Securities Exchange Act of 1934 -- Form 10-Q
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended to
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Commission File Number 1-12494
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CBL & Associates Properties, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 62-1545718
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Park Place, 6148 Lee Highway, Chattanooga, TN 37421
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)(423) 855-0001
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(Former name, former address and former
fiscal year, if changed since last report)
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
----- -----
The number of shares outstanding of each of the registrants classes of
common stock, as of August 6, 1999 : Common Stock, par value $.01 per share,
24,710,702 Shares.
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<PAGE>
CBL & Associates Properties, Inc.
INDEX
PART I FINANCIAL INFORMATION PAGE NUMBER
-----------
ITEM 1: FINANCIAL INFORMATION 3
CONSOLIDATED BALANCE SHEETS - AS OF JUNE 30, 4
1999 AND DECEMBER 31, 1998
CONSOLIDATED STATEMENTS OF OPERATIONS - FOR 5
THE THREE MONTHS ENDED JUNE 30, 1999 AND
1998 AND FOR THE SIX MONTHS ENDED JUNE 30,
1999 AND 1998
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 6
THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2: MANAGEMENT'S DISCUSSION AND 10
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 22
ITEM 2: CHANGES IN SECURITIES 22
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 22
ITEM 4: SUBMISSION OF MATTERS TO HAVE A 22
VOTE OF SECURITY HOLDERS
ITEM 5: OTHER INFORMATION 22
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURE 23
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<PAGE>
CBL & Associates Properties, Inc.
ITEM 1 - FINANCIAL INFORMATION
The accompanying financial statements are unaudited; however, they have
been prepared in accordance with generally accepted accounting principles for
interim financial information and in conjunction with the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not include all
of the disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting solely of normal recurring matters) necessary for a fair
presentation of the financial statements for these interim periods have been
included. The results for the interim period ended June 30, 1999 are not
necessarily indicative of the results to be obtained for the full fiscal year.
These financial statements should be read in conjunction with the CBL &
Associates Properties, Inc. (the "Company") December 31, 1998 audited financial
statements and notes thereto included in the CBL & Associates Properties, Inc.
Form 10-K for the year ended December 31, 1998.
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<PAGE>
CBL & Associates Properties, Inc.
Consolidated Balance Sheets
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Real estate assets:
Land $ 266,693 $265,521
Buildings and improvements 1,632,677 1,609,831
--------- ---------
1,899,370 1,875,352
Less: Accumulated depreciation (201,786) (177,055)
--------- ---------
1,697,584 1,698,297
Developments in progress 165,743 107,491
--------- ---------
Net investment in real estate assets 1,863,327 1,805,788
Cash and cash equivalents 8,211 5,827
Receivables:
Tenant 16,100 17,337
Other 1,774 2,076
Mortgage notes receivable 9,644 9,118
Other assets 17,012 15,201
--------- ---------
$1,916,068 $1,855,347
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage and other notes payable $1,260,600 $1,208,204
Accounts payable and accrued liabilities 62,022 62,466
--------- ---------
Total liabilities 1,322,622 1,270,670
--------- ---------
Distributions and losses in excess of investment
in unconsolidated affiliates 4,806 855
--------- ---------
Minority interest 169,330 168,040
--------- ---------
Commitments and contingencies (Note 2)
Shareholders' Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
2,875,000 outstanding in 1999 and 1998 29 29
Common stock, $.01 par value, 95,000,000 shares authorized,
24,700,480 and 24,590,936 shares issued and outstanding
in 1999 and 1998, respectively 247 246
Additional paid - in capital 454,605 452,252
Accumulated deficit (35,207) (36,235)
Deferred compensation (364) (510)
--------- ---------
Total shareholders' equity 419,310 415,782
--------- ---------
$1,916,068 $1,855,347
========= =========
<FN>
The accompanying notes are an integral part of these balance sheets.
</FN>
</TABLE>
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<PAGE>
CBL & Associates Properties, Inc.
Consolidated Statements Of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rentals:
Minimum $ 48,690 $ 37,967 $ 96,552 $ 74,020
Percentage 1,670 1,154 4,902 2,829
Other 594 387 1,408 820
Tenant reimbursements 20,981 16,552 41,655 32,003
Management, development and leasing fees 969 723 2,009 1,419
Interest and other 1,287 616 2,213 1,364
-------- -------- -------- --------
Total revenues 74,191 57,399 148,739 112,455
-------- -------- -------- --------
EXPENSES:
Property operating 11,682 9,480 23,165 18,324
Depreciation and amortization 12,890 9,720 25,566 18,875
Real estate taxes 6,332 5,290 13,287 10,252
Maintenance and repairs 4,208 3,295 8,270 6,295
General and administrative 3,531 2,730 7,357 5,731
Interest 19,665 15,042 39,436 28,817
Other 146 3 888 9
-------- -------- -------- --------
Total expenses 58,454 45,560 117,969 88,303
-------- -------- -------- --------
Income from operations 15,737 11,839 30,770 24,152
Gain on sales of real estate assets 3,767 581 8,568 2,512
Equity in earnings of unconsolidated affiliates 806 431 1,741 1,168
Minority interest in earnings:
Operating partnership (5,457) (3,604) (12,115) (7,777)
Shopping center properties (297) (99) (662) (308)
-------- -------- -------- --------
Net income 14,556 9,148 28,302 19,747
Preferred dividends (1,617) -- (3,234) --
-------- -------- -------- --------
Net income available to common shareholders $ 12,939 $ 9,148 $ 25,068 19,747
======== ======== ======== ========
Basic per share data:
NET INCOME $ 0.53 $ 0.38 $ 1.02 $ 0.82
======== ======== ======== ========
Weighted average common shares 24,629 24,079 24,602 24,075
outstanding ======== ======== ======== ========
Diluted per share data:
NET INCOME $ 0.52 $ 0.38 $ 1.01 $ 0.81
======== ======== ======== ========
Weighted average common shares and 24,871 24,311 24,835 24,308
potential dilutive common shares ======== ======== ======== ========
outstanding
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
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<PAGE>
CBL & Associates Properties, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $28,302 $19,747
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in earnings 12,777 8,085
Depreciation 21,203 15,985
Amortization 4,997 3,452
Gain on sales of real estate assets (8,568) (2,512)
Equity in earnings of unconsolidated affiliates (1,741) (1,168)
Distributions from unconsolidated affiliates 8,595 2,182
Issuance of stock under incentive plan 36 265
Amortization of deferred compensation 249 222
Write-off of development projects 888 9
Distributions to minority investors (11,276) (8,754)
Changes in assets and liabilities -
Tenant and other receivables 1,539 (1,900)
Other assets (2,641) (2,127)
Accounts payable and accrued liabilities (1,606) 624
-------- --------
Net cash provided by operating activities 52,754 34,110
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction of real estate assets and land acquisition (76,717) (55,044)
Acquisition of real estate assets -- (184,661)
Capitalized interest (3,083) (2,467)
Other capital expenditures (8,610) (8,485)
Deposits in escrow -- 66,108
Proceeds from sales of real estate assets 14,249 6,316
Additions to mortgage notes receivable (1,360) (1,478)
Payments received on mortgage notes receivable 834 1,234
Advances and investments in unconsolidated affiliates (2,846) (643)
-------- --------
Net cash used in investing activities (77,533) (179,120)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other notes payable 126,463 189,663
Principal payments on mortgage and other notes payable (74,067) (89,147)
Additions to deferred financing costs (779) (700)
Proceeds from issuance of preferred stock -- 70,175
Proceeds from issuance of common stock 769 155
Proceeds from exercise of stock options 1,446 --
Dividends paid (26,669) (21,843)
-------- --------
Net cash provided by financing activities 27,163 148,303
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,384 3,293
CASH AND CASH EQUIVALENTS, beginning of period 5,827 3,124
-------- --------
CASH AND CASH EQUIVALENTS, end of period $8,211 $6,417
======== ========
Cash paid for interest, net of amounts capitalized $39,117 $27,751
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
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<PAGE>
CBL & Associates Properties, Inc.
Notes to Consolidated Financial Statements
Note 1 - Unconsolidated Affiliates
At June 30, 1999, the Company had investments in five partnerships all of
which are reflected using the equity method of accounting. Condensed combined
results of operations for the unconsolidated affiliates are presented as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Company's Share
Total For The For The
Six Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1999 1998 1999 1998
------- ------- ------ -------
<S> <C> <C> <C> <C>
Revenues $13,638 $11,251 $6,718 $5,526
------- ------- ------ ------
Depreciation and amortization 1,587 674 779 332
Interest expense 4,213 4,041 2,074 1,984
Other operating expenses 4,293 4,145 2,124 2,042
----- ----- ----- -----
Net income $3,545 $2,391 $1,741 $1,168
====== ====== ====== ======
</TABLE>
Note 2 - Contingencies
The Company is currently involved in certain litigation arising in the
ordinary course of business. In the opinion of management, the pending
litigation will not materially affect the financial statements of the Company.
Additionally, based on environmental studies completed to date on the real
estate properties, management believes any exposure related to environmental
cleanup will not be significant to the financial position and results of
operations of the Company.
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<PAGE>
Note 3 - Credit Agreements
The Company has credit facilities of $230 million of which $68.7 million is
available at June 30, 1999. Outstanding amounts under the credit facilities bear
interest at a weighted average interest rate of 6.25% at June 30, 1999. The
Company's variable rate debt as of June 30, 1999 was $499 million with a
weighted average interest rate of 6.40% as compared to 6.73% as of June 30,
1998. Through the execution of interest rate swap agreements, the Company has
fixed the interest rates on $314 million of variable rate debt on operating
properties at a weighted average interest rate of 6.55%. There were no fees
charged to the Company related to these swap agreements. Of the Company's
remaining variable rate debt of $185 million, interest rate caps are in place on
$100 million leaving $85 million of debt subject to variable rates. The
Company's variable rate debt is limited to construction properties with no debt
subject to variable rates on operating properties. The Company's swap agreements
in place at June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Swap Amount
(in millions) Fixed LIBOR Component Effective Date Expiration Date
------------- --------------------- -------------- ---------------
<S> <C> <C> <C>
$65 5.72% 01/07/98 01/07/2000
81 5.54% 02/04/98 02/04/2000
50 5.70% 06/15/98 06/15/2001
38 5.73% 06/26/98 06/30/2001
80 5.49% 09/01/98 09/01/2001
</TABLE>
At June 30, 1999, the Company had an interest rate cap of 7.5% on $100
million of LIBOR-based variable rate debt.
Note 4 - Segment Information
Management of the Company measures performance and allocates resources
according to property type, which are determined based on differences such as
nature of tenants, capital requirements, economic risks and leasing terms.
Rental income and tenant reimbursements from tenant leases provide the majority
of revenues from all segments. Information on management's reportable segments
is presented as follows (in thousands):
<TABLE>
<CAPTION>
Associated Community
Three Months Ended June 30, 1999 Malls Centers Centers All Other Total
- ------------------------------------- ----- ------- ------- --------- -----
<S> <C> <C> <C> <C> <C>
Revenues $ 54,403 $3,009 $14,594 $ 2,185 $ 74,191
Property operating expenses (1) (19,305) (484) (2,558) 125 (22,222)
Interest expense (14,970) (647) (3,032) (1,016) (19,665)
Gain on sales of real estate assets - - - 3,767 3,767
-------- ------- ------- ------- --------
Segment profit and loss 20,128 1,878 9,004 5,061 36,071
======== ======= ======= =======
Depreciation and amortization (12,890)
General and administrative and other (3,677)
Equity in earnings and minority
interest adjustment (4,948)
--------
Net income $14,556
========
Capital expenditures (2) $ 7,875 $ 535 $6,568 $34,541 $49,519
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Associated Community
Three Months Ended June 30, 1998 Malls Centers Centers All Other Total
- ------------------------------------- ----- ------- ------- --------- -----
<S> <C> <C> <C> <C> <C>
Revenues $ 40,596 $2,215 $13,096 $ 1,492 $ 57,399
Property operating expenses (1) (15,015) (804) (5,230) 2,984 (18,065)
Interest expense (10,539) (330) (3,054) (1,119) (15,042)
Gain on sales of real estate assets 216 - - 365 581
-------- ------- ------- ------- --------
Segment profit and loss 15,258 1,081 4,812 3,722 24,873
======== ======= ======= =======
Depreciation and amortization (9,720)
General and administrative and other (2,733)
Equity in earnings and minority
interest adjustment (3,272)
--------
Net income $ 9,148
========
Capital expenditures (2) $49,358 $3,948 $10,173 $13,870 $77,349
</TABLE>
<TABLE>
<CAPTION>
Associated Community
Six Months Ended June 30, 1999 Malls Centers Centers All Other Total
- ------------------------------------- ----- ------- ------- --------- -----
<S> <C> <C> <C> <C> <C>
Revenues $110,015 $5,914 $28,631 $4,179 $148,739
Property operating expenses (1) (38,587) (963) (3,046) (2,126) (44,722)
Interest expense (29,548) (1,274) (5,813) (2,801) (39,436)
Gain on sales of real estate assets 381 - 404 7,783 8,568
-------- ------- ------- ------- --------
Segment profit and loss 42,261 3,677 20,176 7,035 73,149
======== ======= ======= =======
Depreciation and amortization (25,566)
General and administrative and other (8,245)
Equity in earnings and minority
interest adjustment (11,036)
--------
Net income $28,302
========
Total assets (2) $1,241,259 $82,462 $427,554 $164,793 $1,916,068
Capital expenditures (2) $11,357 $2,209 $8,753 $59,951 $82,270
</TABLE>
<TABLE>
<CAPTION>
Associated Community
Six Months Ended June 30, 1998 Malls Centers Centers All Other Total
- ------------------------------------- ----- ------- ------- --------- -----
<S> <C> <C> <C> <C> <C>
Revenues $79,174 $4,391 $26,192 $2,698 $112,455
Property operating expenses (1) (28,131) (804) (5,230) (706) (34,871)
Interest expense (20,238) (689) (5,990) (1,900) (28,817)
Gain on sales of real estate assets 216 - - 2,296 2,512
-------- ------- ------- ------- --------
Segment profit and loss 31,021 2,898 14,972 2,388 51,279
======== ======= ======= =======
Depreciation and amortization (18,875)
General and administrative and other (5,740)
Equity in earnings and minority
interest adjustment (6,917)
--------
Net income $19,747
========
Total assets (2) $871,671 $66,627 $397,429 $77,332 $1,413,059
Capital expenditures (2) $201,725 $6,045 $15,358 $21,706 $244,834
<FN>
(1) Property operating expenses includes property operating expenses,
real estate taxes, and maintenance and repairs.
(2) Developments in progress are included in the "All Other" category.
</FN>
</TABLE>
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<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with CBL & Associates
Properties, Inc. Consolidated Financial Statements and Notes thereto.
Information included herein contains "forward-looking statements" within
the meaning of the federal securities laws. Such statements are inherently
subject to risks and uncertainties, many of which cannot be predicted with
accuracy and some of which might not even be anticipated. Future events and
actual results, financial and otherwise, may differ materially from the events
and results discussed in the forward-looking statements. We direct you to the
Company's other filings with the Securities and Exchange Commission, including
without limitation the Company's Annual Report on Form 10-K and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference therein, for a discussion of such risks
and uncertainties.
GENERAL BACKGROUND
CBL & Associates Properties, Inc. (the "Company") Consolidated Financial
Statements and Notes thereto reflect the consolidated financial results of CBL &
Associates Limited Partnership (the "Operating Partnership") which includes at
June 30, 1999, the operations of a portfolio of properties consisting of
twenty-four regional malls, thirteen associated centers, eighty-two community
centers, an office building, joint venture investments in four regional malls
and one associated center, and income from six mortgages (the "Properties"). The
Operating Partnership also has one mall, one associated center, three community
centers and two expansions currently under construction and options to acquire
certain shopping center development sites. The consolidated financial statements
also include the accounts of CBL & Associates Management, Inc. (the "Management
Company").
The Company classifies its regional malls into two categories - malls which
have completed their initial lease-up ("Stabilized Malls") and malls which are
in their initial lease-up phase ("New Malls"). The New Mall category is
presently comprised of a redevelopment project Springdale Mall in Mobile,
Alabama, the recently opened Bonita Lakes Mall in Meridian, Mississippi and
Parkway Place Mall in Huntsville, Alabama which was acquired in December 1998
and is being redeveloped in a joint venture with a third party.
In July 1999, the Company acquired York Galleria in York, Pennsylvania. The
purchase price of $68.5 million was funded from a mortgage loan in the amount of
$51.1 million and $30 million in proceeds from the Company's disposition of two
department stores, and two free-standing community centers. The balance of the
proceeds from the dispositions of $12.6 million were used to pay down the
Company's credit lines.
The State of Tennessee has recently enacted legislation that would extend
franchise and excise taxes to limited partnerships for tax years ending in 2000.
The Company's has not determined the impact of the new legislation on its
operations in Tennessee.
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<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
RESULTS OF OPERATIONS
Operational highlights for the three monthsand six months ended June 30,
1999 as compared to June 30, 1998 are as follows:
SALES
Mall shop sales, for those tenants who have reported, in the twenty-five
Stabilized Malls in the Company's portfolio increased by 5.0% on a comparable
per square foot basis.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Sales per square foot $120.91 $115.15
</TABLE>
Total sales volume in the mall portfolio, including New Malls, increased
6.2% to $670.7 million for the six months ended June 30, 1999 from $631.6
million for the six months ended June 30, 1998.
Occupancy costs as a percentage of sales for the six months ended June 30,
1999 and 1998 for the Stabilized Malls were 13.2% and 12.9%, respectively.
Occupancy costs were 11.2%, 11.2% and 11.5% for the years ended December 31,
1998, 1997, and 1996, respectively. Occupancy costs as a percentage of sales are
generally higher in the first three quarters of the year as compared to the
fourth quarter due to the seasonality of retail sales.
OCCUPANCY
Occupancy for the Company's overall portfolio was as follows:
<TABLE>
<CAPTION>
At June 30,
-----------------------
1999 1998
---- ----
<S> <C> <C>
Stabilized malls 92.0% 91.9%
New malls 82.8 90.5
Associated centers 91.7 88.8
Community centers 96.6 97.6
----- -----
Total Portfolio 93.5% 94.2%
----- -----
</TABLE>
Occupancy in the new mall category has been affected by the inclusion of
two properties that are being redeveloped Parkway Place in Huntsville, Alabama
and Springdale Mall in Mobile, Alabama. Excluding Parkway Place and Springdale,
new mall occupancy at the end of the quarter would have been 98.8% and total
portfolio occupancy would have been 94.1%.
-11-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
AVERAGE BASE RENT
Average base rents for the Company's three portfolio categories were as
follows:
<TABLE>
<CAPTION>
At June 30,
-----------------------
1999 1998
---- ----
<S> <C> <C>
Malls $19.95 $19.01
Associated centers 9.61 9.62
Community centers 8.10 8.00
</TABLE>
LEASE ROLLOVERS
On spaces previously occupied, the Company achieved the following results
from rollover leasing for the six months ended June 30, 1999 compared to the
base and percentage rent previously paid:
<TABLE>
<CAPTION>
Per Square Per Square
Foot Rent Foot Rent Percentage
Prior Lease (1) New Lease (2) Increase
--------------- ------------- ----------
<S> <C> <C> <C>
Malls $22.51 $26.25 16.6%
Associated centers 7.75 8.76 13.0%
Community centers 7.87 8.15 3.6%
<FN>
(1) - Rental achieved for spaces previously occupied at the end of the lease
including percentage rent.
(2) - Average base rent over the term of the lease.
</FN>
</TABLE>
For the six months ended June 30, 1999, malls represented 76.1% of total
revenues from all properties; revenues from associated centers represented 3.9%;
revenues from community centers represented 17.9%; and revenues from mortgages
and the office building represented 2.1%. Accordingly, revenues and results of
operations are disproportionately impacted by the malls' achievements.
The shopping center business is somewhat seasonal in nature with tenant
sales achieving the highest levels during the fourth quarter because of the
holiday season. The malls earn most of their "temporary" rents (rents from
short-term tenants) during the holiday period. Thus, occupancy levels and
revenue production are generally the highest in the fourth quarter of each year.
Results of operations realized in any one quarter may not be indicative of the
results likely to be experienced over the course of the fiscal year.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999 TO
THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998
Total revenues for the three months ended June 30, 1999 increased by $16.8
million, or 29.3%, to $74.2 million as compared to $57.4 million in 1998.
Minimum rents increased by $10.7 million, or 28.2%, to $48.7 million as compared
to $38.0 million in 1998, and tenant reimbursements increased by $4.4 million,
or 26.8%, to $21.0 million in 1999 as compared to $16.6 million in 1998.
Percentage rents increased by $0.5 million, or 44.7%, to $1.7 million as
compared to $1.2 million in 1998.
-12-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
Management, leasing and development fees increased by $0.2 million, or
34.0%, to $1.0 million as compared to $0.7 million in 1998. This increase is
primarily due to increases in fees earned in the co-development program and
increases in management fees.
Approximately $13.8 million of the increase in revenues resulted from
operations at the eleven new centers opened or acquired during the past eighteen
months. These centers consist of:
<TABLE>
<CAPTION>
Opening/
Project Name Location Total GLA Type of Addition Acquisition Date
- ------------ -------- --------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sterling Creek Commons Portsmouth, Virginia 65,000 New Development June 1998
Stroud Mall Stroudsburg, Pennsylvania 427,000 Acquisition April 1998
Hickory Hollow Mall Nashville, Tennessee 1,096,000 Acquisition July 1998
Courtyard at Hickory Hollow Nashville, Tennessee 77,000 Acquisition July 1998
Rivergate Mall Nashville, Tennessee 1,074,000 Acquisition July 1998
Village at Rivergate Nashville, Tennessee 166,000 Acquisition July 1998
Lions Head Village Nashville, Tennessee 93,000 Acquisition July 1998
Janesville Mall Janesville, Wisconsin 609,000 Acquisition August 1998
Meridian Mall Lansing, Michigan 767,000 Acquisition August 1998
Fiddler's Run Morganton, North Carolina 203,000 New Development March 1999
Sand Lake Corners Orlando, Florida 559,000 New Development June/July 1999
</TABLE>
Approximately $3.0 million of the increase in revenues resulted from
improved operations and occupancies in the existing centers. The majority of
these increases were generated at Cortlandt Towne Center in Cortlandt, New York
and St. Clair Square in Fairview Heights, Illinois.
Property operating expenses, including real estate taxes and maintenance
and repairs increased in the second quarter of 1999 by $4.2 million or 23.0% to
$22.2 million as compared to $18.1 million in the second quarter of 1998. This
increase is primarily the result of the addition of the eleven new centers
referred to above.
Depreciation and amortization increased in the second quarter of 1999 by
$3.2 million or 32.6% to $12.9 million as compared to $9.7 million in the second
quarter of 1998. This increase is primarily due to the addition of the eleven
new centers referred to above.
Interest expense increased in the second quarter of 1999 by $4.6 million,
or 30.7% to $19.7 million as compared to $15.0 million in 1998. This increase is
primarily due to the additional interest on the eleven centers added during the
last eighteen months referred to above.
The gain on sales of real estate assets increased in the second quarter of
1999 by $3.2 million, to $3.8 million as compared to $0.5 million in 1998. The
majority of gain on sales in the second quarter of 1999 were from anchor pad
sales at the development project Chesterfield Crossing in Richmond, Virginia and
outparcel sales at The Landing at Arbor Place in Douglasville, Georgia.
Equity in earnings of unconsolidated affiliates increased in the second
quarter of 1999 by $0.4 million to $0.8 million from $0.4 million in the second
quarter of 1998 primarily due to the acquisition of a 50% interest in Parkway
Place in Huntsville, Alabama.
-13-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 TO
THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998
Total revenues for the six months ended June 30, 1999 increased by $36.3
million, or 32.3%, to $148.7 million as compared to $112.5 million in 1998. Of
this increase, minimum rents increased by $22.5 million, or 30.4%, to $96.6
million as compared to $74.0 million in 1998, and tenant reimbursements
increased by $9.7 million, or 30.2%, to $41.7 million in 1999 as compared to
$32.0 million in 1998.
Improved occupancies and operations and increased rents in the Company's
operating portfolio generated $6.5 million of increased revenues. The majority
of these increases were generated at Cortlandt Towne Center in Cortlandt, New
York and St. Clair Square in Fairview Heights, Illinois. New revenues of $29.8
resulted from operations at the twelve new centers opened or acquired during the
past eighteen months. These centers are as follows:
<TABLE>
<CAPTION>
Opening/
Project Name Location Total GLA Type of Addition Acquisition Date
- ------------ -------- --------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sterling Creek Commons Portsmouth, Virginia 65,000 New Development June 1998
Burnsville Center Minneapolis (Burnsville), 1,070,000 Acquisition February 1998
Minnesota
Stroud Mall Stroudsburg, Pennsylvania 427,000 Acquisition April 1998
Hickory Hollow Mall Nashville, Tennessee 1,096,000 Acquisition July 1998
Courtyard at Hickory Hollow Nashville, Tennessee 77,000 Acquisition July 1998
Rivergate Mall Nashville, Tennessee 1,074,000 Acquisition July 1998
Village at Rivergate Nashville, Tennessee 166,000 Acquisition July 1998
Lions Head Village Nashville, Tennessee 93,000 Acquisition July 1998
Janesville Mall Janesville, Wisconsin 609,000 Acquisition August 1998
Meridian Mall Lansing, Michigan 767,000 Acquisition August 1998
Fiddler's Run Morganton, North Carolina 203,000 New Development March 1999
Sand Lake Corners Orlando, Florida 559,000 New Development June/July 1999
</TABLE>
Management, leasing and development fees increased by $0.6 million to $2.0
million in the first six months of 1999 as compared to $1.4 million in 1998.
This increase was primarily due to fees earned in the Company's co-development
program and increases in management fees on managed properties.
Property operating expenses, including real estate taxes and maintenance
and repairs, increased in the first six months of 1999 by $9.9 million, or
28.2%, to $44.7 million as compared to $34.9 million in 1998. This increase is
primarily the result of the addition of the twelve new centers referred to
above.
Depreciation and amortization increased in the first six months of 1999 by
$6.7 million, or 35.4%, to $25.6 million as compared to $18.9 million in 1998.
This increase is primarily the result of the addition of the twelve new centers
referred to above.
-14-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
Interest expense increased in the first six months of 1999 by $10.6
million, or 36.8%, to $39.4 million as compared to $28.8 million in 1998. This
increase is primarily the result of interest on debt related to the addition of
the twelve new centers referred to above. The gain on sales of real estate
assets increased for the six months ended June 30, 1999 by $6.1 million to $8.6
million as compared to $2.5 million in 1998. Gain on sales in the first six
months of 1999 was in connection with outparcel sales at the Company's
development in Sand Lake Corners in Orlando, Florida and The Landing at Arbor
Place in Douglasville, Georgia and anchor pad sales at Chesterfield Crossing in
Richmond, Virginia which is now under construction. The gain on sales in the
first six months of 1998 were for outparcel sales at the Company's developments
in Springhurst Towne Center in Louisville, Kentucky and Sterling Creek Commons
in Portsmouth, Virginia.
Equity in earnings of unconsolidated affiliates increased in the first six
months of 1999 by $0.6 million to $1.7 million from $1.2 million in the first
six months of 1998 primarily due to the acquisition of a 50% interest in Parkway
Place in Huntsville, Alabama and improved operations at existing equity centers.
LIQUIDITY AND CAPITAL RESOURCES
The principal uses of the Company's liquidity and capital resources have
historically been for property development, expansion and renovation programs,
acquisitions and debt repayment. To maintain its qualification as a real estate
investment trust under the Internal Revenue Code, the Company is required to
distribute to its shareholders at least 95% of its "Real Estate Investment Trust
Taxable Income" as defined in the Internal Revenue Code of 1986, as amended (the
"Code").
As of August 1, 1999, the Company had $55.0 million available in unfunded
construction and redevelopment loans to be used for completion of the
construction and redevelopment projects and replenishment of working capital
previously used for construction. Additionally, as of August 1, 1999, the
Company had obtained revolving credit lines and term loans totaling $230.0
million of which $51.2 million was available. As a publicly traded company, the
Company has access to capital through both the public equity and debt markets.
The Company has filed a Shelf Registration authorizing shares of the Company's
preferred stock and common stock and warrants to purchase shares of the
Company's common stock with an aggregate public offering price of up to $350
million with $278 million remaining after the Company's preferred stock offering
on June 30, 1998. The Company anticipates that the combination of these sources
will, for the foreseeable future, provide adequate liquidity to enable it to
continue its capital programs substantially as in the past and make
distributions to its shareholders in accordance with the Code's requirements
applicable to real estate investment trusts.
Management expects to refinance the majority of the mortgage notes payable
maturing over the next five years with replacement loans.
-15-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The Company's policy is to maintain a conservative debt to total market
capitalization ratio in order to enhance its access to the broadest range of
capital markets, both public and private. The Company's current capital
structure includes property specific mortgages, which are generally
non-recourse, revolving lines of credit, common stock, preferred stock and a
minority interest in the Operating Partnership. The minority interest in the
Operating Partnership represents the 25.7% ownership interest in the Operating
Partnership held by the Company's executive and senior officers which may be
exchanged for approximately 9.4 million shares of common stock. Additionally,
Company executive officers and directors own approximately 1.7 million shares of
the outstanding common stock of the Company, for a combined total interest in
the Operating Partnership of approximately 30.4%. Ownership interests issued to
fund acquisitions in 1998 may be exchanged for approximately 2.4 million shares
of common stock which represents a 6.5% interest in the Operating Partnership.
Assuming the exchange of all limited partnership interests in the Operating
Partnership for common stock, there would be outstanding approximately 36.6
million shares of common stock with a market value of approximately $965.4
million at June 30, 1999 (based on the closing price of $26.375 per share on
June 30, 1999). The Company's total market equity is $1.036 billion which
includes 2.9 million shares of preferred stock at the closing price of $24.625
per share on June 30, 1999. Company executive and senior officers' ownership
interests had a market value of approximately $258.6 million at June 30, 1999.
Mortgage debt consists of debt on certain consolidated properties as well
as on three properties in which the Company owns a non-controlling interest and
is accounted for under the equity method of accounting. At June 30, 1999, the
Company's share of funded mortgage debt on its consolidated properties adjusted
for minority investors' interests in nine properties was $1.239 billion and its
pro rata share of mortgage debt on unconsolidated properties (accounted for
under the equity method) was $45.9 million for total debt obligations of $1.285
billion with a weighted average interest rate of 7.02%.
The Company's total conventional fixed rate debt as of June 30, 1999 was
$785.5 million with a weighted average interest rate of 7.41% as compared to
8.07% as of June 30, 1998.
The Company's variable rate debt as of June 30, 1999 was $499.0 million
with a weighted average interest rate of 6.39% as compared to 6.73% as of June
30, 1998. Through the execution of swap agreements, the Company has fixed the
interest rates on $314 million of debt on operating properties at a weighted
average interest rate of 6.55%. Of the Company's remaining variable rate debt of
$185.0 million, an interest rate cap in place of $100.0 million leaves only
$85.0 million of debt subject to variable rates. Interest on this $85.0 million
of variable rate debt is capitalized to projects currently under construction
leaving no variable rate debt exposure on operating properties as of June 30,
1999. There were no fees charged to the Company related to its swap agreements.
The Company's swap and cap agreements in place at June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Swap /Cap Amount
(in millions) Fixed LIBOR Component Effective Date Expiration Date
------------- --------------------- -------------- ---------------
<S> <C> <C> <C>
$65 5.72% 01/07/98 01/07/2000
81 5.54% 02/04/98 02/04/2000
50 5.70% 06/15/98 06/15/2001
38 5.73% 06/26/98 06/26/2001
80 5.49% 09/01/98 09/01/2001
100 7.50% 01/01/99 01/05/2000
</TABLE>
Based on the debt (including construction projects) and the market value of
equity described above, the Company's debt to total market capitalization (debt
plus market value equity) ratio was 55.4% at June 30, 1999.
-16-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
DEVELOPMENT, EXPANSIONS AND ACQUISITIONS
Development projects under construction and scheduled to open during 1999
are: Arbor Place Mall in Douglasville, Georgia, a suburb of Atlanta, is
scheduled to open in October 1999. This 1,035,000-square-foot regional mall
includes Dillard's, Parisian and Sears and big-box retailers such as Border's
Books, Bed Bath & Beyond and Old Navy. The Company developed and has sold a
Regal Cinema in Jacksonville, Florida, a 83,000-square-foot free-standing
building, which will open in November 1999.
The Company also has under construction Chesterfield Crossing in Richmond,
Virginia, a 441,000-square-foot community center, Coastal Way in Spring Hill,
Florida a 233,000-square-foot community center and a 28,000-square-foot
expansion of Sutton Plaza in Mt. Olive, New Jersey. The Company currently has
under development The Mall of South Carolina in Myrtle Beach, South Carolina, a
1,095,000-square-foot regional mall and Parkway Place in Huntsville, Alabama, a
822,000-square-foot redevelopment that was acquired in December 1998. Both of
these mall projects depend on the Company's ability to obtain tax increment
financing and other governmental approvals.
In March 1999, the Company opened Fiddler's Run in Morganton, North
Carolina, a 203,000-square-foot community center. The center opened 100% leased
and committed. In July 1999, the Company opened a new Sears department store
addition at Lakeshore Mall in Sebring, Florida and in August 1999 the balance of
phase I of Sand Lake Corners in Orlando, Florida, a 594,000-square-foot
community center. A 38,000-square-foot second phase of Sand Lake Corners will
open in February 2000. In August 1999 the Company opened The Landing at Arbor
Place in Douglasville, Georgia a 165,000-square-foot associated center adjacent
to Arbor Place Mall.
The Company has entered into standby purchase agreements with third-party
developers (the "Developers") for the construction, development and potential
ownership of community centers in Georgia and Texas (the "Co-Development
Projects"). The Developers have utilized these standby purchase agreements to
assist in obtaining financing to fund the construction of the Co-Development
Projects. The standby purchase agreements, which expire in 1999 and 2000,
provide for certain requirements or contingencies to occur before the Company
becomes obligated to fund its equity contribution or purchase the Co-Development
Project. These requirements or contingencies include certain completion
requirements, rental levels, the inability of the Developers to obtain adequate
permanent financing and the inability to sell the Co-Development Project. In
return for its commitment to purchase a Co-Development Project pursuant to a
standby purchase agreement, the Company receives a fee as well as a
participation interest in either the cash flow or gains from sale on each
Co-Development Project. The outstanding amount on standby purchase agreements
was $116.4 million at June 30, 1999. Subsequent to the end of the quarter in
August 1999 the Company was released from a commitment of $43.1 million. The
Company received a fee for this release.
The Company has entered into a number of option agreements for the
development of future regional malls and community centers. Except for these
projects and as further described below, the Company currently has no other
material capital commitments.
It is management's expectation that the Company will continue to have
access to the capital resources necessary to expand and develop its business.
Future development and acquisition activities will be undertaken by the Company
as suitable opportunities arise. Such activities are not expected to be
undertaken unless adequate sources of financing are available and a satisfactory
budget with targeted returns on investment has been internally approved. The
Company will fund its major development, expansion and acquisition activities
with its traditional sources of construction and permanent debt financing as
well as from other debt and equity financings, including public financings, and
its credit facilities in a manner consistent with its intention to operate with
a conservative debt to total market capitalization ratio.
-17-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
OTHER CAPITAL EXPENDITURES
Management prepares an annual capital expenditure budget for each property
which is intended to provide for all necessary recurring and non-recurring
capital improvements. Management believes that its annual operating reserve for
maintenance and recurring capital improvements and reimbursements from tenants
will provide the necessary funding for such requirements. The Company intends to
distribute approximately 60% - 90% of its funds from operations with the
remaining 10% - 40% to be held as a reserve for capital expenditures and
continued growth opportunities. The Company believes that this reserve will be
sufficient to cover (I) tenant finish costs associated with the renewal or
replacement of current tenant leases as their leases expire and (II) capital
expenditures which will not be reimbursed by tenants.
Major tenant finish costs for currently vacant space are expected to be
funded with working capital, operating reserves, or the revolving lines of
credit, and a return on the funds so invested is expected to be earned.
For the first six months of 1999, revenue generating capital expenditures
or tenant allowances for improvements were $5.9 million. These capital
expenditures generate increased rents from these tenants over the term of their
leases. Revenue neutral capital expenditures, which are recovered from the
tenants, were $2.5 million for the first six months of 1999. Revenue enhancing
capital expenditures, or remodeling and renovation costs, were $4.6 million for
the six months ended June 30, 1999.
The Company believes that the Properties are in compliance in all material
respects with all federal, state and local ordinances and regulations regarding
the handling, discharge and emission of hazardous or toxic substances. However,
certain environmental conditions are being evaluated at Parkway Place in
Huntsville, Alabama. There appears to be a high potential for adverse
environmental conditions, specifically Total Petroleum Hydrocarbons, in the
vicinity of an auto service center which had underground storage tanks. The
Company ordered additional engineering studies and as part of the redevelopment
will correct the environmental conditions at the site. The Company has not been
notified by any governmental authority, and is not otherwise aware, of any
material noncompliance, liability or claim relating to hazardous or toxic
substances in connection with any of its present or former properties. The
Company has not recorded in its financial statements any material liability in
connection with environmental matters.
CASH FLOWS
Cash flows provided by operating activities for the first six months of
1999, increased by $18.0 million, or 52.7%, to $52.1 million from $34.1 million
in 1998. This increase was primarily due to the twelve centers opened or
acquired over the last eighteen months and improved operations in the existing
centers. Cash flows used in investing activities for the first six months of
-18-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
1999 decreased by $102.3 million, to $76.9 million compared to $179.1 million in
1998. This decrease was due primarily to a decrease in acquisitions as compared
to the $184.7 million of acquisitions in 1998. Cash flows provided by financing
activities for the first six months of 1999 decreased by $121.1 million, to
$27.2 million compared to $148.3 million in 1998 primarily due to decreased
borrowings related to the development and acquisition program.
IMPACT OF INFLATION
In the last three years, inflation has not had a significant impact on the
Company because of the relatively low inflation rate. Substantially all tenant
leases do, however, contain provisions designed to protect the Company from the
impact of inflation. Such provisions include clauses enabling the Company to
receive percentage rentals based on tenant's gross sales, which generally
increase as prices rise, and/or escalation clauses, which generally increase
rental rates during the terms of the leases. In addition, many of the leases are
for terms of less than ten years which may enable the Company to replace
existing leases with new leases at higher base and/or percentage rentals if
rents of the existing leases are below the then- existing market rate. Most of
the leases require the tenants to pay their share of operating expenses,
including common area maintenance, real estate taxes and insurance, thereby
reducing the Company's exposure to increases in costs and operating expenses
resulting from inflation.
YEAR 2000
The Year 2000 problem results from the use of a two digit year date instead
of a four digit date in the programs that operate computers, information
processing technology and systems and other devices (i.e. non-information
processing systems such as elevators, utility monitoring systems and time clocks
that use computer chips). Systems with a Year 2000 problem have programs that
were written to assume that the first two digits for any date used in the
program would always be "19". Unless corrected, this assumption may result in
computer programs misinterpreting the date January 1, 2000 as January 1, 1900.
This could cause systems to incorrectly process critical financial and
operational information, generate erroneous information or fail altogether.
THE COMPANY'S STATE OF READINESS FOR YEAR 2000 - The Company has completed
a program to identify both its information and non-information processing
applications that are not year 2000 compliant. As a result of this
identification program, the Company believes that its core accounting
applications and the majority of non-information processing applications are
Year 2000 compliant. Certain of its other information and non-information
processing applications were not yet Year 2000 compliant. The Company corrected
or replaced all non-compliant systems and applications including embedded
systems, by the end of 1998. The Company has completed communications with its
significant suppliers and tenants to determine the extent to which the Company
is vulnerable to the failure of such parties to correct their Year 2000
compliance issues. In addition, the Company has formed a Year 2000 Compliance
Team that includes senior personnel from the financial, leasing, accounting,
management information systems and operations management divisions of the
Company. These individuals are charged with the duty of determining the extent
of the Company's ongoing exposure and taking the appropriate action to minimize
any impact of the Year 2000 problem on the Company's operations.
COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUE - The Company does not
expect to incur any significant costs to ensure the Year 2000 compliance of all
information processing systems and non-information processing systems including
embedded systems.
-19-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
RISKS RELATING TO THE YEAR 2000 ISSUE AND CONTINGENCY PLANS - Although the
Company is not currently aware of any specific significant Year 2000 problems
involving third party vendors or suppliers, the Company believes that its most
significant potential risk relating to the Year 2000 issue is in regard to such
third parties. For example, the Company believes there could be failure in the
information systems of certain service providers that the Company relies upon
for electrical, telephone and data transmission and banking services. The
Company believes that any service disruption with respect to these providers due
to a Year 2000 issue would be of a short-term nature. The Company has existing
back-up systems and procedures, developed primarily for natural disasters, that
could be utilized on a short-term basis to address any service interruptions. In
addition, with respect to tenants, a failure of their information systems could
delay the payment of rents or even impair their ability to operate. These tenant
problems are likely to be isolated and would likely not impact the operations of
any particular shopping center or the Company as a whole. While it is not
possible at this time to determine the likely impact of any of these potential
problems, the Company will continue to evaluate these areas and develop
additional contingency plans, as appropriate. Therefore, although the Company
believes that its Year 2000 issues have been addressed and that suitable
remediation and/or contingency procedures will be in place by December 31, 1999,
there can be no assurance that Year 2000 issues will not have a material adverse
effect on the Company's results of operations or financial condition.
FUNDS FROM OPERATIONS
Management believes that Funds from Operations ("FFO") provides an
additional indicator of the financial performance of the Properties. FFO is
defined by the Company as net income (loss) before depreciation of real estate
assets, other non-cash items (including the write-off of development projects
not being pursued) gains or losses on sales of real estate and gains or losses
on investments in marketable securities. FFO also includes the Company's share
of FFO in unconsolidated properties and excludes minority interests' share of
FFO in consolidated properties. The Company computes FFO in accordance with the
National Association of Real Estate Investments Trusts ("NAREIT") recommendation
concerning finance costs and non-real estate depreciation. Beginning with the
first quarter of 1998 the Company included straight line rent in its FFO
calculation. The Company excludes gains or losses on outparcel sales, even
though NAREIT permits their inclusion when calculating FFO. Gains or losses on
outparcel sales would have added $3.8 million in the second quarter of 1999 as
compared to $0.6 million in 1998 and in the six months ended June 30, 1999 would
have added $8.6 million compared to $2.5 million in 1998.
The use of FFO as an indicator of financial performance is influenced not
only by the operations of the Properties, but also by the capital structure of
the Operating Partnership and the Company. Accordingly, management expects that
FFO will be one of the significant factors considered by the Board of Directors
in determining the amount of cash distributions the Operating Partnership will
make to its partners (including the REIT). FFO does not represent cash flow from
operations as defined by GAAP and is not necessarily indicative of cash
available to fund all cash flow needs and should not be considered as an
alternative to net income(loss) for purposes of evaluating the Company's
operating performance or to cash flow as a measure of liquidity.
-20-
<PAGE>
CBL & Associates Properties, Inc.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
For the three months ended June 30, 1999, FFO increased by $5.7 million, or
26.2%, to $27.6 million as compared to $21.9 million for the same period in
1998. For the six months ended June 30, 1999, FFO increased by $11.0 million, or
25.1%, to $54.9 million as compared to $43.9 million for the same period in
1998. The increases in FFO for both periods was primarily attributable to the
new developments opened during 1998 and in the first six months of 1999, the
acquisitions during 1998 and improved operations in the existing portfolio.
The Company's calculation of FFO is as follows: (in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income from operations $15,737 $11,839 $30,770 $24,152
ADD:
Depreciation & amortization from consolidated
properties 12,890 9,720 25,566 18,875
Income from operations of
unconsolidated affiliates 806 431 1,741 1,168
Depreciation & amortization from
unconsolidated affiliates 430 354 820 700
Write-off of development costs
charged to net income 146 3 888 9
SUBTRACT:
Preferred dividend (1,617) -- (3,234) --
Minority investors' share of
income from operations in
nine properties (297) (99) (662) (308)
Minority investors share of
depreciation and amortization
in nine properties (226) (227) (458) (433)
Depreciation and amortization of
non-real estate assets and finance costs (265) (149) (517) (278)
---- ---- ---- ----
TOTAL FUNDS FROM OPERATIONS $27,604 $21,872 $54,914 $43,885
======= ======= ======= =======
</TABLE>
-21-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matter to a Vote of Security Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
A. Exhibits
25.2 Promissory Note with Wells Fargo Bank National
Associates and Parham Road Limited Partnership
(York Galleria) Dated July 1, 1999
25.3 Agreement of Purchase and Sale By and Beween YGL
Partners and CBL & Associates Limited Partnership
assigned to Parham Road Limited Partnership (York
Galleria) Dated February 2, 1999
.
27 Financial Data Schedule
B. Reports on Form 8-K
The following items were reported:
The outline from the Company's July 29, 1999 conference
call with analysts and investors regarding earnings (Item
5) was filed on July 29, 1999.
-22-
<PAGE>
SIGNATURE
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 thereunto duly authorized.
CBL & ASSOCIATES PROPERTIES, INC.
/s/ John N. Foy
---------------------------
John N. Foy
Vice Chairman of the Board, Chief Financial Officer and
Treasurer
(Authorized Officer of the Registrant,
Principal Financial Officer and
Principal Accounting Officer)
Date: August 13, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
No.
-------
25.2 Promissory Note with Wells Fargo Bank National Associates and
Parham Road Limited Partnership (York Galleria) Dated July 1, 1999
25.3 Agreement of Purchase and Sale By and Between YGL Partners and
CBL & Associates Limited Partnership assigned to Parham Road
Limited Partnership (York Galleria) Dated February 2, 1999
27 Financial Data Schedule
------------
Initialed for
Identification
PROMISSORY NOTE
$51,100,000.00 July ___, 1999
FOR VALUE RECEIVED, the undersigned, PARHAM LIMITED PARTNERSHIP, a
Virginia limited partnership (hereinafter called "Maker"), promises to pay to
the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
association, (hereinafter, together with all subsequent holders of this Note,
called "Payee") on or before the _____ day of September, 1999 (the "Maturity
Date"), as hereinafter provided, the principal sum of FIFTY-ONE MILLION ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($51,100,000.00), or so much thereof as may
actually be advanced from time to time, together with interest on the unpaid
principal balance from time to time outstanding at the rate per annum equal to
the "Base Rate" of interest as it fluctuates; provided, however, subject to the
limitations stated herein, the Maker may elect in accordance with the procedures
set forth below to have interest accrue and be paid on all or a portion of the
outstanding principal balance hereof at a rate per annum equal to the "Fixed
Increment Rate" (as defined below).
Defined Terms:
"Base Rate:" An interest rate per annum, fluctuating daily, equal to
the rate announced by Payee from time to time at its principal office in San
Francisco, California as its prime rate in effect on such day. Neither the Base
Rate nor the prime rate of Payee is necessarily intended to be the lowest rate
of interest charged by Payee in connection with extensions of credit. Each
change in the prime rate shall result in a corresponding change in the Base Rate
and such change shall be effective on the effective date of such change in the
prime rate.
"Fixed Increment Rate:" The "Fixed LIBO Rate" (as defined below),
plus one and one-fourth percent (1.25%) (i.e. 125 basis points) per annum.
"Fixed LIBO Rate:" With respect to any "Fixed Period" (as defined
below), the rate per annum which is equal to the quotient of the average rate
per annum (determined solely by Payee and rounded upwards, if necessary, to the
next higher 1/16 of 1%) at which deposits in United States Dollars are offered
to Payee by brokers in the London interbank market as of 11:00 a.m. (London
time) two (2) Business Days prior to the first day of such Fixed Period, in an
amount equal to the "Fixed Increment" (as defined below) so requested and for a
period equal to such Fixed Period. Each determination of the Fixed LIBO Rate by
Payee shall, in absence of manifest error, be conclusive and binding.
"Reserve Requirement:" The daily average during the Fixed Period of the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other schedule changes in reserve requirements during the Fixed Period) which
is imposed under "Regulation D" (as defined below) against "Eurocurrency
liabilities" as defined in Regulation D. Each determination by Payee of the
Reserve Requirement shall, in the absence of manifest error, be conclusive and
binding.
"Regulation D:" Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and shall include any successor or
other regulation relating to reserve requirements applicable to member banks of
the Federal Reserve System.
"Loan:" The loan advanced under this Note and evidenced hereby and by
the other Security Documents.
"Event of Default:" Any default hereunder or under the other Security
Documents.
"Guaranty:" That certain Guaranty of or about even date herewith from
CBL & Associates Limited Partnership in favor of payee.
"Security Documents:" As that term is defined in the Guaranty.
"Fixed Increment:" The portion of the outstanding principal balance
hereof specified by Maker to Payee effective as of the applicable "Fixed Period
Commencement Date" (as defined below); provided, however, in no event shall any
such Fixed Increment be less than One Million and No/100 Dollars
($1,000,000.00).
"Fixed Period:" A period as designated by Maker which is thirty (30) or
sixty (60) days, commencing on the Fixed Period Commencement Date.
Notwithstanding the foregoing, in no event shall any Fixed Period extend beyond
the Maturity Date.
"Fixed Period Commencement Date:" The proposed commencement of the
applicable Fixed Period.
"Business Day:" (a) With respect to any advance, payment or rate
determination for a Fixed Increment, a day, other than a Saturday or Sunday, on
which Payee is open for business in San Francisco and on which dealings in
United States Dollars are carried on in the London interbank market; and (b) for
all other purposes, any day of the week (but not a Saturday, Sunday or holiday)
on which the offices of Payee are open to the public for carrying on
substantially all of Payee's business functions. Unless specifically referenced
in this Note as a Business Day, all references to "days" shall be to calendar
days.
Selection of Fixed Increment Rate
If the Maker elects to have the Fixed Increment Rate apply, it shall
advise the Payee in writing of its election and the Fixed Period and Fixed
Increment for which the Maker desires said rate to apply not later than 11:00
a.m., Pacific Standard Time or Pacific Daylight Time (as applicable), three (3)
Business Days prior to the Fixed Period Commencement Date. Any such election may
be made only (i) once during any thirty (30) day period and (ii) while no Event
of Default is in existence and no event has occurred which with notice and/or
lapse of time would constitute an Event of Default. After Maker has designated a
Fixed Increment to which the Fixed Increment Rate shall apply, such rate shall
apply to the Fixed Increment for the duration of the Fixed Period. At any one
time during the term hereof, no more than three (3) Fixed Increments may be
outstanding. If the Maker elects the Fixed Increment Rate, but the applicable
Fixed Period will commence on a date which is not a Business Day, such Fixed
Period shall be deemed to commence on the next Business Day after it would
otherwise commence, and any interest which accrues hereunder in the interim
shall accrue at the Base Rate.
Notwithstanding anything contained herein to the contrary, if the Maker
elects the Fixed Increment Rate to apply but the Payee is unable for any reason
to obtain funds from Payee in the amount of the Fixed Increment elected for the
Fixed Period elected, interest on such Fixed Increment shall accrue at the Base
Rate unless and until a new election of the Fixed Increment Rate is made by
Maker and the Payee is then able to obtain such funds.
In the absence of an effective election by Maker of the Fixed Increment
Rate in accordance with the above procedures prior to the expiration of the then
current Fixed Period with respect to any Fixed Increment, Payee shall be deemed
to have elected that such Fixed Increment thereafter bear interest at the Fixed
Increment Rate for a fixed period of thirty (30) days.
Special Provisions Applicable to LIBO Rate Provisions. Notwithstanding any
other provisions hereof:
A. Change in Law: If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Payee with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for Payee to make, maintain or fund
advances at the Fixed Increment Rate, Payee shall forthwith give notice thereof
to Maker. Before giving any notice Payee shall designate a different LIBO
lending office if such designation will avoid the need for giving such notice
and will not be otherwise disadvantageous to Payee (as determined in good faith
by Payee). Upon receipt of such notice, Maker shall either (i) repay in full the
then outstanding principal amount of any Fixed Increment, together with accrued
interest thereon, or (ii) convert such Fixed Increments to the Base Rate, either
(a) on the last day of the then-current Fixed Period applicable to such Fixed
Increment if Payee may lawfully continue to maintain and fund advances at the
Fixed Increment Rate to such day or (b) immediately if Payee may not lawfully
continue to fund and maintain advances at the Fixed Increment Rate to such day.
B. Increased Costs. If, after the date hereof, any governmental
authority, central bank or other comparable authority, shall at any time impose,
modify or deem applicable any reserve (including, without limitation, the
Reserve Requirement and any other reserve imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, Payee, or
shall impose on Payee (or its eurodollar lending office) or the interbank
eurodollar market any other condition affecting Fixed Increments, this Note, or
Payee's obligation to permit Maker to elect to have the Fixed Increment Rate
apply to a Fixed Increment; and the result of any of the foregoing is to
increase the cost to Payee of making or maintaining advances at the Fixed
Increment Rate, or to reduce the amount of any sum received or receivable by
Payee hereunder, by an amount deemed by Payee to be material, then, within five
(5) days after demand by Payee, Maker shall pay to Payee, such additional amount
or amounts as will compensate Payee for such increased cost or reduction. Payee
will use good faith and reasonable efforts to designate a different LIBO lending
office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the sole opinion of Payee, be disadvantageous
to Payee. A certificate of Payee claiming compensation under this Paragraph B
and setting forth in reasonable detail the calculation of the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. If Payee demands compensation under this Paragraph B, then Maker
may at any time, upon at least five (5) Business Days' prior notice to Payee
either (i) repay in full all then outstanding Fixed Increments, together with
accrued interest thereon on the date of prepayment or (ii) convert such Fixed
Increments to the Base Rate; provided, however, that Maker shall be liable for
any "Consequential Loss" (as defined below) arising pursuant to such actions,
unless the requirement or condition giving rise to the incurred costs is not
generally applicable to lenders similar to Payee, but rather is applicable
solely to Payee.
C. Payments Not At End of Interest Period. If Maker makes any payment
of principal with respect to any Fixed Increment on any day other than the last
day of a Fixed Period applicable to such Fixed Increment (other than any such
payment required by Paragraph A(ii)(b) above), then Maker shall reimburse Payee
on demand the Consequential Loss incurred by Payee as a result of the timing of
such payment. A certificate of Payee setting forth in reasonable detail the
basis for the determination of the amount of Consequential Loss shall be
delivered to Maker by Payee and shall, in the absence of manifest error, be
conclusive and binding. Any conversion of a Fixed Increment to the Base Rate on
any day other than the last day of the Fixed Period for such Fixed Increment
shall be deemed a payment for purposes of this Paragraph C.
D. Effect on Fixed Increments. If notice has been given pursuant to
Paragraph A above requiring a Fixed Increment to be repaid or converted, then
unless and until Payee notifies Maker that the circumstances giving rise to such
repayment or conversion no longer apply, Maker shall not have the right to elect
to have the Fixed Increment Rate apply. If Payee notifies Maker that the
circumstances giving rise to such repayment or conversion no longer apply, Maker
may thereafter elect to have the Fixed Increment Rate apply in accordance with
the terms of this Note.
E. Notice. Payee shall notify Maker of any event occurring after the
date hereof entitling Payee to compensation under Paragraph B above within 45
days after Payee obtains actual knowledge thereof; provided that if Payee fails
to give such notice to Maker within 45 days after it obtains actual knowledge of
such an event, Payee shall, with respect to compensation payable pursuant to
such Paragraph B in respect of any costs resulting from such event, only be
entitled to payment under Paragraph B for costs incurred from and after the date
45 days prior to the date that Payee gives such notice.
F. Consequential Loss. The term "Consequential Loss" shall mean any
loss, cost or expense incurred by Payee as a result of the payment or conversion
of any Fixed Increment on a day other than the last day of the Fixed Period
applicable thereto or in the redepositing, redeploying or reinvesting the
principal amount so paid or affected by the timing of such conversion including
the sum of (i) the interest which, but for the payment or conversion Payee would
have earned in respect of such principal amount, reduced, if Payee is able to
redeposit, redeploy, or reinvest such principal amount by the interest earned by
Payee as a result of so redepositing, redeploying or reinvesting such principal
amount, plus (ii) any expense or penalty incurred by Payee on redepositing,
redeploying or reinvesting such principal amount.
General Provisions:
Interest based on a 360-day year will be accrued on the number of days
funds are actually outstanding. Interest shall be calculated on a daily basis
and shall be payable monthly on the first day of each and every month following
the date hereof until the Maturity Date, at which time all accrued and unpaid
interest and the unpaid principal balance hereof shall be due and payable in
full.
All payments on this Note shall, at the option of Payee, be applied
first to the payment of accrued but unpaid interest, and any remainder shall be
applied to reduction of the principal balance hereof. All payments hereunder
shall be made to Payee at c/o Wells Fargo Bank, National Association, 2120 East
Park Place, Suite 100, El Segundo, California 90245, or at such other address as
Payee may from time to time designate in writing to Maker.
Except as otherwise specifically provided in the Security Documents,
Maker and any endorsers or guarantors hereof jointly and severally waive
presentment and demand for payment, notice of intent to accelerate maturity,
notice of acceleration of maturity, protest or notice of protest and nonpayment,
bringing of suit and diligence in taking any action to collect any sums owing
hereunder or in proceeding against any of the rights and properties securing
payment hereof. Maker and any endorsers or guarantors hereof agree that the time
for any payments hereunder may be extended from time to time without notice and
consent to the acceptance of further security or the release of any existing
security for this Note, all without in any manner affecting their liability
under or with respect to this Note. No extension of time for the payment of this
Note or any installment hereof shall affect the liability of Maker under this
Note even though Maker is not a party to such agreement.
If a default is made in the payment, in whole or in part, of any sum
provided for herein when due and such default is not cured within fifteen (15)
days after written notice thereof from Payee to Maker, or if an Event of Default
shall occur under the any of the Security Documents, then Payee may, at its
option, without further notice or demand, except as otherwise specifically
provided in the Security Documents, declare the unpaid principal balance and
accrued interest on this Note at once due and payable, foreclose all deeds of
trust, mortgages and liens securing payment hereof, pursue any and all other
rights, remedies, and recourses available to Payee, or pursue any combination of
the foregoing, all remedies hereunder and under the Security Documents being
cumulative.
Failure to exercise any of the foregoing options shall not constitute a
waiver of the right to exercise the same or any other option at any subsequent
time in respect to any other event. The acceptance by Payee of any payment
hereunder that is less than payment in full of all amounts due and payable at
the time of such payment shall not constitute a waiver of the right to exercise
any of the foregoing options at that time or at any subsequent time or nullify
any prior exercise of any such option without the express written consent of
Payee.
If any payment required under this Note is not paid within fifteen (15)
days after written notice has been given to Maker that the same has become due
and payable, Payee may require a late charge for late payment to compensate for
the Payee's loss of use of funds and for the expenses of handling the delinquent
payment, in an amount not to exceed four percent (4%) of such delinquent
payment. Said late charge shall be paid in any event not later than the due date
of the next subsequent installment of principal and/or interest. In the event
the maturity of the indebtedness hereunder is accelerated by Payee, this
paragraph shall apply only to payments overdue prior to the time of such
acceleration. This paragraph shall not be deemed to be a waiver of Payee's right
to accelerate payment of this Note under the terms hereof.
Maker shall have the right prior to the Maturity Date, upon ten (10)
days' prior written notice, to prepay all or any portion (except any portion
constituting a Fixed Increment during its applicable Fixed Period) of the
principal balance owing hereunder from time to time without the payment of any
premium or penalty; provided, however, that (a) if such prepayment is only a
partial payment of the then outstanding principal balance hereof, such
prepayment shall be accompanied by the payment of all accrued but unpaid
interest on the portion of the outstanding principal balance of the Note being
so paid through the date the prepayment is made, and (b) for same day credit all
monies shall be received at Payee's office at c/o Wells Fargo Bank, National
Association, 2120 East Park Place, Suite 100, El Segundo, California 90245 on or
before 11:00 a.m., Pacific Standard Time or Pacific Daylight Time (as
applicable). All monies received after this time shall be deemed received on the
following Business Day and shall continue to accrue interest at the Base Rate to
the date funds are deemed received.
Maker shall have the right to prepay any Fixed Increment during its
applicable Fixed Period only upon payment to Payee at the time of such
prepayment, of an amount (the "Fixed Increment Liquidation Amount") equal to the
excess of (i) the interest that would have been payable by Maker for such Fixed
Increment for the remainder of the applicable Fixed Period at the applicable
Fixed Increment Rate had such prepayment not been made by Maker, over (ii) the
interest to be earned on sums equal to the amount of such Fixed Increment for
the remainder of the applicable Fixed Period as invested by Payee in an interest
bearing obligation of Payee's selection, in its sole and absolute discretion.
In addition, in any such event, the provisions of the immediately
preceding paragraph hereto (relating to the obligation of Maker to pay to Payee
certain amounts in the event of the prepayment of a Fixed Increment prior to the
last day of the applicable Fixed Period) shall apply with respect to any Fixed
Increment prepaid by Maker prior to the last day of the applicable Fixed Period
as a result of the acceleration by Payee of the outstanding principal balance
hereof.
Upon the occurrence of an Event of Default, at the option of the Payee,
all amounts payable hereunder or under the Security Documents shall bear
interest for the period beginning with the date of occurrence of such Event of
Default at a rate of interest per annum (the "Default Rate"), payable on the
first day of each and every month, equal to three percent (3%) above the Base
Rate, as it fluctuates, or three percent (3%) above the Fixed Increment Rate,
whichever is applicable.
Notwithstanding any other provision of this Note to the contrary, from
and after the Maturity Date of this Note, or such earlier date as the unpaid
principal owing on this Note becomes due and payable upon acceleration or
otherwise pursuant to the terms hereof, the whole of the unpaid principal and,
to the fullest extent permitted by law, interest owing on this Note, shall
thereafter bear interest until paid in full at the Default Rate.
All amounts payable hereunder are payable in lawful money of the United
States of America. Maker agrees to pay all costs of collection hereof when
incurred, including reasonable attorneys' fees, whether or not any legal action
shall be instituted to enforce this Note.
This Note is given for business purposes and none of the proceeds of
the Loan or this Note will be used for personal, family or household purposes.
If this Note is executed by more than one party, each such party shall
be jointly and severally liable for the obligations of Maker under this Note. If
the Maker is a partnership, each general partner of Maker shall be jointly and
severally liable hereunder, and each such general partner hereby waives any
requirement of law that, upon an occurrence of an Event of Default hereunder or
under the Security Documents, Payee exhaust any assets of Maker before
proceeding against such general partner's assets.
MAKER AGREES THAT TIME IS OF THE ESSENCE IN THE PERFORMANCE OF ALL
OBLIGATIONS HEREUNDER.
This Note shall be governed by and construed according to the laws of
the State of Georgia.
It is expressly stipulated and agreed to be the intent of Maker and
Payee at all times to comply with the applicable law now or hereafter governing
the interest payable on this Note or the Loan (or applicable United States
federal law to the extent that it permits the Payee to contract for, charge,
take, reserve, or receive a greater amount of interest than under Georgia law).
If the applicable law is ever revised, repealed, or judicially interpreted so as
to render usurious any amount called for under this Note, or under any of the
Security Documents, or contracted for, charged, taken, reserved or received with
respect to the Loan, or if Payee's exercise of the option herein contained to
accelerate the maturity of this Note, or if any prepayment by Maker results in
Maker's having paid any interest in excess of that permitted by applicable law,
then it is Maker's and Payee's express intent that all excess amounts
theretofore collected by Payee be credited on the principal balance of this Note
(or, if the Note has been paid in full, refunded to Maker), and the provisions
of this Note and the Security Documents immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder and thereunder.
All sums paid or agreed to be paid to Payee for the use, forbearance or
detention of the indebtedness evidenced hereby and by the other Security
Documents shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the usury ceiling from time to time in effect and
applicable to the Loan for so long as debt is outstanding under the Loan.
The term "Maker" as used in this Note shall mean and have reference to,
collectively, all parties and each of them directly or indirectly obligated for
the indebtedness evidenced by this Note, whether as principal maker, endorser,
guarantor, or otherwise, together with the respective heirs, administrators,
executors, legal representatives, successors and assigns of each of the
foregoing.
All notices hereunder shall be given at the following addresses: If to
Maker, c/o CBL & Associates Limited Partnership, One Park Place, 6148 Lee
Highway, Chattanooga, Tennessee 37421, Attention: President. If to Payee, Suite
1805, 2859 Paces Ferry Road, Atlanta, Georgia 30339, with a copy of all notices
to Chief Credit Officer - Real Estate Group, Wells Fargo Bank, National
Association, 420 Montgomery Street, 6th Floor, San Francisco, California 94163.
Either party may change their address for notice purposes upon giving thirty
(30) days' prior notice thereof to the other party in accordance with this
paragraph. All notices given hereunder shall be in writing and shall be
considered properly given if mailed by first-class United States mail, postage
prepaid, registered or certified with return receipt requested, if sent by
national overnight courier providing documentation of receipt, if delivered in
person, or if sent by prepaid telegram, telex or telecopy, with a copy of any
communication so sent by telegram, telex or telecopy being sent by mail,
overnight courier or personal delivery as aforesaid. Any notice mailed as above
provided shall be effective three (3) business days after its deposit in the
custody of the United States Postal Service; all other notices shall be
effective upon receipt.
Whenever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note.
IN WITNESS WHEREOF, this Note has been duly executed under seal in
Chattanooga, Tennessee on the date first above written.
"MAKER"
PARHAM LIMITED PARTNERSHIP, a Virginia limited partnership
By: CBL/GP, Inc., a Wyoming corporation, its sole general partner
By:
Its:
Attest:
Its:
(CORPORATE SEAL)
This signature page is attached to and is a part of that certain Promissory Note
in the original principal amount of Fifty-One Million One Hundred Thousand and
No/100 Dollars ($51,100,000.00), from Parham Limited Partnership, a Virginia
limited partnership, as "Maker," to Wells Fargo Bank, National Association, as
"Payee."
AGREEMENT OF PURCHASE AND SALE
YORK GALLERIA
YORK, PENNSYLVANIA
By and Between
YGL PARTNERS,
an Illinois general partnership,
Seller
and
CBL & ASSOCIATES LIMITED PARTNERSHIP,
a Delaware limited partnership
Purchaser
DATED: February ______, 1999
<PAGE>
AGREEMENT OF PURCHASE AND SALE
York Galleria, York, Pennsylvania
THIS AGREEMENT OF PURCHASE AND SALE is made and entered into this __
day of February, 1999 by and between YGL PARTNERS, an Illinois general
partnership ("Seller"), having an address of c/o Heitman Capital Management LLC,
180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601-6789, Attention:
Howard J. Edelman; facsimile number (312) 541-6738, CBL & ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership ("Purchaser"), having an address of
6148 Lee Highway, Suite 300, Chattanooga, Tennessee 37421, Attention: President;
facsimile number (423) 490-8390.
RECITALS
Seller is the owner of a parcel of real estate in York County,
Pennsylvania, legally described on Exhibit A attached hereto, and all buildings
thereon, commonly known as York Galleria (the "Real Property", which together
with any and all appurtenances thereto is collectively referred to as the
"Property"). The Property includes (1) a two-story enclosed regional mall
containing approximately 766, 922 square feet and anchored by Boscov's, Sears,
Bon Ton, and JC Penney (collectively, the "Anchors") and (2) the land underlying
the enclosed mall owned by Seller. The Property does not include (i) the
approximately 9.63 acres of land on which Boscov's and Bon Ton are located or
(ii) approximately 9,150 square feet of unimproved land located at the southeast
corner of the Property.
Subject to and on the terms and provisions of and for the
considerations set forth in this Agreement, Seller has agreed to sell, and
Purchaser has agreed to buy, the Property.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
following meanings:
Closing. Shall have the meaning set forth in Section 4.1 hereof.
Closing Date. As agreed between Seller and Purchaser, but no later
than fifteen (15) days after the expiration of the Due Diligence
Period.
Due Diligence Period. The period commencing on the later of (i) the
date hereof and (ii) the date Seller notifies Purchaser of investment
committee approval pursuant to Section 3.5 hereof, and ending on the
date that is forty-five (45) days after the later of the aforesaid
dates.
[ 439944.5 ]1
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<PAGE>
Escrow Company. Near North National Title Corporation, as agent for
Fidelity National Title Insurance Company.
Proposal. The form of a "Proposal" whether an "Existing Proposal" as
defined in Section 5.8 herein or a "New Proposal" as defined in Section
15(a) (vi) hereof, shall contain a description of the economic terms of
any proposed lease, amendment, or cancellation along with any financial
information on the tenant in Seller's possession.
Title Company. Near North National Title Corporation, as agent for
Fidelity National Title Insurance Company.
2. Sale; Purchase Price.
2.1 Subject to the terms and provisions hereof, Seller agrees to sell
and convey to Purchaser, and Purchaser agrees to purchase from Seller the
Property.
2.2 The total purchase price (hereinafter called the "Purchase Price")
to be paid by Purchaser to Seller for the Property shall be Sixty-eight Million
One Hundred Twenty Thousand and no/100 Dollars ($68,120,000.00). The Purchase
Price shall be payable in the following manner:
(a) Earnest Money. Purchaser shall, within two (2)
business days after the delivery of this Agreement to Seller, deposit with the
Escrow Company, as escrow agent, the amount of One Million and 00/100 Dollars
($1,000,000.00) (hereinafter called the "Earnest Money") which Earnest Money
shall be in the form of a wire transfer of immediately available United States
of America funds or letter of credit in form and substance and issued by a
financial institution acceptable to Seller. The Earnest Money shall become
nonrefundable at the close of business on the last day of the Due Diligence
Period unless this Agreement is terminated prior to the expiration of the Due
Diligence Period. The Earnest Money shall be held and disbursed by the Escrow
Company acting as escrow agent pursuant to the Earnest Money Escrow Agreement in
the form of Exhibit B attached hereto which the parties have executed
simultaneously with this Agreement. The Earnest Money shall be invested in a
federally issued or insured interest bearing instrument with any interest
accruing thereon being deemed part of the Earnest Money and shall be paid to the
party to which the Earnest Money is paid pursuant to the provisions hereof. If
the sale hereunder is consummated in accordance with the terms hereof, the
Earnest Money and any interest thereon shall be applied to the Purchase Price to
be paid by Purchaser at the Closing. In the event of a default hereunder by
Purchaser or Seller, the Earnest Money shall be applied as provided herein.
[ 439944.5 ]2
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<PAGE>
(b) Cash Balance. Purchaser shall pay the balance
of the Purchase Price, subject to the prorations described in Section 5 below,
in cash (the "Cash Balance") by wire transfer of immediately available United
States of America funds to the Title Company for payment to Seller, in
accordance with the terms and conditions of this Agreement, no later than 11:00
am (Chicago, Illinois) on the Closing Date.
3. Conditions Precedent. In the event any of the conditions set forth in
Sections 3.2(b), 3.3, or 3.4 below shall not have been fulfilled, accepted or
deemed accepted or waived as provided herein on or before the applicable dates
specified herein, Purchaser shall have the right to terminate this Agreement by
giving written notice thereof to Seller on or before the respective dates
specified herein, and thereupon all Earnest Money shall be refunded to Purchaser
and neither party shall have any further rights or obligations hereunder, except
for the Surviving Obligations (as hereinafter defined).
3.1 Seller's Deliveries. Seller has delivered or made available to
Purchaser complete copies of the following items pertaining to the Property
which are in Seller's actual possession:
(a) all leases, occupancy agreements, and amendments
thereto listed on Schedule 1 (the "Lease Documents") and all tenant
correspondence;
(b) all service contracts, equipment leases,
warranties, and other agreements listed on Schedule 2 (the "Service Contracts");
(c) copies of the real estate tax bills for the
current year and two prior years, if available;
(d) any existing environmental reports, including
any Phase I environmental report and any other documents and correspondence
relating to the environmental condition of the Property;
(e) the existing owner's title policy;
(f) the existing survey (the "Existing Survey");
(g) annual operating statements for the Property
for the last three calendar years and monthly operating statements for the
months in the current year;
(h) building and site plans and specifications;
(i) any reciprocal easement development and
operating agreements affecting the Property;
[ 439944.5 ]3
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<PAGE>
(j) any licenses and permits currently in effect
with respect to the ownership, use, management or operation of the Property; and
(k) any existing engineering and physical inspection
reports relating to the Property or improvements located thereon.
Seller shall provide to Purchaser any documents described in this
Section 3.1 and first coming into Seller's possession or produced by Seller
after the initial delivery and continue to provide the same during the pendency
of this Agreement.
In the event this Agreement terminates for any reason, Purchaser shall
immediately return to Seller all information delivered by Seller or Seller's
agent(s) to Purchaser or Purchaser's agent(s). The foregoing provision shall
survive termination of this Agreement.
3.2 Due Diligence. Purchaser and its representatives shall be permitted
to enter upon the Property at any reasonable time and from time to time before
the Closing Date to examine, inspect and investigate the Property as well as all
records and other documentation provided by Seller or located at the Property,
including tenant, governmental, and regulatory research and interviews
(collectively, "Due Diligence"). The Due Diligence shall be subject to the
terms, conditions and limitations set forth in this Section 3.2 and Purchaser's
conduct thereof shall be in strict compliance with its covenants and agreements
contained herein.
(a) Purchaser shall have a right to enter upon the
Property for the purpose of conducting its Due Diligence provided that in each
such instance (i) Purchaser notifies Seller of its intent to enter the Property
to conduct its Due Diligence not less than forty-eight (48) hours prior to such
entry; (ii) the date and approximate time period are scheduled with Seller; and
(iii) Purchaser is in full compliance with the insurance requirements set forth
in Section 3.2(f) hereof. At Seller's election, a representative of Seller shall
be present during any entry by Purchaser or its representatives upon the
Property for conducting its Due Diligence. Purchaser shall take all necessary
actions to ensure that neither it nor any of its representatives interfere with
the tenants or ongoing operations occurring at the Property. Purchaser shall not
cause or permit any mechanic liens, materialmen's liens or other liens to be
filed against the Property as a result of its Due Diligence.
(b) Purchaser shall have through the last day of the
Due Diligence Period in which to conduct its Due Diligence and, in Purchaser's
sole discretion, to determine whether the Property is acceptable to Purchaser.
Purchaser may, for any or no reason, terminate this Agreement by giving written
notice of termination to Seller on or before the last day of the Due Diligence
Period. If Purchaser does not timely give notice of termination as aforesaid,
Purchaser shall be deemed to have elected to purchase the Property in accordance
with the terms and conditions of this Agreement and this Agreement shall
[ 439944.5 ]4
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continue in full force and effect. In the event of such termination, the Earnest
Money shall be returned to Purchaser and neither party shall have any further
obligations to the other party hereunder, except for the Surviving Obligations.
(c) Purchaser shall, at least thirty-one (31) days
prior to the Closing Date, notify Seller in writing requesting termination of
any or all of the Service Contracts, which are noted on Schedule 2 as being
terminable upon thirty (30) days notice, that Purchaser does not elect to
assume. If Purchaser does not timely give notice requesting termination of a
Service Contract, Purchaser shall be deemed to have accepted the assumption of
such Service Contract. Purchaser shall assume all other Service Contracts listed
on Schedule 2.
(d) Purchaser shall have the right to conduct, at
its sole cost and expense, any inspections, studies or tests that Purchaser
deems appropriate in determining the condition of the Property, provided,
however, Purchaser is not permitted to perform any intrusive testing, including,
without limitation, a Phase II environmental assessment or boring, without (i)
submitting to Seller the scope and inspections for such testing; and (ii)
obtaining the prior written consent of Seller for such testing, which consent
shall not be unreasonably withheld, denied or delayed, except in connection with
ground water testing, in which case Seller may withhold its consent in its sole
and absolute discretion.
(e) Purchaser agrees and covenants with Seller not
to disclose to any third party (other than lenders, accountants, attorneys and
other professionals and consultants in connection with the transaction
contemplated herein) without Seller's prior written consent, unless Purchaser is
obligated by law to make such disclosure, any of the reports or any other
documentation or information obtained by Purchaser which relates to the Property
or Seller in any way, all of which shall be used by Purchaser and its agents
solely in connection with the transaction contemplated hereby. In the event that
this Agreement is terminated, Purchaser agrees that all such information will be
held in strict confidence.
(f) Purchaser agrees to indemnify, protect, defend
and hold Seller and its partners, trustees, beneficiaries, shareholders,
members, managers, advisors and other agents and their respective partners,
trustees, beneficiaries, employees, officers, directors and shareholders (
collectively, the "Indemnified Parties") harmless from and against any and all
liabilities, claims, losses, damages, costs and expense (including, without
limitation reasonable attorneys fees and court costs and litigation expenses)
suffered or incurred by any of the Indemnified Parties as a result of or in
connection with any activities of Purchaser (including activities of any of
Purchaser's employees, consultants, contractors or other agents) relating to the
Property, including, without limitation, mechanics' liens, damage to the
Property, injury to persons or property resulting from such activities in
connection therewith. In the event that the Property is disturbed or altered in
any way as a result of such activities, Purchaser shall promptly restore the
Property to its condition existing prior to the
[ 439944.5 ]5
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commencement of such activities which disturb or alter the Property.
Furthermore, Purchaser agrees to maintain and cause any of its representatives
or agents conducting any Due Diligence to maintain and have in effect commercial
general liability insurance with (i) limits of not less than One Million and
00/100 Dollars ($1,000,000.00) for personal injury, including bodily injury and
death, and property damage, (ii) such insurance shall name YGL Partners and
Heitman Capital Management LLC, an Iowa limited liability company ("HCMC") as
"Loss Payee" with respect to property damage and additional insureds with
respect to personal injury and (iii) waiver of subrogation. Purchaser shall
deliver to Seller a copy of the certificate of insurance effectuating the
insurance required hereunder prior to the commencement of such activities which
certificate shall provide that such insurance shall not be terminated or
modified without at least thirty (30) days' prior written notice to Seller.
(g) Purchaser acknowledges and agrees that it shall
have no right to review or inspect any of the following: (i) internal memoranda,
correspondence, analyses, documents or reports prepared by or for Seller or an
affiliate of Seller in connection with (A) this Agreement (B) the transaction
contemplated by this Agreement, (C) the acquisition of the Property by Seller
(other than environmental reports, if any) or (D) any prior or current
contemplated reorganization of Seller and certain affiliated funds, (ii)
communications between Seller and HCMC, and (iii) appraisals, assessments or
other valuations of the Property in the possession of Seller or HCMC.
(h) Purchaser agrees and covenants with Seller not
to conduct or cause to be conducted any written or oral communications with any
tenant regarding renegotiating current lease terms or renewal lease terms.
(i) Sections 3.2(e) and 3.2(f) and such other
provisions in this Agreement designated as surviving shall survive Closing or
any termination of this Agreement (collectively, the "Surviving Obligations").
3.3 Title and Survey. Seller shall, at Seller's sole cost and expense,
obtain and deliver to Purchaser for Purchaser's review a commitment for a
standard owner's policy of title insurance along with a copy of each instrument
listed as an exception thereon (the "Title Commitment") on the Real Property
issued by the Title Company and the Existing Survey. During the Due Diligence
Period, Purchaser shall have the right to obtain, at its sole cost and expense,
any desired endorsements to the Title Commitment which are available. Seller
shall obtain and deliver to Purchaser for Purchaser's review an update to the
Existing Survey (the "Updated Survey"). Purchaser shall have until the date
which is fifteen (15) business days after receipt of the Title Commitment and
Existing Survey (such date being referred to as the "Title Review Date") for
examination of Title Commitment and Existing Survey and the making of any
objections thereto, said objections to be made in writing and delivered to
Seller on or before the Title Review Date. If Purchaser shall fail to make any
objections on or before the Title Review Date, Purchaser shall be deemed to have
accepted all exceptions
[ 439944.5 ]6
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to the Title Commitment and the form and substance of the Existing Survey and
all matters shown thereon; all such exceptions and matters and any exceptions or
matters caused by or through Purchaser shall be included in the term "Permitted
Exceptions" as used herein. Purchaser shall have until the later of the
expiration of the Due Diligence Period or the date that is five (5) days after
the delivery of the Updated Survey to Purchaser (the "Updated Survey Review
Period") for examination of the Updated Survey and the making of objections only
to matters shown thereon that were not shown on the Existing Survey, such
objections to be made in writing and delivered to Seller on or before the
expiration of the Updated Survey Review Period. If Purchaser shall fail to make
any such objections to the Updated Survey on or before the expiration of the
Updated Survey Review Period, Purchaser shall be deemed to have accepted the
form and substance of the Updated Survey and all matters shown thereon; all such
exceptions and matters and any exceptions or matters caused by or through
Purchaser shall be included as Permitted Exceptions. If any objections to (i)
the Title Commitment or Existing Survey are made on or before the Title Review
Date, or (ii) the Updated Survey with respect to matters not shown on the
Existing Survey are made on or before the expiration of the Updated Survey
Review Period, then Seller shall have the right, but not the obligation, to (w)
cure such objections to Purchaser's reasonable satisfaction on or before the
Closing Date or (x) terminate this Agreement by giving notice to Purchaser on or
before the date which is two (2) business days after the Due Diligence Period.
If no such notice from Seller concerning such election is received by Purchaser
by such date, then Seller shall be deemed to have elected not to cure any such
objections. If this Agreement is not so terminated by Seller, and any such
objections are not cured by Seller by the scheduled Closing Date, then Purchaser
may as its only option, elect to either: (y) waive such objection(s) and
consummate the transaction contemplated by this Agreement without adjustment to
the Purchase Price; or (z) terminate this Agreement, in which event the Earnest
Money shall be returned to Purchaser and neither party shall have any further
obligations to the other party except for the Surviving Obligations. Seller's
failure to cure any objection which Seller has agreed to cure pursuant to the
provisions of this Section 3.3 shall constitute a default by Seller hereunder
and Seller's obligation shall be specifically enforceable by Purchaser at its
election pursuant to the provisions of Section 17 below.
3.4 Tenant Estoppels. Seller shall have delivered to Purchaser, no
later than three (3) days prior to the Closing Date: (i) estoppel certificates,
substantially in the form of Exhibit E-1 attached hereto or in the form of
estoppel required under such tenant's lease, from tenants leasing at least
eighty percent (80%) of the square footage of the Property currently leased (for
purposes of this provision, a tenant shall not be considered to be leasing a
portion of the Property if the term of its lease is month-to-month or expires
within six (6) months after the Closing Date), excepting the Anchors (the
"Tenant Estoppels") and which shall include all tenants occupying space of
10,000 square feet or more, all Limited divisions, the Gap, CVS, Vision World
and Disc Jockey (the "Tenant Estoppels"), excepting the Anchors; (ii) estoppel
certificates, substantially in the form of Exhibit E-1 attached hereto, or in
the form of estoppel customarily given, by Sears and JC Penney (the "Anchor
Lease
[ 439944.5 ]7
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Estoppels") and all tenants occupying space of 10,000 square feet or more, all
Limited divisions, the Gap, CVS, Vision World and Disc Jockey; it being
understood that Seller shall submit to all of the tenants the form of estoppel
attached hereto as Exhibit E-1; and (iii) estoppel certificates, substantially
in the form of Exhibit E-2 attached hereto, or in the form of estoppel
customarily given, by Bon Ton and Boscov's (the "REA Estoppels"). The Tenant
Estoppels, Anchor Lease Estoppels, and REA Estoppels shall be collectively
referred to as the "Necessary Estoppels." Seller shall not be in default under
this Agreement or have any liability to Purchaser if Seller is unable to obtain
any of the Necessary Estoppels. Further, even after Seller obtains the Necessary
Estoppels, Seller shall use commercially reasonable efforts to obtain the
remaining estoppels and Purchaser shall have the ability to assist Seller in
procuring such estoppels.
3.5 Seller Transaction Approval. The obligations of Seller under this
Agreement (except for the Surviving Obligations) are contingent upon the
Investment Committee approval of HCMC. Not later than March 5, 1999, Seller
shall deliver written notice to Purchaser of such approval or disapproval. If no
such notice is delivered, then Seller shall be deemed to have disapproved this
Agreement.
4. Closing; Conditions; Deliveries.
4.1 Time, Place and Manner of Closing. The Closing shall be held on the
Closing Date in the offices of the Title Company or at any location mutually
acceptable to the parties. Seller shall provide Purchaser a draft of the closing
statement reflecting all prorations and adjustments at least five (5) days prior
to the Closing.
4.2 Condition to Parties' Obligation to Close. In addition to all other
conditions set forth in this Agreement, the obligation of Seller, on the one
hand, and Purchaser, on the other hand, to consummate the transaction
contemplated hereunder shall be contingent upon the following:
(a) The other party's representations and warranties
contained herein shall be true and correct in all material respects as of the
date of this Agreement and the Closing Date;
(b) As of the Closing Date, the other party shall
have performed its obligations hereunder in all material respects and all
deliveries to be made at Closing by such other party have been tendered; and
(c) As of the Closing Date, there shall exist no pending
action, suit or proceeding with respect to the other party before or by any
court or administrative agency which seeks to restrain or prohibit, or to obtain
damages or a discovery order with respect to, this Agreement or the consummation
of the transactions contemplated hereby.
[ 439944.5 ]8
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4.3 Deliveries. At Closing each party shall execute and deliver to the
other and/or the Escrow Company the following documents:
(a) Seller shall deliver to Purchaser and/or the Escrow
Company:
(i) a special warranty deed (the "Deed") to the
Property in recordable form, duly executed by Seller and acknowledged and in
substantially the same form as set forth in Exhibit G attached hereto, conveying
to Purchaser title to the Real Property, subject to the Permitted Exceptions;
(ii) a bill of sale duly executed by Seller and
in substantially the same form as set forth in Exhibit H attached hereto,
conveying to Purchaser title to all personal property owned by Seller and
located at the Real Property, if any;
(iii) an assignment to Purchaser of the Leases
duly executed by Seller and in substantially the same form as set forth in
Exhibit I attached hereto;
(iv) an assignment to Purchaser of the Service
Contracts and other third party contracts pursuant to Section 5.8 hereof being
assumed hereunder, licenses and permits affecting the Property (to the extent
freely assignable) duly executed by Seller and in substantially the same form as
set forth in Exhibit J attached hereto;
(v) a non-foreign transferor certification
pursuant to Section 1445 of the Internal Revenue Code and any similar provisions
of applicable state law, in substantially the same form as set forth on Exhibit
K attached hereto (the "Affidavit");
(vi) a certified resolution of Seller certifying
that Seller has the legal power, right and authority to consummate the sale of
the Property;
(vii) a certificate remaking the representations
and warranties set forth in Section 6 hereof;
(viii) originals of the Leases, Operating Agreements
(as hereinafter defined), Service Contracts and other third party contracts
pursuant to Section 5.8 hereof being assumed hereunder, and keys to the
Property, to the extent same is in Seller's possession; and
(ix) updated rent roll for the Property.
(b) Purchaser shall deliver to Seller or the Escrow
Company:
[ 439944.5 ]9
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(i) the Cash Balance, by wire transfer, as
provided in Section 2.2(b) hereof;
(ii) an assumption duly executed by the
Purchaser of the assignments described in Sections 4.3(a)(iii) and (iv);
(iii) a certificate remaking the representations
and warranties set forth in Section 8 hereof; and
(iv) a certified resolution of Purchaser
certifying that Purchaser has the legal power, right and authority to consummate
the purchase of the Property.
(c) Seller and Purchaser shall jointly deliver to the Escrow
Company:
(i) A closing statement;
(ii) All transfer declarations or similar
documentation required by law;
(iii) Letters to the tenants of the Property in
the form of Exhibit L attached hereto; and
(iv) Notices in substantially the form of
Exhibit M attached hereto to the other party to each Service Contract assumed by
Purchaser pursuant to Section 3.2(c) of this Agreement.
(d) The Escrow Company shall deliver to Purchaser an initialed
mark-up of the Title Commitment, extending the effective date to the Closing
Date, insuring Purchaser as owner of the Real Property, and removing all
exceptions other than Permitted Exceptions.
4.4 Permitted Termination. So long as a party is not in default
hereunder, if any condition to such party's obligation to proceed with the
Closing hereunder has not been satisfied or waived as of the Closing Date or
such earlier date as provided herein, such party may, in its sole discretion,
terminate this Agreement by delivering written notice to the other party before
the Closing Date, or elect to close, notwithstanding the non-satisfaction of
such condition, in which event such party shall be deemed to have waived any
such condition.
5. Prorations. All items of income and expense shall be paid, prorated or
adjusted as of the close of business on the day prior to the Closing Date (the
"Proration Date") in the manner hereinafter set forth:
[ 439944.5 ]10
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5.1 Purchaser shall be credited with (i) the amount of (A) all rents
and (B) all expense contributions, real estate tax contributions, and other
reimbursements from tenants ("Tenant Contributions") received by Seller and
attributable to the period commencing on and including the Closing Date, (ii)
all unapplied cash security deposits held by Seller and which were made by
tenants under all leases of the Real Property in effect as of the Closing Date,
and (iii) all prepaid security deposits for leases whose terms have not
commenced as of the Closing Date. With respect to Seller's account for the gift
certificate program at the Property, which account is not transferable, Seller
shall keep such account open until the earlier of (i) the date all such
outstanding gift certificates are redeemed or (ii) the date the funds in such
account are turned over to the Commonwealth of Pennsylvania by the laws of
escheat. From and after the Closing Date, Seller shall no longer provide any
gift certificates for the Property.
5.2 All rents and Tenant Contributions for the month of Closing shall
be prorated between Purchaser and Seller based upon their respective days of
ownership for such month in which the Closing occurs. Neither Purchaser nor
Seller shall receive credit at Closing for any payments of rental obligations
due but not paid as of the Proration Date. At the time of the final calculation
and collection from tenants of Tenant Contributions for the years 1998, if
applicable, and 1999, whether in the nature of a reconciliation payment or full
payment, in arrears, there shall be a reproration between Purchaser and Seller
as to the Tenant Contributions. Such reproration shall not be made on the basis
of a per diem method of allocation, but shall instead be apportioned between
Seller and Purchaser on the basis of the relative share of actual expenses in
question incurred by Seller and Purchaser during the calendar year(s) in
question. Seller covenants to provide Purchaser with any information necessary
to finalize such calculation. Purchaser covenants to bill tenants for amounts
due from tenants attributable to periods prior to Closing (the years 1998, if
applicable, and 1999), to pursue collections from tenants in accordance with its
customary practices, and, as collected, to timely deliver to Seller reproration
amounts due Seller.
5.3 Percentage rent shall be prorated between Purchaser and Seller by
utilizing the percentage rent payable for such lease year based upon the actual
days of ownership of the Property. There shall be no adjustment for percentage
rent payments until after the receipt of any percentage rent payments made by
the respective tenants.
5.4 Any amounts received from tenants after Closing shall be applied on
a tenant by tenant basis in the following order: (i) first on account of any
amount then due and payable to Purchaser from such tenant(s); (ii) next, on
account of any amount due Seller from such tenant(s) for the period up to and
including the Proration Date and (iii) finally, any balance then remaining to
Purchaser. Seller retains the right to pursue its remedies against tenants after
Closing for any delinquent payments or other amounts owed to Seller, except for
actions or proceedings affecting possession or landlord liens. However, Seller
will not exercise any such rights or remedies unless such delinquent rents have
not been collected by Purchaser and paid to Seller within one (1) year after the
Closing Date. Any money due to
[ 439944.5 ]11
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Seller shall be remitted to Seller within five (5) business days after the end
of each month in which Purchaser receives such money.
5.5 Operating expenses, including, without limitation, permits,
licenses, membership dues, marketing fund contributions and any other prepaid
expenses, shall be prorated between Purchaser and Seller based upon the actual
days of their respective ownership of the Property utilizing the actual expenses
or reasonable estimates.
5.6 Real estate taxes shall be prorated between Seller and Purchaser
based upon the actual days of ownership of the parties for the year in which
Closing occurs utilizing the most recent ascertainable tax bill(s). Seller and
Purchaser agree to reprorate said real estate taxes upon Purchaser's receipt of
the actual tax bill for the tax year in question, if any. Seller reserves the
right (a) to meet with governmental officials and to contest any reassessment
governing or affecting Seller's obligations under this Section, and (b) to
contest any assessment of the Property or any portion thereof and to attempt to
obtain a refund for any taxes previously paid. Seller shall retain all rights
with respect to any refund of taxes applicable to any period prior to the
Closing Date and shall remit to Purchaser any refund applicable to the period
following the Closing Date promptly following receipt.
5.7 Except for utilities billed directly to tenants, utilities shall be
prorated as of the Proration Date based upon estimates using the prior month's
actual invoices.
5.8 Purchaser shall be responsible for and pay for all "Leasing Costs"
which shall include: (a) the cost of all tenant improvements, (b) all leasing
commissions, (c) all space planning costs, (d) all legal costs, and (e) any and
all concessions, that are due and payable as a result of leases made pursuant
to: (i) Existing Proposals listed on Schedule 4 attached hereto which Purchaser
is hereby deemed to have approved, and (ii) any New Proposal which Purchaser
approved, or is deemed to have approved as provided in Section 15 of this
Agreement. Purchaser shall receive the benefit of the lease buyout from Kinney
Shoes (whether in the form of a credit at Closing for all sums received by
Seller from and after the date hereof or to the extent such sums have not been
received by Seller prior to Closing, then in the form of a direct payment from
Kinney Shoes subsequent to Closing) which, as of the date hereof, is estimated
to be approximately $80,000. In addition, any and all Leasing Costs associated
with Subway and Prime Time Racing have been incurred and fully paid for by
Seller. With respect to Sbarro, there are no Leasing Costs associated with such
tenant and any plan review costs which may be necessitated subsequent to the
Closing shall be borne solely by Purchaser.
5.9 All insurance policies and property management agreements shall be
terminated as of the Closing Date and there shall be no proration with respect
to these items.
[ 439944.5 ]12
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All other items which are customarily prorated in transactions similar to the
transaction contemplated hereby and which were not heretofore dealt with, will
be prorated as of the Proration Date. In the event any prorations or
computations made under this Section are based on estimates or prove to be
incorrect, then either party shall be entitled to an adjustment to correct the
same, provided that it makes written demand on the party from whom it is
entitled to such adjustment within one hundred and twenty days after the end of
the current calendar year except for Tenant Contributions not yet collected.
Purchaser shall indemnify and hold Seller harmless from and against any and all
liabilities, losses, damages, claims and costs (including reasonable attorney
fees, court costs and litigation expenses) (i) in connection with Purchaser's
assumption of responsibility for the Leasing Costs as provided in Section 5.8
herein, including but not limited to any and all obligations under third party
contracts assumed by Purchaser as provided by Sections 4.3 (a) (iv) hereof; and
(ii) for which Purchaser received credits pursuant to this Section 5. The
indemnity set forth in the immediately preceding sentence and the covenants
contained in this Section 5 shall survive Closing.
6. Seller's Representations, Warranties and Covenants. Seller hereby represents,
warrants and covenants as follows:
6.1 Power. Seller has the legal power, right and authority to enter
into this Agreement and the instruments referenced herein and to consummate the
transactions contemplated hereby.
6.2 Requisite Action. All requisite action (corporate, trust,
partnership or otherwise) has been taken by Seller in connection with entering
into this Agreement and the instruments referenced herein and the consummation
of the transactions contemplated hereby. No consent of any partner, shareholder,
member, creditor, investor, judicial or administrative body, authority or other
party is required which has not been obtained to permit Seller to enter into
this Agreement and consummate the transaction contemplated hereby.
6.3 Authority. The individuals executing this Agreement and the
instruments referenced herein on behalf of Seller have the legal power, right
and actual authority to bind Seller to the terms and conditions hereof and
thereof.
6.4 Validity. This Agreement and all documents required hereby to be
executed by Seller are and shall be valid, legally binding obligations of and
enforceable against Seller in accordance with their terms.
6.5. Conflicts. None of the execution and delivery of this
Agreement and documents referenced herein, the incurrence of the obligations set
forth herein, the consummation of the transactions herein contemplated or
referenced herein conflicts with
[ 439944.5 ]13
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or results in the material breach of any terms, conditions or provisions of or
constitutes a default under, any bond, note, or other evidence of indebtedness
or any contract, lease or other agreements or instruments to which Seller is a
party.
6.6 Leases. Attached hereto as Schedule 1 is a complete and accurate
list of the leases, occupancy agreements and amendments thereto (collectively
"Lease Documents") relating to the Property as of the date of this Agreement,
which shall be updated by Seller prior to Closing, if necessary including the
addition thereto of Lease Documents executed after the date of this Agreement
through the Closing Date.
6.7 Service Contracts. Attached hereto as Schedule 2 is a complete and
accurate list of the service contracts, equipment leases and other agreements
relating to the Property as of the date of this Agreement which shall be updated
by Seller prior to Closing, if necessary including the addition thereto of any
such agreements executed after the date of this Agreement through the Closing
Date.
6.8 Notices. Seller has not received any written notice that the
Property, or any present uses and operations thereof, are in violation of any
applicable zoning or land-use laws and as of the Closing, Seller shall represent
to Purchaser that Seller has not received any written notice that the Property
or any present uses and operations thereof, are in violation of any applicable
zoning, land-use or other laws, ordinances or regulations.
6.9 Litigation. Except as set forth on Schedule 3 and except for
matters covered by insurance no litigation has been served upon Seller, nor to
the best of the Seller's knowledge has been filed, or threatened in writing,
affecting the Seller's ability to consummate the transaction contemplated by
this Agreement. Schedule 3 shall be updated by Seller prior to Closing, if
necessary.
6.10 Environmental Condition. Seller has no knowledge of any violation
of Environmental Laws related to the Property or the presence or release (other
than as permitted by law) of Hazardous Materials on or from the Property except
as disclosed in the environmental reports, studies and other information
relating to the environmental condition of the Property delivered by Seller to
Purchaser or made available for Purchaser's review. The term "Environmental
Laws" means the Resource Conservation and Recovery Act and the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA") and other
federal laws governing the environment as in effect on the date of this
Agreement together with their implementing regulations and guidelines as of the
date of this Agreement, and all state, regional, county, municipal and other
local laws, regulations and ordinances that are equivalent or similar to the
federal laws recited above or that purport to regulate Hazardous Materials in
effect as of the date of this Agreement. "Hazardous Materials" means any
substance which is (i) designated, defined, classified or regulated as a
hazardous substance, hazardous material, hazardous waste, pollutant or
contaminant under any
[ 439944.5 ]14
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Environmental Law, as currently in effect as of the date of this Agreement, (ii)
petroleum hydrocarbon, including crude oil or any fraction thereof and all
petroleum products, (iii) PCBs, (iv) lead, (v) friable asbestos, (vi) flammable
explosives, (vii) infectious materials, or (viii) radioactive materials.
Attached hereto as Schedule 5 is a list of all environmental reports in Seller's
possession pertaining to the Property.
6.11 Operating Agreements. Attached hereto as Schedule 6 is a complete
and accurate list of all reciprocal easement, operating, or development
agreements, and amendments thereto (collectively, the "Operating Agreements"),
relating to the Property as of the date of this Agreement, which shall be
updated by Seller prior to Closing, if necessary.
6.12 Condemnation. There is no pending, nor to the best of Seller's
knowledge, threatened action in the nature of condemnation against all or any
part of the Property.
6.13 Indemnity. Seller shall indemnify and hold Purchaser harmless from
and against any and all claims, actions, judgments, liabilities, liens, damages,
penalties, fines, costs and reasonable attorneys' fees, foreseen or unforeseen,
asserted against, imposed on or suffered or incurred by Purchaser (or the
Property) directly or indirectly arising out of or in connection with any breach
of the warranties, representations and covenants set forth in this Section 6.
The warranties and representations set forth in this Section 6 shall be deemed
remade as of Closing and updated if necessary, and said warranties and
representations as so remade and updated, and the indemnity obligation set forth
in herein shall survive Closing, provided that any claim by Purchaser based upon
a misrepresentation or breach of any warranty or representation or indemnity
obligation under this Section 6 shall be deemed waived unless Purchaser has (i)
delivered to Seller written notice of such claim prior to the date which is ten
(10) months after the Closing Date, and (ii) filed suit within two (2) months
after delivery to Seller of any such notice of claim.
As used in this Section 6, the term "to Seller's knowledge" "actual knowledge"
or "best of Sellers knowledge" or words of similar import (i) shall mean the
actual knowledge of Howard J. Edelman and Lauren Hogan and not to any other
persons, (ii) shall mean the actual knowledge of such individuals, without any
investigation or inquiry of any kind, and (iii) shall not mean such individuals
are charged with knowledge of the acts, omissions and/or knowledge of Seller's
agents or employees.
Notwithstanding anything contained in this Agreement to the contrary,
Seller shall have no liability for breaches of any representations, warranties
and certifications (the "Representations") which are made by Seller herein or in
any of the documents or instruments required to be delivered by Seller hereunder
if Purchaser, its officers, employees, shareholders, members, partners, or
agents had knowledge of such breach by Seller (including, without limitation,
knowledge gained by Purchaser in the course of its Due Diligence as to a fact or
circumstance which, by its nature, indicates that a Representation
[ 439944.5 ]15
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was or has become untrue or inaccurate) at Closing where Purchaser elects to
proceed to close the transaction contemplated by this Agreement, and Purchaser
shall not otherwise have the right to bring any lawsuit or other legal action
against Seller, nor pursue any other remedies against Seller, as a result of the
breach of such Representation caused thereby, but Purchaser's sole right shall
be to terminate this Agreement in which event, the Earnest Money shall be
returned to Purchaser.
7. Purchase As-Is. EXCEPT FOR THE REPRESENTATIONS OF SELLER EXPRESSLY SET FORTH
IN SECTION 6 OF THIS AGREEMENT, PURCHASER WARRANTS AND ACKNOWLEDGES TO AND
AGREES WITH SELLER THAT PURCHASER IS PURCHASING THE PROPERTY IN ITS "AS-IS,
WHERE IS" CONDITION "WITH ALL FAULTS" AND DEFECTS AS OF THE CLOSING DATE AND
SPECIFICALLY AND EXPRESSLY WITHOUT ANY WARRANTIES, REPRESENTATIONS OR
GUARANTEES, EITHER EXPRESS OR IMPLIED, AS TO ITS CONDITION, FITNESS FOR ANY
PARTICULAR PURPOSE, MERCHANTABILITY, OR ANY OTHER WARRANTY OF ANY KIND, NATURE,
OR TYPE WHATSOEVER FROM OR ON BEHALF OF SELLER. EXCEPT FOR THE REPRESENTATIONS
OF SELLER EXPRESSLY SET FORTH IN SECTION 6 OF THIS AGREEMENT, SELLER
SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR
WRITTEN, PAST OR PRESENT, EXPRESS OR IMPLIED, CONCERNING (A) THE VALUE, NATURE,
QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER,
STRUCTURAL INTEGRITY, SOIL AND GEOLOGY; (B) THE INCOME TO BE DERIVED FROM THE
PROPERTY; (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND
USES WHICH PURCHASER MAY CONDUCT THEREON, INCLUDING THE POSSIBILITIES FOR FUTURE
DEVELOPMENT OF THE PROPERTY; (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS
OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE
GOVERNMENTAL AUTHORITY OR BODY; (E) THE HABITABILITY, MERCHANTABILITY,
MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
PROPERTY; (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY,
INCORPORATED INTO THE PROPERTY; (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK
OF REPAIR OF THE PROPERTY; (H) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS
AT, UNDER, OR ADJACENT TO THE PROPERTY OR ANY OTHER ENVIRONMENTAL MATTER OR
CONDITION OF THE PROPERTY; (I) THE YEAR 2000 COMPLIANCE OF ANY SYSTEM OR OTHER
ELEMENT OF THE PROPERTY; OR (J) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY.
PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES OF SELLER CONTAINED IN SECTION 6 OF THIS AGREEMENT, ANY INFORMATION
PROVIDED BY OR ON BEHALF OF SELLER WITH RESPECT TO THE PROPERTY WAS OBTAINED
FROM A VARIETY OF
[ 439944.5 ]16
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SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER
BY ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO
THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER,
AGENT, EMPLOYEE, SERVANT OR OTHER PERSON EXCEPT FOR THE EXPRESS REPRESENTATIONS
SET FORTH IN SECTION 6 OF THIS AGREEMENT. PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT PURCHASER IS A SOPHISTICATED AND EXPERIENCED PURCHASER OF PROPERTIES
SUCH AS THE PROPERTY AND HAS BEEN DULY REPRESENTED BY COUNSEL IN CONNECTION WITH
THE NEGOTIATION OF THIS AGREEMENT. EXCEPT AS MAY OTHERWISE BE PROVIDED HEREIN,
SELLER HAS MADE NO AGREEMENT TO ALTER, REPAIR OR IMPROVE ANY OF THE PROPERTY.
8. Purchaser's Representations, Warranties and Covenants. Purchaser hereby
represents, warrants and covenants as follows:
8.1 Power. Purchaser has the legal power, right and authority to enter
into this Agreement and the instruments referenced herein and to consummate the
transactions contemplated hereby.
8.2 Requisite Action. All requisite action (corporate, trust,
partnership or otherwise) has been taken by Purchaser in connection with
entering into this Agreement and the instruments referenced herein and the
consummation of the transactions contemplated hereby. No consent of any partner,
shareholder, member, creditor, investor, judicial or administrative body,
authority or other party is required which has not been obtained or shall not be
obtained prior to the Closing Date to permit Purchaser to enter into this
Agreement and consummate the transaction contemplated hereby.
8.3 Authority. The individuals executing this Agreement and the
instruments referenced herein on behalf of Purchaser have the legal power, right
and actual authority to bind Purchaser to the terms and conditions hereof and
thereof.
8.4 Validity. This Agreement and all documents required hereby to be
executed by Purchaser are and shall be valid, legally binding obligations of and
enforceable against Purchaser in accordance with their terms.
8.5 Conflicts. Neither the execution and delivery of this Agreement and
documents referenced herein, nor the incurrence of the obligations set forth
herein, nor the consummation of the transactions herein contemplated, nor
referenced herein conflict with
[ 439944.5 ]17
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or result in the material breach of any terms, conditions or provisions of or
constitute a default under, any bond, note, or other evidence of indebtedness or
any contract, lease or other agreements or instruments to which Purchaser is a
party.
8.6 Litigation. There is no action, suit or proceeding pending or
threatened against Purchaser in any court or by or before any other governmental
agency or instrumentality which would materially and adversely affect the
ability of Purchaser to carry out the transactions contemplated by this
Agreement.
8.7 Indemnity. Purchaser shall indemnify, protect and hold the
Indemnified Parties harmless from and against any and all claims, actions,
judgments, liabilities, liens, damages, penalties, fines, costs and reasonable
attorneys' fees, foreseen or unforeseen, asserted against, imposed on or
suffered or incurred by Seller directly or indirectly arising out of or in
connection with any breach of the warranties, representations and covenants set
forth in this Section 8. The warranties, representations and indemnities set
forth in this Section 8 shall be deemed remade as of Closing and shall survive
Closing, and said warranties and representations as so remade, and the indemnity
obligation set forth in herein shall be deemed waived unless Seller has given
Purchaser written notice of any such claim prior to the date which is ten (10)
months from the Closing Date.
9. Closing Costs. Seller shall pay the following expenses: (i) the costs to
obtain a standard owner's title policy; (ii) the costs to obtain the Existing
Survey and the Updated Survey; (iii) 50% of all closing escrow fees, including
"New York Style" closing fees; (iv) Seller's legal fees and expenses; and (v)
50% of the total amount of all conveyance fees, documentary, stamp and transfer
taxes. Purchaser shall pay the following expenses: (a) the costs for any
endorsements to the title policy; (b) the cost of any reinsurance of the title
policy; (c) 50% of all closing escrow fees, including "New York Style" closing
fees; (d) the fee for the recording of the Deed; (e) all costs and expenses
incurred in connection with the transfer of any transferable permits, warranties
or licenses in connection with the ownership or operation of the Property; (f)
all costs and expenses associated with Purchaser's financing, if any; (g)
Purchaser's legal fees and expenses; and (h) 50% of the total amount of all
conveyance fees, documentary, stamp and transfer taxes. The provisions of this
Section 9 shall survive Closing or any termination of this Agreement.
10. Commissions. Seller shall be solely responsible for the payment of the
commission to Eastdil Realty Company, L.L.C. ("Eastdil"). Seller and Purchaser
each warrant and represent to the other that (other than Eastdil) neither has
had any dealings with any broker, agent, or finder relating to the sale of the
Property or the transactions contemplated hereby, and each agrees to indemnify
and hold the other harmless against any claim for brokerage commissions,
compensation or fees by any broker, agent, or finder in connection the sale of
the Property or the transactions contemplated hereby resulting from the acts of
the indemnifying party. The provisions of this Section 10 shall survive Closing.
[ 439944.5 ]18
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11. New York Style Closing. It is contemplated that the transaction shall be
closed by means of a so-called New York Style Closing, with the concurrent
delivery of the documents of title, transfer of interest, delivery of the title
policy or marked-up title commitment described in Section 4.3(d) and the payment
of the Purchase Price. Seller and Purchaser agree that disbursement of the
Purchase Price, as adjusted by the prorations, shall not be conditioned upon the
recording of the Deed, but rather, upon the unconditional commitment by the
Title Company, in the form of a Pro Forma title policy or mark-up of the Title
Commitment, to issue the title policy effective as of the date of disbursement.
Seller and Purchaser shall each provide any undertaking to the Title Company
necessary to accommodate the New York Style Closing.
12. Attorneys' Fees and Costs. In the event suit or action is instituted to
interpret or enforce the terms of this Agreement, or in connection with any
arbitration or mediation of any dispute, the prevailing party shall be entitled
to recover from the other party such sum as the court, arbitrator or mediator
may adjudge reasonable as such party's costs and attorney's fees, including such
costs and fees as are incurred in any trial, on any appeal, in any bankruptcy
proceeding (including the adjudication of issues peculiar to bankruptcy law) and
in any petition for review. Each party shall also have the right to recover its
reasonable costs and attorney's fees incurred in collecting any sum or debt owed
to it by the other party, with or without litigation, if such sum or debt is not
paid within fifteen (15) days following written demand therefor.
13. Notice. All notices, demands, deliveries and communications (a "Notice")
under this Agreement shall be delivered or sent by: (i) first class, registered
or certified mail, postage prepaid, return receipt requested, (ii) nationally
recognized overnight carrier, or (iii) facsimile with original Notice sent via
overnight delivery addressed to the address of the party in question set forth
in the first paragraph of this Agreement and copies to the parties designated
below or to such other address as either party may designate by Notice pursuant
to this Section 13. Notices shall be deemed given (x) three business days after
being mailed as provided in clause (i) above, (y) one business day after
delivery to the overnight carrier as provided in clause (ii) above, or (z) on
the day of the transmission of the facsimile so long as it is received in its
entirety by 5:00 pm (New York City, New York Time) on such day and the original
of such Notice is received the next business day via overnight mail as provided
in clause (iii) above.
Notices to Seller copy to: Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attn: Laurence B. Dobkin, Esq.
facsimile no. (312) 715-4800
[ 439944.5 ]19
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<PAGE>
Notices to Purchaser copy to: CBL & Associates Limited Partnership
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421
Attention: Mary Ann Sinnott, Esq.
facsimile no. (423) 490-8390
14. Fire or Other Casualty; Condemnation.
14.1 If the Property or any part thereof is damaged by fire or other
casualty prior to the Closing Date which would cost in excess of $1,000,000.00
to repair (as determined by an insurance adjuster selected by the insurance
carriers), Purchaser may terminate this Agreement by written notice to Seller
given on or before the earlier of (i) twenty (20) days following such casualty
or (ii) the Closing Date. In the event of such termination, this Agreement shall
be of no further force and effect and, except for the Surviving Obligations,
neither party shall thereafter have any further obligation under this Agreement,
and Seller shall direct the Escrow Company to promptly return all Earnest Money
to Purchaser. If Purchaser does not elect to terminate this Agreement or the
cost of repair is determined by said adjuster to be less than $1,000,000.00,
then the Closing shall take place as herein provided without abatement of the
Purchase Price, and Seller shall assign and transfer to Purchaser on the Closing
Date, without warranty or recourse, all of Seller's right, title and interest to
the balance of insurance proceeds paid or payable to Seller on account of such
fire or casualty remaining after reimbursement to Seller for the total amount of
all costs and expenses incurred by Seller in connection therewith including but
not limited to making emergency repairs, securing the Property and complying
with applicable governmental requirements. Seller shall pay to Purchaser the
amount of the deductible of any of Seller's applicable insurance policies.
14.2 If any material portion of the Property is taken in eminent domain
proceedings prior to Closing, Purchaser may terminate this Agreement by notice
to Seller given on or before the earlier of (i) twenty (20) days after such
taking or (ii) the Closing Date, and, in the event of such termination, this
Agreement shall be of no further force and effect and, except for the Surviving
Obligations, neither party shall thereafter have any further obligation under
this Agreement, and Seller shall direct the Escrow Company to promptly return
all Earnest Money to Purchaser. If Purchaser does not so elect to terminate or
if the taking is not material, then the Closing shall take place as herein
provided without abatement of the Purchase Price, and Seller shall deliver or
assign to Purchaser on the Closing Date, without warranty or recourse, all of
Seller's right, title and interest in and to all condemnation awards paid or
payable to Seller.
[ 439944.5 ]20
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<PAGE>
15. Operations After Date of This Agreement. Seller covenants and agrees with
Purchaser that:
(a) after the date hereof through the Closing, Seller will (except as
specifically provided to the contrary herein):
(i) Refrain from transferring any of the Property or creating
on the Property any easements, liens, mortgages, encumbrances, or other
interests which will survive Closing or permitting any changes to the
zoning classification of the Land;
(ii) Refrain from entering into or amending any contracts, or
other agreements (excluding leases) regarding the Property (other than
contracts in the ordinary and usual course of business and which are
cancelable by the owner of the Property without penalty within thirty
(30) days after giving notice thereof);
(iii) Continue to operate, maintain, and repair the Property
in a manner consistent with Seller's current practices;
(iv) Comply with all of the material terms of the Lease
Documents;
(v) Refrain from offering the Property for sale or
marketing the same; and
(vi) Deliver to Purchaser copies of all Lease Documents
entered into after the date hereof and copies of all Proposals entered
into after this date (the "New Proposals").
(b) after the date hereof through the Closing, Seller shall not,
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld, conditioned or delayed (except where such consent is
deemed granted as provided in this Section 15(b)) (i) amend any Leases, (ii)
cancel any of such Leases, or (iii) execute any new leases. Purchaser shall have
five (5) days from its receipt of a written description of the economic and all
other material terms of any New Proposal to notify Seller in writing of its
approval or rejection of any such New Proposal. If no such notice is received by
Seller within such period then Purchaser shall be deemed to have approved any
such New Proposal. Seller shall have the right to execute lease documents
evidencing an Existing Proposal or a New Proposal approved or deemed approved by
Purchaser as provided in this Agreement.
16. Assignment. Purchaser shall not assign this Agreement without Seller's prior
written consent which consent may be withheld for any reason or no reason;
provided that Purchaser may, upon five (5) business days prior written notice,
direct that the Property be conveyed directly to a specified designee at
Closing. Subject to the previous sentence, this Agreement shall apply to, inure
to the benefit of and be binding upon and enforceable against the parties
[ 439944.5 ]21
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<PAGE>
hereto and their respective successors and assigns. Seller's consent to any such
assignment shall be conditioned upon Seller's receipt of a duly executed express
assumption of all of the duties and obligations of Purchaser by the proposed
assignee, in a form acceptable to Seller, not less than five (5) business days
prior to the Closing Date.
17. Remedies.
(a) (i) IN THE EVENT THAT SELLER SHALL FAIL TO CONSUMMATE THIS
AGREEMENT AND SUCH FAILURE IS NOT A RESULT OF PURCHASER'S DEFAULT OR A
TERMINATION OF THIS AGREEMENT BY PURCHASER OR SELLER PURSUANT TO A RIGHT TO DO
SO UNDER THE PROVISIONS HEREOF, PURCHASER, IN THE CASE WHERE SUCH FAILURE IS
BASED UPON A VOLUNTARY BREACH BY SELLER ("SELLER'S DEFAULT"), SHALL ONLY BE
ENTITLED TO SEEK AT ITS ELECTION, EITHER: (A) THE REMEDY OF SPECIFIC
PERFORMANCE, OR (B) DAMAGES IN AN AMOUNT NOT TO EXCEED $750,000.00 IN THE
AGGREGATE FOR ALL RECOURSE OF PURCHASER UNDER THE PURCHASE DOCUMENTS (AS DEFINED
IN SECTION 19 HEREOF). IN NO EVENT SHALL SELLER BE LIABLE TO PURCHASER FOR ANY
PUNITIVE, SPECULATIVE OR CONSEQUENTIAL DAMAGES. IN THE CASE WHERE SUCH FAILURE
IS BASED UPON AN INVOLUNTARY BREACH BY SELLER, PURCHASER, AS ITS SOLE AND
EXCLUSIVE REMEDY, MAY TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE
EARNEST MONEY. IN NO EVENT SHALL PURCHASER BE ENTITLED TO RECORD A LIS PENDENS
OR NOTICE OF PENDENCY OF ACTION AGAINST THE PROPERTY FOR ANY REASON WHATSOEVER.
(ii) PURCHASER SHALL (A) NOTIFY SELLER OF ITS ELECTION TO SEEK
THE REMEDY OF SPECIFIC PERFORMANCE ON OR BEFORE THE DATE WHICH IS FORTY FIVE
(45) DAYS AFTER THE DATE OF A SELLER'S DEFAULT AND (B) INSTITUTE PROCEEDINGS
SEEKING ONLY SUCH REMEDY ON OR BEFORE THE DATE WHICH IS THIRTY (30) DAYS AFTER
THE DATE OF PURCHASER'S NOTICE.
(iii) PURCHASER SHALL BE DEEMED TO HAVE WAIVED ITS ELECTION TO
SEEK THE REMEDY OF SPECIFIC PERFORMANCE IF PURCHASER DOES NOT (x) NOTIFY SELLER
OF SUCH ELECTION AS PROVIDED IN SECTION 17(a)(ii) (A) HEREINABOVE , OR (y)
INSTITUTE PROCEEDINGS, SEEKING ONLY SUCH REMEDY AS PROVIDED IN SECTION
17(a)(ii)(B) HEREINABOVE.
(iv) NOTWITHSTANDING ANYTHING IN THIS SECTION 17(a) TO THE
CONTRARY, FAILURE OF A CONDITION PRECEDENT (AS SUCH TERM IS
[ 439944.5 ]22
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<PAGE>
DEFINED IN SECTION 3) SHALL BE CONSIDERED AN INVOLUNTARY BREACH
UNDER THIS SECTION 17(a).
(b) IN THE EVENT THAT PURCHASER SHOULD FAIL TO CONSUMMATE THIS
AGREEMENT FOR ANY REASON, EXCEPT SELLER'S DEFAULT OR THE TERMINATION OF THIS
AGREEMENT BY PURCHASER OR SELLER PURSUANT TO A RIGHT TO DO SO UNDER THE TERMS
AND PROVISIONS HEREOF, THEN SELLER, AS ITS SOLE AND EXCLUSIVE REMEDY MAY
TERMINATE THIS AGREEMENT BY NOTIFYING PURCHASER THEREOF AND RECEIVE OR RETAIN
THE EARNEST MONEY AS LIQUIDATED DAMAGES, PROVIDED THAT THIS PROVISION SHALL NOT
LIMIT SELLER'S RIGHTS TO RECEIVE REIMBURSEMENT FOR ATTORNEYS FEES AND TO PURSUE
AND RECOVER ON A CLAIM WITH RESPECT TO ANY SURVIVING OBLIGATIONS. THE PARTIES
AGREE THAT SELLER WILL SUFFER DAMAGES IN THE EVENT OF PURCHASER'S DEFAULT ON ITS
OBLIGATIONS. ALTHOUGH THE AMOUNT OF SUCH DAMAGES IS DIFFICULT OR IMPOSSIBLE TO
DETERMINE, THE PARTIES AGREE THAT THE AMOUNT OF THE EARNEST MONEY IS A
REASONABLE ESTIMATE OF SELLER'S LOSS IN THE EVENT OF PURCHASER'S DEFAULT. THUS,
SELLER SHALL ACCEPT AND RETAIN THE EARNEST MONEY AS LIQUIDATED DAMAGES BUT NOT
AS A PENALTY. EXCEPT AS OTHERWISE SET FORTH IN THIS SECTION 17(b), SUCH
LIQUIDATED DAMAGES SHALL CONSTITUTE SELLER'S SOLE AND
[INTENTIONALLY LEFT BLANK]
[ 439944.5 ]23
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<PAGE>
EXCLUSIVE REMEDY. IN THE EVENT SELLER IS ENTITLED TO THE EARNEST MONEY AS
LIQUIDATED DAMAGES AND TO THE EXTENT SELLER HAS NOT ALREADY RECEIVED THE EARNEST
MONEY, THE EARNEST MONEY SHALL BE IMMEDIATELY PAID TO SELLER BY THE ESCROW
COMPANY UPON RECEIPT OF WRITTEN NOTICE FROM SELLER AND PURCHASER THAT PURCHASER
HAS DEFAULTED UNDER THIS AGREEMENT, AND PURCHASER AGREES TO TAKE ALL SUCH
ACTIONS AND EXECUTE AND DELIVER ALL SUCH DOCUMENTS NECESSARY OR APPROPRIATE TO
EFFECT SUCH PAYMENT.
SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE
PROVISIONS OF THE FOREGOING LIQUIDATED DAMAGES PROVISION AND BY THEIR SIGNATURES
IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
SELLER: PURCHASER:
YGL Partners, CBL & ASSOCIATES LIMITED
an Illinois general partnership PARTNERSHIP,
a Delaware limited partnership
By: Heitman Capital Management LLC, By: CBL HOLDINGS I, INC.,
an Iowa limited liability company, a Delaware corporate, its general
its duly authorized agent and partner
attorney-in-fact By:__Stephen D. Lebovitz________
Name:Stephen D. Lebovitz
By: ___Howard J. Edelman____ Its: President
Name: Howard J. Edelman
Its: Executive Vice President
18. Miscellaneous.
18.1 Entire Agreement. This Agreement, together with the exhibits
attached hereto, constitute the entire agreement of the parties hereto regarding
the purchase and sale of the Property, and all prior agreements, understandings,
representations and statements, oral or written, are hereby merged herein. In
the event of a conflict between the terms of this Agreement and any prior
written agreements, the terms of this Agreement shall prevail. This Agreement
may only be amended or modified by an instrument in writing, signed by the party
intended to be bound thereby.
18.2 Time. All parties hereto agree that time is of the essence in this
transaction. If the time for performance of any obligation hereunder shall fall
on a Saturday, Sunday
[ 439944.5 ]24
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<PAGE>
or holiday (national, in the State of Illinois or the state in which the
Property is located) such that the obligation hereby can not be performed, the
time for performance shall be extended to the next such succeeding day where
performance is possible.
18.3 Counterpart Execution. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original.
18.4 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA.
18.5 Publicity. Seller and Purchaser hereby covenant and agree that, at
all times after the date of execution hereof and continuing after the Closing,
unless consented to in writing by the other party, no press release or other
public disclosure concerning this transaction shall be made, and each party
agrees to use best efforts to prevent disclosure of this transaction.
18.6 Recordation. Purchaser shall not record this Agreement or a
memorandum or other notice thereof in any public office without the express
written consent of Seller. A breach by Purchaser of this covenant shall
constitute a material default by Purchaser under this Agreement.
18.7 Benefit. This Agreement is for the benefit of Purchaser and
Seller, and except as provided in the indemnities granted by Purchaser in this
Agreement and in the Purchase Documents (as defined in Section 19) with respect
to the Indemnified Parties listed therein, no other person or entity will be
entitled to rely on this Agreement, receive any benefit from it or enforce any
provisions of it against Purchaser or Seller.
18.8 Section Headings. The Section headings contained in this Agreement
are for convenience only and shall in no way enlarge or limit the scope or
meaning of the various and several Sections hereof.
18.9 Further Assurances. Purchaser and Seller agree to execute all
documents and instruments reasonably required in order to consummate the
purchase and sale herein contemplated.
18.10 Severability. If any portion of this Agreement is held to be
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect.
[ 439944.5 ]25
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<PAGE>
18.11 Waiver of Trial by Jury. Seller and Purchaser, to the extent they
may legally do so, hereby expressly waive any right to trial by jury of any
claim, demand, action, cause of action, or proceeding arising under or with
respect to this Agreement, or in any way connected with, or related to, or
incidental to, the dealings of the parties hereto with respect to this Agreement
or the transactions related hereto or thereto, in each case whether now existing
or hereafter arising, and irrespective of whether sounding in contract, tort, or
otherwise. To the extent they may legally do so, Seller and Purchaser hereby
agree that any such claim, demand, action, cause of action, or proceeding shall
be decided by a court trial without a jury and that any party hereto may file an
original counterpart or a copy of this Section with any court as written
evidence of the consent of the other party or parties hereto to waiver of its or
their right to trial by jury.
18.12 Independent Counsel. Purchaser and Seller each acknowledge that:
(a) they have been represented by independent counsel in connection with this
Agreement; (b) they have executed this Agreement with the advice of such
counsel; and (c) this Agreement is the result of negotiations between the
parties hereto and the advice and assistance of their respective counsel. The
fact that this Agreement was prepared by Seller's counsel as a matter of
convenience shall have no import or significance. Any uncertainty or ambiguity
in this Agreement shall not be construed against Seller because Seller's counsel
prepared this Agreement in its final form.
18.13 Governmental Approvals. Nothing contained in this Agreement shall
be construed as authorizing Purchaser to apply for a zoning change, variance,
subdivision maps, lot line adjustment, or other discretionary governmental act,
approval or permit with respect to the Property prior to the Closing, and
Purchaser agrees not to do so. Purchaser agrees not to submit any reports,
studies or other documents, including, without limitation, plans and
specifications, impact statements for water, sewage, drainage or traffic,
environmental review forms, or energy conservation checklists to any
governmental agency, or any amendment or modification to any such instruments or
documents prior to the Closing. Purchaser's obligation to purchase the Property
shall not be subject to or conditioned upon Purchaser's obtaining any variances,
zoning amendments, subdivision maps, lot line adjustment or other discretionary
governmental act, approval or permit.
18.14 No Waiver. No covenant, term or condition of this Agreement other
than as expressly set forth herein shall be deemed to have been waived by Seller
or Purchaser unless such waiver is in writing and executed by Seller or
Purchaser, as the case may be.
18.15 Discharge and Survival. The delivery of the Deed by Seller, and
the acceptance thereof by Purchaser shall be deemed to be the full performance
and discharge of every covenant and obligation on the part of Seller to be
performed hereunder except
[ 439944.5 ]26
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<PAGE>
the Surviving Obligations. No action shall be commenced after the Closing on
any covenant or obligation except the Surviving Obligations.
19. Exculpation of Seller and Related Parties. Notwithstanding anything to the
contrary contained in this Agreement or in any exhibits attached hereto or in
any documents executed or to be executed in connection herewith (collectively,
including this Agreement, said exhibits and any such document, the "Purchase
Documents"), it is expressly understood and agreed by and between the parties
hereto that from and after the Closing: (i) the recourse of Purchaser or its
successors or assigns against Seller with respect to the alleged breach by or on
the part of Seller of any representation, warranty, covenant, undertaking,
indemnity or agreement contained in any of the Purchase Documents (collectively,
"Seller's Undertakings") shall (x) be deemed waived unless Purchaser has
delivered to Seller written notice that Purchaser is seeking recourse under
Seller's Undertakings (the "Recourse Notice") after the Closing Date but prior
to the date that is ten (10) months after the Closing Date and Purchaser has
filed suit with respect to same within two (2) months after the date of
Purchaser's delivery to Seller of the Recourse Notice, and (y) be limited to an
amount not to exceed $750,000.00 in the aggregate of all recourse of Purchaser
under the Purchase Documents; and (ii) no personal liability or personal
responsibility of any sort with respect to any of Seller's Undertakings or any
alleged breach thereof is assumed by, or shall at any time be asserted or
enforceable against, Seller or HCMC, or against any of their respective
shareholders, directors, officers, employees, agents, constituent partners,
members, beneficiaries, trustees or representatives except as provided in (i)
above with respect to Seller.
[The signature page follows]
[ 439944.5 ]27
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
made as of the day and year first above stated.
SELLER:
YGL PARTNERS,
an Illinois general partnership
By: Heitman Capital Management LLC,
an Iowa limited liability company, its
duly authorized agent and attorney-in-
fact
By: _____Howard J. Edelman_____
Name: Howard J. Edelman
Its: Executive Vice President
PURCHASER:
CBL & ASSOCIATES LIMITED
PARTNERSHIP,
a Delaware limited partnership
By: CBL HOLDINGS I, INC., a Delaware
corporation, its general partner
By: ___Stephen D. Lebovitz____
Name: Stephen D. Lebovitz
Its: President
[ 439944.5 ]28
-28-
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A - Legal Description
Exhibit B - Form of Earnest Money Escrow Agreement
Exhibit C - INTENTIONALLY OMITTED
Exhibit D - INTENTIONALLY OMITTED
Exhibit E-1 - Form of Tenant Estoppel Certificate
Exhibit E-2 - Form of REA Estoppel Certificate
Exhibit F - INTENTIONALLY OMITTED
Exhibit G - Form of Deed
Exhibit H - Form of Bill of Sale
Exhibit I - Form of Assignment and Assumption of Leases
Exhibit J - Form of Assignment and Assumption of Contracts,
Licenses and Permits
Exhibit K - Form of Non-Foreign Affidavit
Exhibit L - Form of Tenant Notification Letter
Exhibit M - Form of Vendor Notification Letter
Schedule 1 - List of Leases
Schedule 2 - List of Service Contracts
Schedule 3 - List of Litigation
Schedule 4 - List of Existing Proposals
Schedule 5 - List of Environmental Reports
Schedule 6 - List of Operating Agreements
[ 439944.5 ]29
-29-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
[ 439944.5 ]1
Exhibit A - Page 1
<PAGE>
EXHIBIT B
Form of Earnest Money Escrow Agreement
NEAR NORTH NATIONAL TITLE CORPORATION
Near North National Title Corporation Phone: (312) 419-3918
222 North LaSalle Street Fax: (312) 419-0569
Chicago, Illinois 60601
Re: York Galleria, York,
Pennsylvania
Escrow No.:____________
Date:______________1999
STRICT JOINT ORDER ESCROW
The accompanying letter of credit in the amount of One Million and No/100
Dollars ($1,000,000.00) is deposited with Near North Title Corporation as
Escrowee to be delivered by it only upon the joint order of the undersigned or
their respective legal representatives or assigns.
Near North National Title Corporation, as Escrowee, is hereby expressly
authorized to disregard, in its sole discretion, any and all notices or warnings
given by any of the parties hereto, or by any other person or corporation, but
the said Escrowee is hereby expressly authorized to regard and to comply with
and obey any and all orders, judgments or decrees entered or issued by any court
with or without jurisdiction, and in case the said Escrowee obeys or complies
with any such order, judgment or decrees of any court it shall not be liable to
any of the parties hereto or any other person, firm or corporation by reason of
such compliance, notwithstanding any such order, judgment or decree being
entered without jurisdiction or being subsequently reversed, modified, annulled,
set aside or vacated. In case of any suit or proceeding regarding this escrow,
to which said Escrowee is or may at any time become a party, it shall have a
lien on the contents hereof for any and all costs, attorneys' and solicitors'
fees, whether such attorneys or solicitors shall be regularly retained or
specially employed, and any other expenses which it may have incurred or become
liable for on account thereof, and the undersigned jointly and severally agree
to pay said Escrowee upon demand all such costs, fees and expenses so incurred.
In no case shall the above mentioned letter of credit be surrendered except on
an order signed by the parties hereto, their respective legal representatives or
assigns, or in obedience of the process or order of court as aforesaid.
[ 439944.5 ]1
Exhibit B - Page 1
<PAGE>
PURCHASER:
CBL & ASSOCIATES LIMITED PARTNERSHIP,
a Delaware limited partnership
By: CBL HOLDINGS I, INC., a Delaware corporation,
its general partner
Signed By:
Name: Stephen D. Lebovitz
Its: President
Address: 6148 Lee Highway, Suite 300, Chattanooga, Tennessee 37421
Purchaser's Federal Tax Identification Number:
SELLER:
YGL PARTNERS,
an Illinois general partnership
By: Heitman Capital Management LLC,
an Iowa limited liability company,
its duly authorized agent and attorney-in-fact
Signed By:
Name: Howard J. Edelman
Its: Executive Vice President
Address - c/o Heitman Capital Management LLC, Suite 3600, 180 North
LaSalle Street, Chicago, Illinois 60601-6789.
ACCEPTED:
NEAR NORTH NATIONAL TITLE CORPORATION
By:
Name:
Its:
[ 439944.5 ]2
Exhibit B - Page 2
<PAGE>
EXHIBIT C
INTENTIONALLY OMITTED
[ 439944.5 ]1
Exhibit C - Page 1
<PAGE>
EXHIBIT D
INTENTIONALLY OMITTED
[ 439944.5 ]1
Exhibit D - Page 1
<PAGE>
EXHIBIT E-1
TENANT ESTOPPEL CERTIFICATE
TO: [[Purchaser]] YGL Partners
c/o Heitman Capital Management LLC
180 N. LaSalle Street
Suite 3600
Chicago, IL 60601-6789
Re:
(the "Property")
Gentlemen:
The following statements are made with the knowledge that the
addressees are relying on them in connection with the purchase and sale of the
Property and the assignment to _______________, a ________________ ("Purchaser")
of the Lease (defined below) in connection therewith, and the addressees' and
their respective lenders, successors and assigns and successor owners of the
Property may rely on them for that purpose.
The undersigned ("Tenant"), being the Tenant under the Lease covering
certain premises ("Leased Premises") in the Property, hereby certifies to the
addressees that the following statements are true, correct and complete as of
the date hereof:
1. Tenant is the tenant under a lease with ("Landlord") dated [[INSERT THE
TITLE AND DATE OF ALL AMENDMENTS, MODIFICATIONS AND ANY OTHER AGREEMENTS
RELATING TO THE LEASE, i.e. . . ., "as amended by that certain First Amendment,
dated March 8, 1962," . . . ]], ([[collectively,]] the "Lease"). The Lease
demises to Tenant approximately square feet in the Property. The initial term of
the Lease commenced on , 19 , and will expire on , , exclusive of unexercised
renewal options and extension options contained in the Lease. Except as set
forth in this Paragraph 1 there have been no amendments, modifications or
revisions to the lease, and there are no agreements of any kind between Landlord
and Tenant regarding the Leased Premises.
2. The Lease has been duly authorized and executed by Tenant and is in
full force and effect.
[ 439944.5 ]1
Exhibit E-1 - Page 1
<PAGE>
3. Tenant is presently occupying the Leased Premises. The Lease has not
been assigned by Tenant and no sublease, concession agreement or license
covering the Lease Premises, or any portion of the Leased Premises, has been
entered into by Tenant.
4. Tenant is currently obligated to pay fixed or base rent under the Lease
in the annual amount of $ , payable in monthly installments of $ . Rent
- ------------------ ---------------- has been paid under the Lease through , 19 .
No rent under the Lease has been -------------- ---- paid more than one (1)
month in advance, and no other sums have been deposited with Landlord other than
$ deposited as security under the Lease. The security -------------------
deposit is not subject to any set-off or reduction or any increase for interest
or other credit due to tenant. Except as specifically stated in the Lease,
Tenant is entitled to no rent concessions, free rent, allowances or other
similar compensation in connection with renting the Leased Premises. Percentage
Rent for the last fiscal year of Tenant ending ------ , 19 in the amount of $
has been paid by Tenant to Landlord. ------------------ ----- ------------
5. To Tenant's knowledge, neither Landlord nor Tenant is in default
under the Lease beyond any applicable cure period and, to Tenant's knowledge, no
event has occurred which, with the giving of notice or passage of time, or both,
could result in such a default.
6. Except as specifically stated in the Lease, Tenant has not been
granted (a) any option to extend the term of the Lease, (b) any option to expand
the Leased Premises or to lease additional space within the Property, (c) any
right of first refusal on any space at the Property, (d) any option or right of
first refusal to purchase the Leased Premises or the Building or any part
thereof, or (e) any option to terminate the Lease prior to its stated
expiration.
7. All obligations and conditions under the Lease to be performed to
date by Landlord have been satisfied, free of defenses and set-offs, including,
without limitation, all construction work in the Leased Premises and Landlord
has paid in full all allowances and inducements due and payable to Tenant.
8. The Landlord has not rebated, reduced or waived any amounts due from
Tenant under the Lease, nor has Landlord provided financing for, made loans or
advances to, or invested in Tenant's business.
9. Tenant has not received any notice of any present violation of any
federal, state, county or municipal laws, regulations, ordinances, order or
directives relating to use, operation or condition of the Leased Premises.
[ 439944.5 ]2
Exhibit E-1 - Page 2
<PAGE>
EXECUTED as of the day of , 1999
----- -------------
TENANT
Name of Tenant
(d/b/a, if any: )
By:
Name:
Title
[ 439944.5 ]3
Exhibit E-1 - Page 3
<PAGE>
EXHIBIT E-2
REA ESTOPPEL CERTIFICATE
The undersigned is a party to the ________________________ dated
_________________ recorded in the Office of the Recorder of Deeds of
____________ County on __________________ (the "REA") for a store located at
York Galleria, York
Pennsylvania, by and among
.
The undersigned hereby certifies to ("Purchaser"), its successors
and/or assigns that:
1. The REA has been supplemented as follows and is in full force and effect as
supplemented.
A.
B.
2. currently occupies the Premises (as defined in the REA) and is current
in its payment obligations required under the REA with the most recent
payment made on , 1999.
3. Without undertaking investigation, is not aware of any defaults under
the REA which would give rise to offsets or defenses against any other
party to the REA.
4. Nothing contained herein shall be deemed to constitute a waiver of any
rights may have under the REA and other contained herein is intended to
modify, alter, or change any of the terms or conditions of the REA.
5. No officers or employees signing this certificate
for or on behalf of the shall have any liability
as a result of having given such
certificate.
The undersigned hereby certifies that the certifications set forth
above are true as of the day of , 1999.
By:
Its:
[ 439944.5 ]1
Exhibit E-2 - Page 1
<PAGE>
EXHIBIT F
INTENTIONALLY OMITTED
[ 439944.5 ]1
Exhibit F - Page 1
<PAGE>
EXHIBIT G
SPECIAL WARRANTY DEED
THIS INDENTURE, made as of the day of _________, 1999 by and between
YGL PARTNERS, an Illinois general partnership, party of the first part, and
____________, a ______________, party of the second part, WITNESSETH, that the
party of the first part, for and in consideration of the sum of Ten and No/100
Dollars in hand paid by the party of the second part, the receipt whereof is
hereby acknowledged, by these presents does GRANT, BARGAIN, SELL, REMISE,
RELEASE AND CONVEY unto the party of the second part, and to its heirs and
assigns, FOREVER, the following described real estate, situated in the County of
York and Commonwealth of Pennsylvania known and described as follows, to wit:
See Exhibit "A" attached hereto and made a part hereof.
Together with all of the party of the first part's right, title and
interest in the improvements, hereditaments, easements and appurtenances
thereunto belonging, or in anyway appertaining, and the reversion and
reversions, remainder and remainders, rents, issues and profits thereof, and all
the estate, right, title, interest, claim or demand whatsoever, either in law or
equity, of, in and to the above described premises, with the improvements,
hereditaments, easements and appurtenances (collectively, the "Property"): TO
HAVE AND TO HOLD the Property, unto the party of the second part, its heirs and
assigns forever.
And the party of the first part, for itself, and its successors, does
covenant, promise and agree, to and with the party of the second part, its heirs
and assigns, that it has not done or suffered to be done, anything whereby the
said premises hereby granted are, or may be, in any manner encumbered or
charged, except as provided on Exhibit B, and WILL WARRANT AND DEFEND against
all persons lawfully claiming or to claim the same, by through or under it,
subject to the matters described on Exhibit B, and not otherwise.
Permanent Real Estate Index Number(s):
Address(es) of real estate:
[ 439944.5 ]1
Exhibit G - Page 1
<PAGE>
This instrument was prepared by:
Mail to: Send Subsequent tax bills to:
IN WITNESS WHEREOF, said party of the first part has executed this
Special Warranty Deed as of the date first above written.
By: YGL PARTNERS, an Illinois general
partnership
By: Heitman Capital Management LLC, an
Iowa limited liability company, its duly
authorized agent and attorney-in-fact
By:
Name:
Its:
STATE OF ___________ )
) SS.
COUNTY OF _________ )
I, the undersigned, a Notary Public in and for the County and
State aforesaid, DO HEREBY CERTIFY, that the above named _____________ of
Heitman Capital Management LLC, and Iowa limited liability company, personally
known to me to be the same person whose name is subscribed to the foregoing
instrument as such Executive Vice President, appeared before me this day in
person and acknowledged that he signed and delivered the said instrument as his
own free and voluntary act and as the free and voluntary act of said company as
duly authorized agent and attorney-in-fact for YGL Partners, an Illinois general
partnership for the uses and purposes therein set forth.
Given under my hand and Notary Seal, this day of ______, 1999.
Notary Public
[ 439944.5 ]2
Exhibit G - Page 2
<PAGE>
EXHIBIT A
(TO DEED)
LEGAL DESCRIPTION
[ 439944.5 ]3
Exhibit G - Page 3
<PAGE>
EXHIBIT B
(TO DEED)
PERMITTED EXCEPTIONS
[ 439944.5 ]4
Exhibit G - Page 4
<PAGE>
EXHIBIT H
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that YGL Partners, an Illinois general
partnership ("Seller") in consideration of Ten and 00/00 Dollars ($10.00), the
receipt and sufficiency of which is hereby acknowledged, does hereby sell,
assign, transfer, quit claim and set over unto ______________, a _______________
("Purchaser") all furniture, furnishings, fixtures, equipment and other personal
property set forth on Exhibit A attached hereto and made a part hereof (the
"Personal Property") located at, on and about the real estate commonly known as
York Galleria and legally described in the Agreement, as hereinafter defined
(the "Premises").
TO HAVE AND TO HOLD the Personal Property unto Purchaser and
Purchaser's heirs, legal representatives, successors and assigns forever.
ALL WARRANTIES OF QUALITY OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY ARE EXPRESSLY EXCLUDED. THE PERSONAL PROPERTY SOLD HEREUNDER IS
SOLD IN "AS IS" CONDITION WITHOUT ANY REPRESENTATION OR WARRANTY BY SELLER.
Any liability of Seller shall be limited as set forth in Section 19 of
that certain Agreement of Purchase and Sale between Seller and Purchaser dated,
_____________ ___, 1999 (the "Agreement").
IN WITNESS WHEREOF, Seller has signed this Bill of Sale at _________,
________ this _____ day of ________________, 1999.
SELLER:
YGL Partners
an Illinois general partnership
By: Heitman Capital Management LLC, an
Iowa limited liability company, its duly
authorized agent and attorney-in-fact
By:
Name:
Its:
[ 439944.5 ]1
Exhibit H - Page 1
<PAGE>
EXHIBIT A
(BILL OF SALE)
LIST OF PERSONAL PROPERTY
[ 439944.5 ]2
Exhibit H - Page 2
<PAGE>
EXHIBIT I
ASSIGNMENT AND ASSUMPTION OF LEASES
FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00) and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, YGL Partners, an Illinois general partnership, having its
principal office c/o Heitman Capital Management LLC, 180 North LaSalle Street,
Chicago, Illinois 60601 ("Assignor"), hereby sells, transfers, assigns and sets
over unto ______________________, c/o ______________________ ("Assignee"), its
legal representatives, successors and assigns all of Assignor's right, title and
interest in, to and under (a) those certain leases referred to on Exhibit A
attached hereto and made a part hereof (the "Leases") affecting the real estate
legally described in the Agreement (as hereinafter defined) and commonly known
as York Galleria, York, Pennsylvania, (the "Property") and (b) the rent therein
referred except, however, that portion of said rent attributable to periods of
time prior to the Closing Date (as defined in that certain Agreement of Purchase
and Sale by and between Assignor and Assignee , dated as of ______, 1999; the
"Agreement").
Assignee does hereby accept the foregoing Assignment and
Assumption of Leases subject to the terms and conditions herein and in the
Leases, and does hereby assume, without exculpation, as of the date hereof, and
become responsible for and agree to perform, discharge, fulfill and observe all
of the obligations, terms, covenants, provisions and conditions under the Leases
arising from and after the Closing Date, and Assignee agrees to be liable for
the observance and performance thereof as fully as though Assignee was the
original landlord or lessor thereunder. Assignee agrees to protect, defend,
indemnify and hold harmless Assignor, its legal representatives, successors and
assigns from any and all losses, damages, expenses, fees (including without
limitation reasonable attorneys' fees), court costs, suits, judgments,
liability, claims and demands whatsoever in law or in equity, incurred or
suffered by Assignor, its legal representatives, successors and assigns or any
of them arising out of or in connection with the Leases as to events occurring
from and after the Closing Date. Assignor agrees to protect, defend, indemnify
and hold harmless Assignee, its legal representatives, successors and assigns
from any and all losses, damages, expenses, fees (including, without limitation,
reasonable attorneys' fees), court costs, suits, judgments, liability, claims
and demands whatsoever in law or in equity, incurred or suffered by Assignee,
its legal representatives, successors and assigns or any of them arising out of
or in connection with the Leases as to events occurring prior to the Closing
Date, provided that any claim made by Assignee hereunder shall be deemed waived
unless Assignee has given Assignor written notice of such claim prior to the
date which is ten (10) months after the Closing Date.
Notwithstanding anything to the contrary contained in this Assignment
and Assumption of Leases, it is expressly understood and agreed by and between
the parties
[ 439944.5 ]1
Exhibit I - Page 1
<PAGE>
hereto that: (i) the recourse of Assignee or its successors or assigns against
Assignor with respect to indemnity obligations provided above shall be limited
as set forth in Section 19 of the Agreement and to claims made within ten (10)
months of the date hereof; and (ii) no personal liability or personal
responsibility of any sort with respect to the indemnity obligations of Assignor
above is assumed by, or shall at any time be asserted or enforceable against,
Assignor or Heitman Capital Management LLC, or against any of their respective
shareholders, directors, officers, employees, agents, constituent partners,
members, beneficiaries, trustees or representatives except as provided in (i)
above with respect to Assignor.
This Assignment and Assumption of Leases shall be binding upon and
shall inure to the benefit of Assignor and Assignee and their respective
beneficiaries, legal representatives, heirs, successors and assigns.
This Assignment and Assumption of Leases may be executed in
counterparts, and as so executed shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Assumption of Leases this ____ day of ___________, 1999.
ASSIGNOR:
YGL Partners,
an Illinois general partnership
By: Heitman Capital Management LLC, an
Iowa limited liability company,
its duly authorized agent and attorney-in-fact
By:
Name:
Its:
ASSIGNEE:
,
a
By:
Name:
Its:
EXHIBIT A
(TO ASSIGNMENT AND ASSUMPTION OF LEASES)
LIST OF LEASES
[ 439944.5 ]2
Exhibit I - Page 2
<PAGE>
EXHIBIT J
ASSIGNMENT AND ASSUMPTION OF CONTRACTS,
LICENSES AND PERMITS
FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00) and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, YGL Partners, an Illinois general partnership, having its
principal office c/o Heitman Capital Management LLC, 180 North LaSalle Street,
Chicago, Illinois 60601 ("Assignor"), hereby sells, transfers, assigns and sets
over unto ______________________, c/o ______________________ ("Assignee"), its
legal representatives, successors and assigns effective as of the Closing Date
(as defined in that certain Agreement of Purchase and Sale by and between
Assignor and Assignee, dated as of ________, 1999; the "Agreement") all of
Assignor's right, title and interest in, to and under (a) those agreements
referred to on Exhibit A attached hereto and made a part hereof (the
"Contracts") affecting the real estate legally described in the Agreement and
commonly known as York Galleria, York, Pennsylvania, (the "Property") and (b)
all licenses, warranties and permits relating to the construction, use and
operation of the Property.
Assignee does hereby accept the foregoing Assignment and Assumption of
Contracts, Licenses and Permits and does hereby assume, without exculpation, as
of the Closing Date, and become responsible for and agree to perform, discharge,
fulfill and observe all of the obligations, terms, covenants, provisions and
conditions under the Contracts arising from and after the date hereof, and
Assignee agrees to be liable for the observance and performance thereof as fully
as though Assignee was the original party thereunder. Assignee agrees to
protect, defend, indemnify and hold harmless Assignor, its legal
representatives, successors and assigns from any and all losses, damages,
expenses, fees (including without limitation reasonable attorneys' fees), court
costs, suits, judgments, liability, claims and demands whatsoever in law or in
equity, incurred or suffered by Assignor, its legal representatives, successors
and assigns or any of them arising out of or in connection with the Contracts,
as to events occurring from and after the Closing Date. Assignor agrees to
protect, defend, indemnify and hold harmless Assignee, its legal
representatives, successors and assigns from any and all losses, damages,
expenses, fees (including, without limitation, reasonable attorneys' fees),
court costs, suits, judgments, liability, claims and demands whatsoever in law
or in equity, incurred or suffered by Assignee, its legal representatives,
successors and assigns or any of them arising out of or in connection with the
Contracts, as to events occurring prior to the Closing Date, provided that any
claim made by Assignee hereunder shall be deemed waived unless Assignee has
given Assignor written notice of such claim prior to the date which is ten (10)
months after the Closing Date.
[ 439944.5 ]1
Exhibit J - Page 1
<PAGE>
Notwithstanding anything to the contrary contained in this Assignment
and Assumption of Contracts, Licenses and Permits, it is expressly understood
and agreed by and between the parties hereto that: (i) the recourse of Assignee
or its successors or assigns against Assignor with respect to indemnity
obligations provided above shall be limited as set forth in Section 19 of the
Agreement and to claims made within ten (10) months of the date hereof; and (ii)
no personal liability or personal responsibility of any sort with respect to the
indemnity obligations of Assignor above is assumed by, or shall at any time be
asserted or enforceable against, Assignor or Heitman Capital Management LLC, or
against any of their respective shareholders, directors, officers, employees,
agents, constituent partners, members, beneficiaries, trustees or
representatives except as provided in (i) above with respect to Assignor.
This Assignment and Assumption of Contracts, Licenses and Permits shall
be binding upon and shall inure to the benefit of Assignor and Assignee and
their respective beneficiaries, legal representatives, heirs, successors and
assigns.
This Assignment and Assumption of Contracts, Licenses and Permits may
be executed in counterparts, and as so executed shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Assumption of Contracts, Licenses and Permits this ____ day of
_______________, 1999.
ASSIGNOR:
YGL Partners,
an Illinois general partnership
By: Heitman Capital Management LLC, an
Iowa limited liability company,
its duly authorized agent and attorney-in-fact
By:
Name:
Its:
ASSIGNEE:
,
a
By:
Name:
Its:
[ 439944.5 ]2
Exhibit J - Page 2
<PAGE>
EXHIBIT A
(TO ASSIGNMENT AND ASSUMPTION OF CONTRACTS,
LICENSES AND PERMITS)
LIST OF CONTRACTS
[ 439944.5 ]3
Exhibit J - Page 3
<PAGE>
EXHIBIT K
NON-FOREIGN AFFIDAVIT
Section 1445 of the Internal Revenue Code of 1986, as amended, provides
that a transferee of a U.S. real property interest must withhold tax if the
transferor is a foreign person. To inform the transferee that withholding of tax
is not required upon the disposition of a U.S. real property interest by YGL
Partners, an Illinois general partnership ("Transferor"), the undersigned hereby
certifies the following on behalf of the Transferor:
1. Transferor is not a foreign corporation, foreign partnership,
foreign trust, foreign estate, or foreign person (as those
terms are defined in the Internal Revenue Code and the Income
Tax Regulations promulgated thereunder);
2. Transferor's U.S. employer identification number is 36-3712478; and
3. Transferor's address is c/o Heitman Capital Management LLC,
180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601.
Transferor understands that this certification may be disclosed to the
Internal Revenue Service by the transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
[ 439944.5 ]1
Exhibit K - Page 1
<PAGE>
Under penalties of perjury the undersigned declares that it has
examined this certification and to the best of its knowledge and belief it is
true, correct and complete, and it further declares that it has authority to
sign this document on behalf of Transferor.
Dated: , 1999
Transferor:
YGL Partners,
an Illinois general partnership
By: Heitman Capital Management LLC, an Iowa
limited liability company, its duly authorized
agent and attorney-in-fact
By:
Name:
Its:
[ 439944.5 ]2
Exhibit K - Page 2
<PAGE>
EXHIBIT L
Form of Tenant Notification Letter
____________, 1999
VIA CERTIFIED MAIL - RETURN RECEIPT REQUESTED
[Tenant]
Re: YORK GALLERIA
Dear Tenant:
You are hereby advised that the above referenced property in which you are a
tenant was sold and your lease was assigned and transferred effective as of the
date of this letter to ______________, a ________________ (the "Purchaser").
Your security deposit and advance rental, if any, has been transferred to the
Purchaser, whose address is set forth below. The above referenced property will
be managed by [MANAGEMENT COMPANY] and all checks for rent and other charges
should be made payable to [[______________]]and forwarded to:
[MANAGEMENT COMPANY]
[Property Address]
In accordance with the terms of your lease, copies of all future notices to
landlord should be sent to:
[ 439944.5 ]1
Exhibit L - Page 1
<PAGE>
[PURCHASER ENTITY]
If you have any questions or need any additional information, please feel free
to contact the management office at [Telephone Number].
Sincerely,
SELLER:
YGL Partners,
an Illinois general partnership
By: Heitman Capital Management
LLC, an Iowa limited liability
company, its duly authorized agent
and attorney-in-fact
By:
Its: Vice President
PURCHASER
By:
Name:
Its:
[ 439944.5 ]2
Exhibit L - Page 2
<PAGE>
EXHIBIT M
Form of Vendor Notification Letter
, 1999
VIA CERTIFIED MAIL - RETURN RECEIPT REQUESTED
[Vendor]
RE: YORK GALLERIA
Gentlemen:
This is to advise you that the above referenced property was sold to
________________, a _______________ (the "Purchaser"). As part of the sale, your
contract has been assigned to Purchaser, and any goods, services or utilities
supplied to the property subsequent to the date of this letter shall be for its
account. The above referenced property will be managed by [[Management Company]]
and all future invoices and correspondence and any and all Notices to Purchaser
should be sent to:
SELLER:
YGL Partners,
an Illinois general partnership
By: Heitman Capital Management LLC,
an Iowa limited liability company,
its duly authorized agent and
attorney-in-fact
By:
Its: Vice President
PURCHASER
a
By:
Name:
Its:
SCHEDULE 1
[ 439944.5 ]1
Schedule 1 - Page 1
<PAGE>
LIST OF LEASES
[ 439944.5 ]2
Schedule 1 - Page 2
<PAGE>
SCHEDULE 2
LIST OF SERVICE CONTRACTS
[ 439944.5 ]1
Schedule 2 - Page 1
<PAGE>
SCHEDULE 3
LIST OF LITIGATION
[ 439944.5 ]1
Schedule 3 - Page 1
<PAGE>
SCHEDULE 4
LIST OF EXISTING PROPOSALS
[ 439944.5 ]1
Schedule 4 - Page 1
<PAGE>
SCHEDULE 5
LIST OF ENVIRONMENTAL REPORTS
[ 439944.5 ]1
Schedule 5 - Page 1
<PAGE>
SCHEDULE 6
LIST OF OPERATING AGREEMENTS
[ 439944.5 ]1
Schedule 6 - Page 1
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1999 (unaudited) and the
Consolidated Statement of Operations for the six months ended
June 30, 1999 (unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,211
<SECURITIES> 0
<RECEIVABLES> 17,874
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 17,012
<PP&E> 2,065,113
<DEPRECIATION> 201,786
<TOTAL-ASSETS> 1,916,068
<CURRENT-LIABILITIES> 62,022
<BONDS> 0
0
29
<COMMON> 247
<OTHER-SE> 419,034
<TOTAL-LIABILITY-AND-EQUITY> 1,916,068
<SALES> 0
<TOTAL-REVENUES> 148,191
<CGS> 0
<TOTAL-COSTS> 117,969
<OTHER-EXPENSES> 78,533
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,436
<INCOME-PRETAX> 25,068
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,068
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,068
<EPS-BASIC> 1.02
<EPS-DILUTED> 1.01
<FN>
<F1>Receivables are stated net of allowances.
</FN>
</TABLE>
