 57,081,031 1,250,578 (51,293) (384,637)
Funds From Operations(3)......... 9,679,808 7,258,870 (4) 1,021,657 1,291,047 1,260,709
Number of Properties (at end of
period)........................ 28 25 8 8 6
GLA (sq. ft.) (at end of
period)........................ 2,389,891 2,243,255 754,563 753,790 542,095
Percentage of GLA leased (at end
of period)..................... 89% 95% 95% 96% 95%
(1) Base rent was lower in 1996 as a result of the conveyance of the One West
Hills building on January 1, 1996 to Ivy Realty Trust, a privately held
affiliated office REIT managed by the Investment Manager. All shares of Ivy
Realty Trust were distributed to UIRT shareholders in 1995, 1996 and 1997.
(2) For 1997, 1996 and 1995, UIRT distributed Ivy shares to UIRT shareholders
with a value of $0.398, $0.40 and $0.20 per common share, respectively.
(3) NAREIT defines Funds From Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated entities in which the
REIT holds an interest. Management believes Funds From Operations is
helpful to investors as a measure of the performance of an equity REIT
because, along with cash flows from operating activities, financing
activities and investing activities, it provides investors with an
understanding of the ability of UIRT to incur and service debt and make
capital expenditures. UIRT computes Funds From Operations in accordance
with the standards established by NAREIT, which may differ from the
methodology for calculating Funds From Operations utilized by other equity
REITs, and accordingly, may not be comparable to such other REITs. Further,
11
<PAGE>
Funds From Operations does not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt
service obligations, or other commitments and uncertainties. Funds From
Operations should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of UIRT's financial
performance or to cash flows from operating activities (determined in
accordance with GAAP) as a measure of UIRT's liquidity, nor is it
indicative of funds available to fund UIRT's cash needs, including our
ability to make distributions.
(4) 1998 results have been restated downward by $115,000 based on a
clarification by the National Association of Real Estate Investment Trusts
of the definition of funds from operations.
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
accompanying consolidated financial statements and notes thereto and other
information in this Annual Report on Form 10K. Historical results and trends
which might appear should not be taken as indicative of future operations.
RESULTS OF OPERATIONS
QUARTER ENDED DECEMBER 31, 1999 VERSUS QUARTER ENDED DECEMBER 31, 1998
Net income was $1,250,000 or $0.14 per basic and diluted share for the
fourth quarter of 1999, down from $1,461,000, or $0.15 per share, for the same
quarter of 1998. The decrease in net income from 1998 to 1999 is due primarily
to the increase in interest expense.
Total revenues were $6,741,000 for the fourth quarter of 1999, as compared
to $5,513,000 for the fourth quarter of 1998. This increase relates almost
totally to acquisitions.
Interest expense increased by $754,000 from $1,033,000 in 1998 to
$1,787,000 in 1999. This increase was due mainly to the increase in the average
debt outstanding between periods, from $54,000,000 for 1998 to $89,500,000 for
1999 and the approximately 90 basis point increase in the rate of interest we
pay on our revolving line of credit. The increase in debt outstanding is
primarily a result of expenditures for acquisitions since December 31, 1998 and
the repurchase of common shares. The increases in depreciation and amortization,
operating expenses, and property taxes were primarily the result of
acquisitions.
TWELVE MONTHS ENDED DECEMBER 31, 1999 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1998
Net income was $5,240,000 or $0.56 per share in 1999, compared to net
income in 1998 of $1,924,000, or $0.25 per share. Net income for 1998 includes
the effect of $2,241,000 in amortization of bridge financing costs and $233,000
of extraordinary charges, or an aggregate $0.32 per weighted average share.
Earnings in 1998 before such charges were $4,397,000 or $0.57 per weighted
average share. Even though revenue and earnings were higher in 1999, earnings
per share before non-recurring and extraordinary charges was relatively flat
from 1998 to 1999, because there were 1,731,174 more weighted average shares
outstanding in 1999.
Total revenues increased 46% to $25,996,000 in 1999, compared with
$17,750,000 for the prior year. This increase relates almost totally to
properties acquired since December 31, 1997. These properties were acquired
primarily by using the $79,000,000 in net proceeds from our initial public
offering of common shares in March and April 1998. We also borrowed funds under
our revolving line of credit and assumed existing mortgage loans on acquired
properties.
Recently, the cash returns from properties that have the investment
characteristics we require have been in the 10% to 11% (of cost) range.
Conditions in the debt and equity markets have resulted in interest rates and
return on capital requirements that exceed the level we believe provides us the
opportunity to earn an appropriate profit on newly acquired properties, and we
do not intend to purchase properties in these circumstances. Accordingly, unless
such conditions change, we believe rental revenues in 2000 will not increase
substantially over the 1999 level.
Moreover, as discussed elsewhere herein, we may dispose of one or more
properties in 2000. The five properties currently identified as potential
disposition candidates accounted for approximately $4,100,000, or 16%, of the
1999 revenue. The book value of these properties at December 31, 1999 is
approximately $25,000,000.
If we sell properties and then do not use sale proceeds to acquire new
properties, our rental revenue in 2000 will decline. We may repurchase UIRT
shares with some of the proceeds, if any, in order to mitigate the effect on per
share earnings that would otherwise result from any such decline in rental
revenue. However, there is no assurance that we would be able to repurchase a
sufficient number of UIRT shares to mitigate the decline of rental revenue, and
12
<PAGE>
earnings per share may therefore decline as a result of any such sales of
properties.
Interest expense, before amortization of bridge financing costs, increased
by $2,842,000, from $3,839,000 in 1998 to $6,681,000 in 1999. Weighted average
debt outstanding increased from $39,000,000 for 1998 to $82,300,000 for 1999.
The increase in weighted average debt outstanding is primarily a result of
expenditures for acquisitions and repurchases of our common shares.
Of the total debt and capital lease obligations of $89,700,000 at December
31, 1999, $61,500,000 bears interest at fixed rates, the weighted average of
which is 8.37%. The remaining $28,200,000 of debt bears interest at 155-175
basis points over LIBOR contracts with one to six months durations. At January
31, 2000, the LIBOR rates were approximately 90 basis points higher than those
of one year earlier. A 100 basis point change in LIBOR rates would have
approximately a $280,000 effect on interest expense based on the amount of
variable rate borrowings at December 31, 1999.
We anticipate further increases in interest expense during 2000 for several
reasons. The increases in base rates during 1999 will have a full year's effect
in 2000; there has already been an additional rate increase since December 31,
1999, and other rate increases are not unlikely; and we have increased our
borrowings since December 31, 1999, and may be required to make additional
borrowings to meet our capital and common share distribution requirements.
The increases in depreciation and amortization, operating expenses and
property taxes were primarily the result of acquisitions since December 31,
1997. Primarily in order to manage properties acquired in 1998, the Investment
Manager had approximately 11 employees more on December 31, 1998 than on the
same date in 1997; since December 31, 1998, the Investment Manager employed four
additional personnel. All of these employees are assigned full time to property
operations, accounting, leasing, and asset management and their salaries,
related benefit costs, and occupancy costs are reimbursed by UIRT to the
Investment Manager. UIRT believes that the level of staffing at December 31,
1999 is generally sufficient to operate currently owned properties and
additional properties that may be acquired in the foreseeable future.
Advisory fees increased by $413,000 from $794,000 in 1998 to $1,207,000 in
1999. Advisory fees are calculated based on 6.5% of the sum of FFO (before
advisory fees) and interest expense, and accordingly increase or decrease
generally with revenue levels. From January 1, 1998 through June 30, 1999, the
advisory fee was based on 6.8% of the calculated base. The effect on 1999
advisory fee expense of the Investment Manager's voluntary reduction was to
decrease such expense by approximately $30,000.
TWELVE MONTHS ENDED DECEMBER 31, 1998 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1997
Net income was $1,924,000 or $0.25 per share in 1998, compared to net
income in 1997 of ($772,000), or ($0.85) per share. Net income for 1998 includes
the effect of $2,241,000 in amortization of bridge financing costs and $233,000
of extraordinary charges, or an aggregate $0.32 per weighted average share.
Earnings in 1998 before such charges were $4,397,000 or $0.57 per weighted
average share. Net income for 1997 includes the effect of a $788,000 charge for
the issuance of stock to the Investment Manager. The increase in earnings before
non-recurring and extraordinary charges is primarily a result of operating
income generated by properties acquired since December 31, 1997.
Rental revenues increased 187% to $17,750,000 in 1998, compared with
$6,176,000 for the same period of the prior year. This increase relates almost
totally to acquisitions since December 31, 1997.
Interest expense, before amortization of bridge financing costs, increased
by $1,403,000, from $2,436,000 in 1997 to $3,839,000 in 1998. Weighted average
debt outstanding increased from $25,000,000 for 1997 to $39,000,000 for 1998.
The increase in weighted average debt outstanding is primarily a result of
expenditures for acquisitions, including the amounts borrowed and repaid under
the bridge financing arrangement.
The increases in depreciation and amortization, operating expenses and
property taxes were primarily the result of acquisitions since December 31,
1997. Primarily in order to manage properties acquired in 1998, the Investment
Manager had approximately 11 employees more on December 31, 1998 than on the
same date in 1997. All of these employees are assigned full time to property
operations accounting, leasing, and asset management and their salaries and
related benefit costs are reimbursed by UIRT to the Investment Manager.
Liquidity and Capital Resources
It is our intention that UIRT continually have access to necessary capital.
As noted elsewhere herein, we anticipate that new capital will be required in
order to adequately maintain our properties, fund development and redevelopment
projects, and maintain our $0.86 per share annual distribution. Although we
believe present conditions in the equity markets may make issuance of equity
securities unattractive for the foreseeable future, as previously noted, we
believe our capital requirements and common share distributions can be funded
through a combination of cash flows from operations, additional borrowings, and
property sales.
13
<PAGE>
Cash flows provided by operations for the twelve months ended December 31,
1999, 1998 and 1997 were $10,022,000, $6,210,000 and $1,688,000, respectively.
Substantially all of the year to year difference is the result of operating
income from properties acquired since December 31, 1997 and the effect of
changes in the amounts of and interest rates on debt.
We executed a revolving line of credit agreement during the third quarter
of 1998. The line of credit, which is collateralized by seven of our properties,
provides for borrowings of up to $36,500,000 at approximately 155 basis points
over a London Interbank Offered Rate. At December 31, 1999, we had borrowed
approximately $23,000,000 under the line of credit, and had issued letters of
credit aggregating approximately $6,000,000. Approximately $7,500,000 was
available under the line of credit at December 31, 1999.
However, current provisions of our revolving credit agreement, which we are
seeking to have amended, may restrict us to relatively small increases in our
total debt until and unless property sales provide significant cash proceeds.
Such provisions limit our total borrowings to an amount that does not exceed 50%
of a formula-based calculation of asset value. Our borrowings currently exceed
this level, and pursuant to terms of the agreement, we are in default of the
agreement unless our lender agrees to an amendment. If we are not successful in
having the revolving credit agreement amended, or if property sales do not
provide significant cash proceeds, we may be required to access alternative
sources of capital to reduce our debt levels, and to meet our capital and common
share distribution requirements.
The 20 properties acquired since December 31, 1997 comprise approximately
1,690,000 square feet of GLA, and were acquired subject to approximately
$57,167,000 in mortgage debt. We have also borrowed approximately $18,700,000
under our revolving line of credit for the cash portion of certain properties'
purchase prices. In addition, one of the properties was acquired by a limited
partnership in which UIRT is the sole general and a majority limited partner;
the limited partnership issued limited partnership units to the sellers of the
property in consideration of the sellers contributing the property to the
partnership. Such limited partnership units were valued at approximately
$2,386,000, and are convertible to 238,600 Common Shares.
Pursuant to Board approval, UIRT repurchased 469,500 common shares during
the third and fourth quarters of 1999. The prices paid were the market prices on
the dates of purchase and averaged approximately $6.84 per share. The share
repurchases were funded with approximately $3,211,000 in proceeds from our
revolving line of credit. In January 2000, our Board of Trust Managers
authorized us to repurchase as many as 1,000,000 additional shares in open
market and privately negotiated transactions, such authorization to expire on
December 31, 2000. We believe that at recent prices, and absent higher yielding
acquisition and development opportunities, the repurchase of common shares of
UIRT provides an attractive reinvestment opportunity. If we have sufficient
capital resources and proceeds from sales of property, after repaying debt and
providing for our quarterly distributions to shareholders, we intend to continue
buying UIRT shares.
Year 2000 Issue
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer programs
that have time-sensitive software may recognize the "00" as 1900 rather than the
year "2000", which could result in a major system failure or miscalculations.
The prior year financial statements disclosed that the Company had assessed the
potential impact of the issue and did not anticipate that the year 2000 issue
would pose significant operations problems for the Company.
To date, there have been no problems, interruptions or uncertainties
resulting from the Year 2000 issue as it relates to the Company or its
operations, and we do not anticipate any future problems or costs resulting from
the year 2000 issue.
Funds From Operations
We consider funds from operations to be an alternate measure of the
performance of an equity REIT since such measure does not recognize depreciation
and amortization of real estate assets as operating expenses. We believe that
reductions for these charges are not meaningful in evaluating income-producing
real estate, which historically has not depreciated. The National Association of
Real Estate Investment Trusts defines funds from operations as net income plus
depreciation and amortization of real estate assets, less gains and losses on
sales of properties. Funds from operations does not represent cash flows from
operations as defined by generally accepted accounting principles and should not
be considered as an alternative to net income as an indicator of UIRT's
operating performance or to cash flows as a measure of liquidity. Funds from
operations increased to $2,419,000 for the fourth quarter of 1999, as compared
to $2,351,000 for the same period of 1998. For the twelve months ended December
31, 1999, funds from operations totaled $9,680,000, up $2,421,000 from the same
period of the prior year. This increase relates almost totally to the impact of
UIRT's acquisitions since December 31,1998.
14
<PAGE>
<TABLE>
<CAPTION>
United Investors Realty Trust
Calculation of Funds From Operations
and Funds Available for Distribution
Three Months Ended Twelve Months Ended
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
Restated
--------------------------------------------------------------------
Funds from operations:
<S> <C> <C> <C> <C>
Net income $1,250,328 $ 1,460,871 $5,240,382 $ 1,924,397
Plus real estate related depreciation
and amortization 1,106,400 859,162 4,256,972 2,781,508
Plus loss on early extinguishment of debt 36,477 -- 36,477 232,532
Plus write-off of unamortized bridge
financing costs -- -- -- 2,240,652
Plus minority interest in downREIT
partnerships 25,477 30,501 145,977 79,781
---------- ----------- ---------- ----------
Funds from operations(1) $2,418,682 $ 2,350,534 $9,679,808 $ 7,258,870
========== =========== ========== ===========
Funds from operations per share and downReit
unit $ 0.25 $ 0.24 $ 1.00 $ 0.92
========= ============ ========== ===========
Funds available for distribution:
Funds from operations $2,418,682 $ 2,350,534 $9,679,808 $ 7,258,870
Plus amortization of financing costs 61,801 43,050 176,511 134,308
Less tenant improvements and leasing commissions (181,293) (145,427) (493,893) (341,113)
Less non-recoverable recurring capital
improvements (137,952) (44,448) (352,678) (111,918)
Less straight line rents, net of $80,000
bad debt write-off in March 1999 (78,728) (170,060) (279,546) (346,884)
Plus forgiveness of option loans 40,751 -- 163,004 --
Amounts received from seller
pursuant to master lease -- 43,014 -- 134,929
---------- ----------- --------- -----------
Funds available for distribution $2,123,261 $2,076,663 $8,893,206 $6,728,192
========== ========== ========== ==========
Funds available for distribution per share
and downReit unit $ 0.22 $ 0.21 $ 0.92 $ 0.86
========== ========== ========== ==========
Basic and diluted weighted average number of
shares and downReit partnership units 9,488,911 9,711,220 9,715,477 7,853,174
========== ========== ========== ==========
</TABLE>
(1) The twelve months ended December 31, 1998 results have been restated
downward by $115,000 based on a clarification by the National Association
of Real Estate Investment Trusts of the definition of funds from
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have limited exposure to financial market risks, including changes in
interest rates. An increase or decrease of 100 basis points in interest rates
would have approximately a $280,000 effect on interest expense based on the
amount of variable rate borrowings at December 31, 1999. All such variable rate
borrowings have original maturities through 2001. We do not have any significant
foreign operations and thus are not materially exposed to foreign currency
fluctuations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company and its consolidated subsidiaries
are included in this report on the pages indicated, and are incorporated herein
by reference:
<TABLE>
<S>
Page <C>
- -----
F-1 (a) Report of Independent Auditors
F-2 (b) Consolidated Balance Sheets-December 31, 1999 and 1998
F-3 (c) Consolidated Statements of Operations-Years ended December 31,
1999, 1998 and 1997
F-4 (d) Consolidated Statements of Redeemable Preferred Shares and
Common Shareholders' Equity-Years ended December 31, 1999, 1998 and
1997
F-5 (e) Consolidated Statements of Cash Flows-Years ended December 31,
1999, 1998 and 1997
F-6 (f) Notes to Consolidated Financial Statements
</TABLE> 15
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information required under items 10, 11, 12 and 13 is incorporated by
reference to UIRT's definitive proxy statement to be filed pursuant to
Regulation 14A under the Exchange Act.
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Report of Independent Auditors F-1
Consolidated Balance Sheets as of
December 31, 1999 and 1998 F-2
Consolidated Statements of Operations for the years
ended December 31, 1999, 1998 and 1997 F-3
Consolidated Statements of Redeemable Preferred
Shares and Common Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the years
ended December 31,1999, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6
2. Financial Statement Schedule
The following financial statement schedule of the Company is included
in Item 14 (d):
Schedule III--Real Estate and Accumulated Depreciation F-14
Notes to Schedule III F-16
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
3. Exhibits
Exhibit
Number Description
3.1 First Amended and Restated Declaration of Trust (Incorporated by
reference to Exhibit 3.1 to the Company's registration statement on
Form S-11, dated March 5, 1998 (File No. 333-29475))
3.2 First Amended and Restated Bylaws (Incorporated by reference to
Exhibit 3.2 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
4.1 Instruments defining the rights of security holders. The instruments
are filed in response to items 3.1 and 3.2 above and are incorporated
herein by reference.
4.2 Common share certificate (Incorporated by reference to Exhibit 3.2 to
the Company's registration statement on Form S-11, dated March 5, 1998
(File No. 333-29475))
10.1 Contribution Agreement by and between UIRT-Centennial, L.P., as
"Partnership" and Centennial Acquisition Corp., as "Contributor"
(Incorporated by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10-K, dated March 16, 1999)
10.2 Today Green Oaks, L.P. Agreement of Limited Partnership (Incorporated
by reference to Exhibit 10.2 to the Company's Annual Report on Form
10-K, dated March 16, 1999)
10.3 Second Amendment to Acquisition Agreement by and between Six Flags
Joint Venture, Today Melbourne Plaza, L.P., Today Northwest Crossing,
L.P., Today Green Oaks, L.P., Today Parkwood, L.P., and Today
Richwood, L.P., as Seller, and United Investors Realty Trust as
assignee of Buyer (Incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-K, dated March 16, 1999)
16
<PAGE>
10.4 Lease Agreement By and Between Today Parkwood, L.P., as Landlord and
United Investors Realty Trust as Tenant pertaining to Parkwood Square
Shopping Center Plano, Collin County, Texas dated December 31, 1998
(Incorporated by reference to Exhibit 10.4 to the Company's Annual
Report on Form 10-K, dated March 16, 1999)
10.5 Lease Agreement By and Between Today Richwood, L.P., as Landlord and
United Investors Realty Trust as Tenant Pertaining to Richwood
Shopping Center Richardson, Dallas County, Texas dated December 31,
1998 (Incorporated by reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K, dated March 16, 1999)
10.6 Declaration of Trust dated December 31, 1998 by Today Green Oaks GP,
Inc., a Texas corporation ("Trustee") for and on behalf of United
Investors Realty Trust, a Texas real estate investment trust
("Owner")(Incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K, dated March 16, 1999)
10.7 Promissory Note between UIRT Lake St. Charles and First Union National
Bank (Incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K, dated March 16, 1999)
10.8 Construction Loan Agreement between First Union National Bank and UIRT
(Incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K, dated March 16, 1999)
10.9 Promissory Note dated as of October 16, 1995 executed by Today
Northwest Crossing, L.P. in favor of First Union National Bank of
North Carolina (Incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-K, dated March 16, 1999)
10.10 Promissory Note dated as of October 16, 1995 executed by Today
Melbourne Plaza, L.P. in favor of First Union National Bank of North
Carolina (Incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K, dated March 16, 1999)
10.11 First Amended and Restated Advisory Agreement dated as of June 9,
1997, by and between the Company and Investment Manager (Incorporated
by reference to Exhibit 10.1 to the Company's registration statement
on Form S-11, dated March 5, 1998 (File No. 333-29475))
10.12 1997 Share Incentive Plan (Incorporated by reference to Exhibit 10.2
to the Company's registration statement on Form S-11, dated March 5,
1998 (File No. 333-29475))
10.13 Form of Indemnification Agreement (Incorporated by reference to
Exhibit 10.3 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.14 Loan Agreement dated as of January 30, 1998, by and between the
Company and Nomura Asset Capital Corporation ("Nomura") (Incorporated
by reference to Exhibit 10.4 to the Company's registration statement
on Form S-11, dated March 5, 1998 (File No. 333-29475))
10.15 Promissory Note dated January 30, 1998, executed by the Company in
favor of Nomura (Incorporated by reference to Exhibit 10.5 to the
Company's registration statement on Form S-11, dated March 5, 1998
(File No. 333-29475))
10.16 Assumption and Modification Agreement dated November 19, 1996, by and
among The Travelers Insurance Company, George I. Brown, Park
Northern/Centennial Partners, L.P. and George I. Brown, as Trustee of
the Waipio Trust II (Incorporated by reference to Exhibit 10.6 to the
Company's registration statement on Form S-11, dated March 5, 1998
(File No. 333-29475))
10.17 Promissory Note dated as of July 31, 1995, executed by PFL-290 Limited
Partnership in favor of RFG Financial, Inc. (Incorporated by reference
to Exhibit 10.7 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.18 Promissory Note dated June 10, 1992, executed by Hedwig II, Inc. in
favor of Sun Life Insurance Company of America (Incorporated by
reference to Exhibit 10.8 to the Company's registration statement on
Form S-11, dated March 5, 1998 (File No. 333-29475))
10.19 Promissory Note dated June 10, 1992, executed by Hedwig III Joint
Venture in favor of Sun Life Insurance Company of America
(Incorporated by reference to Exhibit 10.9 to the Company's
registration statement on Form S-11, dated March 5, 1998 (File No.
333-29475))
17
<PAGE>
10.20 Deed of Trust Note dated April 13, 1993, executed by UIRT/University
Park-1, L.P. in favor of The Franklin Life Insurance Company
(Incorporated by reference to Exhibit 10.10 to the Company's
registration statement on Form S-11, dated March 5, 1998 (File No.
333-29475))
10.21 Note Secured by Deed of Trust dated November 9, 1990 executed by
George I. Brown and George I. Brown, as Trustee of the Waipio Trust II
in favor of The Travelers Insurance Company (Incorporated by reference
to Exhibit 10.13 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.22 Earnest Money Contract dated October 13, 1997, by and among the
Company, Balous Miller, John K. Miller, Douglas Miller and Louis Vance
(Incorporated by reference to Exhibit 10.14 to the Company's
registration statement on Form S-11, dated March 5, 1998 (File No.
333-29475))
10.23 Agreement for the Purchase and Sale of Commercial Real Estate dated
December 12, 1997, by and between the Company and the Board of Pension
Commissioners of the City of Los Angeles (Incorporated by reference to
Exhibit 10.15 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.24 Contract of Sale dated December 5, 1997, by and between the Company
and Desert Pacific Properties, L.L.C. (Incorporated by reference to
Exhibit 10.16 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.25 Contract of Sale dated December 5, 1997, by and between the Company
and Rosemeade Park Limited Partnership (Incorporated by reference to
Exhibit 10.17 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.26 Letter Agreement dated November 25, 1997 and October 15, 1997, by and
among the Company, Town `N Country Plaza of Tampa, Limited and James
H. Shimberg, Trustee on Behalf of Landowner (Incorporated by reference
to Exhibit 10.18 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.27 Contract of Sale dated December 5, 1997, by and between Market at
First Colony Joint Venture, Hedwig II Joint Venture, PFL-290 Limited
Partnership, R & R Limited Partnership, Hedwig II, Inc. and the
Company (Incorporated by reference to Exhibit 10.19 to the Company's
registration statement on Form S-11, dated March 5, 1998 (File No.
333-29475))
10.28 Letter Agreement dated February 17, 1998, by and between the Company,
Town `N Country Plaza of Tampa, Limited and James H. Shimberg, Trustee
on Behalf of Landowner (Incorporated by reference to Exhibit 10.20 to
the Company's registration statement on Form S-11, dated March 5, 1998
(File No. 333-29475))
10.29 Contract of Sale dated April 17, 1998 by and between United Investors,
Realty Trust and Veriguest Colony Plaza One 1997. (Incorporated by
reference to Exhibit 10.22 to the Company's Quarterly Report on Form
10-Q dated May 14, 1998)
10.30 Purchase Option dated April 17, 1998 by and between United Investors,
Realty Trust and Veriguest Property Commerce 1995-1, a Texas joint
venture.(Incorporated by reference to Exhibit 10.23 to the Company's
Quarterly Report on Form 10-Q dated May 14, 1998)
10.31 Contract of Sale dated March 23, 1998, by and between the Company and
Dermot Big Curve, LLC (incorporated by reference to Exhibit 10.28 to
the Company's Current Report on Form 8-K dated June 11, 1998)
10.32 Promissory Note dated as of September 20, 1996 made by Dermot Big
Curve, LLC to Liberty Mortgage Acceptance Corporation, as beneficiary
in the principal amount of $6,072,000 (incorporated by reference to
Exhibit 10.29 to the Company's Current Report on Form 8-K dated June
11, 1998)
18
<PAGE>
10.33 Contract of Sale dated October 15, 1997 by and between the Company,
Town N' Country Plaza of Tampa, Ltd. and trustee, James H. Shimberg on
behalf of land owner (incorporated by reference to Exhibit 10.30 to
Company's Quarterly Report on Form 10-Q dated August 14, 1998)
10.34 Promissory Note Dated December 16, 1997 between South Trust Bank,
National Association and Town 'N Country Plaza of Tampa, Ltd.
(incorporated by reference to Exhibit 10.31 to Company's Quarterly
Report on Form 10-Q dated August 14, 1998)
10.35 Amended and Restated Partnership Agreement dated May 15, 1998 of UIRT
Town 'N Country, L.P.(incorporated by reference to Exhibit 10.32 to
Company's Quarterly Report on Form 10-Q dated August 14, 1998)
10.36 Contract of Sale dated June 4, 1998, by and between the Company and
Highland Square Partners Ltd. (incorporated by reference to Exhibit
10.35 to the Company's Current Report on Form 8-K dated October 7,
1998)
10.37 Promissory note dated as of November 26, 1996 made by Highland Square
Partners, Ltd. to Belgravia Capital Corporation, as beneficiary in the
principal amount of $4,525,000. (incorporated by reference to Exhibit
10.36 to the Company's Current Report on Form 8-K dated October 7,
1998)
10.38 Promissory note dated November 26, 1997 made by Veriquest Colony Plaza
One 1997 to Holliday Fenoglio, L.P., as beneficiary in the principal
amount of $3,200,000.(incorporated by reference to Exhibit 10.9 to
Company's Quarterly Report on Form 10-Q dated November 10, 1998)
10.39 Revolving Credit Agreement dated August 25, 1998 made by and among the
Company and Wells Fargo Bank, National Association.(incorporated by
reference to Exhibit 10.10 to Company's Quarterly Report on Form 10-Q
dated November 10, 1998)
**10.40 Third Modification of Credit Agreement dated December 13, 1999 made by
and between Wells Fargo Bank, National Association and United
Investors Realty Trust.
**10.41 Fourth Modification of Credit Agreement dated December 13, 1999 made
by and between Wells Fargo Bank, National Association and United
Investors Realty Trust.
**10.42 Golding United FishHawk Ltd. Agreement of Limited Partnership by and
between Golding United FishHawk, Inc., a Florida corporation, as the
General Partner, and UIRT FISHHAWK LLC, a Florida limited liability
company ("UIRT"), and The Stuart S. Golding Company, a Florida
corporation ("SSG"), as the Limited Partners.
**23.1 Consent of Independent Auditors
**27.1 Financial Data Schedule
(b) Reports on 8-K
None
** Filed as an exhibit hereto.
(c) Exhibits
The list of exhibits filed with this report is set forth in response to
Item 14 (a)(3). The required exhibits have been filed as indicated in the
Exhibit Index. The Company agrees to furnish a copy of any long-term debt
instrument wherein the securities authorized do not exceed 10 percent of the
registrant's total assets on a consolidated basis upon the request of the
Securities and Exchange Commission.
(d) Financial Statements and Schedules
Schedule III -- Real Estate and Accumulated Depreciation attached hereto
is hereby incorporated by reference to this Item.
19
<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.
UNITED INVESTORS REALTY TRUST
(Registrant)
Date: March 15, 2000 By /s/ Robert W. Scharar
___________________________________________
Robert W. Scharar
President and Chief Executive Officer
Date: March 15, 2000 By /s/ R. Steven Hamner
___________________________________________
R. Steven Hamner
Vice President and Chief Financial Officer
(Principal Accounting Officer)
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.
Name Capacity Date
/s/ Robert W. Scharar Trust Manager and
__________________________ Chairman of the Board March 15, 2000
Robert W. Scharar
/s/ Josef C. Hermans
__________________________ Trust Manager March 15, 2000
Josef C. Hermans
/s/ William C. Brooks Trust Manager March 15, 2000
__________________________
William C. Brooks
/s/Frederick E. Fisher Trust Manager March 15, 2000
__________________________
Frederick E. Fisher
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trust Managers and Shareholders
United Investors Realty Trust
We have audited the accompanying consolidated balance sheets of United
Investors Realty Trust and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of operations, redeemable preferred
shares and common shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1999. Our audits also included
the financial statement schedule listed in the index at Item 14(a). These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
United Investors Realty Trust and subsidiaries at December 31, 1999 and
1998, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ Ernst & Young LLP
Houston, Texas
January 22, 2000
F-1
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
--------------------------
1999 1998
---------- -----------
<S> <C> <C>
Investment real estate:
Land........................................................... $48,964,963 $ 44,290,975
Buildings and improvements..................................... 127,232,647 114,716,718
Property under development..................................... 1,105,343 1,321,823
---------- -----------
177,302,953 160,329,516
Less accumulated depreciation.................................. (11,164,573) (7,434,343)
----------- -----------
Investment real estate, net.................................... 166,138,380 152,895,173
Cash and cash equivalents........................................ 1,807,791 5,486,095
Accounts receivable, net of allowance of $112,047 and $120,333
in 1999 and 1998, respectively................................. 2,876,523 2,733,070
Prepaid expenses and other assets................................ 4,143,068 3,509,771
---------- -----------
Total assets........................................... $174,965,762 $164,624,109
=========== ===========
LIABILITIES, MINORITY INTEREST,
AND COMMON SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable......................................... $50,043,083 $ 55,248,437
Capital lease obligations...................................... 11,529,745 9,914,054
Construction note payable...................................... 5,198,132 1,221,393
Short-term notes and line of credit............................ 22,953,000 7,500,000
Accounts payable -- trade...................................... 2,604,242 1,761,208
Accrued property taxes......................................... 2,463,128 2,516,291
Security deposits.............................................. 820,363 722,421
Distributions payable.......................................... 1,945,673 2,045,702
---------- -----------
Total liabilities...................................... 97,557,366 80,929,506
---------- -----------
Minority interest in consolidated partnerships................... 2,745,791 2,825,284
---------- -----------
Commitments and contingencies
Common shareholders' equity:
Common shares of beneficial interest, no par value,
500,000,000 shares authorized, 9,514,889 shares
issued at December 31, 1999 and 1998........................... 87,233,173 87,155,327
Accumulated deficit............................................ (8,517,310) (5,701,789)
---------- ----------
78,715,863 81,453,538
Less:
Treasury shares, at cost, 470,997 and 80,000 at
December 31, 1999 and 1998, respectively.................... (3,238,227) (584,219)
Shareholder notes receivable................................ (815,031) --
---------- ----------
Total common shareholders' equity...................... 74,662,605 80,869,319
---------- ----------
Total liabilities, minority interest,
and common shareholders' equity..................... $174,965,762 $164,624,109
============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Revenues:
Base rents........................................... $19,572,159 $13,231,250 $4,954,820
Percentage rents..................................... 315,400 322,633 26,400
Expense reimbursements............................... 5,759,883 3,769,885 1,167,355
Interest and other income............................ 348,113 426,402 27,278
----------- ----------- ----------
Total revenues............................... 25,995,555 17,750,170 6,175,853
----------- ----------- ----------
Expenses:
Property operating .................................. 2,852,058 1,854,467 609,673
Property taxes....................................... 3,681,844 2,485,915 793,359
Property management fees............................. 272,272 307,783 178,030
General and administrative........................... 1,621,654 1,016,508 384,762
Advisory fees........................................ 1,207,189 794,043 312,000
Share grant to Advisor and officers.................. -- -- 787,500
Interest (including write-off of $2,240,652 in
unamortized bridge financing costs in 1998)........ 6,680,730 6,079,889 2,435,538
Depreciation and amortization........................ 4,256,972 2,907,855 1,309,180
----------- ----------- ----------
Total expenses............................... 20,572,719 15,446,460 6,810,042
Income (loss) before minority interest, extraordinary
item and preferred share distribution requirements 5,422,836 2,303,710 (634,189)
Minority interest in earnings of consolidated
partnerships.......................................... (145,977) (126,111) (40,894)
----------- ----------- ----------
Income (loss) before extraordinary item and preferred
share distribution requirements........................ 5,276,859 2,177,599 (675,083)
Extraordinary item-prepayment penalties incurred on
early extinguishment of debt......................... (36,477) (232,532) --
---------- ----------- ----------
Net income (loss)...................................... 5,240,382 1,945,067 (675,083)
Preferred share distribution requirements.............. -- (20,670) (96,633)
----------- ----------- ----------
Net income (loss) available for common shareholders.... $ 5,240,382 $ 1,924,397 $ (771,716)
=========== =========== ==========
Net income (loss) before extraordinary item and preferred
share distribution requirement per common share...... $0.56 $ 0.28 $ (0.74)
Extraordinary item per common share.................... -- (0.03) --
Preferred share distribution requirement per
common share......................................... -- -- (0.11)
----------- ----------- ----------
Net income (loss) per common share
(basic and diluted).................................. $ 0.56 $ 0.25 $ (0.85)
=========== =========== ==========
Weighted average shares outstanding.................... 9,433,883 7,702,709 912,493
=========== =========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED
SHARES AND COMMON SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
PREFERRED SHARES OF COMMON SHARES OF
BENEFICIAL INTEREST BENEFICIAL INTEREST TREASURY SHARES
------------------- -------------------- ACCUMULATED ---------------------
NUMBER AMOUNT NUMBER AMOUNT DEFICIT NUMBER AMOUNT
------ ---------- --------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.......... 10,737 $ 1,068,226 837,489 $ 7,527,577 $ (385,562) -- $ --
Issuance of common shares of
beneficial interest................. -- -- 77,400 817,500 -- -- --
Loss before preferred share distribution
requirements........................ -- -- -- -- (675,083) -- --
Distributions......................... -- -- -- -- (333,206) -- --
Redeemable preferred shares of
beneficial interest distributions,
$9.00 per share..................... -- -- -- -- (96,633) -- --
------ ----------- --------- ---------- ---------- -------- -----------
Balance at December 31, 1997.......... 10,737 1,068,226 914,889 8,345,077 (1,490,484) -- --
Issuance of common shares of
beneficial interest, net of offering
costs of $7,189,750................. -- -- 8,600,000 78,810,250 -- -- --
Redeemable preferred shares of
beneficial interest distributions,
$9.00 per share.................... -- -- -- -- (20,670) -- --
Preferred share retirement............ (10,737) (1,068,226) -- -- -- -- --
Treasury share purchases.............. -- -- -- -- -- (80,000) (584,219)
Income before preferred share
distribution requirements.......... -- -- -- -- 1,945,067 -- --
Distributions($0.645 per share)....... -- -- -- -- (6,135,702) -- --
------ ----------- --------- ---------- ----------- -------- ------------
Balance at December 31, 1998.......... -- -- 9,514,889 87,155,327 (5,701,789) (80,000) (584,219)
Treasury share purchases.............. -- -- -- -- -- (469,500) (3,210,686)
Share grant........................... -- -- -- -- -- 2,000 14,250
Stock options exercised............... -- -- -- 220,103 -- 81,503 594,928
Offering expenses..................... -- -- -- (142,257) -- -- --
Share forfeiture...................... -- -- -- -- -- (5,000) (52,500)
Distributions ($0.86 per share)....... -- -- -- (8,055,903) -- --
Net income -- -- -- -- 5,240,382 -- --
------ ----------- --------- ---------- ----------- -------- -----------
Balance at December 31, 1999.......... -- $ -- 9,514,889 $87,233,173 $(8,517,310) (470,997) $(3,238,227)
====== =========== ========= =========== =========== ======== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED
SHARES AND COMMON SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
SHAREHOLDER
NOTES RECEIVABLE TOTAL
<S> ---------------- -----------
<C> <C>
Balance at December 31, 1996.......... $ $ 8,210,241
Issuance of common shares of
beneficial interest................. -- 817,500
Loss before preferred share distribution
requirements........................ -- (675,083)
Distributions......................... -- (333,206)
Redeemable preferred shares of
beneficial interest distributions,
$9.00 per share..................... -- (96,633)
--------- -----------
Balance at December 31, 1997.......... -- 7,922,819
Issuance of common shares of
beneficial interest, net of offering
costs of $7,189,750................. -- 78,810,250
Redeemable preferred shares of
beneficial interest distributions,
$9.00 per share.................... -- (20,670)
Preferred share retirement............ -- (1,068,226)
Treasury share purchases.............. -- (584,219)
Income before preferred share
distribution requirements.......... -- 1,945,067
Distributions($0.645 per share)....... -- (6,135,702)
----------- -----------
Balance at December 31, 1998.......... -- 80,869,319
Treasury share purchases.............. -- (3,210,686)
Share grant........................... -- 14,250
Stock options exercised............... (815,031) --
Offering expenses..................... -- (142,257)
Share forfeiture...................... -- (52,500)
Distributions ($0.86 per share)....... -- (8,055,903)
Net income -- 5,240,382
---------- -----------
Balance at December 31, 1999.......... $ (815,031) $74,662,605
========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................... $5,240,382 $1,945,067 (675,083)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 4,143,685 2,812,320 1,094,236
Amortization...................................... 290,250 134,565 81,292
Extraordinary item................................ 36,477 232,532 --
Amortization of bridge financing costs............ -- 2,240,652 --
Minority interest in net income of consolidated
partnerships.................................... 145,977 126,111 40,894
Share forfeiture.................................. (52,500) -- --
Payment of common shares for services............. 14,250 -- 817,500
(Increase) decrease in accounts receivable........ 419,047 (1,935,374) 166,083
Increase (decrease) in accounts payable-trade..... (37,623) 1,208,212 302,148
Changes in other operating assets and liabilities. (178,084) (554,193) (139,013)
---------- ---------- ----------
Net cash provided by operating activities.... 10,021,861 6,209,892 1,688,057
---------- ---------- ----------
Cash flows from investing activities:
Purchase of and capital improvements to investment
real estate....................................... (15,885,181) (59,654,366) (406,802)
Escrow deposits...................................... 181,378 1,503,389 (2,305,000)
---------- ---------- ----------
Net cash used in investing activities........ (15,703,803) (58,150,977) (2,711,802)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from bridge financing....................... -- 53,689,913 --
Payments on bridge financing......................... -- (53,689,913) --
Preferred share retirement........................... -- (1,068,226) --
Convertible note retirement.......................... -- (212,400) --
Proceeds from short-term notes payable............... 15,453,000 7,550,000 2,660,871
Principal payments on mortgage notes payable......... (5,205,354) (16,931,241) (799,964)
Principal payments on short-term notes payable....... -- (3,275,000) (40,000)
Principal payments on capital lease obligations...... (92,509) -- --
Proceeds from construction note payable.............. 3,976,739 1,221,393 --
Preferred share distribution......................... -- (20,670) (96,633)
Proceeds from public offering........................ -- 86,000,000 --
Offering costs....................................... (142,257) (7,189,750) (419,700)
Payment of prepayment penalties...................... (36,477) (232,532) --
Payment of bridge financing costs.................... -- (2,240,652) --
Payment of distributions............................. (8,155,932) (4,090,000) --
Purchase of treasury shares.......................... (3,210,686) (584,219) --
Distributions to holders of minority interests....... (225,470) (1,697,883) (53,996)
Payment of loan acquisition costs.................... (357,416) (147,789) --
---------- ---------- ----------
Net cash provided by financing
activities................................. 2,003,638 57,081,031 1,250,578
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents....... (3,678,304) 5,139,946 226,833
Cash and cash equivalents at beginning of year......... 5,486,095 346,149 119,316
---------- --------- ----------
Cash and cash equivalents at end of year............... $1,807,791 $5,486,095 $ 346,149
========== ========== ==========
</TABLE>
See accompanying notes.
F-6
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
United Investors Realty Trust and Subsidiaries (the "Company"), a Texas
real estate investment trust ("REIT") is engaged in the acquisition,
development, and management of neighborhood and community shopping centers in
the Sunbelt states. The tenants of the Company's shopping centers include
national and regional supermarkets and drug stores and other national, regional,
and local retailers that provide basic necessity and convenience goods and
services to the surrounding population.
The Company operated from 1989 until 1998 as a private REIT. On March 13,
1998, the Company completed an initial public offering (the "IPO") of 7,600,000
common shares of beneficial interest. In April 1998, the Company issued another
1,000,000 common shares of beneficial interest pursuant to the exercise of the
underwriters' overallotment options. Prior to the IPO, the Company had
outstanding approximately 915,000 shares.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and entities in which it owns controlling
interests. All significant intercompany balances have been eliminated. Minority
interests in the accompanying financial statements represent the allocable share
of equity and earnings of consolidated partnerships attributable to interests
held by third parties.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
INVESTMENT REAL ESTATE
Investment real estate, consisting of 28 shopping centers, is recorded at
cost less accumulated depreciation. The cost of real estate acquired by the
issuance of shares of beneficial interest or other securities is determined by
the estimated value of the securities issued or the real estate acquired. The
allocation of cost between land and building is based on the estimated fair
value at the time of the purchase. Depreciation is computed using the
straight-line method over the estimated useful lives of 20 to 40 years for the
shopping centers and over the lease term for tenant improvements (generally 5 to
15 years).
Expenditures for repairs and maintenance are charged to operations as
incurred. Significant betterments are capitalized.
When assets are sold or retired, their costs and related accumulated
depreciation are removed from the accounts, with the resulting gains or losses
reflected in operations for the period.
Recoverability of investment real estate is evaluated when events or
circumstances indicate a possible inability to recover its carrying amount.
Recoverability is determined on a property-by-property basis utilizing the
undiscounted cash flow method. If undiscounted cash flows would be insufficient
to recover the carrying amount of the real estate, the real estate is reduced to
fair value. No reductions have been recorded to date.
INTANGIBLES
Deferred leasing costs at December 31, 1999 and 1998 were $518,154, net of
amortization of $229,356, and $266,507, net of amortization of $242,903,
respectively. Deferred leasing costs are amortized over the life of the
respective lease.
Deferred financing costs at December 31, 1999 and 1998 were $739,909, net
of amortization of $200,068, and $559,005, net of amortization of $263,822,
respectively. Deferred financing costs are amortized over the life of the
respective mortgage note or line of credit.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
individual leases. Reimbursements from tenants for their share of taxes,
insurance and common area maintenance costs are estimated and accrued over the
lease year. Percentage rents are accrued when the tenants' sales exceed the
level that requires rental payments in excess of base rents.
F-7
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income available
for common shareholders by the weighted average number of shares of beneficial
interest outstanding during the year. The assumed conversion of redeemable debt
and redeemable preferred shares would be antidilutive in all years presented.
CONCENTRATION OF RISK
The Company's primary business activity is investing in income-producing
real property. The Company's retail shopping center properties are located in
Austin, College Station, Dallas, El Campo, Houston and San Antonio, Texas;
Lenoir City and Athens, Tennessee; Phoenix and Yuma, Arizona; and Tampa and
Pembroke Pines, Florida. During 1999, revenues were comprised of 68.1% in Texas,
16.2% in Florida, 12.4% in Arizona, and 3.3% in Tennessee.
No single tenant currently accounts for more than 10% of rental revenue.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
2. INVESTMENT REAL ESTATE
At December 31, 1997, the Company owned eight shopping centers. Four
shopping centers were acquired and mortgage debt was refinanced in February 1998
with the proceeds of a $53,700,000 bridge financing arrangement. In March and
April, UIRT sold 8,600,000 common shares through the IPO and raised
approximately $79,000,000 net of offering costs. The proceeds were used to repay
the bridge financing, acquire partnership units from minority interest holders,
retire preferred shares and convertible debt, and acquire four additional
properties. During the remainder of 1998, eight additional properties were
purchased and development commenced on one property. At December 31, 1998, the
Company owned an interest in 25 properties.
During 1999, the Company purchased three additional shopping centers and
completed construction on the center that was under development at December 31,
1998.
The 1999 acquisitions include two centers in Houston, TX: Albertson's
Bissonnet and Albertson's Spring Shadows. The anchor stores at both locations
are owned and occupied by Albertson's Supermarkets. The Company owns the
remaining square footage aggregating approximately 52,000 square feet.
Albertson's Bissonnet was acquired with proceeds from the Company's revolving
line of credit. At December 31, 1999 Albertson's Spring Shadows is owned
pursuant to a capital lease (see Note 3).
The Company also completed the acquisition of the Skipper Palms Shopping
Center in Tampa, Florida. The center has GLA of approximately 86,500 square feet
including a 53,000-square-foot Winn Dixie grocery store. The center was acquired
with proceeds from the Company's revolving line of credit.
Construction was completed on the Lake St. Charles Shopping Center in
Tampa, Florida. The center is anchored by a 46,000 square foot Kash N Karry
grocery store and includes 11,000 square feet of additional store space. Two
vacant pad sites are available for future development.
Of the Company's 28 operating properties, 23 are 100% owned by the Company
either directly or through single purpose, wholly-owned subsidiaries. Two of the
properties (with an aggregate cost of $10,052,859) are owned through limited
partnerships in which the Company holds at least 96% of the partnership
interests. Three of the properties are owned pursuant to capital lease
arrangements that have transferred virtually all risks and rewards of ownership
to the Company. The Company also has one property under development at December
31, 1999.
At December 31, 1999, the Company had identified five properties that may
no longer have the investment characteristics currently attractive to the
Company. These assets held for sale are carried at the lower of depreciated cost
or fair value less costs to dispose. In 1999, these properties accounted for
approximately $4,100,000 in revenue and had a carrying value of approximately
$25,000,000 at December 31, 1999.
F-8
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEBT
REDEEMABLE CONVERTIBLE SUBORDINATED NOTES
At December 31, 1997, the Company had outstanding $212,400 of redeemable
convertible subordinated notes payable bearing interest at 9% with semiannual
interest payments due June 30 and December 31 of each year. These notes were
repaid during 1998.
SHORT-TERM NOTES PAYABLE
During 1996, the Company issued $600,000 of unsecured promissory notes to
individuals. During 1997, the Company issued an additional $400,000 of unsecured
promissory notes to individuals. The notes required quarterly payments of
interest only, at 10% and were repaid in March 1998 with proceeds from the IPO.
CAPITAL LEASE OBLIGATIONS
Property under capital leases, consisting of three shopping centers,
aggregated $19.1 million at December 31, 1999 and is included in buildings and
improvements. Depreciation of the property under capital leases is combined with
depreciation of owned properties in the accompanying financial statements.
Future minimum lease payments under these capital leases for each of the five
years ending December 31 and thereafter are as follows:
<TABLE>
<S> <C>
2000............................................. $ 2,460,834
2001............................................. 821,055
2002............................................. 821,055
2003............................................. 821,055
2004............................................. 821,055
Thereafter....................................... 11,313,887
------------
$ 17,058,941
============
</TABLE>
The amount of these total payments representing interest is approximately
$5.5 million.
MORTGAGE NOTES PAYABLE
The Company's mortgage notes payable consist of fixed-rate debt of
$50,043,083 and $55,248,437 at December 31, 1999 and 1998, respectively. The
interest rates range from 7.50% to 9.30% with payments of principal and interest
due monthly. The notes mature at various times through 2018. The notes are
collateralized by first lien mortgages on properties with an aggregate carrying
value of approximately $74,708,183, net of $3,727,680 of accumulated
depreciation.
Aggregate annual maturities of fixed rate mortgage notes payable for each
of the five years ending December 31 and thereafter are as follows:
<TABLE>
<S> <C>
2000............................................. $ 731,472
2001............................................. 867,350
2002............................................. 3,120,951
2003............................................. 948,593
2004............................................. 1,033,137
Thereafter....................................... 43,341,580
-----------
$50,043,083
===========
</TABLE>
CONSTRUCTION NOTE PAYABLE
The Company has a construction note for the purpose of funding the
development of the Lake St. Charles property. The note is in the amount of
$5,620,000, of which $5,198,132 had been funded at December 31, 1999. Principal
and accrued interest, at a rate of LIBOR plus 1.75%, will be due on June 15,
2000. The note is partially collateralized by the $1,686,000 letter of credit
described in the Letter of Credit section of Note 3.
REVOLVING CREDIT AGREEMENT
Effective August 29, 1998, the Company entered into a $30,000,000 revolving
credit agreement with a bank. On December 17, 1999, the revolving credit
agreement was amended to, among other things, increase the line by $6.5 million.
Borrowings are now collateralized by first mortgage deeds of trust on six
shopping centers and new borrowings bear interest at 154.45 basis points over
F-9
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
selected London Interbank Offered Rates. The facility expires on August 30,
2001. The Company may elect to extend it for one additional year upon
notification to the lender and payment of an extension fee equal to 0.25% of the
aggregate amount outstanding at such date. At December 31, 1999 the Company had
borrowed $22,953,000 under the line at a weighted average rate of approximately
7.8% under LIBOR contracts ranging from one to three months. In addition, the
Company had issued letters of credit aggregating approximately $5,910,000 (see
Letters of Credit below).
One of the credit agreement covenants limits total company debt to not more
than 50% of a formula-based calculation of total asset value. As of December 31,
1999, total debt represented approximately 55% of such value. The Company has
begun discussions with the lender concerning the modification of the loan terms
to increase this limit to 60% and cure the default. The Company may add one or
more unencumbered properties to the lender's pool of collateral properties to
facilitate the modification. In the event the lender is unwilling to modify the
agreement, the lender could accellerate the debt, which is scheduled to mature
in August 2001.
The lender has indicated the willingness to modify the covenant and
accordingly, management believes the Company will be able to successfully modify
the credit agreement. In the event the Company is unsuccessful, management
believes the credit agreement can be refinanced with other lenders, although at
higher interest rates.
Effective August 23, 1996, the Company entered into a $200,000 unsecured
revolving line of credit facility with a bank. Interest of prime (8.25% at
December 31, 1996 and 8.5% at December 31, 1997) plus 1/5% was payable
quarterly. The facility was repaid with proceeds from the IPO.
The Company entered into a $100,000 unsecured revolving line of credit
facility with a bank in February 1996. Interest of prime (8.5% at December 31,
1997) plus 1.5% was payable monthly until maturity in May 1998. As of December
31, 1997 the Company had drawn $100,000 on the bank credit facility. The
facility was repaid with proceeds from the IPO.
The Company entered into short-term mortgage loan agreements with an
affiliate of the Investment Manager (see Note 9) in December 1997. The loan
proceeds, which required interest at 12% and totaled $1,925,000, were repaid
with proceeds from the IPO.
LETTERS OF CREDIT
The Company issued an irrevocable letter of credit in the approximate
amount of $1,686,000 as collateral for a bank loan, the proceeds of which were
used for the development of the Lake St. Charles neighborhood shopping center in
Tampa, Florida. The property was completed during 1999 and the Company acquired
100% of the interest in the limited liability company which owns the property.
In January 1999, the Company issued an irrevocable letter of credit in the
approximate amount of $878,000 to the seller of a neighborhood shopping center
in Houston, Texas. The shopping center was acquired on August 31, 1999, for a
total consideration of approximately $2,000,000 and the letter of credit was
released.
The Company has issued letters of credit aggregating $361,000 to the seller
of three neighborhood shopping centers in Dallas, Texas. The Company is
obligated to purchase approximately 6,016 square feet of additional retail shop
space for an aggregate price equal to the sum of the letters of credit if the
seller remediates certain environmental contamination at these centers.
The Company has issued an irrevocable letter of credit in the approximate
amount of $1,708,000 to the owner of a neighborhood shopping center in Houston,
Texas. This property is subject to a capital lease arrangement at December 31,
1999. The terms of the agreement require the Company to purchase the shopping
center for total consideration of approximately $5,200,000 (of which
approximately $3,500,000 has been paid) in July 2000.
The Company has issued an irrevocable letter of credit in the amount of
$2,155,000 in connection with the joint venture with Stuart S. Golding, Golding
United FishHawk, Ltd (see Note 7).
For each letter of credit, the Company pays an annual fee equal to 1.5% of
the letter of credit amount. The fee is amortized over the life of the letter of
credit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's mortgage notes payable, construction note
payable, and revolving line of credit are estimated based on the current rates
available to the Company for debt of the same remaining maturities. Variable
rate notes payable, and the line of credit are considered to be at fair value
since the interest rates on such instruments reprice based on current market
conditions. The Company considers the carrying value of the fixed rate notes
payable to be a reasonable estimation of their fair value based on the fact that
the rates of such notes are similar to rates available to the Company for debt
of the same terms.
F-10
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. SHARES OF BENEFICIAL INTEREST:
REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST
In 1995, the Company authorized 20,000, $100 par value, 9% redeemable
preferred shares of beneficial interest ("preferred shares") and issued 5,750
preferred shares at par value and 4,987 shares through conversion from the 9%
redeemable convertible subordinated notes (See Note 3). Distributions on the
preferred shares were cumulative from date of issuance and payable on a
quarterly basis.
The Company purchased and redeemed 100% of the preferred shares outstanding
at a redemption price equal to par value plus a 3% premium in March 1998 with
proceeds from the IPO.
COMMON SHARES OF BENEFICIAL INTEREST
In December 1997 the Company issued 75,000 shares to its external advisor,
FCA Corp. (the "Investment Manager") and certain officers as compensation for
past services. The shares were valued at $10.50 for a total of $787,500 which
was charged to expense in 1997. The shares issued to the Investment Manager and
certain officers have certain restrictions as to the timing of any resale, and
accordingly, are valued at an amount lower than the unrestricted shares issued
to the Trust Managers (see Note 9).
The Company also issued 2,400 shares in 1997 to the Trust Managers for
payment of services rendered.
During 1998, the Company completed its IPO and issued 8,600,000 common
shares of beneficial interest. There were 80,000 shares repurchased and held in
treasury at December 31, 1998.
In 1999, the Company issued 81,503 common shares out of treasury in
connection with the exercise of stock options. An additional 469,500 shares were
repurchased by the Company pursuant to its share repurchase plan. A grant of
2,000 shares was issued to an employee and 5,000 grant shares were forfeited.
5. EARNINGS PER SHARE DATA
Basic earnings per share is computed based upon the weighted average number
of common shares outstanding during the period presented. Diluted earnings per
share is computed based upon the weighted average number of common shares and
dilutive common share equivalents outstanding during the periods presented. The
number of diluted shares related to outstanding share options is computed by
application of the Treasury share method. The following table sets forth the
computation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
Year ended December 31,
Weighted Average Shares 1999 1998 1997
-------- -------- --------
<C> <C> <C> <C>
<S>
Basic EPS 9,433,883 7,702,709 912,493
Effect of dilutive securities:
Employee share options -- -- --
--------- ------- -------
Diluted EPS 9,433,883 7,702,709 912,493
========= ======= =======
Distributions per share declared $ 0.86 $ 0.645 $ 0.398
========= ======= =======
</TABLE>
The computations above do not assume the conversion of the Company's redeemable
debt and redeemable preferred shares in 1997 as they would have been
antidilutive to earnings per share.
Weighted average shares outstanding includes 75,000 shares granted to the
Investment Manager and certain officers on December 30, 1997 as if such shares
had been outstanding for the entirety of each year.
6. MINORITY INTEREST
In connection with certain properties acquired, the Company has issued
downREIT partnership units to third party owners in addition to assuming the
existing mortgage debt on the shopping centers and making cash payments to the
sellers. Holders of the partnership units are paid a distribution equivalent to
distributions paid on the Company's common shares, and may convert their
partnership units to REIT shares after one year. All partnership units, totaling
281,594, are currently convertible.
The initial value of the units, and subsequent income allocated and
distributions paid to the minority partners are reflected in minority interest
in consolidated partnerships.
F-11
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. REAL ESTATE VENTURE
In November 1999, the Company entered into a joint venture with affiliates
of the Stuart S. Golding Company ("Golding") to develop grocery-anchored
shopping centers in the central Florida area. At December 31, 1999, the Company
and Golding had formed Golding United FishHawk Ltd. ("FishHawk") for the purpose
of developing an 80,000 square foot center in the Tampa area to be anchored by
an approximately 48,000 square foot Kash N Karry grocery store. FishHawk has
acquired land and incurred debt of approximately $1,600,000 at December 31, 1999
and the Company has issued a letter of credit in the amount of $2,155,000 in
connection with the development of this center. The Company accounts for its
investment in FishHawk by the equity method of accounting.
8. FEDERAL INCOME TAXES
The Company operates in such a manner so as to qualify as a "real estate
investment trust" under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations promulgated thereunder. Under
those Sections, the Company will not be taxed on that portion of its income
distributed to shareholders so long as at least 95 percent of the Company's
otherwise taxable income is distributed to shareholders each year and other
requirements of a qualified real estate investment trust are met. Management
believes the Company has satisfied the income distribution and other
requirements through the year ended December 31, 1999 and believes all other
requirements of a qualified real estate investment trust have been met.
The Company has approximately $545,000 of net operating losses that may be
carried forward to offset future taxable income. However, in 1998, sales of
shares of beneficial interest resulted in a change of ownership for federal
income tax purposes. As a result of the ownership change, the amount of net
operating losses generated prior to the ownership change, which may be used to
offset federal taxable income, is subject to an annual limitation imposed by the
Internal Revenue Code. These net operating losses expire from 2009 through 2016.
The tax status of per-share distributions relating to common shares of
beneficial interest declared attributable to the years presented is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Ordinary income.................................. $0.70 $0.19 $0.00
===== ===== =====
Return of capital................................ $0.16 $0.24 $0.40
===== ===== =====
</TABLE>
9. COMMITMENTS
TENANT LEASES
The Company is the lessor of commercial retail space generally under
operating leases which provide for minimum base rentals plus contingent rentals
based upon a percentage of gross receipts. Most leases also provide that the
tenant must pay as additional rent a pro rata share of real property taxes,
insurance and common area maintenance.
The future minimum base rents for the operating leases in existence at
December 31, 1999, are as follows:
<TABLE>
<S> <C>
2000............................................ $18,147,854
2001............................................ 15,617,813
2002............................................ 12,934,134
2003............................................ 9,664,122
2004............................................ 7,247,990
Thereafter...................................... 42,212,211
-----------
$105,824,124
===========
</TABLE>
GROUND LEASE
The Company has a 40-year ground lease for Park Northern Shopping Center
with an unrelated third party. Rent of $8,333 plus 5% of total gross revenues is
payable monthly through the year 2035. The Company has an option to extend this
lease for four consecutive periods of ten years each. Future minimum lease
payments are as follows:
F-12
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS AMOUNT
----- ----------
<S> <C>
2000.............................................. $ 100,000
2001.............................................. 100,000
2002.............................................. 100,000
2003.............................................. 100,000
2004 through 2035................................. 3,200,000
----------
$3,600,000
==========
</TABLE>
Ground rental expense included in the statement of operations was $133,705,
$134,329, $133,652 in 1999, 1998 and 1997, respectively.
10. ADVISORY AGREEMENT AND RELATED PARTY TRANSACTIONS
The Company is advised by the Investment Manager, FCA Corp. The Chairman of
the Board of Trust Managers is also the principal shareholder and Chief
Executive Officer of FCA Corp. Advisory fee expenses were $1,207,189, $794,043
and $312,000 for 1999, 1998 and 1997, respectively.
Through December 31, 1997 advisory fees were calculated at .8%, on an
annual basis, of the gross Company assets, as defined, at year-end, increased by
noncash reserves. Effective January 1, 1998, the Company amended the advisory
agreement to provide that the advisory fee be based on 6.8% of adjusted funds
from operations as defined (generally, earnings before interest, taxes,
depreciation and amortization and gains or losses from sales of property).
Effective July 1, 1999, the rate was reduced to 6.5%.
In addition, the Company reimburses the Investment Manager for the
salaries, benefits, and occupancy costs of employees who perform property
management, leasing, property level accounting, and other operational duties for
the Company. The Company reimbursed the Investment Manager $710,169 and $279,185
in 1999 and 1998, respectively, as reimbursements for salaries of certain
employees and certain other operating expenses.
Total fees paid to independent trust managers were approximately $38,000,
$44,433 and $33,000 in 1999, 1998 and 1997, respectively. During 1997, $30,000
of the fees paid to trust managers were satisfied by issuing a total of 2,400
shares of beneficial interest (based on an estimated value of $12.50 per share).
11. SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental information is related to the statement of cash
flows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Assumption of mortgage notes payable for acquisition of
investment real estate................................ $ -- $57,167,233 $ --
Minority interest granted in exchange for investment
real estate contributed............................... -- 2,794,440 --
Net liabilities assumed in acquisition of investment
real estate........................................... 102,001 1,372,396 --
Payment of distribution with shares of affiliated trust. -- -- 333,206
Distribution declared but not paid...................... 1,945,673 2,045,702 --
Capital lease obligation on real estate acquired........ 1,708,200 -- --
Receivable from land sale............................... 562,500 -- --
Environmental remediation liability on real estate
acquired............................................. 272,500 -- --
Shareholder notes receivable upon exercise of stock
options.............................................. 815,031 -- --
Cash paid for interest, net of $23,000 of capitalized
interest in 1998 and including $2,240,652 in bridge
financing costs written off in 1998................... 6,556,717 6,079,889 2,433,278
</TABLE>
F-13
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. ENVIRONMENTAL ISSUES
Certain tenants in the Company's properties conduct activities that require
the sale or use of hazardous substances, including petroleum products and dry
cleaning chemicals. Should such tenants misuse or inappropriately dispose of
such substances, the Company may become liable for a portion or all of the
remediation costs. The Company attempts to mitigate this risk by limiting the
number of tenants that conduct such operations, requiring such tenants to
maintain environmental risk insurance, and monitoring the operations of such
tenants.
At December 31, 1998 the Company was aware that a dry cleaning company
tenant in one of the Company's Texas shopping centers had allowed hazardous
substances to contaminate a portion of the Company's property. The tenant is in
the process of obtaining engineering studies which will estimate the cost of
remediation and has acknowledged its obligation to fund such costs. During 1999,
the tenant was enrolled in the Texas Natural Resource Conservation Commission's
Voluntary Cleanup Program. Management of the Company believes there will be no
material adverse effect on the Company's operations as a result.
As part of the Company's due diligence investigation of three shopping
centers acquired in December 1998, the Company discovered that a portion of each
such shopping center was contaminated with varying levels of dry cleaning
substances. As a result of the Company's discovery, the Company acquired only
the portions of the properties that, based on environmental engineering reports,
were not contaminated. The sellers of such properties have placed in escrow
amounts sufficient, based on the engineering reports, to remediate the
contamination. Upon completion by the seller of such remediation, as evidenced
by written confirmation of state environmental authorities, the Company is
obligated to purchase the remaining portions of the shopping centers. The
Company has escrowed letters of credit totaling $361,000 as the purchase price
for these additional retail areas.
At December 31, 1999, the Company was aware that a dry cleaning company
tenant in one of the Florida shopping centers had allowed hazardous substances
to contaminate a portion of the Company's property prior to the time the Company
acquired the property. The tenant is currently enrolled in the State of Florida
Department of Environmental Protection ("FDEP") Drycleaning Solvent Cleanup
Program which provides assessment and cleanup funds for dry cleaning facilities.
The Company has recently submitted to the FDEP an engineering report prepared by
a third party estimating clean up costs that range from $250,000 to $1.3
million. There is no assurance, however, that the FDEP Program will have funds
available at the time the property is selected for clean up. The Company
believes that the actual cost of clean up will be well below the maximum
estimate and has purchased an insurance policy that limits the Company's
exposure to approximately $300,000. At December 31, 1999, the Company has
accrued $272,500 related to remediation, which is included in accounts payable.
13. STOCK OPTION PLAN
During 1998, the Company granted options to purchase 337,000 common shares
to certain officers, employees, Trust Managers, and the Investment Manager. The
recipients are eligible to exercise 25% of their options each January 1,
beginning in 1999. The exercise price is $10.00 per share, up to 100% of which
may be borrowed from the Company, subject to Board approval. The total amount
borrowed in 1999 by the recipients is included in shareholder notes receivable
at December 31, 1999. Loans are repayable over four years and require annual
payments of 25% of the initial principal and interest calculated at the
Applicable Federal Rate published by the IRS. The Applicable Federal Rate as of
January 1, 1999 was 4.64%.
With respect to options that became exercisable on January 1, 1999, the
Board of Trust Managers elected to forgive 80% of the borrowed amount. The loan
will be forgiven in equal installments over a four-year period, at the rate of
20% per year, conditioned upon continued employment by the Company or the
Investment Manager. Included in general and administrative expenses for 1999 is
approximately $112,000, which represents the accrual of such loan forgiveness
with respect to loans made to the Company's officers and employees. Included in
advisory fees for 1999 is $66,000, which represents the accrual of such loan
forgiveness with respect to loans made to the Investment Manager. The Board of
Trust Managers elected to provide financing for options exercisable on January
1, 2000, but not to provide any loan forgiveness with respect to such financing.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its Plan. Opinion No.
25 measures compensation cost using the intrinsic value based method of
accounting. Under this method, compensation cost is the excess of the quoted
market price of the stock at the date of grant over the amount an employee must
pay to acquire the stock. Accordingly, the Company recognized no compensation
expense during 1999.
F-14
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
If the Company had measured compensation cost using the fair value method
prescribed in SFAS 123, "Accounting for Stock-Based Compensation", the impact on
the Company's consolidated net income and earnings per share would have been
less than 3% in both 1999 and 1998. The fair value of each option was estimated
at the date of grant using the Black-Scholes calculation with the following
assumptions:
<TABLE>
<CAPTION>
<S> <C> <C>
Risk-free interest rate 5.36-5.57%
Dividend yield 8.6%
Weighted average option life 5-6 years
Volatility 0.189
</TABLE>
The following table summarizes the stock option activity for the periods
presented:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Options Options Weighted Average
Granted Exercisable Exercise Price
------- ------------ --------------
Options granted in connection
with IPO ..................... 334,000 $10.00
Options outstanding at ------- ------
December 31, 1998............. 334,000 -- $10.00
Options granted on
January 1, 1999................ 8,000 4,000 $ 6.75
Options exercised.............. (81,500) -- $10.00
Options forfeited.............. (12,000) -- $ 6.75
Options outstanding at ------- ------ -------
December 31, 1999............. 248,500 4,000 $ 9.95
======= ======= =======
</TABLE>
On January 1, 2000, an additional 81,500 options out of the 334,000 IPO
options became exercisable. The Company has committed to make loans representing
100% of the exercise price of such options ($10.00 per share) but has elected
not to extend the forgiveness provisions to any such loans. Also on January 1,
2000, each independent Trust Manager was granted an option to purchase 2,000
shares for five years at an exercise price of $6.00 per share. These 6,000 share
became exercisable on the date of grant.
14. SUBSEQUENT EVENTS
In January 2000, the Company announced that its Board of Trust Managers has
approved a plan to repurchase up to 1,000,000, or approximately 11%, of its
outstanding common shares of beneficial interest. The Company would acquire the
shares in the open market or in privately negotiated transactions as management
deems appropriate. The share repurchase program will end on the earlier of
December 31, 2000, or when the authorized limit is reached.
F-15
<PAGE>
<TABLE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
As of December 31, 1999
<CAPTION>
Description Initial cost Cost
- ------------------------------------------------- -------------------------------- Capitalized
Subsequent to
Buildings and Acquisition-
Property Location Encumbrances Land Improvements Improvements
-------- -------- ------------ ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shopping centers:
Albertson's Bissonnet Houston, TX -- 588,160 1,372,374 321,216
Albertson's Spring Shadows Houston, TX 1,708,200 1,574,772 3,674,467 --
Arlington Arlington, TX 3,293,728 1,506,595 3,474,887 15,495
Autobahn (1) San Antonio, TX -- 515,205 1,726,150 48,747
Bandera (1) San Antonio, TX -- 2,350,000 8,759,593 387,048
Benchmark Houston, TX 3,588,179 1,680,174 3,920,406 9,017
Big Curve Yuma, AZ 5,834,623 2,657,118 6,249,350 43,932
Centennial (1) Austin, TX -- 1,400,000 3,527,909 611,333
Colony Plaza Sugar Land, TX 3,147,280 1,258,510 2,936,522 37,330
El Campo (1) El Campo, TX -- 360,000 1,640,350 64,000
Garland Garland, TX 1,811,550 851,265 1,980,784 13,939
Hedwig Houston, TX -- 1,710,334 4,940,936 8,000
Highland Square Sugar Land, TX 4,350,230 2,305,673 5,379,903 107,889
Hurst Hurst, TX 1,903,775 1,020,768 2,366,794 71,291
Lake St. Charles Tampa, FL 5,198,132 1,432,818 3,560,569 --
Market at First Colony (1) Houston, TX -- 4,620,502 8,260,308 105,298
Mason Park (1) Houston, TX -- 4,560,164 10,640,382 81,468
McMinn I Athens, TN -- 301,912 1,005,614 72,506
McMinn W (2) Athens, TN -- 212,000 1,164,438 (1,164,438)
Park Northern Phoenix, AZ 2,609,143 -- 4,410,691 210,461
Plano Plano, TX 6,482,220 2,658,183 6,191,076 50,364
Richardson Richardson, TX 3,339,325 1,475,441 3,353,961 92,733
Rosemeade Carrollton, TX 3,406,419 1,379,880 3,047,363 87,561
Skipper Palms Tampa, FL -- 1,277,851 3,254,152 40,000
Southwest Walgreens Phoenix, AZ -- 1,425,812 3,327,240 20,988
Town `N Country Tampa, FL 2,380,356 1,511,833 3,527,611 16,438
Twin Lakes (1) Lenoir City, TN -- 860,706 2,969,230 53,306
University Mall Pembroke Pines, 13,102,906 5,550,000 13,141,475 491,629
FL
University Park College Station, 4,614,894 1,842,331 4,955,490 375,458
TX
Property under development:
McMinn Athens, TN -- 1,030,724 -- --
Market at First Colony Houston, TX -- 74,619 -- --
Undeveloped land:
University Park College Station, -- 276,569 -- --
TX
Revolving line of credit 22,953,000 -- -- --
------------- ------------ ------------ ----------
Totals $ 89,723,960 $ 50,269,919 $124,760,025 $2,273,009
============= ============ ============ ==========
F-16
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
As of December 31, 1999
Gross Amounts at Which
Carried at Close of Period
-------------------------------
DESCRIPTION
- --------------------------
Building and Accumulated Date of Date
Property Land Improvements Total Depreciation Construction Acquired
-------- ---- ------------ ----- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping centers:
Albertson's Bissonnet 894,647 1,387,103 2,281,750 45,595 1999 1999
Albertson's Spring Shadows 1,574,772 3,674,467 5,249,239 52,369 1999 1999
Arlington 1,510,342 3,486,635 4,996,977 115,940 1982 1998
Autobahn 515,205 1,774,897 2,290,102 546,832 1984 1990
Bandera 2,350,000 9,146,641 11,496,641 1,923,668 1989 1992
Benchmark 1,680,174 3,929,423 5,609,597 236,376 1986 1998
Big Curve 2,657,118 6,293,282 8,950,400 335,125 1969/1983/ 1998
1990/1996
Centennial 1,400,000 4,139,242 5,539,242 1,290,414 1970 1991
Colony Plaza 1,258,510 2,973,852 4,232,362 150,264 1997 1998
El Campo 360,000 1,704,350 2,064,350 224,160 1985 1996
Garland 854,611 1,991,377 2,845,988 67,012 1984 1998
Hedwig 1,710,334 4,948,936 6,659,270 309,610 1974 1998
Highland Square 2,307,773 5,485,692 7,793,465 262,711 1998 1998
Hurst 1,025,834 2,433,019 3,458,853 80,417 1982 1998
Lake St. Charles 1,432,818 3,560,569 4,993,387 55,979 1999 --
Market at First Colony 4,058,147 8,927,961 12,986,108 528,055 1988 1998
Mason Park 4,560,164 10,721,850 15,282,014 695,002 1985 1998
McMinn I 301,912 1,078,120 1,380,032 312,443 1982 1994
McMinn W 212,000 -- 212,000 -- 1982 1994
Park Northern -- 4,621,152 4,621,152 510,544 1982 1996
Plano 2,661,931 6,237,692 8,899,623 207,744 1985 1998
Richardson 1,501,689 3,420,446 4,922,135 111,909 1984 1998
Rosemeade 1,379,880 3,134,924 4,514,804 166,432 1986 1998
Skipper Palms 1,289,851 3,282,152 4,572,003 61,268 1984 1999
Southwest Walgreens 1,425,812 3,348,228 4,774,040 213,393 1975 1998
Town `N Country 1,511,833 3,544,049 5,055,882 192,466 1970 1998
Twin Lakes 860,706 3,022,536 3,883,242 858,452 1986 1989
University Mall 5,550,000 13,633,104 19,183,104 776,419 1973 1998
University Park 1,842,331 5,330,948 7,173,279 833,974 1991 1993
Property under development:
McMinn 1,030,724 -- 1,030,724 --
Market at First Colony 74,619 -- 74,619 --
Undeveloped land:
University Park 276,569 -- 276,569 --
----------- ------------ ------------ -----------
Totals
$50,070,306 $127,232,647 $177,302,953 $11,164,573
=========== ============ ============ ===========
</TABLE>
(1) These properties are collateral for the revolving line of credit, as
described in Note 3.
(2) McMinn W is currently under development, the net carrying value has been
transferred to property under development.
F-17
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO SCHEDULE III
AS OF DECEMBER 31, 1999
(a) Initial cost for acquired property is cost at acquisition.
(b) The aggregate gross cost of land, buildings and improvements for federal
income tax and book purposes is substantially the same.
(c)
RECONCILIATION OF REAL ESTATE
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year........ $160,329,516 $ 39,734,731 $39,327,929
Additions -- acquisitions........... 16,386,946 120,501,767 37,520
Additions -- tenant improvements.... 207,024 207,593 319,226
Additions -- capital expenditures... 1,025,962 111,918 50,056
Deductions.......................... (646,495) (226,493) --
----------- ----------- -----------
Balance at end of year............ $177,302,953 $160,329,516 $39,734,731
=========== =========== ===========
</TABLE>
RECONCILIATION OF ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year........... $7,434,343 $4,861,957 $3,767,721
Depreciation expense................... 4,123,636 2,798,879 1,094,236
Deductions............................. (393,406) (226,493) --
---------- ---------- ----------
Balance at end of year............... $11,164,573 $7,434,343 $4,861,957
========== ========== ==========
</TABLE>
(d) See description of mortgage notes payable in Note 3 to the consolidated
financial statements.
(e) Depreciation is computed based upon the following estimated lives:
<TABLE>
<S> <C>
Buildings................................................... 20-40 years
Improvements................................................ 5-15 years
</TABLE>
F-18
<PAGE>
ITEM 14. EXHIBITS
3.1 First Amended and Restated Declaration of Trust (Incorporated by
reference to Exhibit 3.1 to the Company's registration statement on
Form S-11, dated March 5, 1998 (File No. 333-29475))
3.2 First Amended and Restated Bylaws (Incorporated by reference to
Exhibit 3.2 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
4.1 Instruments defining the rights of security holders. The instruments
are filed in response to items 3.1 and 3.2 above and are incorporated
herein by reference.
4.2 Common share certificate(Incorporated by reference to Exhibit 3.2 to
the Company's registration statement on Form S-11, dated March 5, 1998
(File No. 333-29475))
10.1 Contribution Agreement by and between UIRT-Centennial, L.P., as
"Partnership" and Centennial Acquisition Corp., as "Contributor".
(Incorporated by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10-K, dated March 16, 1999.)
10.2 Today Green Oaks, L.P. Agreement of Limited Partnership. (Incorporated
by reference to Exhibit 10.2 to the Company's Annual Report on Form
10-k, dated March 16, 1999).
10.3 Second Amendment to Acquisition Agreement by and between Six Flags
Joint Venture, Today Melbourne Plaza, L.P., Today Northwest Crossing,
L.P., Today Green Oaks, L.P., Today Parkwood, L.P., and Today
Richwood, L.P., as Seller, and United Investors Realty Trust as
assignee of Buyer. (Incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-k, dated March 16, 1999).
10.4 Lease Agreement By and Between Today Parkwood, L.P., as Landlord and
United Investors Realty Trust as Tenant pertaining to Parkwood Square
Shopping Center Plano, Collin County, Texas dated December 31,
1999.(Incorporated by reference to Exhibit 10.4 to the Company's
Annual Report on Form 10-k, dated March 16, 1999).
10.5 Lease Agreement By and Between Today Richwood, L.P., as Landlord and
United Investors Realty Trust as Tenant Pertaining to Richwood
Shopping Center Richardson, Dallas County, Texas dated December 31,
1998. (Incorporated by reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-k, dated March 16, 1999).
10.6 Declaration of Trust dated December 31, 1998 by Today Green Oaks GP,
Inc., a Texas corporation ("Trustee") for and on behalf of United
Investors Realty Trust, a Texas real estate investment trust
("Owner").(Incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-k, dated March 16, 1999).
10.7 Promissory Note between UIRT Lake St. Charles and First Union National
Bank. (Incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-k, dated March 16, 1999).
10.8 Construction Loan Agreement between First Union National Bank and
UIRT. (Incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-k, dated March 16, 1999).
10.9 Promissory Note dated as of October 16, 1995 executed by Today
Northwest Crossing, L.P. in favor of First Union National Bank of
North Carolina. (Incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-k, dated March 16, 1999).
10.10 Promissory Note dated as of October 16, 1995 executed by Today
Melbourne Plaza, L.P. in favor of First Union National Bank of North
Carolina. (Incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-k, dated March 16, 1999).
10.11 First Amended and Restated Advisory Agreement dated as of June 9,
1997, by and between the Company and Investment Manager (Incorporated
by reference to Exhibit 10.1 to the Company's registration statement
on Form S-11, dated March 5, 1998 (File No. 333-29475))
10.12 1997 Share Incentive Plan (Incorporated by reference to Exhibit 10.2
to the Company's registration statement on Form S-11, dated March 5,
1998 (File No. 333-29475))
10.13 Form of Indemnification Agreement (Incorporated by reference to
Exhibit 10.3 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.14 Loan Agreement dated as of January 30, 1998, by and between the
Company and Nomura Asset Capital Corporation ("Nomura") (Incorporated
by reference to Exhibit 10.4 to the Company's registration statement
on Form S-11, dated March 5, 1998 (File No. 333-29475))
10.15 Promissory Note dated January 30, 1998, executed by the Company in
favor of Nomura (Incorporated by reference to Exhibit 10.5 to the
Company's registration statement on Form S-11, dated March 5, 1998
(File No. 333-29475))
10.16 Assumption and Modification Agreement dated November 19, 1996, by and
among The Travelers Insurance Company, George I. Brown, Park
Northern/Centennial Partners, L.P. and George I. Brown, as Trustee of
the Waipio Trust II (Incorporated by reference to Exhibit 10.6 to the
Company's registration statement on Form S-11, dated March 5, 1998
(File No. 333-29475))
10.17 Promissory Note dated as of July 31, 1995, executed by PFL-290 Limited
Partnership in favor of RFG Financial, Inc. (Incorporated by reference
to Exhibit 10.7 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.18 Promissory Note dated June 10, 1992, executed by Hedwig II, Inc. in
favor of Sun Life Insurance Company of America (Incorporated by
reference to Exhibit 10.8 to the Company's registration statement on
Form S-11, dated March 5, 1998 (File No. 333-29475))
10.19 Promissory Note dated June 10, 1992, executed by Hedwig III Joint
Venture in favor of Sun Life Insurance Company of America
(Incorporated by reference to Exhibit 10.9 to the Company's
registration statement on Form S-11, dated March 5, 1998 (File No.
333-29475))
10.20 Deed of Trust Note dated April 13, 1993, executed by UIRT/University
Park-1, L.P. in favor of The Franklin Life Insurance Company
(Incorporated by reference to Exhibit 10.10 to the Company's
registration statement on Form S-11, dated March 5, 1998 (File No.
333-29475))
10.21 Note Secured by Deed of Trust dated November 9, 1990 executed by
George I. Brown and George I. Brown, as Trustee of the Waipio Trust II
in favor of The Travelers Insurance Company (Incorporated by reference
to Exhibit 10.13 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.22 Earnest Money Contract dated October 13, 1997, by and among the
Company, Balous Miller, John K. Miller, Douglas Miller and Louis Vance
(Incorporated by reference to Exhibit 10.14 to the Company's
registration statement on Form S-11, dated March 5, 1998 (File No.
333-29475))
10.23 Agreement for the Purchase and Sale of Commercial Real Estate dated
December 12, 1997, by and between the Company and the Board of Pension
Commissioners of the City of Los Angeles (Incorporated by reference to
Exhibit 10.15 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.24 Contract of Sale dated December 5, 1997, by and between the Company
and Desert Pacific Properties, L.L.C. (Incorporated by reference to
Exhibit 10.16 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.25 Contract of Sale dated December 5, 1997, by and between the Company
and Rosemeade Park Limited Partnership (Incorporated by reference to
Exhibit 10.17 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.26 Letter Agreement dated November 25, 1997 and October 15, 1997, by and
among the Company, Town `N Country Plaza of Tampa, Limited and James
H. Shimberg, Trustee on Behalf of Landowner (Incorporated by reference
to Exhibit 10.18 to the Company's registration statement on Form S-11,
dated March 5, 1998 (File No. 333-29475))
10.27 Contract of Sale dated December 5, 1997, by and between Market at
First Colony Joint Venture, Hedwig II Joint Venture, PFL-290 Limited
Partnership, R & R Limited Partnership, Hedwig II, Inc. and the
Company (Incorporated by reference to Exhibit 10.19 to the Company's
registration statement on Form S-11, dated March 5, 1998 (File No.
333-29475))
10.28 Letter Agreement dated February 17, 1998, by and between the Company,
Town `N Country Plaza of Tampa, Limited and James H. Shimberg, Trustee
on Behalf of Landowner (Incorporated by reference to Exhibit 10.20 to
the Company's registration statement on Form S-11, dated March 5, 1998
(File No. 333-29475))
10.29 Contract of Sale dated April 17, 1998 by and between United Investors,
Realty Trust and Veriguest Colony Plaza One 1997. (Incorporated by
reference to Exhibit 10.22 to the Company's Quarterly Report on Form
10-Q dated May 14, 1998)
10.30 Purchase Option dated April 17, 1998 by and between United Investors,
Realty Trust and Veriguest Property Commerce 1995-1, a Texas joint
venture.(Incorporated by reference to Exhibit 10.23 to the Company's
Quarterly Report on Form 10-Q dated May 14, 1998)
10.31 Contract of Sale dated March 23, 1998, by and between the Company and
Dermot Big Curve, LLC (incorporated by reference to Exhibit 10.28 to
the Company's Current Report on Form 8-K dated June 11, 1998)
10.32 Promissory Note dated as of September 20, 1996 made by Dermot Big
Curve, LLC to Liberty Mortgage Acceptance Corporation, as beneficiary
in the principal amount of $6,072,000 (incorporated by reference to
Exhibit 10.29 to the Company's Current Report on Form 8-K dated June
11, 1998)
10.33 Contract of Sale dated October 15, 1997 by and between the Company,
Town N' Country Plaza of Tampa, Ltd. and trustee, James H. Shimberg on
behalf of land owner (incorporated by reference to Exhibit 10.30 to
Company's Quarterly Report on Form 10-Q dated August 14, 1998)
10.34 Promissory Note Dated December 16, 1997 between South Trust Bank,
National Association and Town 'N Country Plaza of Tampa, Ltd.
(incorporated by reference to Exhibit 10.31 to Company's Quarterly
Report on Form 10-Q dated August 14, 1998)
10.35 Amended and Restated Partnership Agreement dated May 15, 1998 of UIRT
Town 'N Country, L.P.(incorporated by reference to Exhibit 10.32 to
Company's Quarterly Report on Form 10-Q dated August 14, 1998)
10.36 Contract of Sale dated June 4, 1998, by and between the Company and
Highland Square Partners Ltd. (incorporated by reference to Exhibit
10.35 to the Company's Current Report on Form 8-K dated October 7,
1998)
10.37 Promissory note dated as of November 26, 1996 made by Highland Square
Partners, Ltd. to Belgravia Capital Corporation, as beneficiary in the
principal amount of $4,525,000. (incorporated by reference to Exhibit
10.36 to the Company's Current Report on Form 8-K dated October 7,
1998)
10.38 Promissory note dated November 26, 1997 made by Veriquest Colony Plaza
One 1997 to Holliday Fenoglio, L.P., as beneficiary in the principal
amount of $3,200,000.(incorporated by reference to Exhibit 10.9 to
Company's Quarterly Report on Form 10-Q dated November 10, 1998)
10.39 Revolving Credit Agreement dated August 25, 1998 made by and among the
Company and Wells Fargo Bank, National Association.(incorporated by
reference to Exhibit 10.10 to Company's Quarterly Report on Form 10-Q
dated November 10, 1998)
**10.40 Third Modification of Credit Agreement dated December 13, 1999 made by
and between Wells Fargo Bank, National Association and United
Investors Realty Trust.
**10.41 Fourth Modification of Credit Agreement dated December 13, 1999 made
by and between Wells Fargo Bank, National Association and United
Investors Realty Trust.
**10.42 Golding United FishHawk Ltd. Agreement of Limited Partnership by and
between Golding United FishHawk, Inc., a Florida corporation, as the
General Partner, and UIRT FISHHAWK LLC, a Florida limited liability
company ("UIRT"), and The Stuart S. Golding Company, a Florida
corporation ("SSG"), as the Limited Partners.
**23.1 Consent of Independent Auditors.
**27.1 Financial Data Schedule
(b) Reports on 8-K
None
** Filed as an exhibit hereto.
<PAGE>
Exhibit 10.40
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #2199)
1000 Louisiana, 4th Fl.
Houston, TX 77002
Attn: April Konopka
Loan No. 4277
THIRD MODIFICATION OF CREDIT AGREEMENT
Secured Loan
THIS THIRD MODIFICATION OF CREDIT AGREEMENT ("Agreement") dated December 13,
1999, is entered into by and between WELLS FARGO BANK, NATIONAL ASSOCIATION
("Lender"), and UNITED INVESTORS REALTY TRUST, a Texas real estate investment
trust ("Borrower").
RECITALS
A. Pursuant to the terms of that certain Revolving Credit Agreement between
Borrower and Lender dated as of August 25, 1998, Lender made a revolving
credit facility available to Borrower in the maximum outstanding principal
amount of THIRTY MILLION AND NO/100THS DOLLARS ($30,000,000.00) ("Credit
Facility"). Such Revolving Credit Agreement has been previously amended by
Modification Agreement dated January 25, 1999, and modification letter
agreement entered into in April, 1999 (all three such documents being
collectively referred to herein as the "Original Credit Agreement").
B. The Credit Facility is evidenced by a promissory note dated as of August
25, 1998, executed by Borrower in favor of Lender, in the principal amount
of $30,000,000 ("Note"), and is further evidenced by the documents
described in the Original Credit Agreement as "Loan Documents". The Note is
secured by, among other things, those four (4) Deeds of Trust and Security
Agreements ("Deeds of Trust") dated as of August 25, 1998, executed by
Borrower, as Grantor, to Stephen P. Prinz, as Trustee, in favor of Lender,
as Beneficiary, covering the real property and improvements ("Property")
therein described, and those four (4) Assignments of Rents and Leases (the
"Assignments of Rents"), dated as of August 25, 1998, between Borrower, as
Assignor, and Lender, as Assignee, relating to the Property. The Deeds of
Trust and Assignments of Rents were recorded as set forth in Exhibit A
attached hereto.
C. The Note, Deeds of Trust, Original Credit Agreement, this Agreement, the
other documents described in the Original Credit Agreement as "Loan
Documents", together with all modifications and amendments thereto and any
document required hereunder, are collectively referred to herein as the
"Loan Documents".
D. By this Agreement, Borrower and Lender intend to modify and amend certain
terms and provisions of the Loan Documents. All capitalized terms not
expressly defined herein shall have the meanings for such terms as set
forth in the Original Credit Agreement. All references herein to Sections
shall mean Sections in the Original Credit Agreement unless otherwise
indicated.
NOW, THEREFORE, Borrower and Lender agree as follows:
1. CONDITIONS PRECEDENT. The following are conditions precedent to Lender's
obligations under this Agreement:
1.1. If required by Lender, receipt and approval by Lender of a Down-Date
Endorsement to the Title Policy No. for each of the Deeds of Trust as
set forth in Exhibit A by the respective title companies that issued
the policies (the "Title Companies") and the commitment of each Title
Company to issue a Form T-38 Endorsement pursuant to Procedural Rule
P-9b(3), showing that coverage under such title policy has not been
reduced or terminated solely by virtue hereof, and other assurances
acceptable to Lender that the priority and validity of the Deeds of
Trust have not been and will not be impaired by this Agreement or the
transactions contemplated hereby;
1.2. Receipt by Lender of the executed originals of this Agreement, the
organizational and authorization items described in Sections 5.1 (g) -
(l), relating to this Agreement as applicable, and any and all other
documents and agreements which are required by this Agreement or by
any other Loan Document, each in form and content acceptable to
Lender;
1.3. Recordation in the Real Property Records of the County where each of
the Properties is located of any documents which are required to be
recorded by this Agreement or by any other Loan Document (if any);
1.4. Reimbursement to Lender by Borrower of Lender's costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, title insurance
costs, recording fees, attorney' fees, appraisal, engineers' and
inspection fees, internal review fees and documentation costs and
charges, whether such services are furnished by Lender's employees or
agents or by independent contractors;
1.5. The representations and warranties contained in this Agreement are
true and correct;
1.6. The payment to Lender of an extension fee of 0.20% of the aggregate
amount of the Commitment as set forth in Section 3.1(b);
1.7. Receipt by Lender of an opinion of counsel to the Loan Parties, and
addressed to Lender in substantially the form attached as EXHIBIT H of
the Original Credit Agreement, modified as provided below; and
1.8. Receipt by Lender of a Reaffirmation of Guaranty by all existing
Guarantors in the form attached as Exhibit O, and a Guaranty by all
new or additional entities required to be named as Guarantor under the
Original Credit Agreement, each such document modified as provided
below.
2. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants that:
2.1. No Default, breach or failure of condition has occurred, or would
exist with notice or the lapse of time or both, under any of the Loan
Documents (as modified by this Agreement);
2.2. All representations and warranties herein and in the other Loan
Documents are true and correct, which representations and warranties
shall survive execution of this Agreement;
2.3. The existing Guarantors executing the Reaffirmation of Guaranty and
the new Guarantors executing the additional Guaranty constitute all of
the entities required under the Credit Agreement to serve as
Guarantors of the Credit Facility.
3. MODIFICATION OF LOAN DOCUMENTS. The Loan Documents are hereby supplemented
and modified to incorporate the following, which shall supersede and prevail
over any conflicting provisions of the Loan Documents:
3.1. Extension of Certain Dates. Effective as of the date hereof, the
Revolving Credit Termination Date and Maturity Date recited in the
Note are hereby extended to August 25, 2001.
3.2. Future Extension; Reappraisals. In addition to the extension
effectuated by this Agreement, Borrower will have the option to extend
this modified Revolving Credit Termination Date for one more one-year
period (ending August 25, 2002) on the terms set forth in Section
2.11, and Lender will have the right to reappraise and re-determine
the Appraised Value of all or any Pool Properties upon receipt of
Borrower's extension request as provided in such section.
Notwithstanding the foregoing, Lender reserves the right, at Lender's
option and at Borrower's expense, to re-appraise and re-determine the
Appraised Value of all or any Pool Properties as described in Section
2.11 within the period of 90 to 120 days prior to August 25, 2000,
which was the original Revolving Credit Termination Date defined in
the Original Credit Agreement. The Extension Fee described in Section
3.1 (b) shall be amended to be 0.25% of the aggregate amounts of the
Commitments at the time indicated therein.
3.3. Modification of Form Documents. All Loan Documents and other documents
at any time required to be executed or delivered under the Credit
Agreement in the forms of such documents attached to the Original
Credit Agreement as exhibits shall be executed or delivered in such
forms, modified, however, as necessary or appropriate to correctly
refer to this Agreement and the modifications effected hereby.
3.4. Expenses. Borrower shall immediately pay Lender upon demand all costs
and expenses incurred by Lender in connection with: (a)the preparation
of this Agreement, all other Loan Documents and Other Related
Documents contemplated hereby; (b)the administration of this
Agreement, the other Loan Documents and Other Related Documents for
the term of the Credit Facility; and (c)the enforcement or
satisfaction by Lender of any of Borrower's obligations under this
Agreement, the other Loan Documents or the Other Related Documents.
For all purposes of this Agreement, Lender's costs and expenses shall
include, without limitation, all appraisal fees, cost engineering and
inspection fees, internal review fees, legal fees and expenses,
accounting fees, environmental consultant fees, auditor fees, and the
cost to Lender of any title insurance premiums, title surveys, release
and notary fees. Borrower recognizes and agrees that formal written
appraisals of the Property and Improvements by a licensed independent
appraiser may be required by Lender's internal procedures and/or
federal regulatory reporting requirements on an annual and/or
specialized basis and that Lender may, at its option, require
inspection of the Property and Improvements by an independent
supervising architect and/or cost engineering specialist prior to each
advance; at least once each month during the course of construction
even though no disbursement is to be made for that month; upon
completion of the Improvements and at least semi-annually thereafter.
If any of the services described above are provided by an employee of
Lender, Lender's costs and expenses for such services shall be
calculated in accordance with Lender's standard charge for such
services.
3.5. Year 2000 Covenant. Borrower shall ensure that the following are Year
2000 Compliant in a timely manner, but in no event later than December
31, 1999: (a) [the Property and Improvements; (b)Borrower itself; and
(c)any other major commercial properties and entities in which
Borrower holds a controlling interest. Borrower shall further make
reasonable inquiries of and request reasonable validation that each of
the following are similarly Year 2000 Compliant: (x) all major tenants
or other entities from which Borrower receives payments; and (y) all
major contractors, suppliers, service providers and vendors of
Borrower. As used in this paragraph, "major" shall mean properties or
entities the failure of which to be Year 2000 Compliant would have a
material adverse economic impact upon Borrower. The term "Year 2000
Compliant" shall mean, in regard to any property or entity, that all
software, hardware, equipment, goods or systems utilized by or
material to the physical operations, business operations, or financial
reporting of such property or entity (collectively, the "systems")
will properly perform date sensitive functions before, during and
after the year 2000. In furtherance of this covenant, Borrower shall,
in addition to any other necessary actions perform a comprehensive
review and assessment of all systems of Borrower, [the Property and
Improvements,] and shall adopt a detailed plan, with itemized budget,
for the testing, remediation, and monitoring of such systems. Borrower
shall, within thirty business days of Lender's written request,
provide to Lender such certifications or other evidence of Borrower's
compliance with the terms of this paragraph as Lender may from time to
time reasonably require.
4. FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has previously
delivered to Lender all of the relevant formation and organizational documents
of Borrower, of the partners or joint venturers of Borrower (if any), and of all
guarantors of the Credit Facility (if any), and all such formation documents
remain in full force and effect and have not been amended or modified since they
were delivered to Lender. Borrower hereby certifies that: (i) the above
documents are all of the relevant formation and organizational documents of
Borrower; (ii) they remain in full force and effect; and (iii) they have not
been amended or modified since they were previously delivered to Lender.
5. HAZARDOUS SUBSTANCES. Without in any way limiting any other provision of
this Agreement, Borrower expressly reaffirms as of the date hereof, and
continuing hereafter: (i) each and every representation and warranty in the Loan
Documents respecting "Hazardous Substances"; and (ii) each and every covenant
and indemnity in the Loan Documents respecting "Hazardous Substances".
6. ACKNOWLEDGMENT BY BORROWER. Borrower hereby acknowledges, agrees and
represents that:
(i) Borrower is indebted to Lender pursuant to the terms of the Note and
the Credit Agreement as modified hereby;
(ii) the liens, security interests and assignments created and evidenced by
the Loan Documents, including but not limited to this Agreement and the Loan
Documents expressly required in connection herewith, are, respectively, valid
and subsisting liens, security interests and assignments of the respective
dignity and priority recited in all Loan Documents; and such liens, security
interests and assignments are given as security for all indebtedness evidenced
by all of the Loan Documents;
(iii) there are no claims or offsets against, or defenses or counterclaims
to, the terms or provisions of the Loan Documents, and the other obligations
created or evidenced by the Loan Documents;
(iv) Borrower has no claims, offsets, defenses or counterclaims arising
from any of Lender's acts or omissions with respect to the Property, the Loan
Documents or Lender's performance under the Loan Documents or with respect to
the Property;
(v) the representations and warranties contained in the Loan Documents are
true and correct representations and warranties of Borrower and third parties,
as of the date hereof; and
(vi) Lender is not in default and no event has occurred which, with the
passage of time, giving of notice, or both, would constitute a default by Lender
of Lender's obligations under the terms and provisions of the Loan Documents. To
the extent Borrower now has any claims, offsets, defenses or counterclaims
against Lender or the repayment of all or a portion of the Credit Facility,
whether known or unknown, fixed or contingent, same are hereby forever
irrevocably waived and released in their entirety.
7. NON-IMPAIRMENT. Except as expressly provided herein, nothing in this
Agreement shall alter or affect any provision, condition, or covenant contained
in the Note or other Loan Document or affect or impair any rights, powers, or
remedies of Lender, it being the intent of the parties hereto that the
provisions of the Note and other Loan Documents shall continue in full force and
effect except as expressly modified hereby.
8. MISCELLANEOUS. This Agreement and the other Loan Documents shall be governed
by and interpreted in accordance with the laws of the State of Texas, except if
preempted by federal law, and except as expressly provided in the Mortgages
covering Property located in states other than Texas. In any action brought or
arising out of this Agreement or the Loan Documents, Borrower, and the general
partners and joint venturers of Borrower, hereby consent to the jurisdiction of
any federal or state court having proper venue within the State of Texas and
also consent to the service of process by any means authorized by Texas or
federal law. The headings used in this Agreement are for convenience only and
shall be disregarded in interpreting the substantive provisions of this
Agreement. All capitalized terms used herein, which are not defined herein,
shall have the meanings given to them in the other Loan Documents. Time is of
the essence of each term of the Loan Documents, including this Agreement. If any
provision of this Agreement or any of the other Loan Documents shall be
determined by a court of competent jurisdiction to be invalid, illegal or
unenforceable, that portion shall be deemed severed from this Agreement and the
remaining parts shall remain in full force as though the invalid, illegal, or
unenforceable portion had never been a part thereof.
9. INTEGRATION; INTERPRETATION. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS
INSTRUMENT MAY BE AMENDED ONLY BY AN INSTRUMENT IN WRITING EXECUTED BY THE
PARTIES HERETO.
10. WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES BORROWER'S RIGHTS UNDER
THE PROVISIONS OF CHAPTER 17, SUBCHAPTER E, SECTION 17.41 THROUGH 17.63
INCLUSIVE OF THE TEXAS BUSINESS AND COMMERCE CODE, GENERALLY KNOWN AS THE
"DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT", A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF
BORROWER'S OWN SELECTION, BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. IT IS
THE INTENT OF LENDER AND BORROWER THAT THE RIGHTS AND REMEDIES WITH RESPECT TO
THIS TRANSACTION SHALL BE GOVERNED BY LEGAL PRINCIPLES OTHER THAN THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT. THE WAIVER SET FORTH HEREIN
SHALL EXPRESSLY SURVIVE THE TERMINATION OF THE REFERENCED TRANSACTION. BORROWER
REPRESENTS AND WARRANTS TO LENDER THAT BORROWER (i)IS A BUSINESS CONSUMER,
(ii) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE
BORROWER TO EVALUATE THE MERITS AND RISKS OF THE SUBJECT TRANSACTION, (iii)IS
NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH RESPECT TO THE SUBJECT
TRANSACTION, AND (iv) HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL (WHO WAS
NOT, DIRECTLY OR INDIRECTLY, IDENTIFIED, SUGGESTED OR SELECTED BY LENDER OR
LENDER'S AGENTS) IN CONNECTION WITH THE REFERENCED TRANSACTION.
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be duly
executed in multiple counterpart originals as of the date first above written.
"LENDER/BENEFICIARY"
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
Name: David C. Williams
Title: Vice President
"BORROWER/GRANTOR"
UNITED INVESTORS REALTY TRUST,
a Texas real estate investment trust
By:
Name:
Title:
STATE OF TEXAS
COUNTY OF
This instrument was ACKNOWLEDGED before me on _____________, 1999, by
___________________, the ___________________ of UNITED INVESTORS REALTY TRUST, a
Texas real estate investment trust, on behalf of said trust.
[S E A L]
My Commission Expires: Notary Public - State of Texas
Printed Name of Notary Public
STATE OF TEXAS
COUNTY OF HARRIS
This instrument was ACKNOWLEDGED before me on _____________, 1999, by DAVID C.
WILLIAMS, Vice President of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national
banking association, on behalf of said association.
[S E A L]
My Commission Expires: Notary Public - State of Texas
Printed Name of Notary Public
EXHIBIT A
DEEDS OF TRUST
AND ASSIGNMENTS OF RENTS
Property County Deed of Trust Assignment of Rents Title Company Policy No. File
No.; Vol./Pg. File No.; Vol./Pg.
Autobahn
Bexar 98-0231157; 98-0231158 Lawyers Title 91-00-625429 V. 7769/P. 0658
Bandera
Bexar 98-0231161; 98-0231162 Lawyers Title 91-00625428 V. 7769/P. 0726
Market at First Colony
Ft. Bend FBC 98104043 98-104044 Lawyers Title 91-00-625431
Mason Park Harris T453543 T453543 Lawyers Title 91-00-625430
Loan No. 4277
ENVIRONMENTAL INDEMNITORS' CONSENT
Each of the undersigned (collectively, "Indemnitors") consents to the
foregoing Modification Agreement and the transactions contemplated thereby and
reaffirms its obligations under the Environmental Indemnity Agreement
("Indemnity") dated August 25, 1998, relating to the Pool Property designated
below such Indemnitor's signature set forth below, and its waivers, as set forth
in the Indemnity, of each and every one of the possible defenses to such
obligations. Indemnitor further reaffirms that its obligations under the
Indemnity are separate and distinct from Borrower's obligations.
Each Indemnitor understands that the Lender's exercise of a non-judicial
foreclosure sale under the subject Deed of Trust relating to the Pool Property
so designated below may result in an adverse effect on any subrogation,
reimbursement or contribution rights which Indemnitor may have against the
Borrower. Indemnitor specifically waives any and all rights and defenses arising
out of an election of remedies by Lender, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, may have an adverse effect on Indemnitor's rights of subrogation and
reimbursement against the principal. Indemnitor further specifically waives any
and all rights and defenses that Indemnitor may have because Borrower's debt is
secured by real property; this means, among other things, that: (1) Lender may
collect from Indemnitor without first foreclosing on any real or personal
property collateral pledged by Borrower; (2) if Lender forecloses on any real
property collateral pledged by Borrower, then (A) the amount of the debt may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price, and (B) Lender
may collect from Indemnitor even if, by foreclosing on the real property
collateral, there might be an adverse affect on any right Indemnitor may have to
collect from Borrower. The foregoing sentence is an unconditional and
irrevocable waiver of any rights and defenses Indemnitor may have because
Borrower's debt is secured by real property. This understanding and waiver is
made in addition to and not in limitation of any of the existing terms and
conditions of the Indemnity.
AGREED and dated as of December 13, 1999.
"INDEMNITORS"
a ______________________________________________
By:
Name:
Title:
PROPERTY:
a ______________________________________________
By:
Name:
Title:
PROPERTY:
a ______________________________________________
By:
Name:
Title:
PROPERTY:
a ______________________________________________
By:
Name:
Title:
PROPERTY:
a ______________________________________________
By:
Name:
Title:
PROPERTY:
Loan No. 4277
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #2199)
1000 Louisiana, 4th Fl.
Houston, TX 77002
Attn: April Konopka
Loan No. 4277
<PAGE>
Exhibit 10.41
FOURTH MODIFICATION OF CREDIT AGREEMENT
Secured Loan
THIS FOURTH MODIFICATION OF CREDIT AGREEMENT ("Agreement") dated December 13,
1999, is entered into by and between WELLS FARGO BANK, NATIONAL ASSOCIATION
("Lender"), and UNITED INVESTORS REALTY TRUST, a Texas real estate investment
trust ("Borrower").
RECITALS
A. Pursuant to the terms of that certain Revolving Credit Agreement between
Borrower and Lender dated as of August 25, 1998, Lender made a revolving credit
facility available to Borrower in the maximum outstanding principal amount of
THIRTY MILLION AND NO/100THS DOLLARS ($30,000,000.00) ("Credit Facility"). Such
Revolving Credit Agreement has been previously modified by Modification
Agreement dated January 25, 1999, and modification letter agreement entered into
in April, 1999, and further modified by that Third Modification of Credit
Agreement dated as of December 13, 1999 (the "Third Modification) (such
Revolving Credit Agreement and all such previous modifications being
collectively referred to herein as the "Original Credit Agreement").
B. The Credit Facility is evidenced by a promissory note dated as of August 25,
1998, executed by Borrower in favor of Lender, in the principal amount of
$30,000,000.00 (the "$30 Million Note"), and is further evidenced by the
documents described in the Original Credit Agreement as "Loan Documents". The
$30 Million Note is secured by, among other things, those four (4) deeds of
trust ("Deeds of Trust") dated August 25, 1998, executed by Borrower, as
Grantor, to Stephen P. Prinz, as Trustee, in favor of Lender, as Beneficiary,
covering the real property and improvements ("Property") therein described, and
those four (4) Assignments of Rents and Leases (the "Assignments of Rents"),
dated August 25, 1998, between Borrower, as Assignor, and Lender, as Assignee,
relating to the Property. The Deeds of Trust and Assignments of Rents were
recorded as set forth in Exhibit A attached hereto.
C. The $30 Million Note, Deeds of Trust, Original Credit Agreement, the other
documents described in the Original Credit Agreement as "Loan Documents", this
Agreement, the $6.5 Million Note described below, together with all
modifications and amendments thereto and any document required hereunder, are
collectively referred to herein as the "Loan Documents".
D. By this Agreement, Borrower and Lender intend to modify and amend certain
terms and provisions of the Loan Documents. All capitalized terms not expressly
defined herein shall have the meanings for such terms as set forth in the
Original Credit Agreement. All references herein to Sections shall mean Sections
in the Revolving Credit Agreement dated as of August 25, 1998, unless otherwise
indicated.
NOW, THEREFORE, Borrower and Lender agree as follows:
1. CONDITIONS PRECEDENT. The following are conditions precedent to Lender's
obligations under this Agreement:
1.1. Receipt and approval by Lender of assurances acceptable to Lender that
the priority and validity of the Deeds of Trust and Assignments of Rent given
prior to the date hereof, as amended by that certain First Amendment to Deeds of
Trust and Assignments of Rent dated as of even date herewith, executed by
Borrower, as Grantor, and Lender, as Beneficiary, have not been and will not be
impaired by this Agreement or the transactions contemplated hereby;
1.2. Receipt by Lender of the executed originals of this Agreement and the
$6.5 Million Note, the organizational and authorization items described in
Sections 5.1 (g) - (l), relating to this Agreement and the $6.5 Million Note as
applicable, and any and all other documents and agreements which are required by
this Agreement or by any other Loan Document, each in form and content
acceptable to Lender;
1.3. Recordation in the Real Property Records of the County where each of
the Properties is located of any documents which are required to be recorded by
this Agreement or by any other Loan Document (if any);
1.4. Reimbursement to Lender by Borrower of Lender's costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, title insurance costs, recording fees,
attorneys' fees, appraisal, engineers' and inspection fees, internal review fees
and documentation costs and charges, whether such services are furnished by
Lender's employees or agents or by independent contractors;
1.5. The representations and warranties contained in this Agreement are
true and correct;
1.6. The payment to Lender of a commitment fee of 0.50% of the aggregate
amount of the Additional Commitment;
1.7. Receipt by Lender of an opinion of counsel to the Loan Parties, and
addressed to Lender in substantially the form attached as EXHIBIT H of the
Original Credit Agreement, modified as provided below; and
1.8. Receipt by Lender of a Reaffirmation of Guaranty by all existing
Guarantors in the form attached as Exhibit O, and a Guaranty by all new or
additional entities required to be named as Guarantor under the Original Credit
Agreement, each such document modified as provided below.
2. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants that:
2.1. No Default, breach or failure of condition has occurred, or would
exist with notice or the lapse of time or both, under any of the Loan Documents
(as modified by this Agreement);
2.2. All representations and warranties herein and in the other Loan
Documents are true and correct, which representations and warranties shall
survive execution of this Agreement;
2.3. The existing Guarantors executing the Reaffirmation of Guaranty and
the new Guarantors executing the additional Guaranty constitute all of the
entities required under the Credit Agreement to serve as Guarantors of the
Credit Facility.
3. MODIFICATION OF LOAN DOCUMENTS. The Loan Documents are hereby supplemented
and modified to incorporate the following, which shall supersede and prevail
over any conflicting provisions of the Loan Documents:
3.1. Additional Commitment. The Commitment Amount set forth on the
signature page of the Revolving Credit Agreement is hereby increased to
$36,500,000.00. The increase of $6,500,000.00 provided in the foregoing sentence
is referred to as the "Additional Commitment".
3.2. $6.5 Million Note. The Additional Commitment is evidenced by the promissory
note dated as of December 13, 1999 (the "$6.5 Million Note"), in the principal
amount of $6,500,000.00, executed by Borrower, made payable to the order of
Lender. All references in the Loan Documents to "Note", "Revolving Note" or
"Notes" shall mean and include both the $30 Million Note and the $6.5 Million
Note unless expressly stated otherwise.
3.3. Interest Rate Change. "Adjustable LIBO Rate" means, with respect to
any Interest Period, an interest rate per annum equal to the lesser of (a) the
sum of (1) the LIBO Rate with respect to such Interest Period plus (2) 1.5445%
or (b) the Maximum Lawful Rate.
3.4. Permitted Investments. Section 8.6(iv) is hereby amended to read as
follows:
"Properties in the process of development, such that the aggregate book
value of all such Properties under development and the remaining costs to
complete such Properties under development exceeds 15% of Gross Asset Value."
3.5. The notice addresses in Section 11.1 are hereby amended as follows:
(i) for Borrower, the requirement to send copies of notices to Lewis
Sandler is hereby deleted and the following is substituted:
United Realty Investors Trust
5847 San Felipe, Suite 850
Houston, Texas 77057
Attn: Chief Financial Officer
Telecopier: 713-268-6005
Telephone: 713-781-2860
(ii) for Agent, the addresses set forth in the Original Credit Agreement
are deleted and the following are substituted therefor:
Wells Fargo Bank, National Association
Disbursement and Operations Center
2120 East Park Place, Suite 100
El Segundo, California 90245
Attn: Ms. Elizabeth MacDonald
with a copy to:
Wells Fargo Bank, National Association
1000 Louisiana, 4th Floor (AU#2199)
Houston, Texas 77002-5093
Attn: Mr. David Williams
3.6. Modification of Form Documents. All Loan Documents and other documents
at any time required to be executed or delivered under the Credit Agreement in
the forms of such documents attached to the Revolving Credit Agreement dated
August 25, 1998, as exhibits shall be executed or delivered in such forms,
modified, however, as necessary or appropriate to correctly refer to this
Agreement, the $6.5 Million Note and the modifications effected hereby.
3.7. Expenses. Borrower shall immediately pay Lender upon demand all costs
and expenses incurred by Lender in connection with: (a) the preparation of this
Agreement, all other Loan Documents and Other Related Documents contemplated
hereby; (b) the administration of this Agreement, the other Loan Documents and
Other Related Documents for the term of the Credit Facility; and (c) the
enforcement or satisfaction by Lender of any of Borrower's obligations under
this Agreement, the other Loan Documents or the Other Related Documents. For all
purposes of this Agreement, Lender's costs and expenses shall include, without
limitation, all appraisal fees, cost engineering and inspection fees, internal
review fees, legal fees and expenses, accounting fees, environmental consultant
fees, auditor fees, and the cost to Lender of any title insurance premiums,
title surveys, release and notary fees. Borrower recognizes and agrees that
formal written appraisals of the Property and Improvements by a licensed
independent appraiser may be required by Lender's internal procedures and/or
federal regulatory reporting requirements on an annual and/or specialized basis
and that Lender may, at its option, require inspection of the Property and
Improvements by an independent supervising architect and/or cost engineering
specialist prior to each advance; at least once each month during the course of
construction even though no disbursement is to be made for that month; upon
completion of the Improvements and at least semi-annually thereafter. If any of
the services described above are provided by an employee of Lender, Lender's
costs and expenses for such services shall be calculated in accordance with
Lender's standard charge for such services.
3.8. Year 2000 Covenant. Borrower shall ensure that the following are Year
2000 Compliant in a timely manner, but in no event later than December 31, 1999:
(a) the Property and Improvements; (b) Borrower itself; and (c) any other major
commercial properties and entities in which Borrower holds a controlling
interest. Borrower shall further make reasonable inquiries of and request
reasonable validation that each of the following are similarly Year 2000
Compliant: (x) all major tenants or other entities from which Borrower receives
payments; and (y) all major contractors, suppliers, service providers and
vendors of Borrower. As used in this paragraph, "major" shall mean properties or
entities the failure of which to be Year 2000 Compliant would have a material
adverse economic impact upon Borrower. The term "Year 2000 Compliant" shall
mean, in regard to any property or entity, that all software, hardware,
equipment, goods or systems utilized by or material to the physical operations,
business operations, or financial reporting of such property or entity
(collectively, the "systems") will properly perform date sensitive functions
before, during and after the year 2000. In furtherance of this covenant,
Borrower shall, in addition to any other necessary actions perform a
comprehensive review and assessment of all systems of Borrower, [the Property
and Improvements,] and shall adopt a detailed plan, with itemized budget, for
the testing, remediation, and monitoring of such systems. Borrower shall, within
thirty business days of Lender's written request, provide to Lender such
certifications or other evidence of Borrower's compliance with the terms of this
paragraph as Lender may from time to time reasonably require.
4. FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has previously
delivered to Lender all of the relevant formation and organizational documents
of Borrower, of the partners or joint venturers of Borrower (if any), and of all
guarantors of the Credit Facility (if any), and all such formation documents
remain in full force and effect and have not been amended or modified since they
were delivered to Lender. Borrower hereby certifies that: (i) the above
documents are all of the relevant formation and organizational documents of
Borrower; (ii) they remain in full force and effect; and (iii) they have not
been amended or modified since they were previously delivered to Lender.
5. HAZARDOUS SUBSTANCES. Without in any way limiting any other provision of
this Agreement, Borrower expressly reaffirms as of the date hereof, and
continuing hereafter: (i) each and every representation and warranty in the Loan
Documents respecting "Hazardous Substances"; and (ii) each and every covenant
and indemnity in the Loan Documents respecting "Hazardous Substances".
6. ACKNOWLEDGMENT BY BORROWER. Borrower hereby acknowledges, agrees and
represents that:
(i) Borrower is indebted to Lender pursuant to the terms of the $30 Million
Note, the $6.5 Million Note and the Original Credit Agreement as modified
hereby;
(ii) the liens, security interests and assignments created and evidenced by
the Loan Documents, including but not limited to this Agreement and the Loan
Documents expressly required in connection herewith, are, respectively, valid
and subsisting liens, security interests and assignments of the respective
dignity and priority recited in all Loan Documents; and such liens, security
interests and assignments are given as security for all indebtedness evidenced
by all of the Loan Documents;
(iii) there are no claims or offsets against, or defenses or counterclaims
to, the terms or provisions of the Loan Documents, and the other obligations
created or evidenced by the Loan Documents;
(iv) Borrower has no claims, offsets, defenses or counterclaims arising
from any of Lender's acts or omissions with respect to the Property, the Loan
Documents or Lender's performance under the Loan Documents or with respect to
the Property;
(v) the representations and warranties contained in the Loan Documents are
true and correct representations and warranties of Borrower and third parties,
as of the date hereof; and
(vi) Lender is not in default and no event has occurred which, with the
passage of time, giving of notice, or both, would constitute a default by Lender
of Lender's obligations under the terms and provisions of the Loan Documents. To
the extent Borrower now has any claims, offsets, defenses or counterclaims
against Lender or the repayment of all or a portion of the Credit Facility,
whether known or unknown, fixed or contingent, same are hereby forever
irrevocably waived and released in their entirety.
7. NON-IMPAIRMENT. Except as expressly provided herein, nothing in this
Agreement shall alter or affect any provision, condition, or covenant contained
in the Notes or other Loan Document or affect or impair any rights, powers, or
remedies of Lender, it being the intent of the parties hereto that the
provisions of the Notes and other Loan Documents shall continue in full force
and effect except as expressly modified hereby.
8. MISCELLANEOUS. This Agreement and the other Loan Documents shall be
governed by and interpreted in accordance with the laws of the State of Texas,
except if preempted by federal law, and except as expressly provided in the
Mortgages covering Property located in states other than Texas. In any action
brought or arising out of this Agreement or the Loan Documents, Borrower, and
the general partners and joint venturers of Borrower, hereby consent to the
jurisdiction of any federal or state court having proper venue within the State
of Texas and also consent to the service of process by any means authorized by
Texas or federal law. The headings used in this Agreement are for convenience
only and shall be disregarded in interpreting the substantive provisions of this
Agreement. All capitalized terms used herein, which are not defined herein,
shall have the meanings given to them in the other Loan Documents. Time is of
the essence of each term of the Loan Documents, including this Agreement. If any
provision of this Agreement or any of the other Loan Documents shall be
determined by a court of competent jurisdiction to be invalid, illegal or
unenforceable, that portion shall be deemed severed from this Agreement and the
remaining parts shall remain in full force as though the invalid, illegal, or
unenforceable portion had never been a part thereof.
9. INTEGRATION; INTERPRETATION. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS
INSTRUMENT MAY BE AMENDED ONLY BY AN INSTRUMENT IN WRITING EXECUTED BY THE
PARTIES HERETO.
10. WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES BORROWER'S RIGHTS
UNDER THE PROVISIONS OF CHAPTER 17, SUBCHAPTER E, SECTION 17.41 THROUGH 17.63
INCLUSIVE OF THE TEXAS BUSINESS AND COMMERCE CODE, GENERALLY KNOWN AS THE
"DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT", A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF
BORROWER'S OWN SELECTION, BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. IT IS
THE INTENT OF LENDER AND BORROWER THAT THE RIGHTS AND REMEDIES WITH RESPECT TO
THIS TRANSACTION SHALL BE GOVERNED BY LEGAL PRINCIPLES OTHER THAN THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT. THE WAIVER SET FORTH HEREIN
SHALL EXPRESSLY SURVIVE THE TERMINATION OF THE REFERENCED TRANSACTION. BORROWER
REPRESENTS AND WARRANTS TO LENDER THAT BORROWER (i) IS A BUSINESS CONSUMER,
(ii) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE
BORROWER TO EVALUATE THE MERITS AND RISKS OF THE SUBJECT TRANSACTION, (iii) IS
NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH RESPECT TO THE SUBJECT
TRANSACTION, AND (iv) HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL (WHO WAS
NOT, DIRECTLY OR INDIRECTLY, IDENTIFIED, SUGGESTED OR SELECTED BY LENDER OR
LENDER'S AGENTS) IN CONNECTION WITH THE REFERENCED TRANSACTION.
<PAGE>
Exhibit 23.1
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
duly executed in multiple counterpart originals as of the date first above
written.
"LENDER/BENEFICIARY"
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:
Name: David C. Williams
Title: Vice President
"BORROWER/GRANTOR"
UNITED INVESTORS REALTY TRUST,
a Texas real estate investment trust
By:
Name:
Title:
STATE OF TEXAS
COUNTY OF
This instrument was ACKNOWLEDGED before me on _____________, 1999, by
___________________, the ___________________ of UNITED INVESTORS REALTY TRUST, a
Texas real estate investment trust, on behalf of said trust. [S E A L] My
Commission Expires: Notary Public - State of Texas Printed Name of Notary Public
Loan No. 4277 C:\windows\TEMP\UIRT Fourth Modification of Credit Agreement.doc
10 EXHIBIT A DEEDS OF TRUST AND ASSIGNMENTS OF RENTS
Property County Deed of Trust Assignment of Rents Title Company Policy No. File
No.; Vol./Pg. File No.; Vol./Pg.
Autobahn Bexar 98-0231157; 98-0231158 Lawyers Title 91-00-625429 V. 7769/P. 0658
Bandera
Bexar 98-0231161; 98-0231162 Lawyers Title 91-00625428 V. 7769/P. 0726
Market at First Colony
Ft. Bend FBC 98104043 98-104044 Lawyers Title 91-00-625431
Mason Park Harris T453543 T453543 Lawyers Title 91-00-625430
Loan No. 4277
<PAGE>
11 ENVIRONMENTAL INDEMNITORS' CONSENT
Each of the undersigned (collectively, "Indemnitors") consents to the foregoing
Modification Agreement and the transactions contemplated thereby, INCLUDING BUT
NOT LIMITED TO THE ADDITIONAL COMMITMENT IN THE AMOUNT OF $6,500,000.00 and
reaffirms its obligations under the Environmental Indemnity Agreement
("Indemnity") dated August 25, 1998, relating to the Pool Property designated
below such Indemnitor's signature set forth below, and its waivers, as set forth
in the Indemnity, of each and every one of the possible defenses to such
obligations. Indemnitor further reaffirms that its obligations under the
Indemnity are separate and distinct from Borrower's obligations. Each Indemnitor
understands that the Lender's exercise of a non-judicial foreclosure sale under
the subject Deed of Trust relating to the Pool Property so designated below may
result in an adverse effect on any subrogation, reimbursement or contribution
rights which Indemnitor may have against the Borrower. Indemnitor specifically
waives any and all rights and defenses arising out of an election of remedies by
Lender, even though that election of remedies, such as a nonjudicial foreclosure
with respect to security for a guaranteed obligation, may have an adverse effect
on Indemnitor's rights of subrogation and reimbursement against the principal.
Indemnitor further specifically waives any and all rights and defenses that
Indemnitor may have because Borrower's debt is secured by real property; this
means, among other things, that: (1) Lender may collect from Indemnitor without
first foreclosing on any real or personal property collateral pledged by
Borrower; (2) if Lender forecloses on any real property collateral pledged by
Borrower, then (A) the amount of the debt may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the collateral is
worth more than the sale price, and (B) Lender may collect from Indemnitor even
if, by foreclosing on the real property collateral, there might be an adverse
affect on any right Indemnitor may have to collect from Borrower. The foregoing
sentence is an unconditional and irrevocable waiver of any rights and defenses
Indemnitor may have because Borrower's debt is secured by real property. This
understanding and waiver is made in addition to and not in limitation of any of
the existing terms and conditions of the Indemnity.
AGREED and dated as of
December 13, 1999.
"INDEMNITORS"
By:
Name:
Title:
<PAGE>
Exhibit 10.42
GOLDING UNITED FISHHAWK LTD.
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of December __, 1999
TABLE OF CONTENTS
ARTICLE I.....................................................................1
1.01 Organization..........................................................1
1.02 Name..................................................................1
1.03 Principal Office; Registered Office; Registered Agent.................1
1.04 Term..................................................................1
1.05 Recording of Agreement................................................1
1.06 Definitions...........................................................1
ARTICLE II....................................................................6
2.01 Purpose of the Partnership............................................6
2.02 Authority of the Partnership..........................................6
2.03 Special Limitations...................................................6
ARTICLE III...................................................................7
3.01 General Partner.......................................................7
3.02 Initial Limited Partner...............................................7
3.03 Additional Limited Partners...........................................8
3.04 Partnership Capital...................................................8
3.05 Capital Accounts......................................................9
3.06 Liability of Partners.................................................9
3.07 Defaults.............................................................10
3.08.Pre-Development Expenses.............................................11
ARTICLE IV...................................................................11
4.01. Determination and Allocation of Profits and Losses..................11
4.02. Allocation of Losses................................................11
4.03. Allocation of Profits...............................................12
4.04. Tax Allocations.....................................................12
4.05. Regulatory Allocations..............................................12
4.06. Allocations in Event of Assignment; Prorations......................14
ARTICLE V....................................................................15
5.01. Net Cash From Operations............................................15
5.02. Limitation on Cash Distributions to Partners........................15
5.03. Distribution Upon Sale or Refinancing of the Project................15
ARTICLE VI...................................................................15
6.01. Management Power of General Partner.................................16
6.02. Restrictions on the Authority of the General Partner................16
6.03. Duties and Obligations of the General Partner.......................17
6.04. Designation of Tax Matters Partner..................................18
6.05. Other Businesses of Partners........................................19
6.06. Reimbursement and Compensation.....................................20
6.07. Indemnification of the General Partner by the Partnership...........20
6.08. Rights and Obligations of Limited Partners..........................20
ARTICLE VII..................................................................21
7.01. Withdrawal by General Partner......................................21
7.02. Incapacity of General Partner......................................22
7.03. Removal of General Partner.........................................22
7.04. Replacement of General Partner.....................................23
7.05. Admission of a Successor General Partner...........................23
7.06. Liability of Withdrawing General Partner...........................24
7.07. Consent of Limited Partners to Admission of Successor
General Partners...................................................24
ARTICLE VIII.................................................................24
8.01. Restrictions on Transfers of Interest..............................24
8.02. Assignees..........................................................25
8.03. Substituted Limited Partners; New Limited Partners.................26
8.04. Indemnification and Terms of Admission.............................27
8.05. Incapacity of a Limited Partner....................................27
ARTICLE IX...................................................................27
9.01. Dissolution........................................................27
9.02. Liquidation........................................................28
ARTICLE X....................................................................29
10.01. Amendments Generally...............................................29
10.02. Adoption of Amendments.............................................29
10.03. Amendments on Admission or Withdrawal of Partners..................29
10.04. Amendment of Certificate...........................................29
ARTICLE XI...................................................................30
11.01. Method of Giving Consent...........................................30
11.02. Meetings...........................................................30
11.03. Submissions to Limited Partners....................................30
ARTICLE XII..................................................................30
12.01. Power of Attorney..................................................30
ARTICLE XIII.................................................................31
13.01. Records and Accounting.............................................32
13.02. Annual Reports.....................................................32
13.03. Tax Information....................................................32
13.04. Partnership Funds..................................................33
13.05. Elections..........................................................33
ARTICLE XIV..................................................................33
14.01. Notification.......................................................33
14.02. Governing Law; Separability of Provisions..........................33
14.03. Entire Agreement...................................................33
14.04. Headings, Etc......................................................33
14.05 Section and Schedule References....................................34
14.06. Binding Provisions.................................................34
14.07. No Waiver..........................................................34
14.08. Legends............................................................34
14.09. Conflicting Provisions.............................................34
14.10. Counterparts.......................................................34
<PAGE>
GOLDING UNITED FISHHAWK LTD.
LIMITED PARTNERSHIP AGREEMENT
This LIMITED PARTNERSHIP AGREEMENT ("Agreement") is entered into and shall
be effective as of December __, 1999, by and between GOLDING UNITED FISHHAWK
INC., a Florida corporation, as the General Partner, and UIRT FISHHAWK LLC, a
Florida limited liability company ("UIRT"), and The Stuart S. Golding Company, a
Florida corporation ("SSG"), as the Limited Partners, pursuant to the provisions
of the Act (as defined below), on the following terms and conditions:
ARTICLE I.
ORGANIZATION AND DEFINITIONS
1.01 Organization. The parties to this Agreement (jointly the "Partners"
and individually a "Partner") enter into and form a partnership as a Florida
limited partnership (the "Partnership") for the limited purposes and scope set
forth in this Agreement. The Partnership shall be governed by the laws of the
State of Florida pursuant to this Agreement. The Partners agree to continue the
Partnership in accordance with this Agreement.
1.02 Name. The name of the Partnership is "Golding United FishHawk Ltd."
1.03 Principal Office; Registered Office; Registered Agent. The principal
office of the Partnership will be at 27001 US Highway 19, Suite 2095,
Clearwater, Florida 33761, or at such other location as determined by the
General Partner. The initial registered office of the Partnership will be at 701
Brickell Avenue, Suite 3000, Miami, Florida 33131. Intrastate Registered Agent
Corporation will be the initial registered agent of the Partnership.
1.04 Term. The Partnership will commence as of the date of this Agreement
and will continue until December 31, 2051, or unless it is sooner terminated in
accordance with Article IX of this Agreement.
1.05 Recording of Agreement. The General Partner shall take all actions
necessary to file properly with the Florida Department of State the Certificate
of Limited Partnership, Affidavit of Capital Contributions, Certificate of
Registered Agent and all other documents, as and to the extent required by the
laws of the State of Florida to reflect this Agreement as amended from time to
time. All filing fees will be paid by the Partnership. The General Partner shall
take all other action necessary to perfect and maintain the Partnership as a
limited partnership under the laws of the State of Florida and (if and to the
extent required by applicable law) to amend the documents listed above from time
to time.
1.06 Definitions. As used in this Agreement, the following terms have the
meanings ascribed to them in this Section 1.06 and include the plural as well as
the singular number:
"Act" means the Florida Revised Uniform Limited Partnership Act (1986), as
it may be amended, or any subsequent Florida law concerning limited partnerships
that is enacted in substitution for that law.
"Additional Limited Partners" shall mean those Persons admitted to the
Partnership pursuant to Section 3.03.
"Agreement" means this Limited Partnership Agreement, as amended from time
to time.
"Book Gain" or "Book Loss" means gain or loss recognized by the Partnership
for book purposes in any Fiscal Year or other period by reason of (i) a sale or
other disposition of any Partnership asset, or (ii) an adjustment to Book Value
made pursuant to this Agreement. Book Gain or Book Loss shall be computed by
reference to the Book Value of the asset as of the date of such sale or other
disposition rather than by reference to the tax basis of the asset at such date.
Every reference in this Agreement to "gain" or "loss" refers to Book Gain or
Book Loss, rather than to tax gain or tax loss, unless the context manifestly
otherwise requires.
"Book Value" of an asset means the gross fair market value of an asset
(other than cash), as determined by the General Partner, transferred as a
Capital Contribution to the Partnership or, as of any particular date, the value
at which the asset is reflected on the books of the Partnership as of such date.
The Book Value of all partnership assets shall be adjusted to equal their
respective fair market values, as determined by the General Partner, as of the
following times: (i) the acquisition of an additional Partnership Interest by
any new or existing Partner in exchange for more than a de minimis Capital
Contribution or at the time otherwise required by Section 3.03; (ii) the
distribution by the Partnership to a Partner of more than a de minimis amount of
Partnership property or money in exchange for all or a part of the Partner's
Partnership Interest or at the time otherwise required by Section 3.03; (iii)
the termination of the Partnership for federal income tax purposes in accordance
with Section 708(b)(1)(B) of the Code; and (iv) at any other time required by
Treasury Regulations 1.704-1(b)(2)(iv), 1.704-2 or 1.704-3. Adjustments in
accordance with clauses (i) and (ii), above, shall be made only if the General
Partner determines that such adjustments are necessary or appropriate to reflect
the economic interests of the Partners in the Partnership. In addition, the Book
Value of any Partnership asset distributed to any Partner shall be adjusted to
its market value as determined on the date of distribution.
"Capital Account" means the account maintained for each Partner in the
Partnership's books of account in the manner described in Section 3.05.
"Capital Contribution" means the total amount of cash or other property
(which value is to be determined by the General Partner) contributed to the
equity of the Partnership by each Partner pursuant to this Agreement. Any
reference in this Agreement to the Capital Contribution of either a Partner or
any assignee of a Partner includes any Capital Contribution previously made by
any prior Partner to whose Partnership Interest the then existing Partner or
assignee succeeded.
"Code" means the Internal Revenue Code of 1986, as it may be amended, or
any subsequent federal law concerning income tax as enacted in substitution for,
or that corresponds with, such Code.
"Consent" means the consent of a Person, given as provided in
Section 11.01, to do the act or thing for which the consent is solicited, or the
act of granting such consent, as the context may require. Reference to the
Consent of a majority or specified percentage in interest of the Limited
Partners means the Consent of Limited Partners whose aggregate Partnership
Percentage Interests represent over 50% or at least such specified percentage,
as the case may be, of the Partnership Percentage Interests of all Limited
Partners.
"Depreciation" means, for each Fiscal Year or other period, an amount equal
to the depreciation, amortization or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year or other period for federal income
tax purposes, except that if the Book Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such Fiscal
Year or other period, Depreciation shall be that amount which bears the same
relationship to the Book Value of such asset as the depreciation, amortization
or other cost recovery deduction allowable for federal income tax purposes bears
to its adjusted tax basis.
"General Partner" means the Person designated in this Agreement as the
general partner of the Partnership and any Person who becomes a general partner
of the Partnership pursuant to this Agreement, in the Person's capacity as a
general partner of the Partnership.
"General Partnership Interest" means the Partnership Interest of a General
Partner representing its Capital Contribution and its right to receive its share
of the Profits and Losses, distributions and liquidation proceeds of the
Partnership, all in accordance with the terms of this Agreement, and excludes
Partnership Rights.
"Incapacity" means, as to any Person, the adjudication of bankruptcy,
incompetence or insanity, or the death, dissolution or termination (other than
by merger or consolidation), as the case may be, of such Person.
"Limited Partners" means the Persons designated in this Agreement as the
limited partners of the Partnership and any Persons who become limited partners
of the Partnership, pursuant to this Agreement, in the Person's capacity as
limited partners of the Partnership.
"Limited Partnership Interest" means the Partnership Interest of a Limited
Partner, representing the Capital Contribution of the Limited Partner and the
right to receive its share of the Profits and Losses, distributions and
liquidation proceeds of the Partnership, all in accordance with the terms of
this Agreement, and excludes Partnership Rights.
"Master Agreement" means the Master Agreement dated as of December 14, 1999
between United Investors Realty Trust, a Texas real estate investment trust, and
The Stuart S. Golding Company, a Florida corporation.
"Net Cash From Operations" means the gross cash proceeds from Partnership
operations less the portion of such proceeds used to pay or establish reserves
for all Partnership expenses, monthly scheduled debt payments (excluding balloon
payments), capital improvements, replacements and contingencies, all as
determined by the General Partner in its sole and absolute discretion, provided,
however, that "Net Cash From Operations" shall not be reduced by depreciation,
amortization, cost recovery deductions or similar allowances and shall not
include any item that constitutes "Net Cash From Capital Transactions." "Net
Cash From Operations" shall be increased by any reductions of reserves
previously established.
"Net Cash From Capital Transactions" means the net cash realized by the
Partnership by virtue of a sale, refinancing, condemnation or other disposition
of the Partnership's property, in whole or in part, after (a) repayment of
applicable debt; (b) the payment of all expenses and amounts required to be paid
under the instruments evidencing or relating to such debt; (c) the payment of
all expenses related to the transaction; and (d) the retention of such amounts
which the General Partner determines in its absolute discretion may be necessary
to satisfy contingencies and other liabilities or obligations of the
Partnership. Net Cash From Capital Transactions shall be increased by any
reductions of reserves previously established, which reserves previously reduced
the net cash from capital transactions.
"Nonrecourse Debt" means any mortgage securing the Project or any other
Partnership liability to the extent that no Partner (or related person within
the meaning of Treasury Regulations 1.752-4(b)) bears the economic risk of loss
for such liability under Treasury Regulations 1.752-2.
"Nonrecourse Deductions" has the meaning set forth in Treasury Regulations
1.704-2(c).
"Notification" means a writing, containing the information required by this
Agreement to be communicated to any Person, sent as provided in Section 14.01.
"Partner Nonrecourse Deductions" has the meaning, and shall be determined
in the manner, set forth in Treasury Regulations 1.704-2(i)(2).
"Partner or Partners" refers to individually, or jointly, the General
Partner and the Limited Partner.
"Partnership Interest" includes only a Partner's Capital Contribution and
the right to receive its share of the Profits and Losses, distributions and
liquidation proceeds of the Partnership, all in accordance with the terms of
this Agreement, and excludes Partnership Rights.
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations 1.704-2(d) and, as provided in such Treasury Regulations, shall
generally be determined by computing, for each Nonrecourse Debt of the
Partnership, any Profit the Partnership would realize if it disposed of the
Partnership assets subject to that liability for no consideration other than
full satisfaction of the liability, and then aggregating the separate amounts of
Profit so computed for each Nonrecourse Debt.
"Partnership Percentage Interest" means with respect to a Partner, the
Partner's percentage interest in the Partnership's allocations of Profits,
Losses and cash and in-kind distributions, subject to the terms and conditions
of this Agreement and as set forth beside its name in Schedule "A".
"Partnership Rights" excludes the Partnership Interest of a Partner, and
includes, in addition to other rights provided
in this Agreement, the rights provided to it by the Act.
"Person" means a natural person, corporation, trust, partnership, joint
venture, association, limited liability company or other business or other legal
entity.
"Profit" or "Loss" means, for each Fiscal Year, an amount equal to the
Partnership's taxable income or loss for such year, determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Profit or Loss shall increase
Profit or decrease Loss, as the case may be;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv), shall decrease Profit or
increase Loss, as the case may be;
(iii)In lieu of the depreciation, amortization or other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year;
(iv) Book Gain or Book Loss shall be taken into account in lieu of any tax
gain or tax loss recognized by the
Partnership; and
(v) Items of income, gain, loss or deduction specially allocated pursuant
to Section 4.04 or 4.05 shall not be
taken into account.
If the Partnership's taxable income or loss for such Fiscal Year, as
adjusted in the manner provided above, is a positive amount, such amount shall
be the Partnership's Profit for such Fiscal Year; and if negative, such amount
shall be the Partnership's Loss for such Fiscal Year.
"Project" means the acquisition and development of approximately nine acres
located at the southwest corner of FishHawk Boulevard and Lithia-Pinecrest Road
in Lithia, Hillsborough County, Florida.
"Pro Rata" means in the proportion that the item being measured for each
Partner bears to the total of all such items for all Partners for whom a
contribution, distribution or allocation is due or being made, shared or
determined.
"Substituted Limited Partner" means any Person admitted to the Partnership
as a Limited Partner pursuant to the provisions of Section 8.03.
"Tax Matters Partner" means the General Partner.
"Treasury Regulations" means the regulations of the United States Treasury
Department pertaining to the income tax, as amended, and any successor provision
to such regulations.
ARTICLE II.
PURPOSE AND BUSINESS OF THE PARTNERSHIP
2.01 Purpose of the Partnership. The Partnership has been formed for
the purpose of developing, managing, operating, maintaining and otherwise
dealing with the Project.
2.02 Authority of the Partnership. To carry out its purposes, the
Partnership, consistent with and subject to the provisions of this
Agreement and all applicable laws, is empowered and authorized to do any
and all acts and things incidental to, or necessary, appropriate, proper,
advisable or convenient for, the furtherance and accomplishment of its
purposes and the protection and benefit of the Partnership, including,
without limitation:
(a)developing, constructing, managing, operating, maintaining,
improving, buying, selling, conveying, licensing, assigning, exchanging,
mortgaging or leasing the Project or personal property necessary,
convenient or incidental to the accomplishment of the purpose of the
Partnership;
(b)entering into any kind of activity, and performing and carrying out
contracts of any kind, in connection with, or necessary or incidental to,
the accomplishment of the purpose of the Partnership;
(c)acquiring any real or personal property, in fee, or under lease or
by license, or any right in or appurtenant to such property, that is
necessary, convenient or incidental to the Project, provided that all
property owned by the Partnership shall be titled and held in the
Partnership's name;
(d)borrowing money and issuing evidences of indebtedness in
furtherance of the Partnership business and securing any Partnership
indebtedness by mortgage, pledge, security interest or other lien; and
(e)negotiating and concluding agreements for the sale, lease, license,
exchange or other disposition of all or any part of the property of the
Partnership, or for the refinancing of any indebtedness or mortgage loan on
the property of the Partnership.
2.03 Special Limitations. Notwithstanding the authority of the
Partnership set forth in Section 2.02 or any other provision of this
Agreement, the Partnership shall not:
(a)engage in any business or activity other than the ownership,
development, leasing, management, operation and maintenance of the Project,
and activities incidental to the Project;
(b)acquire or own any material assets other than (i) the Project, and
(ii) such incidental personal property as may be necessary or appropriate
for the operation of the Project;
(c)commingle its assets with the assets of any of its general
partners, affiliates, principals or of any other person or entity;
(d)fail to maintain its records, books of account and bank accounts
separate and apart from those of the general partners, principals and
affiliates of the Partnership, the affiliates of any general partner of the
Partnership.
(e)enter into any contract or agreement with any general partner,
principal or affiliate of the Partnership, except upon terms and conditions
that are intrinsically fair and substantially similar to those that would
be available on an arms-length basis with third parties other than any
general partner, principal or affiliate of the Partnership.
(f)seek the dissolution or winding up in whole, or in part, of the
Partnership;
(g)maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from
those of any general partner, principal or affiliate of the Partnership, or
any general partner, principal or affiliate of such person or any other
person;
(h)hold itself out to be responsible for the debts of another person;
(i)make any loans or advances to any third party, including any
general partner, principal or affiliate of the Partnership, or any general
partner, principal or affiliate of such person;
(j)fail to file its own tax returns;
(k)fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct its
business solely in its own name in order not (i) to mislead others as to
the identity with which such other party is transacting business, or (ii)
to suggest that the Partnership is responsible for the debts of any third
party (including any partner, principal or affiliate of the Partnership, or
any general partner, principal or affiliate of such person); or
(l)fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light
of its contemplated business operations.
ARTICLE III.
PARTNERS, CAPITAL, DEFAULTS
3.01 General Partner. Golding United FishHawk Inc. is the General
Partner of the Partnership. The name, address, Capital Contribution and
Partnership Percentage Interest of the General Partner are set forth in
Schedule A, as amended from time to time. The General Partner shall not be
required to lend any funds to the Partnership or to make any additional
Capital Contribution to the Partnership not specifically described in this
Article III or in the Master Agreement.
3.02 Initial Limited Partners. UIRT and SSG are the initial Limited
Partners of the Partnership. Their addresses, Capital Contributions and
Partnership Percentage Interests are set forth in Schedule A, as amended
from time to time. No Limited Partner shall be required to lend any funds
to the Partnership or to make any additional Capital Contribution to the
Partnership not specifically described in this Article III in the Master
Agreement.
3.03 Additional Limited Partners. Except as specifically provided to
the contrary in this Agreement, the General Partner is not authorized
without the written consent of the Limited Partners to admit Additional
Limited Partners to the Partnership.
3.04 Partnership Capital.
(a) (i) All Capital Contributions made by the Partners to the
Partnership pursuant to this Section 3.04(a) shall be made Pro Rata by each
Partner, according to its Partnership Percentage Interest, and are set
forth in Schedule A.
(ii) Any Capital Contribution required to be made pursuant to this
Section 3.04(a) shall be made by each Partner to the Partnership by no
later than ten business days after notice by the General Partner. The
General Partner shall use its best efforts to provide informal notice to
the Partners of the pending request for Capital Contributions at least 30
days prior to the deadline for the making of such Capital Contributions.
(b)No Partner shall be paid interest on any Capital Contribution to
the Partnership or on such Partner's Capital Account.
(c)A Partner shall not receive from the Partnership or out of
Partnership property, and the Partnership shall not return to a Partner,
any part of its Capital Contribution, except (i) to the extent that a
distribution is determined to be a return of a Partner's Capital
Contribution, or (ii) pursuant to the dissolution, winding up and
termination of the Partnership, and then in each case only if (1) all
liabilities of the Partnership, except liabilities to the Partners on
account of their Capital Contributions or any Partner loans, have been paid
or there remains property of the Partnership sufficient to pay them, and
(2) the Partnership s Certificate of Limited Partnership is cancelled or
amended, if necessary, to reflect the withdrawal and reduction. Under
circumstances requiring or permitting a return of its Capital Contribution,
a Partner may demand and receive only cash in return for its Capital
Contribution, unless the General Partner decides to distribute Partnership
property in kind to the Partners. Each Partner, by signing this Agreement
or a counterpart of it, consents to all distributions of cash, property and
capital authorized by this Agreement and releases all other Partners from
all liability to both it and the Partnership for all capital distributions
made in accordance with this Agreement.
(d)The General Partner may from time to time determine that additional
capital (in addition to the Capital Contributions required under
Section 3.04(a)) is required in order to achieve the purpose of the
Partnership described in Section 2.01 above. Upon such a determination, in
the event all of the Limited Partners do not agree to make additional
Capital Contributions Pro Rata in the aggregate amount determined by the
General Partner, the General Partner is authorized, notwithstanding Section
3.03 to the contrary and without the need for additional approval by the
Limited Partners, to offer additional interests in the Partnership to
investors upon such terms and conditions as are determined by the General
Partner to be fair and reasonable. The General Partner shall first offer
such additional interests in the Partnership to those Persons who are
Partners in the Partnership at the time of such offer, Pro Rata according
to each such Person's Partnership Percentage Interest. Any unsold interests
in the Partnership after such initial offering can then be sold to other
investors, who shall be admitted to the Partnership as Limited Partners.
The General Partner is authorized to take all necessary actions, including
the amendment of this Agreement, to reflect the admission of new Limited
Partners and the adjustment of the Partners' Partnership Percentage
Interests, resulting from the offering of additional interests in the
Partnership pursuant to this Section 3.4(d). Notwithstanding anything to
the contrary contained in this Section 3.04 or elsewhere in this Agreement,
no Partner shall be obligated to make additional Capital Contributions.
3.05 Capital Accounts.
(a)A separate Capital Account shall be maintained for each Partner in
accordance with the following provisions:
(i) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits, and any items of Profits that are specially allocated pursuant to
Article IV, and the amount of any Partnership liabilities that are assumed
by such Partner or that are secured by any Partnership property distributed
to such Partner.
(ii) To each Partner's Capital Account there shall be debited the
amount of cash and the fair market value (as determined by the General
Partner) of any Partnership property distributed to such Partner pursuant
to any provisions of this Agreement, such Partner's distributive share of
Losses, and any items in the nature of expenses or losses that are
specially allocated pursuant to Article IV, and the amount of any
liabilities of such Partner that are assumed by the Partnership or that are
secured by any property contributed by such Partner to the Partnership.
(b)The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Treasury Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits to the Capital Accounts, are
computed in order to comply with such Treasury Regulations, the General
Partner may make such modification. The General Partner shall adjust the
amounts debited or credited to Capital Accounts with respect to (i) any
property contributed to the Partnership or distributed to a Partner and
(ii) any liabilities that are secured by such contributed or distributed
property or that are assumed by the Partnership or a Partner, in the event
the General Partner determines that such adjustments are necessary or
appropriate pursuant to Treasury Regulations 1.704-1(b)(2)(iv). The General
Partner also shall make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply
with Treasury Regulations 1.704-1(b).
3.06 Liability of Partners.
(a)Subject to Section 3.06(b), no Limited Partner shall have any
personal liability whatsoever in its capacity as a Limited Partner, whether
to the Partnership, to any of the Partners or to the creditors of the
Partnership, for the debts, liabilities, contracts or any other obligations
of the Partnership, or for any losses of the Partnership. A Limited Partner
shall be liable only to make its Capital Contributions and shall not be
required to lend any funds to the Partnership or, after its Capital
Contributions shall have been paid, subject to Section 3.06(b), to make any
further Capital Contributions to the Partnership or to repay to the
Partnership, any Partner or any creditor of the Partnership all or any
fraction of any negative amount of such Limited Partner's Capital Account.
(b)In accordance with the law of the State of Florida, a limited
partner of a partnership may, under certain circumstances, be required to
return to the partnership, for the benefit of partnership creditors,
amounts, with interest on such amounts, previously distributed to such
partner as a return of capital. It is the intent of the General Partner
that no distribution to any Limited Partner pursuant to Section 5.01 shall
be deemed a return or withdrawal of capital, and that no Limited Partner
shall be obligated to pay any such amount to or for the account of the
Partnership or any creditor of the Partnership. However, if any court of
competent jurisdiction holds that, notwithstanding the provisions of this
Agreement, any Limited Partner is obligated to make any such payment, such
obligation shall be the obligation of such Limited Partner and not of the
General Partner.
(c)The General Partner shall not have any personal liability to any
Limited Partner for the repayment of any amounts outstanding in the Capital
Account of a Limited Partner, including, but not limited to, Capital
Contributions. Any such payment shall be solely from the assets of the
Partnership. The General Partner shall not be liable to any Limited Partner
by any reason of any change in the federal income tax laws as they apply to
the Partnership and the Limited Partners, whether such change occurs
through legislative, judicial or administrative action, so long as the
General Partner has acted in good faith and in a manner reasonably believed
to be in the best interests of the Limited Partners.
(d)The General Partner shall have no personal liability to repay to
the Partnership any portion or all of any negative amount of the General
Partner's Capital Account, except as otherwise provided in Section 9.02(c).
3.07 Defaults.
(a)Each Partner, by its execution of this Agreement, hereby
acknowledges and agrees that such Partner's obligation to pay any Capital
Contributions at the times and in the amounts described in Section 3.04(a)
constitutes a legally enforceable obligation of such Partner and consents
to the enforcement and collection of such obligation by any legal means,
without the requirement of any prior accounting or other equitable
procedure on the part of the Partnership.
(b)The General Partner, subject to the unanimous approval of the
non-Defaulting Partners, can agree to not cause the forfeiture of a
Defaulting Partner's Interest in the Partnership and can agree to permit
such Defaulting Partner to cure its default on such terms as are agreed to
by the General Partner (subject to the approval of all the non-Defaulting
Partners) and the Defaulting Partner. Each Partner acknowledges and agrees,
however, that, because the making of Capital Contributions by the Partners
to the Partnership on a timely basis is necessary for the Partnership to
fulfill its purpose, and the Partnership and the non-Defaulting Partners
will be substantially damaged by the Defaulting Partner's failure to make
its Capital Contributions on a timely basis, the forfeiture of a Defaulting
Partner's interest in the Partnership is an appropriate remedy for a
default by such a Partner, regardless of the fact that such Partner might
previously have made Capital Contributions to the Partnership that have not
been returned to the Partner.
(c)A Defaulting Partner shall have no Partnership Rights that
otherwise are provided to a Partner under the terms of this Agreement.
(d)The Capital Contribution obligations of the non-Defaulting Partners
shall not increase as a result of the default of a Partner or the
forfeiture of a Defaulting Partner's interest in the Partnership, unless
otherwise unanimously agreed to by the non-Defaulting Partners.
3.08. Pre-Development Expenses. Amounts expended by a Partner prior
to the execution of this Agreement that are listed in Schedule B and
included in Prepartnership Expenses in accordance with Section 6.06(c)
shall be treated as Capital Contributions or, at the option of such
Partner, as loans by such Partner to the Partnership. If the Partner elects
to treat such amounts as Capital Contributions, such amounts shall reduce
the amount of cash Capital Contributions that the Partner would otherwise
be obligated to make to the Partnership pursuant to Section 3.04(a)(i).
ARTICLE IV
PROFITS AND LOSSES
4.01. Determination and Allocation of Profits and Losses. Profits and
Losses of the Partnership shall be determined for each Fiscal Year of the
Partnership in accordance with the method of income tax accounting adopted
by the General Partner for the Partnership consistently applied and shall
be allocated among the Partners in the manner provided for in this
Article IV.
4.02. Allocation of Losses. The Partnership's Losses, if any, arising
in a Fiscal Year shall be allocated among the Partners as follows:
(a)First: To the extent of the aggregate positive Capital Account
balances of the Partners as of the end of the Fiscal Year, Pro Rata to the
Partners in accordance with each such Partner's positive Capital Account
balance; and then
(b)Second: To the General Partner.
For purposes of Section 4.02(a), a Partner's Capital Account shall be
reduced for items described in Treasury Regulations
1.704-1(b)(2)(ii)(d)(4), (5) and (6). Subject to the next following
sentence, and notwithstanding Section 4.02(a) to the contrary, Nonrecourse
Deductions shall be allocated among the Partners Pro Rata in accordance
with their respective Partnership Percentage Interests, even if the
allocation results in a Limited Partner having a negative Capital Account
Balance. With respect to any Partner, the amount of Loss for any Fiscal
Year or other period that would otherwise be allocated to a Partner under
Section 4.02(a) shall not be so allocated if to do so would cause or
increase a negative balance in such Partner's Capital Account in excess of
such Partner's share of Partnership Minimum Gain (including such Partner's
share, if any, of Partner Nonrecourse Debt Minimum Gain as defined in
Treasury Regulations 1.704-2(i)(2)). Any Loss in excess of the limitation
set forth in the immediately preceding sentence shall be allocated under
Section 4.02(a) among the Partners Pro Rata in accordance with the amounts
not in excess of such limitation for such Partners with the balance of such
Loss, if any, allocated to the General Partner in accordance with Section
4.02(b).
4.03. Allocation of Profits. Profits arising in a Fiscal Year shall be
allocated among the Partners as follows:
(a)First: To the General Partner until Profits allocated to the
General Partner during the term of the Partnership pursuant to this
Section 4.03(a) equal Losses allocated to the General Partner during the
term of the Partnership pursuant to Section 4.02(b); then
(b)Second: To the Partners Pro Rata in accordance with the amount of
Losses allocated to each Partner pursuant to Section 4.02(a) during the
term of the Partnership, until the Profits allocated to each such Partner
during the term of the Partnership pursuant to this Section 4.03(b) equal
the amount of Losses allocated to each such Partner during the term of the
Partnership pursuant to Section 4.02(a); and then
(c)Third: To the Partners Pro Rata in accordance with their respective
Partnership Percentage Interests.
4.04. Tax Allocations.
(a)Except as otherwise provided in this Agreement, for Federal income
tax purposes, all items of Partnership income, gain, loss, deduction,
basis, amount realized and credit, and the character and source of such
items, shall be allocated among the Partners in the same manner as the
corresponding items of income, gain, loss, deduction or credit are
allocated to Capital Accounts in accordance with Sections 4.02, 4.03 or
4.05. The Partnership shall maintain such books, records and accounts as
are necessary to make such allocations.
(b)The General Partner is authorized to make, for tax purposes,
allocations of income, gain, loss or deduction or adopt conventions as are
necessary or appropriate to comply with the relevant Treasury Regulations
or Internal Revenue Service pronouncements under Section 704(c) of the
Code, and in particular, in respect of a Capital Contribution of property
other than cash and adjustments to the Book Value of Partnership assets at
the times specified in the definition of Book Value. Allocations will be
made in a manner consistent with Treasury Regulations 1.704-3 and in
conformity with Treasury Regulations 1.704-1(b)(2)(iv)(f) and
1.704-1(b)(4)(i).
4.05. Regulatory Allocations.
(a)Qualified Income Offset. If any Partner unexpectedly receives an
adjustment, allocation or distribution described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) in any Fiscal Year or other
period, and as a result would, but for this Section 4.05(a), have a
negative balance in its Capital Account as of the last day of such Fiscal
Year or other period which is in excess of the sum of (i) the amount (if
any) such Partner is obligated to restore (whether under this Agreement or
otherwise, and including for this purpose, without limitation, such
partner's exposure with respect to debt or other obligations or liabilities
of the Partnership) and (ii) the amount of such Partner's share of
Partnership Minimum Gain (including for this purpose such Partner's share
of Partner Nonrecourse Debt Minimum Gain) as of such last day, then items
of income and gain of the Partnership (consisting of a pro rata portion of
each item of Partnership income, including gross income and gain) for such
Fiscal Year or other period (and, if necessary, for subsequent Fiscal Years
or periods) shall be specially allocated to such Partner in the amount and
in the proportions required to eliminate such excess as quickly as
possible. For purposes of this Section 4.05(a), a Partner's Capital Account
shall be computed as of the last day of a Fiscal Year or other period in
the manner provided in Section 3.06, but shall be increased by any
allocation of income to such Partner for such Fiscal Year or other period
under Sections 4.05(b), 4.05(c) and 4.05(d).
(b)Gross Income Allocation. If any Partner would otherwise have a
negative balance in its Capital Account as of the last day of any Fiscal
Year or other period which is in excess of the sum of (i) the amount (if
any) such Partner is obligated to restore (whether under this Agreement or
otherwise, and including for this purpose, without limitation, such
Partner's exposure with respect to debt or other obligations or liabilities
of the Partnership) and (ii) the amount of such partner's share of
Partnership Minimum Gain (including for this purpose such partner's share
of Partner Nonrecourse Debt Minimum Gain) as of such last day, then items
of income and gain of the Partnership shall be specially allocated to such
Partner (in the manner specified in Section 4.05(a)) so as to eliminate
such excess as quickly as possible. For purposes of this Section 4.05(b), a
Partner's Capital Account shall be computed as of the last day of a Fiscal
Year or other period in the manner provided in Section 3.06, but shall be
increased by any allocation of income to such Partner for such Fiscal Year
or other period under Sections 4.05(c) and 4.05(d).
(c)Partnership Minimum Gain Chargeback. If there is a net decrease in
Partnership Minimum Gain during any Fiscal Year or other period, each
partner shall be allocated items of Partnership income and gain for such
Fiscal Year or other period (and, if necessary, for subsequent Fiscal Years
or periods) in proportion to, and to the extent of, an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain during such
Fiscal Year or other period, determined in accordance with Treasury
Regulations 1.704-2(g). The requirement set forth in the preceding sentence
shall be subject to the exceptions and limitations referred to in Treasury
Regulations 1.704-2(f). This Section 4.05(c) is intended to constitute a
"minimum gain chargeback" provision as described in Treasury Regulations
1.704-2(f) and shall be construed so as to meet the requirements of such
Treasury Regulation.
(d)Partner Nonrecourse Debt Minimum Gain Chargeback. If there is a net
decrease in Partner Nonrecourse Debt Minimum Gain during any Fiscal Year or
other period, each Partner shall be allocated items of Partnership income
and gain for such Fiscal Year or other period (and, if necessary, for
subsequent Fiscal Years or periods) in proportion to, and to the extent of,
an amount equal to such Partner's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain during such Fiscal Year or other period,
determined in a manner consistent with the provisions of Treasury
Regulations 1.704-2(g)(2). The requirement set forth in the preceding
sentence shall be subject to the exceptions and limitations referred to in
Treasury Regulations 1.704-2(i)(4). This Section 4.05(d) is intended to
comply with the minimum gain chargeback requirement contained in Treasury
Regulations 1.704-2(i)(4), and shall be construed so as to meet the
requirements of said Treasury Regulation.
(e)Partner Nonrecourse Deductions. If one or more Partners bear the
economic risk of loss (within the meaning of Section 1.752-2 of the
Treasury Regulations) with respect to any Partner Nonrecourse Debt, Partner
Nonrecourse Deductions attributable to such debt shall be allocated among
such Partners in accordance with the ratios in which such Partners share
the economic risk of loss for such Partner Nonrecourse Debt.
(f)Curative Allocations. The allocations set forth in Section 4.05(a)
through (e) above (the "Regulatory Allocations") are intended to comply
with certain requirements of Treasury Regulations 1.704-1(b) and 1.704-2.
The Regulatory Allocations may not be consistent with the manner in which
the Partners intend to allocate Profit and Loss or make Partnership
distributions. Accordingly, notwithstanding the other provisions of this
Article IV, but subject to the Regulatory Allocations, the General Partner
is hereby directed to reallocate items of income, gain, deduction and loss
among the Partners so as to eliminate the effect of the Regulatory
Allocations and thereby to cause the respective Capital Accounts of the
Partners to be in the amounts (or as close to such amounts as possible)
that they would have been if Profit and Loss (and such other items of
income, gain, deduction and loss) had been allocated without reference to
the Regulatory Allocations. In general, the General Partner anticipates
that this will be accomplished by specially allocating other Profit and
Loss (and such other items of income, gain, deduction and loss) among the
Partners so that the net amount of the Regulatory Allocations and such
special allocations to each such Partner is zero. The General Partner shall
have discretion to accomplish this result in any reasonable manner. In
addition, if in any Fiscal Year or other period there is a decrease in
Partnership Minimum Gain, or in Partner Nonrecourse Debt Minimum Gain, and
application of the minimum gain chargeback requirements contained in
Section 4.05(c) or Section 4.05(d) would cause a distortion in the economic
arrangement among the Partners, the General Partner may, if the General
Partner does not expect that the Partnership will have sufficient other
income to correct such distortion, request the Internal Revenue Service to
waive either or both of such minimum gain chargeback requirements. If such
request is granted, this Agreement shall be applied in such instance as if
it did not contain such minimum gain chargeback requirements.
4.06. Allocations in Event of Assignment; Prorations.
(a)Subject in all cases to applicable law, if there is an assignment
of all or any part of a Partner's Partnership Interest, for purposes of
allocations of Profits and Losses and distributions of cash and property,
the effective date of the assignment as to the Partnership will be: (i) in
the case of a voluntary assignment under Article VIII, the effective date
stated in the assignment instrument or such other date as the assignor and
assignee agree, but not earlier than the date the General Partner receives
Notification of the assignment; or (ii) in the case of an involuntary
assignment, the date of the operative event. Profits and Losses and
distributions of cash and property shall be allocated to the Person owning
the Partnership Interest at the time of the occurrence of the Profits and
Losses or distribution, as the case may be.
(b)In the event of the admission of a new Partner, the termination of
a Partner's interest in the Partnership or a change in a Partner's
Partnership Interest, at any time other than the end of a Partnership
Fiscal Year, the new Partner's or remaining Partners' share of the
Partnership's Profits and Losses shall be allocated between the new Partner
and the other Partners, or the remaining Partners, as the case may be, in
the same ratio as the number of days in such Fiscal Year before and after
the date of such admission, termination or change; provided, however, that
if there has been a sale or other disposition (including in-kind
distributions to Partners) of the assets of the Partnership (or any
material part of such assets) during such year, then the Partnership shall
treat the periods before and after the date of such admission, termination
or change as separate years for the purpose of allocating the Profits and
Losses (including the Profits and Losses deemed to be realized upon the
distribution of assets in kind to Partners) associated with such events and
shall allocate such items accordingly. Notwithstanding the foregoing, the
Partnership's "allocable cash basis items," as that term is used in
Section 706(d)(2)(B) of the Code, shall be allocated as required by
Section 706(d)(2) of the Code and the Treasury Regulations promulgated
under such Code section.
ARTICLE V
DISTRIBUTIONS
5.01. Net Cash From Operations. Within a reasonable period after the
end of each calendar year, or at more or less frequent intervals as the
General Partner may determine in its sole discretion, the General Partner
shall distribute Net Cash From Operations, if any, to the Partners Pro Rata
in accordance with their respective Partnership Percentage Interests. The
General Partner, subject to Section 5.02, will use best efforts, but is not
required, to make distributions to Partners under this Section 5.01(a) in
amounts sufficient so that they can satisfy their respective income tax
liabilities. In making such distributions, the General Partner shall (i)
assume all Partners are subject to a state income tax at a rate of 5
percent (deductible for federal income tax purposes) and to federal income
tax at the highest rate specified in Section 1 of the Code; (ii) disregard
the income, losses or other tax attributes from sources other than the
Partnership; and (iii) take into account all distributions made by the
partnership with respect to prior Fiscal Years and the allocations of
Profits and Losses to such Partners in such Years. Notwithstanding the
foregoing, the General Partner's ability to make distributions of Net Cash
From Operations may be limited by the terms of the instruments evidencing
the Partnership's indebtedness.
5.02. Limitation on Cash Distributions to Partners. The General
Partner shall not distribute Net Cash From Operations to any Partner
unless, after such distribution is made, the fair market value of the
Partnership's assets exceeds 140% of its total liabilities, excluding
liabilities to the Partners on account of their loans and Capital
Contributions.
5.03. Distribution Upon Sale or Refinancing of the Project.
(a)Upon the sale or other disposition of all or substantially all
of the assets of the Partnership causing a dissolution of the
Partnership under Section 9.01(a)(v), the proceeds from such a sale or
distribution shall be distributed to the Partners in accordance with
Section 9.02.
(b)Upon any other event generating Net Cash From Capital
Transactions not described in Section 5.03 (a), such Net Cash shall be
distributed to the Partners in the following orders of priority:
(i) First: Pro Rata to those Partners having positive Capital
Account balances in proportion to such positive balances until they
are reduced to zero; and then
(ii) Second: Pro Rata to the Partners in accordance with their
respective Partnership Percentage Interests.
ARTICLE VI
MANAGEMENT
6.01. Management Power of General Partner. Subject to the terms
of this Agreement, the General Partner shall have full, exclusive and
complete discretion in the management and control of the affairs of
the Partnership, shall make all decisions affecting Partnership
affairs, and shall have all of the rights, powers and obligations of a
general partner of a limited partnership under the Act and otherwise
as provided by law. Except as otherwise expressly provided in this
Agreement, the General Partner is hereby granted the right, power and
authority to do on behalf of the Partnership all things which, in its
sole judgment, are necessary or appropriate to manage the
Partnership's affairs and fulfill the purposes of the Partnership,
including, by way of illustration and not by way of limitation, the
power and authority from time to time to do the following:
(a)To incur all expenditures permitted by this Agreement;
(b)To establish and maintain one or more bank accounts for the
Partnership in such bank or banks as the General Partner may, from
time to time, designate as depositories of the funds of the
Partnership;
(c)To the extent that funds of the Partnership are available, to
pay all expenses, debts and obligations of the Partnership;
(d)To the extent that funds of the Partnership are available, to
make distributions periodically to the Partners in accordance with the
provisions of Article V;
(e)To establish and maintain the books and records of the
Partnership in accordance with Article XIII;
(f)To retain Persons to provide development, management and other
services to the Partnership with respect to the Project;
(g)To borrow money (including from Partners or their affiliates)
and issue evidences of indebtedness and to secure any Partnership
indebtedness by mortgage, pledge, security interest or other lien;
(h)To perform all normal business functions, and otherwise
operate and manage the business and affairs of the Partnership, in
accordance with and as limited by this Agreement, in particular as
described in Section 2.02; and
(i)To invest in assets, securities or interests in securities of
any nature, including (without limit) commodities, options, futures,
precious metals, currencies and in domestic or foreign markets or
investment funds (such as, but not limited to, mutual funds); to trade
on credit or margin accounts (whether secured or unsecured) and to
pledge Partnership assets for that purpose; and to deposit such
assets, securities or interests in securities of any nature with
brokers to be held in "street" names.
Any and all persons dealing with the Partnership shall have the
right to rely upon the actions of the General Partner to bind the
Partnership by its actions or signature and the General Partner need
not obtain any written Consent or permission from the Limited Partners
to so bind the Partnership.
6.02. Restrictions on the Authority of the General Partner.
(a)Without the written Consent or ratification of all of the
Limited Partners, the General Partner shall not have the authority to:
(i)Do any act in contravention of this Agreement;
(ii)Do any act that would make it impossible to carry on the
ordinary business of the Partnership;
(iii)Confess a judgment against the Partnership;
(iv)Possess Partnership property or assign its rights in specific
Partnership property for other than a Partnership purpose;
(v)Admit a person as a General Partner, except as provided in
this Agreement;
(vi)Admit a person as a Limited Partner, except as provided in
this Agreement; or
(vii)Continue the business with Partnership property after the
General Partner's removal or Incapacity, except as provided in this
Agreement.
(b)In the event that the written Consent or ratification of all
of the Limited Partners is obtained under this Section 6.02, the
General Partner agrees promptly to amend the Certificate of Limited
Partnership of the Partnership and this Agreement to the extent
necessary to reflect such actions.
(c)Subject to Section 9.01, the General Partner shall not have
the authority to elect to dissolve the Partnership without the Consent
of all the Limited Partners.
6.03. Duties and Obligations of the General Partner.
(a)The General Partner shall take all action which may be
necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership under the laws of the State
of Florida and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Limited Partners or
to enable the Partnership to conduct the business in which it is
engaged.
(b)The General Partner shall devote to the Partnership such time
as shall be necessary to conduct the Partnership business and affairs
in an appropriate manner.
(c)The General Partner shall be under a fiduciary duty and obligation
to conduct the affairs of the Partnership in the best interest of the
Partnership, including the safekeeping and use of all Partnership funds and
assets (whether or not in the immediate possession or control of the
General Partner) and the use of such funds and assets for the benefit of
the Partnership. The General Partner shall be entitled to cause the
Partnership to enter into transactions with affiliates of the General
Partner, or any Limited Partner or that benefit affiliates of the General
Partner or any Limited Partner, so long as such transactions are entered
into principally for the benefit of the Partnership in the ordinary course
of Partnership business.
(d)The General Partner shall at all times conduct its affairs and the
affairs of the Partnership in such a manner that no Limited Partner will
have any personal liability with respect to any Partnership indebtedness.
The General Partner shall use its best efforts in the conduct of the
Partnership's business to put all Persons with whom the Partnership does
business or in whom the Partnership invests on notice that the Limited
Partners are not liable for Partnership obligations, and all agreements to
which the Partnership is a party shall include a statement to the effect
that the Partnership is a limited partnership organized under the Act; but
the General Partner shall not be liable to the Limited Partners for any
failure to give such notice to such Persons or for the failure of any such
agreement to contain such statement.
(e)The Tax Matters Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension of the due date) any
federal, state or local tax returns required to be filed by the
Partnership. The General Partner shall cause the Partnership to pay any
taxes payable by the Partnership (it being understood that the expenses of
preparation and filing of such returns, and the amounts of such taxes, are
expenses of the Partnership and not of the General Partner); provided,
however, that the General Partner shall not be required to cause the
Partnership to pay any tax so long as the General Partner or the
Partnership is in good faith and by appropriate legal proceeding contesting
the validity, applicability or amount of such tax and such contest does not
materially endanger any right or interest of the Partnership.
6.04. Designation of Tax Matters Partner.
(a)The General Partner shall act as the Tax Matters Partner of the
Partnership, as provided in Treasury Regulations pursuant to section 6231
of the Code. Each Partner hereby approves of such designation and agrees to
execute, certify, acknowledge, deliver, swear to, file and record at the
appropriate public offices such documents as may be deemed necessary or
appropriate to evidence such approval.
(b)To the extent and in the manner provided by applicable Code
sections and Treasury Regulations under such Code sections, the Tax Matters
Partner shall furnish the name, address, profits, interest and taxpayer
identification number of each Partner (or assignee) to the IRS.
(c)To the extent and in the manner provided by applicable Code
sections and Treasury Regulations under such Code sections, the Tax Matters
Partner shall inform each Partner of administrative or judicial proceedings
for the adjustment of Partnership items required to be taken into account
by a Partner for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being referred
to as "judicial review").
(d)The Tax Matters Partner is authorized, but not required:
(i) To enter into any settlement with the IRS with respect to any
tax audit or judicial review, and in the settlement agreement the Tax
Matters Partner may expressly state that such agreement shall bind all
Partners except that such settlement agreement shall not bind any
Partner (i) who (within the time prescribed pursuant to the Code and
Treasury Regulations) files a statement with the IRS providing that
the Tax Matters Partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner or (ii) who is a
"notice partner" (as defined in section 6231 of the Code) or a member
of a "notice group" (as defined in section 6223(b)2));
(ii) In the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be taken
into account by a Partner for tax purposes (a "final adjustment") is
mailed to the Tax Matters Partner, to seek judicial review of such
final adjustment, including the filing of a petition for readjustment
with the Tax Court, or the filing of a complaint for refund with the
United States Claims Court or the District Court of the United States
for the district in which the Partnership's principal place of
business is located;
(iii)To intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(iv) To file a request for an administrative adjustment with the
IRS at any time and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition or complaint) for
judicial review with respect to such request;
(v) To enter into an agreement with the IRS to extend the period
for assessing any tax which is attributable to any item required to be
taken into account by a Partner for tax purposes, or an item affected
by such item; and
(vi) To take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or regulations.
(e)Notwithstanding any other provision of this Agreement, the
Partnership shall indemnify and reimburse, to the full extent provided by
law, the Tax Matters Partner for all expenses, including legal and
accounting fees (as such fees are incurred), claims, liabilities, losses
and damages incurred in connection with any tax audit or judicial review
proceeding with respect to the tax liability of the Partners, the payment
of all such expenses to be made before any cash distributions are made to
the Partners. Neither the General Partner nor any of its Affiliates nor
other Person shall be obligated to provide funds for such purpose.
(f)The taking of any action and the incurring of any expense by the
Tax Matters Partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole discretion of the Tax
Matters Partner and the provisions on limitations of liability of the
General Partner and the indemnification set forth in this Agreement shall
be fully applicable to the Tax Matters Partner in its capacity as such.
6.05. Other Businesses of Partners. Subject to Section 6.02(a) and the
Master Agreement, any Partner and any affiliate of any Partner may engage
in or possess any interest in other business ventures of any kind, nature
or description, independently or with others, whether such ventures are
competitive with the Partnership or otherwise. Subject to Section 6.02(a)
and the Master Agreement, neither the Partnership nor any Partners shall
have any rights or obligations by virtue of this Agreement or the
partnership relationship created hereby in or to such independent ventures
or the income or profits or losses derived from such independent ventures,
and the pursuit of such ventures, even if competitive with the business of
the Partnership, shall not be deemed wrongful or improper.
6.06. Reimbursement and Compensation.
(a)The General Partner shall be entitled to be reimbursed by the
Partnership for out-of-pocket expenses incurred in its capacity as General
Partner in connection with the operation of the Project. It is contemplated
by the Partners, however, that all Partnership expenses will be incurred
and paid directly by the Partnership, and that any reimbursement of
out-of-pocket expenses to the General Partner would be an extraordinary
event. The General Partner shall attempt to avoid these out-of-pocket
expenses, whenever practical, by using Partnership funds to pay for all
Partnership expenses.
(b)The General Partner shall not receive any compensation for the
development, management, operation or other activities involving the
Project.
(c)Upon the execution of this Agreement, the Partners shall agree upon
the amount of pre-formation expenses incurred and paid or owing to third
parties by a Partner and list those expenses (collectively the
"Prepartnership Expenses") in a schedule substantially in the form of
Schedule B. Prepartnership expenses incurred to third parties include, but
are not limited to, amounts expended in connection with the organization of
the Partnership such as legal, accounting, filing fees of any kind and
mailing and courier expenses. Pre-formation expenses incurred, but not
paid, to a third party on or prior to the date of execution of this
Agreement, but which are billed to the General Partner or its affiliates
after such date, shall be paid by the Partnership and the General Partner
shall determine the amount of such expenses.
6.07. Indemnification of the General Partner by the Partnership.
Neither the General Partner nor any of its affiliates shall be liable,
responsible or accountable in damages or otherwise to the Partnership or
any Limited Partner for any loss or damage incurred by reason of any act or
omission performed or omitted by the General Partner or such affiliates on
behalf of, and for the benefit of the Partnership, in good faith and in a
manner reasonably believed by them to be in the best interests of the
Partnership. The Partnership shall indemnify and hold harmless the General
Partner and any of its affiliates and any of its heirs, administrators,
successors and assigns who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including any
action by or in the right of the Partnership), by reason of any acts or
omissions or alleged acts or omissions arising out of such Person's
activity as a General Partner or as an affiliate of a General Partner, if
such activities were performed in good faith and in a manner reasonably
believed by such Person to be in the best interests of the Partnership,
against losses, damages or expenses for which such Person has not otherwise
been reimbursed (including attorneys' fees, judgments, fines and amounts
paid in settlement) actually incurred by such Person in connection with
such action, suit or proceeding, provided that the satisfaction of any
indemnification and any hold harmless shall be from and limited to
Partnership assets and no Limited Partner shall have any personal liability
on account of such indemnification and hold harmless.
6.08. Rights and Obligations of Limited Partners.
(a)A Limited Partner shall take no part in the management or control
of the Partnership's business, but may exercise the rights and powers of a
Limited Partner under this Agreement. A Limited Partner shall have no power
to represent, act for, sign for or bind the General Partner or the
Partnership. The Limited Partners hereby Consent to the exercise by the
General Partner of the powers conferred on it by law and this Agreement.
(b)The Limited Partners shall have the following voting, approval,
consent or similar rights:
(i)The right to approve or disapprove the appointment of a
successor General Partner pursuant to Section 7.05;
(ii)The right to dissolve the Partnership pursuant to Section
9.01(a)(iii); and
(iii)The right to amend this Agreement pursuant to Section 10.02.
ARTICLE VII
TRANSFERABILITY OF GENERAL PARTNER'S INTEREST
7.01 Withdrawal by General Partner. Subject to Section 7.03, the
General Partner may withdraw from the Partnership, but only upon compliance
with all of the following procedures:
(a)The General Partner shall, at least 60 days prior to such
withdrawal, give Notification to all Partners that it proposes to withdraw
and that there be substituted in its place a Person designated and
described in such Notification.
(b)Enclosed with the Notification shall be a certificate, duly
executed by or on behalf of such proposed successor General Partner, to the
effect that:
(i) It is experienced in performing (or employs sufficient personnel
who are experienced in performing) functions that the General Partner is
required to perform under this Agreement;
(ii) It has the requisite financial wherewithal to satisfy its
obligations under this Agreement; and
(iii) It is willing to become the General Partner under this Agreement
and will assume all duties and responsibilities of the General Partner,
without receiving any compensation for services from the Partnership in
excess of that payable under this Agreement to the withdrawing General
Partner and without receiving any participation in the withdrawing General
Partner's General Partnership Interest other than that agreed upon by the
General Partner and the successor General Partner.
(c)If the General Partner withdraws, there shall be on file at the
principal office of the Partnership, prior to such withdrawal, audited
financial statements of the proposed successor General Partner, as of a
date not earlier than 12 months prior to the date of the Notification
required by this Section 7.01, certified by a nationally or regionally
recognized firm of independent certified public accountants, together with
a certificate duly executed on behalf of the proposed successor General
Partner by its principal financial officer, to the extent that no material
adverse change in its financial condition has occurred since the date of
such audited financial statements that has caused its net worth, excluding
the purchase price of its General Partnership Interest in the Partnership,
to be reduced to less than the amount required under Section 7.01(b). Such
audited financial statements and certificate shall be available for
examination by any Limited Partner during normal business hours.
(d)A Two-Thirds Majority In Interest of the Limited Partners has
consented to the appointment of any successor General Partner pursuant to
this Section 7.01.
(e)The withdrawing General Partner shall cooperate fully with the
successor General Partner so that the responsibilities of the withdrawing
General Partner may be transferred to the successor General Partner with as
little disruption of the Partnership's business and affairs as practicable.
7.02.Incapacity of General Partner.
(a)In the event of the Incapacity of the General Partner, the
Partnership will be dissolved and must be liquidated and terminated, unless
the Partnership is reconstituted in accordance with this Section 7.02.
(b)Upon the Incapacity of the General Partner, (i) the Incapacitated
General Partner immediately will cease to be a General Partner and to have
any Partnership Rights provided by this Agreement, and (ii) the General
Partnership Interest of the Incapacitated General Partner, including all
obligations attendant to it, automatically will become a Limited
Partnership Interest, without any Partnership Rights provided by this
Agreement.
(c)If dissolution of the Partnership results from the Incapacity of
the General Partner and if a successor General Partner has been selected
pursuant to Section 7.04, the Partnership automatically will be
reconstituted as a successor limited partnership and will continue the
business of the Partnership with the Partnership property, and the
successor General Partner designated pursuant to Section 7.04 will be
admitted as the General Partner, provided the terms and conditions of
Section 7.05(a) are satisfied. The successor limited partnership will be
deemed to have acquired the assets and liabilities of the Partnership by
contribution from the Partners in accordance with their Partnership
Percentage Interests. The successor limited partnership will be governed by
the terms and provisions of this Agreement.
7.03. Removal of General Partner.
(a)(i) The General Partner may be removed at the election of any
Limited Partner, for one of the following causes:
(A) A final judicial determination that the General Partner (1) was
grossly negligent in performing its obligations under this Agreement; (2)
committed a felony involving moral turpitude in connection with the
management of the Partnership or its business, (3) committed a fraud on the
Partners or the Partnership; or (4) breached a material fiduciary
obligation to either the Partnership or the Partners under this Agreement
or a material undertaking by it in this Agreement.
(B) The withdrawal of the General Partner without providing a
successor General Partner that is approved in the manner required by
Section 7.01(d).
(ii) Unless the appropriate election is made under Section
7.03(a)(iii), a removal pursuant to this Section 7.03(a) will be treated as
the Incapacity of the General Partner and will be subject to the provisions
of Section 7.02.
(iii)If the General Partner is removed for cause pursuant to Section
7.03(a)(i), the Partnership shall have the option for 30 days, beginning on
the day after the day of the removal of the General Partner, to purchase
the Partnership Interest of the General Partner by agreeing to pay to the
General Partner an amount equal to 100% of the sum of (A) the outstanding
principal balance of any loans made by the General Partner to the
Partnership with accrued and unpaid interest, plus (B) the lower of (1) the
balance in the General Partner's Capital Account or (2) the value of the
General Partner's Partnership Interest determined under Section 7.03(b). In
order to exercise the option to purchase the General Partner's Partnership
Interest, the approval of a Two-Thirds Majority In Interest of the Limited
Partners shall be required.
(iv) The Partnership shall exercise the option provided for in Section
7.03(a)(iii) by providing notice of such election to the General Partner by
no later than the end of the option period. If an option is exercised under
Section 7.03(a)(iii), then the Partnership shall make payment in cash to
the General Partner in an amount equal to the value of the General
Partner's Partnership Interest within 30 days after the date that the value
of the General Partner's Partnership Interest is determined under Section
7.03(b).
(b)The value of the General Partner's Partnership Interest for
purposes of Section 7.03(a) shall be the value of such Partnership Interest
that is determined by agreement of all the Partners in the Partnership. If
any disagreement exists as to the value of the Partnership Interest, then
the Partners shall select two independent appraisers (or a different number
of appraisers, if agreed to by all the Partners) to determine the fair
market value of the Partnership Interest. The values determined by each of
the appraisers shall be averaged to arrive at the value of the Partnership
Interest. An appraisal made pursuant to the provisions of this Section
7.03(b) shall be binding on both the Partnership and the General Partner.
The cost of the appraisals shall be the responsibility of and shall be paid
by the Partnership. The Limited Partners, by approval of a Two-Thirds
Majority In Interest, can waive the application of this valuation
procedure, in which case Section 7.03(a)(iii)(B)(1) shall immediately be
applicable.
7.04. Replacement of General Partner. Upon the removal of the General
Partner in accordance with Section 7.03 or upon the occurrence of
circumstances causing the Partnership to lack a General Partner, the
Partnership will be dissolved and must be liquidated unless Limited
Partners constituting a Two-Thirds Majority In Interest elect within 60
days after the occurrence of the vacancy to select a successor General
Partner, to reconstitute the Partnership in accordance with Section 7.02
and to continue the business of the Partnership with its property.
7.05.Admission of a Successor General Partner.
(a)The admission of any successor General Partner pursuant to this
Article VII shall be effective only if and after the following conditions
are satisfied:
(i) The Person has accepted and assumed in writing all the terms and
provisions of this Agreement;
(ii) If the Person is not a natural person, it has provided counsel
for the Partnership with a certified copy of a resolution of its Board of
Directors or other authorizing action taken under its controlling documents
or agreements, authorizing it to become a General Partner under the terms
and conditions of this Agreement;
(iii)The Person has executed two counterparts of this Agreement as
then in effect, an Amended Certificate of Limited Partnership and such
other documents or instruments as may be required or appropriate to effect
the admission of that person as a General Partner; and
(iv) The Limited Partners have given their approval, if required under
this Article VII.
(b)Notwithstanding anything to the contrary in this Article VII, a
General Partnership Interest shall at all times be subject to the
restrictions on transfer set forth in Section 8.01.
7.06.Liability of Withdrawing General Partner. A General Partner who
shall withdraw from the Partnership, or who shall sell, transfer or assign
its General Partnership Interest, or who shall have ceased to be the
General Partner because of its Incapacity, shall remain liable for
obligations and liabilities incurred by it as General Partner prior to the
time such withdrawal, sale, transfer, assignment or Incapacity shall have
become effective or occurred, but it shall be free of any obligation or
liability incurred on account of the activities of the Partnership from and
after the time such withdrawal, sale, transfer, assignment or Incapacity
shall have become effective.
7.07.Consent of Limited Partners to Admission of Successor General
Partners. Each Limited Partner hereby Consents pursuant to Section 7.01 to
the admission of any Person as a successor General Partner meeting the
requirements of Section 7.01 to whose admission as such Limited Partners
constituting a Two-Thirds Majority In Interest have expressly Consented,
and no further expressed Consent or approval shall be required.
ARTICLE VIII
TRANSFERABILITY OF A LIMITED PARTNERSHIP INTEREST
8.01.Restrictions on Transfers of Interest.
(a)Notwithstanding any other provisions of this Section 8.01, no sale,
exchange, transfer or assignment (collectively "Transfer") of a Partnership
Interest (General or Limited) may be made unless in the opinion of
responsible counsel (who may be counsel for the Partnership), satisfactory
in form and substance to the General Partner and counsel for the
Partnership (which opinion may be waived, in whole or in part, at the
discretion of the General Partner):
(i) Such Transfer, when added to the total of all other Transfers of
Partnership Interests within the preceding 12 months, would not result in
the Partnership being considered to have terminated within the meaning of
Section 708 of the Code;
(ii) Such Transfer would not violate any federal securities laws or
any state securities or "Blue Sky" laws (including any investor suitability
standards) applicable to the Partnership or the Partnership Interest to be
Transferred;
(iii) Such Transfer would not cause the Partnership to lose its status
as a partnership for federal income tax purposes; and
(iv) Any required opinion of counsel is delivered in writing to the
Partnership prior to the time of the Transfer.
(b)In no event shall all or any part of a Partnership Interest be
Transferred to a minor or an incompetent, except in trust or by will or
intestate succession.
(c)A Limited Partner may Transfer all or any part of its Limited
Partnership Interest only with the Consent of the General Partner, which
consent shall not be unreasonably withheld.
(d)Each Limited Partner agrees that it will, upon the request of the
General Partner, execute such certificates or other documents and perform
such acts as the General Partner deems appropriate after an assignment of a
Partnership Interest by that Limited Partner to preserve the limited
liability of the Limited Partners under the law of the jurisdictions in
which the Partnership is doing business. For purposes of this Section
8.01(d), any transfer of a Partnership Interest, whether voluntary or by
operation of law, shall be considered an assignment.
(e)Any purported assignment of a Partnership Interest which is not
made in compliance with this Agreement is hereby declared to be null and
void and of no force or effect whatsoever.
(f)Each Limited Partner agrees that it will, prior to the time the
General Partner consents to an assignment of a Partnership Interest by that
Limited Partner, pay all reasonable expenses, including attorneys' fees,
incurred by the Partnership in connection with such assignment.
8.02.Assignees.
(a)The Partnership shall not recognize for any purpose any purported
Transfer of a Partnership Interest of a Limited Partner unless the
provisions of Section 8.01 shall have been complied with and there shall
have been filed with the Partnership a dated Notification of such Transfer,
in form satisfactory to the General Partner, executed and acknowledged by
both the seller, assignor or transferor and the purchaser, assignee or
transferee, and such Notification (i) contains the acceptance by the
purchaser, assignee or transferee of all of the terms and provisions of
this Agreement and (ii) represents that such Transfer was made in
accordance with all applicable laws and regulations. Any Transfer shall be
recognized by the Partnership as effective on the date on which such
Notification is filed with the Partnership.
(b)Unless and until an assignee of a Limited Partnership Interest
becomes a Substituted Limited Partner, such assignee shall not be entitled
to vote or give Consents with respect to such Limited Partnership Interest.
(c)Any Limited Partner who shall assign all of its Partnership
Interest shall cease to be a Limited Partner, except that, unless and until
a substituted Limited Partner is admitted in its stead, such assigning
Limited Partner shall retain the statutory rights of the assignor of a
Limited Partnership Interest under the Act.
(d)Anything in this Agreement to the contrary notwithstanding, both
the Partnership and the General Partner shall be entitled to treat the
assignor of a Limited Partnership Interest as the absolute owner of such
Limited Partnership Interest in all respects, and shall incur no liability
for distributions made in good faith to it, until such time as a written
assignment that conforms to the requirements of this Article VIII has been
received by the Partnership and accepted by the General Partner.
8.03.Substituted Limited Partners; New Limited Partners.
(a)No Limited Partner shall have the right to substitute a purchaser,
assignee, transferee, donee, heir, legatee, distributee or other recipient
of any of such Limited Partner's Partnership Interest as a Limited Partner
in its place. Any such purchaser, assignee, transferee, donee, heir,
legatee, distributee or other recipient of a Limited Partnership Interest
(whether pursuant to a voluntary or involuntary transfer) shall be admitted
to the Partnership as a Substituted Limited Partner only (i) with the
Consent of the General Partner, which Consent shall be granted or withheld
in the absolute discretion of the General Partner and may be arbitrarily
withheld, (ii) by satisfying the requirements of Sections 8.01 and 8.02,
and (iii) upon an amendment to this Agreement and, if necessary, the
Partnership's Certificate of Limited Partnership recorded in the proper
records of each jurisdiction in which such recordation is necessary to
qualify the Partnership to conduct business or to preserve the limited
liability of the Limited Partners. Any such Consent by the General Partner
may be evidenced by the execution by the General Partner of an amendment to
this Agreement evidencing the admission of such Person as a Limited
Partner. The Limited Partners hereby Consent and agree to such admission of
a Substituted Limited Partner by the General Partner, and agree that the
General Partner may, on behalf of each Partner and on behalf of the
Partnership, cause the Certificate of Limited Partnership of the
Partnership to be appropriately amended, and recorded as so amended, and
Schedule A to be appropriately amended, in the event of such admission.
(b)Each Substituted Limited Partner, as a condition to its admission
as a Limited Partner, shall execute and acknowledge such instruments, in
form and substance satisfactory to the General Partner, as the General
Partner deems necessary or desirable to effectuate such admission and to
confirm the agreement of the Substituted Limited Partner to be bound by all
the terms and provisions of this Agreement with respect to the Partnership
Interest acquired. All reasonable expenses, including attorneys' fees,
incurred by the Partnership in this connection shall be borne by such
Substituted Limited Partner.
(c)Until an assignee shall have been admitted to the Partnership as a
Substituted Limited Partner pursuant to Section 8.03(a), such assignee
shall be entitled to all of the rights of an assignee of a limited
partnership interest under the Act.
(d)In the event of an offering of additional interests in the
Partnership pursuant to the provisions of Section 3.04(d), each new Limited
Partner, as a condition to its admission as a Limited Partner, shall
execute and acknowledge such instruments, in form and substance
satisfactory to the General Partner, as the General Partner deems necessary
or desirable to effectuate such admission and to confirm the agreement of
the new Limited Partner to be bound by all the terms and provisions of this
Agreement with respect to the Partnership Interest acquired. The General
Partner shall amend this Agreement and, if necessary, the Partnership's
Certificate of Limited Partnership to the extent required to reflect the
admission of the new Limited Partners, the making of additional Capital
Contributions to the Partnership, and the resulting adjustments in
Partnership Percentage Interests of the Partners. The Limited Partners
hereby consent and agree to such admission of new Limited Partners by the
General Partner and the adjustment in Partnership Percentage Interests of
the Partners, and agree that the General Partner may, on behalf of each
Partner and on behalf of the Partnership, cause this Agreement and Schedule
A to be appropriately amended, in the event of such admissions and
adjustment in Partnership Percentage Interests.
(e)Notwithstanding any other provision of this Section 8.03, an
assignee shall not be admitted to the Partnership as a Substituted Limited
Partner unless in the opinion of responsible counsel (who may be counsel
for the Partnership) satisfactory in form and substance to the General
Partner and counsel to the Partnership (which opinion may not be waived by
the General Partner or the Partnership), such admission would not
jeopardize the characterization of the Partnership as a partnership for
federal income tax purposes.
8.04.Indemnification and Terms of Admission. Each Limited Partner
shall indemnify and hold harmless the Partnership, the General Partner and
every Limited Partner who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of or
arising from any actual or alleged misrepresentation or misstatement of
facts or omission to state facts made (or omitted to be made) by such
Limited Partner in connection with any assignment, transfer, encumbrance or
other disposition of all or any part of a Limited Partnership Interest, or
the admission of a Substituted Limited Partner to the Partnership, against
expenses for which the Partnership or such other Person has not otherwise
been reimbursed (including attorneys' fees, judgments, fines and amounts
paid in settlement) actually and reasonably incurred by it in connection
with such action, suit or proceeding.
8.05.Incapacity of a Limited Partner. If a Limited Partner dies, his
executor, administrator or trustee, or if he is adjudicated incompetent,
his committee, guardian or conservator, or if he becomes bankrupt, the
trustee or receiver of his estate, shall have all the rights of a Limited
Partner for the purpose of settling or managing the estate of such Limited
Partner and such power as the Incapacitated Limited Partner possessed to
assign all or any part of the Incapacitated Limited Partner's Partnership
Interest and to join with such assignee in satisfying conditions precedent
to such assignee becoming a Substituted Limited Partner. The Incapacity of
a Limited Partner shall not dissolve the Partnership.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND
TERMINATION OF THE PARTNERSHIP
9.01.Dissolution.
(a)The Partnership shall be dissolved upon the happening of any of the
following events:
(i)The expiration of its term;
(ii)The Incapacity of the General Partner, unless the Partnership is
reconstituted in accordance with Section 7.02;
(iii)The election to dissolve the Partnership by all of the Limited
Partners;
(iv)The withdrawal of the General Partner without the designation of a
successor General Partner under Section 7.01, unless the Partnership is
reconstituted in accordance with Section 7.02;
(v) The election by the General Partner to dissolve the Partnership
following the sale, distribution to the Partners or other disposition at
any one time of all or substantially all of the assets of the Partnership;
or
(vi)Termination required by operation of law.
(b)Dissolution of the Partnership shall be effective on the day on
which the event giving rise to the dissolution occurs, but the Partnership
shall not terminate until the Certificate of Limited Partnership of the
Partnership has been cancelled and the assets of the Partnership have been
distributed as provided in Section 9.02.
9.02.Liquidation.
(a)Upon dissolution of the Partnership, the General Partner or a
liquidating trustee, if one is appointed, shall wind up the affairs of the
Partnership and, in its sole discretion, liquidate all or any part of the
assets of the Partnership. The General Partner or such liquidating trustee
shall, in its absolute discretion, determine the time, manner and terms of
any sale or other disposition of the Partnerships investments for the
purpose of obtaining, in its opinion, fair value for such assets.
(b)Profits and Losses arising from such sales upon liquidation shall
be allocated as provided in Article IV. In settling accounts after
dissolution, the assets of the Partnership shall be paid out in the
following order:
(i)To creditors, whether by payment or by establishment of reserves,
in the order of priority as provided by law; and
(ii)To each Partner in an amount equivalent to the positive amount of
its Capital Account on the date of distribution or, if the remaining assets
in the Partnership are (A) insufficient to return the entire Capital
Accounts or (B) in excess of the amount of such Capital Accounts, Pro Rata
to the Partners according to the positive balances in their Capital
Accounts.
(c)Upon dissolution and liquidation of the Partnership, after any
allocations of Profits or Losses, but before any distributions to the
Partners upon such liquidation, the General Partner shall contribute to the
capital of the Partnership an amount equal to the negative amount, if any,
of its Capital Account.
(d)When the General Partner or trustee has complied with the foregoing
liquidation plan, the Partners shall execute, acknowledge and cause to be
filed an instrument evidencing the cancellation of the Certificate of
Limited Partnership of the Partnership.
ARTICLE X
AMENDMENTS
10.01.Amendments Generally.
(a)Amendments to this Agreement to reflect the addition or
substitution of a Limited Partner, the admission of a successor General
Partner or the withdrawal of a General Partner shall be made at the time
and in the manner referred to in Section 7.05 or 8.03.
(b)The General Partner shall, within a reasonable time after the
adoption of any amendment to this Agreement, make any filings or
publications required or desirable to reflect such amendment, including any
required filing for recordation of the Certificate of Limited Partnership
or other instrument or similar document of the type contemplated by Section
6.03(a).
10.02.Adoption of Amendments.
(a)Except as otherwise provided in Section 10.01, this Agreement may
be amended from time to time only with the Consent of all of the Partners.
(b)On the adoption of any amendment to this Agreement, the amendment
shall be executed by the General Partner and all of the Limited Partners
and shall be recorded in the proper records of each jurisdiction in which
recordation is necessary for the Partnership to conduct business or to
preserve the limited liability of the Limited Partners. Each Limited
Partner hereby irrevocably appoints and constitutes the General Partner as
its agent and attorney-in-fact to execute, swear to and record any and all
such amendments. The power of attorney given hereby is irrevocable, is
coupled with an interest and shall survive the Incapacity of a Limited
Partner granting it.
10.03.Amendments on Admission or Withdrawal of Partners. If this
Agreement shall be amended to reflect the admission or substitution of a
Partner, the amendment to this Agreement shall be adopted, executed and
sworn to by all Partners, the Person to be substituted or added and the
assigning Limited Partner. Any such amendment may be executed by the
General Partner on behalf of the Limited Partners, the substituted or added
Limited Partner and the assigning Limited Partner pursuant to the power of
attorney granted in Section 12.01. If this Agreement shall be amended to
reflect the withdrawal, removal or Incapacity of the General Partner and
the continuation of the business of the Partnership, such amendment shall
be adopted, executed and sworn to by the successor General Partner and by
all of the Limited Partners.
10.04.Amendment of Certificate. In the event this Agreement shall be
amended pursuant to this Article X, the General Partner shall amend the
Certificate of Limited Partnership of the Partnership to reflect such
change if it deems such amendment to be necessary.
ARTICLE XI
CONSENTS AND MEETINGS
11.01. Method of Giving Consent. Any Consent required by this
Agreement may be given as follows:
(a)By a written Consent given by the Consenting Partner at or prior to
the doing of the act or thing for which the Consent is solicited, provided
that such Consent shall not have been nullified by either (i) Notification
to the General Partner by the Consenting Partner at or prior to the time
of, or the negative vote by such Consenting Partner at, any meeting held to
consider the doing of such act or thing, or (ii) Notification to the
General Partner by the Consenting Partner prior to the doing of any act or
thing the doing of which is not subject to approval at such meeting; or
(b)By the affirmative vote by the Consenting Partner to the doing of
the act or thing for which the Consent is solicited at any meeting called
and held pursuant to Section 11.02 to consider the doing of such act or
thing.
11.02. Meetings. Any matter requiring the Consent of all or any of the
Limited Partners pursuant to this Agreement may be considered at a meeting
of the Partners held not less than 20 nor more than 60 days after
Notification of such meeting shall have been given by the General Partner
to all Partners. Such Notification (a) may be given by the General Partner,
in its discretion, at any time; and (b) shall be given by the General
Partner within 30 days after receipt by the General Partner of a request
for such a meeting made by Limited Partners constituting a Two-Thirds
Majority In Interest. Any such Notification shall state briefly the
purpose, time and place of the meeting. All such meetings shall be held at
such reasonable place as the General Partner shall designate and during
normal business hours.
11.03. Submissions to Limited Partners. The General Partner shall give
all the Limited Partners Notification of any proposal or other matter
required by any provision of this Agreement or by law to be submitted for
the consideration and approval of the Limited Partners. Such Notification
shall include any information required by the relevant provision of this
Agreement or by law.
ARTICLE XII
POWER OF ATTORNEY
12.01. Power of Attorney.
(a)Each Limited Partner, by its execution of this Agreement, hereby makes,
constitutes and appoints the General Partner as its true and lawful agent and
attorney-in-fact, with full power of substitution and full power and authority
in its name, place and stead to make, execute, sign, acknowledge, swear to,
record and file:
(i) this Agreement and any amendments to this Agreement;
(ii) the original Certificate of Limited Partnership of the Partnership and
all amendments to such Certificate of Limited Partnership required or permitted
by law or the provisions of this Agreement;
(iii) all certificates and other instruments deemed advisable by the
General Partner to carry out the provisions of this Agreement and applicable law
or to permit the Partnership to become or to continue as a limited partnership
wherein the Limited Partners have limited liability in the jurisdiction(s) where
the Partnership may be doing business;
(iv) all instruments that the General Partner deems appropriate to reflect
a change or modification of this Agreement or the Partnership in accordance with
this Agreement, including, without limitation, the substitution of assignees as
Substituted Limited Partners or admission of new Limited Partners pursuant to
Section 8.03;
(v) all conveyances and other instruments or papers deemed advisable by the
General Partner to effect the dissolution and termination of the Partnership;
(vi) all fictitious or assumed name certificates required or permitted to
be filed on behalf of the Partnership; and
(vii) all other instruments or papers which may be required or permitted by
law to be filed on behalf of the Partnership.
(b)The foregoing power of attorney:
(i) Is coupled with an interest and shall be irrevocable and survive the
Incapacity of each Limited Partner;
(ii) May be executed by the General Partner by signing separately as
attorney-in-fact for each Limited Partner or, after listing all of the Limited
Partners executing an instrument, by a single signature of the General Partner
acting as attorney-in-fact for all of them; and
(iii) Shall survive the delivery of an assignment by a Limited Partner of
its Partnership Interest; except that, where the assignee of such Limited
Partnership Interest has been approved by the General Partner for admission to
the Partnership as a Substituted Limited Partner, the power of attorney of the
assignor shall survive the delivery of such assignment for the sole purpose of
enabling the General Partner to execute, swear to, acknowledge and file any
instrument necessary or appropriate to effect such substitution.
(c)Each Limited Partner shall execute and deliver to the General Partner,
within five days after receipt of the General Partner's request, such further
designations, powers-of-attorney and other instruments as the General Partner
deems necessary or appropriate to carry out the terms of this Agreement.
ARTICLE XIII
RECORDS AND ACCOUNTING; REPORTS
13.01. Records and Accounting.
(a)Proper and complete records and books of account of the business of the
Partnership, including a list of the names and addresses and Partnership
Percentage Interests of all Limited Partners, shall be maintained at the
Partnership's principal place of business, and each Limited Partner or its duly
authorized representative shall have access to them, upon reasonable notice and
for a proper purpose, at all reasonable times during business hours. Any
Partner, or its duly authorized representatives, upon paying the costs of
collection, duplication and mailing, shall be entitled for any proper purpose to
a copy of the list of names and addresses and Partnership Percentage Interests
of the Limited Partners. Such information shall be used for Partnership purposes
only.
(b)The books and records of the Partnership shall be kept on the accrual
basis of accounting, which shall also be followed by the Partnership for federal
income tax purposes. The external financial statements of the Partnership shall
be prepared in accordance with generally accepted accounting principles
consistently applied, and shall be appropriate and adequate for the
Partnership's business and for carrying out all provisions of this Agreement.
The taxable year of the Partnership shall be the calendar year. The Fiscal Year
of the Partnership for purposes of its external financial statements shall be
selected by the General Partner, but such Fiscal Year need not be the calendar
year. Whenever this Agreement uses the term "Fiscal Year", it shall refer to
either the taxable year or fiscal year for external financial statements as the
context requires if such years are not the same.
(c) There shall be an interim closing of the books of account of the
Partnership at such time as the Partnership's taxable year ends pursuant to the
Code and at such other times as the General Partner determines is required under
this Agreement.
13.02. Annual Reports. Within a reasonable period of time after the end of
each Fiscal Year, the General Partner shall cause to be delivered to each Person
who was a Partner at any time during the Fiscal Year, an annual report
containing the following information:
(a)Financial statements of the Partnership, including, without limitation,
a balance sheet as of the end of the Partnership's Fiscal Year and statements of
income, Partners' equity and changes in financial position, for such Fiscal
Year, which shall be prepared in accordance with generally accepted accounting
principals consistently applied;
(b)A statement of cash and in-kind distributions to Partners for the period
covered by the annual report; and
(c)A description of the activities of the Partnership during the period
covered by the annual report.
13.03. Tax Information. Within a reasonable period of time after the end of
each calendar year, the General Partner will cause to be delivered to each
Person who was a Partner at any time during such calendar year all information
necessary for the preparation of such Partner's federal income tax returns,
including a statement showing each Partner's share of Profits or Losses, and the
amount of any distribution made to or for the account of such Partner pursuant
to this Agreement.
13.04. Partnership Funds. No funds of the Partnership shall be kept in any
account other than a Partnership account and funds shall not be commingled with
the funds of any other Person, and the General Partner shall not employ, or
permit any other Person to employ, such funds in any manner except for the
benefit of the Partnership. The funds of the Partnership not needed in the
operation of the business may be deposited in such bank accounts as the General
Partner may designate pursuant to Section 6.01(b). Withdrawals from such
accounts shall be made upon such signatures as the General Partner may
designate.
13.05. Elections. The General Partner may cause the Partnership to make all
elections required or permitted to be made by the Partnership under the Code and
not otherwise expressly provided for in this Agreement, in the manner that the
General Partner believes is in the best interest of the Partnership.
ARTICLE XIV
MISCELLANEOUS
14.01. Notification.
(a)Any Notification to any Limited Partner shall be at the address of such
Partner set forth in Schedule A or such other mailing address of which such
Limited Partner shall advise the General Partner in writing. Any Notification to
the Partnership or the General Partner shall be at the principal office of the
General Partner, as set forth in Schedule A. The General Partner may at any time
change the location of its principal office. Notification of any such change
shall be given to the Partners on or before the date of any such change.
(b)Any Notification shall be deemed to have been duly given if personally
delivered or sent by United States mail or by facsimile transmission and will be
deemed given, unless earlier received (i) if sent by certified or registered
mail, return receipt requested, five calendar days after being deposited in the
United States mails, postage prepaid; (ii) if sent by United States Express
Mail, two calendar days after being deposited in the United States mails,
postage prepaid; (iii) if sent by facsimile transmission, the date sent; and
(iv) if delivered by hand, on the date of receipt.
14.02. Governing Law; Separability of Provisions. It is the intention of
the parties that the internal laws of the State of Florida and, in particular,
the provisions of the Act, as the same may be amended from time to time, shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties. If any provision of this
Agreement shall be held to be invalid, the remainder of this Agreement shall not
be affected by such holding.
14.03. Entire Agreement. This Agreement constitutes the entire agreement
among the parties; it supersedes any prior agreement or understandings among
them, oral or written, all of which are hereby cancelled. This Agreement may not
be modified or amended other than pursuant to Article X.
14.04. Headings, Etc. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the interpretation of this
Agreement. Whenever from the context it appears appropriate, each term stated in
either the singular or the plural shall include the singular and the plural, and
pronouns stated in either the masculine or the neuter gender shall include the
masculine, the feminine and the neuter.
14.05 Section and Schedule References. All references in this Agreement to
sections and schedules shall be deemed to be references to Sections of, and
Schedules to, this Agreement, unless the context requires otherwise. All
references to Sections of this Agreement shall be deemed to include all
subsections of such Sections.
14.06. Binding Provisions. The covenants and agreements contained in this
Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and assigns of the respective parties to
this Agreement.
14.07. No Waiver. The failure of any Partners to seek redress for violation
or to insist on strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act which would have constituted a
violation from having the effect of an original violation.
14.08. Legends. If certificates are issued evidencing a Limited Partnership
Interest, each such certificate shall bear such legends as may be required by
applicable federal and state laws, or as may be deemed necessary or appropriate
by the General Partner to reflect restrictions upon transfer contemplated in
this Agreement.
14.09. Conflicting Provisions. In the event of a conflict between the
provisions of this Agreement and a Master Agreement between the Limited Partners
or their predecessors, the provisions of the Master Agreement shall govern.
14.10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GENERAL PARTNER
GOLDING UNITED FISHHAWK, INC.
By:
Its:
LIMITED PARTNERS
UIRT FISHHAWK LLC
By:
Its:
THE STUART S. GOLDING COMPANY
By:
Its:
<PAGE>
Exhibit 23.1
Consent of Independent Auditors.
We consent to the incorporation by reference in the: 1) Registration
Statement on Form S-8 pertaining to the 1999 Open Market Purchase Plan of United
Investors Realty Trust (the "Company"); 2) Registration Statement on Form S-3
and related Prospectus of the Company for the registration of 15,000,000 common
shares of beneficial interest; and 3) Registration Statement on Form S-3 and
related Prospectus of the Company of up to $100,000 of common shares, preferred
shares, debt securities, securities warrants and rights, of our report dated
January 22, 2000 with respect to the Consolidated Financial Statements and
Schedule of United Investors Realty Trust and Subsidiaries included in this
Annual Report on Form 10-K for the year ended December 31, 1999.
SCHEDULE A
Capital Percentage
Contributions Interests
GENERAL PARTNER
<TABLE>
<S> <C> <C>
Golding United FishHawk Inc. $ 10 1%
LIMITED PARTNER(S)
UIRT FishHawk LLC $495 49.5%
The Stuart S. Golding Company $495 49.5%
</TABLE>
SCHEDULE B
Prepartnership Expenses
As of December __, 1999, the Partnership had incurred $125,325 of
Prepartnership Expenses, $45,000 of which were paid by SSG and $80,325 of which
were paid by UIRT. These entire amounts constitute loans to the Partnership by
the Partner that paid such amount. Unless otherwise elected in writing by the
Partners, all other amounts expended by the Partners for Prepartnership Expenses
shall constitute a loan to the Partnership.
The Prepartnership Expenses as of December __, 1999 are as follows:
1. Prepartnership Expenses paid by SSG:
(To Be Provided)
2. Prepartnership Expenses paid by UIRT:
Letter of Credit Fee to Wells Fargo $32,325.00
Letter of Credit Fee to UIRT $21,550.00
Legal Fees $26,000.00
Travel Expenses $ 450.00
Total UIRT Expenses $80,325.00
CERTIFICATE OF LIMITED PARTNERSHIP
OF
GOLDING UNITED FISHHAWK LTD.
The undersigned general partner represents that it has formed a limited
partnership pursuant to the Florida Revised Uniform Limited Partnership Act (the
"Act"), and that it has executed this Certificate of Limited Partnership
pursuant to the foregoing Act and states herein as follows:
I. Name
The name of the limited partnership is Golding United FishHawk Ltd.
II. Records of the Partnership
The address of the office in Florida at which place the records of the
partnership shall be maintained is as follows:
27001 US Highway 19
Suite 2095
Clearwater, FL 33761
III. Registered Agent
The address of the registered office of the partnership and the name of the
registered agent for service of process located at that office is as follows:
Intrastate Registered Agent Corporation
701 Brickell Avenue, Suite 3000
Miami, Florida 33131
IV. General Partners
The name and business address of the general partner of the partnership is as
follows:
Golding United FishHawk Inc.
27001 US Highway 19
Suite 2095
Clearwater, FL 33761
V. Mailing Address
The mailing address of the partnership is as follows:
27001 US Highway 19
Suite 2095
Clearwater, FL 33761
VI. Dissolution
The latest date on which the partnership is to dissolve is December 31, 2051.
The undersigned General Partner of the partnership has executed this
Certificate of Limited Partnership on December ___, 1999.
GOLDING UNITED FISHHAWK INC., a
Florida corporation
By: ____________________________
R. Steven Hamner
Vice President
<PAGE>
ACCEPTANCE OF DESIGNATION AS REGISTERED AGENT
AND AGENT FOR SERVICE OF PROCESS
The undersigned, having been designated the agent for service of process
pursuant to Section 620.105, Florida Statutes and Registered Agent pursuant to
Section 620.192, Florida Statutes of GOLDING UNITED FISHHAWK LTD., a limited
partnership to be formed concurrently herewith under the Florida Revised Uniform
Limited Partnership Act (1986), does hereby accept such designation and the
obligations provided for in Section 620.105 and 620.192, Florida Statutes. Dated
this ____ day of December, 1999.
INTRASTATE REGISTERED AGENT
CORPORATION
701 Brickell Avenue, Suite 3000
Miami, Florida 33131
By:___________________________________
Name: Steven H. Hagen
Title: Vice President
<PAGE>
AFFIDAVIT OF CAPITAL CONTRIBUTIONS
BEFORE ME, the undersigned authority, personally appeared R. Steven Hamner,
a duly authorized officer of GOLDING UNITED FISHHAWK INC., a Florida corporation
and the general partner of GOLDING UNITED FISHHAWK LTD., a Florida limited
partnership, who certifies as follows:
1. The amount of capital contributions to date of the limited partners is
$990.
2. The total amount contributed and anticipated to be contributed by the
limited partners at this time totals $990. Signed on the date set forth below.
Under penalties of perjury the undersigned declares that the facts herein
alleged are true to its best knowledge and belief.
GOLDING UNITED FISHHAWK
INC., a Florida corporation,
general partner
By:
R. Steven Hamner
Vice President
Dated: December ___, 1999
STATE OF )
) SS:
COUNTY OF ________ )
The foregoing Affidavit of Capital Contributions was acknowledged
before me this ___ day of December, 1999, by R. STEVEN HAMNER, who is
personally known to me or produced
_____________________________________________ as identification, in
his capacity as Vice President of GOLDING UNITED FISHHAWK INC., a
Florida corporation.
___________________________________
Notary Public
State of
My Commission Expires:
<PAGE>
MANAGEMENT AGREEMENT
THIS AGREEMENT, made effective December 17, 1999, among Golding United
FishHawk Ltd., a Florida limited partnership (hereinafter "GUFH") STUART S.
GOLDING COMPANY (hereinafter "SSG"), a Florida corporation, and United Investors
Realty Trust (hereinafter "UIRT"), a Texas real estate investment trust
(hereinafter SSG and UIRT together, the "Managers").
WITNESSETH:
WHEREAS, on December 17, 1999 GUFH acquired a parcel of land to be
developed into a shopping center to be known as FishHawk Center, located in
Tampa, Florida (hereinafter the "Shopping Center"), and WHEREAS, the parties
wish to formalize their agreement regarding the management of the Shopping
Center. NOW, THEREFORE, the parties hereto agree, in consideration of the mutual
promises set forth herein, as follows:
Section 1. Definition. 1.1 For the purposes of this Agreement, the term
"Operations" means the leasing, maintenance and operation of the Shopping
Center.
Section 2. Management of the Shopping Center. 2.1 The overall management and
control of the Shopping Center shall be under the direction of GUFH. The
Managers shall be responsible for the implementation of the decisions of GUFH
and for conducting the ordinary and usual business and affairs relating to the
Operations of the Shopping Center. 2.2 The Managers shall faithfully and
diligently manage and operate the Shopping Center in accordance with the highest
standards applicable to shopping centers of similar size and character and,
subject to the terms hereof, in compliance with all mortgages, leases and other
agreements pertaining to or governing the Operations of the Shopping Center. 2.3
No action shall be taken, sum expended, decision made, or obligation incurred by
the Managers with respect to a matter within the scope of any of the major
decisions (hereinafter called "Major Decisions") as enumerated below, unless the
Managers are directed to do so by GUFH. The Major Decisions shall include: (1)
financing operations of GUFH, including but not limited to financing and
refinancing the Shopping Center; (2) sale, or other transfer, or mortgage or the
placing or suffering of any other encumbrance on the Shopping Center or any part
or parts thereof; (3) any lease or other arrangement for space in the Shopping
Center excepting leases which have terms in accordance with the following
requirements: i. the initial term of the lease is at least 3 (three) years. ii.
the annual base rent is at least the amount reflected in the pre-development pro
forma statement of lease revenue or the annual budget, both only as approved by
GUFH. (4) approval of all construction and architectural contracts and all
architectural plans, specifications and drawings prior to the construction of
any improvement contemplated thereby; (5) selecting or varying depreciation and
accounting methods and making other decisions with respect to treatment of
various transactions for federal and state income tax purposes; (6) making any
expenditure or incurring any obligation by or of GUFH involving a sum in excess
of $5,000 in any fiscal year for any transaction or group of similar
transactions for expenditures made and obligations incurred pursuant to except
for those specifically set forth in a budget theretofore approved by GUFH except
for repairs of an emergency nature; and (7) determination of the maximum and
minimum working capital requirements of GUFH. 2.4 (a) The Managers shall, and
are hereby authorized to implement or cause to be implemented all Major
Decisions approved by GUFH, and shall conduct or cause to be conducted the
ordinary and usual business affairs of GUFH, in accordance with and as limited
by this Agreement on behalf of GUFH, including the following: (1) SSG to serve
as manager with authority over and responsibility for the shopping center
facilities day to day management of the Shopping Center; (2) UIRT and SSG to
take all reasonable steps to collect, and enforce the collection of all rentals
and other charges due GUFH from tenants in accordance with the terms of their
leases and, in connection with the collection of percentage rents payable under
such leases, to keep records of gross sales reports of tenants and compute
percentage rents; to terminate tenancies, upon consent of GUFH; to sign and
serve in the name of GUFH such notices as are deemed needful by Manager in the
enforcement of the leases; to institute and prosecute actions with the consent
of GUFH; to evict tenants, upon consent of GUFH, and to recover possession of
premises occupied by them; to sue for or in the name of GUFH (upon consent of
GUFH) and recover rents and other sums due; and when expedient (and upon
approval of GUFH) to settle, compromise and release such actions or suits or
reinstate such tenancies; (3) SSG and UIRT to advise GUFH promptly of the
service upon or delivery to the Managers of any summons, subpoena, or other
legal document including, without limitation, notices, letters or other
communication setting out or claiming an actual or alleged potential liability
of GUFH or any violation of any governmental regulations; (4) UIRT to engage
counsel, but only as designated by or with the approval of GUFH, without
limitation, for the enforcement of the collection of rent or eviction of a
tenant; the fees and expenses of such counsel shall be borne by GUFH; (5) SSG to
furnish or supply to tenants, at the cost of GUFH and except as otherwise
specified herein, any and all services required to be furnished or supplied by
GUFH pursuant to the leases; (6) SSG to promptly notify GUFH of any actual or
threatened condemnation which may affect the Shopping Center or the area in the
general vicinity thereof; (7) SSG and UIRT to obtain and renew such permits and
any other governmental licenses as shall be necessary in connection with the
Operations of the Shopping Center and comply with all laws, regulations, orders,
ordinances, rules and requirements of all governmental authorities, federal,
state or local. (8) SSG to negotiate and, when approved by GUFH, enter into and
supervise performance of contracts covering the construction of any improvements
or any repairs or alterations; provided, however, if the cost thereof shall not
exceed $5,000 for any transaction or group of similar transactions, SSG shall
not be required to obtain such approval; (9) SSG and UIRT to negotiate and
obtain all agreements, deeds, leases, assignments and other instruments pursuant
to which GUFH, in its normal course of business shall lease or dispose of
portions of the Shopping Center or any interest therein, provided, however, that
no such agreement, deed, lease, assignment or other instrument shall be
effective unless and until approved and executed by GUFH; The Managers will use
the form of lease provided by UIRT, unless GUFH approves a different form. (10)
SSG and UIRT, to the extent that funds of GUFH are available therefor, to make
repairs, purchase supplies, pay all operating expenses and provide reserves for
repair and maintenance in accordance with the budget and other instructions of
GUFH; (11) UIRT to the extent that funds of GUFH are available therefor, to pay
all taxes, assessments, rents and other impositions applicable to the Shopping
Center and other assets owned; (12) SSG and UIRT to protect and preserve the
titles and interests of GUFH with respect to the shopping Center and other
assets owned; (13) UIRT, to the extent that funds of GUFH are available
therefor, to pay all premiums for and maintain all property and public liability
insurance obtained by GUFH, except SSG and UIRT shall obtain and maintain any
required workmen's compensation insurance and shall deliver certificates thereof
to GUFH; (14) UIRT, to the extent that funds of GUFH are available therefor, to
pay all debts and other obligations of GUFH, including amounts due under
permanent financing of the Shopping Center and other loans to GUFH previously
approved by GUFH and costs of construction, operation and maintenance of the
Shopping Center; (15) UIRT to maintain all funds of GUFH held by the Managers in
such accounts and in such bank or banks as may be approved from time to time by
GUFH; (16) SSG and UIRT to prepare for submission to GUFH budgets and plans of
development for approval for the Operations of the Shopping Center as provided
in Section 3 hereof; (17) UIRT to keep all books of account and other records of
GUFH in accordance with the terms of this Agreement; (18) UIRT to prepare and
deliver to each Partner the periodic reports provided for in Section 4.3; (19)
UIRT to make distributions, to the extent that funds of GUFH are available
therefor, to each Partner pursuant to written instructions from GUFH; (20) UIRT
to hold all security deposits of tenants of the Shopping Center in accordance
with the laws of the State of Florida and apply the same for the purposes set
forth in the respective leases. (b) SSG and UIRT shall not expend more than the
fair and reasonable market value at the time and place of delivery of
performance for any goods purchased or services engaged on behalf of GUFH and
shall collect for GUFH any rebates, credits or discounts for any purchase made
on behalf of GUFH. (c) Any provision hereof to the contrary notwithstanding,
except for expenditures made and obligations incurred and previously approved by
GUFH or in direct pursuance to a budget approved by GUFH, SSG and UIRT shall not
have any authority to make any expenditure or incur any obligations on behalf of
GUFH.
Section 3. Budgets. Not less than once in each calendar year and not later than
90 days prior to the end of the fiscal year, SSG and UIRT shall prepare and
submit to GUFH for its consideration, a budget ("Budget") setting forth the
estimated receipts and expenditures (capital, operating and other) to be
received and incurred in connection with the Operations of the Shopping Center
for the period covered by the Budget. Such budget will be prepared on the form
provided by UIRT unless GUFH approves a different form. When approved by GUFH,
SSG shall in good faith use its best efforts to implement the Budget and shall
be authorized, without the need for further approval of GUFH to make the
expenditures and incur the obligations provided for in the Budget.
Section 4. Records and Accounts. 4.1 UIRT shall provide an accounting system to
account for the business of GUFH which shall set forth its charts of accounts
and procedures to meet the reporting, accounting and tax return requirements of
GUFH in respect of Operations (such system as approved and adopted by GUFH being
hereinafter called the "Accounting System"). 4.2 SSG and UIRT shall keep or
cause to be kept full, true and accurate records and accounts of operations and
of SSG and UIRT's performance of its duties under this Agreement and of all
transactions on behalf of GUFH in connection therewith and of the costs and
expenses thereof, including but without limiting the generality of the
foregoing, records and accounts in accordance with the Accounting System. 4.3
UIRT shall within fifteen (15) days of the end of each calendar month furnish
GUFH a statement setting forth the cash flow from the Operations of the Shopping
Center and within sixty (60) days after the end of each calendar year a balance
sheet and related statement of profit or loss for GUFH for said period. Within
the time allowed by Internal Revenue Service regulations after the end of each
calendar year, UIRT shall submit to GUFH, federal and state tax returns for
GUFH. GUFH shall pay UIRT reasonable expenses fees to prepare aforesaid balance
sheet, profit and loss statement and tax returns, such fees estimated at
approximately $5,000 for calendar year 1999. UIRT may also incur outside
accountant fees in preparation of the tax returns, for which GUFH will reimburse
UIRT. UIRT shall also prepare and furnish GUFH on a quarterly basis a statement
comparing revenue and expenses actually incurred with the Budget prepared
pursuant to Section 3 hereof. 4.4 UIRT shall permit GUFH upon request, to
inspect and copy any and all records and accounts and furnish GUFH with such
rent receipts, expense vouchers and statements compiled from such records as any
Partner may reasonably request.
Section 5. Management Personnel; Maintenance and Service Expense; Management
Fee. (a) SSG and UIRT at their sole and separate cost and expense shall pay for
the services of all persons performing executive, administrative, stenographic,
clerical and accounting services (except for those performed by legal counsel
and independent certified public accountants at the request of GUFH and except
for those performed by on site personnel approved by GUFH) in connection with
day-to-day operations of the Shopping Center. Subject to the terms of Sections
2.4 and 3 hereof, SSG and UIRT shall provide personnel, hire independent
contractors and purchase supplies for the conduct of GUFH affairs as may be
needed for the orderly and expeditious Operations of the Shopping Center in a
business like manner. (c) If SSG shall furnish or render services to tenants of
the Shopping Center other than those which are usually or customarily furnished
or rendered in connection with the mere rental of shopping center premises, the
cost of such services shall be borne by GUFH; SSG shall notify UIRT to make a
separate charge to the tenants for such services and the amount of such charge
shall be received and retained by GUFH. (d) For the performance of its duties as
Managers under this Agreement, GUFH will pay SSG a management fee equal to 4%
per annum and UIRT 2% per annum of all basic rents and percentage rents, paid by
tenants for space in the Shopping Center. In addition, SSG shall receive leasing
commissions in accordance with the attached Exhibit A, and UIRT will be paid for
tax return preparation services pursuant to Section 4.3 above.
Section 6. Term. (a) This Agreement shall continue until terminated, upon 30
(thirty) days written notice, by GUFH, SSG or UIRT (b) This Agreement shall be
terminated and except as to liabilities or claims which shall have accrued or
arisen prior to such termination, all obligations hereunder shall cease upon the
happening of any of the following events: (i) If a petition in bankruptcy is
filed by or against GUFH, SSG or UIRT, or if any shall make an assignment for
the benefit of creditors, or take advantage of any insolvency act, any party
hereto may terminate this Agreement immediately upon giving written notice to
the other parties. (ii) If SSG or UIRT is negligent in the performance of this
Agreement, or if SSG or UIRT deliberately or willfully fail to perform any of
their obligations under this Agreement within ten (10) days after a written
demand for performance by GUFH, GUFH may terminate this Agreement immediately
upon giving written notice to SSG or UIRT. (c) Upon termination of this
Agreement, SSG and UIRT shall deliver to GUFH any and all leases, accounting
records, files and other documents relating to the Shopping Center.
Section 7. Indemnification; Authority. 7.1 Except with respect to its agreements
contained herein, SSG or UIRT, its officers, agents and employees shall not be
responsible for any loss or damage suffered or done in the course of the
discharge of its duties hereunder except for any loss or damage arising directly
or indirectly from bad faith or willful act or gross negligence of its officers,
agents or employees. 7.2 SSG or UIRT shall not have authority to act for or to
assume any obligation or liability on behalf of GUFH except such authority as
conferred on SSG and UIRT by this Agreement, and SSG and UIRT shall indemnify
and hold GUFH and its respective successors and assigns and agents harmless from
and against any and all losses, claims damages and liabilities arising out of
any act or any assumption of any obligation by SSG and UIRT done or undertaken
on behalf of GUFH except pursuant to such authorization.
Section 8. Assignment of Management Agreement. This Agreement shall be binding
upon the parties hereto and their respective successors and assigns; provided,
however, that SSG or UIRT may not assign their rights and interests or delegate
the whole of or, except as authorized by this Agreement, delegate any part of
their obligations or duties under this Agreement without the written consent of
GUFH.
Section 9. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
Section 10. Notices. All notices, consent, approvals
and other communications hereunder shall be in writing and shall be delivered or
mailed by first-class mail, postage prepaid, addressed as follows: (a) If to
GUFH: at 27001 U.S. Highway 19 North, Suite 2095, Clearwater, Florida 33761 or
at such other address as GUFH shall have furnished to the Managers in writing.
(b) If to SSG: at 27001 U.S. Highway 19 North, Suite 2095, Clearwater, Florida
33761 or at such other address as Managers shall have furnished to GUFH in
writing. (c) If to UIRT: at 5847 San Felipe, Suite 850, Houston, Texas 77057 or
at such other address as UIRT shall have furnished to the Managers in writing.
Section 11. Amendments. Neither this Agreement nor any terms hereof may be
changed, waived, discharged or terminated orally, except by an instrument in
writing signed by both parties. Section 12. Miscellaneous. (a) This Agreement
shall not include within its scope any arrangements between GUFH and SSG and
UIRT for services in connection with any future development of the Shopping
Center. (b) Except as herein other wise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their personal
representatives, successors and assigns. (c) The headings in this Agreement are
for reference only and shall not limit or, define the meaning hereof. (d) This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GUFH: GOLDING UNITED FISHHAWK INC.
(General Partner)
By: /s/ David Scher, President
-------------------------------------------------------
David Scher, President
THE MANAGERS: STUART S. GOLDING COMPANY
By:/s/Loren Pollack, President
-------------------------------------------------------
Loren Pollack, President
UNITED INVESTORS REALTY TRUST By: R. Steven Hamner,
Vice President - Chief Financial Officer
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the: 1) Registration
Statement on Form S-8 pertaining to the 1999 Open Market Purchase Plan of United
Investors Realty Trust (the "Company"); 2) Registration Statement on Form S-3
and related Prospectus of the Company for the registration of 15,000,000 common
shares of beneficial interest; and 3) Registration Statement on Form S-3 and
related Prospectus of the Company of up to $100,000,000 of common shares,
preferred shares, debt securities, securities warrants and rights, of our report
dated January 22, 2000 with respect to the Consolidated Financial Statements and
Schedule of United Investors Realty Trust and Subsidiaries included in this
Annual Report on Form 10-K for the year ended December 31, 1999.
/s/ Ernst & Young, LLP
Houston, Texas
March 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000868196
<NAME> United Investors Realty Trust
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Dec-31-1999
<EXCHANGE-RATE> 1.00
<CASH> 1,807,791
<SECURITIES> 0
<RECEIVABLES> 2,876,523
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,827,382
<PP&E> 177,302,953
<DEPRECIATION> (11,164,573)
<TOTAL-ASSETS> 174,965,762
<CURRENT-LIABILITIES> 7,833,406
<BONDS> 0
0
0
<COMMON> 83,994,946
<OTHER-SE> (9,332,341)
<TOTAL-LIABILITY-AND-EQUITY> 174,965,762
<SALES> 0
<TOTAL-REVENUES> 25,995,555
<CGS> 0
<TOTAL-COSTS> 5,878,626
<OTHER-EXPENSES> 8,013,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,680,730
<INCOME-PRETAX> 5,276,859
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,276,859
<DISCONTINUED> 0
<EXTRAORDINARY> (36,477)
<CHANGES> 0
<NET-INCOME> 5,240,382
<EPS-BASIC> 0.56
<EPS-DILUTED> 0.56
</TABLE>
