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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 16, 1998
(June 26, 1998)
KRANZCO REALTY TRUST
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(Exact Name of Registrant as Specified in Charter)
Maryland 1-11478 23-2691327
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
128 Fayette Street, Conshohocken, Pennsylvania 19428
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (610) 941-9292
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(Former Name or Former Address, if Changed Since Last Report)
=============================================================================<PAGE>
Item 5. Other Events.
On June 26, 1998 Kranzco Realty Trust ("Kranzco" or the "Company")
entered into an agreement to acquire nine community shopping centers in five
midwest and southern states for approximately $85 million (the "Southeast
Acquisition"). The purchase price will initially be financed through a first
mortgage financing and borrowings under Kranzco's $50 million secured first
mortgage loan facility with Salomon Brothers Realty Corp. Five of the
centers are in Georgia and the others are in Ohio, Tennessee, Florida and
Virginia. The centers have a total of 1.4 million square feet of gross
leaseable area and an overall leased rate of approximately 99%. Wal-Mart is
a tenant in nine of the centers and has vacated its space at two of the
centers but continues to pay rent in accordance with its leases. Wal-Mart
has subleased space at one of these two centers to a third party. Besides
Wal-Mart, other well-known anchor retailers are Eckerd Drug, Food Lion, Radio
Shack and CVS. After the purchase, Kranzco will own 68 properties in 19
states with a total of nine million square feet of GLA, an approximate 15
percent increase in GLA. The purchase is subject to customary due diligence
and is expected to close by August 31, 1998.
Kranzco is acquiring such properties from Europco Property Investors II,
Ltd., a Georgia limited partnership; Europco Property Investors III, Ltd., a
Georgia limited partnership; Europco Property Investors IV, Ltd., a Georgia
limited partnership; Secured Properties Investors V, L.P., a Georgia limited
partnership; Secured Properties Investors VIII, L.P., a Georgia limited
partnership; Secured Properties Investors IX, L.P. a Georgia limited
partnership; and Tifton Partners, L.P., a Georgia limited partnership.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kranzco Realty Trust:
We have audited the combined statement of revenue and certain expenses of the
Southeast Acquisition Properties for the year ended December 31, 1997. This
combined financial statement is the responsibility of the Southeast
Acquisition Properties' management. Our responsibility is to express an
opinion on this combined financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statement is
free of material misstatement. An audit includes examining, on a test basis,
the evidence supporting the amounts and disclosures in the combined financial
statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall combined financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The combined statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in a current report on Form 8-K of Kranzco
Realty Trust, as described in Note 1, and is not intended to be a complete
presentation of the Southeast Acquisition Properties' revenue and expenses.
In our opinion, the combined statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of the Southeast
Acquisition Properties for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.
Philadelphia, Pa.
July 2, 1998 /S/ ARTHUR ANDERSEN LLP
<PAGE>
SOUTHEAST ACQUISITION PROPERTIES
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
For the Three
For the Year Months
Ended Ended
December 31, March 31,
1997 1998
------------- --------------
(unaudited)
REVENUE
Minimum rent (Note 2) $ 8,237,692 $ 2,077,003
Percentage rent 214,817 20,019
Tenant reimbursements 803,032 178,456
------------- ------------
Total revenue 9,255,541 2,275,478
------------- ------------
CERTAIN EXPENSES
Maintenance and other
operating expenses 552,248 123,142
Utilities 92,272 28,110
Real estate taxes 419,823 123,382
------------- ------------
Total certain expenses 1,064,343 274,634
------------- ------------
REVENUE IN EXCESS OF
CERTAIN EXPENSES $ 8,191,198 $ 2,000,844
============= ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
SOUTHEAST ACQUISITION PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1997
1. BASIS OF PRESENTATION:
The accompanying combined statements of revenue and certain operating
expenses of the Southeast Acquisition Properties (the "Properties") consist
of the following properties:
Property Square Footage
-------- --------------
Douglasville, Georgia 267,800
Snellville, Georgia 220,885
Tifton, Georgia 186,629
Pensacola, Florida 171,653
Staunton, Virginia 166,944
Circleville, Ohio 127,130
Vidalia, Georgia 93,696
Jefferson City, Tennessee 92,968
Summerville, Georgia 67,809
The combined statements of revenue and certain expenses are to be included in
the Company's current report on Form 8-K, as the above described transaction
has been deemed to be significant pursuant to the rules and regulations of
the Securities and Exchange Commission.
The accounting records of six of the nine Properties are maintained on a
modified cash basis. Adjusting entries have been made to present the
accompanying financial statements in accordance with generally accepted
accounting principles. The accompanying combined financial statements
exclude certain expenses such as interest, depreciation and amortization,
professional fees and other costs not directly related to the expected future
operations of the Properties.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenue and expenses during the reporting
period. The ultimate results could differ from those estimates.
The combined statement of revenue and certain expenses for the three months
ended March 31, 1998 is unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal, recurring adjustments) necessary
for the fair presentation of the combined statement of revenue and certain
expenses for the interim period have been included. The results of the
interim period are not necessarily indicative of the results for the full
year.
2. OPERATING LEASES:
Minimum rent presented includes straight-line adjustments for rental revenue
increases in accordance with generally accepted accounting principles. The
aggregate rental revenue increase resulting from the straight-line adjustment
for the year ended December 31, 1997, was $30,301 and for the three-month
period ended March 31, 1998 was $9,617.
Wal-Mart Stores, Inc. is a tenant in each of the nine Properties. Wal-Mart
has vacated two of such Properties, but continues to pay rent in accordance
with both its leases. Wal-Mart has subleased space to a third party at one
of these propertes. Wal-Mart's annual minimum rent is approximately
$3,800,000 collectively at the nine Properties, which is greater than 10% of
the Properties' minimum rent.
The Properties are leased to tenants under operating leases with expiration
dates extending to the year 2015. Future minimum rentals under noncancelable
operating leases, excluding tenant reimbursements of operating expenses, as
of December 31, 1997, are as follows:
1998 $ 8,141,964
1999 7,657,861
2000 6,956,189
2001 6,405,779
2002 6,002,577
Thereafter 41,346,059
Certain leases also include provisions requiring tenants to reimburse the
Properties for management costs and other operating expenses up to stipulated
amounts.
3. SUBSEQUENT EVENT
The Properties are under contract to be acquired by Kranzco Realty Trust for
$84,750,000.
<PAGE>
(b) Pro Forma Financial Information.
Kranzco Realty Trust Pro Forma Combined Condensed Financial Information
(Unaudited)
The accompanying financial statements present the unaudited pro forma
combined condensed Balance Sheet of Kranzco Realty Trust after giving effect
to the consummation of the Southeast Acquisition, as of March 31, 1998 and
the unaudited pro forma combined condensed Statements of Operations of
Kranzco Realty Trust for the three months ended March 31, 1998 and for the
year ended December 31, 1997.
The unaudited pro forma combined condensed Balance Sheet as of March 31,
1998 is presented as if the consummation of the Southeast Acquisition had
occurred on March 31, 1998. The unaudited pro forma combined condensed
Statements of Operations for the three months ended March 31, 1998 and for
the year ended December 31, 1997 are presented as if the consummation of the
UPI Acquisition, the Georgia Acquisition and the Southeast Acquisition had
occurred as of January 1, 1997.
Preparation of the pro forma financial information was based on
assumptions deemed appropriate by the management of Kranzco Realty Trust.
The assumptions give effect to the consummation of the UPI Acquisition, the
Georgia Acquisition and the Southeast Acquisition in accordance with
generally accepted accounting principles, the entity qualifying as a REIT,
distributing all of its taxable income and, therefore, incurring no federal
income tax expense during the periods presented. The pro forma financial
information is unaudited and is not necessarily indicative of the results
which actually would have occurred if the transactions had been consummated
at the beginning of the periods presented, nor does it purport to represent
the future financial position and results of operations for future periods.
The pro forma information should be read in conjunction with the historical
financial statements of Kranzco Realty Trust incorporated by reference into
this Form 8-K.
<PAGE>
Kranzco Realty Trust
Pro Forma Combined Condensed Balance Sheet
As of March 31, 1998
(Unaudited)
The Company Southeast The Company
(Historical) Acquisition (Pro Forma)
---------- ----------- ---------
(Dollar amounts
Assets: in thousands)
Shopping centers, at cost, net $441,063 $87,000 (A) $528,063
Cash and marketable securities 6,448 -- 6,448
Restricted cash 1,185 -- 1,185
Rents and other receivables, net 9,732 -- 9,732
Prepaid expenses 2,067 -- 2,067
Deferred financing costs, net 1,828 1,000 2,828
Other deferred costs, net 2,155 -- 2,155
Other assets 1,172 -- 1,172
-------- ------- --------
Total assets $465,650 $88,000 $553,650
======== ======= ========
Liabilities:
Mortgages and notes payable $257,201 $88,000 (A) $345,201
Tenant security deposits 1,364 -- 1,364
Accounts payable and accrued
expenses 2,772 -- 2,772
Other liabilities 574 -- 574
Distributions payable 6,617 -- 6,617
-------- ------- --------
Total liabilities 268,528 88,000 356,528
-------- ------- --------
Kranzco Series C Preferred Shares 1,782 -- 1,782
Beneficiaries Equity:
Common shares and Preferred shares 135 -- 135
Capital in excess of par value 261,647 -- 261,647
Cumulative net income available
for common shares 35,465 -- 35,465
Cumulative distributions on
common shares (101,784) -- (101,784)
-------- ------- --------
195,463 -- 195,463
Unearned compensation on
restricted common shares (123) -- (123)
-------- ------- --------
Total beneficiaries' equity 195,340 -- 195,340
-------- ------- --------
Total liabilities, Kranzco
Series C Preferred Shares
and beneficiaries' equity $465,650 $88,000 $553,650
======== ======= ========
The accompanying notes and management's assumptions are an integral part of
this statement.<PAGE>
Notes and Management's Assumptions to Pro Forma Combined Condensed
Balance Sheet for Kranzco Realty Trust as of March 31,1998.
(Dollar amounts in thousands)
(A) Adjustment to reflect acquisition of Southeast
Acquisition Properties:
Purchase Price $84,750
Plus: Acquisition costs 2,250
Total Purchase Price 87,000
Deferred financing costs 1,000
-------
$88,000
=======
Acquisition paid for by:
First Mortgage $66,000
Credit lines 22,000
-------
Total Debt $88,000
=======
<PAGE>
Kranzco Realty Trust
Pro Forma Combined Condensed
Statement of Operations for
the Three Months Ended March 31, 1998
(Unaudited)
Southeast
The Company Acquisition The Company
(Historical) (Pro Forma) (Pro Forma)
---------- --------- ---------
(a)
(Dollar amounts in thousands
except share and per share data)
REVENUE:
Minimum rent $13,407 $2,077 $15,484
Percentage rent 310 20 330
Expense reimbursements 2,839 178 3,017
Other income 28 -- 28
Interest income 123 -- 123
------- ------ -------
Total revenue 16,707 2,275 18,982
------- ------ -------
EXPENSES:
Interest 4,871 1,733(b) 6,604
Depreciation and amortization 3,450 594(c) 4,044
Real estate taxes 1,804 123 1,927
Operations and maintenance 2,101 151 2,252
General and administrative 809 -- 809
------- ------ -------
Total expenses 13,035 2,601 15,636
------- ------ -------
Net income (loss) 3,672 (326) 3,346
DISTRIBUTIONS ON
PREFERRED SHARES 2,013 -- 2,013
------- ------ -------
Net income (loss)
attributable to
common shareholders $1,659 $(326) $1,333
======= ====== =======
Basic and Diluted
Earnings per Common Share $0.16 $0.13
======= =======
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OF BENEFICIAL
INTEREST 10,424,000 10,424,000
The accompanying notes and management's assumptions are an integral part of
this statement.<PAGE>
<TABLE>
<CAPTION>
Kranzco Realty Trust
Pro Forma Combined Condensed
Statement of Operations for
the Year Ended December 31, 1997
(Unaudited)
Georgia Acquisition
UPI /Issuance of Payoff
The Company Acquisition Preferred Shares of Existing Southeast The Company
(Historical) (Pro Forma) (Pro Forma) Debt Total Acquisition Pro Forma
---------- --------- ------------------- ---------- ----- ----------- -----------
(d) (e) (a)
(Dollar amounts in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Minimum rent $47,579 $1,194 $4,668 $-- $53,441 $8,238 $61,679
Percentage rent 1,163 4 -- -- 1,167 215 1,382
Expense reimbursements 11,165 152 692 -- 12,009 803 12,812
Other income 127 -- -- -- 127 -- 127
Interest income 278 -- -- -- 278 -- 278
------- ------ ------ ----- ------- ------ -------
Total revenue 60,312 1,350 5,360 -- 67,022 9,256 76,278
------- ------ ------ ----- ------- ------ -------
EXPENSES:
Interest 18,887 498 1,765(f) (1,862)(g) 19,288 6,930(b) 26,218
Depreciation and
amortization 12,534 228(h) 1,023(i) -- 13,785 2,375(c) 16,160
Real estate taxes 6,584 83 394 -- 7,061 420 7,481
Operations and
maintenance 8,346 96 482 -- 8,924 644 9,568
General and
administrative 2,877 0 -- -- 2,877 -- 2,877
------- ------ ------ ----- ------- ------ -------
Total expenses 49,228 905 3,664 (1,862) 51,935 10,369 62,304
------- ------ ------ ----- ------- ------ -------
Net income 11,084 445 1,696 1,862 15,087 (1,113) 13,974
DISTRIBUTIONS ON
PREFERRED SHARES 3,565 528 4,275(j) -- 8,368 -- 8,368
------- ------ ------ ----- ------- ------ -------
Net income (loss)
attributable to
common shareholders $7,519 $(83) $(2,579) $1,862 $6,719 $(1,113) $5,606
======= ====== ====== ===== ======= ====== =======
NET INCOME PER COMMON
SHARE $0.73 $ 0.64 $0.54
======= ======= =======
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OF BENEFICIAL
INTEREST 10,342,000 10,426,000 10,426,000
The accompanying notes and management's assumptions are an integral part of this statement.
/TABLE
<PAGE>
Footnotes to Pro Forma Combined Condensed Statements of Operations
(unaudited)
(a) To record the operations of the 1998 Acquisition Properties.
(b) To record interest on the debt incurred to acquire the 1998 Acquisition
Properties:
Rate Debt March 31, 1998 December 31, 1997
First Mortgage 7.50% $66,000 $1,238 $4,950
Credit Lines 9.00% 22,000 495 1,980
------- ------ ------
Total $88,000 $1,733 $6,930
(c) To record depreciation and amortization on the Southeast Acquisition
Properties:
Purchase Price $84,750
Costs 2,250
Total $87,000 $544 $2,175
Amortization of
deferred financing costs 1,000 50 200
------- ---- ------
$88,000 $594 $2,375
======= ==== ======
(d) In February 1997, Kranzco acquired from Union Property Investors, Inc.
("UPI") 16 properties located in 11 states for approximately $65
million, aggregating approximately 1.3 million square feet of GLA (the
"UPI Acquisition"). This adjustment reflects the operations of UPI.
(e) In December 1997, Kranzco acquired five shopping centers in the Atlanta
metropolitan area (the "Georgia Properties") aggregating approximately
650,000 square feet of GLA, for approximately $44 million (the "Georgia
Acquisition"). This adjustment reflects the operations of the Georgia
Properties.
(f) To reflect interest expense of debt assumed and the additional
borrowings as a result of the Georgia Acquisition:
December 31,
1997
-----------
Debt assumed $20,435
Interest expense
at various rates $1,765
<PAGE>
(g) To record the repayment of debt outstanding and the related reduction of
interest expenses as follows:
Principal amount of debt repayment $19,894
Interest expense reduction on debt repayment $1,862
(h) The depreciation and amortization include pro forma adjustments as a
result of the UPI Acquisition.
(i) To reflect depreciation expense over a 30-year life as a result of the
Georgia Acquisition as follows:
December 31,
1996
-----------
Depreciable basis
of the Georgia Properties $30,702
Depreciation expense $ 1,023
=====
(j) To record the distributions on the issuance of
Series D Preferred Shares: December 31,
1997
-----------
Shares issued 1,800
Face amount per share $ 25.00
Gross Proceeds $ 45,000
Distribution rate 9.50%
--------
Distributions $ 4,275
<PAGE>
(c) Exhibits
2.1 Sales Contract dated June 26, 1998 by and among Kranzco Realty Trust, a
Maryland real estate investment trust, and Europco Property Investors
II, Ltd., a Georgia limited partnership; Europco Property Investors III,
Ltd., a Georgia limited partnership; Europco Property Investors IV,
Ltd., a Georgia limited partnership; Secured Properties Investors V,
L.P., a Georgia limited partnership; Secured Properties Investors VIII,
L.P., a Georgia limited partnership; Secured Properties Investors IX,
L.P. a Georgia limited partnership; and Tifton Partners, L.P., a Georgia
limited partnership.
23.1 Consent of Independent Public Accountants - Arthur Andersen LLP.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 16, 1998
KRANZCO REALTY TRUST
By:/s/ Norman M. Kranzdorf
______________________________
Name: Norman M. Kranzdorf
Title: President and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
2.1 Sales Contract dated June 26, 1998 by and among Kranzco Realty
Trust, a Maryland real estate investment trust, and Europco
Property Investors II, Ltd., a Georgia limited partnership; Europco
Property Investors III, Ltd., a Georgia limited partnership;
Europco Property Investors IV, Ltd., a Georgia limited partnership;
Secured Properties Investors V, L.P., a Georgia limited
partnership; Secured Properties Investors VIII, L.P., a Georgia
limited partnership; Secured Properties Investors IX, L.P. a
Georgia limited partnership; and Tifton Partners, L.P., a Georgia
limited partnership.
23.1 Consent of Independent Public Accountants - Arthur Andersen LLP
SALES CONTRACT
THIS SALES CONTRACT (this "Agreement") is entered into on June 26, 1998,
by and among Kranzco Realty Trust, a Maryland real estate investment trust
(the "Purchaser") and Europco Property Investors II, Ltd., a Georgia limited
partnership; Europco Property Investors III, Ltd., a Georgia limited
partnership; Europco Property Investors IV, Ltd., a Georgia limited
partnership; Secured Properties Investors V, L.P., a Georgia limited
partnership; Secured Properties Investors VIII, L.P., a Georgia limited
partnership; Secured Properties Investors IX, L.P., a Georgia limited
partnership; and Tifton Partners, L.P., a Georgia limited partnership (each
individually is referred to herein as a "Seller," and all are referred to
herein collectively as the "Sellers").
FOR AND IN CONSIDERATION of the mutual covenants set forth herein and
other good and valuable consideration, the receipt, sufficiency and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
TERMS OF PURCHASE
1.1 Purchase and Sale. Sellers shall sell and Purchaser shall purchase
all those tracts or parcels of land located in: Vidalia, Georgia, and more
particularly described on "A1"; Jefferson City, Tennessee, and more
particularly described on Exhibit "A2"; Staunton, Virginia, and more
particularly described on Exhibit "A3"; Summerville, Georgia, and more
particularly described on Exhibit "A4"; Tifton, Georgia, and more
particularly described on Exhibit "A5"; Circleville, Ohio, and more
particularly described on Exhibit "A6"; Douglasville, Georgia, and more
particularly described on Exhibit "A7"; Snellville, Georgia, and more
particularly described on Exhibit "A8"; and Pensacola Florida, and more
particularly described on Exhibit "A9", each such exhibit being attached
hereto; together with all improvements now or hereafter located thereon; and
fixtures and personal property, whether tangible or intangible, of Sellers,
if any, used or usable in connection with the operation of the buildings
located thereon ( each of the tracts of land, together with the improvements
and personalty located thereon, is individually referred to herein as a
"Property" or collectively as the "Properties"). The Properties also shall
be deemed to include the following:
(A) Easements, rights of way, privileges, appurtenances, and
rights to the same belonging to and inuring to the benefit of the Properties;
and
(B) Any strips and gores adjacent to the Properties and any land
lying in the beds of any street, road or avenue, open or proposed, in front
of or adjoining said Properties to the center line thereof; and
(C) All fixtures, machinery, equipment, furnishings, appliances,
supplies, operational records and other personal property owned by a Seller
and located on any of the Properties, including, without limitation, all
fittings, heating, air cooling, air conditioning, freezing, lighting,
laundry, incinerating, and power equipment and apparatus; all engines, pipes,
pumps, tanks, motors, conduits, switch boards, plumbing, lifting, cleaning,
fire prevention, fire extinguishing and refrigerating equipment and
apparatus; all furnaces, oil burners or units thereof; all appliances, vacuum
cleaning systems, awnings, screens, storm doors and windows, cabinets,
partitions, ducts and compressors, furniture and furnishings, hot water
heaters, garbage receptacles and containers above and below ground,
janitorial supplies, landscaping materials, lawn mowers, tools, vehicles and
articles of a nature similar to the foregoing; and all future additions to or
substitutions for the foregoing, or any part thereof, between the date hereof
and the date of Closing (as hereinafter defined) hereunder; and all other
personal property now upon or hereafter placed on any of the Properties and
owned by a Seller, and all warranties and guarantees to and right of action
of any Seller therefor, if any. (The property described in this subsection
(c), when referred to separately from the Properties, is hereinafter
sometimes called "Personalty").
(D) Any other interest of any Seller in and to the Properties or
pertaining thereto, including without limitation, all of Sellers' right,
title and interest in and to the following (collectively, "Other Interests"):
(i) Any catalogs, booklets, manuals, files, logs, records,
correspondence, purchaser prospect lists, tenant lists, tenant prospect lists
and other mail in lists, sales brochures and material, leasing brochures and
materials, advertisement materials and other items, including without
limitation, title information, soil engineering and environmental
inspections, studies and reports, market studies, and similar inspections
with respect to the sale, management, leasing, promotion, ownership,
maintenance, use, occupancy and operation of the Properties;
(ii) Any name, trade name, trademark, service mark or logo
(and all goodwill associated therewith) by which the Properties or any part
thereof may be known or which may be used in connection with the Properties,
including without limitation, the names associated with each of the Shopping
Centers and all other fictitious names used on the date hereof or which any
Seller has the right to use in connection with the ownership, use, occupancy
or operation of the Properties (collectively, "Names") together with all
registrations, if any, for such Names;
(iii) Any bank or other depository accounts relating to the
tenant security deposits;
(iv) Any bond, guaranty, warranty or repair agreements now
existing and outstanding concerning the Properties or any part thereof,
including without limitation, any bond, guaranty or warranty (including, any
fidelity bonds) relating to construction, use, maintenance, occupancy or
operation of the improvements constituting part of the Properties and the
Personalty, subject to any limitation contained in each such bond, guaranty
and warranty;
(v) Any licenses, permits, franchise approvals and
certificates of any governmental authorities required or used in or relating
to the ownership, use, maintenance, occupying or operation of any part of the
Properties;
(vi) Any surveys of, and plans and specifications relating to,
the Properties;
(vii) The Service Agreements (as hereinafter defined);
(viii) Any unrecorded utility agreements including any deposits
made thereunder;
(ix) The Leases (as hereinafter defined);
(x) Any unpaid awards for any taking by condemnation or any
damage to the Properties by reason of a change of grade of any street or
highway or any award paid to any Seller after the date hereof and not used or
applied by such Seller to the restoration of the applicable Property;
(xi) Any unpaid proceeds for any damage to the Properties by
reason of fire or other casualty, or any proceeds paid to any Seller and not
used or applied by such Seller to the restoration of the Properties;
(xii) Any development rights with respect to the Properties;
and
(xiii) The proceeds of any tax appeals with respect to the
Properties.
1.2 Purchase Price. The Purchase Price for the Properties shall be
Eighty-Four Million Seven Hundred Fifty Thousand and No/100ths Dollars
($84,750,000.00). The parties agree that Purchaser shall not have the option
to purchase only a portion of the Properties. The parties have allocated the
Purchase Price among the Properties as set forth on Exhibit "E". The
Purchase Price shall be paid or accounted for at the hereinafter defined
Closing in the following manner:
a. Assumed Indebtedness. Purchaser shall take the Properties
subject to all mortgages, deeds of trust or security deeds currently
affecting same (the "Assumed Indebtedness"), except for the mortgages and
security deeds affecting the Staunton, Virginia phase I parcel, the
Circleville, Ohio parcel and the Vidalia, Georgia parcel, which shall be
satisfied at Closing.
b. Cash. Purchaser shall pay Sellers the amount by which the
Purchase Price, as adjusted by the closing prorations and adjustments
specified in Article 3, exceeds the sum of (i) the principal balance of the
Assumed Indebtedness, together with all accrued interest and other charges
payable after deducting all escrows held by the lender, and (ii) a reserve
for surviving claims in the amount of Six Hundred Thousand Dollars ($
600,000.00) (the "Reserve"). The Reserve shall be held in accordance with
the escrow agreement set forth in Exhibit "B" attached hereto (the "Escrow
Agreement").
1.3 Earnest Money. Within three (3) days of execution of this
Agreement, Purchaser shall deliver to Sellers' attorneys, Holland & Knight,
LLP, Purchaser's promissory note in the amount of Eight Hundred Forty-Seven
Thousand Five Hundred and No/100ths Dollars ($847,500.00) made payable to
Sellers in the form of Exhibit "F" attached hereto (the "Earnest Money
Note"), which shall be held by Sellers' attorney in accordance with the terms
of an escrow agreement to be entered into between Purchaser, Sellers and
Sellers' attorneys.
1.4 Time of Closing. The closing of the transaction contemplated
hereby (the "Closing") shall take place in the offices of Purchaser's
counsel, Robinson Silverman Pearce Aronsohn & Berman LLP in New York City
beginning at 10:00 A.M. on or before August 31, 1998 or such date as
Purchaser designates at least three (3) days in advance. Purchaser shall
have the right to extend Closing for up to thirty (30) days by giving two (2)
days' notice to Sellers.
ARTICLE 2
PRECLOSING ACTIVITY AND CONTINGENCIES
2.1 Sellers' Pre-Closing Delivery of Documents. Sellers shall make
available to Purchaser within five (5) days after the date hereof the
following:
a. Leases and Assumed Indebtedness. Copies of the existing
Leases, as that term is hereinafter defined and the underlying documents with
respect to the Assumed Indebtedness;
b. Title Insurance Commitments. Title Insurance Commitments
withrespect to the Properties showing the Purchaser as the proposed insured;
c. Surveys. Surveys of the Properties made in accordance with
the "minimum detail requirements for ALTA/ACSM Land Title surveys" jointly
established and adopted by ALTA and ACSM;
d. Phase I Environmentals. Current Phase I Environmental Reports
with respect to the Properties; and
e. Sellers' Files. All information in Sellers' possession with
respect to the Properties, including but not limited to Lease files and
Tenant correspondence files, plans and specs, certificates of occupancy,
insurance policies, which are attached hereto as Exhibit "K" (or certificates
if a blanket policy is in place) and any warranties with respect to the
Properties, but specifically excluding any appraisals of the Properties in
Sellers' possession and any correspondence between Sellers and Broker with
respect to the Properties.
2.2 Purchaser's Examination of Title; Title Insurance. Sellers shall
convey fee simple title to the Properties by limited warranty deeds, subject
only to ad valorem taxes not yet due and payable, the Assumed Indebtedness,
and all other matters set forth on Exhibit "G" (collectively, the "Permitted
Exceptions"). With respect to those items which are not Permitted
Exceptions, Sellers may, but shall not be obligated to, satisfy such
objections at Closing; provided, however, that Sellers shall be obligated to
satisfy all liens in a liquidated amount.
2.3 Operation of Property. Until the Closing, Sellers shall:
a. Contract Compliance. Comply with all the terms, conditions
and provisions of all Leases, liens, mortgages, agreements, insurance
policies, licenses and permits and other contractual arrangements relating to
the Properties, make all payments due thereunder and suffer no default;
b. Contracts. Without written approval of Purchaser, which
approval shall not be unreasonably withheld, neither negotiate nor enter into
any new contract or lease nor modify any existing contract or lease affecting
the use or operation of the Properties on or before the Closing;
c. Security Deposits. Not return to any Tenants (as hereinafter
defined) any security deposit unless required to do so by the applicable
Leases. Not apply any security deposits except with respect to those Leases
terminated with Purchaser's consent pursuant to Section 2.3.b;
d. Changes. Promptly notify Purchaser in writing of any default
under the Leases or any material change in conditions affecting the
Properties; and
e. Maintenance of Property. Sellers, in accordance with their
normal practices and procedures, will continue to maintain and to make all
repairs and replacements to the Properties so as to keep the Properties in
substantially their present condition, reasonable wear and tear excepted, and
Sellers shall operate and manage the Properties in the same manner as they
have previously operated the Properties. Sellers shall continue to expend
funds budgeted or planned for advertising, maintenance and capital
improvements with respect to the Properties until Closing is completed.
2.4 Inspection Period. Purchaser shall have thirty (30) days from the
date of execution of this Agreement (the "Inspection Period") to conduct its
inspection with respect to the Properties. Purchaser shall have the option
to terminate this Agreement for any reason by delivering written notice of
termination to Sellers on or before the end of the Inspection Period, in
which event the Earnest Money Note shall be immediately returned to
Purchaser, and this Agreement shall be terminated, except for the provisions
which by their terms survive termination. If such option is not exercised,
this Agreement shall remain in full force and effect without further action
by the parties and Purchaser's option to terminate this Agreement will be
deemed to have been waived.
2.5 Purchaser's Access. Purchaser and its representatives, agents and
independent contractors shall have the right to enter upon the Properties
from time to time during ordinary business hours for the purpose of
inspecting the Properties and generally obtaining information at Purchaser's
sole cost, expense and risk. Purchaser shall give Sellers reasonable advance
notice of Purchaser's entries and inspections so that Sellers, at their
option, may have one of its representatives familiar with the Properties
accompany Purchaser. Purchaser shall indemnify, protect, defend and hold
Sellers harmless from and against any claims, losses, liabilities or damages
(including reasonable attorneys' fees) resulting from such entry, inspection
or other activities, and from and against any mechanic's liens or claims of
lien resulting therefrom. Such indemnification shall survive the Closing or
termination of this Agreement. Purchaser will not contact any of Sellers'
employees, tenants, vendors, contractors or consultants regarding the
Properties without the prior written consent of Sellers which shall not be
unreasonably withheld. Sellers will permit representatives of Purchaser to
enter upon the Properties for the purposes of conducting soil tests, borings,
percolation tests, and any other tests, inspections, or examinations that
Purchaser desires in regard to engineering and planning for future
development of the Properties, or testing existing conditions, including (but
not by way of limitation) such other tests, inspections, or examinations as
Purchaser may request to determine subsurface or topographic conditions of
the Properties. Purchaser shall hold Sellers harmless for any costs or
damages resulting from Purchaser's conducting of such tests, including but
not limited to, the cost of repairing any portion of the Properties and any
damage to any person.
2.6 Destruction Or Damages Prior to Closing Date. If all or any
material portion of any Property shall be condemned or damaged prior to the
Closing, or a bona fide threat of condemnation shall be made prior to
Closing, or there shall be claimed against the Properties any municipal code,
ordinance, or regulatory violation, Purchaser may elect to (a) terminate this
Agreement, or (b) reduce the Purchase Price in the amount of (i) the
condemnation award received by or payable to Sellers, or (ii) the amount of
insurance proceeds received by or payable to Sellers for such damage (plus
the applicable deductible amount with respect to such damage), or (iii) the
cost of curing such violation. Purchaser's election under this Section shall
be exercised by giving written notice thereof to Sellers within fifteen (15)
days after receipt of written notice from Sellers of such taking or damage or
violation or the amount of the condemnation award or insurance proceeds
payable with respect to such taking or damage, whichever is later. If
Purchaser elects to terminate this Agreement under this Section, the Earnest
Money Note immediately shall be returned to Purchaser and there shall be no
further rights, duties or obligations hereunder.
2.7 Sellers' Contingency. Sellers' obligations under this Agreement are
subject to the condition precedent that each Seller's limited partners
approve the transaction described in this Agreement during the Inspection
Period. In the event that Sellers are unable to obtain said consent, then
this Agreement shall terminate, be null and void, and the parties hereto
shall have no further obligations to each other and the Earnest Money Note
shall be returned to Purchaser, except that Sellers shall pay to Purchaser
the third party expenses incurred by Purchaser in connection herewith,
including legal and accounting fees, engineering fees, etc. Sellers hereby
represent that they have no reason to believe they will not obtain such
consents.
ARTICLE 3
CLOSING
3.1 Delivery by Sellers. At Closing, Sellers shall deliver possession
of the Properties to Purchaser subject to the rights of the Tenants under the
Leases. Sellers also shall deliver the following items. Documents shall be
duly executed and in recordable form, if intended to be recorded.
a. Conveyances.
i. Limited Warranty Deeds. Limited Warranty Deeds conveying
fee simple title to the Properties free and clear of all liens,
restrictions and encumbrances except the Permitted Exceptions;
ii. Bills of Sale. Limited Warranty Bills of Sale conveying
the personalty free and clear of all liens, restrictions and encum-
brances except the Permitted Exceptions;
iii. Assignments of Leases. Assignments of all Sellers'
rights under the Leases, which assignments shall also indemnify
Purchaser with respect to matters arising under such Leases prior to the
Closing; and
iv. Sellers' Rights Under Contracts, Guaranties, Etc. To the
extent permitted by each such document, an assignment of Sellers' rights
under any contracts, guaranties and warranties with respect to the
Properties, which assignments shall also indemnify Purchaser with
respect to matters arising under such contracts prior to the date of
Closing.
b. Sellers' Certificates.
i. Representations. Certificates of the Sellers confirming
that all representations and warranties made by Sellers in this
Agreement are true and correct on and as of Closing;
ii. Organization, Authority, Etc. Certificates dated within
ten (10) days of the Closing from the (i) Georgia Secretary of State
indicating that Sellers are validly existing in that State and (ii)
general partner of each Seller, certifying that the sale of each
Property is authorized pursuant to the terms of its Seller's limited
partnership agreement and authorizing specified officers to sign on its
Seller's behalf the documents necessary to consummate this sale; and
iii. Affidavits.
A. Title. Such affidavits or other documents as are
reasonably required by Purchaser's title insurer as a condition to
insuring title to the Properties without the survey exception or other
exceptions, except for the Permitted Exceptions.
B. Foreign Person. An affidavit that each Seller is not
a foreign person within the meaning of Section 1445(f) of the Internal
Revenue Code of 1986, as amended, or a nonresident of Georgia within the
meaning of Section 48-7-128(b) of the Official Code of Georgia
Annotated; and
C. Reporting Requirements. An affidavit setting forth
such information as may be required to comply with the reporting
requirements relating to sales of real property (other than Section 1445
referred to above) imposed under the U.S. Internal Revenue Code.
c. Other Deliveries.
i. Notices. Notices of sale, addressed to the Tenants,
holders of Assumed Indebtedness and service contractors;
ii. Keys. All keys to the Properties which each Seller has
in its possession, properly tagged for identification;
iii. Tenant Estoppel Letters. An estoppel letter from Wal-
Mart Stores, Inc., with respect to each Property, plus an estoppel
letter from all anchors (as identified in the Confidential Offering
Memorandum prepared by CB Commercial Investment Properties Group on
behalf of the Sellers) and seventy-five percent (75%) of the remaining
tenants by rent at each Property dated within thirty (30) days of the
date of Closing. In the event that a Lease has a form of estoppel
letter attached thereto or in the event the Lease states what shall be
in an estoppel letter, Sellers shall deliver an estoppel letter in such
form or containing such information. In the event that the Lease does
not contain any such form or applicable language, Sellers shall deliver
an estoppel letter in a form reasonably acceptable to Purchaser.
Delivery of such estoppels shall be a condition to Purchaser's
obligations hereunder, but failure to deliver such estoppels shall not
constitute a default of the Seller;
iv. Assignment of Names. Valid assignments, duly executed
and acknowledged by each Seller, assigning to Purchaser all of the
Sellers' right, title and interest in the Names, together with such
documents as shall be necessary to transfer any logos, trademarks or
service marks association with the Names and for proper termination of
Sellers' use of the Names;
v. Rent Rolls. Rent rolls for the Properties, certified by
Sellers to be true and correct as of the Closing substantially in the
form of Exhibit "C" annexed hereto; and a list, certified by Sellers to
be true and correct as of the Closing, setting forth the names of any
Tenant in arrears in the payment of rent under such Tenant's Lease and
the amount of such arrearage;
vi. Bills. Copies of the most recent paid real estate tax,
personal property tax, water, sewer, gas and electric bills with respect
to the Properties, and any bills for any other amounts which if unpaid
could become liens against the Properties;
vii. Assignments of Other Interests. Assignments, in form and
substance reasonably satisfactory to Purchaser, of Sellers' rights in
and to the Other Interests;
viii. Plans and Specifications. A complete set of Plans and
Specifications for the buildings and improvements constituting part of
the Properties and modifications and alterations thereto, if available
to Sellers or in Sellers' possession;
ix. Updated Financial Information. Financial information for
the Properties for the period January 1, 1998 through the Closing;
x. Assumed Indebtedness Documents. Original executed
counterparts of the documents constituting the Assumed Indebtedness, or,
if originals are not available, copies thereof certified by Sellers as
true and correct;
xi. Mortgagee Estoppels. Estoppel certificates from the
holders of the Assumed Indebtedness consenting to the sale of the
Properties to Purchaser and setting forth such other information with
respect to such Assumed Indebtedness as is set forth in the form of
Exhibit "H" attached hereto. Failure to deliver such shall not
constitute a default of the Sellers, but shall be a condition to
Purchaser's obligations hereunder;
xii. Lease Documents. Original executed counterparts of the
documents constituting the Leases, or, if originals are not available,
copies thereof certified by Sellers as true and correct;
xiii. Transfer Tax Returns. To the extent required, transfer
tax returns;
xiv. Termination of Related Party Agreements. Terminations of
any management agreements and any other agreements between any of the
Sellers and their respective affiliates with respect to the Properties;
xv. Escrow Agreement. The Escrow Agreement attached hereto as
Exhibit "B"; and
xv. Additional Documents. Such other documents as may be
reasonably required to consummate the transactions herein contemplated.
3.2 Delivery by Purchaser. At Closing, Purchaser shall deliver the
following items to the Sellers. Documents shall be duly executed and in
recordable form, if intended to be recorded.
a. Cash Portion. The cash portion of the purchase price as
described in Section 1.2(b) of this Agreement and as adjusted by prorations
and adjustments pursuant to Section 3.4.
b. Security Deposits. A receipt for any security deposit assigned
at Closing to Purchaser by Sellers and an indemnification of Sellers against
claims relating to any such security deposit actually assigned to Purchaser;
c. Lease Assignments. Purchaser shall execute the assignment of
all Leases which also shall indemnify Sellers with respect to matters arising
under the Leases after the date of Closing;
d. Escrow Agreement. The Escrow Agreement attached hereto as
Exhibit "B"; and
e. Additional Documents. Such other documents as may be
reasonably required to consummate the transactions herein contemplated.
3.3 Costs. Sellers shall pay any state and/or local transfer tax, any
applicable sales tax in connection with the Personalty conveyed at Closing
and its own attorney's fees. Purchaser and Sellers shall split equally the
transfer fees and related expenses charged by the respective lenders with
respect to the Assumed Indebtedness and any charges of the Escrow Agent. In
the event that Purchaser does not assume all or any portion of the Assumed
Indebtedness, Sellers shall pay one-half of any prepayment penalty and/or
prepayment premium to satisfy any such loan, provided that in such event
Sellers shall not be obligated to pay more than Sellers would have for
Purchaser to assume such indebtedness. Otherwise, Purchaser shall be
responsible for all costs connected with the Closing.
3.4 Prorations and Adjustments.
a. Prorations. The following items shall be prorated on a daily
basis at the Closing, as of day of Closing, unless provided otherwise herein.
In the event that any of such items proves to have been prorated incorrectly
at Closing, the parties agree to in good faith make the appropriate
adjustments after Closing, provided that any such adjustments shall be made
by December 31, 1998.
i. Taxes. City, county, state and school district ad
valorem taxes and all other taxes and assessments. Proration shall be
based upon the latest millage rate and assessments available with
respect to the Properties. If such proration is based upon estimates,
rather than on actual bills, then either party may demand after the
Closing and shall be entitled to receive upon demand, payment from the
other party correcting any proration based upon inaccurate estimates,
provided such demand complies with Section 3.4(a);
ii. Expenses. Utility charges and all other operating
expenses, including service contracts. If proration of such charges and
expenses is based upon estimate, rather than actual bills, then either
party may demand after the Closing and shall be entitled to receive upon
demand, payment from the other party correcting any proration based upon
inaccurate estimates, provided such demand complies with Section 3.4(a);
iii. Rents. Rents and other income from or relating to the
Properties. Any common area maintenance charges, reimbursements
pursuant to tax or expense escalation or pass through clauses, and other
similar charges paid by Tenants subsequent to Closing and attributable
in part to expenditures by Sellers for a period prior to Closing shall
be prorated on a daily basis between Sellers and Purchaser. With
respect to percentage rent payments for the year of Closing, the parties
agree that Purchaser shall be entitled to all of such sums and in
exchange, Purchaser shall pay to Seller an additional One Hundred
Thousand Dollars ($100,000.00) at Closing. Adjustments and payments
with regard to rents (but not percentage rents), common area maintenance
charges, reimbursements pursuant to tax or expense escalations or pass
through clauses, and other similar charges paid by Tenants which prove
to have been prorated incorrectly shall be revised, provided such demand
complied with Section 3.4(a); and
iv. Assumed Indebtedness. Interest on the Assumed
Indebtedness shall be apportioned as of the Closing. Purchaser shall
reimburse Sellers for all escrow accounts held by the holders of the
Assumed Indebtedness as indicated on the mortgagee estoppel and consent.
b. Credits. Security Deposits shall be credited to Purchaser at
the Closing
c. Adjustments.
i. Wal-Mart. In the event that at or prior to Closing Wal-
Mart contends that the percentage rent paid at the Vidalia, Georgia
location should be less than that received by the applicable Seller for
the lease year 1997, the Purchase Price shall be reduced by One Hundred
Twenty Thousand Dollars ($120,000).
ii. Fashion Bug. In the event that the dispute with Fashion Bug
referenced on Exhibit "D" is not resolved prior to Closing, Purchaser agrees
to assume all of Seller's rights and liabilities with respect to this matter,
including Seller's interest as "Defendant" in the litigation. In exchange
for assuming such liability, the Purchase Price shall be reduced by Two
Hundred Fifty Thousand Dollars ($250,000.00) and the portion of the Purchase
Price allocated to this parcel should be reduced accordingly Prior to
Closing, the applicable Seller shall not settle the Fashion Bug litigation
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld.
ARTICLE 4
SELLERS' WARRANTIES, REPRESENTATIONS AND AGREEMENTS
Each Seller hereby warrants, represents and agrees as follows:
4.1 No Condemnation Pending or Threatened. There is no pending or
threatened condemnation or similar proceeding affecting the Properties or any
portion thereof, and each Seller has no knowledge that any such action is
presently contemplated.
4.2 Pending Litigation. To the best of each Seller's knowledge, there
are no legal actions, suits, or other legal or administrative proceedings
pending or threatened against any Seller which affect the Properties or
against third parties affecting the Properties, but for the matters shown on
Exhibit "D" attached hereto and incorporated herein.
4.3 Hazardous Substances. Sellers have delivered to Purchaser certain
Phase I Environmental Reports with respect to the Properties identified
herein. Other than as set forth therein, which is expressly excepted from
this representation, each Seller further represents that it has not used,
generated, treated, stored, released, discharged or disposed of Hazardous
Substances (as hereinafter defined), on or from the Properties at any time.
"Hazardous Substance" shall refer to any hazardous or toxic substance or
waste as those terms are defined by any applicable federal or state law or
regulation, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq. and the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., together with
petroleum, petroleum products, PCB, friable asbestos or formaldehyde-based
insulation items .
4.4 Leases. With regard to the leases (each such lease is herein
referred to as a "Lease" and all such leases are herein referred to
collectively as the "Leases") specified on the rent roll attached hereto as
Exhibit "C" (the "Rent Roll") with the tenants named thereon (each such
tenant is herein referred to as a "Tenant" and all such tenants are herein
referred to collectively as the "Tenants"):
a. Forms of Leases. The respective written Leases constitute the
entire agreements with the Tenants. The Leases have not been modified,
altered, amended, and do not differ in any respect from the copies of the
Leases delivered to Purchaser pursuant to the provisions of this Agreement,
except as set forth in amendments to such Leases which have been delivered to
Purchaser;
b. Performance of Landlord's Obligations. Each Seller, as the
Landlord under the respective Leases, is not in default thereunder and no
Seller has received any written notice of a default by the Landlord under any
Lease; and
c. Performance of Tenant's Obligations. No Tenant is in default
under its Lease, nor has any event occurred which, coupled with the giving of
notice or the passage of time, would constitute a default by any Tenant under
its Lease, other than as set forth in Exhibit "C."
4.5 Possession/Defaults. There are no leases, tenancies, licenses or
other rights of occupancy or use for any portion of the Properties other than
the Leases. Except as otherwise noted in Exhibit "C" or Exhibit "D", each of
the Leases are valid and subsisting and in full force and effect, have not
been amended, modified or supplemented and the tenant, licensee or occupant
thereunder is in actual possession. Except as set forth in Exhibit "C" or
Exhibit "D", no Tenant has asserted any claim, offset or defense which would
in any way affect the collection of rent from such Tenant, other than as set
forth in Exhibit "D". All decorating, repairs, alterations and other work
required to be performed by the Landlord under each of the Leases, or the
cost thereof to be reimbursed to any such tenants as an incident of such
tenancy, has been performed or reimbursed or will have been performed or
reimbursed by Sellers at their cost prior to the date of Closing. No tenant,
licensee or other occupant under any of the Leases has any right or option to
acquire the Properties, or any part thereof or interest therein.
4.6 Rent Roll. The rents set forth in Exhibit "C" are the actual
rents, income and charges presently being collected by Sellers under the
Leases. Except as otherwise set forth in Exhibit "C" or Exhibit "D", no
tenant, licensee or occupant under any of the Leases is entitled to any
concessions, rent-free occupancy, allowances, rebates or refunds or has
prepaid any rents or other charges for more than the current month. No
security deposits have been paid by any tenants of the Properties which have
not heretofore been returned, except as set forth on Exhibit "C" hereto.
4.7 Brokerage . No brokerage or leasing commission or other
compensation is due and payable at the time of Closing to any person, firm,
corporation or other entity with respect to or on account of any of the
Leases.
4.8 Performance . Sellers have performed, and at Closing shall have
performed, all obligations which they have under the Leases, and all other
agreements relating to the Properties, which obligations shall have accrued
as of Closing.
4.9 Agreements. Exhibit "I" attached hereto is a complete and correct
list of all existing and proposed management, service, equipment, supply,
maintenance, exhibitor's concession, union or collective bargaining
agreements, which are not cancelable on or prior to Closing with respect to
or affecting the Properties (the "Service Agreements") and each of such
agreements is in full force and effect and has not been amended, modified or
supplemented except as set forth on Exhibit "I". Those contracts which shall
survive Closing and which shall be assigned to Purchaser are designated as
such in Exhibit "I". No written notice of default or breach by Sellers in
the terms of any such agreements has been received by Sellers or their
agents. Sellers have performed and at Closing, shall have performed all
obligations which they have under said agreements and contracts.
4.10 Licenses. Exhibit "J" attached hereto is a complete and correct
list of each license and permit held by Sellers in connection with the
ownership and operation of the Properties.
4.11 Structures. To the best of Sellers' knowledge, without independent
investigation or inquiry, all buildings, structures and improvements, roads,
parking areas, curbs, sidewalks, sewers, and other utilities thereon, and
their existing uses, are in compliance with all applicable laws, ordinances,
rules and regulations, and requirements of all governmental authorities
having jurisdiction thereof, including without limitation, those pertaining
to zoning, subdivision, building, safety, fire and health, sewage connection,
treatment and disposal and all necessary and appropriate permits and
approvals therefor have been properly issued to Sellers and are in good
standing. All charges and fees for such permits and approvals have been paid
in full.
4.12 Governmental Authority. Sellers have not and at the Closing shall
not have received from any governmental authority, any notices requiring
improvements or installations on or in connection with the Properties, or
asserting, any violation of any applicable law, regulation or other
governmental requirement.
4.13 Personalty. Sellers are the sole and absolute owners of the
Personalty and the Other Interests, free and clear of all liens and
encumbrances, except for security interests to be discharged at or before
Closing hereunder. Prior to Closing, no items of Personalty or the Other
Interests being sold hereunder will be removed from the Properties, unless
replaced with items of comparable value.
4.14 Insurance. The policies of insurance set forth on Schedule "L"
attached hereto are currently in force. Sellers have not received any
written notice from any insurance company which has issued a policy with
respect to the Properties or from any board or fire underwriters (or other
body exercising similar functions) (a) claiming any defects or deficiencies
which have not been cured or corrected, (b) requesting the performance of any
repairs, alterations or other work which have not been performed, or (c)
stating, in effect, that any of such policies will not be renewed or will be
renewed at a higher premium than is presently payable therefor.
4.15 Tax Bills. Sellers have delivered to Purchaser copies of the
latest real estate tax bills with respect to the Properties. To the best of
Seller's knowledge, there are no other properties included in the tax bills
affecting any of the Properties. There are no proceedings or applications
pending before any governmental authority, department or agency with respect
to the assessed value of the Properties.
4.16 Interest in Property. No person, firm or entity other than
Purchaser has any rights to acquire all or part of the Properties.
4.17 Agreements. There are no agreements relating to the Properties
other than Leases, Permitted Exceptions and Service Agreements.
4.18 Financial Information. Sellers has delivered to Purchaser true,
correct and complete financial information with respect to the Properties for
the calendar years 1995, 1996 and 1997, and for the first three months of
calendar year 1998.
4.19 Guaranties and Warranties. The guaranties and warranties set forth
on Exhibit "M" are all of the guaranties and warranties applicable to the
operation of the Properties of any portion thereof.
4.20 Assumed Indebtedness. True and correct copies of all of the
Assumed Indebtedness documents have been delivered by Sellers to Purchaser.
All of such documents are identified on Exhibit "N" attached hereto. The
Assumed Indebtedness Documents are in full force and effect, without default
by Seller. The outstanding principal balance of the Assumed Indebtedness
after application of the regularly scheduled principal amortization payments,
as of May 31, 1998 is Thirty-One Million Four Hundred Fifty-One Thousand One
Hundred Seventy-Four and 53/100ths Dollars ($31,451,174.53).
4.21 Employees. Other than employees of JAMESTOWN, a Georgia general
partnership and JAMESTOWN Management Corporation, a Georgia corporation,
there are no persons who are employed in connection with the management,
operation or maintenance of the Properties. Each of such persons so employed
is a non-union employee. Sellers shall be responsible for and shall pay all
employee wages (and any payroll taxes applicable thereto), bonuses, fringe
and other benefits through the day of Closing. Sellers acknowledges that
Purchaser is not obligated or required to employ any person currently
employed by Sellers, JAMESTOWN or JAMESTOWN Management Corporation.
4.22 At Time of Closing. The representations and warranties set forth
in this Article 4 shall be true and correct on and as of the Closing with the
same force and effect as if made at that time.
4.23 As Is Condition of Property. Purchaser acknowledges that it
is purchasing the Properties "AS-IS WHERE-IS AND WITH ALL FAULTS", and that
except for the representations or warranties of Sellers set forth in this
Agreement, it is not relying on any other representation or warranty made by
Sellers or by any person acting on Sellers' behalf. Purchaser and anyone
claiming through Purchaser hereby fully and irrevocably releases Sellers and
Sellers' agents and representatives from any and all claims it may now have
or hereafter acquire against Sellers or its agents and representatives for
any cost, loss, liability, expense, damage, action or cause of action,
whether foreseen or unforeseen, arising from or related to the physical
condition of the Properties, the presence of Hazardous Substances, or any
other condition (whether patent, latent or otherwise) affecting the
Properties, except for claims against Sellers based upon obligations
expressly provided in this Agreement. The provisions of this Section shall
survive the Closing.
ARTICLE 5
BROKERS
5.1 Brokers. Sellers and Purchaser each represent and warrant to the
other that no commission, charge or fee is or will be owed for brokerage or
similar services in connection with the transaction contemplated hereby by
reason of its actions other than to CB Commercial Real Estate Group, Inc.
("Broker") for which Sellers will be responsible. The representation and
warranty set forth in this Section 5.1 shall survive the Closing or any
termination or expiration of this Agreement.
ARTICLE 6
DEFAULT
6.1 Default. If the transaction contemplated by this Agreement is not
consummated through the default of Sellers, the Earnest Money Note shall be
returned promptly to Purchaser. Purchaser's remedy, in addition to the
return of the Earnest Money Note, shall be solely the right to seek specific
performance. If such transaction is not consummated through the default of
Purchaser, then Sellers shall accept the Earnest Money Note as full
liquidated damages for such default, whereupon Purchaser shall be released
and relieved of any and all further obligations under this Agreement. It is
understood and agreed by the parties that the amount of the Earnest Money
Note represents a reasonable pre-estimate of the probable loss resulting from
such a breach. The right of Sellers to receive and retain the Earnest Money
Note as full liquidated damages shall be the sole remedy of Sellers, whether
at law or in equity, in the event of default by Purchaser.
ARTICLE 7
ASSIGNMENT
7.1 Assignment. Purchaser may assign its rights hereunder with the
prior written consent of Sellers. No such consent shall be required with
respect to any assignment to any subsidiary(ies) of Purchaser, provided such
assignment is acceptable to the applicable lender with respect to any Assumed
Indebtedness.
ARTICLE 8
NOTICES
8.1 Notices. Any notices required or permitted hereunder shall be in
writing unless otherwise provided herein and shall be deemed duly given and
effective (i) when sent by fax to the number given below, if one is given, or
when delivered in person; or (ii) upon receipt after being sent by Federal
Express, or similar overnight courier service charges prepaid; or (iii) upon
receipt after being deposited in the postal service of the United States with
postage prepaid and properly marked for certified mail with request for
return receipt. If given to Sellers, any such notice shall be addressed as
follows:
JAMESTOWN Management Corporation
Two Paces West, Suite 1600
2727 Paces Ferry Road
Atlanta, Georgia 30339
Attention: Mr. Richard D. Crossley and
Matt M. Bronfman
Facsimile: 770- 805-1001
with a copy to: A. Summey Orr III, Esq.
Holland & Knight
One Atlantic Center, 20th Floor
1201 W. Peachtree Street, N.W.
Atlanta, Georgia 30309-3400
Fax: 404-881-0470
If given to Purchaser:
Kranzco Realty Trust
128 Fayette Street
Conshohocken, Pennsylvania 19428
Attention: Mr. Norman M. Kranzdorf
Fax: 610-941-9193
with a copy to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Jonathan S. Margolis, Esq.
Fax: 212-541-4630
Any party may change the address to which future notices to it shall be sent
by giving written notice to the other parties hereto of such change. Notice
sent by fax shall be deemed to have been given in writing, provided a number
is given above for the party to whom notice is to be given.
ARTICLE 9
MISCELLANEOUS
9.1 Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement and the rights and obligations
of the parties hereunder shall be governed in all respects by the laws of the
State of Georgia, unless required otherwise by law.
9.2 Cumulative Rights, etc. All rights, powers and privileges
conferred by the Agreement upon the parties shall be cumulative with, but not
restricted to, those given by law.
9.3 Waiver, etc. No delay or failure by any party hereto in exercising
any of its rights, remedies, powers or privileges under this Agreement or at
law or in equity and no custom, practice or course of dealing between or
among any of such parties or any other person shall be deemed a waiver by
such party of any such rights, remedies, powers or privileges, even if such
delay or failure is continuous or repeated. No single or partial exercise of
any right, remedy, power or privilege shall preclude any other or further
exercise thereof by any such party or the exercise of any other right,
remedy, power or privilege by such party, including, without limitation, the
right of such party subsequently to demand exact compliance with the terms of
this Agreement.
9.4 Successors. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
9.5 Amendment. Any amendment to this Agreement shall be binding upon
Purchaser and Sellers as soon as a written amendment has been executed by
both regardless of whether such amendment has also been signed by the Escrow
Agent. For purposes of this Section, the sending of a fax constitutes a
"writing" executed by the party sending the same. Only written amendments to
this Agreement shall be effective.
9.6 Survival. All terms and conditions hereof shall survive Closing
through December 31, 1998, except as expressly noted to the contrary.
9.7 Time. Time is of the essence of this Agreement.
9.8 Counterparts. This Agreement may be executed in several counter-
parts, each of which shall be deemed an original, and all such counterparts
together shall constitute one and the same instrument.
9.9 Severability. This Agreement is intended to be performed in accor-
dance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement, or
the application thereof to any person or circumstance, shall be invalid or
unenforceable for any reason and to any extent, then the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby but rather shall be enforced to
the greatest extent permitted by law.
9.10 Entire Agreement. This Agreement and all Exhibits hereto and the
instruments referred to herein contain the entire agreement and understanding
between the parties hereto relating to the subject matter hereof.
9.11 Interrelation. This Agreement is in all respects intended by each
party hereto to be deemed and construed to have been jointly prepared by the
parties. The parties hereby expressly agree that any uncertainty or
ambiguity existing herein shall not be interpreted against either of them as
a result of the actual identity of the draftsman.
9.12 Incorporation of Exhibits. All Exhibits attached to this Agreement
and referred to herein are incorporated herein by such reference.
9.13 Deadlines on Non-business Days. In the event any deadline
specified herein falls on a day which is not a regular business day, then the
deadline shall be extended to the end of the next following regular business
day.
9.14 Confidentiality. Purchaser will keep confidential all information
and materials resulting from its inspection and made available by Sellers
(collectively, the "Information"), except for disclosure to Purchaser's
directors, employees, auditors, counsel, advisors or representatives
(collectively, the "Representatives" who need to know the Information in
order to evaluate the possible acquisition, provided such Representatives
agree to keep the Information confidential; and except for such disclosure as
is required by applicable law. If this Agreement is terminated, Purchaser
will return to Sellers on demand all of the Information and all reports and
other information obtained by Purchaser from Sellers. The confidentiality
provisions of this Section shall survive termination of this Agreement.
9.15 References to Seller. Notwithstanding references to
"Sellers" collectively hereunder, Purchaser acknowledge that the obligations
of each "Seller" hereunder are independent and that each "Seller" only shall
be responsible for the specific Property it owns and no Seller shall be
liable for the actions or inactions of any other Seller.
9.16 Exculpation. This Agreement and all documents, agreements,
understandings and arrangements relating to this transaction have been
executed by the undersigned in his capacity as an officer or trustee of
Purchaser which has been formed as a Maryland real estate investment trust
pursuant to a Declaration of Trust of Kranzco Realty Trust, dated June 17,
1992, as amended and restated, and not individually, and none of the
trustees, officers or shareholders of Purchaser shall be bound or have any
personal liability hereunder or thereunder. Each party thereto shall look
solely to the assets of Purchaser for satisfaction of any liability of
Purchaser in respect to this Agreement and all documents, agreements,
understandings and arrangements relating to this transaction, and will not
seek recourse or commence and action against any of the trustees, officers or
shareholders of Purchaser or any of their personal assets for the performance
of payment of any obligation hereunder or thereunder. The foregoing shall
also apply to any future documents, agreements, understandings, arrangements
and transactions between the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has signed this Agreement
under seal.
SELLERS:
EUROPCO PROPERTY INVESTORS II, LTD., a Georgia
limited partnership
By: JAMESTOWN, a Georgia general partnership
By:________________________________
Name/Title
EUROPCO PROPERTY INVESTORS III, LTD., a Georgia
limited partnership
By: JAMESTOWN, a Georgia general partnership
By:________________________________
Name/Title
EUROPCO PROPERTY INVESTORS IV, LTD., a Georgia
limited partnership
By: JAMESTOWN, a Georgia general partnership
By:________________________________
Name/Title
SECURED PROPERTIES INVESTORS V, L.P., a Georgia
limited partnership
By: JAMESTOWN, a Georgia general partnership
By:________________________________
Name/Title
SECURED PROPERTIES INVESTORS VIII, L.P., a Georgia
limited partnership
By: JAMESTOWN, a Georgia general partnership
By:________________________________
Name/Title
SECURED PROPERTIES INVESTORS IX, L.P., a Georgia
limited partnership
By: JAMESTOWN, a Georgia general partnership
By:________________________________
Name/Title
TIFTON PARTNERS, L.P., a Georgia limited partnership
By: JAMESTOWN, a Georgia general partnership
By:________________________________
Name/Title
PURCHASER:
KRANZCO REALTY TRUST, a Maryland real estate
investment trust
By:___________________________________________
Norman M. Kranzdorf, President
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K of our report dated February 28, 1997 on the
financial statements of Kranzco Realty Trust and our report dated July 2,
1998 on the financial statements of the Southeast Acquisition Properties,
included in this Form 8-K, into the Company's previously filed Registration
Statements on Form S-3 (File Nos. 33-75554 and 33-72076) and on Form S-8
(File Nos. 33-56990 and 33-94294).
Philadelphia, Pa. /s/ ARTHUR ANDERSON LLP
July 17, 1998
